OMEGA FINANCIAL CORP /PA/, S-4/A, 1995-05-08

OMEGA FINANCIAL CORP /PA/
S-4/A, 1995-05-08
NATIONAL COMMERCIAL BANKS

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<PAGE> 1

As filed with the Securities and Exchange Commission on May 8, 1995
Registration No. 33-91472
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------

AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------

OMEGA FINANCIAL CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)

Pennsylvania 6712 25-1420888
- ---------------------------- --------------------------- ------------------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)

366 Walker Drive Daniel L. Warfel
State College, PA 16801 Executive Vice President and
(814) 231-7680 Chief Financial Officer
- --------------------------------- 366 Walker Drive
(Address, including zip code, of State College, PA 16801
registrant's principal executive (814) 231-7680
offices) ----------------------------------
(Address, including zip code, and
telephone number, including
area code, of agent for service)

Copies to:

Sol Genauer, Esquire John B. Lampi, Esquire
Blank, Rome, Comisky & McCauley Schnader, Harrison, Segal & Lewis
1200 Four Penn Center Plaza Suite 700
Philadelphia, PA 19103 30 North Third Street
Harrisburg, PA 17101-1713

-----------------------

Approximate date of commencement of proposed sale of the securities to the
public: The date of mailing the within Proxy Statement-Prospectus to the
shareholders of Montour Bank.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

<PAGE> 2

OMEGA FINANCIAL CORPORATION

Cross Reference Sheet for
Registration Statement on Form S-4
<TABLE>
<CAPTION>
Items of Form S-4 Prospectus Caption or Location
----------------- ------------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION

1. Forepart of Registration Statement
and Outside Front Cover Page of Prospectus. . . . . . . . . Facing page of Registration Statement; Outside Front
Cover of Prospectus; and Notice of Annual Meeting
of Shareholders.

2. Inside Front and Outside
Back Cover Pages of Prospectus. . . . . . . . . . . . . . . Inside Front Page of Prospectus; Available
Information and Incorporation of Documents by
Reference; Table of Contents.

3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information . . . . . . . . . . . . . . . Summary and General Information; Rights of
Dissenting Shareholders; Certain Federal Income Tax
Consequences.

4. Terms of the Transaction. . . . . . . . . . . . . . . . . . The Proposed Merger and Related Matters;
Description of the Capital Stock of the Omega;
Comparison of the Rights of Shareholders of the
Capital Stock of the Omega and Montour Bank;
Certain Federal Income Tax Consequences;
Appendices A, B, C, and D.

5. Pro Forma Financial Information . . . . . . . . . . . . . . Not Applicable.

6. Material Contracts with
the Company Being Acquired. . . . . . . . . . . . . . . . . The Proposed Merger and Related Matters.

7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters. . . . . . . . . . . . . . . . . . . . . . . . Other Considerations - Resales of Omega Common
Stock.

8. Interests of Named Experts and Counsel. . . . . . . . . . . Legal Matters.
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
Items of Form S-4 Prospectus Caption or Location
----------------- ------------------------------
<S> <C>
9. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities. . . . . . . . . . . . . . . . Part II - Item 22(a).

B. INFORMATION ABOUT THE
REGISTRANT

10. Information with Respect to
S-3 Registrants . . . . . . . . . . . . . . . . . . . . . Not Applicable.

11. Incorporation of Certain
Information by Reference. . . . . . . . . . . . . . . . . Not Applicable.

12. Information with Respect to
S-2 or S-3 Registrants. . . . . . . . . . . . . . . . . . Available Information and Incorporation of
Documents by Reference.

13. Incorporation of Certain
Information by Reference. . . . . . . . . . . . . . . . . Available Information and Incorporation of
Documents by Reference.
14. Information with Respect to
Registrants Other than S-3 or
S-2 Registrants . . . . . . . . . . . . . . . . . . . . . Not Applicable.

C. INFORMATION ABOUT
THE COMPANY BEING ACQUIRED

15. Information with Respect to
S-3 Companies . . . . . . . . . . . . . . . . . . . . . . Not Applicable.

16. Information with Respect to
S-2 or S-3 Companies. . . . . . . . . . . . . . . . . . . Not Applicable.
</TABLE>

<PAGE> 4

<TABLE>
<CAPTION>
Items of Form S-4 Prospectus Caption or Location
----------------- ------------------------------
<S> <C>
17. Information with Respect to
Companies Other than S-3 or
S-2 Companies . . . . . . . . . . . . . . . . . . . . . . Description of Montour Bank; Montour Bank Market Prices
and Dividends; Montour Bank Selected Financial Data;
Management's Discussion and Analysis of Financial Condition
and Results of Operations of Montour Bank; Financial
Statements of Montour Bank
D. VOTING AND MANAGEMENT
INFORMATION

18. Information if Proxies, Consents or
Authorizations are to be Solicited . . . . . . . . . . . . Summary and General Information; Rights of
Dissenting Shareholders.

19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer. . . . . . . . Not applicable.
</TABLE>

<PAGE> 5

MONTOUR BANK
1519 Bloom Road
Danville, Pennsylvania 17821

TO OUR SHAREHOLDERS:

The Annual Meeting of the Shareholders of Montour Bank will be held on June
14, 1995, at 10:00 a.m., local time, at the main office of Montour Bank. In
addition to electing directors, you will be asked to consider and approve an
Agreement and Plan of Reorganization and a related Agreement and Plan of Merger
under which Montour Bank would become a wholly-owned subsidiary of Omega
Financial Corporation ("Omega"). Omega is a multi-bank holding company
headquartered in State College, Pennsylvania. Through its three subsidiary
banks, Omega Bank, N.A., Penn Central National Bank and Hollidaysburg Trust
Company, Omega currently maintains 40 retail branch offices in Central
Pennsylvania.

The merger agreement calls for each share of Montour Bank common stock, par
value $5.00 per share ("Montour Bank Common Stock") to be exchanged for either
Alternative I: .5 shares of Omega common stock, par value $5.00 per share
("Omega Common Stock"); Alternative II: $12.00 cash, or Alternative III: a
combination of Omega Common Stock and cash under Alternative I and Alternative
II. Not more than 49% nor less than 40% of the outstanding shares of Montour
Bank Common Stock may be exchanged for cash. However, if the "average price" of
Omega Common Stock is more than $30.00, the exchange ratio of Montour Bank
Common Stock for Omega Common Stock will be changed from one share of Montour
Bank Common Stock for one-half share of Omega Common Stock to one share of
Montour Bank Common Stock for the fraction of a share of Omega Common Stock
obtained by multiplying .5 by a fraction equal to 30 divided by the "average
price." The merger agreement provides that the "average price" of Omega Common
Stock will be the mean average of the closing sale prices for Omega Common Stock
on the NASDAQ National Market System for the thirty business day period ending
on the fifteenth business day before the date the merger is consummated.

You may elect to receive (subject to certain limitations) in exchange for
all of your Montour Bank Common Stock either: Alternative I: all Omega Common
Stock; Alternative II: all cash; or Alternative III: a combination of Omega
Common Stock and cash. If you make no election, you will receive either Omega
Common Stock, cash or a combination of Omega Common Stock and cash as determined
by the Board of Directors of Omega in its discretion. Therefore, I urge all
shareholders to complete and return the enclosed Form of Election. If you elect
Alternative III, you should indicate the number of shares of Montour Bank Common
Stock you wish to exchange for cash and the number you wish to exchange for
Omega Common Stock. You should complete and return the enclosed Form of Election
in accordance with the instructions accompanying the Form of Election which
should be carefully read and strictly complied with. All Forms of Election must
be received by Montour Bank no later than 10:00 A.M. (local time) on June 14,
1995.

On May 5, 1995, the last sale price for Omega Common Stock, as reported on
the NASDAQ National Market System, was $26 5/8 per share.

The Merger is subject to approval by certain government agencies and by the
holders of at least two-thirds of the outstanding shares of Montour Bank Common
Stock.
<PAGE> 6

The attached Proxy Statement-Prospectus describes the material features of
the proposed Merger, including the details of the exchange and certain other
information about the parties to the transaction. I urge all of our shareholders
to read it closely.

Your Board of Directors, after careful consideration, has unanimously
approved the proposed Merger and believes that the Merger is in the best
interests of Montour Bank and its shareholders. Accordingly, your Board of
Directors unanimously recommends that you vote FOR the proposed Merger.

Whether or not you are planning to attend the Annual Meeting, it is
important that your shares be represented. Please complete, sign and date the
enclosed proxy and mail it promptly in the return envelope provided. Returning
the enclosed proxy does not prejudice your right to vote your shares in person
at the Annual Meeting if you choose to do so.

Sincerely,

M. Ralph Campbell
Chairman

May 8, 1995

YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY
THE ENCLOSED PROXY, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
PLEASE DO NOT SEND IN ANY MONTOUR BANK CERTIFICATES AT THIS TIME.

<PAGE> 7

Montour Bank
1519 Bloom Road
Danville, Pennsylvania 17821

------------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held on June 14, 1995

------------------------------

Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of Montour Bank will be held on June 14, 1995 at 10:00 a.m.,
local time, at Montour Bank's offices at 1519 Bloom Road, Danville, Pennsylvania
17821 for the following purposes:

1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization, dated January 11, 1995 (the "Reorganization Agreement") between
Montour Bank and Omega Financial Corporation ("Omega") and the related Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which Montour Bank will
be merged with and into Montour Interim Bank, a wholly-owned subsidiary in
formation of Omega, and shareholders of Montour Bank would receive either (a)
common stock of Omega, (b) cash, or (c) a combination of common stock of Omega
and cash, all as more fully described in the accompanying Proxy Statement -
Prospectus;

2. To elect four Class B directors to serve for a 3-year term and until
their successors are duly elected and qualified;

3. To vote on adjournment of the Annual Meeting, if necessary, to permit
further solicitation of proxies in the event there are not sufficient votes at
the time of the Annual Meeting to constitute a quorum or to approve the Merger;

4. To ratify the selection of J.H. Williams & Co., Certified Public
Accountants of Kingston, Pennsylvania as the independent auditors of Montour
Bank for the fiscal year ending December 31, 1995; and

5. To consider and act upon such other matters as may properly be brought
before the Annual Meeting or any adjournments or postponements thereof.

A copy of the Reorganization Agreement is annexed as Appendix "A" to the
attached Proxy Statement-Prospectus and a copy of the Merger Agreement is
annexed as Appendix "B" thereto.

The Board of Directors of Montour Bank has fixed the close of business on
May 5, 1995 as the record date for the Annual Meeting. Only holders of record of
Common Stock of Montour Bank at the close of business on that date will be
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
or postponements thereof.

BY ORDER OF THE BOARD OF DIRECTORS

Secretary

May 8, 1995

THE MERGER IS OF MAJOR IMPORTANCE TO THE SHAREHOLDERS OF MONTOUR BANK.
ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE
INFORMATION PRESENTED IN THE ATTACHED PROXY STATEMENT-PROSPECTUS.

<PAGE> 8

- ------------------------------------------------------------------------------

MONTOUR BANK

PROXY STATEMENT

----------------

OMEGA FINANCIAL CORPORATION

PROSPECTUS

125,424 SHARES OF COMMON STOCK

- ------------------------------------------------------------------------------

This Proxy Statement-Prospectus (the "Proxy Statement") is being furnished
to shareholders of Montour Bank in connection with the solicitation of proxies
by the Board of Directors of Montour Bank for use at its Annual Meeting of
Shareholders (including any adjournments or postponements thereof) which is to
be held on June 14, 1995. At the Annual Meeting, in addition to the election of
directors and ratification of auditors, shareholders of Montour Bank will
consider and take action upon the proposed merger (the "Merger") of Montour Bank
with and into Montour Interim Bank ("Interim"), a wholly-owned subsidiary in
formation of Omega Financial Corporation ("Omega") pursuant to the Agreement and
Plan of Merger, dated January 11, 1995 ("Merger Agreement") between Montour Bank
and Interim and the related Agreement and Plan of Reorganization, dated January
11, 1995 (the "Reorganization Agreement") between Omega and Montour Bank. The
125,424 shares of Omega Common Stock covered by this Prospectus represents the
maximum number of shares of common stock, par value $5.00 per share, of Omega
issuable in the Merger.

This Proxy Statement also constitutes a prospectus of Omega with respect to
shares of Omega Common Stock issuable to Montour Bank shareholders in the
Merger.

THE SHARES OF OMEGA COMMON STOCK OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE SHARES OF OMEGA COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.

----------------

The date of this Proxy Statement-Prospectus is May 8, 1995.

<PAGE> 9

AVAILABLE INFORMATION AND INCORPORATION
OF DOCUMENTS BY REFERENCE

Under the rules and regulations of the Securities and Exchange Commission
(the "Commission"), the solicitation of the shareholders of Montour Bank to
approve the Merger constitutes an offering of Omega Common Stock to be issued in
connection with the Merger. Accordingly, Omega has filed with the Commission a
Registration Statement on Form S-4 under the Securities Act of 1933, as amended
(the "Securities Act") with respect to such offering. This Proxy Statement-
Prospectus also constitutes a prospectus of Omega filed as part of the
Registration Statement. This Proxy Statement-Prospectus does not contain all of
the information set forth in such Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
such information, reference is made to the Registration Statement and the
exhibits filed as a part thereof. Such additional information may be obtained
from the Commission's principal office in Washington, D.C. Statements contained
in this Proxy Statement-Prospectus or in any document incorporated in this Proxy
Statement-Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or to such other document, each such
statement being qualified in all respects by such reference.

Omega is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance with these
requirements, Omega files reports, proxy statements and other information with
the Commission.

The Registration Statement, as well as the reports, proxy statements and
other information filed by Omega pursuant to the informational requirements of
the Exchange Act, can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the following regional offices of the
Commission: New York Regional Office, 75 Park Place, Room 1228, New York, New
York 10007; and Chicago Regional Office, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the public reference section of the Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 at prescribed
rates. Omega Common Stock is quoted on the NASDAQ National Market System under
the symbol "OMEF", and such reports, proxy statements and other information can
also be inspected at the office of NASDAQ Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.

This Proxy Statement-Prospectus incorporates by reference pursuant to the
Exchange Act Omega's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (which includes portions of the 1994 Annual Report to
Shareholders). This document was previously filed by Omega with the Commission
and is not presented herein. This document (not including exhibits thereto,
unless such exhibits are specifically incorporated by reference into the
information incorporated herein) is available free of charge to any shareholder
of Montour Bank, as of the Record Date, including any beneficial owner, upon
written or oral request directed to the Corporate Secretary, Omega Financial
Corporation, P.O. Box 619, State College, PA 16804. Responses to any such
request will be made within one business day by sending the requested document
by first class mail or other equally prompt means. In order to insure timely
delivery of the document, any requests should be made at least five business
days prior to the date of the Annual Meeting.

A copy of Omega's 1994 Annual Report to Shareholders for the fiscal year
ended December 31, 1994, (not including exhibits thereto) is being furnished to
each person who receives this Proxy Statement-Prospectus. The following
information contained in that document is incorporated by reference herein:
<PAGE> 10

market price of and dividends on Omega's Common Stock and related stockholder
matters (page 6); audited financial statements and related notes thereto (pages
26 to 47); management's discussion and analysis of financial condition and
results of operations (pages 8 to 25); and selected financial data (page 7) and
supplementary financial information (page 46).

All information contained in this Proxy Statement-Prospectus with respect to
Omega and its subsidiaries was supplied by Omega and all information with
respect to Montour Bank and its subsidiaries was supplied by Montour Bank.

No person is authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement-Prospectus does not constitute an offer to
sell, or a solicitation of an offer to purchase, the securities offered by this
Proxy Statement-Prospectus, or the solicitation of a Proxy, to or from any
person, in any jurisdiction where it is unlawful to make such offer or
solicitation of any offer or proxy solicitation. Neither the delivery of this
Proxy Statement-Prospectus nor any distribution of the securities made under
this Proxy Statement-Prospectus shall, under any circumstances, create an
implication that there has been no change in the affairs of Omega or Montour
Bank since the date of this Proxy Statement-Prospectus.

This Proxy Statement-Prospectus does not constitute a prospectus for the
public reoffering of Omega Common Stock.

<PAGE> 11

TABLE OF CONTENTS

Page
----
SUMMARY AND GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 1
The Montour Bank Annual Meeting . . . . . . . . . . . . . . . . . . . . 1
Date, Place and Time of Montour Bank Annual Meeting . . . . . . . . . 1
Purpose of Montour Bank Annual Meeting. . . . . . . . . . . . . . . . 1
Shares Entitled to Vote and Shares Outstanding. . . . . . . . . . . . 1
Vote Required by Montour Bank Shareholders. . . . . . . . . . . . . . 2
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . 3
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Parties to the Merger . . . . . . . . . . . . . . . . . . . . . . . . 3
Principal Terms of the Merger . . . . . . . . . . . . . . . . . . . . 4
Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Exchange Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Recommendations of the Board of Directors of Montour Bank;
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . 6
Opinion of Montour Bank Financial Advisor . . . . . . . . . . . . . . 6
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . 7
Conditions to the Merger. . . . . . . . . . . . . . . . . . . . . . . 7
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 8
Differences in Shareholder Rights . . . . . . . . . . . . . . . . . . 8
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . 8
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . 8
Comparative Per Share Data. . . . . . . . . . . . . . . . . . . . . . 8
Market Value of Securities. . . . . . . . . . . . . . . . . . . . . . 9

THE PROPOSED MERGER AND RELATED MATTERS . . . . . . . . . . . . . . . . . . 10
Principal Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Election by Montour Bank Shareholders . . . . . . . . . . . . . . . . 11
Adjustment to Exchange Ratio. . . . . . . . . . . . . . . . . . . . . 13
Offer to Purchase Warrants. . . . . . . . . . . . . . . . . . . . . . 14
Background of and Reasons for the Merger; Recommendation of
Montour Bank Board of Directors . . . . . . . . . . . . . . . . . . . 14
Opinion of Montour Bank Financial Advisor . . . . . . . . . . . . . . 16
Consideration to be Received. . . . . . . . . . . . . . . . . . . . . 17
Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exchange Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Conditions and Covenants. . . . . . . . . . . . . . . . . . . . . . . 18
Termination and Expenses; Waivers . . . . . . . . . . . . . . . . . . 20
Modification and Waiver . . . . . . . . . . . . . . . . . . . . . . . 21
Interests of Certain Persons in the Merger. . . . . . . . . . . . . . 22
<PAGE> 12

Page
----
TABLE OF CONTENTS (Continued)

RIGHTS OF DISSENTING SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . 23

CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . . . 27

OTHER CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 28
Resales of Omega Common Stock . . . . . . . . . . . . . . . . . . . . 29
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . 29

DESCRIPTION OF THE CAPITAL STOCK OF OMEGA. . . . . . . . . . . . . . . . . 30
Omega Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Series A ESOP Cumulative Convertible Preferred Stock. . . . . . . . . 31
"Anti-Takeover" and "Anti-Greenmail" Provisions and Management
Implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

COMPARISON OF THE RIGHTS OF THE SHAREHOLDERS OF THE CAPITAL STOCK
OF OMEGA AND MONTOUR BANK. . . . . . . . . . . . . . . . . . . . . . . 38

DESCRIPTION OF OMEGA . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

DESCRIPTION OF MONTOUR BANK. . . . . . . . . . . . . . . . . . . . . . . . 41

MONTOUR BANK MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . 46

MONTOUR BANK SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 48

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF MONTOUR BANK. . . . . . . . . . . . . . . . . 49

ELECTION OF DIRECTORS OF MONTOUR BANK. . . . . . . . . . . . . . . . . . . 61

BENEFICIAL OWNERSHIP OF MONTOUR BANK VOTING SECURITIES . . . . . . . . . . 65

RATIFICATION OF APPOINTMENT OF AUDITORS. . . . . . . . . . . . . . . . . . 69

ADJOURNMENT OF ANNUAL MEETING. . . . . . . . . . . . . . . . . . . . . . . 70

EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

INDEX TO FINANCIAL STATEMENTS OF MONTOUR BANK. . . . . . . . . . . . . . . 71

<PAGE> 13

Page
----
TABLE OF CONTENTS (Continued)

AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . . . . Appendix "A"

AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . . . Appendix "B"

OPINION OF DANIELSON ASSOCIATES, INC. . . . . . . . . . . . . . Appendix "C"

SUBCHAPTER D OF CHAPTER 15 OF THE PENNSYLVANIA BUSINESS
CORPORATION LAW OF 1988 (15 PA. C.S. SECTIONS 1571-1580)
AS AMENDED, RELATING TO DISSENTERS' RIGHTS . . . . . . . . . . . Appendix "D"

<PAGE> 14

PROXY STATEMENT-PROSPECTUS

--------------------------

SUMMARY AND GENERAL INFORMATION

The following is a brief summary of certain information contained elsewhere
in the Proxy Statement-Prospectus (this "Proxy Statement"). This summary is
included to assist the shareholders of Montour Bank in their review of this
Proxy Statement and is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Proxy Statement, including the
appendices hereto.

--------------------------

The Montour Bank Annual Meeting

Date, Place and Time of Montour Bank Annual Meeting

This Proxy Statement is being furnished to the shareholders of Montour Bank
in connection with the solicitation of proxies by the Board of Directors of
Montour Bank for use at the Annual Meeting of Shareholders of Montour Bank (the
"Montour Bank Annual Meeting") which will be held at the main office of Montour
Bank, 1519 Bloom Road, Danville, Pennsylvania 17821 on June 14, 1995 at 10:00
a.m., local time, and any adjournments or postponements thereof. This Proxy
Statement and related materials are first being mailed to shareholders of
Montour Bank on or about May 8, 1995.

Purpose of Montour Bank Annual Meeting

At the Montour Bank Annual Meeting, the shareholders of Montour Bank are
being asked to: (i) consider and act upon a proposal to approve the
Reorganization Agreement between Montour Bank and Omega and a related Merger
Agreement between Montour Bank and Interim each dated January 11, 1995, which
together provide for the merger of Montour Bank with and into Interim (the
"Merger") (the Agreement and Plan of Reorganization and the Agreement and Plan
of Merger are collectively referred to as the "Merger Agreements"); (ii) elect
four Class B directors; (iii) vote on adjournment of the Montour Bank Annual
Meeting, if necessary, to permit further solicitation of proxies in the event
there are not sufficient votes at the time of the Montour Bank Annual Meeting to
constitute a quorum or to approve the Merger Agreements; (v) ratify the
selection of J.H. Williams & Co., certified public accountants, as the
independent auditors of Montour Bank for the fiscal year ended December 31,
1995; and (v) act on such other matters as may be properly brought before the
Montour Bank Annual Meeting.

Shares Entitled to Vote and Shares Outstanding

Only holders of record of Montour Bank Common Stock at the close of business
on May 5, 1995 (the "Record Date") will be entitled to notice of and to vote at
the Montour Bank Annual Meeting. At the close of business on such date, there
were 418,080 shares of Montour Bank Common Stock outstanding.

<PAGE> 15

Shareholders of Montour Bank Common Stock of record on the Record Date are
entitled to one vote per share on any matter that may properly come before the
Montour Bank Annual Meeting. The presence, either in person or by proxy, of the
holders of a majority of the shares of Montour Bank Common Stock outstanding as
of the Record Date is necessary to constitute a quorum at the Montour Bank
Annual Meeting.

Vote Required by Montour Bank Shareholders

Approval of the Merger will require the affirmative vote, either in person
or by proxy, of the holders of Montour Bank Common Stock entitled to cast at
least two-thirds of the votes which all holders of Montour Bank Common Stock are
entitled to cast thereon. Abstentions and broker non-votes will not constitute
or be counted as votes cast for purposes of the Montour Bank Annual Meeting.

The directors and officers of Montour Bank are entitled to vote (including
those shares as to which they have shared voting power) an aggregate of
approximately 44.34% of the shares of Montour Bank Common Stock outstanding as
of the Record Date. Each director and officer of Montour Bank has agreed to vote
the shares of Montour Bank Common Stock as to which he has or shares voting
power FOR the proposal to approve the Merger.

With respect to the election of directors, shareholders are entitled to
cumulative voting. This means that each shareholder has the right, in person or
by proxy, to multiply the number of votes to which he or she is entitled by the
number of directors to be elected and to cast the whole number of such votes for
one candidate or to distribute all or fewer of them among two or more
candidates. The four nominees receiving the most votes at the Annual Meeting
will be elected directors.

Proxies

A Form of Proxy is enclosed. Each properly executed and returned proxy will
be voted at the Annual Meeting in accordance with the instructions thereon. If
no instructions are given, the proxy will be voted FOR the proposal to approve
the Merger, FOR the election of each of the nominees for Class B director, FOR
ratification of J.H. Williams & Co. and FOR adjournment of the Montour Bank
Annual Meeting, if necessary.

The enclosed Proxy confers discretionary authority to vote with respect to
any and all of the following matters that may properly come before the Montour
Bank Annual Meeting: (i) matters which Montour Bank does not know a reasonable
time before the Montour Bank Annual Meeting are to be presented at the Montour
Bank Annual Meeting; (ii) approval of the minutes of a prior meeting of
shareholders, if such approval does not amount to ratification of the action
taken at the meeting; (iii) the election of any person to any office for which a
bona fide nominee is named in this Proxy Statement and such nominee is unable to
serve or for good cause will not serve; and (iv) matters incident to the conduct
of the Montour Bank Annual Meeting. In connection with such matters, the persons
designated as proxies will vote in accordance with their best judgment.

Any shareholder of Montour Bank giving a proxy may revoke it at any time
before it is exercised by giving written notice of such revocation to the
Secretary of Montour Bank prior to its exercise. The presence at the Montour
<PAGE> 16

Bank Annual Meeting of any shareholder who has given a proxy will not revoke the
proxy unless the shareholder files written notice of such revocation with the
Secretary of Montour Bank prior to the voting of the proxy.

The Board of Directors of Montour Bank knows of no matters, other than the
matters described in this Proxy Statement, that will be presented for
consideration at the Montour Bank Annual Meeting. However, if other matters
properly come before the Montour Bank Annual Meeting, it is intended that the
persons designated as proxies will vote upon such matters in accordance with
their best judgment.

Solicitation of Proxies

In addition to solicitation by mail, directors, officers and employees of
Montour Bank may solicit proxies from the shareholders of Montour Bank
personally or by telephone or telegram. Brokerage houses, nominees, banks,
fiduciaries and other custodians will be requested by Montour Bank to forward
soliciting materials to beneficial owners. The expense of the proxy solicitation
will be borne by Montour Bank.

The Merger

The following is a brief summary of certain information contained elsewhere
in this Proxy Statement. This summary is included to assist the shareholders of
Montour Bank in their review of this Proxy Statement and is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Proxy Statement, including the appendices hereto.

Parties to the Merger

Omega. Omega is a Pennsylvania business corporation which is registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). Omega's three banking subsidiaries are Omega Bank, N.A., Penn
Central National Bank and Hollidaysburg Trust Company. Omega Bank, N.A. provides
retail and commercial banking services through 23 banking offices in Centre,
Clinton, Mifflin and Juniata Counties, Pennsylvania. Penn Central National Bank
provides similar services through seven banking offices in Huntingdon and
Bedford Counties, Pennsylvania. Hollidaysburg Trust Company operates eight full
service banking offices in Blair County, Pennsylvania. As of December 31, 1994,
Omega had total consolidated assets of approximately $939.9 million and
stockholders' equity of approximately $113.1 million.

Omega is a legal entity separate and distinct from its subsidiary banks.
Accordingly, the right of Omega and consequently the right of creditors and
shareholders of Omega to participate in any distribution of the assets or
earnings of any affiliated bank is necessarily subject to the prior claims of
creditors of the affiliated bank, except to the extent that claims of Omega in
its capacity as a creditor may be recognized. The principal source of Omega's
revenue and cash flow is dividends from its affiliated banks and other
subsidiaries.

The mailing address of Omega's executive offices is 366 Walker Drive, State
College, Pennsylvania 16801 and its telephone number is (814) 231-7680.
<PAGE> 17

Montour Bank. Montour Bank was organized in 1989 as a Pennsylvania-chartered
banking institution. Montour Bank is a member of the Federal Reserve System. Its
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") under
the Bank Insurance Fund.

Montour Bank is a full service commercial bank providing a wide range of
services to individuals and small to medium sized businesses in its Montour
County, Pennsylvania market area. Among its services, Montour Bank accepts time,
demand and savings deposits and makes secured and unsecured commercial, real
estate and consumer loans. At December 31, 1994, Montour Bank has total assets
of approximately $41.0 million and stockholders' equity of $3.9 million.

Montour Bank has one office located at 1519 Bloom Road, Danville,
Pennsylvania 17821 and its telephone number is 717-275-8000.

Principal Terms of the Merger

On the date the Merger is consummated, Montour Bank will be merged with and
into Interim which will be the surviving corporation and a wholly-owned
subsidiary of Omega. The name of Interim as the surviving corporation will be
changed to "Montour Bank".

On the Effective Date of the Merger, each issued and outstanding share of
Montour Bank Common Stock, based upon an election to be made by each Montour
Bank shareholder (or, in the absence of such election, by determination of
Omega), will be exchanged for either: (a) one-half share of Omega Common Stock,
(b) $12 cash, or (c) a combination of Omega common stock and cash under (a) and
(b) above. Not more than 49% nor less than 40% of the outstanding shares of
Montour Bank Common Stock may be converted into cash.

In the event that holders of more than 49% of the outstanding shares of
Montour Bank Common Stock elect to receive cash in exchange for Montour Bank
Common Stock, then that portion in excess of the maximum 49% cash consideration
will be distributed pro-rata in Omega Common Stock to those Montour Bank
shareholders who elected to receive cash at the rate of one half share of Omega
Common Stock for each share of Montour Bank Common Stock and the amount of cash
to be received by such shareholders in exchange for their shares of Montour Bank
Common Stock will be appropriately reduced.

In the event that holders of less than 40% of the outstanding shares of
Montour Bank Common Stock elect to receive cash in exchange for Montour Bank
Common Stock, then that portion of the required 40% cash consideration that has
not been selected will be distributed, pro rata in cash at the rate of $12 for
each share of Montour Bank Common Stock, to those Montour Bank shareholders who
have elected to receive Omega Common Stock in exchange for their shares of
Montour Bank Common Stock and the number of shares of Omega Common Stock to be
received by such shareholders in exchange for their shares of Montour Bank
Common Stock will be appropriately reduced.

Each Montour Bank shareholder is being asked to make an election with
respect to the form of consideration to be received by him in exchange for his
shares of Montour Bank Common Stock, which election will be legally binding, but
<PAGE> 18

will be subject to adjustment in the event that holders of more than 49% or less
than 40% of the outstanding shares of Montour Bank Common Stock elect to receive
cash in exchange for their Montour Bank Common Stock.

If a shareholder makes no election, he will receive either Omega Common
Stock or cash or a combination of Omega Common Stock and cash as determined by
the Board of Directors of Omega in its discretion The election of shareholders
should be made on the enclosed Form of Election. Each shareholder should
complete and return the enclosed Form of Election in accordance with the
instructions accompanying the Form of Election which should be carefully read
and strictly complied with. All Forms of Election must be received by Montour
Bank no later than 10:00 a.m. (local time) on June 14, 1995 the date of the
Montour Bank Annual Meeting.

If the "average price" of Omega Common Stock is more than $30, the exchange
ratio of Montour Bank Common Stock for Omega Common Stock will be changed from
one share of Montour Bank Common Stock for one-half share of Omega Common Stock
to one share of Montour Bank Common Stock for the fraction of a share of Omega
Common Stock obtained by multiplying .5 by a fraction equal to 30 divided by the
"average price." The Merger Agreement provides that the "average price" of Omega
Common Stock will be the mean average of the closing sales prices for Omega
Common Stock on the NASDAQ National Market System for the thirty business day
period ending on the fifteenth business day before the date the merger is
consummated.

If the "average price" of Omega Common Stock is less than $20 for the 30
business day period ending on the fifteenth business day preceding the Effective
Date, the Reorganization Agreement will terminate and be of no further force and
effect unless (i) the Montour Bank Board of Directors waives this provision in
writing or (ii) Omega agrees to provide sufficient additional shares of Omega
Common Stock under the Merger Agreement so that the number of shares of Omega
Common Stock received in exchange for two shares of Montour Bank Common Stock
equals $20 in market value using the "average price" to determine such market
value.

Since the Effective Date of the Merger may not occur for several weeks after
the Annual Meeting, the market value of Omega Common Stock may vary between the
date of the Annual Meeting and the Effective Date of the Merger. In the Merger
Agreement the exchange ratio of one-half share of Omega Common Stock for each
share of Montour Bank Common Stock is fixed, subject to adjustment as described
above. Therefore, a shareholder of Montour Bank must bear certain of the risk
with respect to any decrease in the value of Omega Common Stock subsequent to
the Annual Meeting and prior to the Effective Date of the Merger. See "THE
PROPOSED MERGER AND RELATED MATTERS - Consideration to be Received."

In lieu of the issuance of fractional shares of Omega Common Stock, cash
adjustments will be paid equal to an amount determined by multiplying such
fraction of a share of Omega Common Stock by the "average price" of Omega Common
Stock as determined above.

Effective Date

Subject to the terms and conditions specified in the Merger Agreements and
upon satisfaction of all requirements of law, including the receipt of all
approvals required by federal and state governmental agencies and boards, it is
<PAGE> 19

currently anticipated that the Merger will be consummated (the "Effective Date")
in the third quarter of 1995. See "THE PROPOSED MERGER AND RELATED MATTERS -
Effective Date."

Exchange Procedure

Omega has designated its subsidiary Omega Bank, N.A. to act as the exchange
agent to receive the stock certificates of Montour Bank shareholders and to
exchange such certificates for Omega Common Stock and cash. See "THE PROPOSED
MERGER AND RELATED MATTERS - Exchange Procedure."

MONTOUR BANK SHAREHOLDERS SHOULD NOT SURRENDER THEIR STOCK CERTIFICATES
UNTIL INSTRUCTIONS ARE RECEIVED FROM THE EXCHANGE AGENT AND SHOULD NOT SEND IN
THEIR STOCK CERTIFICATES WITH THE PROXY.

Recommendations of the Board of Directors of Montour Bank;
Reasons for the Merger

The Board of Directors of Montour Bank believes that the terms of the Merger
are fair and in the best interest of the Montour Bank shareholders and has
unanimously approved the Merger Agreements. The Board of Directors of Montour
Bank recommends that the Montour Bank shareholders approve and adopt the Merger
Agreements.

The Board of Directors of Montour Bank believes that the Merger will result
in a stronger and more effective competitor in the Montour County, Pennsylvania
market, which will be better able to compete effectively in the rapidly changing
marketplace for banking and financial services and to take advantage of
opportunities that would not be available to Montour Bank on its own. The
Montour Bank Board of Directors believes that the Merger will provide Montour
Bank's customers with a broader range of products and services as well as
greater convenience. Furthermore, the Montour Bank Board of Directors believes
that the Merger will afford Montour Bank shareholders who elect to exchange
their Montour Bank Common Stock for Omega Common Stock the opportunity to
continue as equity participants with a more liquid investment in a larger
regional banking company and begin to receive dividends on their investments.
See "THE PROPOSED MERGER AND RELATED MATTERS -- Reasons for the Merger;
Recommendations of Montour Bank Board of Directors."

Opinion of Montour Bank Financial Advisor

Montour Bank has engaged Danielson Associates, Inc., a bank consulting firm
("Danielson"), to act as its advisor for the purpose of evaluating the
consideration to be provided to Montour Bank's shareholders in the Merger and to
opine as to its fairness, from a financial point of view. Danielson has rendered
its opinion to the Board of Directors of Montour Bank that the consideration to
be received in the Merger by Montour Bank's shareholders is fair, from a
financial point of view. See "THE PROPOSED MERGER AND RELATED MATTERS - Opinion
of Montour Bank Financial Advisor." This opinion, which is annexed as Appendix
"C" to this Proxy Statement, should be read in its entirety for information with
respect to the assumptions made and the matters considered by Danielson in
rendering such opinion.
<PAGE> 20

Rights of Dissenting Shareholders

Under the Pennsylvania Business Corporation Law of 1988, as amended ("BCL"),
each outstanding share of Montour Bank Common Stock, the holder of which has (i)
timely filed with Omega a written demand for appraisal pursuant to Section 1574
of the BCL, (ii) effected no change in the beneficial ownership of said shares
from the date of such filing continuously through the Effective Date, (iii)
refrained from voting such shares in approval of the Merger and (iv) otherwise
complies with the procedures required by the BCL, shall not be converted in the
Merger into Omega Common Stock but such holder shall have such rights to receive
in cash the "fair value" of such share of Montour Bank Common Stock in lieu of
Omega Common Stock as are provided by the BCL. See "RIGHTS OF DISSENTING
SHAREHOLDERS" and Subchapter 15D of the BCL, a copy of which is attached hereto
as Appendix "D" and incorporated herein by reference. Shareholders considering
exercising rights under Subchapter 15D of the BCL are advised to review Appendix
"D" in its entirety and to consult their own legal counsel.

Conditions to the Merger

The obligations of the parties to the Reorganization Agreement and the
Merger Agreement are subject to the satisfaction of a number of conditions,
including the approval of the Merger by the shareholders of Montour Bank and
compliance with certain other terms and conditions, including the receipt of all
approvals required by all federal and state governmental agencies. The Board of
Directors of Montour Bank and Omega may waive such conditions notwithstanding
shareholder approvals except for those conditions relating to regulatory
approvals and the shareholders vote contemplated herein. See "THE PROPOSED
MERGER AND RELATED MATTERS - Conditions and Covenants."

Termination

The Merger Agreements may be terminated at any time prior to the Effective
Date, either before or after the approval of the shareholders of Montour Bank,
among other methods, (a) by a vote of a majority of the Board of Directors of
both Omega and Montour, (b) by a vote of a majority of the Board of Directors of
Montour Bank, in the event of a material breach of the Merger Agreement by Omega
if such breach is not cured within ten business days after notice by Montour
Bank of its intention to terminate; (c) by a vote of a majority of the Board of
Directors of Omega, in the event of a material breach of the Merger Agreements
by Montour Bank which is not cured within ten business days after notice by
Omega of its intent to terminate; or (e) by a vote of a majority of the Board of
Directors of either Omega or Montour Bank, in the event that the terminating
party is not in material breach of the Merger Agreements and: (i) the Merger
shall not have been consummated on or before December 31, 1995; (ii) any
approval of any regulatory authority required as a condition to the consummation
of the Merger Agreements, and the transactions contemplated thereby shall have
been denied by final non-appealable action of such authority; (iii) the
shareholders of Montour Bank shall have failed to approve the Merger Agreements
at the shareholders meetings called for that purpose; or (iv) the party giving
such notice elects to terminate the Merger Agreements and abandon the Merger, as
of a stated date, which shall not be less than ten business days after the date
on which such notice is given, because (x) the party receiving such notice will
be unable, by December 31, 1995, to meet or satisfy one or more specified
conditions precedent (set forth in the Merger Agreement) to the obligation of
the party sending such notice to close under the Merger Agreements and (y) the
<PAGE> 21

party sending such notice does not intend to waive the satisfaction of such
conditions precedent. See "THE PROPOSED MERGER AND RELATED MATTERS - Termination
and Expenses; Waivers."

Regulatory Approvals

The Merger is subject to prior approval by the Board of Governors of the
Federal Reserve System ("FRB"), the FDIC and the Pennsylvania Department of
Banking (the "Department"). Applications for such approvals have been filed, but
no assurance can be given that such regulatory approvals will be obtained. See
"OTHER CONSIDERATIONS - Regulatory Approvals."

Differences in Shareholder Rights

Upon consummation of the Merger, shareholders of Montour Bank who elect to
exchange their Montour Bank Common Stock for Omega Common Stock will become
shareholders of Omega and their rights as such will be governed by Omega's
Amended and Restated Articles of Incorporation and Bylaws. The rights of
shareholders of Omega are different in certain respects from the rights of
shareholders of Montour Bank. See "COMPARISON OF THE RIGHTS OF THE SHAREHOLDERS
OF THE CAPITAL STOCK OF OMEGA AND MONTOUR BANK."

Certain Federal Income Tax Consequences

The Merger is intended to be a tax-free reorganization so that no gain or
loss would be recognized by Omega or Montour Bank, and no gain or loss would be
recognized by Montour Bank shareholders with respect to the exchange of their
shares of Montour Bank Common Stock for shares of Omega Common Stock, except in
respect of cash received for fractional shares. Consummation of the Merger is
conditioned upon an opinion of Omega counsel, dated the Effective Date of the
Merger, being delivered to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"). See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."

IT IS RECOMMENDED THAT EACH SHAREHOLDER CONSULT HIS OR HER OWN
PERSONAL TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES TO HIM OR HER
RESULTING FROM THE MERGER.

Accounting Treatment

It is anticipated that the Merger will be accounted for by Omega as a
purchase. See "OTHER CONSIDERATIONS - Accounting Treatment."

Comparative Per Share Data

The following table sets forth certain unaudited comparative per share data
relating to book value per common share, cash dividends declared per common
share, and income from continuing operations per common share (i) on a
historical basis for Omega and Montour Bank, (ii) on a pro forma basis per share
of Omega Common Stock to reflect consummation of the Merger, and (iii) on an
equivalent pro forma basis per share of Montour Bank Common Stock to reflect
<PAGE> 22

consummation of the Merger. The data presented as proforma per share of Omega
Common Stock and as equivalent pro forma per share of Montour Bank Common Stock
assumes that 55% of the issued and outstanding shares of Montour Bank Common
Stock will be exchanged in the Merger for Omega Common Stock and that 45% of the
issued and outstanding shares of Montour Bank Common Stock will be exchanged in
the Merger for cash. See "THE PROPOSED MERGER AND RELATED MATTERS." This
information should be read in conjunction with the consolidated financial
statements of Omega, including the notes thereto, which accompany this Proxy
Statement, and the financial statements of Montour Bank, including the notes
thereto, included elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
Historical Per Share
--------------------
Omega Montour Pro Forma Per Equivalent Pro Forma Per
----- ------- Omega Share Montour Bank Shares
------------- ------------------------
<S> <C> <C> <C> <C>
Book Value Per
Common Share:

December 31, 1994 $18.90 $9.24 $19.02 $9.51

Cash Dividends
Declared Per
Common Share:

Year Ended .66 -- .65 .325
December 31, 1994

Income From
Continuing
Operations Per
Common Share:

Year Ended 2.08 1.10 2.09 1.05
December 31, 1994:
(primary)
</TABLE>

Market Value of Securities

The following table sets forth the market value per share of Omega Common
Stock and Montour Bank Common Stock and the equivalent market value per share of
Montour Bank Common Stock on January 10, 1995 the last business day preceding
public announcement of the Merger. The equivalent market value per share of
Montour Bank Common Stock is based on the exchange ratio of .5 shares of Omega
Common Stock for each share of Montour Bank Common Stock. The historical market
value per share of Omega Common Stock represents the last reported sales price
<PAGE> 23

on such date as reported on the NASDAQ Stock Market. The historical market value
per share of Montour Bank Common Stock represents the price of the last sale
known to the Board of Directors of Montour Bank. See "MONTOUR BANK MARKET PRICES
AND DIVIDENDS."

Montour Bank
------------------------
Omega Historical Historical Equivalent
---------------- ---------- ----------
January 10, 1995 . . . . . . . $24.50 $10.00 $12.25

THE PROPOSED MERGER AND RELATED MATTERS

Principal Terms

The description of the terms and conditions of the Merger and of the Merger
Agreements included in this Proxy Statement are qualified in their entirety by
reference to the Agreement and Plan of Reorganization and the Agreement and Plan
of Merger, copies of which are attached hereto as Appendices "A" and "B,"
respectively, and are incorporated herein by reference. SHAREHOLDERS ARE URGED
TO CAREFULLY REVIEW THE MERGER AGREEMENTS.

The Merger

Pursuant to the terms of the Merger Agreement and related Reorganization
Agreement, and in accordance with the provisions of the Pennsylvania Banking
Code of 1965, as amended ("Banking Code"), Montour Bank will be merged with and
into Interim which will be the surviving corporation. The name of the surviving
corporation will be "Montour Bank," which will be a wholly owned subsidiary of
Omega. After the Effective Date of the Merger, Omega will have four subsidiary
banks: Omega Bank, N.A., Penn Central National Bank, Hollidaysburg Trust Company
and Montour Bank.

On the Effective Date of the Merger, (i) all of the shares of the surviving
corporation will be owned by Omega, and (ii) each issued and outstanding share
of Montour Bank Common Stock (except for shares owned by shareholders of Montour
Bank who duly assert dissenters' rights in accordance with the Merger Agreements
and applicable law), based upon elections of the shareholders of Montour Bank
pursuant to procedures set forth in the Merger Agreements and described below,
will be converted into the right to receive, subject to adjustment under certain
circumstances as described below under "Adjustment to Exchange Ratio," either:
(a) one-half share of Omega Common Stock, (b) $12 cash, or (c) a combination of
Omega common stock and cash under (a) and (b) above. Not more than 49% nor less
than 40% of the outstanding shares of Montour Bank Common Stock may be converted
into cash. Each Montour Bank shareholder is being asked to make an election with
respect to the form of consideration to be received by him in exchange for his
shares of Montour Bank Common Stock, which election shall be legally binding,
but shall be subject to adjustment in the event that holders of more than 49% or
less than 40% of the outstanding shares of Montour Bank Common Stock elect to
receive cash in exchange for their Montour Bank Common Stock. See "--Election by
Montour Bank Shareholders."
<PAGE> 24

The conversion of Montour Bank Common Stock into shares of Omega Common
Stock, cash or a combination of Omega Common Stock and cash, as set forth in the
prior paragraph, will occur automatically on the Effective Date of the Merger.
Montour Bank shareholders of record on the Effective Date will be entitled to
receive in exchange for their certificates of Montour Bank Common Stock, based
upon the election procedures set forth in the Merger Agreements and described
below, a certificate or certificates representing Omega Common Stock, cash, or a
combination of Omega Common Stock and cash. In addition, any Montour Bank
shareholder receiving Omega Common Stock will be entitled to receive cash in
lieu of fractional shares of Omega Common Stock. See "Exchange Procedure." Until
so surrendered, each outstanding certificate, which prior to the Effective Date
represented shares of Montour Bank Common Stock, shall be deemed to evidence the
ownership of shares of Omega Common Stock, cash, or both, as set forth above.

On the Effective Date, all properties and assets of every kind held by
Montour Bank and Interim will become the properties and assets of the surviving
corporation, which will become liable for all of the debts, liabilities and
other obligations of Montour Bank and Interim.

Election by Montour Bank Shareholders

The Merger Agreements require that Montour Bank ask each of its shareholders
to make a legally binding election to receive upon conversion of their Montour
Bank Common Stock in the Merger, either: (a) shares of Omega Common Stock at the
rate of one half share of Omega Common Stock for each share of Montour Bank
Common Stock held by such shareholder; (b) $12.00 in cash for each share of
Montour Common Stock held by such shareholder; or (c) a combination of Omega
Common Stock and cash under (a) and (b). Not more than 49% nor less than 40% of
the outstanding shares of Montour Bank Common Stock may be converted into cash.
The number of shares of Omega Common Stock for which Montour Bank Common Stock
may be exchanged is subject to adjustment as described under "--Adjustment to
Exchange Ratio."

The operation of the adjustment required by the preceding paragraph is
illustrated by the following example:

If 418,080 shares of Montour Bank Common Stock are outstanding immediately
prior to the Effective Date, a maximum of 49% (or 204,859.2 shares) may be
exchanged for cash. If the holders of 70% of the outstanding shares of
Montour Bank Common Stock (292,656 shares)) elect to receive cash and 30% of
the outstanding shares of Montour Bank Common Stock (125,424 shares) elect
to receive Omega Common Stock, then the maximum number of shares that may be
exchanged for cash has been exceeded by the elections of Montour
<PAGE> 25

shareholders. As a result, the difference between the maximum number of
shares that may be exchanged for cash and the number of shares that actually
elect to be so exchanged (87,796.8 shares in this example) would be
exchanged for Omega Common Stock, on a pro rata basis among those
shareholders who elected to receive cash, at the rate of one-half share of
Omega Common Stock for each share of Montour Bank Common Stock. The number
of shares of Montour Bank Common Stock to be exchanged for Omega Common
Stock in lieu of cash by each such shareholder will be determined by
multiplying the number of shares of Montour Bank Common Stock such
shareholder elected to exchange for cash by a fraction the numerator of
which is equal to the difference between the maximum number of shares that
may be exchanged for cash and the number of shares that actually elect to be
so exchanged (87,796.8 shares in the example) and the denominator of which
is equal to the number of shares which elected to be exchanged for cash
(292,656 shares in this example). Thus each of the holders of the 292,656
shares of Montour Bank Common Stock who elected to receive cash in exchange
for their shares would receive Omega Common Stock, in lieu of cash, at the
rate of one-half share of each share of Montour Bank Common Stock in
exchange for 87,796.8/292,656 of their shares.

The operation of the adjustment set forth in the preceding paragraph is
illustrated by the following example:

If 418,080 shares of Montour Common Stock are outstanding immediately prior
to the Effective Date, a minimum of 167,232 shares of Montour Bank Common
Stock must be exchanged for cash. If holders of 90 percent of the
outstanding shares of Montour Bank Common Stock (376,272 shares) elect to
receive Omega Common Stock, and holders of 10 percent of the outstanding
shares of Montour Bank Common Stock (41,808 shares) elect to receive cash,
then the minimum number of shares that must be exchanged for cash would not
be satisfied by the elections of Montour Bank shareholders. As a result, the
difference between the minimum number of shares that must be exchanged for
cash and the number of shares that actually elect to be so exchanged
(125,424 shares in this example) would be exchanged for cash, on a pro rata
basis among those shareholders who elected to receive Omega Common Stock, at
the rate of $12 for each share of Montour Bank Common Stock. The number of
shares of Montour Bank Common Stock to be exchanged for cash by each such
shareholder would be equal to the number of shares held by him, multiplied
by a fraction, the numerator of which is equal to the difference between the
<PAGE> 26

minimum number of shares that must be exchanged for cash and the number of
shares that actually elect to be so exchanged (125,424 shares in this
example) and the denominator of which is equal to the number of shares which
elected to be exchanged for Omega Common Stock (376,272 in this example).
Thus, each of the holders of the 376,272 shares of Montour Bank Common Stock
who elected to receive Omega Common Stock in exchange for their shares would
receive cash, in lieu of Omega Common Stock, at the rate of $12 per share in
exchange for 125,424/376,272 of their shares.

For purposes of computing the limitation on the number of outstanding shares
of Montour Bank Common Stock which may be exchanged for cash, the amount of cash
paid in lieu of issuance of fractional shares and with respect to shares which
exercise dissenters' rights will be included. See "--Consideration to be
Received" and "RIGHTS OF DISSENTING SHAREHOLDERS."

In accordance with the terms of the Merger Agreements, Montour Bank is
asking each Montour Bank shareholder to make an election to receive in exchange
for all of his Montour Bank Common Stock upon consummation of the Merger either:
Alternative I, all Omega Common Stock; Alternative II, all cash; or Alternative
III, any combination of Omega Common Stock and cash. If a shareholder elects
Alternative III, he must indicate the number of shares of Montour Bank Common
Stock that he desires to exchange for cash and the number of shares of Montour
Bank Common Stock that he desires to exchange for Omega Common Stock. If a
shareholder makes no election, he will receive either Omega Common Stock or cash
or a combination of Omega Common Stock and cash as determined by the Board of
Directors of Omega in its discretion. The election of shareholders should be
made on the enclosed Form of Election. Each shareholder should complete and
return the enclosed Form of Election in accordance with the instructions
accompanying the Form of Election which should be carefully read and strictly
complied with. All Forms of Election must be received by Montour Bank no later
than 10:00 a.m. (local time) on June 14, 1995, the date of the Montour Annual
Meeting.

Pursuant to the Reorganization Agreement, the Board of Directors of Montour
Bank and Omega specifically reserved the right (without seeking shareholder
approval), and whether before or after any shareholder approval has been
obtained) by mutual agreement in writing, to change or modify the method, timing
and procedures described herein, in any manner which they deem to be in the
mutual best interest of Montour and Omega or which they deem to be required
under applicable law.

Adjustment to Exchange Ratio

Common Stock on the NASDAQ National Market System for the thirty business day
period ending on the fifteenth business day before the date the merger is
consummated.

In the event that Omega changes the number of shares of its common stock
issued and outstanding prior to consummation of the Merger as a result of a
stock split, stock dividend or similar recapitalization, the exchange ratio
under which Montour Bank Common Stock will be exchanged for shares of Omega
Common Stock will be appropriately adjusted.

If the "average price" of Omega Common Stock is less than $20 for the 30
business day period ending on the fifteenth business day preceding the Effective
Date, the Reorganization Agreement will terminate and be of no further force and
effect unless (i) the Montour Bank Board of Directors waives this provision in
writing or (ii) Omega agrees to provide sufficient additional shares of Omega
Common Stock under the Merger Agreement so that the number of shares of Omega
Common Stock received in exchange for two shares of Montour Common Stock equals
$20 in market value using the "average price" to determine such market value.

Offer to Purchase Warrants

As of the date of execution of the Merger Agreements, warrants exercisable
for 177,865 shares of Montour Bank Common Stock at a purchase price of $10.00
per share were issued and outstanding (the "Warrants"). In satisfaction of a
condition precedent to Montour's obligations under the Reorganization Agreement,
Omega offered to purchase the Warrants for a purchase price of $2.00 per share
of Montour Bank Common Stock issuable upon exercise of the Warrants. All holders
of the Warrants have accepted Omega's offer and have agreed that the Warrants
shall not be exercised or exercisable unless the Reorganization Agreement is
terminated.

Background of and Reasons for the Merger;
Recommendation of Montour Bank Board of Directors

The Board of Directors of Montour Bank has, from time to time, considered
Montour Bank's position as an independent bank in the changing and increasingly
competitive financial services industry and its strategic alternatives -
continued independence, internal growth, or present or future sale. Montour
Bank's competition includes credit unions, banks and thrift institutions, most
of which have substantially greater resources than Montour Bank. See
"DESCRIPTION OF MONTOUR BANK - Competition."

In order to compete, Montour Bank has over the years priced its deposit
products at attractive rates and has invested these funds into consumer loans
which were mostly indirect automobile loans. Moreover, this strategy included
tight expense control and the continuance of good asset quality. The result of
this strategy was good profits in 1994. However, with a rising interest rate
environment, the Board of Directors had to consider the fact that interest
margins would tend to narrow. In addition, it would be necessary to increase
operating costs as the bank grew. These costs would be mostly attributable to
new personnel salaries and benefits and the upgrading of data processing
equipment. Finally, the Board of Directors realized that the bank would also
<PAGE> 28

eventually have to pay taxes which would also decrease potential net income.
Under these circumstances, Montour Bank's Board of Directors engaged Danielson
as its financial advisor.

In the latter half of 1994, the Montour Bank Board of Directors met with
Danielson and reviewed Montour Bank's strategic alternatives and its operating
situation. Danielson presented its analysis of the intrinsic present value of
Montour Bank. In addition, Danielson reviewed and identified potential acquirors
of Montour Bank. The Board of Directors decided to make informal inquiries to a
number of financial institutions to ascertain any indications of interest.

After informal discussions with a number of financial institutions, the
Omega offer was reviewed and analyzed by management and Danielson. The Board
concluded unanimously that the offer from Omega was a fair offer and approved
the transaction with Omega pursuant to the Merger Agreements. In reaching its
conclusions, the Montour Bank Board of Directors considered, among other things:
(i) information compiled by Danielson concerning the financial performance and
condition, business operations, capital levels, asset quality and prospects of
Omega on a comparative basis relative to market value, book value and dividends
per equivalent share resulting from the offer, growth rates of earnings and
dividends, monthly trading volume of Omega's securities, and other historical
and pro forma financial information relating to the offer; (ii) the opinion of
Danielson (see "Opinion of Montour Bank Financial Advisor"); (iii) the ability
of the potentially combined organizations to compete in the Montour County,
Pennsylvania banking market; (iv) the current regulatory environment for banking
and financial services; and (v) the impact of the possible combination on the
depositors, employees, customers, vendors and communities served by Montour
Bank. No one of these considerations was given preference over the others.
However, each consideration was part of the entire basis on which the Board of
Directors reached its decision.

The Board of Directors of Montour Bank believes that the terms of the Merger
are fair and in the best interests of the Montour Bank shareholders and has
unanimously approved the Merger Agreements. The Board of Directors of Montour
Bank recommends that the Montour Bank shareholders approve the Merger
Agreements.

The Board of Directors of Montour Bank believes that the Merger will result
in a stronger and more effective competitor in the Montour County, Pennsylvania
market, which will be better able to compete effectively in the rapidly changing
marketplace for banking and financial services and to take advantage of
opportunities that would not be available to Montour Bank on its own. The
Montour Bank Board of Directors believes that the Merger will provide Montour
Bank's customers with a broader range of products and services as well as
greater convenience. Furthermore, the Montour Bank Board of Directors believes
that the Merger will afford Montour Bank shareholders the opportunity to
continue as equity participants with a more liquid investment in a larger
regional banking company and begin to receive dividends on their investments, if
they decide to exchange their shares for Omega shares.
<PAGE> 29

Opinion of Montour Bank Financial Advisor

The Board of Directors of Montour Bank retained Danielson as financial
advisor to Montour Bank in connection with the Merger. Montour Bank requested
that Danielson render an opinion as to whether the consideration to be paid by
Omega to Montour Bank shareholders is fair, from a financial point of view.
Montour Bank did not impose any limitations upon the scope of the investigation
to be performed by Danielson in formulating such opinion.

Danielson is continuously engaged in the valuation of bank, bank holding
company, thrift and thrift holding company securities in connection with
mergers, acquisitions, and other securities transactions. Danielson has
knowledge of, and experience with Pennsylvania banking markets and thrift and
banking organizations operating in those markets. Danielson was selected by
Montour Bank based upon, among other things, Danielson's reputation and
experience in the banking and thrift industries. The terms of the Merger were
not determined by Danielson but instead were established by the respective
boards of directors of Montour Bank and Omega.

Danielson delivered a written opinion to the Montour Bank Board of
Directors, as of the date Montour Bank executed the Merger Agreements and as of
May 3, 1995, both to the effect that the consideration to be received by Montour
Bank shareholders in the Merger is fair, from a financial point of view. The
full text of the May 3, 1995 written opinion of Danielson appears as Appendix
"C" to this Proxy Statement. The opinion contains the factors considered by
Danielson in rendering such an opinion. Montour Bank shareholders are strongly
encouraged to read such opinion in its entirety.

In the course of preparing its opinion, Danielson analyzed the market of
Montour Bank, discussed with management of Montour Bank the business and
prospects of Montour Bank, compared the financial performance of Montour Bank
with the financial performance of other banks in the region, compared Montour
Bank to other new banks that were acquired in 1993 and 1994 and considered any
characteristics unique to Montour Bank. In addition, Danielson analyzed certain
financial and market information of Omega and compared Omega to other banks
whose common stock is actively traded.

Danielson based its opinion on data supplied by Montour Bank and on publicly
available information, all of which Danielson believed to be reliable, but the
completeness and accuracy of which is not guaranteed by Danielson. In rendering
its opinion, Danielson assumed, based upon representations of Montour Bank
management, that there exists no significant loan problems beyond what are
stated in recent reports to regulatory agencies and in the monthly report to
directors.

DANIELSON'S OPINION IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT
OF VIEW OF THE CONSIDERATION TO BE RECEIVED BY MONTOUR BANK SHAREHOLDERS AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY MONTOUR BANK SHAREHOLDER AS TO HOW
SUCH SHAREHOLDER SHOULD VOTE AT THE MONTOUR BANK ANNUAL MEETING. THE SUMMARY OF
<PAGE> 30

THE OPINION OF DANIELSON SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.

For services provided by Danielson in connection with the Merger, Montour
Bank will pay Danielson a total fee of approximately $25,000. In addition,
Montour Bank has agreed to reimburse Danielson for reasonable out-of-pocket
expenses and to indemnify Danielson against certain liabilities, including
liabilities under federal securities laws.

Consideration to be Received

From and after the Effective Date, each certificate which, prior to the
Effective Date of the Merger, represented shares of Montour Bank Common Stock,
based upon the election procedures set forth in the Merger Agreements, will
evidence either ownership of shares of Omega Common Stock, cash or a combination
of Omega Common Stock and cash. No fractional shares of Omega Common Stock will
be issued. In lieu of the issuance of fractional shares, cash adjustments will
be paid equal to an amount determined by multiplying such fraction of a share of
Omega Common Stock by the "average price" of Omega Common Stock as determined
above.

Since the Effective Date of the Merger may not occur for several weeks after
the Annual Meeting, the market value of Omega Common Stock may vary between the
date of the Annual Meeting and the Effective Date of the Merger. In the Merger
Agreement, the exchange ratio of one-half share of Omega Common Stock for each
share of Montour Bank Common Stock is fixed, subject to adjustment as set forth
above. Therefore, a shareholder of Montour Bank must bear certain of the risk
with respect to any decrease in the value of Omega Common Stock subsequent to
the Annual Meeting and prior to the Effective Date of the Merger.

Effective Date

Subject to the terms and conditions specified in the Reorganization
Agreement and the Merger Agreement, and upon satisfaction of all requirements of
law, including, among other conditions, receipt of the approval of the FRB, the
FDIC and the Department and the expiration of all waiting periods prescribed by
law, the "Effective Date" will occur upon the filing of Articles of Merger with
the Department of State of the Commonwealth of Pennsylvania. It is currently
anticipated that the Merger will be consummated in the third quarter of 1995.

The Reorganization Agreement provides for an outside Effective Date of
December 31, 1995. See "--Termination and Expenses; Waivers."

Exchange Procedure

Omega has designated Omega Bank, N.A. in State College, Pennsylvania, to act
as Exchange Agent to receive Montour Bank shareholders' certificates and to
exchange such certificates for certificates of Omega Common Stock and cash.
Promptly after the Effective Date, the Exchange Agent will mail to each record
holder of Montour Bank Common Stock, a letter of transmittal and instructions
for use in effecting the surrender of such certificates for exchange. Upon
<PAGE> 31

surrender to the Exchange Agent of such certificates, based upon the election
procedures set forth in the Merger Agreements, the Exchange Agent will exchange
such certificates for shares of Omega Common Stock, cash, or a combination of
Omega Common Stock and cash and pay to any record holder receiving Omega Common
Stock any payment due for a fractional share of Omega Common Stock. No interest
will be paid or accrued on the amounts payable upon surrender of stock
certificates.

Until the certificates representing Montour Bank Common Stock are
surrendered for exchange after consummation of the Merger, holders of such
certificates will not be paid dividends on Omega Common Stock into which such
shares have been converted. When such certificates are surrendered, any unpaid
dividends will be paid without interest.

MONTOUR BANK SHAREHOLDERS SHOULD NOT SURRENDER THEIR STOCK CERTIFICATES
UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED AND SHOULD NOT
SEND IN THEIR MONTOUR BANK STOCK CERTIFICATES WITH THEIR PROXY.

Conditions and Covenants

In addition to the approval and adoption of the Merger Agreements by the
shareholders of Montour Bank, the obligations of Omega and Montour Bank are
subject to the satisfaction or, where permitted, waiver of certain conditions,
including among others: (a) the correctness in all material respects at and as
of the Effective Date, of the representations and warranties of the respective
parties contained in the Merger Agreements; (b) the performance in all material
respects by the respective parties of all obligations contained in the Merger
Agreements required to be performed or complied with by them at or prior to the
closing; (c) the exchange of certain minutes of meetings of Omega's and Montour
Bank's Board of Directors and shareholders and closing certificates; (d) the
receipt of all required permits, consents and approvals from all federal and
state governmental agencies and boards including, without limitation, the FRB,
the FDIC and the Department, and any applicable waiting periods shall have
expired; and (e) that no action, suit, proceeding or material claim shall be
pending which seeks to prevent consummation of the transactions contemplated by
the Merger Agreements, or seeks material damages against Montour or Omega
whether or not in connection with or by reason of the Merger Agreements and no
governmental or regulatory authority shall be claiming that the transaction
constitutes a violation of law, provided, however, that if Omega provides full
indemnification on terms reasonably acceptable to Montour and its directors and
officers with respect to an action, proceeding or material claim, such action,
proceeding or material claim will not be deemed a condition precedent to
Montour's obligations; (f) the effectiveness with the Commission of the
registration of the Omega Common Stock to be issued in connection with the
merger and no stop order suspending the effectiveness of such registration
having been issued and no proceeding for such purpose having been initiated or
is being contemplated by the Commission.

The obligation of Omega to consummate the Merger is also subject to certain
additional conditions, including among others that: (a) there shall have been no
material adverse change in the business, consolidated earnings or consolidated
net worth of Montour Bank, it being understood, however, that material adverse
changes caused by events or conditions affecting banks generally will not
<PAGE> 32

relieve Omega of its obligations to consummate the Merger; (b) Montour Bank
shall have delivered to Omega all consents and authorizations of landlords or
others necessary to permit the Merger to be consummated without violation of any
lease or other material agreement to which Montour is a party; (c) each
affiliate of Montour Bank shall have delivered to Omega a letter in form and
substance satisfactory to counsel for Omega, stating that he or she will not
resell shares of Omega Common Stock acquired pursuant to the Merger Agreements,
except as permitted by SEC Rule 145; (d) Omega receive an opinion from an
independent investment banker selected by it, dated the date of the mailing of
Montour's proxy materials to its shareholders, in form and substance
satisfactory to Omega, to the effect that based on a review described therein,
the terms and conditions of the Merger are fair to the shareholders of Omega
from a financial point of view, and such opinion shall not have been revoked or
withdrawn by the investment banker on or prior to the Effective Date; (e) no
stock purchase warrants of Montour Bank or other rights with respect to the
stock of Montour shall be outstanding immediately prior to the Effective Date;
and (f) the employment agreement between Montour Bank and M. Ralph Campbell
shall have been executed by M. Ralph Campbell. See "--Interest of Certain
Persons in the Merger."

The obligation of Montour Bank to consummate the Merger is also subject to
certain additional conditions, including among others that: (a) on or before the
Effective Date there shall be no material adverse change in the business,
consolidated earnings or consolidated net worth of Omega and its subsidiaries,
it being understood, however, that material adverse changes caused by events or
conditions affecting banks generally will not relieve Montour Bank of its
obligations to consummate the merger; (b) Montour Bank receive an opinion from
an independent investment banker selected by Montour Bank, dated the date of the
mailing of Montour Bank's proxy materials to its shareholders, in form and
substance satisfactory to Montour Bank, to the effect that based on a review
described therein, the consideration to be paid to the shareholders of Montour
Bank is fair to the shareholders of Montour Bank from a financial point of view;
(c) counsel for Omega shall have furnished to Montour Bank an opinion to the
effect that the Merger is, as to the shareholders of Montour Bank who exchange
their shares of Montour Bank for shares of Omega, a tax-free reorganization
within the meaning of Section 368(a) of the Code, except with respect to cash
payments or payments for fractional shares; and (d) Omega shall have delivered
to Montour Bank resolutions which provide that upon the Effective Date the Board
of Directors of Interim as the surviving corporation shall consist of not more
than 16 members, four of which shall be appointed by Omega and not more than 12
of whom shall be appointed by Montour Bank.

Montour Bank has agreed that it will continue to conduct its business in the
usual, regular and ordinary manner consistent with past practices and will use
its best efforts consistent with good banking practices to preserve intact its
business organization, the services of its officers and employees and will
maintain satisfactory relationships with customers and others having business
relations with Montour Bank. Montour Bank has agreed that until the Effective
Date, without the prior written consent of Omega, it will not do any of the
following: (a) make any changes in its authorized, issued or outstanding capital
stock or any security convertible into capital stock, except as may be caused by
the exercise of Montour Bank's outstanding stock purchase warrants; (b) declare
or pay any dividends; (c) effect any recapitalization, reclassification, stock
dividend, stock split or like change in its capital or grant any warrants,
<PAGE> 33

options, rights, convertible securities or other arrangements or commitments
which obligates an entity (i) to issue or dispose of its equity securities, or
(ii) to acquire any of its equity securities; (d) make any other distribution of
its assets or properties to its shareholders; (e) acquire any shares of Montour
Bank's or Omega's capital stock of any class; (f) enter into or commit to enter
into any new employment contract or amend any existing employment contract or
grant any salary increase, bonus, or other form of compensation payable to any
officer, employee or agent, except for salary increases and bonuses to persons
who are not directors or officers of Montour Bank or relations thereto provided
such increases and bonuses are consistent with the past practices of Montour
Bank; (g) amend the Articles of Incorporation or the Bylaws of Montour Bank; (h)
except in the ordinary course of business consistent with past practice, incur
any indebtedness, liabilities (whether current, long term, fixed, contingent,
liquidated, unliquidated or otherwise) or obligations; (i) except in the
ordinary course of business consistent with past practice, purchase or otherwise
acquire, or sell or otherwise dispose of, any equity security, debt security or
asset; (j) change its criteria with respect to risk or overall quality of
Montour Bank's investment portfolio or loan portfolio or make or sell any
investment or loan except consistent with the past practices of Montour Bank;
(k) make capital expenditures or commit to make capital expenditures other than
in the ordinary course of business consistent with past practice; or (l) create
any new employee benefit plan or make any contributions to any employee benefit
plan or other plan relating to its officers, employees and agents except as may
be required by the terms of any existing employee benefit plan or by applicable
law.

Montour Bank has also agreed that until the Effective Date, it shall not (i)
negotiate (except with Omega), nor solicit or encourage from any director,
officer, stockholder, other person or entity (other than Omega), any inquiry or
proposal relating to a merger or consolidation of Montour Bank, or sale of the
assets or stock of Montour Bank; (ii) engage indirectly in such activities
through a broker, finder, consultant, officer, director, stockholder or other
intermediary or representative; or (iii) cooperate with or furnish to any of the
foregoing (other than Omega) non-public information concerning Montour Bank in
connection with such an inquiry or proposal. Montour Bank shall promptly notify
Omega orally, and confirm in writing, all relevant details relating to all
inquires or proposals which Montour Bank may receive relating to any such
matter.

Termination and Expenses; Waivers

The Merger Agreements provide that the Merger Agreements may be terminated
and the Merger abandoned (either before or after approvals or authorizations by
the shareholders of Montour Bank) at any time prior to the Effective Date by,
among other methods: (a) by a vote of a majority of the Board of Directors of
both Omega and Montour; (b) by a vote of a majority of the Board of Directors of
Montour Bank, in the event of a material breach of the Merger Agreement by Omega
if such breach is not cured within ten business days after notice by Montour
Bank of its intention to terminate; (c) by a vote of a majority of the Board of
Directors of Montour Bank or Omega in the event that, at any time after the date
of the Merger Agreement and before the approval of Montour Bank's shareholders
at the Annual Meeting, if either financial adviser retained for such purpose is
unable in view of developments occurring after the date of the Merger Agreement
(other than developments resulting from the solicitation by Montour Bank or its
<PAGE> 34

subsidiaries or any of the directors, officers, employees or agents of Montour
Bank or its subsidiaries of a competing acquisition offer from a third party) to
furnish to Montour Bank or Omega, as the case may be, an opinion to the effect
that the transactions contemplated by the Merger Agreements are fair from a
financial point of view to such entities' shareholders; (d) by a vote of a
majority of the Board of Directors of Omega, in the event of a material breach
of the Merger Agreements by Montour Bank which is not cured within ten business
days after notice by Omega of its intent to terminate; or (e) by a vote of a
majority of the Board of Directors of either Omega or Montour Bank, in the event
that the terminating party is not in material breach of the Merger Agreements
and: (i) the Merger shall not have been consummated on or before December 31,
1995; (ii) any approval of any regulatory authority required as a condition to
the consummation of the Merger Agreements, and the transactions contemplated
thereby shall have been denied by final non-appealable action of such authority;
(iii) the shareholders of Montour Bank shall have failed to approve the Merger
Agreements at the shareholders meetings called for that purpose; or (iv) the
party giving such notice elects to terminate the Merger Agreements and abandon
the Merger, as of a stated date, which shall not be less than ten business days
after the date on which such notice is given, because (x) the party receiving
such notice will be unable, by December 31, 1995, to meet or satisfy one or more
specified conditions precedent (set forth in the Merger Agreement) to the
obligation of the party sending such notice to close under the Merger Agreements
and (y) the party sending such notice does not intend to waive the satisfaction
of such conditions precedent.

In addition to the foregoing, if the "average price" of Omega Common Stock
is less than $20 for the 30 business day period ending on the fifteenth business
day preceding the Effective Date, the Reorganization Agreement will terminate
and be of no further force and effect unless (i) the Montour Bank Board of
Directors waives this provision in writing or (ii) Omega agrees to provide
sufficient additional shares of Omega Common Stock under the Merger Agreement so
that the number of shares of Omega Common Stock received in exchange for two
shares of Montour Bank Common Stock equals $20 in market value using the
"average price" to determine such market value.

The Merger Agreements provide that if the Merger is not consummated, for any
reason whatsoever, each party shall pay its own expenses, except that (a) the
cost of printing the Registration Statement and related Prospectus relating to
the issuance of Omega Common Stock in the Merger shall be incurred equally by
Omega and Montour and (b) Montour shall reimburse Omega for financial consulting
advice provided at the request of Montour at the rate of $30.00 per hour plus
out of pocket expenses. Montour Bank has agreed that, without the prior written
consent to Omega, its expenses in connection with the merger, including,
advisory, financial counseling, printing, legal and accounting expenses, will
not exceed $70,000.

Modification and Waiver

The Merger Agreements may be amended by Omega and Montour Bank (including,
without limitation, any extension of the December 31, 1995 outside date for
completion of the Merger, or amendments with respect to the structure of the
Merger), by action taken by or on behalf of their respective Boards of
Directors, at any time before or after approval of the Merger Agreements by the
shareholders of Montour Bank, provided, however, that after approval by Montour
<PAGE> 35

Bank's shareholders no amendment may be made that charges the amount or form of
the consideration to be delivered to such party's shareholders as contemplated
by the Merger Agreement or result in an adverse tax or other effect to either
Montour Bank's or Omega's shareholders.

Any party to the Merger Agreements may extend the time for the performance
of any of the obligations or other acts of the other party and may waive, at any
time before or after approval of the Merger Agreements by the shareholders of
Montour Bank (a) any inaccuracies of the other party in the representations and
warranties contained in the Reorganization Agreement, (b) compliance with any of
the covenants or agreements of the other party contained in the Reorganization
Agreement,(c) the performance by the other party of any of its obligations set
forth in the Reorganization Agreement, and (d) the satisfaction of any condition
to the obligations of the waiving party pursuant to the Reorganization
Agreement.

Interests of Certain Persons in the Merger

It is a condition to the obligation of each of Montour Bank and Omega to
consummate the Merger that M. Ralph Campbell, the Chairman of the Board of
Montour Bank, enter into an employment agreement with Montour Bank effective as
of the Effective Date. Under the terms of the employment agreement Mr. Campbell
would be Chairman of the Board of Montour Bank and, on a full-time basis, be
responsible for facilitating the growth of Montour Bank's collateralized loan
portfolio. The term of the employment agreement would continue until the
earliest of (i) the date Mr. Campbell dies or becomes permanently disabled; (ii)
termination of Mr. Campbell's employment for cause; (iii) termination of Mr.
Campbell's employment without cause; (iv) mutual agreement of Mr. Campbell and
Montour Bank; or (v) three years after the Effective Date.

Mr. Campbell's base salary under the employment agreement will be $55,000
per year. If Mr. Campbell's employment is terminated without cause, he will be
entitled to severance payments from the date of termination until the earlier of
the following dates: (i) one year from the date of such termination without
cause; (ii) the date Mr. Campbell dies or becomes permanently disabled; or (iii)
three years from the Effective Date. The amount of severance payable is equal to
Mr. Campbell's base annual salary prorated in accordance with the length of the
severance payment period.

<PAGE> 36

RIGHTS OF DISSENTING SHAREHOLDERS

Pursuant to the Pennsylvania Banking Code of 1965, shareholders of Montour
Bank who object to the Merger Agreement are entitled to the rights and remedies
of dissenting shareholders in accordance with the procedures set forth in the
BCL. The following is a summary of the rights and remedies of dissenting
shareholders of Montour Bank in accordance with Subchapter D of Chapter 15
(Sections 1571 through 1580) of the BCL ("Subchapter 15D") and is qualified in
its entirety by reference to Subchapter 15D, a copy of which is attached hereto
as Appendix "D" and incorporated herein by reference. Pursuant to the BCL, any
Montour Bank shareholder who objects to the Merger and complies with the
provisions of Subchapter 15D shall be entitled to the rights and remedies of
dissenting shareholders therein provided, if any. Shareholders considering
exercising rights under Subchapter 15D are advised to review Appendix "D" in its
entirety and to consult their own legal counsel.

Pursuant to Section 1574 of the BCL, any Montour Bank shareholder who wishes
to dissent from the Merger and obtain payment of the fair value of his shares
(defined in Section 1572 of the BCL as the fair value of shares immediately
before the effectuation of the corporate action to which the dissenter objects,
taking into account all relevant factors, but excluding any appreciation or
depreciation in anticipation of the corporate action) must file with Montour
Bank, prior to the vote on the Merger, a written notice of intention to demand
that he be paid the fair value for his shares if the proposed action is
effectuated, must effect no change in the beneficial ownership of his shares
from the date of such filing continuously through the effective date of the
proposed action and must refrain from voting his shares in approval of such
action. (Sending in an unmarked proxy with respect to the Merger will be deemed
to be a vote in approval of the Merger.) A dissenter who fails in any respect
shall not acquire any right to payment of the fair value of his shares under the
BCL. Neither a proxy nor a vote against the proposed corporate action shall
constitute the written notice required by Section 1574.

A record holder of shares of Montour Bank Common Stock may assert
dissenters' rights as to fewer than all of such shares registered in his name
only if he dissents with respect to all the shares beneficially owned by any one
person and discloses the name and address of the person or persons on whose
behalf he dissents. In that event, his rights shall be determined as if the
shares as to which he has dissented and his other shares were registered in the
names of different shareholders. A beneficial owner of shares of Montour Bank
Common Stock who is not the record holder may assert dissenters' rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of Subchapter 15D if he submits to Montour Bank not
later than the time of the assertion of dissenters' rights a written consent of
the record holder. A beneficial owner may not dissent with respect to some but
less than all shares of the same class or series owned by the owner, whether or
not the shares so owned by him are registered in his name.

If the Merger is approved by Montour Bank shareholders, Montour Bank, prior
to the Merger, or Omega, after the Merger, (Montour Bank or Omega, as the case
may be, is hereinafter in this discussion referred to as the "corporation"),
<PAGE> 37

shall mail a further notice to all dissenters who gave due notice of intention
to demand payment of the fair value of their shares and who refrained from
voting in favor of the proposed action. The notice shall: (1) state where and
when a demand for payment must be sent and certificates for certificated shares
must be deposited in order to obtain payment; (2) inform holders of
uncertificated shares to what extent transfer of shares will be restricted from
the time that demand for payment is received; (3) supply a form for demanding
payment that includes a request for certification of the date on which the
shareholder, or the person on whose behalf the shareholder dissents, acquired
beneficial ownership of the shares; and (4) be accompanied by a copy of
Subchapter 15D. The time set by Montour Bank in this further notice for receipt
of the demand and deposit of certificated shares shall be not less than thirty
(30) days from the mailing of such notice.

A SHAREHOLDER WHO FAILS TO TIMELY DEMAND PAYMENT, OR FAILS (IN THE CASE OF
CERTIFICATED SHARES) TO TIMELY DEPOSIT CERTIFICATES, AS REQUIRED BY SUCH NOTICE
SHALL NOT HAVE ANY RIGHT UNDER SUBCHAPTER 15D OF THE BCL TO RECEIVE PAYMENT OF
THE FAIR VALUE OF HIS SHARES.

If any shares are not represented by certificates, the corporation may
restrict their transfer from the time of receipt of demand for payment until
effectuation of the Merger or the release of restrictions under the terms of
Section 1577(a) of the BCL (relating to failure to effectuate the Merger). The
dissenter shall retain all other rights of a shareholder until those rights are
modified by the Merger.

Within sixty (60) days after the date set for demanding payment and
depositing certificates, if the Merger has not been effectuated, the corporation
shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. When uncertificated shares have been released from transfer
restrictions and deposited certificates have been returned, the corporation may
at any later time send a new notice conforming to the requirements of Section
1575 of the BCL (relating to notice to demand payment), with like effect.

Promptly after effectuation of the Merger or upon timely receipt of demand
for payment if the Merger has already been effectuated, the corporation shall
either remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates, the amount that the corporation
estimates to be the fair value of the shares, or give written notice that no
remittance under Section 1577 of the BCL will be made. The remittance or notice
shall be accompanied by: (1) the closing balance sheet and statement of income
of Montour Bank for a fiscal year ending not more than sixteen (16) months
before the date of remittance or notice together with the latest available
interim financial statements; (2) a statement of the corporation's estimate of
the fair value of the shares; and (3) a notice of the right of the dissenter to
demand payment or supplemental payment, as the case may be, accompanied by a
copy of Subchapter 15D.
<PAGE> 38

If the corporation does not remit the amount of its estimate of the fair
value of the shares as described above, it shall return any certificates that
have been deposited and release uncertificated shares from any transfer
restrictions imposed by reason of the demand for payment. The corporation may
make a notation on any such certificate or on its records relating to any such
uncertificated shares that such demand has been made. If shares with respect to
which notation has been so made shall be transferred, each new certificate
issued therefor or the records relating to any transferred uncertificated shares
shall bear a similar notation, together with the name of the original dissenting
holder or owner of such shares. A transferee of such shares shall not acquire by
such transfer any rights in the corporation other than those that the original
dissenter had after making demand of their fair value.

If the corporation gives notice of its estimate of the fair value of the
shares, without remitting such amount, or remits payment of its estimate of the
fair value of a dissenter's shares as permitted by Section 1577(c) of the BCL
(relating to payment of fair value of shares) and the dissenter believes that
the amount stated or remitted is less than the fair value of his shares, he may
send to the corporation his own estimate of the fair value of the shares, which
shall be deemed a demand for payment of the amount or the deficiency. Where the
dissenter does not file his own such estimate within thirty (30) days after the
mailing by the corporation of its remittance or notice, the dissenter shall be
entitled to no more than the amount stated in the notice or remitted to him by
the corporation.

Within sixty (60) days after the latest of (1) effectuation of the Merger,
(2) timely receipt of any demand for payment under Section 1575 of the BCL
(relating to notice to demand payment), or (3) timely receipt of any estimates
pursuant to Section 1578 of the BCL (relating to estimate by dissenter of fair
value of shares), if any demands for payment remain unsettled, the corporation
may file in court an application for relief requesting that the fair value of
the shares be determined by the court.

All dissenters wherever residing, whose demands have not been settled, shall
be made parties to the proceeding as in an action against their shares. A copy
of the application shall be served on each such dissenter. If a dissenter is a
nonresident, the copy may be served on him in the manner provided or prescribed
by or pursuant to 42 Pa. C.S. Ch. 53 (relating to bases of jurisdiction and
interstate and international procedure). The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof. Each dissenter who is made a party shall be entitled to
recover the amount by which the fair value of his shares is found to exceed the
amount, if any, previously remitted, plus interest.

If the corporation fails to file an application to the court as provided in
Subsection (a) of Section 1579 of the BCL, any dissenter who made a demand and
who has not already settled his claim against the corporation may do so in the
name of the corporation at any time within thirty (30) days after the expiration
of the sixty (60) day period. If a dissenter does not file an application within
the thirty (30) day period, each dissenter entitled to file an application shall
<PAGE> 39

be paid the corporation's estimate of the fair value of the shares and no more,
and may bring an action to recover any amount not previously remitted.

The costs and expenses of any proceeding under Section 1579 of the BCL
(relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the corporation except that any
part of the costs and expenses may be apportioned and assessed as the court
deems appropriate against all or some of the dissenters who are parties and
whose action in demanding supplemental payment under Section 1578 of the BCL
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith.

Fees and expenses of counsel and of experts for the respective parties may
be assessed as the court deems appropriate against the corporation and in favor
of any or all dissenters if the corporation failed to comply substantially with
the requirements of Subchapter 15D and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this Subchapter. If the court finds that the services of counsel for
any dissenter were of substantial benefit to other dissenters similarly situated
and should not be assessed against the corporation, it may award to those
counsel reasonable fees to be paid out of the amounts awarded to the dissenters
who were benefitted.
<PAGE> 40

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

THE FOLLOWING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER IS INCLUDED SOLELY FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THE TAX
CONSEQUENCES FOR ANY PARTICULAR SHAREHOLDER MAY BE AFFECTED BY MATTERS NOT
DISCUSSED HEREIN, AND IT IS RECOMMENDED THAT EACH SHAREHOLDER CONSULT HIS OR HER
PERSONAL TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES (INCLUDING FEDERAL, STATE
AND LOCAL TAX CONSEQUENCES, IF ANY) TO HIM OR HER RESULTING FROM THE MERGER AND
FROM ANY SUBSEQUENT DISPOSITION OF STOCK ACQUIRED PURSUANT TO THE MERGER.

Consummation of the Merger is conditioned upon there being delivered an
opinion of Blank, Rome, Comisky & McCauley, counsel to Omega, that for federal
income tax purposes, under current law, assuming that the Merger and related
transactions will take place as described in the Reorganization Agreement and
Merger Agreement, among other things, as to the shareholders of Montour Bank who
exchange their shares of Montour Bank Common Stock for shares of Omega Common
Stock, the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, and Omega and Montour Bank will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.

In that case, in the opinion of Blank, Rome, Comisky & McCauley, the
following would be the material federal income tax consequences of the Merger:

(i) no gain or loss will be recognized by Omega or Montour Bank in the
Merger;

(ii) no gain or loss will be recognized by the shareholders of Montour
Bank upon their receipt of Omega Common Stock in exchange for their Montour
Bank Common Stock, except that shareholders who receive cash proceeds for
fractional interests in Omega Common Stock will recognize gain or loss equal
to the difference between such proceeds and the tax basis allocated to their
fractional share interests, and such gain or loss will constitute capital
gain or loss if their Montour Bank Common Stock is held as a capital asset
at the Effective Date;

(iii) the tax basis of the shares of Omega Common Stock (including
fractional share interests) received by the shareholders of Montour Bank
will be the same as the tax basis of their Montour Bank Common Stock
exchanged therefor; and

(iv) the holding period of Omega Common Stock in the hands of the
Montour Bank shareholders will include the holding period of their Montour
Bank Common Stock exchanged therefor, provided such Montour Bank Common
Stock is held as a capital asset at the Effective Date.
<PAGE> 41

OTHER CONSIDERATIONS

Regulatory Approvals

The Merger is subject to approval by the FRB, the FDIC and the Department.
Applications seeking regulatory approvals of the Merger have been filed with the
FRB, the FDIC and the Department.

Under the BHC Act, the FRB must withhold approval of the Merger, if it finds
that the transaction would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any geographical area. In addition, the FRB may not approve the
Merger, if it finds that the effect thereof may be substantially to lessen
competition or to tend to create a monopoly or would in any other manner be in
restraint of trade, unless it finds that the anti-competitive effects of the
Merger are clearly outweighed in the public interest by the probable effects of
the Merger in meeting the convenience and needs of the communities to be served.
The FRB will also take into consideration the financial and managerial resources
and future prospects of the banking subsidiaries following the transactions, as
well as the compliance records of such banking subsidiaries with the Community
Reinvestment Act. The FRB has indicated that it will not approve a significant
acquisition unless the resulting institution has adequate capitalization, taking
into account, among other things, asset quality.

Under the BHC Act, the Merger may not be consummated for 30 days from the
date of approval by the FRB, during which time the United States Department of
Justice or others may challenge the Merger on antitrust grounds. Because the
banking and non-banking markets in which Omega and Montour Bank operate are
highly competitive and are expected to remain so after the Merger, neither Omega
nor Montour Bank believes that the Merger is likely to raise significant issues
under United States antitrust laws. During such period, the Department of
Justice may commence legal action challenging the transaction under the
antitrust laws. If, however, the Justice Department does not commence a legal
action during such 30-day period, it may not thereafter challenge the
transaction except in an action commenced under Section 2 of the Sherman
Antitrust Act.

The BHC Act provides for the publication of notice and the opportunity for
administrative hearings relating to the application for approval of the FRB
noted above and authorizes the FRB to permit interested parties to intervene in
the proceedings. If an interested party is permitted to intervene, such
intervention could substantially delay the approval of the FRB required for
consummation of the Merger.

Under the Federal Deposit Insurance Act, the Merger is subject to the
approval of the FDIC. The FDIC is prohibited from approving any merger that
would tend to create or result in a monopoly, or which would further a
combination, conspiracy or attempt to monopolize the business of banking in any
part of the United States. Similarly, the FDIC may not approve a transaction
whose effect in any section of the country may be substantially to lessen
competition, or which in any other manner would be in restraint of trade. The
FDIC may, however, approve any such transaction if it finds that the
anticompetitive effects of the proposed transaction are clearly outweighed in
<PAGE> 42

the public interest by its probable effect in meeting the convenience and needs
of the community to be served, for example, where approval of the merger may
prevent the probable failure of one of the banks involved. In every case, the
FDIC must also consider the financial and managerial resources and future
prospects of the existing and proposed institutions, and the convenience and
needs of the community to be served.

The Merger is also subject to approval by the Department. The factors that
the Department will consider in determining whether to grant its approval
include the competitive effects of the Merger, the principles of sound banking
and the public interest and the needs of the communities served by Omega and
Montour Bank.

It is anticipated that the regulatory approvals described above will be
obtained prior to the end of the third quarter of 1995, but no assurance can be
given that such regulatory approval will be obtained or that the other
conditions to the Merger will be satisfied or waived so as to permit
consummation of the Merger. As described under "THE PROPOSED MERGER AND RELATED
MATTERS - Termination and Expenses; Waivers," if the Merger is not consummated
prior to December 31, 1995, Omega and Montour Bank will each have the right to
terminate the Merger Agreements.

Resales of Omega Common Stock

Omega Common Stock to be issued in the Merger has been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and will be freely
transferable, except for shares thereof received by persons, including directors
and executive officers of Montour Bank, who may be deemed to be "affiliates"
thereof, as such term is defined in Rule 145 under the Securities Act. Rule 145
limits the amount of Omega Common Stock that such persons may sell during any
three-month period and prescribes certain other restrictions on resale. It is a
condition to the consummation of the Merger that Omega shall have obtained from
such persons a written undertaking to the effect that no sale, transfer or other
disposition will be made of any shares of Omega Common Stock received in the
Merger except in compliance with the provisions of Rule 145 under the Securities
Act. See "THE PROPOSED MERGER AND RELATED MATTERS -Conditions and Covenants."
This Proxy Statement does not cover resales of Omega Common Stock received by
any person who may be deemed an affiliate of Montour Bank or Omega.

Accounting Treatment

It is anticipated that the Merger will be accounted for by Omega as a
purchase. Under such purchase method of accounting, all assets and liabilities
of Montour Bank will be adjusted to their estimated fair market values at the
Effective Date of the merger, net of applicable income tax effects, and combined
with the historical assets and liabilities of Omega.
<PAGE> 43

DESCRIPTION OF THE CAPITAL STOCK OF OMEGA

The following statements are summaries of certain provisions of Omega's
capital stock and are qualified in their entirety by reference to the complete
texts of Omega's Amended and Restated Articles of Incorporation, as amended (the
"Restated Articles"), copies of which are filed as exhibits to the Registration
Statement of which this Proxy Statement is a part.

Under Omega's Restated Articles, Omega is authorized to issue 25,000,000
shares of common stock, par value $5.00 per share, and 5,000,000 shares of
preferred stock, par value $5.00 per share. As of March 31, 1995, there were
5,975,196 shares of Omega's Common Stock outstanding and 219,781 shares of
Series A ESOP Cumulative Convertible Preferred Stock outstanding. Reference
should be made to Omega's 1994 Annual Report to Shareholders, a copy of which is
being furnished to each person who receives this Proxy Statement for additional
information concerning Omega Common Stock and Series A ESOP Cumulative
Convertible Preferred Stock.

Under Omega's Restated Articles, the Board of Directors is authorized,
without further shareholder action, to provide for the issuance of the preferred
stock in one or more series, with such designations, number of shares, relative
rights, preferences and limitations as shall be set forth in resolutions
providing for the issuance thereof adopted by the Board of Directors.

Omega Common Stock

Voting Rights. Holders of Omega Common Stock are entitled to one vote for
each share held and have no cumulative voting rights in the election of
directors.

Dividends. Subject to such preferences, limitations and relative rights as
may be fixed for any series of preferred stock that may be issued, including the
Series A ESOP Cumulative Convertible Preferred Stock, holders of Omega Common
Stock are entitled to receive such dividends, when, as and if declared by the
Board of Directors out of funds legally available therefor.

Cash available for dividend distribution to the holders of Omega's Common
Stock and preferred stocks, including the presently outstanding shares of Series
A ESOP Cumulative Convertible Preferred Stock, must initially come from
dividends paid to Omega by Omega's subsidiaries. Accordingly, restrictions on
payment of cash dividends by Omega is affected by any restrictions on the
payment of dividends by Omega's subsidiaries.

Liquidation. In the event of liquidation, after payment of or provision for
all debts and liabilities and subject to the rights of any series of preferred
stock which may be outstanding, including the Series A ESOP Cumulative
Convertible Preferred Stock, the holders of Omega Common Stock would share pro
rata in all assets distributable to shareholders in respect of shares held by
them.

Preemptive Rights. Holders of Omega Common Stock have no preemptive rights.
<PAGE> 44

NASDAQ Listing. Omega Common Stock is included for quotation on the NASDAQ
National Market System. As a result, in order to maintain such inclusion,
approval of Omega's shareholders is required for the issuance of additional
shares of Omega Common Stock or securities convertible into Omega Common Stock
if the issuance of such securities (1) is in connection with the acquisition of
a company, is not in connection with a public offering for cash, and the
securities issued have or will have voting power equal to or in excess of 20% of
the voting power outstanding before such issuance; (2) is in connection with the
acquisition of a company in which a director, officer or substantial shareholder
of Omega has a 5% or greater interest and the issuance of the securities could
result in an increase in outstanding common stock or voting power of 5% or more;
(3) is in connection with a transaction other than a public offering at a price
less than the greater of book or market value, and will equal 20% or more of the
common stock or 20% or more of the voting power outstanding before issuance; or
(4) would result in a change in control of Omega. Under NASDAQ National Market
System rules, shareholder approval is also required for the establishment of a
stock option or purchase plan in which stock may be acquired by officers and
directors other than a broadly-based plan in which other security holders of
Omega or employees of Omega participate.

Transfer Agent and Registrar. The transfer agent and registrar for the
Common Stock is Omega Bank, N.A.

Series A ESOP Cumulative Convertible Preferred Stock

The Series A ESOP Cumulative Convertible Preferred Stock is only issuable to
a trustee acting on behalf of a Omega employee benefit plan, and in the event
any shares are transferred, they are automatically converted into Omega Common
Stock as provided in the conversion provisions.

Rank. The Series A ESOP Cumulative Convertible Preferred Stock ranks senior
to the Omega Common Stock as to the payment of dividends and the liquidation of
Omega.

Voting Rights. Holders of Series A ESOP Cumulative Convertible Preferred
Stock are entitled to one vote for each full share of the Omega Common Stock
into which it is convertible on the record date for such vote and have no
cumulative voting rights. Except as otherwise required by law, the holders of
the Series A ESOP Cumulative Preferred Stock shall vote together with the
holders of Omega Common Stock and not as a separate class.

If any amendment to Omega's Restated Articles would create (or increase the
authorized number of shares of) any class of stock ranking senior to the Series
A ESOP Cumulative Convertible Preferred Stock in any respect, then the
affirmative vote of the holders of a majority of all outstanding shares of
Series A ESOP Cumulative Convertible Preferred Stock, voting as a separate
class, would be required for its adoption.

Dividends. Holders of the Series A ESOP Cumulative Convertible Preferred
Stock are entitled to cumulative dividends accruing from the date of issue,
when, as and if declared by the Board of Directors out of funds legally
available therefor, for the fifteen year period subsequent to the date of
<PAGE> 45

issuance of the Series A ESOP Cumulative Convertible Preferred Stock at the
annual rate of $1.80 per share and from and after the fifteen year period
subsequent to the date of issuance at an annual rate equal to the lesser of
$1.80 and the annual cash dividend per share payable had the shares of Series A
ESOP Cumulative Convertible Preferred Stock been converted in whole shares of
Omega Common Stock as of the record date for the payment of such cash dividend.
If all accrued dividends on the Series A ESOP Cumulative Convertible Preferred
Stock have not been paid or set apart for payment, (i) no dividends or other
distributions may be paid or set apart for payment on the Omega Common Stock or
any other class of capital stock ranking on parity with or junior to the Series
A ESOP Cumulative Convertible Preferred Stock as to dividends or other
distributions, (ii) Omega is prohibited from repurchasing, redeeming or
otherwise acquiring its Common Stock or any other class of capital stock ranking
on parity with or junior to the Series A ESOP Cumulative Convertible Preferred
Stock as to dividends, and (iii) Omega is prohibited from issuing any preferred
stock which ranks senior to or on parity with the Series A ESOP Cumulative
Convertible Preferred Stock.

Liquidation. In the event of any liquidation, dissolution or winding up of
the affairs of Omega, whether voluntary or otherwise, after payment or provision
for payment of the debts and other liabilities of Omega, the holders of the
Series A ESOP Cumulative Convertible Preferred Stock are entitled to receive,
out of the assets of Omega legally available for distribution to its
shareholders, the amount of $22.75 in cash for each share of Series A ESOP
Cumulative Convertible Preferred Stock, plus an amount equal to all dividends
accrued and unpaid on each such share up to the date fixed for distribution,
before any distribution may be made to the holders of Omega Common Stock or any
other class of capital stock ranking junior to the Series A ESOP Cumulative
Convertible Preferred Stock as to dividends or other distributions.

Redemption. The Series A ESOP Cumulative Convertible Preferred Stock is
redeemable in whole or in part, at the option of Omega, at $24.10 per share
beginning July 1, 1993, thereafter declining to $22.75 per share on or after
July 1, 1999, plus in each case any accumulated and unpaid dividends to the date
fixed for redemption.

Conversion. At any time prior to redemption, shares of Series A ESOP
Cumulative Convertible Preferred Stock are convertible at the option of the
holders thereof into Omega Common Stock at the current conversion rate of 1.05
shares of Omega Common Stock for each share of Series A ESOP Cumulative
Convertible Preferred Stock, except that, with respect to shares of Series A
ESOP Cumulative Convertible Preferred Stock called for redemption, the right to
convert ceases at the close of business on the redemption date. No payment or
adjustment on account of dividends accrued or in arrears will be made on the
shares of Series A ESOP Cumulative Convertible Preferred Stock surrendered for
conversion.

The conversion rate is subject to adjustment in the event of payment of a
dividend in shares of capital stock of Omega, any subdivision or combination of
Omega Common Stock or a reclassification of Omega Common Stock. The conversion
rate also is subject to adjustment in case of any issuance of rights to holders
of Omega Common Stock to subscribe for shares of Omega Common Stock at less than
the then current market price or any distribution to holders of Omega Common
Stock of evidences of indebtedness or assets.

No fractional shares of Omega Common Stock will be issued on conversion, but
if such conversion results in a fraction, a cash adjustment will be paid.
<PAGE> 46

Preemptive Rights. The holders of Series A ESOP Cumulative Convertible
Preferred Stock are not entitled to any preemptive rights.

Transfer Agent, Conversion Agent and Registrar. The transfer agent,
conversion agent and registrar for the Series A ESOP Cumulative Convertible
Preferred Stock is Omega Bank, N.A.

"Anti-Takeover" and "Anti-Greenmail" Provisions and Management Implications

A number of provisions of Omega's Restated Articles and Bylaws deal with
matters of corporate governance and certain of the rights of shareholders. For
example, the Restated Articles significantly restrict the ability of any person
to acquire the beneficial ownership of more than 10% of any class of equity
security of Omega outstanding.

The following discussion is a general summary of certain provisions of the
Restated Articles and Bylaws of Omega relating to stock ownership and transfers,
the Board of Directors and business combinations, which may be deemed to have
"anti-takeover" and "anti-greenmail" effects. These and other provisions affect
shareholder rights and should be given careful attention. The following
description of certain of these provisions is necessarily general and reference
should be made in each case to the Restated Articles and Bylaws of Omega, copies
of which are filed as exhibits to the Registration Statement of which this Proxy
Statement is a part.

The purpose of the "anti-takeover" and "anti-greenmail" provisions of the
Restated Articles is to discourage third parties from attempting a hostile
takeover of Omega. The Board of Directors of Omega has been concerned that
various tactics which they perceive to be disruptive and inequitable have become
relatively common practices among those who seek to acquire control of existing
corporations. Such tactics include: (1) the accumulation of substantial stock
positions preparatory to proxy fights and other measures calculated to force a
company to repurchase that stock position at a substantial premium over market
price (the so-called "greenmail transactions"); (2) "two-tier pricing," which
occurs when one price is offered in a tender offer for a controlling block of
stock, and then a much lower price is paid for the remainder of the outstanding
stock in a subsequent business combination; and (3) partial tender offers, in
which only a bare majority of the shares but a number sufficient for control are
tendered for, to the exclusion of the balance of the shares.

The Restated Articles tend to make Omega less vulnerable to such disruptive
and inequitable tactics. Omega believes the effect of these provisions would be
to compel would-be takeover bidders to negotiate with its Board of Directors.
The Boards of Directors of Omega believe that the Restated Articles provide the
Board of Directors of Omega with necessary negotiating strength in the face of
an attempt by a third party to acquire control of Omega and that having an
organizational structure that discourages hostile takeover attempts reduces the
possibility that hasty, ill-considered action might be taken in response to the
pressure of such a takeover attempt. This increased negotiating strength and
reduction of pressure would permit the Board to consider carefully proposals to
acquire control of Omega and to act in the best interests of Omega and its
shareholders.

10% Limitation "Voting Securities". The Restated Articles provide that no
Person (as defined therein) shall have the right to cast more than 10% of the
total votes entitled to be cast by all holders of Voting Securities (as defined
<PAGE> 47

therein) at any meeting, without approval of the Board of Directors of Omega and
subject to such conditions as the Board of Directors may impose.

"Person" is defined to include an individual, partnership, corporation,
group or other entity and include a "Shareholder Group". A "Shareholder Group"
exists when two or more Persons act together as a partnership, limited
partnership, syndicate, association or other group for the purpose of acquiring,
holding, disposing of or voting shares of stock, or are deemed a "group" for
purposes of Section 13(d) of the Securities Exchange Act of 1934 and the
regulations thereunder. The term "Person" does not include Omega or any
subsidiary of Omega holding securities for itself or as a fiduciary for its
customers, or a trustee holding Voting Securities for the benefit of Omega or
any of its subsidiaries pursuant to one or more employee benefit plans sponsored
by Omega or any subsidiary. "Voting Securities" is defined as all outstanding
securities of Omega entitled to vote (whether in the election of directors or
otherwise). At present, Omega's only outstanding Voting Securities are Omega
Common Stock and its Series A ESOP Cumulative Convertible Preferred Stock. It is
anticipated that following consummation of the Merger, Omega's only outstanding
Voting Securities will continue to be Omega Common Stock and its Series A ESOP
Cumulative Convertible Preferred Stock.

The 10% voting limitation of the Restated Articles does not apply to the
casting of votes by a person as a proxy holder for other shareholders pursuant
to proxies that were revocable and secured from shareholders who are not part of
a Shareholder Group which includes the Person voting such proxies. The Omega
Board of Directors' determination with respect to the existence of a Shareholder
Group and the numbers of votes which any Person is entitled to cast is
conclusive in the absence of clear and convincing evidence of bad faith. Votes
cast in violation of the Restated Articles will not be counted.

10% Limitation on "Holdings" of Voting Securities. The Restated Articles
provide that no Person (as defined therein) may have Holdings (as defined
therein) that exceed 10% of Omega's Voting Securities, except as authorized by,
and subject to such conditions as may be imposed by, the Omega Board of
Directors.

As used in the Restated Articles, "Holdings" means: (1) the Voting
Securities which the Person owns of record; (ii) the Voting Securities as to
which the Person has direct or indirect beneficial ownership (as such term is
used in Section 13(d) of the Securities Exchange Act of 1934); and (iii) the
Voting Securities owned of record or beneficially (as defined in clause (ii)) by
members of a Shareholder Group which includes such Person.

The Omega Board of Directors may terminate the voting rights of any Person
who acquires Holdings that cause a violation of the Restated Articles for a long
as such violation continues. In addition, the Board may commence litigation to
enforce the restrictions of the Restated Articles or to take other appropriate
action, including, without limitation, seeking injunctive relief and resorting
to the remedy set forth in the Restated Articles. The Board of Directors'
determination with respect to the existence of a violation of the provisions of
the Restated Articles is conclusive in the absence of clear and convincing
evidence of bad faith.

Omega's Right to Repurchase Excess Holdings. The Restated Articles provide
that, in addition to its rights and remedies, Omega, or its designee(s), shall
<PAGE> 48

have the right, at Omega's option, to purchase all or any part of a Person's
Holdings that exceed 10% of Omega's issued and outstanding Voting Securities.
The Restated Articles set forth in detail the manner in which the option is to
be exercised.

Specifically, the Restated Articles authorize the Board of Directors of
Omega to exercise its option to purchase Voting Securities held in violation of
the Restated Articles by adoption of a resolution to that effect specifying
(among other things) the name of the Person whose Voting Securities are to be
purchased, the date of such purchase (which shall be not less than 20 days nor
more than 60 days after the adoption of the resolution), the purchase price and
other particulars attending the transaction (the "Resolution").

The purchase price for the Voting Securities is intended to equal the
average market price for such Voting Securities during a period (the
"Measurement Period") beginning 65 trading days prior to the date on which the
Resolution was adopted and ending five days prior to the date on which the
Resolution was adopted. "Trading Day" means a day on which there is stock traded
on the New York Stock Exchange or National Association of Securities Dealers
Automatic Quotation System. If the Voting Securities being purchased are neither
securities for which prices are quoted or bid on a national securities exchange
or in the over-the-counter market nor securities convertible into such
securities, the purchase price is determined by computing the lower of: (i) the
last sale price prior to the date of adoption of the Resolution; or (ii) the per
share or other unit book value of such Voting Security, using generally accepted
accounting principles, consistently applied, as of the last day of the calendar
quarter immediately preceding the date of adoption of the Resolution.

However, if the Person from whom the Voting Securities are purchased
acquired the Voting Securities within one year prior to the date of adoption of
the Resolution, the purchase price cannot exceed the direct cost to acquire such
Voting Securities (excluding legal, accounting, investment advisory or other
direct costs, whether or not similar to the foregoing) incurred by the Person
from whom such Voting Securities are repurchased, regardless of the result
obtained by applying the formula previously described. The purpose of this
provision is to prevent a Person who violates the Restated Articles from making
a profit on Voting Securities held less than one year.

The purchase price will be computed by an independent public accounting firm
selected by the Board of Directors. The accounting firm's computation shall be
conclusive in the absence of clear and convincing evidence of bad faith.

Omega is required to give notice to Persons whose Voting Securities are
being purchased within ten days after the adoption of the Resolution. Omega or
its designee is required to deposit the purchase price for the Voting Securities
in a designated account. The purchase price could be withdrawn from the account
by the Person whose Voting Securities have been purchased upon delivery by such
Person of certificates representing such Voting Securities and an irrevocable
proxy authorizing the purchaser to vote such Voting Securities.

In the event that the Person whose Voting Securities are being purchased
does not deliver the share certificates and proxies on or before the designated
date of purchase, the transfer of the Voting Securities shall be deemed to have
occurred notwithstanding and the records of Omega will be marked accordingly.
<PAGE> 49

The Restated Articles appoint the Secretary of Omega agent and attorney-in-fact
for all Omega shareholders to make transfers on Omega's books and to execute
proxies on their behalf.

If Omega or its designee should fail to deposit the purchase price, the
Resolution will be considered revoked and of no force or effect. Revocation of
the Resolution shall not give the Person whose Voting Securities were to have
been purchased any legal or equitable claim against Omega for the purchase price
or otherwise. Revocation of the Resolution shall not prevent Omega from
exercising its rights by adopting a new Resolution with respect to the Person
whose Voting Securities were the subject of the revoked Resolution.

Omega need not exercise its purchase option proportionately with respect to
the individual members of a Shareholder Group (as defined in the Restated
Articles), but may exercise such option as to any one or more or all of such
individual members.

"Supermajority" Provision Concerning Removal of Directors. The Restated
Articles provide that any one director, class of the Board, or the entire Board
may be removed from office only by the vote of the holders of at least 75%, or
such higher percentage as may be required by law, of the outstanding shares of
capital stock of Omega then eligible to vote. The Omega Restated Articles also
impose a requirement that directors be removed only for cause (and by the
aforementioned 75% stockholder vote). The Restated Articles define "cause" as:
conviction of the director of a felony; declaration by order of court that the
director is of unsound mind; or, gross abuse of trust committed in bad faith.

"Supermajority" Provision Concerning Amendments to Omega's Restated Articles
or Amended Bylaws. The Restated Articles require, for the adoption of any
shareholder proposal to amend Omega's Restated Articles or Bylaws which is not
previously approved by the Board, the vote of shareholders entitled to cast at
least 75% of the votes eligible to be cast thereon.

Authorization of Preferred Stock. The Restated Articles authorize the
issuance of 5,000,000 shares of Omega Preferred Stock. The provisions in the
Restated Articles relating to the issuance of Omega Preferred Stock may have the
effect not only of discouraging tender offers or other stock acquisitions but
also of deterring existing shareholders from making management changes. Issuance
of Omega Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could make it more difficult
for a third party to secure a majority of outstanding voting stock.

Business Combinations. An additional provision of the Restated Articles
enables the Board of Directors of Omega to oppose a tender offer on the basis of
factors other than economic benefit to shareholders, such as: the impact the
acquisition of Omega would have on the community; the effect of the acquisition
upon employees, depositors and customers; and the reputation and business
practices of the tender offeror. The provision permits the Board of Directors of
Omega to recognize its responsibilities to these constituent groups and to Omega
and its subsidiaries and the community which they serve.

Shareholder Nominations for Directors. Omega's Bylaws provide that, with
certain exceptions, nominations of candidates for election as Directors of
Omega, other than those made by management of Omega, must be more than 60 days
<PAGE> 50

prior to any shareholders' meeting called for the election of Directors. This
provision could be viewed as "anti-takeover" in nature, since it may make it
more difficult for shareholders to nominate candidates and may give an advantage
to incumbent management's nominees.

These provisions may enhance the possibility that a potential bidder for
control of Omega will be required to act through arm's-length negotiation with
respect to such major transactions as a merger, consolidation or purchase of
substantially all the assets of Omega. The overall effect of the foregoing
provisions as well as the Restated Articles and Bylaws may be to deter a future
tender offer. Shareholders might view such an offer to be in their best
interests should the offer include a substantial premium over the market price
of Omega Common Stock at that time. In addition, these provisions may have the
effect of assisting Omega's management to retain its position and place it in a
better position to resist changes that the shareholders may want to make if
dissatisfied with the conduct of Omega's business.

Omega has no present plans to adopt any other "anti-takeover" and
"anti-greenmail" provisions.
<PAGE> 51

COMPARISON OF THE RIGHTS OF THE
SHAREHOLDERS OF THE CAPITAL STOCK OF OMEGA AND MONTOUR BANK

The rights of the shareholders of Montour Bank are presently governed by the
Pennsylvania Banking Code of 1965 and the Articles of Incorporation and Bylaws
of Montour Bank. As a result of the Merger, shareholders of Montour Bank who
receive Omega Common Stock in the merger will become shareholders of Omega, and,
as such, their rights as shareholders will be governed by the BCL and the
Restated Articles and Bylaws of Omega. Certain differences in the rights of
shareholders of Omega and Montour Bank arise from the distinctions between the
Banking Code and BCL and the Articles and Bylaws of each. Although it is
impracticable to note all of the differences, the following is a summary of
certain significant differences.

The Articles of Incorporation of Montour Bank authorize the issuance of
3,000,000 shares of common stock, $5.00 par value per share and 500,000 shares
of preferred stock, $5.00 par value per share. On the Record Date, 418,080
shares of Montour Bank Common Stock were issued and outstanding. Upon the
consummation of the Merger, the Montour Bank Common Stock will be cancelled, and
the holders of Montour Bank Common Stock will receive shares of Omega Common
Stock, cash or shares of Omega Common Stock and cash as described in "THE
PROPOSED MERGER AND RELATED MATTERS." The Omega Restated Articles authorize the
issuance of 25,000,000 shares of Omega Common Stock, par value $5.00 per share,
and 5,000,000 shares of preferred stock, $5.00 per share.

Dividends. Holders of Montour Bank Common Stock are entitled to dividends
as and when declared by the Board of Directors of Montour Bank out of funds
legally available therefor. Subject to such preferences, limitations and
relative rights as may be fixed for any series of preferred stock that may be
issued, including the Series A ESOP Cumulative Convertible Preferred Stock,
holders of Omega Common Stock are entitled to receive such dividends, when, as
and if declared by the Board of Directors out of funds legally available
therefor. Cash available for dividend distribution to the holders of Omega's
Common Stock and preferred stocks, including the presently outstanding shares of
Series A ESOP Cumulative Convertible Preferred Stock, must initially come from
dividends paid to Omega by Omega's subsidiaries. Accordingly, restrictions on
payment of cash dividends by Omega is affected by any restrictions on the
payment of dividends by Omega's subsidiaries.

Voting; Election of Directors. Holders of Montour Bank Common Stock are
entitled to one vote per share on all matters submitted to a vote of
shareholders, except in each election of directors every shareholder entitled to
vote has the right to cumulate his votes by multiplying the number of votes to
which he may be entitled by the total number of directors to be elected in the
same election and he may cast the whole number of such votes for one candidate
or he may distribute them among any two or more candidates. Holders of Omega
Common Stock are entitled to one vote for each share held and have no cumulative
voting rights in the election of directors. Like the Bylaws of Omega which
provide for the classification of directors into three classes with
approximately one-third of the directors elected annually for three-year terms,
the Bylaws of Montour Bank also provide for a classified Board of Directors.
Both the Omega Bylaws and the Montour Bank Bylaws also contain provisions
limiting shareholder nominations for elections of directors.
<PAGE> 52

Liquidation. As with Omega Common Stock, in the event of any liquidation,
dissolution or winding up of Montour Bank, holders of Montour Bank Common Stock
will be entitled to share ratably in all assets available for distribution after
the payment of debts, liabilities and preferences.

Other Matters. Like Omega Common Stock, Montour Bank Common Stock has no
preemptive rights.

"Anti-Takeover" and "Anti-Greenmail" Provisions and Management Implications.
Both the Restated Articles of Omega and the Montour Bank Articles of
Incorporation include a provision which enables their respective Board of
Directors to oppose a tender offer on the basis of factors other than economic
benefit to shareholders, such as: the impact the acquisition of Omega or Montour
Bank would have on employees, depositors and customers; and any antitrust or
other legal and regulatory issues that are raised by the offer.

Unlike the Omega Restated Articles, the Articles of Incorporation of Montour
Bank do not contain any provisions limiting the voting rights or ownership of
shares of Montour Bank Common Stock in excess of 10%, or requiring
supermajorities for shareholder nominations for directors or amendments to the
Articles and Bylaws. See "DESCRIPTION OF CAPITAL STOCK OF OMEGA - Certain
Anti-Takeover and Anti-Greenmail Provisions and Management Implications."

Non-Applicability of Certain Anti-Takeover Provisions of the Banking Code

Section 1610 of the Banking Code provides that any holder of voting shares
of a bank that becomes subject to a "control transaction" may make written
demand on, and is entitled to receive cash from, the control person or group
equal to the fair value of each voting share as of the day prior to the date on
which the control transaction occurs. A "control transaction" refers to the
acquisition by a person or group of the status of a controlling person or group.
This status is obtained when a person, or a group of persons acting in concert,
has voting power (which can include an option or contract) over voting shares of
the bank that would entitle the holders thereof to cast at least 30% of the
votes that all shareholders would be entitled to cast in an election of
directors. No similar provisions are applicable to Omega.

Dissenters' Rights

The dissenters' rights, if any, of Omega shareholders and Montour Bank
shareholders are governed by the rights and remedies and limitations on such
rights and remedies provided in the BCL. The BCL provides for dissenters' rights
in a variety of transactions including mergers or consolidations to which a
corporation is a party (other than mergers not requiring a shareholder vote).
However, except in the case of a merger or consolidation in which their shares
would be converted into something other than shares of the surviving or new
corporation (or cash in lieu of fractional shares), shareholders are not
entitled to dissenters' rights in any of the transactions mentioned above if
their stock is either listed on a national securities exchange or held of record
by 2,000 or more shareholders. While Omega Common Stock is not listed on the New
York or American Stock Exchanges, Omega currently has in excess of 2,000
shareholders of record. Montour Bank Common Stock is not listed on the New York
or American Stock Exchanges and is not held by more than 2,000 shareholders of
record, and, therefore, the dissenters' rights provisions of the BCL would
continue to apply to Montour Bank.
<PAGE> 53

DESCRIPTION OF OMEGA

Omega Financial Corporation is a Pennsylvania business corporation which is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended. Omega was formed, effective December 31, 1986, as a result of the
merger of Heritage Financial Services Corporation ("Heritage") into Peoples
National Bancorp, Inc. ("Peoples") and the change of Peoples' name to Omega.

Peoples was incorporated on June 24, 1982 and became an active bank holding
company on December 7, 1982 through the acquisition of all of the outstanding
shares of Peoples National Bank of Central Pennsylvania ("Peoples Bank").
Heritage was incorporated on June 21, 1982 and became an active bank holding
company on December 31, 1982 through the acquisition of all of the outstanding
shares of The Russell National Bank ("Russell Bank"). As a result of the merger
of Heritage into Peoples, Omega became the holding company for both Peoples Bank
and Russell Bank.

On January 28, 1994, Penn Central Bancorp, Inc. ("Penn Central"), a bank
holding company, merged into Omega. As a result of the merger of Penn Central
into Omega, Omega became the holding company for Penn Central's wholly-owned
subsidiaries, including its banking subsidiaries: Penn Central National Bank
("Penn Central Bank"), Hollidaysburg Trust Company ("Hollidaysburg") and the
First National Bank of Saxton ("Saxton Bank").

On February 18, 1995, Peoples Bank and Russell Bank merged to form Omega
Bank, N.A. and on March 18, 1995 Saxton Bank merged into Penn Central Bank.

Omega's bank subsidiaries (the "Banks") currently provide retail and
commercial banking services through 40 offices in Central Pennsylvania. Omega
Bank operates 24 full service banking offices in Centre, Clinton, Mifflin and
Juniata counties. Penn Central Bank operates six full service banking offices in
Huntington and Bedford counties, and Hollidaysburg operates nine full service
banking offices in Blair County.

The Banks provide a full range of banking services including an automatic
teller machine network, checking accounts, NOW accounts, savings accounts, money
market certificates, investment certificates, fixed rate certificates of
deposit, club accounts, secured and unsecured commercial and consumer loans,
construction and mortgage loans, safe deposit facilities, credit loans with
overdraft checking protection and student loans. The Banks also provide a
variety of trust services.

As of December 31, 1994, The Banks operated an aggregate of 37 automated
teller machines (ATMs) at various locations. The Banks are members of the Money
Access Center ("MAC") System and the "Plus System." The MAC System operates
through Pennsylvania and the "Plus System" operates nationwide.

The Banks have a relatively stable deposit base with no major seasonal
depositor or group of depositors. Most of their commercial customers are small
and midsized businesses in Central Pennsylvania.
<PAGE> 54

On January 22, 1986, Omega formed Central Pennsylvania Life Insurance Co.,
an Arizona corporation, for the purpose of underwriting credit life insurance
for Omega's bank subsidiaries. On December 26, 1985, Omega formed Central
Pennsylvania Investment Co., a Delaware corporation, for the purpose of holding
and managing certain investments of Omega. On January 14, 1988, Omega formed
Central Pennsylvania Leasing, Inc., a Pennsylvania corporation, for the purpose
of leasing activities. As of December 31, 1994, no activity had transpired. On
January 14, 1988, Omega formed Central Pennsylvania Real Estate, Inc. for the
purpose of engaging in real estate transactions for Omega. As of December 31,
1994, no activity had transpired.

The Banks service areas are characterized by intense competition for banking
business among other commercial banks, savings and loan associations, mutual
savings banks and other financial institutions. The Banks actively compete with
such banks and institutions for local retail and commercial accounts. The Banks
also are subject to competition from other banks and financial institutions in
Central Pennsylvania, as well as other financial institutions outside their
service areas, for certain types of banking business. Many competitors have
substantially greater financial resources and larger branch systems than those
of the Banks.

In commercial transactions, the Banks' respective legal lending limits to a
single borrower enable them to compete effectively for the business of small and
midsized businesses. However, this legal lending limit is considerably lower
than that of various competing institutions and thus may act as a constraint on
each Bank's effectiveness in competing for financings in excess of the limit.

In consumer transactions, the Banks believe that they are able to compete on
a substantially equal basis with larger financial institutions because they
offer competitive interest rates on savings and time accounts and loans.

In competing with other banks, savings and loan associations and other
financial institutions, the Banks seek to provide personalized services through
management's knowledge and awareness of their service areas, customers and
borrowers.

Other competitors, including credit unions, consumer finance companies,
factors, insurance companies, and money market mutual funds, compete with
certain lending and deposit gathering services offered by the Banks. The Banks
also compete with insurance companies, investment counseling firms, mutual funds
and other business firms and individuals in corporate and trust investment
management services.

As of December 30, 1994, Omega, had a total of 468 full-time employees and
101 part-time employees.

DESCRIPTION OF MONTOUR BANK

Business

Montour Bank was organized in 1989. It is a Pennsylvania-chartered banking
institution and member of the Federal Reserve System. Its deposits are insured
<PAGE> 55

by the FDIC under the Bank Insurance Fund. Montour Bank has one office located
at 1519 Bloom Road, Danville, Pennsylvania 17821. Montour Bank owns the land and
building on this site.

Montour Bank is a full service commercial bank providing a wide range of
services to individuals and small to medium sized businesses in its Montour
County, Pennsylvania market area. Among its services, Montour Bank accepts time,
demand and savings deposits and makes secured and unsecured commercial, real
estate and consumer loans. Montour Bank's business is not seasonal in nature and
is not dependent upon any single customer or small group of customers for
deposits or loans.

As of December 31, 1994, Montour Bank had 14 full-time employees and no
part-time employees.

Competition

Montour Bank competes with other local credit unions, commercial banks,
thrifts and other financial institutions, most of which are larger than Montour
Bank, as well as with major regional banking and financial institutions. These
competitors include Geisinger Credit Union of Danville, Pennsylvania;
Commonwealth Bank, a division of Meridian Bank of Reading, Pennsylvania; FNB
Bank, N.A., a subsidiary of Fulton Financial Corporation of Lancaster,
Pennsylvania; and Northern Central Bank, a subsidiary of Keystone Financial
Corporation of Harrisburg, Pennsylvania. Montour Bank is generally competitive
in its service area with respect to interest rates paid on time and savings,
deposits, service charges on deposit, accounts and interest charged on loans.

Supervision and Regulation

The operations of Montour Bank are subject to federal and state statutes
applicable to banks chartered under the banking laws of the Commonwealth of
Pennsylvania, to members of the Federal Reserve System, and to banks, whose
deposits are insured by the FDIC. Montour Bank's operations are also subject to
regulations of the Department, the FRB and the FDIC.

Federal and state banking laws and regulations govern, among other things, a
bank's scope of business, investments, reserves against deposits, loans and
collateral, mergers and consolidations and establishment of branches. All banks
in Pennsylvania are permitted to maintain branch offices in any county of the
state. Branches may be established only after approval by the Department. The
Department is required to grant approval only if it finds that there is a need
for banking services or facilities such as are contemplated by the proposed
branch. The Department may disapprove an application if the applicant bank does
not have the requisite capital and surplus or if the application relates to the
establishment of a branch in a county contiguous to the county in which the
applicant's principal place of business is located, and another banking
institution that has its principal place of business in the county in which the
proposed branch would be located has, in good faith, notified the Department of
its intention to establish a branch in the same municipal location in which the
proposed branch would be located.
<PAGE> 56

The laws of Pennsylvania applicable to Montour Bank include, among other
things, provisions that: (1) require the maintenance of certain reserves against
deposits; (2) limit the type and amount of loans that may be made and the
interest that may be earned thereon; (3) restrict investments and other
activities; and (4) limit the payment of dividends. The amount of funds that
Montour Bank may lend to a single borrower is limited generally under
Pennsylvania law to fifteen percent (15%) of the aggregate of its capital,
surplus, undivided profits, loan loss reserves and capital securities of Montour
Bank (all as defined by statute and regulation).

Applicable Pennsylvania law also requires that a bank obtain the approval of
the Department prior to effecting any merger where the surviving bank would be a
Pennsylvania-chartered bank. In reviewing any merger application, the Department
would consider, among other things, whether the merger would be consistent with
adequate and sound banking practices and whether the merger would be in the
public interest on the basis of several factors, including the potential effect
of the merger on competition and the convenience and needs of the area primarily
to be served by Montour Bank resulting from he merger.

Federal law also prohibits acquisitions of control of a bank, such as
Montour Bank, without prior notice to the FRB. "Control" is defined for this
purpose as the power, directly or indirectly, to direct the management or
policies of Montour Bank or to vote twenty-five (25%) or more of its capital
securities.

From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of Montour Bank. It cannot be predicted whether any such legislation
will be adopted or how such legislation would affect the business of Montour
Bank. As a consequence of the extensive regulation of commercial banking
activities in the United States, Montour Bank's business is particularly
susceptible to being affected by federal legislation and regulations that may
increase the cost of doing business.

For example, under the Community Reinvestment Act of 1977 ("CRA"), the FRB
is required to assess the record of all financial institutions regulated by it
to determine if these institutions are meeting the credit needs of the community
(including low- and moderate-income neighborhoods). The FRB must take a bank's
community reinvestment record into account when evaluating any application made
by the particular bank for, among other things, approval of a branch or the
deposit facility, an office relocation, a merger, or an acquisition of bank
shares. The FRB is required by law to make publicly available each bank's CRA
record. CRA evaluations include a descriptive rating ("outstanding",
"satisfactory", "needs to improve", or "substantial noncompliance") and a
statement describing the basis for the rating. Montour Bank's most recent rating
pursuant to the CRA was "satisfactory."

Effect of Government Monetary Policies

The earnings of Montour Bank are and will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States government
and its agencies.
<PAGE> 57

The monetary policies of the FRB have had, and will likely continue to have,
an important impact on the operating results of commercial banks through the
FRB's power to implement national monetary policy in order, among other things,
to curb inflation or combat recession. The FRB has a major effect upon the
levels of bank loans, investments and deposits through its open market
operations in United States government securities and thorough its regulation,
among other things, of the discount rate on borrowing of member banks and the
reserve requirements against member bank deposits. It is not possible to predict
the nature and impact of future changes in monetary and fiscal policies.

Legislation and Regulatory Changes

From time to time, legislation is enacted which has the effect of increasing
the cost of doing business, limiting or expanding permissible activities or
affecting he competitive balance between banks and other financial institutions.
Proposals to change the laws and regulations governing the operations and
taxation of banks, bank holding companies and other financial institution are
frequently made in Congress, and before various bank regulatory agencies. No
prediction can be made as to the likelihood of any major changes or the impact
such changes might have on Montour Bank.

Legal Proceedings

In the opinion of the management of the Bank, there are no proceedings
pending to which the Montour Bank is a party or to which its property is
subject, which, if determined adversely to Montour Bank, would be material in
relation to the Bank's undivided profits or financial condition. There are no
proceedings pending other than ordinary routine litigation incident to the
business of Montour Bank. In addition, no material proceedings are pending or
are known to be threatened or contemplated against the Montour Bank by
government authorities.

Environmental Issues

There are several federal and state statutes that govern the obligations of
financial institutions with respect to environmental issues. Besides being
responsible under such statutes for its own conduct, a bank also may be held
liable under certain circumstances for actions of borrowers or other third
parties on properties that collateralize loans held by the bank. Such potential
liability may far exceed the original amount of the loan made by the bank.
Currently, Montour Bank is not a party to any pending legal proceedings under
any environmental statute nor is Montour Bank aware of any circumstances that
may give rise to liability of Montour Bank under any such statute.

<PAGE> 58

Regulatory Capital Requirements

The following table presents Montour Bank's capital ratios at December
31, 1994.

(In Thousands)

Tier I Capital . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,864
Tier II Capital. . . . . . . . . . . . . . . . . . . . . . . . . . 376
Total Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,240

Adjusted Total Average Assets. . . . . . . . . . . . . . . . . . . 39,134
Total Adjusted Risk-Weighted Assets(1) . . . . . . . . . . . . . . 32,173

Tier I Risk-Based Capital Ratio(2) . . . . . . . . . . . . . . . . 12.01%
Required Tier I Risk-Based Capital Ratio . . . . . . . . . . . . . 4.00
Excess Tier I Risk-Based Capital Ratio . . . . . . . . . . . . . . 8.01

Total Risk-Based Capital Ratio(3). . . . . . . . . . . . . . . . . 13.18%
Required Total Risk-Based Capital Ratio. . . . . . . . . . . . . . 8.00
Excess Total Risk-Based Capital Ratio. . . . . . . . . . . . . . . 5.18

Tier I Leverage Ratio(4) . . . . . . . . . . . . . . . . . . . . . 9.87%
Required Tier I Leverage Ratio . . . . . . . . . . . . . . . . . . 3.00
Excess Tier I Leverage Ratio . . . . . . . . . . . . . . . . . . . 6.87
- ------------------------------
(1) Includes off-balance sheet items at credit-equivalent values less intangible
assets.

(2) Tier I Risk-Based Capital Ratio is defined as the ratio of Tier I Capital
to Total Adjusted Risk-Weighted Assets.

(3) Total Risk-Based Capital Ratio is defined as the ratio of Tier I and Tier II
Capital to Total Adjusted Risk-Weighted Assets.

(4) Tier I Leverage Ratio is defined as the ratio of Tier I Capital to Adjusted
Total Average Assets.

Montour Bank was required to implement, on January 1, 1994, Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("FASB 115"). For regulatory capital reporting
purposes, FASB 115 changed the composition of stockholders' equity in financial
statements prepared in accordance with generally accepted accounting principles
by including as a separate component of equity the amount of net unrealized
holding gains or losses on debt and equity securities that are deemed to be
available-for-sale. The implementation of FASB 115 did not have a material
effect during 1994 on the regulatory capital ratios of Montour Bank.

Effective January 27, 1995, the FDIC has issued a final rule with respect to
the implementation of FASB 115 for regulatory capital reporting purposes. Under
<PAGE> 59

this final rule, net unrealized holding losses on available-for-sale equity
securities (but not debt securities) with readily determinable fair values will
be included (i.e., deducted) when calculating Montour Bank Tier 1 capital. All
other unrealized holding gains and losses on available-for-sale securities will
be excluded (i.e., not deducted) from Montour Bank's Tier 1 capital. Based upon
the composition of Montour Bank's investment portfolio as of December 31, 1994,
such final rule will have no material effect on Montour Bank's Tier 1 capital.

Montour Bank's ability to maintain the required levels of capital is
substantially dependent upon the success of Montour Bank's capital and business
plans; the impact of future economic events on Montour Bank loan customers; and
Montour Bank's ability to manage its interest rate risk and investment portfolio
and control its growth and other operating expenses.

MONTOUR BANK MARKET PRICES AND DIVIDENDS

Montour Bank Common Stock Prices and Common Stock Dividends

There is no established public trading market for Montour Bank Common Stock.
Occasionally, individuals sell and buy shares of the Montour Bank Common Stock
in privately negotiated transactions. Montour Bank acts as its own transfer
agent and keeps its own stock transfer ledger. According to such ledger, the
following number of shares were transferred during the years indicated:

Year Number of Shares Transferred
- ---- ----------------------------
1992 4900
1993 14,600
1994 48,997

The lowest and highest prices per share known by the management of Montour
Bank for the above years were between $8.00 and $10.00 per share, respectively.
These prices may or may not include any mark-up, mark-down or commission.

On January 10, 1995, the last business day preceding public announcement of
the Merger, the last known stock price was $10.00 per share.

As of March 31, 1995, there were 203 holders of record of Montour Bank
Common Stock.

Dividend Restrictions on Montour Bank

Any future dividends of Montour Bank are subject to certain regulatory
considerations and the discretion of its Board of Directors and will depend upon
a number of factors, including operating results, financial conditions and
general business conditions. The shareholders are entitled to receive dividends,
as and when declared by the Board of Directors of Montour Bank, out of funds
<PAGE> 60

legally available therefor, subject to the restrictions set forth in the
Pennsylvania Banking Code of 1965 (the "Pennsylvania Banking Code") and the
Federal Deposit Insurance Act.

The Pennsylvania Banking Code provides that cash dividends may be declared
and paid only out of accumulated net earnings and that, prior to the declaration
of any dividend, if the surplus of Montour Bank is less than the amount of its
capital, Montour Bank shall, until surplus is equal to such amount, transfer to
surplus an amount which is at least 10% of the net earnings of Montour Bank for
the period since the end of the last fiscal year or for any shorter period since
the declaration of a dividend. If the surplus of Montour Bank is less than 50%
of the amount of capital, no dividend may be declared or paid without the prior
approval of the Department until such surplus is equal to 50% of Montour Bank's
capital.

The Federal Deposit Insurance Act generally prohibits all payments of
dividends by any bank which is in default on any assessment for deposit
insurance premium to the FDIC.

As of December 31, 1994, there were no funds available at Montour Bank that
could be paid as a dividend to shareholders under current Pennsylvania law.
<PAGE> 61

MONTOUR BANK SELECTED FINANCIAL DATA

The following selected financial data, as of December 31, 1994, 1993, 1992,
1991, and 1990 and for the years then ended have been derived from the financial
statements of Montour Bank. The financial statements as of December 31, 1994 and
1993 and for the two-year period ended December 31, 1994, included elsewhere
herein, have been audited by J.H. Williams & Co., independent public
accountants. Average balance and ratio information presented have not been
audited. The information set forth below should be read in conjunction with the
consolidated financial statements of Montour Bank, including the related notes
thereto included elsewhere herein.

Five-Year Financial Summary
<TABLE>
<CAPTION>
BALANCE SHEET INFORMATION 1994 1993 1992 1991 1990
at December 31 -------------------------------------------------------
(In thousands of dollars, except share data)
<S> <C> <C> <C> <C> <C>
Assets................................... $ 41,013 $ 29,489 $ 18,938 $ 13,941 $ 7,754
Deposits................................. 36,081 25,937 15,468 10,340 3,894
Loans, net............................... 32,277 24,434 13,876 8,635 3,157
Investment securities.................... 4,941 2,339 2,281 2,947 1,105
Shareholders' equity..................... 3,865 3,401 3,342 3,496 3,814
Number of shares outstanding - common.... 418,080 417,580 417,580 417,580 417,580

INCOME STATEMENT INFORMATION
Years Ended December 31
Total interest income..................... $ 2,594 $ 1,841 $ 1,311 $ 897 $ 371
Net interest income....................... 1,222 906 619 420 273
Provision for loan losses................. 76 121 81 83 32
Income before income taxes................ 331 60 (154) (318) (263)
Income tax expense........................ (127) 0 0 0 0
Net income................................ 458 60 (155) (318) (263)

PER COMMON SHARE DATA*
Net income............................... $ 1.10 $ 0.14 $ (0.37) $ (0.76) $ (0.63)
</TABLE>

FINANCIAL RATIOS
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Return on average equity..................... 12.82% 1.79% -4.55% -8.68% -7.22%
Return on average assets .................... 1.27 0.25 -0.95 -2.92 -5.21
Average equity to average assets ............ 9.88 13.71 20.95 33.66 72.13
</TABLE>

<PAGE> 62

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF MONTOUR BANK

FINANCIAL CONDITION

Montour Bank was founded in 1989 as a financial intermediary specializing in
consumer auto loans and therefore its financial condition should be viewed in
terms of trends in its uses and sources of funds. The following table depicts
average balances, the dollar change and percentage change for the past two
years.

Changes in Uses and Sources of Funds
($ in thousands)
<TABLE>
<CAPTION>

1994 Increase(Decrease) 1993 Increase(Decrease) 1992
Average ------------------ Average ------------------ Average
Balance Amount % Balance Amount % Balance
------- ------ -------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Funding Uses:
Loans $29,613 $10,077 51.6% $19,536 $ 8,038 69.9% $11,498
Investment securities 3,125 433 16.1% 2,692 85 3.3% 2,607
Interest bearing deposits and other 260 127 95.5% 133 (44) (24.9%) 177
Federal funds sold 1,670 239 16.7% 1,431 66 4.8% 1,365
------- ------- ------ ------- ------- ------ -------
Total interest earning assets 34,668 10,876 45.7% 23,792 8,145 52.1% 15,647
Non-interest earning assets 1,846 945 104.9% 901 415 85.4% 486
Less: Allowance for loan losses (345) (102) 42.0% (243) (96) 65.3% (147)
------- ------- ------ ------- ------- ------ -------
Total uses $36,169 $11,719 47.9% $24,450 $ 8,464 52.9% $15,986
======= ======= ====== ======= ======= ====== =======
Funding Sources:
Interest bearing demand deposits $ 3,894 $ 490 14.4% $ 3,404 $ 1,444 73.7% $ 1,960
Savings deposits 1,553 43 2.8% 1,510 1,167 340.2% 343
Time deposits 25,108 9,897 65.1% 15,211 5,339 54.1% 9,872
Other 638 638 0.0% 0 0 0.0% 0
------- ------- ------ ------- ------- ------ -------
Total interest bearing liabilities 31,193 11,068 55.0% 20,125 7,950 65.3% 12,175
Demand deposits 1,192 356 42.6% 836 246 41.7% 590
Other liabilities 211 74 54.0% 137 34 33.0% 103
Shareholders' equity 3,573 221 6.6% 3,352 (59) (1.7%) 3,411
------- ------- ------ ------- ------- ------ -------
Total sources $36,169 $11,719 47.9% $24,450 $ 8,171 50.2% $16,279
------- ------- ------ ------- ------- ------ -------
</TABLE>

ASSETS

Total assets during 1994 averaged $36,169,000, an increase of $11,719,000 or
47.9% above the $24,450,000 average in 1993. The 1993 average was an increase of
$8,171,000 or 50.2% compared to 1992 when total assets averaged $16,279,000.
Average earning assets as a percent of average total assets was 95.85% in 1994,
97.31% in 1993 and 96.12% in 1992.

As of December 31, 1994, total assets were $41,013,000, as compared to December
31, 1993, when assets totaled $29,489,000, representing an increase of
$11,524,000, or 39.1%.

<PAGE> 63

LOANS

Total loans, net of unearned income, averaged $29,613,000 in 1994, $19,536,000
in 1993, and $11,498,000 in 1992. Montour Bank's loan growth in 1994 was
primarily in the consumer loan area, accounting for $8,000,000. The growth in
the consumer loan area can be attributed to the interest rate environment and
the aggressive nature management has taken towards consumer auto lending. The
loan portfolio has grown in dramatic fashion, with an increase of $10,077,000,
or 51.6%, in 1994 compared to an increase of $8,038,000, or 69.9%, in 1993 and
an increase of $5,575,000, or 94.1%, in 1992.

As of December 31, 1994, total loans were $32,653,000, as compared to December
31, 1993, when loans totaled $24,742,000, representing an increase of
$7,911,000, or 32.4%. As of December 31, 1992, loans were $14,064,000.

DISTRIBUTION OF LOAN TYPES

The following is a breakdown as to what percent each major loan category is to
total loans.

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural .... 10.19% 11.40% 13.61% 17.33% 12.88%
Real Estate, Construction ................. 1.11% 2.07% 2.34% 1.62% 3.33%
Real Estate, Mortgage ..................... 25.71% 26.65% 46.03% 50.52% 65.66%
Installment, Net .......................... 62.99% 59.88% 38.02% 30.53% 18.13%
------ ------ ------ ------ ------
100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ======
</TABLE>

<PAGE> 64

RISK ELEMENTS OF LOAN PORTFOLIO

The table below presents information concerning nonperforming assets, including
non-accrual loans and loans 90 days past due. At December 31, 1994,
nonperforming loans as a percentage of the allowance for loan losses was 7.18%
compared to 11.07% at December 31, 1993. As a percentage of year-end loans,
nonperforming loans were 0.08% and 0.13% for 1994 and 1993, respectively
(Amounts in Thousands).
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------
1994 1993 1992 1991 1990
------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Non-accrual................................ 27 0 0 10 0
Accruing Loans 90 Days Past Due............ 0 34 7 0 0
Restructued................................ 0 0 0 0 0
------- ----- ----- ----- -----
27 34 7 10 0
======= ===== ===== ===== =====
</TABLE>

The Bank places all loans on a non-accrual status when collection of principal
is in doubt, or when interest is 90 days past due, unless the loan is secured
and in the process of collection.

<PAGE> 65

INVESTMENT SECURITIES

Investment securities averaged $3,125,000 in 1994, $2,692,000 in 1993 and
$2,607,000 in 1992. All debt investment securities are classified as held to
maturity at the time of purchase. In 1994 average holdings of U.S. Treasury
securities increased $549,000 or 71.4%, U.S. Government agencies increased
$426,000 or 43.6%.

The table below presents the value of investment securities for each of the past
three years.

<TABLE>
<CAPTION>
December 31,
--------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
U.S Treasury Securities................... $1,326 $825 $316
U.S Government Agency Securities.......... 3,339 808 1,140
Other Corporate Bonds and Stock........... 276 706 825
------ ------ ------
Total Securities....................... $4,941 $2,339 $2,281
====== ====== ======
</TABLE>

OTHER INVESTMENTS

Other investments, which include time deposits with banks and federal funds
sold, averaged $1,930,000 in 1994, $1,564,000 in 1993 and $1,542,000 in 1992.
These investments were purchased with liquidity in mind and relatively good
yields.

<PAGE> 66

DEPOSITS

Total deposits averaged $31,747,000 in 1994, an increase of $10,786,000 or 51.5%
over the 1993 average of $20,961,000. 1993 showed an increase of $8,196,000 or
64.2% compared to the 1992 average of $12,765,000. In 1994 average deposits
reflected increases in all transaction accounts, with a dramatic 65.1% increase
in time deposits.

At year end, total deposits increased $10,144,000 or 39.1% to $36,081,000 in
1994 compared to an increase of $10,469,000 or 67.7% to $25,937,000 in 1993 and
an increase of $5,128,000 or 49.6% to $15,468,000 in 1992.

Short-term time deposits were the primary source of deposit growth in 1994. Time
deposits on average grew $9,897,000 or 65.1%. The increase in time deposit money
funded the growth in loans.

The table below provides information on the average amount of, and average rate
paid on the deposit categories indicated for each of the last three years
(Amounts in Thousands).

<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1994 1993 1992
----------------- ----------------- ----------------
Amount Rate Amount Rate Amount Rate
------ ----- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Non-Interest Bearing Deposits........... $1,192 $836 $590
Interest Bearing Deposits
Demand and Money Market Deposits..... 3,894 3.06% 3,404 3.67% 1,960 4.29%
Savings Deposits..................... 1,553 2.96% 1,510 3.71% 343 4.08%
Time Deposits........................ 25,108 4.68% 15,211 4.96% 9,872 6.02%
------- ------- -------
Total............................. $31,747 $20,961 $12,765
======= ======= =======
</TABLE>

SHAREHOLDERS' EQUITY

Total shareholders' equity at December 31, 1994, was $3,865,000. This represents
an increase of $464,000 or 13.6% over the 1993 amount of $3,401,000. In 1992
shareholders' equity was $3,342,000.

The ratio of average equity to average assets was 9.88% in 1994, 13.71% in 1993
and 20.95% in 1992.

Federal banking regulators have established capital adequacy requirement for
banks based on risk factors. All banks are required to have a minimum of 4% of
risk adjusted assets in Tier 1 capital and 8% of risk adjusted assets in total
capital (Tier I and Tier II capital). As of December 31, 1994, Montour Bank's
Tier I capital ratio was 12.01% and its total capital ratio was 13.18%.

Return on average assets and equity was 1.27% and 12.82%, respectively, in
1994 as compared to 0.25% and 1.79% in 1993 and -0.95% and -4.55% in 1992.

<PAGE> 67

LIQUIDITY

Liquidity refers to the ability of the Bank to satisfy the financial needs of
its depositors and borrowers. Liquidity can be provided by the sale or maturity
of assets or by the acquisition of additional funds in the form of deposits or
other borrowings such as federal funds purchased or the use of the Federal
Reserve Discount Window.

A measure of liquidity is the average loan to deposit ratio. This ratio was
93.3% and 93.2% at December 31, 1994 and 1993, respectively.

Cash and due from banks are managed to their lowest possible levels. Cash on
hand is available to handle normal customer needs, and due from banks is managed
at target levels to reimburse correspondents for services rendered.

<PAGE> 68

OVERVIEW OF THE SUMMARY OF OPERATIONS

For the year 1994, the Bank's net income was a record $458,119. This represents
an increase of $398,318 or 666.07% compared to the net income of $59,801 earned
in 1993. In 1993, net income increased $214,236 from a loss in 1992 of $154,435,
primarily as a result of increased loan activity. In 1992, net income increased
$163,107 from a loss of $317,542 in 1991.

Net interest income increased $315,203 in 1994, while total non-interest income
decreased $6,080. In 1993, net interest income increased $287,781, while
non-interest income increased $10,235. In 1992, non-interest income increased
$1,556, while net interest income increased $199,006.

The provision for possible loan losses decreased $44,608 in 1994 to $76,092,
increased $40,150 in 1993 to $120,700 and decreased $2,150 in 1992 to $80,550.
Non-interest expense increased $82,167 or 10.9% in 1994, while the increase was
$43,630 or 6.15% in 1993 and $39,605 or 5.91% in 1992.

NET INTEREST INCOME

Net interest income is the amount by which interest income on earning assets
exceeds interest paid on interest bearing liabilities.

Interest income amounted to $2,593,719 for the year 1994 as compared to
$1,841,376 in 1993 and $1,310,977 in 1992. The increase in interest income in
each of these years is attributed to the dramatic loan growth. Of the $753,000
increase in interest income in 1994, $679,000 or 90% of the increase can be
traced to the loan area, where average balances increased by $10,077,000. While
average yield on loans decreased by 54 basis points from 8.34% in 1993 to 7.80%
in 1994, causing a reduction in income of $111,000, the large increase in
volumes contributed $790,000.

Similarly, in 1993, average loans increased by $8,038,000, or 70%, resulting in
a $559,000 increase in interest income, while income from other earning assets
in aggregate declined by $29,000.

The gross yield on earning assets comparing 1994 with 1993 decreased 26
basis points from 7.74% to 7.48%. The gross yield in 1992 amounted to 8.38%.

Interest expense increased $437,141 or 46.76% to $1,371,936 in 1994 compared to
an increase of $242,617 or 35.05% to $934,795 in 1993 and an increase of
$215,015 or 45.06% to $692,178 in 1992. The 1994 increase in interest expense is
primarily a result of significant growth in average time deposits, which grew by
$9,897,000, or 65%. As the interest bearing deposits were growing, the average
rates were showing a decline. The cost of interest bearing liabilities during
1994 when compared to 1993 decreased 25 basis points from 4.65% to 4.40%. The
deposit growth in 1993 was also very strong with interest bearing demand
deposits growing 74%, savings deposits growing 340% and time deposits growing by
54%. This occurred during a time when general market rates were declining,
resulting in increased interest expense of only $243,000, representing a
decrease in average rates paid of 103 basis points. The total cost of interest
bearing liabilities in 1992 was 5.68%. Average interest bearing liabilities in
total increased to $31,193,000 in 1994 compared to $20,125,000 in 1993 and
$12,175,000 in 1992.
<PAGE> 69

Net interest income was $1,222,000 in 1994, an increase of $316,000 or 34.88%
from 1993. The change was a result of an increase of $314,000 due to favorable
volume and mix changes and an increase of $2,000 due to interest rate effects.
Net yield on interest earning assets decreased 29 basis points to 3.52% in 1994
from 3.81% in 1993.

In total, net interest income in 1993 was $906,000, or 46% greater than in 1992
when net interest income was $619,000. Net yield on earning assets in 1993 was
3.81% or 15 basis points less than in 1992.

<PAGE> 70

NET INTEREST INCOME, AVERAGE BALANCES, AND RATES

The following tables show average asset and liability balances, average interest
rates and interest income and expenses for the three years ended December 31,
1994 (Amounts in Thousands).

<TABLE>
<CAPTION>
1994 1993 1992
------------------------- ------------------------- -------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS

Interest Earning Assets

Loans........................ $29,613 $2,309 7.80% $19,536 $1,630 8.34% $11,498 $1,071 9.31%
Investment Securities........ 3,125 200 6.40% 2,692 165 6.13% 2,607 185 7.10%
Interest Bearing
Deposits/Other.............. 260 12 4.62% 133 4 3.01% 177 11 6.21%
Federal Funds Sold........... 1,670 73 4.37% 1,431 42 2.94% 1,365 44 3.22%
------- ------ ------ ------- ------ ------ ------- ------ ------
Total Interest Earning Assets.. 34,668 2,594 7.48% 23,792 1,841 7.74% 15,647 1,311 8.38%

Non-interest Earning Assets

Cash and Due from Banks...... 637 510 393
Allowance for Loan Losses.... (345) (243) (147)
Premises and Equipment....... 1,004 182 197
Other Assets................. 205 209 189
------- ------- -------
Total.................... $36,169 $24,450 $16,279
======= ======= =======
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest Bearing Liabilities
Interest Bearing Demand
Deposits................... $3,894 119 3.06% $3,404 125 3.67% $1,960 84 4.29%
Savings Deposits............. 1,553 46 2.96% 1,510 56 3.71% 343 14 4.08%
Time Deposits................ 25,108 1,176 4.68% 15,211 754 4.96% 9,872 594 6.02%
Other,including Short-term
Borrowings, Long-term Debt,
and other Liabilities....... 638 31 4.86% 0 0 0.00% 0 0 0.00%
------- ------ ------ ------- ------ ------ ------- ------ ------
Total Interest Bearing
Liabilities.................. 31,193 1,372 4.40% 20,125 935 4.65% 12,175 692 5.68%
------ ------ ------
Non-interest Bearing Liabilities
Demand Deposits.............. 1,192 836 590
Other........................ 211 137 103
Shareholders' Equity........... 3,573 3,352 3,411
------- ------- -------
Total.................... $36,169 $24,450 $16,279
======= ======= =======
Net Interest Income............ $1,222 $ 906 $ 619
====== ====== ======
Net Yield on Interest Earning
Assets....................... 3.52% 3.81% 3.96%
====== ====== ======
</TABLE>

<PAGE> 71

VOLUME AND YIELD/RATE VARIANCES

The following table presents an analysis of year-to-year changes in net interest
income segregated into amounts attributable to both volume and rate variances.
The change in rate-volume is allocated proportionately to rate and volume based
on the absolute dollar amount of each change. The changes in interest income and
expenses are calculated independently for each line in the table (Amounts in
Thousands).

<TABLE>
<CAPTION>
1994 Compared to 1993 1993 Compare to 1992
Increase (Decrease) Due to Increase (Decrease) Due to
-------------------------- --------------------------
Volume Rate Total Volume Rate Total
------ ----- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets
Loans......................... $790 ($111) $679 $681 ($122) $559
Investment Securities......... 28 7 35 6 (26) (20)
Interest Bearing
Deposits/Other.............. 5 3 8 (2) (5) (7)

Federal Funds Sold............ 8 23 31 2 (4) (2)
------ ------ ------ ------ ----- -----
Total Interest Earning Assets... 831 (78) 753 687 (157) 530

Interest Bearing Liabilities
Interest Bearing Demand
Deposits.................... 17 (23) (6) 54 (13) 41
Savings Deposits.............. 2 (12) (10) 43 (1) 42
Time Deposits................. 467 (45) 422 279 (119) 160
Other,including Short-term
Borrowings, Long-term Debt,
and other Liabilities....... 31 0 31 0 0 0
Total Interest Bearing
Liabilities................. 517 (80) 437 376 (133) 243
------ ------ ------ ------ ----- -----
Changes in Net Interest Income.. 314 2 316 311 (24) 287
====== ====== ======= ====== ===== =====
</TABLE>

<PAGE> 72

PROVISION FOR POSSIBLE LOAN LOSSES

The provision for possible loan losses, which is an amount added to the
allowance for possible loan losses, amounted to $76,092 in 1994 compared to
$120,700 in 1993 and $80,550 in 1992. The increases in the three years were
necessary due primarily to the dramatic loan growth. The allowance for loan
losses as a ratio to net loans was 1.15% and 1.24% for December 31, 1994 and
1993, respectively.

SUMMARY OF LOAN LOSS EXPERIENCE

A summary of the changes in the allowance for possible loan losses for each of
the past five years, including loan loss experience by major category, is
presented below (Amounts in Thousands).

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Period............... $307 $187 $112 $32
---- ---- ---- ---- ----
Charge-Offs
Commercial, Financial and Agricultural
Real Estate, Construction.................
Real Estate, Mortgage.....................
Installment, Net.......................... (10) (2) (16) (3)
---- ---- ---- ---- ----
Total Charge-Offs...................... (10) (2) (16) (3) 0

Recoveries
Commercial, Financial and Agricultural
Real Estate, Construction.................
Real Estate, Mortgage.....................
Installment, Net.......................... 3 1 10
---- ---- ---- ---- ----
Total Recoveries....................... 3 1 10 0 0
---- ---- ---- ---- ----
Net Charge-Offs.............................. (7) (1) (6) (3) 0
Provisions Charged to Operations............. 76 121 81 83 32
---- ---- ---- ---- ----

Balance at End of Period..................... $376 $307 $187 $112 $32
</TABLE>

ALLOCATION OF ALLOWANCE FOR POSSIBLE LOAN LOSSES

The allowance for possible loan losses is established through charges to
earnings in the form of a provision for possible loan losses. The amount charged
to earnings is based on several factors which include, but are not limited to,
the following: a continuing review of past due loans, non-accrual loans, and
overall portfolio quality; regular examinations of the loan portfolio by bank
regulatory agencies and independent accountants. In the opinion of management,
the balance in the allowance account at December 31, 1994, is adequate for
future losses, inherent in the current loan portfolio.

<PAGE> 73

NON-INTEREST INCOME AND NON-INTEREST EXPENSE

Total non-interest income, made up primarily of deposit service fees, was
$20,574 in 1994, representing a decrease of $6,080 or 22.66% compared to the
$26,834 earned in 1993. The 1993 amount was an increase of $10,235 or 61.66%
compared to the $16,599 earned in 1992. In 1992, the increase was $1,556 or
10.34%. As a percentage of average assets, non-interest income was 0.57% as
compared to 1.10% in 1993.

Total non-interest expense, excluding the provision for possible loan losses,
was $835,080, an increase of $82,167 or 10.91% in 1994. In 1993, the increase
was $43,630 or 6.15% from 1992. The ratio of total non-interest expense to total
average assets was 2.31% in 1994, 3.08% in 1993 and 4.36% in 1992.

Salaries and benefits increased $41,593 or 17.01% in 1994 as compared to a
decrease of $2,581 or 1.04% in 1993. The 1994 increase is the result of an
increase of staffing, along with the additional payroll benefits that would
accompany this increase. Occupancy expense decreased due to the purchase of the
bank building effective the first quarter of 1994. Prior to the purchase, the
Bank leased the building, requiring an annual rental of $92,500 for the first
five years. The Bank also leased computer hardware and software until November
1993, at which time the Bank bought out the lease. The total rental expense for
operating leases for the years ended December 31, 1994 and 1993, is $23,151 and
$35,708, respectively.

Other non-interest expenses increased $82,167 or 30.29% to $353,392 in 1994
compared to an increase of $27,337, or 11.21%, to $271,225 in 1993.

INCOME TAXES

Income taxes for 1994 amounted to a tax benefit of $126,754 compared to no tax
in 1993. As a result of the Bank's net operating loss carryforwards in 1994 and
1993, no current payable income tax is required. Effective January 1, 1993, the
Bank adopted the Financial Accounting Standard Board Statement No. 109,
"Accounting for Income Taxes," resulting in no impact on net income, since it
resulted in deferred tax assets equal to deferred tax liabilities after
providing for a valuation allowance which also occurred as of December 31, 1993.
As required, the valuation allowance was redetermined at December 31, 1994, the
effect of which is disclosed in Note 11 to the Financial Statements.

ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

The Financial Accounting Standard Board has issued Statement No. 114,
"Accounting by Creditor for Impairment of a Loan," as amended by FAS No. 118,
which is required to be adopted in 1995. This statement addresses the accounting
by creditor for impairment of certain loans. It generally requires that impaired
loans that are within the scope of the statement be measured based on the
present value of expected future cash flows discounted at the loans' effective
interest rates. The Bank intends to adopt the statements in the fiscal year
beginning January 1, 1995. Implementation of these statements is not expected to
have a material effect on the financial condition or results of operation on the
bank.

<PAGE> 74

ELECTION OF DIRECTORS OF MONTOUR BANK

The Montour Bank has a classified Board of Directors with staggered 3-year
terms of office. In a classified board, the directors are generally divided into
separate classes of equal number. The terms of the separate classes expire in
successive years. Thus, at each Annual Meeting of Shareholders, successors to
the class of directors whose term then expires are elected to hold office for a
term of three years, so that the office of one class expires each year. At the
Annual Meeting Shareholders will elect four class B Directors.

Information as to Nominees, Directors and Executive Officers

The following table contains certain information with respect to the
nominees and the director(s) whose terms of office expire in 1995, 1996 and
1997, respectively.

Principal Occupation Bank Director
Name Age for Past Five Years Since
- ---- --- -------------------- -------------

Class A Directors Whose Term Expires In 1997

M. Ralph Campbell 67 President/CEO Community 1989
(1)(2)(3)(4) National Bank of Shamokin
until March 1987; presently
Chairman of the Montour Bank

George A. Park 67 Retired in 1988 as a Vice 1993
President and Regional
Manager for a Commercial
Bank; Since 1988, has been an
Administrative Assistant for
a Law Firm

Carol B. Houk 63 Owner of Womens and Childrens 1989
(5)(6) Specialty Stores

Francis C. Moyer 47 Vice President and Senior 1989
(1)(2)(3)(4) Lending Officer, First National
Bank of Danville until July 1989;
presently President and Chief
Executive Officer of the Bank

Larry A. Underkoffler 52 President/Phase One Graphic 1989
(2) Resources

<PAGE> 75
Principal Occupation Bank Director
Name Age for Past Five Years Since
- ---- --- -------------------- -------------

Nominees for Class B Directors whose terms will expire in 1998 and Class B
Directors Whose Term Expires In 1995

Pravin Gadani 44 Medical Doctor 1990

James P. Garman 56 President, True-Built Door 1989
(2)(3) Units, Inc.

Thomas N. Mertz 54 Vice President/Treasurer 1989
(1)(3)(4) Danville Sales and Service, Inc.

Hasu P. Shah 50 Engineer 1990

Class C Directors Whose Term Expires In 1996

William W. Campbell 70 Owner/Manager, Television 1989
(1) Sales/Service Business

Charles I. Keiter 72 Land Developer 1989
(1)(2)

Richard J. Swope 67 Owner/Mohawk Flush Doors, 1990
(2)(4) Inc. (Presently Retired)
- ------------------------------
(1) Member of the Loan Committee. This Committee is comprised of the Chairman
of the Board, the President and three (3) outside directors. This committee
meets once a week if there are loans to consider or approve. This committee
is authorized by the Board of Directors to approve loans up to $200,000.
This committee met eight times in 1994.

(2) Member of the Executive and Asset and Liability Committee. This Committee
is comprised of the Chairman of the Board, the President and five (5)
outside directors. This committee is responsible for the Montour Bank's
strategic planning and pricing of loans and deposits. The committee meets
on an as needed basis. This committee met 11 times in 1994.

(3) Member of the Human Resources Committee. This Committee is comprised of the
Chairman of the Board, the President and five (5) outside directors. This
committee meets to review and discuss any personnel issues including
employee compensation. This committee did not meet in 1994.

(4) Member of the Audit Committee. This Committee is comprised of the Chairman
of the Board, the President and five (5) outside directors. This committee
did not meet in 1994.

Generally, in 1994, the Board of Directors met once a month. Each director
received seventy-five dollars ($75.00) for each Board of Directors meeting that
<PAGE> 76

he or she attended. In addition, each director, other than M. Ralph Campbell,
Chairman, and Francis C. Moyer, President and Chief Executive Officer, received
fifty dollars ($50.00) for each committee meeting of the Montour Bank that he or
she attended. During 1994, the Board of Directors of the Montour Bank held 37
meetings. In 1994, directors received $13,150 in the aggregate for attendance at
Board Meetings and Committee Meetings of the Montour Bank.

All of the directors, except Messrs. William Campbell, Gadani and Shah,
attended at least seventy-five percent (75%) of the meetings of the Montour
Bank's Board of Directors.

The Montour Bank does not have a compensation or a nominating committee. A
shareholder who desires to propose an individual for consideration by the Board
of Directors as a nominee for director should submit a proposal in writing to
the Secretary of the Montour Bank in accordance with Section 10.1 of the Montour
Bank's By-laws.

Remuneration of Officers and Directors

The following table sets forth all cash compensation for services in all
capacities paid by the Montour Bank during 1994, (1) to each of the two most
highly compensated executive officers of the Montour Bank and (2) to all
officers and directors of the Montour Bank as a group:

CASH COMPENSATION TABLE

Name of Individual Capacities in Cash
or Number in Group which Served Compensation(1)
- ------------------ ------------- ---------------
Two (2) Most Highly Executive Officers $101,950
Compensated Executive
Officers as a Group(2)

All Officers and Directors Officers and Directors $113,150
as a Group (12 Directors,
4 Officers, 13 persons in total)

- ------------------------------
(1) Includes salaries and all fees to directors.

(2) These two (2) officers are: M. Ralph Campbell, Chairman of the Board and
Francis C. Moyer, President and Chief Executive Officer.
<PAGE> 77

Certain Transactions

There have been no material transactions, proposed or consummated, between
the Montour Bank and any director or executive officer of the Montour Bank, or
any associate of the foregoing persons. The Montour Bank has had and intends to
continue to have banking and financial transactions in the ordinary course of
business with Directors and Officers of the Montour Bank and their associates on
comparable terms and with similar interest rates as those prevailing from time
to time for other customers of the Montour Bank. Total loans outstanding from
the Montour Bank at December 31, 1994, to the Montour Bank's Officers and
Directors as a group and members of their immediate families and companies in
which they had an ownership interest of 10% or more was $1,122,654 or 29.04% of
the Montour Bank's total equity capital accounts. Such loans do not involve more
than the normal risk of collectibility nor do they present other unfavorable
features.

Retirement Plan

The Montour Bank has a defined contribution 401K retirement plan (the "Plan").
An employee who qualifies may elect to contribute into the Plan an amount up to
15% of his or her annual compensation. The Montour Bank contributes to each
participating employee's account $.50 for each $1.00 contributed by an employee
to a maximum aggregate amount equal to 2% of an employee's annual compensation.
The Montour Bank's payments to the Plan in 1994 was $2,978.

Principal Officers of Montour Bank

The following table sets forth selected information about the principal
officers of the Montour Bank, each of whom is elected by the Board of Directors
of the Montour Bank and each of whom holds office at the discretion of the Board
of Directors of the Montour Bank:

<TABLE>
<CAPTION>
Number
Bank of Shares Age as of
Office/Position with Held Employee Beneficially March 31,
Name Bank Since Since Owned 1995
- ---- -------------------- ----- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
M. Ralph Campbell Chairman of the Board 1989 1989 70,703(2) 67

Charles I. Keiter Secretary 1989 (1) 112,715(3) 72

James P. Garman Treasurer 1989 (1) 36,600(4) 56

Francis C. Moyer President and Chief 1993 1989 2,000(5) 47
Executive Officer
</TABLE>

- ------------------------------
(1) Messrs. Keiter and Garman are not employees of the Montour Bank.
<PAGE> 78

(2) See footnote 7 above under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for further information regarding Mr.
Campbell's stockholdings.
(3) See footnote 13 above under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for further information regarding Mr. Keiter's
stockholdings.
(4) See footnote 9 above under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for further information regarding Mr. Garman's
stockholdings.
(5) See footnote 11 above under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for further information regarding Mr. Moyer's
stockholdings.

BENEFICIAL OWNERSHIP OF MONTOUR BANK VOTING SECURITIES

Principal Owners

The following table sets forth, as of March 31, 1995, the name and address
of each person who owns of record or who is known by the Board of Directors to
be the beneficial owner of five percent (5%) or more of the bank's outstanding
Common Stock, the number of shares beneficially owned by such person and the
percentage of the bank's outstanding Common Stock so owned.

Percent of Outstanding
Shares Beneficially Common Stock
Name and Address Owned (1)(2) Beneficially Owned
- ---------------- ------------------- ----------------------
M. Ralph Campbell 70,703(3) 11.86%
2 Primrose Court
Danville, PA 17821

William W. Campbell 31,000(4) 5.20%
c/o Penn TV Sale & Service
735 Market Street
Sunbury, PA 17801

James P. Garman 36,300(5) 6.09%
RD #1, Box 69
Sunbury, PA 17801

Charles Keiter 112,715(6) 18.91%
R.D. #4, Box 282
Danville, PA 17821

Plumbers and Pipefitters 37,500(7) 6.29%
Local 520 Benefit Fund
P.O. Box 6250
Harrisburg, PA 17112

- ------------------------------
<PAGE> 79

(1) See footnote 1 below under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for the definition of "beneficial
ownership."
(2) See footnote 2 below under the caption entitled "Beneficial Ownership by
Officers, Directors and Nominees."
(3) See footnote 7 below under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for further information regarding Mr.
Campbell's stockholdings.
(4) See footnote 8 below under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for further information regarding Mr.
Campbell's stockholdings.
(5) See footnote 9 below under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for further information regarding Mr.
Garman's stockholdings.
(6) See footnote 13 below under the caption entitled "Beneficial Ownership of
Officers, Directors and Nominees" for further information regarding Mr.
Keiter's stockholdings.
(7) The Plumbers and Pipefitters Local 520 Benefit Fund presently holds 30,000
shares or 7.18% of the outstanding common stock. The Plumbers and
Pipefitters Local 520 Benefit Fund may, at any time up to February 28, 1995,
purchase up to 7,500 shares of common stock pursuant to a stock warrant
agreement. In calculating a tabulated percent of class, the 7,500 additional
shares were added to shares of common stock held presently by The Plumbers
and Pipefitters Local 520 Benefit Fund and to the total outstanding shares
assuming all outstanding stock warrants were exercised. For further
information, see footnote 19 below under the caption "Beneficial Ownership
by Officers, Directors and Nominees."

Beneficial Ownership by Officers, Directors and Nominees

The following table sets forth as of March 31, 1995, the amount and percentage
of the Common Stock of the bank beneficially owned by each director, each
nominee and all officers and directors of the bank as a group.

Name of Individual Amount and Nature of Percent
Or Identity of Group Beneficial Ownership(1)(2) of Class(3)(19)
-------------------- -------------------------- ---------------
M. Ralph Campbell(4)(7) 70,703 11.86%
William W. Campbell(6)(8) 31,000 5.20%
Pravin Gadani(5)(17) 11,500 1.92%
James P. Garman(5)(9) 36,600 6.09%
Carol B. Houk(4)(14) 6,000 1.00%
Charles I. Keiter(6)(13) 112,715 18.91%
Thomas N. Mertz(5)(10) 13,000 2.18%
Francis C. Moyer(4)(11) 2,000 --
George A. Park(4)(18) 100 --
Hasu P. Shah(5)(15) 7,700 1.29%
Richard J. Swope(6)(16) 11,500 1.92%
Larry A. Underkoffler(4)(12) 28,500 4.78%

All Officers and Directors 331,318 55.59%
as a Group (12 Directors,
4 Officers, 12 Persons
in total)

<PAGE> 80

- ------------------------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the Securities and Exchange Commission as
adopted by the Board of Governors of the Federal Reserve System and may
include securities owned by or for the individual's spouse and minor
children and any other relative who has the same home, as well as
securities to which the individual has or shares voting or investment power
or has the right to acquire beneficial ownership within 60 days after March
31, 1995. Beneficial ownership may be disclaimed as to certain of the
securities.
(2) Information furnished by the Directors and the bank.
(3) Less than one percent (1%) unless otherwise indicated.
(4) A Class A Director Whose Term Expires in 1994 and a nominee for a Class A
Director whose term will expires in 1997.
(5) A Class B Director Whose Term Expires in 1995.
(6) A Class C Director Whose Term Expires in 1996.
(7) Mr. M. Ralph Campbell holds presently 30,203 shares or 7.23% of the
outstanding common stock. Mr. Campbell may, at any time up to February 28,
1997, purchase up to 40,500 shares of common stock pursuant to a stock
warrant agreement. In calculating a tabulated percent of class, the 40,500
additional shares were added to shares of common stock held presently by
Mr. Campbell and to the total outstanding shares assuming all outstanding
warrants were exercised.
(8) Mr. William W. Campbell holds presently 15,500 shares or 3.7% of the
outstanding common stock. Mr. Campbell may, at any time up to February 28,
1997, purchase up to 15,500 shares of common stock pursuant to a stock
warrant agreement. In calculating a tabulated percent of class, the 15,500
additional shares were added to shares of common stock held presently by
Mr. Campbell and to the total outstanding shares assuming all outstanding
warrants were exercised.
(9) Mr. James P. Garman holds presently 19,500 shares or 4.66% of the
outstanding common stock. Of the 19,500 shares presently held by Mr.
Garman, 16,300 shares are held individually; and 1,600 shares are held for
benefit of his wife and 1,600 shares are held for benefit of Mr. Garman by
Merrill Lynch Pierce Fenner & Smith. Mr. James Garman may, at any time up
to February 28, 1997, purchase up to 17,100 shares of common stock pursuant
to a stock warrant agreement. In calculating a tabulated percent of class,
the 17,100 additional shares were added to shares of common stock held
presently by Mr. Garman and to the total outstanding shares assuming all
outstanding warrants were exercised.
(10) Mr. Thomas N. Mertz holds presently 6,500 shares or 1.5% of the outstanding
common stock. Of the 6,500 shares presently held by Mr. Mertz, 4,000 shares
<PAGE> 81

are owned individually and 2,500 shares are owned jointly with his spouse.
Mr. Mertz may, at any time up to February 28, 1997, purchase up to 6,500
shares of common stock pursuant to a stock warrant agreement. In
calculating a tabulated percent of class, the 6,500 additional shares were
added to shares of common stock held presently by Mr. Mertz and to the
total outstanding shares assuming all outstanding warrants were exercised.
(11) Mr. Francis C. Moyer holds presently 1,000 shares or less than 1% of the
outstanding common stock. These shares are owned jointly with his spouse.
Mr. Moyer may, at any time up to February 28, 1997, purchase up to 1,000
shares of common stock pursuant to a stock warrant agreement. In
calculating a tabulated percent of class, the 1,000 additional shares were
added to shares of common stock held presently by Mr. Moyer and to the
total outstanding shares assuming all outstanding warrants were exercised.
(12) Mr. Larry A. Underkoffler holds presently 17,500 shares or 4.18% of the
outstanding common stock. Mr. Underkoffler may, at any time up to February
28, 1997, purchase up to 11,000 shares of common stock pursuant to a stock
warrant agreement. In calculating a tabulated percent of class, the 11,000
additional shares were added to shares of common stock held presently by
Mr. Underkoffler and to the total outstanding shares assuming all
outstanding warrants were exercised.
(13) Mr. Charles I. Keiter holds presently 65,090 shares or 15.58% of the
outstanding common stock. Of the 65,090 shares presently held by Mr.
Keiter, 3,500 shares are owned individually, 52,590 shares are owned
jointly with his spouse and 9,000 shares are held by Legg Mason Wood
Walker, Inc., as trustee and custodian for certain retirement plans of
Charles I. Keiter. Mr. Keiter may, at any time up to February 28, 1997,
purchase up to 47,625 shares of common stock pursuant to a stock warrant
agreement. In calculating the tabulated percentage of class, the 47,625
additional shares were added to the shares of common stock presently held
by Mr. Keiter and to the total outstanding shares assuming all outstanding
warrants were exercised.
(14) Mrs. Carol B. Houk holds presently 3,000 shares or less than 1% of the
outstanding common stock. Mrs. Houk may, at any time up to February 28,
1997, purchase up to 3,000 shares of common stock pursuant to a stock
warrant agreement. In calculating a tabulated percent of class, the 3,000
additional shares were added to shares of common stock held presently by
Mrs. Houk and to the total outstanding shares assuming all outstanding
warrants were exercised.
(15) Mr. Hasu P. Shah holds presently 7,000 shares or 1.67% of the outstanding
common stock. Of these shares, 5,000 shares are owned by him individually
and 2,000 are owned jointly with his spouse. Mr. Shah may, at any time up
to February 28, 1995, purchase up to 700 shares of common stock pursuant to
a stock warrant agreement. In calculating a tabulated percent of class, the
700 additional shares were added to shares of common stock held presently
by Mr. Shah and to the total outstanding shares assuming all outstanding
warrants were exercised.
(16) Mr. Richard J. Swope holds presently 10,000 shares or 2.3% of the
outstanding common stock. Mr. Swope may, at any time up to February 28,
1995, purchase up to 1,500 shares of common stock pursuant to a stock
warrant agreement. In calculating a tabulated percent of class, the 1,500
additional shares were added to shares of common stock held presently by
Mr. Swope and to the total outstanding shares assuming all outstanding
warrants were exercised.
<PAGE> 82

(17) Dr. Pravin Gadani holds presently 10,000 shares or 2.3% of the outstanding
common stock. All of these shares are owned jointly with his spouse. Mr.
Gadani may, at any time up to February 28, 1995, purchase up to 1,500
shares of common stock pursuant to a stock warrant agreement. In
calculating a tabulated percent of class, the 1,500 additional shares were
added to shares of common stock held presently by Mr. Gadani and to the
total outstanding shares assuming all outstanding warrants were exercised.
(18) Mr. George A. Park holds these shares jointly with his spouse.
(19) The percent of class assumes all outstanding warrants have been exercised
and therefore, on a pro forma basis, 595,945 shares of common stock would
be outstanding. In satisfaction of a condition precedent to Montour's
obligations under the Reorganization Agreement, Omega offered to purchase
the Warrants for a purchase price of $2.00 per share of Montour Bank Common
Stock issuable upon exercise of the Warrants. All holders of the Warrants
have accepted Omega's offer and have agreed that the Warrants shall not be
exercised or exercisable unless the Reorganization Agreement is terminated.

RATIFICATION OF APPOINTMENT OF AUDITORS

Unless instructed to the contrary, it is intended that votes will be cast
pursuant to the proxies for the ratification of the selection of J.H. Williams
as the Bank's independent public accountants for its fiscal year ending December
31, 1995. The Bank has been advised by J.H. Williams that none of its members
has any financial interest in the Bank. Ratification of J.H. Williams will
require an affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting. J.H. Williams served as the Bank's
independent public accountants for the Bank's 1994 fiscal year.

In addition to performing customary audit services, J.H. Williams assisted
the Bank with the preparation of its federal and state tax returns, and provided
assistance in connection with regulatory matters, charging the Bank for such
services at its customary hourly billing rates. These non-audit services were
approved by the Bank's Board of Directors, after due consideration of the effect
of the performance thereof on the independence of the accountants and after the
conclusion by the Bank's Board of Directors that there was no effect on the
independence of the accountants.

In the event that the shareholders do not ratify the selection of J.H.
Williams as the Bank's independent public accountants for the 1995 fiscal year,
another accounting firm will be chosen to provide independent public accountant
audit services for the 1995 fiscal year. The Board of Directors recommends that
the shareholders vote FOR the ratification of the selection of J.H. Williams as
the auditors for the Bank for the year ending December 31, 1995.

It is understood that even if the selection of J.H. Williams is ratified,
the Board of Directors, in its discretion, may direct the appointment of a new
independent auditing firm at any time during the year if the Board of Directors
determines that such a change would be in the best interests of the Bank and its
shareholders.
<PAGE> 83

ADJOURNMENT OF ANNUAL MEETING

In the event that there are not sufficient votes to constitute a quorum or
approve the adoption of the Merger Agreements at the time of the Montour Bank
Annual Meeting, such proposal could not be approved unless the Montour Bank
Annual Meeting were adjourned in order to permit further solicitation of
proxies. In order to allow proxies that have been received by Montour Bank at
the time of the Montour Bank Annual Meeting to be voted for such adjournment, if
necessary, Montour Bank has submitted the question of adjournment under such
circumstances to its shareholders as a separate matter for their consideration.
If the Annual Meeting is adjourned it will be adjourned only from day to day or
for such longer periods not in excess of fifteen days each as may be directed by
the shareholders present in person or by proxy at the meeting. A majority of the
shares represented and voting at the Montour Bank Annual Meeting is required in
order to approve any such adjournment. The Board of Directors of Montour Bank
recommends that shareholders vote their proxies in favor of such adjournment so
that their proxies may be used for such purposes in the event it should become
necessary. Properly executed proxies will be voted in favor of any such
adjournment unless otherwise indicated thereon. If it is necessary to adjourn
the Montour Bank Annual Meeting, notice of the time and place of the adjourned
meeting may be given by announcement at the meeting.

EXPERTS

The financial statements of Montour Bank as of December 31, 1992, 1993 and
1994 and for the years then ended included in this Proxy Statement-Prospectus
have been audited by J.H. Williams & Co., independent public accountants, as
stated in their report and have been included herein in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements of Omega Financial Corporation
incorporated by reference to Omega Financial Corporation's Annual Report on Form
10-K for the year ended December 31, 1994 have been audited by Arthur Andersen
LLP, independent public accountants, as set forth in their report thereon
incorporated by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

LEGAL MATTERS

Blank, Rome, Comisky & McCauley will render its opinion that the Omega
Common Stock offered hereby will, when issued as contemplated herein, be validly
issued, fully paid and non-assessable. Certain legal matters will be passed upon
for Montour Bank by Schnader, Harrison, Segal & Lewis, Philadelphia and
Harrisburg, Pennsylvania.
<PAGE> 84

INDEX TO FINANCIAL STATEMENTS OF MONTOUR BANK

Report of Independent Public Accountants . . . . . . . . . . . . . . . .F-1

Balance Sheets as of
December 31, 1994 and 1993. . . . . . . . . . . . . . . . . . . . . . .F-2

Statements of Income (Loss) for the Years Ended
December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . .F-3

Statements of Stockholders' Equity for
the Years Ended December 31, 1994 and 1993. . . . . . . . . . . . . . .F-4

Statements of Cash Flows for
the Years Ended December 31, 1994 and 1993. . . . . . . . . . . . . . .F-5

Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . .F-6

<PAGE> 85

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders of Montour Bank
Danville, Pennsylvania

We have audited the accompanying balance sheets of Montour Bank as of December
31, 1994 and 1993, and the related statements of income, stockholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Montour Bank as of December 31,
1994 and 1993 and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.

As explained in Note 2 to the financial statements, effective January 1, 1993,
the Bank changed its method of accounting for income taxes and effective January
1, 1994, the Bank changed its method of accounting for investments in debt and
equity securities.

/s/ JH William & Co.
--------------------

Kingston, Pennsylvania
January 26, 1995
<PAGE> 86

MONTOUR BANK
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 627,746 $ 509,981
Interest-bearing deposits with other financial institutions. . . . . . . . . 239,482 293,343
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,448,000 1,574,000
Investment securities:
Securities available for sale, cost approximates fair value. . . . . . . 223,150 0
Securities to be held to maturity, estimated fair value 1994,
$4,600,394; 1993, $2,396,739. . . . . . . . . . . . . . . . . . . . . 4,717,781 2,339,054
Loans, net of unearned income. . . . . . . . . . . . . . . . . . . . . . . . 32,653,020 24,741,554
Allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . 375,837 307,071
----------- -----------
Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,277,183 $24,434,483
Premises and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . 1,157,698 173,499
Accrued interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . 125,914 83,569
Other assets, net of valuation allowance of $0 in 1994 and
$239,865 in 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,478 80,867
----------- -----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,013,432 $29,488,796
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,572,339 $ 1,010,400
Interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,508,970 24,926,393
----------- -----------
Total Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,081,309 $25,936,793
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850,000 0
Accrued interest and other expenses. . . . . . . . . . . . . . . . . . . . . 213,523 139,334
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,657 11,303
----------- -----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,148,489 $26,087,430
=========== ===========
STOCKHOLDERS' EQUITY
Preferred stock, par value $5.00 per share; authorized
500,000 shares; no shares issued . . . . . . . . . . . . . . . . . . . . $ 0 $ 0
Common stock, par value $5.00 per share; authorized 3,000,000
shares; issued and outstanding 418,080 shares 1994 and
417,580 shares 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,090,400 2,087,900
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,069,187 2,066,229
Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (294,644) (752,763)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . . . . . $ 3,864,943 $ 3,401,366
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . $41,013,432 $29,488,796
=========== ===========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-2
<PAGE> 87

MONTOUR BANK
STATEMENTS OF INCOME
FOR YEARS ENDED DECEMBER 31, 1994 AND 1993
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . $ 2,308,620 $ 1,629,893
Interest and dividends on investment securities:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,775 153,610
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,983 11,871
Interest on federal funds sold. . . . . . . . . . . . . . . . . . . . . 73,301 41,746
Interest on deposits in other financial institutions. . . . . . . . . . 12,040 4,256
----------- -----------
TOTAL INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . $ 2,593,719 $ 1,841,376
----------- -----------
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,340,772 $ 934,795
Interest on long-term borrowings . . . . . . . . . . . . . . . . . . . . . 31,164 0
----------- -----------
TOTAL INTEREST EXPENSE $ 1,371,936 $ 934,795
----------- -----------
Net Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,221,783 $ 906,580
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . 76,092 120,700
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,145,691 $ 785,880
----------- -----------
NON-INTEREST INCOME
Service charges and fees . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,502 $ 16,540
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,252 10,294
----------- -----------
TOTAL NON-INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . $ 20,754 $ 26,834
----------- -----------
NON-INTEREST EXPENSES
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 238,454 $ 199,357
Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,705 45,209
Occupancy expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . 62,403 117,669
Furniture and equipment expense. . . . . . . . . . . . . . . . . . . . . . 70,224 80,004
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,902 39,449
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . 353,392 271,225
----------- -----------
TOTAL NON-INTEREST EXPENSES . . . . . . . . . . . . . . . . . . . . . $ 835,080 $ 752,913
----------- -----------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . $ 331,365 $ 59,801
Applicable income tax (benefit). . . . . . . . . . . . . . . . . . . . . . (126,754) 0
----------- -----------
NET INCOME $ 458,119 $ 59,801
=========== ===========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.10 $ .14
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING. . . . . . . . . . . . . . . . . . . . $ 417,865 $ 417,580
=========== ===========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3

<PAGE> 88

MONTOUR BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PREFERRED COMMON
STOCK STOCK SURPLUS DEFICIT TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 . . . . . . . . . . . . . $ 0 $2,087,900 $2,066,229 $(812,564) $3,341,565
Net income . . . . . . . . . . . . . . . . . . . . 0 0 0 59,801 59,801
------------- ---------- ---------- --------- ----------
BALANCE, DECEMBER 31, 1993 . . . . . . . . . . . . $ 0 $2,087,900 $2,066,229 $(752,763) $3,401,366
Stock warrants exercised, resulting in 500 shares
issued . . . . . . . . . . . . . . . . . . . . 0 2,500 2,958 0 5,458
Net income . . . . . . . . . . . . . . . . . . . . 0 0 0 458,119 458,119
------------- ---------- ---------- --------- ----------
BALANCE, DECEMBER 31, 1994 . . . . . . . . . . . . $ 0 $2,090,400 $2,069,187 $(294,644) $3,864,943
============= ========== ========== ========= ==========
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-4
<PAGE> 89

MONTOUR BANK
STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1994 AND 1993
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------
1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 458,119 $ 59,801
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . 76,092 120,700
Provision for depreciation and amortization. . . . . . . . . . . . . . . 75,631 44,161
Premium amortization on investment securities. . . . . . . . . . . . . . 34,164 17,429
Deferred income taxes (benefit). . . . . . . . . . . . . . . . . . . . . (126,754) 0
(Increase) decrease in accrued interest receivable . . . . . . . . . . . (42,345) (2,041)
(Increase) decrease in other assets. . . . . . . . . . . . . . . . . . . (11,174) (26,405)
Increase (decrease) in accrued interest and other expenses . . . . . . . 74,189 14,458
Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . (7,646) 8,062
------------ ------------
NET CASH USED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . $ 530,276 $ 236,165
------------ ------------
INVESTING ACTIVITIES
Purchase of investment securities available for sale. . . . . . . . . . . . $ (23,800) $ 0
Proceeds from sales of investment securities available for sale . . . . . . 10,700 0
Purchases of investment securities to be held to maturity . . . . . . . . . (3,271,092) (1,360,994)
Proceeds from maturities of investment securities
held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648,151 1,285,496
Net (increase) decrease in loans. . . . . . . . . . . . . . . . . . . . . . (7,918,792) (10,679,002)
Purchases of premises and equipment . . . . . . . . . . . . . . . . . . . . (1,037,513) (8,981)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . $(11,592,346) $(10,763,481)
------------ ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits . . . . . . . . . . . . . . . . . . . . $ 10,144,516 $ 10,468,343
Proceeds from long-term borrowings. . . . . . . . . . . . . . . . . . . . . 850,000 0
Proceeds from issuance of common stock. . . . . . . . . . . . . . . . . . . 5,458 0
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . $ 10,999,974 $ 10,468,343
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ (62,096) $ (58,973)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . 2,377,324 2,436,297
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . . . . . $ 2,315,228 $ 2,377,324
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,304,383 $ 912,392
============ ============
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5

<PAGE> 90

MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

1. GENERAL

Montour Bank (the Bank) is a Pennsylvania state-chartered banking
institution. The Bank was incorporated on June 27, 1989 and upon receiving
a certificate of authority from the banking department, the Bank officially
commenced banking business May 15, 1990.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of the Bank conform to generally
accepted accounting principles and to general practices within the banking
industry. The more significant policies follow:

INVESTMENT SECURITIES

The Bank adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" as
required January 1, 1994. As a result of adopting Statement 115 the Bank
classified investment securities into two categories: those to be held to
maturity and those available for sale.

The Bank has determined that all debt investment securities purchased
during 1994 as well as those owned January 1, 1994 and December 31, 1994
were classified as held to maturity. The Bank holds only a limited amount
of investment equity securities which could not be classified as held to
maturity which are in the form of Federal Reserve Bank stock, Federal Home
Loan Bank stock and Pennsylvania Independent Bank stock. Since these stocks
are customarily redeemed at cost there was no unrealized gain or loss on
these available for sale securities. Accordingly, there has been no impact
on the Bank's financial position or results of operations as a result of
implementing the change in accounting principle required by Statement 115.

The classification of investment securities into categories held to
maturity or available for sale is initially determined at the date the
security is purchased and re-evaluated at each balance sheet date. Debt
securities are classified as held to maturity when the Bank has the ability
and positive intent to hold the securities to maturity. Investment
securities held to maturity are carried at cost adjusted for amortization
of premium and accretion of discount to maturity.

Debt securities not classified as held to maturity and equity
securities are included in the available for sale category and are carried
at fair value and the amount of any unrealized gain or loss is reported as
a separate component of Stockholders' Equity net of the effect of deferred
income tax.

Interest, dividends, amortization of premiums, and accretions of
discounts are included in interest and dividends on investment securities
for both classes of investment securities. The cost of investment
securities sold, redeemed or matured is based on the specific
identification method.

<PAGE> 91
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

LOANS

Loans are stated at face value, net of unearned income and the
allowance for possible loan losses. The interest on real estate loans is
accrued on the principal amount outstanding, primarily using a 360-day
year. Interest on other loans is accrued on the principal amount
outstanding, primarily on an actual day basis.

Most non-refundable loan fees and certain direct costs are deferred
and amortized over the life of the loans using the interest method. The
amortization is reflected as an interest yield adjustment and the deferred
portion of the net fees and costs is reflected as a part of the loan
balances.

Loans are placed on a non-accrual status when collection of principal
is in doubt, or when interest is 90 days past due, unless the loan is well
secured and in the process of collection. Classification of a loan as
non-accrual is also considered when the financial position of the borrower
is in a condition of significant deterioration. When loans are placed on
non-accrual, any loan interest receivable is reversed as a charge against
current earnings. Interest payments received on non-accrual loans are
applied as a reduction of the principal balance of the loan.

ALLOWANCE FOR LOAN LOSSES

The provision for loan losses charged to operating expenses reflects
the amount deemed appropriate by management to establish an adequate
allowance for possible loan losses as it relates to the loan portfolio.
Management makes regular assessments of the Bank's loans and other credit
risks to determine the level of the allowance. Current economic conditions,
deterioration in credit concentrations, or pledged collateral, and trends
in portfolio volume, maturity, composition, delinquencies, nonaccruals, and
other pertinent factors are considered in determining the adequacy of the
allowance. In the opinion of management, the allowance for loan losses is
adequate to absorb unforeseeable loan losses.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated
depreciation computed on the straight-line method over the estimated useful
lives of the assets. Maintenance and minor repairs are charged to
operations as incurred.

ORGANIZATION EXPENSES

Expenses incurred in organizing the Bank have been deferred and are
included in other assets. The costs are amortized over 5 years on a
straight-line basis commencing with the first month of operation as a Bank.

<PAGE> 92
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

INCOME TAXES

The Bank adopted Statement of Accounting Standards No. 109,
"Accounting for Income Taxes" as required on January 1, 1993. As permitted
in the Statement, prior year financial statements have not been restated to
reflect the change in accounting method. Under this method deferred tax
assets and liabilities are determined based on the differences between the
financial statement and income tax bases of assets and liabilities measured
by using the enacted tax rates and laws expected to be in effect when the
timing differences are expected to reverse. Deferred tax expense or benefit
is based on the difference between deferred tax asset or liability from
period to period. The statement also provides criteria for recognition of
deferred tax benefit for the effect of net operating loss carryforwards.
Further, the Statement requires that a valuation allowance be provided in
an amount sufficient to reduce deferred tax assets to the amount that is
more likely than not to be realized and that the valuation allowance be
re-evaluated at each financial reporting date.

The effect of adopting Statement 109 January 1, 1993 resulted in no
impact on net income since it resulted in deferred tax assets equal to
deferred tax liabilities after providing for a valuation allowance which
also occurred as of December 31, 1993. As required, the valuation allowance
was redetermined at December 31, 1994 the effect of which is disclosed in
Note 11 to the financial statements.

NET INCOME (LOSS) PER SHARE

Net income per share on common stock is calculated by dividing net
income by the weighted number of shares of common stock outstanding.

STATEMENTS OF CASH FLOWS

For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and due from other banks, interest bearing deposits in
other banks and federal funds sold. The Bank considers cash classified as
interest bearing deposits with other banks as cash equivalent since they
are represented by cash accounts essentially on a demand basis. Federal
funds are also included as a cash equivalent since they are generally
purchased and sold for one-day periods.

REPORTING FORMAT

Certain amounts in the financial statements of the prior period have
been reclassified to conform with presentation used in the 1993 financial
statements. Such classifications have no effect on the Bank's financial
condition or net income.

3. CHANGES IN ACCOUNTING STANDARDS

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107

In December 1991, the Financial Accounting Standards Board issued
Statement No. 107. "Disclosures about Fair Value of Financial Instruments",
which requires disclosure of the estimated fair value of financial
instruments. The statement was effective beginning with December 1992 for

<PAGE> 93
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

financial statements of calendar year entities, except those with total
assets of less than $150 million. For those calendar year entities who meet
the exception, the effective date shall be for financial statements ending
December 31, 1995.

The Bank's assets were less than $150 million at the measurement date
and therefore is not required to provide these additional disclosures until
December 31, 1995. Since Statement 107 requires only additional disclosure
requirements, its adoption will not affect the financial position or
results of operations of the Bank.

STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NO.'S 114 and 118

In May, 1993, the Financial Accounting Standards Board issued
Statement No. 114, "Accounting by Creditors for Impairment of a Loan".
Statement 114 requires that impaired loans be measured based upon the
present value of expected future cash flows discounted at the loan's
effective interest rate, or at the loan's observable market price or fair
value of the collateral if the loan is collateral dependent.

Statement 114 was amended in October, 1994 by issuance of Financial
Accounting Standards Board Statement No. 118 "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure". Statement 118
amends Statement 114 to allow a creditor to use existing methods for
recognizing income on an impaired loan and amends certain disclosure
requirements of Statement 114 to require information about the recorded
investment in certain impaired loans and related income recognition on
those impaired loans.

Statement 114, as amended by Statement 118, is effective for financial
statements beginning after December 15, 1994. The Bank intends to adopt the
Statements in its fiscal year beginning January 1, 1995. Implementation of
these Statements are not expected to have a material effect on the
financial condition or results of operations of the Bank.

4. RESTRICTED CASH BALANCES

Compensating cash balances are required to be maintained with the
Federal Reserve Bank and correspondent banks as compensation for check
clearing and other services. The required balances at December 31, 1994
totalled $257,000.00.

<PAGE> 94

MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

5. INVESTMENT SECURITIES

The Bank adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" as required
January 1, 1994. (See Note 2 to financial statements for explanation). The
following is a summary of the investment securities by respective category:

-------AVAILABLE FOR SALE SECURITIES------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994:
Equity Securities
FHLB stock. . . . . . . . . . . . . . . . . . . . $ 88,500 $ 0 $ 0 $ 88,500
Federal Reserve stock . . . . . . . . . . . . . . 124,650 0 0 124,650
Atlantic Central Bankers Bank stock . . . . . . . 10,000 0 0 10,000
---------- ---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . $ 223,150 $ 0 $ 0 $ 223,150
========== ========== ========== ==========

</TABLE>

--------HELD TO MATURITY SECURITIES-------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994:
U.S. Treasury securities: $1,326,308 $ 0 $ 14,822 $1,311,486
U.S. government corporations and
agencies - mortgage-backed. . . . . . . . . . 3,339,037 34 102,282 3,236,789
Corporate debt securities. . . . . . . . . . . . 52,436 0 317 52,119
---------- ---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . $4,717,781 $ 34 $ 117,421 $4,600,394
========== ========== ========== ==========
</TABLE>

-------INVESTMENT SECURITIES------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1993:
U.S. Treasury securities . . . . . . . . . . . . $ 824,614 $ 41,636 $ 0 $ 866,250
U.S. government corporations and
agencies - mortgage-backed. . . . . . . . . . 807,587 13,119 0 820,706
Corporate debt securities:
Bonds and notes . . . . . . . . . . . . . . . 150,318 762 0 151,080
Asset-backed. . . . . . . . . . . . . . . . . 346,485 2,168 0 348,653
---------- ---------- ---------- ----------
Total debt securities. . . . . . . . . . . . . . $2,129,004 $ 57,685 $ 0 $2,186,689
Equity securities. . . . . . . . . . . . . . . . 210,050 0 0 210,050
---------- ---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . $2,339,054 $ 57,685 $ 0 $2,396,739
========== ========== ========== ==========
</TABLE>

Since there were no public funds, trust funds or repurchase agreements
individually by customer in excess of $100,000 held by the Bank at December 31,
1994 and 1993, the pledging of investment securities was not required.

<PAGE> 95
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

The amortized cost and estimated fair value of investment securities, by
contractual maturity, are shown below at December 31, 1994. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
----HELD TO MATURITY---- ----AVAILABLE FOR SALE----
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Due in one year or less. . . . . . . . . . . . . $ 703,246 $ 699,110 $ 0 $ 0
Due after one year through five years. . . . . . 363,013 352,494 0 0
Due after five years through ten years . . . . . 312,485 312,000 0 0
Due after ten years. . . . . . . . . . . . . . . 0 0 223,150 223,150
---------- ---------- -------- --------
$1,378,744 $1,363,604 $223,150 $223,150
Mortgage-backed securities . . . . . . . . . . . 3,339,037 3,236,789 0 0
---------- ---------- -------- --------
$4,717,781 $4,600,393 $223,150 $223,150
========== ========== ======== ========
</TABLE>

There were no sales of debt securities in 1994 and 1993.

6. LOANS

Major classifications of loans at December 31, 1994 and 1993 consisted of:

1994 1993
----------- -----------
<S> <C> <C>
Commercial and industrial. . . . . . . . . . . . . . . . . . . . . . . . . $ 3,326,901 $ 2,821,670
Real estate - construction . . . . . . . . . . . . . . . . . . . . . . . . 361,354 513,276
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . 8,394,333 6,593,175
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,107,470 16,623,284
----------- -----------
Gross Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,190,058 $26,551,405
Add (deduct):
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,591,820) (1,855,134)
Unamortized loan fees and costs, net. . . . . . . . . . . . . . . . . . 54,782 45,283
----------- -----------
Loans, net of unearned income. . . . . . . . . . . . . . . . . . . . . . . $32,653,020 $24,741,554
=========== ===========

</TABLE>

<PAGE> 96
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

There were two loans on non-accrual status in the amount of $27,443 at
December 31, 1994 and no such loans outstanding at December 31, 1993. The Bank
has granted loans to bank directors, executive officers, their immediate
families and to companies in which they own at least a 10% interest. Related
party loans are made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
unrelated parties. Such loans do not involve more than the normal risk of
collectibility nor do they present other unfavorable features. Shown below is a
summary of activity for these related party loans for the years ended:

1994 1993
----------- -----------
<S> <C> <C>
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 816,397 $ 806,134
New Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 985,533 342,872
Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (675,428) (332,610)
Other reductions for terminated employees. . . . . . . . . . . . . . . . . 3,848 0
---------- ----------
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . $1,122,654 $ 816,396
========== ==========
</TABLE>

Changes in the allowance for loan losses for the years ended December 31,
1994 and 1993, were as follows:
<TABLE>
<CAPTION>

1994 1993
----------- -----------
<S> <C> <C>
Balance beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . $ 307,071 $ 187,361
Provision charged to operations. . . . . . . . . . . . . . . . . . . . . . 76,092 120,700
Loans charged off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,053) (1,685)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,727 695
---------- ----------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 375,837 $ 307,071
========== ==========
</TABLE>

As of December 31, 1994, there were no significant commitments to lend
additional funds with respect to non-accrual and restructured loans.

7. PREMISES AND EQUIPMENT

The following is a summary of premises and equipment:
<TABLE>
<CAPTION>

1994 1993
----------- -----------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,000 $ 0
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 883,838 0
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . 326,996 243,321
---------- ----------
$1,280,834 $ 243,321
Less: Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . 123,136 69,822
---------- ----------
$1,157,698 $ 173,499
========== ==========
</TABLE>

The amount of depreciation for the years ended December 31, 1994 and 1993
was $53,314 and $21,844, respectively.

<PAGE> 97
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

8. DEPOSITS

Major classifications of deposits at December 31, 1994 and 1993 consisted
of the following:

1994 1993
----------- -----------
<S> <C> <C>
Demand - non-interest bearing. . . . . . . . . . . . . . . . . . . . . . . $ 1,572,339 $ 1,010,400
Demand - interest bearing. . . . . . . . . . . . . . . . . . . . . . . . . 858,044 741,977
Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,569,945 4,558,529
Time - under $100,000. . . . . . . . . . . . . . . . . . . . . . . . . . . 26,763,757 17,312,955
Time - $100,000 and over . . . . . . . . . . . . . . . . . . . . . . . . . 3,317,224 2,312,932
----------- -----------
$36,081,309 $25,936,793
=========== ===========
</TABLE>

Interest expense related to time deposits of $100,000 or more was $121,387
in 1994 and $101,848 in 1993.

Shown below is a schedule summarizing classifications and remaining
maturities of time deposits of $100,000 and over at December 31, 1994:
<TABLE>
<CAPTION>

CERTIFICATES
OF DEPOSIT
-------------
<S> <C>
Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 776,467
Over three months to six months. . . . . . . . . . . . . . . . . . . . . . 505,770
Over six to twelve months. . . . . . . . . . . . . . . . . . . . . . . . . 1,334,987
Over twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700,000
----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,317,224
==========
</TABLE>
<PAGE> 98
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

9. LONG-TERM BORROWINGS

Long-term borrowings are comprised of advances from the Federal Home Loan
Bank. Under terms of a blanket agreement, collateral for the loans are secured
by certain qualifying assets of the Bank which consist principally of first
mortgage loans.

A schedule of long-term borrowings by maturity as of December 31, 1994
follows:

MATURITY INTEREST RATE AMOUNT
---------- ------------- ----------
03-06-95 4.62% $ 425,000
03-06-96 5.22% 425,000
----------
$ 850,000
==========

10. STOCKHOLDERS' EQUITY, STOCK OPTIONS AND STOCK PURCHASE AGREEMENTS

In connection with its initial public offering in 1990 the Bank had also
issued 139,600 stock purchase warrants to the organizers of the Bank and 38,765
stock purchase warrants to other stockholders. The warrants issued to the
organizers are valid for seven years expiring February 28, 1997 and those
warrants issued to others are valid for five years expiring February 28, 1995.
Each warrant provides the owner the right to purchase a share of common stock at
a cost of $10 per share. During 1994 a stockholder in the "other stockholder"
category exercised his option and purchased 500 shares.

11. INCOME TAXES

The current and deferred components of the income tax provision (benefit)
are as follows:
<TABLE>
<CAPTION>

1994 1993
----------- -----------
<S> <C> <C>
Federal
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0
Deferred (benefit). . . . . . . . . . . . . . . . . . . . . . . . . . . (126,754) 0
---------- ----------
Total provision (benefit) for income taxes . . . . . . . . . . . . . . . . $ (126,754) $ 0
========== ==========
</TABLE>
<PAGE> 99
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

As a result of utilization of the Bank's net operating loss carryforwards
in 1994 and 1993, no currently payable income tax is required. At December 31,
1994 the Bank had net operating loss carryforwards as follows:

AMOUNT
OF UNUSED DATE OF
YEAR ENDED TAX LOSS EXPIRATION
---------- --------- ----------
December 31, 1991 $ 6,167 December 31, 2006
December 31, 1992 $150,127 December 31, 2007

Effective January 1, 1993, the Bank adopted Statement of Financial
Accounting Standards No. 109 as more fully explained in Note 2 to Financial
Statements which required the Bank to change its method of accounting for income
taxes. Statement 109 was adopted on a prospective basis and amounts attributable
to prior years were not required to be reflected or restated. Application of
Statement 109 as of January 1, 1993 and December 31, 1993 resulted in no impact
on net income after providing for a valuation allowance.

The deferred tax assets and liabilities resulting from temporary timing
differences including net operating loss carryforwards have been netted to
reflect net deferred tax assets which are included in other assets in these
financial statements. The components of the net deferred tax asset at December
31, 1994, December 31, 1993 and January 1, 1993 are as follows:
<TABLE>
<CAPTION>

-----DECEMBER 31,----- JANUARY 1,
------------------------- ----------
1994 1993 1993
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Net operating losses. . . . . . . . . . . . . . . . . $ 53,140 $170,919 $197,503
Loan loss reserve . . . . . . . . . . . . . . . . . . 112,104 87,443 50,709
De Nova bank start-up costs . . . . . . . . . . . . . 3,328 13,313 23,297
Other . . . . . . . . . . . . . . . . . . . . . . . . 0 0 379
Less valuation allowance. . . . . . . . . . . . . . . 0 (239,865) (260,185)
-------- -------- --------
TOTAL $168,572 $ 31,810 $ 11,703
-------- -------- --------
Deferred tax liabilities:
Loan origination fees and costs . . . . . . . . . . . $ 21,598 $ 16,414 $ 161
Depreciation. . . . . . . . . . . . . . . . . . . . . 20,220 15,396 11,542
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,818 $ 31,810 $ 11,703
-------- -------- --------
Net deferred tax asset . . . . . . . . . . . . . . . . . $126,754 $ 0 $ 0
======== ======== ========
</TABLE>

<PAGE> 100
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

A summary of deferred tax and other changes to the net deferred
tax asset for the years ended December 31, 1994 and 1993 follows:

1994 1993
----------- -----------
<S> <C> <C>
Net deferred tax asset, beginning of year. . . . . . . . . . . . . . . . . $ 0 $ 0
Deferred tax (expense) benefit, operations . . . . . . . . . . . . . . . . 126,754 0
---------- ----------
Net deferred tax asset, end of year. . . . . . . . . . . . . . . . . . . . $ 126,754 $ 0
========== ==========

</TABLE>

It is anticipated that all tax assets as of December 31, 1994 will be
realized, accordingly, no valuation allowance has been provided.

12. EMPLOYEE BENEFIT PLAN

The Bank adopted a defined contribution 401K retirement plan in the year
1991. Employees who qualify may elect to contribute a maximum of 15% of their
compensation. The Bank will contribute $.50 for each $1.00 up to the first 2%
that each employee contributes. The Bank's contribution to the plan for 1994 and
1993 was $2,978 and $3,336 respectively.

13. LEASE AND OTHER COMMITMENTS

Prior to the purchase the Bank leased the building from Ram U.Y.A.
Investment Company, a partnership consisting of Martin Mariano and Anthony Rado,
both of whom are stockholders of the Bank. Mr. Mariano was also a Bank Director
through June 1992. The lease required an annual rental of $92,500 for the first
five years of a twenty year lease with all expenses of operation and
maintenance, excluding capital repairs and improvements, to be the
responsibility of the Bank. The lease provided for rent increases at the end of
each five year interval.

The rent expense incurred with the building for the years ended December
31, 1994 and 1993 was $16,411 and $92,500 respectively.

The Bank also leased computer hardware and software until November 1993, at
which time the Bank bought out the lease. Various incidental office equipment is
also leased under operating leases with terms renewable on an annual basis.

The total rental expense for operating leases for the years ended December
31, 1994 and 1993 is $23,151 and $35,709, respectively.
<PAGE> 101
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

14. REGULATORY MATTERS

Regulatory authorities restrict the availability of surplus for payment of
dividends. No dividends can be paid until such time that the Bank has
accumulated net earnings.

Federal regulations provide standards which require that U.S. banking
organizations meet certain minimum capital ratios as a measure of capital
adequacy. In general, the standards require banks to maintain capital based on
"risk-adjusted" assets so that categories of assets with potentially higher
credit risk will require more capital backing than assets with lower risk. In
addition, banks are required to maintain capital to support, on a
"risk-adjusted" basis, certain off-balance sheet activities such as loan
commitments and letters of credit.

The Federal Standards provide specific guidelines which classify Capital
into two Tiers, referred to as Tier 1 and Tier 2. Under these guidelines the
Bank's Tier 1 capital consists of common stockholders' equity and Tier 2 capital
consists of the allowance for loan losses. Total qualifying capital consists of
the total of Tier 1 capital plus Tier 2 capital with Tier 2 capital being
limited to 100% of Tier 1 capital. At December 31, 1994, the Bank exceeded the
minimum capital requirements as reflected in the following table:

<TABLE>
<CAPTION>
MINIMUM
CALCULATED STANDARD
RATIOS RATIOS
---------- --------
<S> <C> <C>

Risk Based Ratios:
Tier 1 Capital to Risk-Weighted Assets . . . . . . . . 12.01% 4.00%
Total Qualifying Capital to Risk-Weighted Assets . . . 13.18% 8.00%
</TABLE>

15. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK

The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, standby
letters of credit and commercial letters of credit These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the balance sheet. The contract or notional amounts of
these instruments reflect the extent of involvement the Bank has in particular
classes of financial instruments.

The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
letters of credit is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.

<PAGE> 102
MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

The Bank may require collateral or other security to support financial
instruments with off-balance-sheet credit risk:
<TABLE>
<CAPTION>

CONTRACT OR
NOTIONAL AMOUNT
---------------------
1994 1993
---------- --------

<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit. . . . . . . . . . . . . . . . . . . . . $2,330,000 $ 968,566
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . $ 74,918 $ 0
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the counter-party. Collateral held varies but may include
accounts receivable, securities, inventory, property, equipment and
income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Bank may hold collateral
supporting those commitments for which collateral is deemed necessary. There was
no collateral held for those commitments at December 31, 1994.

The Bank grants commercial, consumer and residential loans to customers
within the state. It is management's opinion that the loan portfolio was
balanced and diversified at December 31, 1994 and 1993 to the extent necessary
to avoid any concentration of credit risk.

16. SUBSEQUENT EVENT

On January 11, 1995, Montour Bank entered into an Agreement and Plan of
Reorganization and Plan of Merger with Omega Financial Corporation of State
College, Pennsylvania ("Omega").

Pursuant to these agreements, Omega will acquire all of the issued and
outstanding shares of the common stock of Montour Bank in exchange for cash
and/or Omega common stock. For each share of Montour Bank common stock held, a
shareholder of Montour Bank will be able to select the exchange medium of: (1)
one-half share of Omega common stock, (2) $12 cash or (3) a combination of Omega
common stock and cash as set forth in (1) and (2) above. Moreover, current
Montour bank warrantholders will receive $2 cash for every warrant that they
hold.

<PAGE> 103

MONTOUR BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------------------------------

The transaction is conditioned upon approval by the shareholders of Montour
Bank and appropriate bank regulatory authorities. It is anticipated that the
closing on this transaction will occur in the third quarter of 1995.

<PAGE> 104

APPENDIX A

<PAGE> 105

AGREEMENT AND
PLAN OF REORGANIZATION
----------------------

AGREEMENT AND PLAN OF REORGANIZATION dated January 11, 1995 by and between
Omega Financial Corporation ("Omega"), a Pennsylvania business corporation
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "Holding Company Act"), and Montour Bank ("Montour"), a bank
incorporated under the Pennsylvania Banking Code of 1965, as amended (the
"PBC").

BACKGROUND
----------

The Boards of Directors of Omega and Montour have determined that the
combination of their two companies through the merger described herein is in the
best interests of the parties to this Agreement and their respective
shareholders. Simultaneously with the execution and delivery of this Agreement,
Montour has executed and delivered an agreement and plan of merger (the "Merger
Agreement") providing for the merger of Montour into a newly formed banking
subsidiary of Omega (hereafter called "NEWCO").

NOW, THEREFORE, in consideration of the mutual covenants, agreements and
provisions contained herein and subject to the satisfaction of the terms and
conditions set forth herein and in the Merger Agreement, and intending to be
legally bound hereby, Omega and Montour agree as follows:

1. THE MERGER
----------

Subject to the provisions of this Agreement and of the Merger
Agreement, Montour will be merged with and into NEWCO on the Effective Date (as
hereinafter defined) and NEWCO shall survive the merger and have its name
changed to "Montour Bank". Omega agrees to issue, as of the Effective Date,
certain shares of Omega common stock, par value $5.00 per share ("Omega Common
Stock") for the outstanding shares of capital stock of Montour, and provide cash
to NEWCO to pay for the remaining shares of Montour common stock, all as more
fully provided in this Agreement and pursuant to the formula set forth in the
Merger Agreement. Notwithstanding anything to the contrary contained in the
Merger Agreement, if the Average Price (as hereafter defined) of Omega Common
Stock is less than $20 for the 30 business day period ending on the fifteenth
business day next preceding the Effective Date, this Agreement shall terminate
and be of no further force or effect unless (a) the Montour Board of Directors
waives this provision in writing or (b) Omega shall agree to provide sufficient
additional shares of Omega Common Stock under the Merger Agreement so that the
number of shares of Omega Common Stock received in exchange for two shares of
Montour common stock equals $20 in market value (using the Average Price to
determine such market value and subject to adjustment as provided in Section 2.4
of the Merger Agreement). "Average Price" as used herein shall refer to the mean
average of the closing sale prices for Omega Common Stock (as quoted in the
NASDAQ National Market System as reported by The Wall Street Journal) for the
thirty business day period ending on the fifteenth business day next preceding
the Effective Date.
<PAGE> 106

2. EFFECTIVE DATE
--------------

Subject to the terms and conditions specified in this Agreement and
the Merger Agreement, and upon satisfaction of all requirements of law,
including, among other conditions, receipt of the approval of The Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), the
Federal Deposit Insurance Corporation (the "FDIC") and the Department of Banking
of the Commonwealth of Pennsylvania (the "Pennsylvania Department of Banking"),
and the expiration of all waiting periods prescribed by law, the "Effective
Date" shall occur at the time of the filing of the Articles of Merger of the
Constituent Corporations, as defined in the Merger Agreement, with the Secretary
of State of the Commonwealth of Pennsylvania or at the time specified in the
Articles of Merger, whichever is later.

3. REPRESENTATIONS, WARRANTIES AND
COVENANTS OF MONTOUR
--------------------------------

Montour represents, warrants and covenants to Omega and agrees as
follows:

3.1 Montour is a bank duly organized and validly existing under the
PBC and the other laws of the Commonwealth of Pennsylvania. Montour has no
subsidiaries. The deposits of Montour are insured pursuant to and in accordance
with the Federal Deposit Insurance Act and Montour is a member of the Bank
Insurance Fund. Except as set forth in Schedule 3.1 annexed to this Agreement,
Montour is not required to be qualified or licensed to do business as a foreign
corporation in any other jurisdiction other than its jurisdiction of
incorporation except where the failure to be so qualified and/or licensed to do
business as a foreign corporation would not have a material adverse effect on
Montour. Schedule 3.1 contains complete copies of the Articles or Certificate of
Incorporation and Bylaws of Montour, as currently in effect. Montour does not
own any equity interest, directly or indirectly, in any other company or control
any other company, except for equity interests held in the investment portfolio
of Montour. Except as set forth in Schedule 3.1, there are no subscriptions,
options, warrants, calls, commitments, agreements or other Rights outstanding
and held by Montour with respect to any other entity's capital stock. Except as
disclosed in Schedule 3.1, no person or "group" (as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) is the beneficial
owner of 5% or more of the outstanding shares of Montour Common Stock. The
Montour Common Stock is not registered under Section 12 of the Securities
Exchange Act of 1934.
<PAGE> 107

3.2 The authorized capital stock of Montour consists of 3,000,000
shares of Montour Common Stock and 500,000 shares of Preferred Stock, each of
which shares have a par value of $5.00 per share. A total of 418,080 shares of
Montour Common Stock have been validly issued and are outstanding and fully paid
as of the date hereof, and there are no treasury shares as of the date hereof.
No shares of Montour Preferred Stock are issued or outstanding. Except as set
forth in Schedule 3.2, there are no outstanding subscriptions, Rights, options,
warrants, calls, commitments or agreements to which Montour is a party or by
which Montour may be bound, which relate to the issuance or sale by it of shares
of Montour Common Stock or Montour Preferred Stock, except as contemplated by
this Agreement or the Merger Agreement. The number of issued and outstanding
shares of Montour Common Stock will be the same on the Effective Date as on the
date hereof, except as this number may be affected by the exercise of Stock
Purchase Warrants described in Schedule 3.2. No shares of Montour Preferred
Stock will be outstanding on the Effective Date.

3.3 (a) There have been delivered to Omega (a) the audited balance
sheets of Montour as of December 31, 1993, December 31, 1992, and December 31,
1991, and the related statements of income, statements of cash flows and
statements of changes in shareholders' equity together with related notes for
the years then ended, and (b) the unaudited balance sheet of Montour as of
December 31, 1994 and the related statements of income, statements of changes in
shareholders' equity and statements of cash flow for the twelve-month period
ended December 31, 1994 (collectively, the "Montour Financial Statements"). The
Montour Financial Statements (i) are in accordance with the books and records of
Montour, (ii) are true and correct in all material respects and fairly present
the financial position, assets and liabilities, and results of operations of
Montour at their respective dates and for the respective periods then ended and
(iii) have been prepared in accordance with generally accepted accounting
principles consistently applied, subject in the case of interim statements to
normal and recurring year-end adjustments. The Montour Financial Statements have
been examined and reported upon by and/or reviewed by, as the case may be, J. H.
Williams & Co., independent certified public accountants. J. H. Williams & Co.
is "independent" with respect to Montour under the criteria established and
applied by the Securities and Exchange Commission.
<PAGE> 108

(b) Except as reflected, noted or adequately reserved against
in the Montour Financial Statements, as of December 31, 1994, Montour did not
have any liabilities (whether accrued, absolute, contingent or otherwise) which
were required to be reflected, noted or reserved against in the Montour
Financial Statements under generally accepted accounting principles or which are
in any case or in the aggregate material.

3.4 Except as set forth on Schedule 3.4 annexed to this Agreement: (a)
Montour has filed all federal, state, city, county and local tax returns which
are required to be filed by it and such returns are true and correct in all
material respects; (b) Montour has paid all taxes required to be paid pursuant
to such returns prior to the date of this Agreement or has established adequate
reserves therefor; (c) Montour has not received any notice of any deficiencies
or other assessments of tax, interest or penalties claimed to be owed by
Montour; (d) no extensions of time with respect to any date on which any tax
return was or is to be filed by Montour is in force and no waiver or agreement
by Montour is in force for the extension of time for the assessment or payment
of any tax; and (e) the statute of limitations with respect to any tax year
still open has not been waived. Except as set forth in Schedule 3.4, the federal
income tax returns of Montour have been examined by the Internal Revenue Service
and all deficiencies and assessments of tax, interest and penalties made or
proposed in connection therewith have been paid.

3.5 Montour has good and marketable title to all its assets free and
clear of all liens or other encumbrances other than (a) the liens or other
encumbrances described in Schedule 3.5 annexed to this Agreement, or (b) such
liens or other encumbrances shown in the Montour Financial Statements or the
notes thereto, or (c) encumbrances or restrictions imposed by law, ordinances or
regulations incidental to the usual and normal conduct of business or other
imperfections of title or restrictions or encumbrances, incurred in the ordinary
course of Montour's business, all of which, in the aggregate, do not materially
adversely interfere with the present use of such property in Montour's business
and with respect to any real estate which do not result in the inability to
procure title insurance thereon at regular rates. With the foregoing exceptions
and except as set forth in Schedule 3.5, no person owns any interest in any of
the assets of Montour except as incidental to banking transactions entered into
in the ordinary course of business.
<PAGE> 109

3.6 Except as set forth in Schedule 3.6 annexed to this Agreement,
from December 31, 1994 to the date of this Agreement, there has been no material
adverse change in the business or condition, financial or otherwise, of Montour.
Except as set forth in Schedule 3.6, from December 31, 1994 to the date of this
Agreement, Montour has not (i) incurred any indebtedness, liabilities (whether
current, long term, fixed, contingent, liquidated, unliquidated, or otherwise)
or obligations other than in the ordinary course of business consistent with
past practice; (ii) declared or paid any dividends or made any distribution of
any of its assets in kind or redeemed or repurchased any shares of its Common
Stock or options or warrants to purchase Montour Common Stock or Montour
Preferred Stock; (iii) sold or transferred any of its assets, except in the
ordinary course of business consistent with past practice; or (iv) acquired the
assets or capital stock of any other person except in the ordinary course of
business consistent with past practice.

3.7 From December 31, 1994 to the date of this Agreement, there has
been no damage, destruction or loss, whether covered by insurance or not,
materially adversely affecting the assets or business of Montour or any other
event or condition of any character materially adversely affecting the assets or
business of Montour (other than events or conditions affecting the banking
industry generally).

3.8 Montour has delivered to Omega a list describing all insurance
policies or binders maintained by Montour and has made available to Omega for
inspection copies of all such policies or binders. Such policies and binders are
in full force and effect as of the date hereof and the insurance coverages
provided thereby will be maintained in full force and effect to the Effective
Date.

3.9 (a) Except as set forth in Schedule 3.9 annexed to this Agreement
or as disclosed in Montour's Proxy Statement dated April 22, 1994, Montour is
not a party to, has not proposed nor has any obligation under, any of the
following, whether written or oral: (i) contracts and other agreements with any
current or former director, officer, employee, shareholder, consultant or agent,
(ii) contracts and other agreements with any labor union (whether in effect or
expired), (iii) bonus, severance, hospitalization, vacation, deferred
compensation, pension or profit sharing, retirement, post employment, payroll
savings, stock option, appreciation rights, group life or medical insurance,
death benefit, welfare, or other employee benefit plan as defined in Section

<PAGE> 110

3(3) of the Employee Retirement Income Security Act of 1974, as amended,
("ERISA") (hereinafter collectively the "Montour Employee Benefit Plans"), (iv)
leases for real or personal property involving more than $10,000 per year and
having a term of more than one year, or (v) other contracts and agreements
involving more than $10,000 per year and having a term of more than one year of
any other nature with any person. A copy of each such contract, agreement and
lease set forth on Schedule 3.9 or disclosed in Montour's Proxy Statement dated
April 22, 1994 has been made available to Omega, or, if oral, has been described
in Schedule 3.9.

(b) All material contracts, agreements and leases (whether or
not set forth in Schedule 3.9 or disclosed in Montour's Proxy Statement dated
April 22, 1994 but excluding loans made in the ordinary course of business) to
which Montour is a party are in full force and effect; Montour is not in default
under any of them nor to the best of Montour's knowledge is any other party to
any material contract, agreement or lease in default thereunder; and neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereby will result in any breach or, acceleration of, or constitute
(or with notice or lapse of time or both would constitute) a default under any
such material contract, agreement or lease. To the best of Montour's knowledge,
no employee of Montour is represented by a union with respect to his or her
employment by Montour and no attempt has been or is currently being made by any
person to have the employees of Montour represented by a labor union.

3.10 The Montour Employee Benefit Plans and their operations comply in
all material respects with all applicable laws including, without limitation,
ERISA and the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code" or the "Code"). Except as set forth on Schedule 3.9, in respect of the
Montour Employee Benefit Plans identified on Schedule 3.9 or in Montour's Proxy
Statement dated April 22, 1994, Montour has made all contributions required to
be made by it and has or will have accrued as of the Effective Date all payments
due and payable as of the Effective Date. The employee pension benefit plans (as
defined in Section 3(2) of ERISA) of Montour have been properly submitted to the
Internal Revenue Service within the time prescribed therefor by applicable
federal regulations and have received determination letters from the Internal
Revenue Service that such plans are qualified plans pursuant to Section 401(a)
of the Code, in accordance with the final regulations promulgated under ERISA,
except as otherwise set forth in Schedule 3.9. To the best of Montour's
knowledge, there has been no "reportable event" (as defined in the Code or
ERISA), no event described in Section 4062(e) of ERISA, no violation of Section
404 of ERISA, no "prohibited transaction" (as defined in the Code or ERISA), no
<PAGE> 111

violation of the reporting and disclosure provisions of the Code and ERISA and,
except as contemplated by this Agreement, no termination or partial termination
of any Montour Employee Benefit Plan maintained or established by Montour or to
which Montour contributes. Montour has delivered to Omega (i) the most recent
actuarial valuation of its defined benefit retirement plans, and (ii) Form 5500
for such plans and for its profit sharing plan as filed with the IRS for the
calendar year as set forth in Schedule 3.9. There is no material issue relating
to its employee pension benefit plans, or its related trusts, currently pending
before the Internal Revenue Service, the Department of Labor or the Pension
Benefit Guaranty Corporation and Montour has no knowledge of any pending or
threatened litigation by any participant, beneficiary or government agency
involving any Montour Employee Benefit Plan or of any fact or circumstance which
materially adversely affects the status of any Montour Employee Benefit Plan
listed in Schedule 3.9. To the best of Montour's knowledge, no event has
occurred which will result in liability to Montour in connection with any
employee pension benefit plan established, maintained or contributed to by
Montour or any other entity which, with Montour, constitute elements of either
(i) a controlled group of corporations (within the meaning of Section 414(b) of
the Code), (ii) a group of trades or businesses under common control (within the
meaning of Sections 414(c) of the Code or 4001 of ERISA), (iii) an affiliated
service group (within the meaning of Section 414(m) of the Code), or (iv) any
other group required to be aggregated pursuant to regulations under Section
414(o) of the Code. Montour has not incurred any liability to the Pension
Benefit Guaranty Corporation.

3.11 Schedule 3.11 annexed to this Agreement sets forth a list of all
actions, suits, investigations (formal or informal) or proceedings pending
against Montour or any of its past or present officers or directors in any court
or before any governmental agency or arbitration tribunal other than those in
which the liability of Montour is likely to be less than $5,000, or $10,000 in
the aggregate for all of such omitted actions, suits, investigations or
proceedings. Schedule 3.11 may, at the option of Montour, list actions, suits,
investigations or proceedings in which the liability of Montour is likely to be
less than $5,000 and any listing in such Schedule shall not be deemed an
admission of liability. Montour has not received during the past year any
written or oral communications from any shareholder of Montour or other person
or entity threatening any such action, investigation or proceeding. There are no
<PAGE> 112

actions, suits, investigations (formal or informal) or proceedings pending or,
to the knowledge of Montour, threatened against Montour or any of its past or
present officers or directors in any court or before any governmental agency or
arbitration tribunal which (either individually or in the aggregate) are likely
to have a material adverse effect on the net worth of Montour. Montour, or, in
their capacity as such, Montour's officers, directors or employees are not
subject to or bound by, and have not been subject to or bound by at any time
during the five years preceding the date hereof any judgment, order, memorandum
of understanding, agreement, writ, injunction or decree of any such court,
agency or tribunal, except as set forth in Schedule 3.11. Montour is in
compliance in all material respects with all of the items listed in Schedule
3.11 which are currently applicable to it.

3.12 There are no pending actions, suits or proceedings which have
been brought by or on behalf of Montour in any court or before any governmental
agency or arbitration tribunal, except such actions, suits and proceedings as
were brought in the ordinary course of its business or as listed in Schedule
3.12 annexed to this Agreement. Schedule 3.12 also sets forth a list and
description of all applications by Montour pending before any state or federal
agency having jurisdiction over the affairs of Montour.

3.13 On and after the date hereof, to and including the Effective
Date, Montour will not, without the prior written consent of Omega, do any of
the following:

(a) make any changes in its authorized, issued or outstanding
capital stock or any security convertible into capital stock, except as may be
caused by the exercise of stock purchase warrants set forth in Schedule 3.2
hereof;

(b) declare or pay any dividends;

(c) effect any recapitalization, reclassification, stock
dividend, stock split or like change in its capital or grant any Rights;

(d) make any other distribution of its assets or properties to
its shareholders;

(e) acquire any shares of Montour's or Omega's capital stock of
any class;

(f) enter into or commit to enter into any new employment
contract or amend any existing employment contract or grant any salary increase,
bonus, or other form of compensation payable to any officer, employee or agent,
except for salary increases and bonuses to persons who are not directors or
officers of Montour or relations thereto provided such increases and bonuses are
consistent with the past practice of Montour;
<PAGE> 113

(g) amend the Articles of Incorporation or
the By-Laws of Montour;

(h) except in the ordinary course of business consistent with
past practice, incur any indebtedness, liabilities (whether current, long term,
fixed, contingent, liquidated, unliquidated or otherwise) or obligations;

(i) except in the ordinary course of business consistent with
past practice, purchase or otherwise acquire, or sell or otherwise dispose of,
any equity security, debt security or asset;

(j) change its criteria with respect to risk or overall quality
of Montour's investment portfolio or loan portfolio or make or sell any
investment or loan except consistent with the past practices of Montour;

(k) make capital expenditures or commit to make capital
expenditures other than in the ordinary course of business consistent with past
practice; or

(l) create any new Employee Benefit Plan or make any
contributions to any Employee Benefit Plan or other plan relating to its
officers, employees and agents except as may be required by the terms of any
existing Employee Benefit Plan or by applicable law;

and Montour has not done any of the things described in clauses (a) through (l)
of this Section 3.13 since December 31, 1993 except as set forth in Schedule
3.13 annexed to this Agreement or in the Montour Financial Statements.

3.14 Montour will (and has done so since December 31, 1994, except as
otherwise set forth on Schedule 3.6) continue to conduct its business in the
usual, regular and ordinary manner consistent with past practices and will use
its best efforts consistent with good banking practices to preserve intact its
business organization, the services of its officers and employees and will
maintain satisfactory relationships with customers and others having business
relations with Montour. Omega hereby consents to the incurring and payment by
Montour, prior to the Effective Date, of all reasonable and necessary expenses
in connection with the transaction contemplated by this Agreement and the Merger
Agreement, including, but not limited to, advisory, financial counseling,
printing, legal and accounting expenses, and fees and other charges provided
that the aggregate amount incurred and/or paid with respect to all such expenses
shall not exceed $70,000 without the prior written consent of Omega.
<PAGE> 114

3.15 Montour has the corporate power and authority to own, lease and
operate its properties and to conduct its business as now conducted. Montour has
complied and is in compliance in all material respects with all federal, state
and local laws, regulations, ordinances, rules or orders affecting or regulating
the conduct and operations of its business or its properties.

3.16 Montour has the legal power and authority to enter into this
Agreement and the Merger Agreement and to consummate the transactions
contemplated hereby and thereby, subject to all necessary regulatory approvals,
including, without limitation, approval of the Federal Reserve Board, the FDIC,
and the Pennsylvania Department of Banking, and, in the case of this Agreement
and the Merger Agreement, subject to the approval of the shareholders of Montour
under applicable law. Montour will recommend to its shareholders that they
approve the Merger and all other acts and transactions contemplated by this
Agreement and the Merger Agreement. Approval of this Agreement and the Merger
Agreement by the Montour shareholders shall also be deemed to authorize the
Montour Board of Directors to amend, supplement or waive any of the provisions
of this Agreement and the Merger Agreement as provided in Section 16 of this
Agreement.

3.17 The Board of Directors of Montour has authorized the execution,
delivery and performance of this Agreement and the Merger Agreement and the
transactions contemplated hereby and thereby. Neither the execution, delivery
and performance of this Agreement or the Merger Agreement, nor, subject to the
approval of Montour's shareholders and subject to all necessary regulatory
approvals, including, without limitation, approval of the Federal Reserve Board,
the FDIC, and the Pennsylvania Department of Banking, will the consummation of
the transactions contemplated hereby or thereby or the fulfillment of, or the
compliance with, the terms, conditions, and provisions of this Agreement or the
Merger Agreement, conflict with, or result in a breach of, any of the terms,
conditions or provisions of the Articles of Incorporation or the By-Laws of
Montour, or of any material contract or other material agreement to which
Montour is a party or by which it may be bound, or constitute (with or without
the giving of notice or the passage of time, or both) a default under any such
material contract or other agreements or cause the acceleration of the maturity
of any material obligation of Montour or result in the creation of a lien or
other encumbrance on any of Montour's assets or constitute a violation of, or
cause Montour not to be in compliance with, any federal, state or local law,
regulation, ordinance, rule or order.
<PAGE> 115

3.18 All Schedules and other documents required to be delivered by or
on behalf of Montour in connection with this Agreement, the Merger Agreement,
and the transactions contemplated hereby and thereby are true and complete in
all material respects. No representation, warranty or covenant made by Montour
to Omega in; and no Schedule or other document delivered by or on behalf of (or
to be delivered by or on behalf of) Montour in connection with this Agreement,
the Merger Agreement or the transactions contemplated hereby or thereby contains
(or will contain) any untrue statement of a material fact or omits to state any
material fact necessary to make the statements made not false or misleading.
Except for events or conditions affecting the banking industry in general, or
except as set forth in Schedule 3.18 annexed to this Agreement, there is no fact
which Montour has not disclosed to Omega in writing which materially adversely
affects or could materially adversely affect the business or condition
(financial or otherwise) or prospects of Montour.

3.19 To the best of Montour's knowledge, Schedule 3.19 annexed to this
Agreement is a true and complete list of the Affiliates of Montour as the term
"Affiliates" is used in Rule 145 promulgated under the Securities Act of 1933,
as amended (the "1933 Act").

3.20 All the properties and assets of Montour used in connection with
its businesses are in good operating condition and in a state of reasonable
maintenance and repair.

3.21 None of the information supplied or to be supplied by Montour for
inclusion in the documents to be prepared in connection with the transactions
contemplated by this Agreement including, without limitation, (i) documents to
be filed with the SEC, including the Proxy Statement and the Registration
Statement, (ii) filings pursuant to any state securities and blue sky laws, and
(iii) filings made in connection with obtaining all necessary regulatory
approvals, including, without limitation, approval of the Federal Reserve Board,
the FDIC, and the Pennsylvania Department of Banking, will, in the case of the
Registration Statement at the time the Registration Statement is declared
<PAGE> 116

effective pursuant to the 1933 Act, in the case of the Proxy Statement at the
time of the mailing thereof and of the Montour shareholders' meeting, and in the
case of other documents at the time such documents are filed with any federal or
state regulatory authority and/or at the time they are distributed to
shareholders of Montour, contain or will contain any untrue statements of a
material fact or omit to state any material fact necessary in order to make the
statements therein not misleading (or, in the case of the Proxy Statement, in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading).

3.22 The minute books of Montour contain complete and accurate records
of all meetings and other corporate actions of the shareholders and Boards of
Directors (including committees of the Boards of Directors) of each and of all
material corporate actions taken by such directors and shareholders.

3.23 On and after the date hereof, to and including
the Effective Date:

(a) From the date hereof until the Effective Date, Montour
shall not (i) negotiate (except with Omega), nor solicit or encourage from any
director, officer, shareholder, other person or entity (other than Omega), any
inquiry or proposal relating to a merger or consolidation of Montour, or sale of
assets or stock of Montour; (ii) engage indirectly in such activities through a
broker, finder, consultant, officer, director, shareholder or other intermediary
or representative; or (iii) cooperate with or furnish to any of the foregoing
(other than Omega) non-public information concerning Montour in connection with
such an inquiry or proposal. Montour shall promptly notify Omega orally, and
confirm in writing, all relevant details relating to all inquiries or proposals
which Montour may receive relating to any such matter; and

(b) Montour shall promptly provide Omega copies of all written
correspondence sent to or received from any regulatory authority having
jurisdiction over Montour;

3.24 Except as set forth on Schedule 3.24 of this Agreement, to the
knowledge of Montour, neither Montour nor any properties owned or operated by
Montour has been or is in violation of or liable under any Environmental Law (as
hereinafter defined), except for such violations or liabilities that,
individually or in the aggregate, would not have a material adverse effect on
the assets, business, financial condition or results of operation of Montour.
<PAGE> 117

There are no actions, suits or proceedings, or demands, claims, notices or
investigations (including without limitation notices, demand letters or requests
for information from any environmental agency) instituted or pending, or to the
knowledge of Montour threatened relating to the liability of any property owned
or operated by Montour under any Environmental Law. "Environmental Law" means
any federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any regulatory authority relating to (i)
the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface soil, subsurface soil, plant and animal life or any other
natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of any substance presently listed, defined, designated or classified
as hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether
by type or by quantity, including any material containing any such substance as
a component.

3.25 All loans reflected on the unaudited balance sheet of Montour as
of December 31, 1994 have, or will have, arisen in the ordinary course of
business and represent in all material respects legally valid and enforceable
written obligations to Montour in accordance with their terms. In connection
with all such loans, Montour has complied in all material respects with all
federal, state, county, local and foreign laws, ordinances, regulations and
orders relating in any material respect to the loans; all such loans, and any
and all agreements, documents and instruments related thereto are in full force
and effect; and Montour is not in default thereunder. There is no condition or
basis known to Montour for any claim of a default by any party to any such loan
nor is there an event which with notice, lapse of time, or both would constitute
a default under any such loan except to the extent provided for in any related
reserve reflected on the books and records of Montour. Except as reflected in
the unaudited financial statements of Montour as of December 31, 1994, there are
no refunds or discounts or any other adjustments payable in respect of any such
loan or any defenses, rights of set-off, assignments, restrictions, liens or
other encumbrances enforceable by third parties or affecting any of such loans.
The allowance for loan loss of Montour as of December 31, 1994 complies in all
respects with generally accepted accounting principles consistently applied.
<PAGE> 118

4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OMEGA
--------------------------------------------------

Omega represents, warrants and covenants to Montour and agrees as
follows:

4.1 Omega is a business corporation duly organized and validly
existing under the laws of the Commonwealth of Pennsylvania. Omega is registered
as a bank holding company under the Holding Company Act. Except as set forth on
Schedule 4.1 annexed to this Agreement, Omega has no subsidiaries. All
references to "Omega" hereafter contained in this Section 4 shall be deemed to
include Omega and all of its subsidiaries. The deposits of each of the bank
subsidiaries of Omega are insured pursuant to and in accordance with the Federal
Deposit Insurance Act and each is a member of the Bank Insurance Fund.

4.2 The authorized capital stock of Omega consists of (i) 10,000,000
shares of Omega Common Stock of which 5,985,735 shares have been validly issued
and are presently outstanding, fully paid and non-assessable as of the date
hereof, (ii) 1,000,000 shares of preferred stock, par value $5.00 per share, of
which 219,781 shares of Series A ESOP Cumulative Convertible Preferred Stock is
issued and outstanding as of the date hereof, and (iii) there are no shares held
in treasury as of the date hereof. Omega owns all of the issued and outstanding
capital stock (except for directors qualifying shares) of The Peoples National
Bank of Central Pennsylvania and owns either directly or through other
subsidiaries (regardless of tier) all of the issued and outstanding capital
stock (except for directors qualifying shares) of the other banking entities set
forth on Schedule 4.1 hereof, free and clear of any lien or other encumbrance.
There are no outstanding subscriptions, Rights, options, warrants, calls,
commitments or agreements, as to which Omega is a party or by which it may be
bound, which relate to the issuance or sale by it of shares of its capital
stock, except those disclosed in Omega's 1994 Annual Meeting Proxy Statement, or
as set forth on Schedule 4.2 annexed to this Agreement or as contemplated by
this Agreement and the Merger Agreement. The foregoing shall not be construed as
preventing Omega from (a) proceeding with other mergers or other acquisitions
using Omega Common Stock or other securities of Omega as any part of the
consideration therefor so long as Omega is the survivor of such merger or other
acquisition or (b) from issuing stock pursuant to its dividend reinvestment plan
or its employees stock option plan or employee stock purchase plan or for other
proper purposes or (c) from repurchasing shares of stock for its treasury.
<PAGE> 119

4.3 (a) There have been delivered to Montour (i) the audited
consolidated balance sheets of Omega and its subsidiaries as of December 31,
1993, 1992 and 1991 and the related consolidated statements of income,
statements of cash flow and statements of changes in shareholders' equity for
the years then ended with notes, and (ii) the unaudited consolidated balance
sheet of Omega and its subsidiaries as of December 31, 1994 and the related
consolidated statements of income, statements of changes in shareholders' equity
and statements of cash flow for the twelve-month period then ended
(collectively, the "Omega Financial Statements"). The Omega Financial Statements
(i) are in accordance with the books and records of Omega and its subsidiaries,
(ii) are true and correct in all material respects and fairly present the
consolidated financial position, assets and liabilities, and results of
operations of Omega at their respective dates and for the respective periods
then ended, and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as otherwise noted in a
footnote thereto and subject in the case of interim statements to normal and
recurring year-end adjustments. The audited Omega Financial Statements have been
examined and reported upon by Arthur Andersen & Co., independent certified
public accountants. Arthur Andersen & Co. is "independent" with respect to Omega
under the criteria established and applied by the Securities and Exchange
Commission.

(b) Except as reflected, noted or adequately reserved against
in the Omega Financial Statements, as of December 31, 1994, Omega did not have
any liabilities (whether accrued, absolute, contingent or otherwise) which are
required to be reflected, noted or reserved against in the Omega Financial
Statements under generally accepted accounting principles or which are in any
case or in the aggregate material.

4.4 Except as set forth on Schedule 4.4: (a) Omega has filed all
federal, state, city, county and local tax returns which are required to be
filed by it and such returns are true and correct in all material respects; (b)
Omega has paid all taxes required to be paid pursuant to such returns prior to
the date of this Agreement or has established adequate reserves therefor; (c)
Omega has not received any notice of any deficiency or other assessment of tax,
interest or penalties claimed to be owed by Omega; (d) no extensions of time
with respect to any date on which any tax return was or is to be filed by Omega
is in force and no waiver or agreement by Omega is in force for the extension of
time for the assessment or payment of any tax; and (e) the statute of
limitations with respect to any tax year still open has not been waived. The
federal income tax returns of Omega have been examined by the Internal Revenue
Service through the fiscal year ended as set forth in Schedule 4.4 and except as
set forth on Schedule 4.4, all deficiencies and assessments of tax, interest and
penalties made or proposed in connection therewith have been paid.
<PAGE> 120

4.5 Omega has good and marketable title to all its assets free and
clear of all liens or other encumbrances other than (a) the liens or other
encumbrances described in Schedule 4.5 annexed to this Agreement, or (b) such
liens or other encumbrances shown in the Omega Financial Statements or the notes
thereto, or (c) encumbrances or restrictions imposed by law, ordinances or
regulations incidental to the usual and normal conduct of business or other
imperfections of title, or restrictions or encumbrances or mechanics liens
incurred in the ordinary course of business all of which, in the aggregate, do
not materially adversely interfere with the present use of such property in
Omega's business and with respect to any real estate which do not result in the
inability to procure title insurance thereon at regular rates. With the
foregoing exceptions and except as set forth in Schedule 4.5, no person owns any
interest in any of the assets of Omega except as incidental to banking
transactions entered into in the ordinary course of business.

4.6 From December 31, 1994 to the date of this Agreement, there has
been no material adverse change in the business or consolidated condition,
financial or otherwise, of Omega. Except as set forth in Schedule 4.6 annexed to
this Agreement, from December 31, 1994 to the date of this Agreement, Omega has
not (i) incurred any indebtedness, liabilities (whether current, long term,
fixed, contingent, liquidated, unliquidated, or otherwise) or obligations other
than in the ordinary course of business consistent with past practice; (ii)
excluding transfers among Omega and its subsidiaries, declared or paid any
dividends (other than its regular quarterly cash dividends) or made any
distribution of any of its assets in kind or redeemed or repurchased any shares
of its capital stock; (iii) sold or transferred any of its assets, except in the
ordinary course of business consistent with past practice; or (iv) acquired the
assets or capital stock of any other person other than in the ordinary course of
business consistent with past practice.

4.7 From December 31, 1994 to the date of this Agreement, there has
been no damage, destruction or loss, whether covered by insurance or not,
materially adversely affecting the assets or business of Omega or any other
event or condition of any character materially adversely affecting the assets or
business of Omega (other than events or conditions affecting the banking
industry generally).
<PAGE> 121

4.8 On and after the date hereof, to and including the Effective Date,
Omega will not, without the prior written consent of Montour, do any of the
following:

(a) Make any changes in its authorized, issued or outstanding
capital stock or any security convertible into capital stock, except in
connection with its Employee Stock Ownership Plan or other employee benefit
plans (including a stock purchase or stock option plan) or in connection with a
transaction designed to raise capital for Omega except that if subscription
rights are granted to shareholders of Omega, such subscription rights shall be
granted on equal terms to the shareholders of Montour (which terms may, but need
not, include a pro rata grant of such rights based on the relative stockholdings
of Omega's shareholders and Montour's shareholders in Omega after the Merger);

(b) Declare or pay any dividends except that: (i) Omega
subsidiaries may declare and pay dividends to Omega, to the extent consistent
with past practice, and (ii) Omega may declare and pay regular quarterly cash
dividends to its shareholders on its Common Stock and its Series A ESOP
Cumulative Convertible Preferred Stock consistent with past practice (including
increases in regular cash dividends consistent with past practices);

(c) Make any other distribution of its assets or properties to
their shareholders, except as permitted in clause (a) or (b) above, provided
that the foregoing shall not prohibit the repurchase of shares of Omega stock
for its treasury;

(d) Amend the Articles of Incorporation or By-Laws of Omega,
except where required by applicable law or contemplated by this Agreement or the
Merger Agreement;

(e) Change the criteria, with respect to risk, for selecting
investments or making loans; or

(f) Make capital expenditures or commit to make capital
expenditures other than in the ordinary course of business;

and Omega has not done any of the things described in clauses (a) through (f) of
this Section 4.8 since December 31, 1994 except as set forth in Schedule 4.8
annexed to this Agreement. The foregoing shall not be construed as preventing
Omega from proceeding with other mergers or other acquisitions using Omega
Common Stock or other securities of Omega as any part of the consideration
therefor so long as Omega is the survivor of such merger or other acquisition or
from issuing stock pursuant to its dividend reinvestment plan or its employees
stock option plan or employee stock purchase plan.
<PAGE> 122

4.9 Omega will (and has done so since December 31, 1994, except as
otherwise set forth on Schedule 4.6) continue to conduct its business in the
usual, regular and ordinary manner consistent with past practices.

4.10 Omega has the corporate power and authority to own, lease and
operate its properties and to conduct its business as now conducted. Omega has
complied and is in compliance in all material respects with all federal, state
and local laws, regulations, ordinances, rules or orders affecting or regulating
the conduct and operations of its businesses and properties.

4.11 Omega has the legal power and authority to enter into this
Agreement or the Merger Agreement, and to consummate the transactions
contemplated hereby and thereby, subject to all necessary regulatory approvals,
including, without limitation, approval of the Federal Reserve Board, the FDIC,
and the Pennsylvania Department of Banking.

4.12 The Board of Directors of Omega has authorized the execution,
delivery and performance of this Agreement or the Merger Agreement and the
transactions contemplated hereby and thereby. Neither the execution, delivery
and performance of this Agreement or the Merger Agreement, and subject to all
necessary regulatory approvals, nor the consummation of the transactions
contemplated hereby and thereby or the fulfillment of, or the compliance with,
the terms, conditions, and provisions of this Agreement or the Merger Agreement,
will conflict with or result in the breach of, the terms, conditions or
provisions of the Articles of Incorporation or the By-Laws of Omega or the
Articles of Association or the By-Laws of any of its subsidiaries, or of any
material contract or other material agreement to which Omega is a party or by
which it may be bound or constitute (with or without the giving of notice or
passage of time, or both) a default under any such instrument or cause the
acceleration of the maturity of any material obligation of Omega, or result in
the creation of a lien or other encumbrance on any of Omega's assets or
constitute a violation of, or cause Omega not to be in compliance with, any
federal, state or local law, regulation, ordinance, rule or order.

4.13 All Schedules and other documents required to be delivered by or
on behalf of Omega in connection with this Agreement or the Merger Agreement and
the transactions contemplated hereby and thereby are true and complete in all
material respects. No representation, warranty or covenant made by Omega to
Montour in, and no Schedule or other document delivered by or behalf of (or to
be delivered by or on behalf of) Omega in connection with this Agreement or the
Merger Agreement or the transactions contemplated hereby or thereby contains (or
will contain) any untrue statement of a material fact or omits to state any
material fact necessary to make the statements made, in the context in which
made, not false or misleading. Except for events or conditions affecting banks
generally, there is no fact which Omega has not disclosed to Montour in writing
which materially adversely affects or could materially adversely affect the
business or condition (financial or other) of Omega.

4.14 Omega has filed all reports, registration statements and filings,
together with any amendments required to be made thereto, required to be filed
with the SEC under the 1933 Act or the 1934 Act since prior to January 1, 1992
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements, and
will so file and furnish to Montour all such reports, statements and filings
required to be made after the date hereof (collectively, the "Omega Reports").
As of their respective dates, the Omega Reports referred to herein complied, or
will comply, as the case may be, in all material respects with all rules and
regulations promulgated by the SEC, and did not, or will not, as the case may
be, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. True and complete copies of all Omega Reports filed prior to the
date hereof have been delivered by Omega to Montour and all Omega Reports filed
subsequent to the date hereof and prior to the Effective Date will be promptly
delivered by Omega to Montour.

4.15 None of the information supplied or to be supplied by Omega for
inclusion in the documents to be prepared in connection with the transactions
contemplated by this Agreement including, without limitation, (i) documents to
be filed with the SEC, including the Proxy Statement and the Registration
Statement, (ii) filings pursuant to any state securities and blue sky laws, and
(iii) filings made in connection with obtaining all necessary regulatory
approvals, including, without limitation, approval of the Federal Reserve Board,
the FDIC, and the Pennsylvania Department of Banking, will, in the case of the
Registration Statement at the time the Registration Statement is declared
<PAGE> 123

effective pursuant to the 1933 Act, in the case of the Proxy Statement at the
time of the mailing thereof and of the Montour shareholders meeting, and in the
case of other documents at the time such documents are filed with any federal or
state regulatory authority and/or at the time they are distributed to
shareholders of either Montour or Omega, contain or will contain any untrue
statements of a material fact or omit to state any material fact necessary in
order to make the statements therein not misleading (or, in the case of the
Proxy Statement, in order to make the statements therein, in light of the
circumstances under which they were made not misleading).

5. APPROVAL OF SHAREHOLDERS AND SECURITIES ACT OF 1933
---------------------------------------------------

5.1 As promptly as practicable after the "Registration Statement"
referred to below becomes effective with the Securities and Exchange Commission
("SEC"), Montour will hold a meeting of its shareholders for the purpose of
authorizing the transactions contemplated by this Agreement and the Merger
Agreement insofar as they relate to Montour. After Montour's shareholders shall
have approved this Agreement and the Merger Agreement, and the transactions
contemplated hereby and thereby, such approval shall not be revocable. Montour
will, in accordance and full compliance with applicable law, solicit proxies
from its shareholders in favor of the transactions described in and contemplated
by this Agreement and the Merger Agreement, for use at the meeting of Montour's
shareholders referred to above. Except with the prior written consent of Omega,
Montour will not distribute any materials to its shareholders in connection with
such solicitation of proxies other than materials contained in the Registration
Statement after such Registration Statement shall have become effective.

5.2 Between the date of mailing the notice of the Montour
shareholders' meeting to be held as provided in Section 5.1 of this Agreement,
and the time such meeting was held, Montour shall ask each of its shareholders,
subject to the consummation of the transactions contemplated hereby and by the
Merger Agreement, to make a legally binding election to receive, upon the
conversion of their Montour Common Stock in the Merger, and subject to the
consummation of the transactions contemplated hereby, either: (a) shares of
Omega Common Stock at the rate of one half of one share of Omega Common Stock
for each share of Montour Common Stock held by such shareholder ("Option A"); or
(b) $12.00 in cash for each share of Montour Common Stock ("Option B") held by
<PAGE> 124

such shareholder; or (c) a combination of Omega Common Stock and cash (subject
to the limitations as provided in Sections 2.2, 2.3 and 2.4 of the Merger
Agreement and the automatic pro ration provisions as contained therein). Except
as otherwise permitted by Omega, a Montour shareholder shall only be permitted
to make such election with respect to all shares of Montour Common Stock held by
him (using a form separate from the proxy form) and failure by a Montour
shareholder to make the required election shall constitute an election to
receive (i) Omega Common Stock; (ii) cash or (iii) any combination of Omega
Common Stock and cash as the Board of Directors of Omega shall in its sole
discretion determine prior to the Effective Date. Any shareholder who makes an
election shall, with the consent of Omega, have the right to revoke such
election as to any or all of the shares with respect to which such election was
made by such shareholder given written notice to Montour of such revocation
prior to the vote at the meeting of Montour shareholders contemplated by Section
5.1 of this Agreement.

5.3 Notwithstanding the provisions of Section 5.2 above, the Boards of
Directors of the parties hereto specifically reserve the right (without seeking
shareholder approval and whether before or after any shareholder approval has
been obtained), by mutual agreement in writing, to change or modify the method,
timing and procedures for the making of the election described in such Section
5.2, in any manner which they deem to be in the parties' mutual best interests
or which they deem to be required under applicable law. The rights of the Boards
of Directors of the parties under this Section 5.3 are in addition to the rights
reserved and provided to them in Section 12 of this Agreement.

5.4 Omega and Montour acknowledge that the transactions contemplated
hereby are subject to the provisions of the 1933 Act, and Rule 145 promulgated
thereunder. Omega agrees to prepare promptly (with the assistance and
cooperation of Montour) and file a Registration Statement pursuant to the
provisions of the 1933 Act for the purposes of registering the shares of Omega
Common Stock to be issued in connection with the transactions contemplated
hereby. Montour agrees to provide promptly to Omega information concerning the
business and financial condition and affairs of Montour as may be required or
appropriate for inclusion in the Registration Statement,and to cause its counsel
and auditors to cooperate with Omega counsel and auditors in the preparation and
filing of such Registration Statement. After the execution of this Agreement and
prior to the effectiveness of the Registration Statement, and thereafter until
the Effective Date, Montour and Omega will promptly advise one another of facts,
if any, which should be set forth in amendments of or supplements to the
Prospectus or amendments or supplements to the Registration Statement. Omega and
Montour agree to use their respective best efforts to have such Registration
Statement declared effective under the 1933 Act as soon as may be practicable
and to distribute the prospectus contained in such Registration Statement
<PAGE> 125

("Prospectus") to the shareholders of Montour in accordance with applicable law.
Except to the extent permitted by Rule 145(b) or with the prior consent of the
other, Omega and Montour agree to use their best efforts not to publish any
communication, other than the Registration Statement or notice and proxy
material accompanied by the Prospectus, in respect of this Agreement or the
Merger Agreement or the transactions contemplated hereby or thereby. Omega shall
not be required to maintain the effectiveness of the Registration Statement or
the Prospectus for the purpose of resale by the affiliates of Montour, as such
term is used in Rule 145.

5.5 Each party warrants, represents and covenants to the other that
when the Registration Statement shall become effective, and at all times
subsequent to effectiveness, up to and including the date of the Montour's
shareholder meeting with respect to the transactions contemplated hereby, such
Registration Statement and all amendments or supplements thereto will, with
respect to the information furnished by each party or its representatives to the
other party or its representatives, (i) comply in all material respects with the
provisions of the 1933 Act and the 1934 Act and the rules and regulations
thereunder and (ii) not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading. Each party, warrants, represents
and covenants to the other that all information, furnished to each other for use
in the regulatory filings described in or contemplated by this Agreement and the
Merger Agreement shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading. Each party hereby agrees to
fully indemnify and hold harmless the other party and its directors, officers
and representatives, from and against any and all losses, claims, liabilities,
damages and expenses (including reasonable attorneys fees) that arise out of or
are based upon a breach of this warranty, representation and covenant.

6. PRIOR TO CLOSING
----------------

6.1 Omega and Montour agree that either party may, prior to Closing,
through its own representatives, make such investigation of the assets,
liabilities and business of the other party as it deems necessary or advisable
solely for purposes of facilitating the transactions contemplated by this
<PAGE> 126

Agreement and the Merger Agreement. From and after the date hereof, Omega or
Montour, as the case may be, and subject to applicable law, will provide to the
officers and accredited representatives of the other, its (including
subsidiaries,) books and records at such times as either shall reasonably
request in order that Omega or Montour, as the case may be, may have full
opportunity to make such investigation as either shall desire to make of the
business and affairs of the other and its subsidiaries, provided that such
investigation shall not unduly interfere with the normal conduct by the other
and its subsidiaries of their business. Omega and Montour, as the case may be,
shall each furnish to the other such information about its business and affairs
as the other may reasonably request in order to consummate the transactions
herein contemplated. All non-public materials and information furnished by the
parties hereto shall be held strictly confidential and may not be used by the
receiving party for their own benefit whatsoever and will be returned to the
party who furnished such material and information if the closing contemplated
hereunder does not occur. The obligations of the parties pursuant to the
preceding sentence shall survive any termination of this Agreement for any
reason whatsoever.

6.2 Omega and Montour agree that each shall deliver to the other on or
prior to ten business days from the date hereof the Schedules required to be
delivered by it to the other pursuant to Sections 3, 4 and 11 hereof, as the
case may be. In addition to the investigations provided for in Section 6.1
hereof, within thirty business days of the date hereof, Montour shall permit
Omega, through Omega's representatives and Omega shall permit Montour, through
Montour's representatives, to make such a financial, legal and accounting review
and examination of the Schedules, assets, liabilities and business of Montour or
Omega, as the case may be, including, without limitation, all books, records,
documentation and reports related thereto, as it deems necessary or advisable.
Either Omega or Montour shall have the right to terminate this Agreement and the
Merger Agreement if, as a result of such review and examination, either Omega or
Montour, in its sole and absolute discretion, determines not to proceed with the
Merger. If either Omega or Montour determines not to proceed with the Merger
pursuant to this Section 6.2, it shall promptly notify the other party hereto of
such fact in writing no later than thirty business days after the date hereof.

6.3 Omega and Montour will cooperate with each other in promptly
obtaining all government, regulatory and shareholder consents and approvals
necessary for the consummation of the transactions contemplated by this
Agreement and the Merger Agreement. Omega and Montour shall cooperate with each
<PAGE> 127

other and shall promptly furnish and make available to each other any and all
information, data and facts which may be required to obtain all government,
regulatory and shareholder consents and approvals and to comply with all rules
in obtaining Omega's and Montour's shareholders' respective consents to the
Merger.

6.4 Omega and Montour shall use their best efforts to file appropriate
Articles or Certificate of Merger with the Department of State of the
Commonwealth of Pennsylvania at or prior to the time of the Closing, such
Articles or Certificate of Merger to specify the same Effective Date.

7. CONDITIONS PRECEDENT TO OMEGA'S OBLIGATIONS
-------------------------------------------

The obligations of Omega hereunder to close under this Agreement and
the Merger Agreement are subject to the following conditions precedent (all or
any of which may be waived by Omega in its sole discretion):

7.1 Each of the representations and warranties herein made by Montour
shall be true in all material respects on the Effective Date as if made on, as
of, and with respect to the Effective Date, and the agreements contained herein
and in the Merger Agreement required to be performed by Montour on or before the
Effective Date shall have been so performed in all material respects. On the
Effective Date, Montour will furnish a certificate to Omega, dated as of the
Effective Date, of its Chairman of the Board and of its Secretary to the effect
set forth in this Section 7.1.

7.2 On or before the Effective Date, Montour and Omega shall have
received all required permits, consents and approvals (which permits, consents
and approvals shall be unconditional and free of any restrictions or
requirements by reason of acceptance of any such permit, consent or approval)
from all federal and state governmental agencies and boards (including, without
limitation, the Federal Reserve Board, the FDIC, and the Pennsylvania Department
of Banking) and any applicable waiting periods shall have expired.

7.3 Omega shall have received an opinion of counsel for Montour in the
form attached hereto, which is in substance reasonably satisfactory to Omega.

7.4 On or before the Effective Date, Montour shall have taken all
necessary corporate action, and shall have delivered to Omega certified copies
of the minutes of the meetings of the Board of Directors and shareholders of
Montour, approving this Agreement or the Merger Agreement and the transactions
contemplated by this Agreement and the Merger Agreement.
<PAGE> 128

7.5 On or before the Effective Date, there shall have been no material
adverse change in the business, consolidated earnings or consolidated net worth
of Montour. It is understood, however, that material adverse changes caused by
events or conditions affecting banks generally will not relieve Omega or its
subsidiaries of their obligations to close.

7.6 The Registration Statement shall have been declared effective by
the SEC; no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated, or to the knowledge of Omega or Montour, shall be contemplated
or threatened by the SEC.

7.7 On or before the Effective Date, Montour shall have delivered to
Omega all consents and authorizations of landlords or others necessary to permit
the Merger to be consummated without the violation of any lease or other
material agreement to which Montour is a party.

7.8 Each Affiliate (as the term is defined in SEC Rule 144) of Montour
shall have delivered to Omega a letter in form and substance satisfactory to
counsel for Omega, stating that he or she will not resell shares of Omega Common
Stock acquired pursuant to this Agreement and the Merger Agreement, except as
permitted by SEC Rule 145.

7.9 No action, suit, proceeding, or material claim shall be pending
which (A) seeks material damages against Montour or Omega whether or not in
connection with or by reason of this Agreement or the Merger Agreement or (B)
seeks to prevent consummation of the transactions contemplated by this Agreement
or the Merger Agreement; no governmental authority shall be claiming that the
transaction shall constitute a violation of law.

7.10 On or before the Effective Date, the shareholders of Montour
shall have duly approved the transactions contemplated by this Agreement and the
Merger Agreement insofar as they relate to Montour.

7.11 On or before the mailing of the proxy materials to the
shareholders of Montour contemplated by Section 5 hereof, Omega shall have been
furnished with an opinion of an independent investment banker selected by it,
dated the date of the mailing of Montour's proxy materials to its shareholders,
in form and substance satisfactory to Omega, to the effect that based upon the
review described therein, the terms and conditions of the Merger are fair to the
shareholders of Omega from a financial point of view, and such opinion shall not
have been revoked or withdrawn by said independent investment banker on or prior
to the Effective Date.
<PAGE> 129

7.12 No stock purchase warrants of Montour or other Rights with
respect to the stock of Montour shall be outstanding immediately prior to the
Effective Date.

7.13 The Employment Agreement between NEWCO and
M. Ralph Campbell in the form attached hereto shall have been
executed by M. Ralph Campbell.

8. CONDITIONS PRECEDENT TO MONTOUR'S OBLIGATIONS
---------------------------------------------

The obligations of Montour hereunder to close under this Agreement and
the Merger Agreement is subject to the following conditions precedent (all or
any of which may be waived by Montour in its sole discretion):

8.1 Each of the representations and warranties herein made by Omega
shall be true in all material respects on the Effective Date as if made on, as
of, and with respect to the Effective Date, and the agreements contained herein
and in the Merger Agreement required to be performed by Omega on or before the
Effective Date shall have been so performed in all material respects. On the
Effective Date, Omega shall furnish a certificate to Montour dated the Effective
Date, of its Chairman of the Board or President and its Secretary, to the effect
set forth in this Section 8.1.

8.2 On or before the Effective Date, Montour and Omega shall have
received all required permits, consents and approvals from all federal and state
governmental agencies and boards (including, without limitation, the Federal
Reserve Board, the FDIC, and the Pennsylvania Department of Banking) and any
applicable waiting periods shall have expired.

8.3 Montour shall have received an opinion of counsel for Omega in the
form attached hereto, which is in substance reasonably satisfactory to Montour.

8.4 On or before the Effective Date, Omega shall have taken all
necessary corporate action, and shall have delivered to Montour certified copies
of the minutes of the meetings of the Board of Directors of Omega approving this
Agreement and the Merger Agreement and the transactions contemplated by this
Agreement and the Merger Agreement.
<PAGE> 130

8.5 On or before the Effective Date, there shall be no material
adverse change in the business, consolidated earnings or consolidated net worth
of Omega and its subsidiaries. It is understood, however, that material adverse
changes caused by events or conditions affecting banks generally will not
relieve Montour of its obligation to close.

8.6 The Registration Statement shall have been declared effective by
the SEC; no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated or, to the knowledge of Omega or Montour, shall be contemplated
or threatened by the SEC.

8.7 Omega shall have sufficient authorized but unissued shares of
Omega Common Stock and cash to meet all of its obligations under this Agreement
and all of NEWCO's obligations under the Merger Agreement.

8.8 No action, proceeding or material claim shall be pending which (A)
seeks material damages against Omega or Montour whether or not in connection
with or by reason of this Agreement or the Merger Agreement or (B) seeks to
prevent consummation of the transactions contemplated by this Agreement or the
Merger Agreement; no governmental authority shall be claiming that the
transaction shall constitute a violation of law. Notwithstanding the foregoing,
if Omega provides full indemnification on terms, reasonably acceptable to
Montour, to Montour and its directors and officers with respect to an action,
proceeding or material claim brought by any party, such action, proceeding or
material claim shall not be deemed a condition precedent to Montour's obligation
to close.

8.9 On or before the Effective Date, the shareholders of Montour shall
have duly approved this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby insofar as they relate to Montour.

8.10 Counsel for Omega shall have furnished to Montour a legal opinion
to the effect that the reorganization contemplated by this Agreement and the
Merger Agreement is, as to the shareholders of Montour who exchange their shares
of Montour for shares of Omega, a tax-free reorganization within the meaning of
Section 368(a) of the Code, except with respect to cash payments or payments for
fractional shares.

8.11 On or before the mailing of the proxy materials to the
shareholders of Montour contemplated by Section 5 hereof, Montour shall have
been furnished with an opinion of an independent investment banker selected by
it, dated the date of the mailing of Montour's proxy materials to its
shareholders, in form and substance satisfactory to Montour, to the effect that
based upon the review described therein, the Exchange Ratios (as defined in
Section 2.2 of the Merger Agreement) to be paid to the shareholders of Montour
is fair to the shareholders of Montour from a financial point of view.
<PAGE> 131

8.12 Omega shall have delivered to Montour current and effective
certified resolutions of its Board of Directors implementing Section 9.3 of this
Agreement as of the Effective Date.

8.13 The Employment Agreement between NEWCO and M. Ralph Campbell in
the form attached hereto shall have been executed by NEWCO.

8.14 Omega shall have offered to purchase the Stock Purchase Warrants
expiring February 28, 1995 and expiring February 28, 1997 of Montour for a
purchase price of $2.00 for each share of Montour Common Stock covered by such
Warrants, such purchase to be effective only upon the Effective Date of the
Merger. Omega does hereby make such offer pursuant to the attached documents
entitled "Amendment No. 1 to Stock Purchase Warrants of Montour Bank Expiring
February 28, 1995" and "Amendment No. 1 to Stock Purchase Warrants of Montour
Bank Expiring February 28, 1997", respectively.

9. CLOSING AND POST-CLOSING
------------------------

9.1 Closing shall take place at the offices of Omega, 366 Walker
Drive, State College, Pennsylvania 16801, commencing at 10:00 A.M. on the tenth
business day immediately following the later of (i) the approval of the Merger
by Montour's shareholders, or (ii) approval of the Merger by all regulatory
authorities and the expiration of all applicable waiting periods, or such other
date as is mutually agreed to in writing by Omega and Montour provided that all
conditions precedent to the obligations of Montour and Omega to close have then
been met or waived (the "Closing").

9.2 At the close of business on the last business day preceding the
Closing, the stock transfer books of Montour shall be closed.

9.3 Upon the Effective Date, the Board of Directors of NEWCO as the
surviving corporation following the Merger shall consist of not more than 16
members, 4 of whom shall be appointed by Omega and not more than 12 of whom
shall be appointed by Montour.
<PAGE> 132

9.4 The indemnification rights of the directors and officers of
Montour shall survive the Merger and be enforceable thereafter against both
NEWCO and Omega; provided, however, that Omega shall not be required to
indemnify any director or officer of Montour if such person would not have been
indemnified as a director or officer of Omega for the same act or omission.

10. EXPENSES
--------

If the transactions contemplated by this Agreement and the Merger
Agreement are consummated, Omega and Montour, each, shall pay all expenses
incurred by each of them in connection with this Agreement or the Merger
Agreement and such consummation except that the cost of printing the
Registration Statement and related Prospectus heretofore referred to shall be
incurred equally by Omega and Montour. If the transactions contemplated by this
Agreement and the Merger Agreement are not consummated, for any reason
whatsoever, each party shall pay its own expenses, except that (a) the cost of
printing the Registration Statement and related Prospectus heretofore referred
to shall be incurred equally by Omega and Montour and (b) Montour shall
reimburse Omega for financial consulting advice provided at the request of
Montour at the rate of $30.00 per hour plus out-of-pocket expenses. In the event
that this Agreement is not consummated, nothing contained in this Section 10
shall be deemed to preclude either party from seeking to recover damages from
the other or to obtain other legal or equitable relief (including specific
performance) as provided in Section 12.2.

11. BROKERS AND FINDERS
-------------------

Except as set forth in Schedule 11, each party to this Agreement
represents and warrants that such party has not dealt with any broker, finder or
other person, firm or corporation performing brokerage, finder or similar
services, and does not know of any person, firm or corporation asserting a
brokerage, finder's or similar claim, in connection with the making or
negotiation of this Agreement and the Merger Agreement or the transactions
contemplated thereby. Schedule 11 sets forth the full terms and conditions of
any Agreement with any person referred to in the prior sentence.

12. TERMINATION
-----------

12.1 Notwithstanding any other provision of this Agreement or the
Merger Agreement and, notwithstanding the adoption or approval of this Agreement
or the Merger Agreement by the shareholders of Montour, this Agreement and the
Merger Agreement may be terminated and the Merger abandoned at any time before
the Effective Date:
<PAGE> 133

(a) By a vote of a majority of the Board of Directors of both
Omega and Montour;

(b) By a vote of a majority of the Board of Directors of
Montour, in the event of a material breach of this Agreement or the Merger
Agreement by Omega if such breach is not cured within ten business days after
notice by Montour of its intention to terminate;

(c) By a vote of a majority of the Board of Directors of
Montour or Omega in the event that, at any time after the date of this Agreement
and before the approval of Montour's shareholders at the meetings held pursuant
to Section 5.1 of this Agreement if either financial adviser retained for such
purpose is unable in view of developments occurring after the date of this
Agreement (other than developments resulting from the solicitation by Montour or
any of the directors, officers, employees or agents of Montour of a competing
acquisition offer from a third party) to furnish to Montour or Omega, as the
case may be, an opinion to the effect that the transactions contemplated by this
Agreement are fair from a financial point of view to such entities'
shareholders. It is understood that Omega may not retain a financial advisor;

(d) By a vote of a majority of the Board of Directors of Omega,
in the event of a material breach of this Agreement or the Merger Agreement by
Montour which is not cured within ten business days after notice by Omega of its
intent to terminate;

(e) By written notice to Montour or Omega, as the case may be,
from the other pursuant to Section 6.2 of the Agreement;

(f) By a vote of a majority of the Board of Directors of either
Omega or Montour, in the event that the terminating party is not in material
breach of this Agreement or the Merger Agreement and: (i) the Merger shall not
have been consummated on or before December 31, 1995; (ii) any approval of any
regulatory authority required as a condition to the consummation of this
Agreement or the Merger Agreement, and the transactions contemplated hereby or
thereby shall have been denied by final non-appealable action of such authority;
(iii) the shareholders of Montour shall have failed to approve this Agreement at
the shareholder meeting called for that purpose; or (iv) the party giving such
notice elects to terminate this Agreement and abandon the Merger, as of a stated
date, which shall not be less than ten business days after the date on which
such notice is given, because (x) the party receiving such notice will be
unable, by December 31, 1995, to meet or satisfy one or more specified
conditions precedent (as set forth in Sections 7 or 8 hereof, as the case may
be) to the obligation of the party sending such notice to close under this
Agreement and (y) the party sending such notice does not intend to waive the
satisfaction of such conditions precedent; or
<PAGE> 134

(g) As provided in Section 1 hereof.

12.2 In the event of termination of this Agreement by either Omega or
Montour as provided in Section 12.1(a), (c), (e), (f) (subsections (i), (ii) and
(iii)) or Section 12.1(g) above, this Agreement shall forthwith become void and
there shall be no liability on the part of either Omega or Montour or their
respective officers or directors, except as set forth in Section 6.1 and in
Section 10. In the event that this Agreement is terminated in accordance with
Section 12.1(b), (d) or (f) (subsection (iv)), the parties so terminating shall
be entitled to pursue whatever remedies may be available at law or in equity.

13. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------------------

The respective representations, warranties and covenants of the
parties in this Agreement shall not survive the Effective Date and shall
terminate on the Effective Date, except for the covenants contained in Sections
4.2 (last sentence only), 9.3, 9.4, and 16.3 hereof. However, such termination
shall not be deemed to deprive any of the parties hereto or their subsidiaries,
or any of their directors, officers or controlling persons, of any defense in
law or equity which otherwise would be available against the claims of any
person, including, but not limited to, any shareholder or former shareholder of
the parties hereto. Prior to the Effective Date, each party shall be deemed to
have relied upon each and every representation and warranty of the other party,
regardless of any investigation heretofore or hereafter made by or on behalf of
such party.

14. BENEFITS OF THIS AGREEMENT AND MERGER AGREEMENT
-----------------------------------------------

This Agreement and the Merger Agreement and the rights and obligations
of Omega and Montour hereunder shall not be assigned by any party to any third
party, except with the written consent of the other. This Agreement and the
Merger Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns. Nothing in this
Agreement or the Merger Agreement, expressed or implied, is intended to confer
upon any person, other than the parties thereto any rights or remedies under or
by reason of this Agreement and, except as aforesaid, there are no third party
beneficiaries of this Agreement or the Merger Agreement. After the Effective
Date, the provisions of Sections 4.2 (last sentence only), 9.3 and 9.4 shall be
enforceable by the intended beneficiaries thereof.
<PAGE> 135

15. NOTICES
-------

Any notice, request, instruction, legal process, or other instrument
to be given or served hereunder by any party to another shall be deemed given or
served if in writing and delivered personally (including, but not limited to,
recognized courier service) or sent by registered or certified mail, postage
prepaid, to the respective party or parties at the following addresses:

If to Omega:

366 Walker Drive
State College, PA 16801
Attn: David B. Lee, Chairman of the Board
and Chief Executive Officer

With a copy to:

Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attn: Frederick D. Lipman, Esquire

If to Montour:

1519 Bloom Road
Danville, PA 17821
Attn: M. Ralph Campbell
Chairman of the Board

With copies to:

Schnader, Harrison, Segal & Lewis
Suite 700, 30 North Third Street
Harrisburg, PA 17101-1713
Attn: John B. Lampi, Esquire

and to such other address or addresses as either party may designate to the
other by like notice as set forth above.
<PAGE> 136

16. MISCELLANEOUS
-------------

16.1 As used in this Agreement, the following terms have the following
meanings unless the context otherwise requires:

(i) "contracts and other agreements" means and includes all
contracts, agreements, indentures, leases, franchises, licenses, commitments or
legally binding arrangements, express or implied, written or oral;

(ii) "lien or other encumbrance" means and includes any lien,
pledge, mortgage, security interest, claim, lease, charge, option, right of
first refusal, easement or any other encumbrance whatsoever;

(iii) "person" means a natural person, corporation,
partnership, sole proprietorship, joint venture, limited liability company,
association, joint-stock company, trust, estate, unincorporated organization,
government (and any branch or subdivision thereof), government agency,
cooperative or other entity.

(iv) "subsidiaries" means when used with respect to a party to
this Agreement any corporation 50% or more of whose outstanding stock is either
directly or indirectly (through one or more other subsidiaries) owned by such
party.

(v) "Rights" means any warrants, options, rights, convertible
securities or other arrangements or commitments which obligates an entity (a) to
issue or dispose of its equity securities or (b) to acquire any of its equity
securities.

(vi) "business day" means a day on which regular trading of
securities occurs on the principal stock exchanges in the United States and
"NASDAQ".

(vii) the terms "to Montour's knowledge" or "known to Montour"
or similar terms mean to the knowledge of, or known to, Montour or any of the
directors, officers, employees or agents of Montour; the terms "to Omega's
knowledge" or "known to Omega" or similar terms mean to the knowledge of, or
known to, Omega or its subsidiaries, or any of the directors, officers,
employees or agents of Omega or its subsidiaries.
<PAGE> 137

16.2 Montour and Omega will each cause its respective subsidiaries, if
any, to abide by its respective obligations under this Agreement.

16.3 Subsequent to the Effective Date and subject to applicable law,
the Board of Directors of Omega shall reserve the right to withhold dividends on
its Common Stock or from any former shareholder of Montour who receives Omega
Common Stock in exchange for his Montour Common Stock and who fails to exchange
certificates representing the shares of Montour Common Stock for certificates
representing the shares of Omega Common Stock in accordance with the Merger
Agreement within a reasonable period of time after being advised by the Board of
Directors of Omega of its determination that the exchange is in the best
interests of Omega.

16.4 Omega and Montour shall consult with each other as to the form
and substance of any press release or other public disclosure of matters related
to this Agreement or any of the transactions contemplated hereby; provided,
however, that nothing in this Section shall be deemed to prohibit any party
hereto from making any disclosure which its counsel deems necessary or advisable
in order to fulfill such party's disclosure obligations imposed by law.

16.5 This Agreement and the Schedules hereto may be amended by the
parties hereto (including, without limitation; any extension of the date
referred to in Section 12.1(f), and including amendments to the Merger Agreement
with respect to the structure of the Merger), by action taken by or on behalf of
their respective Boards of Directors, at any time before or after approval of
this Agreement and the Merger Agreement by the shareholders of Omega and
Montour; provided, however, that after approval by a party's shareholders no
such amendment shall change the amount or form of the consideration to be
delivered to such party's shareholders as contemplated by the Merger Agreement
or result in an adverse tax or other effect to either Montour's or Omega's
shareholders. Neither this Agreement nor the Merger Agreement may be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.

16.6 Each party hereto, by written instrument executed in the same
manner (but not necessarily by the same person) as this Agreement, may extend
the time for the performance of any of the obligations or other acts of the
other party hereto and may waive, at any time before or after approval of this
Agreement and the Merger Agreement by the shareholders of Omega and Montour (a)
any inaccuracies of the other party in the representations or warranties
contained in this Agreement or in any document delivered pursuant hereto, (b)
compliance with any of the covenants or agreements of the other party contained
<PAGE> 138

in this Agreement, (c) the performance (including performance to the
satisfaction of a party or its counsel) by the other party of any of its
obligations set forth herein, and (d) the satisfaction of any condition to the
obligations of the waiving party pursuant hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall any waiver
constitute a continuing waiver unless otherwise expressly provided.

16.7 This Agreement and the Merger Agreement contain the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and thereby and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations, covenants
or other agreements between the parties in connection with the subject matter
hereof except as specifically set forth herein and therein.

16.8 This Agreement has been executed in the Commonwealth of
Pennsylvania and shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania, applicable to contracts made to be performed
solely in the Commonwealth of Pennsylvania. The legal principle that ambiguities
are construed against the drafter of a document shall not be applicable to this
document. This Agreement may be executed in any number of copies, each of which
shall be deemed an original, and all of which together, shall be deemed one and
the same instrument.

IN WITNESS WHEREOF, pursuant to authority duly given by the respective
Boards of Directors of Omega and Montour, this Agreement has been signed on
behalf of said corporation by their respective Chairman of the Boards, under
their respective corporate seals, and attested by their respective Secretaries,
all on the day, month and year first written above. The signature of a Secretary
of a corporate party is intended not only as an execution hereof, but also is a
certification that such corporation's board of directors has duly authorized
the execution and delivery of this Agreement.

OMEGA FINANCIAL CORPORATION

By: /s/ David B. Lee
----------------------------------
David B. Lee, Chairman
of the Board and Chief
Executive Officer

[CORPORATE SEAL] Attest: /s/ David N. Thiel
------------------------------
David N. Thiel, Secretary

MONTOUR BANK

By: /s/ M. Ralph Campbell
----------------------------------
M. Ralph Campbell, Chairman
of the Board

[CORPORATE SEAL] Attest: /s/ Charles I. Keiter
------------------------------
Charles I. Keiter,
Secretary

<PAGE> 139

APPENDIX B

<PAGE> 140
AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT made this 11th day of January, 1995 by and between MONTOUR
BANK ("Montour"), a bank incorporated under the Pennsylvania Banking Code of
1965, as amended, and Montour Interim Bank ("NEWCO"), a newly formed bank under
the Pennsylvania Banking Code of 1965, as amended, and a wholly owned subsidiary
of Omega Financial Corporation ("Omega"), a Pennsylvania business corporation
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended. Montour and NEWCO are sometimes collectively referred to as the
"Constituent Corporations".

BACKGROUND

Omega and Montour have entered into an Agreement and Plan of Reorganization
of even date herewith (the "Reorganization Agreement") which contemplates the
merger of Montour with and into NEWCO (the "Merger") in accordance with the
terms and conditions of the Reorganization Agreement and of this Agreement and
Plan of Merger (the "Merger Agreement").

NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and subject to the satisfaction of the terms and conditions set
forth herein and in the Reorganization Agreement, and intending to be legally
bound hereby, Montour and NEWCO do hereby agree as follows:

Section 1. General

1.1 Shareholder Approval. This Merger Agreement shall be promptly
submitted to the respective shareholders of the Constituent Corporations and, if
approved by the vote or consent of the shareholders of each of them required by
law, the Merger shall be made effective in the manner provided in Section 1.4
below.

1.2 The Merger. On the Effective Date, as hereinafter defined, Montour
shall be merged with and into NEWCO under the Pennsylvania Banking Code of 1965,
as amended, the separate existence of Montour shall cease, and NEWCO shall be
the surviving bank (the "Surviving Corporation"), in accordance with this Merger
Agreement.

1.3 Name. The name of the Surviving Corporation shall be changed to
Montour Bank on the Effective Date, as hereinafter defined, and the location of
its principal office shall be 1519 Bloom Road, Danville, Montour County,
Pennsylvania.

1.4 Effect of Merger. On the Effective Date, the Surviving Corporation
shall possess all the rights, privileges, powers, immunities, purposes and
franchises, both public and private, and all the property (real, personal and

<PAGE> 141

mixed) and franchises of each of the Constituent Corporations. All debts due on
whatever account to any of the Constituent Corporations, including subscriptions
to shares and other choices in action belonging to any of the Constituent
Corporations, shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed. The Surviving Corporation
shall thence forth be responsible for all the liabilities and obligations of
each of the Constituent Corporations, but the liabilities of the Constituent
Corporations, or of their shareholders, directors or officers, shall not be
affected; nor shall the rights of the creditors thereof or of any persons
dealing with the Constituent Corporations, or any liens upon the property of the
Constituent Corporations, be impaired by the Merger; and any claim existing or
action or proceeding pending by or against any of the Constituent Corporations
may be prosecuted to judgment as if the Merger had not taken place or the
Surviving Corporation may be proceeded against or substituted in its place. Any
taxes, penalties and public accounts of the Commonwealth of Pennsylvania claimed
against any of the Constituent Corporations but not settled, assessed or
determined prior to the Merger shall be settled, assessed or determined against
the Surviving Corporation and, together with interest thereon, shall be a lien
against the franchises and property, both real and personal, of the Surviving
Corporation.

1.5 Continuation in Business. The Surviving Corporation shall continue
in business with the assets and liabilities of the Constituent Corporations.

1.6 Articles of Incorporation. The Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") of the Surviving Corporation
shall be as set forth in Exhibit "A" attached hereto and made a part hereof.

1.7 By-Laws. The Amended and Restated By-Laws of the Surviving
Corporation shall be as set forth in Exhibit "B" attached hereto and made a part
hereof.

1.8 Directors. On the Effective Date, the then Board of Directors of
NEWCO, together with the four new directors appointed pursuant to Section 9.3 of
the Reorganization Agreement, shall continue to serve as the Board of Directors
of the Surviving Corporation until such time as their successors have been
elected and qualified.

1.9 Officers. On the Effective Date, all persons who are executive or
other officers of NEWCO, subject to the provisions of Section 9.3 of the
Reorganization Agreement, shall remain as officers of the Surviving Corporation

<PAGE> 142

until such time as the Board of Directors of the Surviving Corporation shall
otherwise determine.

1.10 Effective Date. Subject to the terms and upon satisfaction of all
requirements of law and the conditions specified in this Merger Agreement and
the Reorganization agreement including, among other conditions, receipt of the
approval of The Board of Governors of the Federal Reserve Board, the Federal
Deposit Insurance Corporation, and the Department of Banking of the Commonwealth
of Pennsylvania, the Merger shall become effective, and the effective date of
the Merger (the "Effective Date") shall occur, at the time of the filing of the
Articles of Merger of the Constituent Corporations with the Secretary of State
of the Commonwealth of Pennsylvania.

Section 2. Conversion and Exchange of Shares

2.1 Stock of NEWCO. On the Effective Date, each share of common stock,
par value $5.00 per share, of NEWCO issued or outstanding immediately prior to
the Effective Date (except for shares owned by shareholders of NEWCO who duly
assert dissenters' rights in accordance with this Merger Agreement and
applicable law) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be automatically converted into and become one share
of common stock, par value $5.00 per share, of the Surviving Corporation. From
and after the Effective Date, each certificate which, prior to the Effective
Date, represented shares of NEWCO shall evidence ownership of shares of the
Surviving Corporation on the basis hereinbefore set forth.

2.2 Stock of Montour. Except as hereafter provided, on the Effective
Date, each share of common stock, par value $5.00 per share, of Montour
("Montour Common Stock") issued and outstanding immediately prior to the
Effective Date (except for shares owned by shareholders of Montour who duly
assert dissenters' rights in accordance with this Merger Agreement and
applicable law) shall, based on the election described in Section 5.2 of the
Reorganization Agreement as to the type of consideration to be received by the
holder thereof in exchange for all of his shares of Montour Common Stock (except
as hereinafter provided), and by virtue of the Merger and without any action on
the part of the holder thereof, be automatically converted into and become
either (a) one-half share of the Common Stock of Omega, par value $5.00 per
share (the "Omega Common Stock"), (b) $12 cash, (c) a combination of Omega
common stock and cash under (a) and (b) above (collectively, the "Exchange
Ratios"). Not more than forty-nine percent (49%) nor less than forty percent
(40%) of the total number of outstanding shares of Montour Common Stock, as of
the date hereof and immediately prior to the Effective Date, shall be converted

<PAGE> 143

into cash. In the event that holders of more than forty nine percent (49%) of
the total number of outstanding shares of Montour Common Stock elect to receive
cash in exchange for Montour Common Stock, then that portion in excess of the
maximum forty-nine percent (49%) non-stock consideration shall be distributed
pro-rata in Omega Common Stock, at the rate of one-half share of Omega Common
Stock for each share of Montour Common Stock, to those Montour shareholders who
have elected to receive cash in exchange for their shares of Montour Common
Stock and the amount of cash to be received by such shareholders in exchange for
their shares of Montour Common Stock shall be appropriately reduced. In the
event that holders of less than forty percent (40%) of the total number of
outstanding shares of Montour Common Stock elect to receive cash in exchange for
Montour Common Stock, then that portion of the required forty percent (40%)
non-stock consideration that has not been selected shall be distributed, pro
rata in cash at the rate of $12 for each share of Montour Common Stock, to those
Montour shareholders who have elected to receive Omega Common Stock in exchange
for their shares of Montour Common Stock and the number of shares of Omega
Common Stock to be received by such shareholders in exchange for their shares of
Montour Common Stock shall be appropriately reduced. The operation of the
immediately preceding sentence is illustrated by the following example:

Pursuant to the terms of Section 2.2 of this Merger Agreement,
assuming that 418,080 shares of Montour Common Stock are outstanding,
as of the date hereof and also immediately prior to the Effective
Date. A minimum of 40 percent (or 167,232 shares) must be exchanged
for cash. Assuming that all shareholders of Montour make an election
and that holders of 90 percent of the outstanding shares of Montour
Common Stock (376,272 shares) elect to receive Omega Common Stock, and
the holders of 10 percent of the outstanding shares of Montour Common
Stock (41,808 shares) elect to receive cash, then the minimum number
of shares that must be exchanged for cash would not be satisfied by
the elections of Montour shareholders. As a result, pursuant to
Section 2.2 of this Merger Agreement, the difference between the
minimum number of shares that must be exchanged for cash and the
number of shares that actually elect to be so exchanged (125,424
shares in this example) would be exchanged for cash, on a pro rata
basis among those shareholders who elected to receive Omega Common
Stock, at the rate of $12 for each share of Montour Common Stock. The
number of shares of Montour Common Stock to be exchanged for cash by

<PAGE> 144

each such shareholder would be equal to the number of shares held by
him, multiplied by a fraction, the numerator of which is equal to the
difference between the minimum number of shares that must be exchanged
for cash and the number of shares that actually elect to be so
exchanged (125,424 shares in this example) and the denominator of
which is equal to the number of shares which elected to be exchanged
for Omega Common Stock (376,272 in this example). Thus, each of the
holders of the 376,272 shares of Montour Common Stock who elected to
receive Omega Common Stock in exchange for their shares would receive
cash, in lieu of Omega Common Stock, at the rate of $12 per share in
exchange for 125,424/376,272 of their shares.

Any Montour shareholder who shall fail timely to make the required election
shall be deemed to have elected to receive (i) Omega Common Stock, (ii) cash,
(iii) any combination as determined by the Board of Directors of Omega in its
sole discretion. The elections deemed made pursuant to the immediately preceding
sentence shall be used in making the computations of the type set forth in the
above example.

From and after the Effective Date, each certificate which, prior to the
Effective Date, represented shares of Montour Common Stock shall evidence
ownership of either: (i) the number of shares of Omega Common Stock into which
the shares of Montour Common Stock represented by such certificate shall have
been converted, together with the right to receive any cash to which a Montour
shareholder is entitled in lieu of the issuance of a fractional share, or (ii)
the right to receive cash.

Notwithstanding anything to the contrary contained herein, in the event
that the Average Price (as hereafter defined) of Omega Common Stock is more than
$30, the Exchange Ratio of Montour Common Stock for Omega Common Stock shall be
changed from one share of Montour Common Stock for one-half share of Omega
Common Stock to one share of Montour Common Stock for the fraction of a share of
Omega Common Stock obtained from the following formula: multiply .5 by a
fraction equal to 30 divided by the Average Price; the result shall be rounded
to two decimal points, with a third decimal point rounded upward if it equals
.005 or more and ignored if it equals less than .005. "Average Price" as used
herein shall refer to the mean average of the closing sale prices for Omega
Common Stock (as quoted in the NASDAQ National Market System as reported by The
Wall Street Journal) for the thirty business day period ending on the fifteenth
business day next preceding the Effective Date. This paragraph shall not apply
if, prior to the thirtieth business day ended on the fifteenth business day next

<PAGE> 145

preceding the Effective Date, Omega shall have made a public announcement of the
intention to sell control of Omega to another entity, whether such sale be in
the form of a merger, consolidation or sale of substantially all of the assets
of Omega and its subsidiaries.

For purposes of computing the limitations on the number of outstanding
shares of Montour Common Stock which elect cash pursuant to this Section 2.2,
the amount of cash paid in lieu of fractional shares pursuant to Section 2.3
hereof and shares which exercise dissenters' rights pursuant to this Section
2.8, shall be included.

2.3 Fractional Share Adjustments. No fractional shares of Omega Common
Stock shall be issued as a result of the Merger. In lieu of the issuance of
fractional shares, cash adjustments will be paid to the shareholders of Montour
in respect of any fraction of a share of Omega Common Stock which would
otherwise be issuable under this Merger Agreement. Such cash adjustment shall be
equal to an amount determined by multiplying such fraction by the Average Price.

2.4 Certain Adjustments. In the event that Omega changes the number of
shares of its common stock issued and outstanding prior to the Effective Date as
a result of a stock split, stock dividend or similar recapitalization and the
record date therefor shall be after the date hereof and prior to the Effective
Date, the ratio under which Montour Common Stock may be converted into and
exchanged for shares of Omega Common stock pursuant to Section 2.2 of this
Merger Agreement shall be appropriately adjusted.

2.5 Treasury Stock. Each share of Montour Common stock held as a
treasury share immediately prior to the Effective Date, if any, shall thereupon
and without notice be canceled.

2.6 Exchange Agent. At or prior to the Effective Date, Omega shall
designate the Peoples National Bank of Central Pennsylvania in State College,
Pennsylvania, to act as Exchange Agent to receive from the holders thereof
certificates which immediately prior to the Effective Date represented Montour
Common Stock and to exchange such certificates for certificates of Omega Common
Stock and cash as herein provided.

2.7 Exchange Procedure. Promptly after the Effective Date, the
Exchange Agent shall mail to each record holder, as of the Effective Date, of an
outstanding certificate or certificates, which prior to the Effective Date
represented shares of Montour Common Stock, a letter of transmittal (which shall
specify how delivery shall be effected, and that risk of loss and title to such
certificate or certificates shall pass only upon proper delivery of such

<PAGE> 146

certificates or certificates, together with a properly executed letter of
transmittal, to the Exchange Agent at its address stated therein) and
instructions for use in effecting the surrender of such certificate or
certificates for exchange therefor. Upon surrender to the Exchange Agent of such
certificate or certificates, together with such letter of transmittal, properly
executed, the Exchange Agent shall, based on such record holder's election, as
described in Section 5.2 of the Reorganization Agreement and in Section 2.2 of
this Merger Agreement, exchange such certificate or certificates for: (a) shares
of Omega Common Stock; (b) cash, or (c) a combination of Omega Common Stock and
cash; and pay to any record holder receiving Omega Common Stock any payment due
for a fractional share of Omega Common Stock. Until so surrendered, each
outstanding certificate or certificates, which prior to the Effective Date
represented shares of Montour Common Stock and which are thereupon exchanged for
Omega Common Stock, shall be deemed for all purposes to evidence ownership of
the number of shares of Omega Common Stock and the right to receive payment for
any fractional share of Omega Common Stock into which the shares represented by
such certificate or certificates have been changed or converted as aforesaid.
Until so surrendered, each certificate or certificates outstanding, which prior
to the Effective Date represented shares of Montour Common Stock, and which are
thereupon exchanged for cash or any combination of cash and Omega Common Stock,
shall evidence the right to receive cash and/or ownership of Omega Common Stock
in which the shares represented by such certificate or certificates have been
changed or converted as aforesaid; provided however, that no payment of cash
shall be payable upon or in respect of any such certificate until it has been
surrendered and exchanged as aforesaid.

2.8 Dissenters' Rights. Shareholders of Montour shall be entitled to
exercise the rights of dissenting shareholders, with respect to this Merger
Agreement, as provided in Sections 1222 and 1607 of the Pennsylvania Banking
Code of 1965, as amended.

2.9 Ownership of Stock of Surviving Corporation. It is the intention
of the Constituent Corporations that, immediately after the Effective Date, all
of the outstanding capital stock of the Surviving Corporation shall be owned by
Omega.

Section 3. Additional Terms

3.1 Conditions. The obligations of the parties hereto to effect the
Merger shall be subject to all of the terms and conditions contained in the
Reorganization Agreement.

<PAGE> 147

3.2 Termination. This Merger Agreement may be terminated and the
Merger abandoned by the mutual written consent of the Boards of Directors of the
parties hereto prior to or after the approval of the shareholders of the
parties. If the Reorganization Agreement is terminated pursuant to the terms
thereof, then this Merger Agreement shall terminate simultaneously and the
Merger shall be abandoned without further action by the parties hereto.

3.3 Amendment, Supplement or Waiver. Any party to this Merger
Agreement may, at any time prior to the Effective Date, by action taken by its
Board of Directors or officers thereunto duly authorized, waive any of the terms
or conditions of this Merger Agreement or agree to an amendment or supplement to
this Merger Agreement by an agreement in writing executed in the same manner
(but not necessarily by the same persons) as this Merger Agreement. No
amendment, supplement or waiver of this Merger Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Merger Agreement shall be deemed or shall constitute a waiver
of any other provisions hereof (whether or not similar), nor shall any waiver
constitute a continuing waiver unless otherwise expressly provided. Furthermore,
and not in limitation of the foregoing, each party's Board of Directors may
authorize the amendment or supplementation of this Merger Agreement or waiver of
any provision hereof, either before or after the approval by Montour's
shareholders provided in section 5 of the Reorganization Agreement (and without
seeking further shareholder approval), so long as such amendment, supplement or
waiver does not result in a material change in the amount or form of
consideration provided for herein.

3.4 No Beneficiaries. Nothing expressed or implied in this Merger
Agreement is intended or shall be construed to confer upon or give any person,
firm or corporation other than the parties hereto, any rights or remedies under
or by reason of this Merger Agreement, except as otherwise provided in Section
3.1 hereof, and, except as aforesaid, there are no third party beneficiaries of
this Merger Agreement.

3.5 Assignment; Parties Bound. No party hereto shall assign this
Merger Agreement or any part hereof without the prior written consent of the
other parties. Except as otherwise provided herein, this Merger Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.

3.6 Entire Agreement. This Merger Agreement and the Reorganization
Agreement constitute the entire agreement between the parties pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements,

<PAGE> 148

understandings, negotiations and discussion, whether oral or written, of the
parties, and there are no warranties, representations, covenants or other
agreements between the parties in connection with the subject matter hereof
except as specifically set forth herein or therein.

3.7 Counterparts. This Merger Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

3.8 Governing Law. This Merger Agreement shall be governed by the laws
of the Commonwealth of Pennsylvania applicable to contracts executed in and to
be performed exclusively within the Commonwealth of Pennsylvania. The legal
principle that ambiguities are construed against the drafter of a document shall
not be applicable to this document.

WITNESS the signatures and seals of the Constituent Corporations on the day
and year first above written, each hereunto set by its duly authorized officers
and attested by its Secretary or Assistant Secretary pursuant to a resolution of
the of the Board of Directors.

MONTOUR BANK

By:/s/ M. Ralph Campbell
---------------------
(CORPORATE SEAL) M. Ralph Campbell,
Chairman of the Board

Attest:/s/ Charles I. Keiter
---------------------
Charles I. Keiter,
Secretary

MONTOUR INTERIM BANK

(CORPORATE SEAL) By:/s/ David B. Lee
----------------
Attest:/s/ David N. Thiel
------------------

<PAGE> 149

APPENDIX C

<PAGE> 150

DANIELSON ASSOCIATES, INC.
6110 Executive Boulevard
Suite 304
Rockville, Maryland 20852-3903
Tel: (301) 468-4884
Fax: (301) 466-0013

May 3, 1995

Board of Directors
Montour Bank
1519 Bloom Road
Danville, Pennsylvania 17821

Dear Board Member:

This is an updated Danielson Associates Inc.'s ("Danielson Associates")
opinion as to the "fairness" of the offer made by Omega Financial Corporation
("Omega") to buy all of the outstanding common stock and warrants of Montour
Bank ("Montour" or the "Bank") of Danville, Pennsylvania. The "fair" sale value
is defined as the price at which all of Montour's common stock would change
hands between a willing seller and a willing buyer, each having reasonable
knowledge of the relevant facts. In opining to the "fairness" of the offer, it
must also be determined that Omega's common stock is properly valued.

In the course of preparing the opinion, the Bank's market has been
analyzed; its business and prospects have been discussed with management; its
financial performance has been compared with banks in the region and other new
banks; and any unique characteristics have been considered. Montour also has
been compared to new banks that have been acquired in 1993 and 1994.

In addition, the financial and stock performance of Omega has been analyzed
and compared to comparable banks whose common stock is actively traded; the
movement of its common stock and dividend payments have been examined; the
dilutive effect on it stock of this merger has been analyzed; and any unique
characteristics have been considered. Omega's financial performance also has
been related to its stock value.

<PAGE> 151

This opinion is based on data supplied by Montour, and it relies on some
public information, all of which is believed to be reliable, but the
completeness or accuracy of such information cannot be guaranteed. In
particular, the opinion assumes, based on management's representation, that
there are no significant loan problems beyond what are stated in the recent
reports to regulatory agencies and in the monthly report to the directors.

In determining the "fair" sale value of Montour, primary emphasis has been
given to prices paid for commercial banks with similar financial, market and
structural characteristics, and specifically new banks. These prices were then
related to earnings and equity capital, also referred to as "book."

In determining the "fair" market value of Omega's common stock, primary
emphasis has been given to market value of comparable banks. The analysis has
shown its stock to be "fairly" valued.

Based on these comparisons, an analysis of Montour's performance and
potential and any unique characteristics, it has been determined that the Omega
offer to Montour, of which as much 60% will be in Omega stock, which is "fairly"
valued, represented a "fair" offer from a financial point of view to Montour and
its shareholders. There has been no significant change since then, and in our
opinion it is still a "fair offer."

Respectfully submitted,

/s/ Arnold G. Danielson
-----------------------
Arnold G. Danielson
President
Danielson Associates Inc.

<PAGE> 152

APPENDIX D

<PAGE> 153
Subchapter D of Chapter 15 of the
Pennsylvania Business Corporation Law of 1988
(15Pa.C.S. 1571-1580) as amended, relating to Dissenters' Rights

Subchapter D -- Dissenters Rights

Section 1571. Application and effect of subchapter.

(a) General rule -- Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:

Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenter rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions).
Section 7104(b)(3) (relating to procedure).

(b) Exceptions

(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting at
which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to
be voted on, are either:

(i) listed on a natural securities exchange; or

(ii) held to record by more than 2,000 shareholders; shall not
have the right to obtain payment of the fair value of any such shares
under the subchapter.

(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:

(i) Shares converted by a plan if the shares are not converted
solely into shares of the acquiring, surviving, new or other corporation or
solely into such shares and money in lieu of fractional shares.

(ii) Shares of any preferred or special class unless the
articles, the plan or the terms of the transaction entitle all shareholders
of the class to vote thereon and require for the adoption of the plan or

<PAGE> 154

the effectuation of the transaction the affirmative vote of a majority of
the votes cast by all shareholders of the class.

(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).

(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the liabilities
of the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.

(c) Grant of optional dissenters rights. -- The bylaws or a resolution of
the board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.

(d) Notice of dissenters rights. -- Unless otherwise provided by statute,
if a proposed corporate action that would give rise to dissenters rights under
this subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:

(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with terms of this subchapter; and

(2) a copy of this subchapter.

(e) Other statutes. -- The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.

(f) Certain provisions of articles ineffective. -- This subchapter may not
be relaxed by any provision of the articles.

(g) Cross references. -- See section 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).

Section 1572 Definitions.

The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:

"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of

<PAGE> 155

this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.

"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.

"Fair value." The fair value of shares immediately before the effectuation
of the corporation action to which the dissenter objects, taking into account
all relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.

"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including average rate
currently paid by the corporation on its principal bank loans.

Section 1573. Record and beneficial holders and owners.

(a) Record holders of shares. -- A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.

(b) Beneficial owners of shares. -- A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.

Section 1574. Notice of intention to dissent.

If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.

Section 1575. Notice to demand payment.

(a) General Rule. -- If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:

<PAGE> 156

(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.

(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted form the time that demand for payment is
received.

(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.

(4) Be accompanied by a copy of this subchapter.

(b) Time for receipt of demand for payment. -- The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.

Section 1576. Failure to comply with notice to demand payment, etc.

(a) Effect of failure of shareholder to act. -- A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.

(b) Restriction on uncertificated shares. -- If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).

(c) Rights retained by shareholder. -- The dissenter shall retain all other
rights of shareholder until those rights are modified by effectuation of
proposed corporate action.

Section 1577. Release of restriction or payment for shares.

(a) Failure of effectuate corporate action. -- Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.

(b) Renewal of notice to demand payment. -- When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.

(c) Payment of fair value of shares. -- Promptly after effectuation of the
proposed corporation action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:

<PAGE> 157

(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending no more
than 16 months before the date of remittance or notice together with latest
available interim financial statements.

(2) A statement of the corporation's estimate of the fair value of
the shares.

(3) A notice if the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.

(d) Failure to make payment. -- If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by subsection
(c), it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefore or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.

Section 1578. Estimate by dissenter of fair value of shares.

(a) General rule. -- If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believe that the amount stated or remitted is less that the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.

(b) Effect of failure to file estimate. -- Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing by
the corporation of its remittance or notice, the dissenter shall be entitled to
no more than the amount stated in the notice or remitted to him by the
corporation.

Section 1579. Valuation proceedings generally.

(a) General rule. -- Within 60 days after the latest of:

(1) effectuation of the proposed corporate action;

(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or

(3) timely receipt of any estimate pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);

if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.

(b) Mandatory joinder of dissenters. -- All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on

<PAGE> 158

each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).

(c) Jurisdiction of the court. -- The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.

(d) Measure of recovery. -- Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.

(e) Effect of corporation's failure to file application. -- If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time with 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.

Section 1580. Costs and expenses of valuation proceedings.

(a) General rule. -- The costs and expense of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expense of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.

(b) Assessment of counsel fees and expert fees where lack of good faith
appears. -- Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in
respect to the rights provided by this subchapter.

(c) Award fees for benefits to other dissenters. -- If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenter similarly situated and should not be assessed against the corporation,
it may award to those counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited.

<PAGE> 159

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

Article V of Omega's Amended and Restated By-laws provides for
indemnification to the fullest extent permitted by applicable law. Reference is
made to the By-laws of Omega filed as Exhibit 3.3 hereto.

Directors and officers are also insured against certain liabilities for
their actions, as such, by an insurance policy obtained by the registrant.

Item 21. Exhibits and Financial Statement Schedules

(a) Exhibits.

Number Title
------ -----
2.1 Agreement and Plan of Reorganization/1/. The schedules to
this Agreement are not filed as an exhibit hereto pursuant to
Regulation S-K, Item 601(b)(2); however, Omega will furnish
copies of these schedules to the Commission upon its request.

2.2 Agreement and Plan of Merger/2/.

(1) 3.1 Amended and Restated Articles of Incorporation of Omega.

(6) 3.2 Certificate of Amendment to the Amended and Restated
Articles of Incorporation.

(12) 3.3 Articles of Amendment to the Amended and Restated Articles
of Incorporation

(8) 3.4 Amended and Restated By-laws of Omega, as amended.

*5.1 Opinion of Blank, Rome, Comisky & McCauley.

10.1 Intentionally Omitted

- ----------
/1/ Attached to the Proxy Statement-Prospectus as Appendix "A".
/2/ Attached to the Proxy Statement-Prospectus as Appendix "B".
*Previously filed.

<PAGE> 160

10.2 Intentionally Omitted

(7) 10.3 Severance Agreement by and among David B. Lee, the
Registrant, and Peoples Bank dated March 15, 1990.

(7) 10.4 Severance Agreement by and among Daniel L. Warfel and the
Registrant dated December 18, 1990.

(2) 10.5 Peoples (now Omega) Employe Stock Purchase Plan.

(2) 10.6 Peoples (now Omega) Stock Option Plan (1986).

(7) 10.7 Amendment No. 1 to Stock Option Plan (1986).

(7) 10.8 Omega Amended and Restated Employee Stock Ownership Plan.

(7) 10.8.1 ESOP Trust Agreement

(4) 10.9 Peoples (now Omega) Employee Retirement Plan.

(4) 10.10 Second Amendment to Peoples (now Omega) Employee Retirement
Plan.

(7) 10.11 TRA '86 Amendments to Peoples (now Omega) Employee
Retirement Plan.

(5) 10.12 Form of Peoples Bank Executive Supplemental Income Agreement.

(1) 10.13 Form of Russell Bank Deferred Compensation Agreement for
Directors.

(1) 10.14 Credit Agreement, dated December 6, 1985, between the
Company and Pittsburgh National Bank.

(3) 10.15 Salary Continuation Agreement, dated January 15, 1985,
between the Company and Charles H. Zendt, Jr.

10.16 Intentionally Omitted

(4) 10.17 Omega Executive Incentive Compensation Plan.

(8) 10.18 Omega Amended and Restated 401(k) Profit Sharing Plan.

(7) 10.19 First Amendment to Amended and Restated 401(k) Profit
Sharing Plan.

(7) 10.20 Purchase Agreement (with Exhibits) between Omega and
Mid-State Bank & Trust Company ("Mid-State")

<PAGE> 161

(7) 10.21 Assignment of Promissory Note from Omega to Mid-State
together with $5,000,000 Secured Promissory Note of Omega
Financial Corporation Employee Stock Ownership Plan Trust
("ESOP Trust").

(7) 10.22 Pledge and Security Agreement between Omega and the ESOP
Trust.

(7) 10.23 Mortgage from Omega to Mid-State.

(10) 10.24 Severance Agreement, as amended, with D. Stephen Martz.

(10) 10.25 Severance Agreement, as amended, with Robert T. Gentry.

(11) 10.26 1994 Stock Option Plan for Non-Employee Directors.

(12) 10.27 Hollidaysburg Trust Company Profit Sharing Plan.

(12) 10.28 Directors Deferred Compensation Agreements for Peoples
National Bank and Omega Financial Corporation.

13.1 The Registrant's Annual Report to Shareholders for the year
ended December 31, 1994. (Such Report, except for those
portions expressly incorporated by reference in the filing,
is furnished for the information of the Commission and is not
to be deemed "filed" as part of this Registration.

The portions of such Report which are incorporated by reference into the
filing are being filed in electronic format).

*23.1 Consent of Arthur Andersen, LLP.

*23.2 Consent of J.H. Williams & Co.

*23.3 Consent of Blank, Rome, Comisky & McCauley (Included in
Opinion filed as Exhibit 5.1).

23.4 Consent of Danielson Associates, Inc.

*23.5 Consent of Schnader, Harrison, Segal & Lewis.

*24.1 Powers of Attorney of certain signatories (Included on
signature page).

99.1 Opinion of Danielson Associates, Inc.

*99.2 Form of Proxy for the Annual Meeting of Shareholders of
Montour Bank.

- ------------------------------

* Previously filed

<PAGE> 162

(1) Incorporated by reference from Omega's (formerly People's) Annual
Report on Form 10-K for the year ended December 31, 1986.

(2) Incorporated by reference from Omega's (formerly People's)
Registration Statement on Form S-4 (File No. 33-9045).

(3) Incorporated by reference from Omega's Annual Report on Form 10-K
for the year ended December 31, 1987.

(4) Incorporated by reference from Omega's Annual Report on Form 10-K
for the year ended December 31, 1988.

(5) Incorporated by reference from Omega's Annual Report on Form 10-K
for the year ended December 31, 1989.

(6) Incorporated by reference from Omega's Quarterly Report on Form
10-Q for the period ended June 30, 1990.

(7) Incorporated by reference from Omega's Annual Report on Form 10-K
for the year ended December 31, 1990.

(8) Incorporated by reference from Omega's Annual Report on Form 10-K
for the year ended December 31, 1992.

(9) Incorporated by reference from Omega's Registration Statement on
Form S-4 (File No. 33-71070).

(10) Incorporated by reference from Omega's Annual Report on Form 10-K
for the year ended December 31, 1993.

(11) Incorporated by reference from Omega's Registration Statement on
Form S-8 (Registration No. 33-82214).

(12) Incorporated by reference from Omega's Annual Report on Form 10-K
for the year ended December 31, 1994.

(b) Financial Statement Schedules

(1) Included in the Prospectus:

None.

(2) Included in the Registration Statement but not in the
Prospectus.

None.

<PAGE> 163

Item 22. Undertakings

(a) 1. The undersigned Registrant hereby undertakes:

(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by section 10(a)(3) of the Securities Act of
1933, as amended (the "Act"); (ii) to reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; (iii) to include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.

(b) That, for the purpose of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

2. The undersigned Registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.

3. The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this Registration Statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), such reoffering prospectus will contain the information called for by
the applicable registration form with respect to reoffering by persons who may
be deemed underwriters, in addition to the information called for by the other
items of the applicable form.

4. The Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (3) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

<PAGE> 164

5. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.

(b). The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.

(c). The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

<PAGE> 165

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in State College,
Pennsylvania on this 8th day of May, 1995.

OMEGA FINANCIAL CORPORATION

By: /s/ David B. Lee
------------------
David B. Lee
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in the
capacities indicated, on May 8, 1995.

SIGNATURES CAPACITY
- ---------- --------

/s/ David B. Lee Chairman of the Board,
- ------------------------- Chief Executive Officer and Director
David B. Lee (Principal Executive Officer)

* President and Chief Operating
- ------------------------- Officer and Director
D. Stephen Martz

Executive Vice President, -- Credit
- ------------------------- and Director
Robert T. Gentry

/s/ Daniel L. Warfel Executive Vice President and Chief
- ------------------------- Financial Officer (Principal
Daniel L. Warfel Financial Officer)

* Senior Vice President and
- ------------------------- Controller (Principal
JoAnn N. McMinn Accounting Officer)

* Director
- -------------------------
Raymond F. Agostinelli

<PAGE> 166

SIGNATURES CAPACITY
- ---------- --------
* Director
- -------------------------
Merle K. Evey

Director
- -------------------------
Philip E. Gingerich

Director

- -------------------------
David K. Goodman, Sr.

Director
- -------------------------
William E. Henry

* Director
- -------------------------
George R. Lovette

Director
- -------------------------
Albert N. Massod

* Director
- -------------------------
Don C. Meyer

Director
- -------------------------
Robert N. Oliver

* Director
- -------------------------
James W. Powers, Sr.

* Director
- -------------------------
Stanton R. Sheetz

* Director
- -------------------------
Robert A. Szeyller

Director

- -------------------------
Samuel D. Zeiders, Jr.

*By: /s/ Daniel L. Warfel
-------------------------
Daniel L. Warfel, Attorney-in-Fact

<PAGE> 167

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

---------

EXHIBITS

AMENDMENT NO. 1

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT 0F 1933

----------

OMEGA FINANCIAL CORPORATION
(Exact name of Registrant as Specified in its Charter)

<PAGE> 168

EXHIBIT INDEX

2.1 Agreement and Plan of Reorganization/3/. The schedules to
this Agreement are not filed as an exhibit hereto pursuant to
Regulation S-K, Item 601(b)(2); however, Omega will furnish
copies of these schedules to the Commission upon its request.

2.2 Agreement and Plan of Merger/4/.

(1) 3.1 Amended and Restated Articles of Incorporation of Omega.

(6) 3.2 Certificate of Amendment to the Amended and Restated Articles
of Incorporation.

(12) 3.3 Articles of Amendment to the Amended and Restated Articles of
Incorporation

(8) 3.4 Amended and Restated By-laws of Omega, as amended.

*5.1 Opinion of Blank, Rome, Comisky & McCauley.

10.1 Intentionally Omitted

10.2 Intentionally Omitted

(7) 10.3 Severance Agreement by and among David B. Lee, the
Registrant, and Peoples Bank dated March 15, 1990.

(7) 10.4 Severance Agreement by and among Daniel L. Warfel and the
Registrant dated December 18, 1990.

(2) 10.5 Peoples (now Omega) Employe Stock Purchase Plan.

(2) 10.6 Peoples (now Omega) Stock Option Plan (1986).

(7) 10.7 Amendment No. 1 to Stock Option Plan (1986).

(7) 10.8 Omega Amended and Restated Employee Stock Ownership Plan.

(7) 10.8.1 ESOP Trust Agreement

(4) 10.9 Peoples (now Omega) Employee Retirement Plan.

(4) 10.10 Second Amendment to Peoples (now Omega)
Employee Retirement Plan.
- ------
/3/ Attached to the Proxy Statement-Prospectus as Appendix "A".
/4/ Attached to the Proxy Statement-Prospectus as Appendix "B".
*Previously filed.

<PAGE> 169

(7) 10.11 TRA '86 Amendments to Peoples (now Omega) Employee Retirement
Plan.

(5) 10.12 Form of Peoples Bank Executive Supplemental Income Agreement.

(1) 10.13 Form of Russell Bank Deferred Compensation Agreement for
Directors.

(1) 10.14 Credit Agreement, dated December 6, 1985, between the Company
and Pittsburgh National Bank.

(3) 10.15 Salary Continuation Agreement, dated January 15, 1985,
between the Company and Charles H. Zendt, Jr.

10.16 Intentionally Omitted

(4) 10.17 Omega Executive Incentive Compensation Plan.

(8) 10.18 Omega Amended and Restated 401(k) Profit Sharing Plan.

(7) 10.19 First Amendment to Amended and Restated 401(k) Profit Sharing
Plan.

(7) 10.20 Purchase Agreement (with Exhibits) between Omega and
Mid-State Bank & Trust Company ("Mid-State")

(7) 10.21 Assignment of Promissory Note from Omega to Mid-State
together with $5,000,000 Secured Promissory Note of Omega
Financial Corporation Employee Stock Ownership Plan Trust
("ESOP Trust").

(7) 10.22 Pledge and Security Agreement between Omega and the ESOP
Trust.

(7) 10.23 Mortgage from Omega to Mid-State.

(10) 10.24 Severance Agreement, as amended, with D. Stephen Martz.

(10) 10.25 Severance Agreement, as amended, with Robert T. Gentry.

(11) 10.26 1994 Stock Option Plan for Non-Employee Directors.

(12) 10.27 Hollidaysburg Trust Company Profit Sharing Plan.

(12) 10.28 Directors Deferred Compensation Agreements for Peoples
National Bank and Omega Financial Corporation.

<PAGE> 170

*23.1 Consent of Arthur Andersen, LLP.

*23.2 Consent of J.H. Williams & Co.

*23.3 Consent of Blank, Rome, Comisky & McCauley (Included in
Opinion filed as Exhibit 5.1).
23.4 Consent of Danielson Associates, Inc.