SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-13599
Omega Financial Corporation
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(Exact name of registrant as
specified in its charter)
Pennsylvania 25-1420888
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(State or other jurisdiction (IRS Employer Identification
or Number)
incorporation of
organization)
366 Walker Drive
State College, Pennsylvania 16801
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number,
Including
Area Code: (814) 231-7680
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that the
registrant was requested to file such reports), and (2) has
been subject to such filing requirements for the past ninety
days. Yes X No
-- -- ----
The number of shares outstanding of each of the Registrant's classes
of common stock as of October 30, 1995:
Common Stock, $5.00 par value - 6,037,753 shares
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PART I.Financial Information
Item 1. Financial Statements
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
SEPTEMBER 30, DECEMBER 31,
ASSETS 1995 1994
Cash and due from banks $35,836 $42,151
Interest bearing deposits with other 853 4,182
financial institutions
Federal funds sold 10,745 350
Investment securities held to maturity
(market value-$186,047 and $195,107, 187,363 202,212
respectively)
Investment securities available for sale 27,641 25,610
Total loans 709,764 648,711
Less: Unearned discount (4,169) (778)
Allowance for loan losses (11,594) (11,057)
Net loans 694,001 636,876
Premises and equipment, net 17,355 16,520
Other assets 15,823 12,052
TOTAL ASSETS $989,617 $939,953
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $115,627 $118,439
Interest bearing 730,502 683,297
Total deposits 846,129 801,736
Short-term borrowings 2,519 11,868
Other liabilities 8,522 7,204
ESOP debt 4,410 4,518
Long-term debt 5,700 1,050
Other interest bearing liabilities 482 468
TOTAL LIABILITIES 867,762 826,844
Preferred stock, par value $5.00 per share:
Authorized - 5,000,000 shares;
Issued and outstanding -
219,781 shares Series A Convertible 5,000 5,000
Unearned compensation related to ESOP debt (4,410) (4,518)
Common stock, par value $5.00 per share:
Authorized - 25,000,000 shares;
Issued and outstanding -
6,036,898 shares at September 30, 1995;
5,985,735 shares at December 31, 1994 30,185 29,929
Capital surplus 5,042 4,211
Retained earnings 84,329 77,263
Net unrealized gain on securities available 1,709 1,224
for sale
TOTAL SHAREHOLDERS' EQUITY 121,855 113,109
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $989,617 $939,953
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
INTEREST INCOME:
Interest and fees on loans $15,853 $13,252 $44,684 $38,976
Interest and dividends on investment 2,991 2,965 8,619 8,881
securities
Other interest income 156 283 499 567
TOTAL INTEREST INCOME. 19,000 16,500 53,802 48,424
INTEREST EXPENSE:
Interest on deposits 7,502 5,888 20,917 17,392
Interest on short-term borrowings 71 22 217 79
Interest on long-term debt and
other interest bearing liabilities 47 16 72 46
TOTAL INTEREST EXPENSE 7,620 5,926 21,206 17,517
NET INTEREST INCOME 11,380 10,574 32,596 30,907
Provision for loan losses 109 75 457 474
INCOME FROM CREDIT ACTIVITIES 11,271 10,499 32,139 30,433
OTHER INCOME:
Service fees 1,300 1,238 3,750 3,711
Trust fees 586 529 1,768 1,526
Gain on sale of loans 19 14 28 28
Investment securities gains and losses,
net:
Investment securities held to maturity 3 3 4 3
Investment securities available for 33 198 442 727
sale
TOTAL OTHER INCOME 1,941 1,982 5,992 5,995
OTHER EXPENSE:
Salaries and employee benefits 4,042 3,944 12,026 11,754
Net occupancy expense 757 502 1,847 1,577
Equipment expense 465 467 1,330 1,471
Data processing service 368 374 1,092 1,210
FDIC insurance premiums (52) 457 852 1,393
Other 2,340 1,807 6,238 5,655
TOTAL OTHER EXPENSE 7,920 7,551 23,385 23,060
Income before taxes 5,292 4,930 14,746 13,368
Income tax expense 1,532 1,336 4,317 3,574
NET INCOME $3,760 $3,594 $10,429 $9,794
NET INCOME PER COMMON SHARE:
Primary $0.61 $0.58 $1.69 $1.59
Fully diluted $0.59 $0.57 $1.64 $1.55
WEIGHTED AVERAGE SHARES AND EQUIVALENTS:
Primary 6,057 6,018 6,033 6,010
Fully diluted 6,291 6,249 6,274 6,241
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
Cash flows from operating activities:
Net income $10,429 $9,794
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,362 1,539
Provision for loan losses 457 475
Gain on sale of investment securities (446) (730)
Gain on sale of fixed assets and other property owned (7) (173)
Gain on sale of loans (28) (28)
Increase in tax asset (91) (345)
Decrease in interest receivable and other assets 1,684 37
Increase (decrease) in interest payable 294 (1,584)
Increase (decrease) in taxes payable 123 (21)
Amortization of deferred net loan fees (301) (342)
Deferral of net loan fees 819 106
Decrease in accounts payable and accrued expenses - (270)
Total adjustments 4,866 (1,336)
Net cash provided by operating activities 15,295 8,458
Cash flows from investing activities:
Proceeds from the sale or maturity of:
Interest bearing deposits with other financial 5,448 675
institutions
Investment securities available for sale - sales and 10,916 19,418
maturities
Investment securities held to maturity - maturities 49,475 38,734
Purchase of:
Interest bearing deposits with other financial (1,218) (14)
institutions
Investment securities held to maturity (34,997) (33,024)
Investment securities available for sale (11,620) (26,967)
Decrease (increase) in loans (27,312) 1,075
Gross proceeds from sale of loans 4,772 1,336
Capital expenditures (1,246) (1,195)
Sale of fixed assets and other property owned 56 1,029
Increase in federal funds sold (10,336) (1,682)
Acquisition of bank (net of $562 cash received in (1,880) -
acquisition)
Net cash provided by (used in) investing activities (17,942) (615)
Cash flows from financing activities:
Increase in deposits 9,467 2,303
Decrease in short-term borrowings, net (12,299) (5,241)
Principal payment on long-term debt (350) -
Proceeds from long-term debt 5,000 -
Net change in other interest bearing liabilities 14 9
Dividends paid (3,465) (3,217)
Tax benefit from preferred stock dividend and stock option 102 107
activity
Issuance of common stock 741 648
Issuance, acquisition and sale of treasury stock, net (2,878) 38
Net cash used in financing activities (3,668) (5,353)
Net increase (decrease) in cash and due from banks $(6,315) $2,490
Cash and due from banks at beginning of period $42,151 $34,292
Cash and due from banks at end of period 35,836 36,782
Net increase (decrease) in cash and due from banks $(6,315) $2,490
Interest paid $20,912 $19,101
Income taxes paid 4,222 3,700
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
A. Basis of Presentation:
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, including
normal recurring accruals considered necessary for a fair presentation,
have been included. Operating results for the nine months ended September
30, 1995, are not necessarily indicative of the results that may be
experienced for the year ending December 31, 1995 or any other interim
period. For further information, refer to the Consolidated Financial
Statements and Footnotes included in the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
The accompanying Consolidated Financial Statements include Omega Financial
Corporation (Omega), a bank holding company, and the combined results of
its wholly-owned banking and non-banking subsidiaries.
B. Accounting Changes
Accounting by Creditors for Impairment of a Loan - Statement of Financial
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Accounting Standards No. 114 as amended by SFAS No. 118
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Omega adopted FAS114 "Accounting by Creditors for Impairment of a Loan", as
amended by FAS118, as of January 1, 1995. This statement addresses the
accounting by creditors for impairment of certain loans. There was no
material effect on the Corporation's financial condition or results of
operation upon adoption of this pronouncement.
Accounting for Certain Investments in Debt and Equity Securities-Statement
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of Financial Accounting Standards No. 115
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On January 1, 1994, Omega adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". As a result of this adoption, Omega has segmented its
investment securities into two categories: those held to maturity and
those available for sale. This statement requires that the unrealized net
gain (loss), net of tax, for securities classified as available for sale be
reflected as a component of shareholders' equity, and the carrying value of
these securities be reflected at fair market value.
The effect of adoption resulted in an increase to shareholders' equity of
$2,061,000 on January 1, 1994.
Debt securities are acquired with the intent to maintain them in the
portfolio until maturity, and except as noted below, are carried at
amortized cost. Omega does not engage in trading activity, however
management considers, for liquidity purposes, a portion of the portfolio to
be designated as available for sale. Therefore, certain debt securities
have been specifically categorized as such. Additionally, all marketable
equity securities are classified as "available for sale". A table
detailing the breakout of investment categories can be found in the
accompanying Investment Securities section of the Management Discussion and
Analysis .
Statement of Financial Accounting Standards No. 112 - Employers' Accounting
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for Post-Employment Benefits
----------------------------
Omega provides certain post-employment benefits to its employees. The
Corporation has adopted SFAS No. 112 as of January 1, 1994 and the impact
was not material to the Company's financial statements.
C. Commitments and Contingent Liabilities:
In the ordinary course of business, Omega and its subsidiaries make
commitments to extend credit to their customers. At September 30, 1995 and
December 31, 1994 standby letters of credit issued and outstanding amounted
to $15,501,000 and $10,327,000, respectively. These letters of credit are
not reflected in the accompanying financial statements. Management does
not anticipate any significant losses as a result of these transactions.
At September 30, 1995, the Corporation had $104,998,000 outstanding in
unused lines of credit commitments extended to its customers. Of this
amount, $26,238,000, or 25.1%, are commitments to consumers for home equity
lines of credit and credit card limits. The remainder, $78,670,000, are
commercial commitments.
In 1994, the Corporation entered into a five year agreement to obtain data
processing services from an outside service bureau. The agreement provides
for termination penalties if it is canceled prior to the end of the
commitment period by the Corporation.
D. Earnings Per Share Data:
Primary earnings per share is computed based on the weighted average number
of shares and common stock equivalents outstanding during each period.
Primary earnings per share is computed by dividing net earnings after
preferred stock dividends by the weighted average number of shares and
dilutive common stock equivalents outstanding. The outstanding preferred
stock is not a common stock equivalent. On a fully-diluted basis, both
earnings and shares outstanding are adjusted to assume the conversion of
convertible preferred stock from the date of issue.
Computations of Per Share Earnings
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
PRIMARY EARNINGS PER SHARE
Net income.................... $3,760 $3,594 $10,429 $9,794
Dividend requirements for preferred
stock net of tax benefits......... (72) (71) (216) (214)
Net earnings applicable to common 3,688 3,523 10,213 9,580
stock.........................
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding.......... 5,990 5,958 5,973 5,949
Common stock equivalents - options 67 60 60 61
Weighted average of common shares
outstanding and equivalents. 6,057 6,018 6,033 6,010
Primary earnings per common share $0.61 $0.58 $1.69 $1.59
FULLY DILUTED EARNINGS PER SHARE
Net income.................... $3,760 $3,594 $10,429 $9,794
Additional cash contribution required
to service debt on assumed conversion
of preferred stock (tax effected).. (45) (45) (129) (139)
Net earnings applicable to common 3,715 3,549 10,300 9,655
stock.........................
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding.......... 5,990 5,958 5,973 5,949
Common stock equivalents - options 70 60 70 61
Assumed conversion of preferred stock
outstanding and equivalents. 231 231 231 231
Weighted average of common shares
outstanding and equivalents. 6,291 6,249 6,274 6,241
Fully diluted earnings per common $0.59 $0.57 $1.64 $1.55
share.........................
F. Acquisitions
On January 11, 1995, Omega entered into an Agreement and Plan of
Reorganization with Montour Bank ("Montour"), a bank incorporated under the
Pennsylvania Banking Code of 1965. This merger was approved by the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation and the Department of Banking of the Commonwealth of
Pennsylvania, as well as the stockholders of Montour, and was consummated
on July 31, 1995.
The transaction was accounted for under the purchase method. For each share
of Montour, shareholders received, at their election and subject to certain
adjustments, one-half share of Omega common stock or $12.00 in cash, or a
combination of stock and cash, with 43.1% of the total outstanding shares
being converted to cash. Warrant holders received $2.00 per warrant. Total
consideration for the acquisition was $5.727 million in the aggregate, with
123,957 shares of Omega stock issued and $2.442 million paid in cash to
Montour shareholders. Montour's assets at July 31, 1995 were $44.641
million.
G. Defined Benefit Plan
During 1994, management developed a plan to terminate its defined benefit
plan and transfer the plan's assets and obligations at the settlement date
to a defined contribution plan. In anticipation of the execution of
management's plan, Omega froze the accrual of benefits under the Omega
defined benefit plan effective April 15, 1994. Management expects to
complete the termination of the defined benefit plan in 1995 or early 1996.
In completing the settlement of the defined benefit plan and the
transferring of assets and obligations to a defined contribution plan, the
shortfall, if any, between the then fair value of plan assets and the final
settlement amount of plan obligations will be charged against earnings.
However, management does not believe the net impact of the termination of
Omega's defined benefit plan will have a material effect on Omega's
financial position or results of operations.
H. Investment Considerations
In analyzing whether to make, or to continue, an investment in Omega,
investors should consider, among other factors, certain investment
considerations more particularly described in "Item 1: Business -
Investment Considerations" in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, a copy of which can be obtained from
David N. Thiel, Senior Vice President, Omega Financial Corporation, 366
Walker Drive, State College, Pennsylvania 16801.
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1. Comparison of the Nine and Three Months Ended September 30, 1995 and 1994
Operations
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A. Nine months ended September 30, 1995 and 1994
For the first nine months of 1995, income before taxes increased by
$1,378,000, or 10.3%, compared to the same period in 1994. A $1,706,000, or
5.6% increase in the corporation's income from credit activities was a
significant factor in this achievement.
Other income in total remained at the same level, while total other expense
increased by $325,000, or 1.4%.
The tax provision for the first nine months of 1995 increased by $743,000,
or 20.8% when compared to the first nine months of 1994. The effective tax
rate rose to 29.3% in 1995 from 26.7% in 1994, as a consequence of a
continued reduction in tax-exempt income resulting from a smaller
percentage of tax-exempt investments to total assets in 1995 than in 1994.
Additionally, Omega's federal tax rate has risen to 35% in 1995, as
compared to 34% in 1994.
B. Three months ended September 30, 1995 and 1994
The third quarter's income before income taxes increased $362,000, or 7.3%,
when compared to the same period in 1994. A $772,000 increase in income
from credit activities contributed substantially to the increase, while
increases in non-interest expense related categories partially offset this
improvement.
Other income decreased $41,000 while other expense increased $369,000, for
a decreased net contribution of $410,000.
After the income tax provision (which increased by $196,000, or 14.7%
compared to the same period in 1994) was deducted from earnings, net income
showed an improvement of $166,000, or 4.6%, over the third quarter of 1994.
The effective tax rate for the third quarter of 1995 increased to 28.9%
from 27.1% in the third quarter of 1994 as levels of tax exempt investments
have fallen slightly, and Omega's federal tax rate has increased.
Following are selected key ratios for the period:
Three Months Ended Nine Months Ended
September 30 September 30
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1995 1994 1995 1994
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Return on average assets (annualized) 1.54% 1.53% 1.47% 1.39%
Return on average equity (annualized) 12.58 13.02 11.94 12.15
Dividend payout ratio (common) 28.91 28.27 30.38 29.81
Average equity to average assets 12.25 11.71 12.32 11.47
Net Interest Income
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A. Nine months ended September 30, 1995 and 1994
Omega's net interest income for the first nine months of 1995 improved by
$1,689,000, or 5.5%. While the purchase of Montour Bank during the third
quarter added $8,214,000 in average earning assets, Omega's total increase
in average earning assets was only $7,816,000. Average loan volumes
increased by $34,530,000 as compared to 1994. The Montour acquisition
provided $7,977,000 of the loan increase, while maturities of Omega's
investment and money market securities funded the difference. The shift of
almost $27 million from lower yielding investments to higher-yielding loan
products combined with a higher prime rate contributed significantly to the
increase of 74 basis points in yield on earning assets.
Although the Montour acquisition increased average interest bearing
deposits by $7,362,000, total interest bearing deposits have averaged
$700,275,000 in 1995 or $6,000,000 less than in 1994. Other funding sources
were increased on average by $13,816,000. Total cost of funding sources was
3.18%, 53 basis points higher than 1994. The result is a net interest
spread of 4.88% through September of 1995, improved by 21 basis points from
the same period in 1994, when the spread was 4.67%. On a fully tax
equivalent basis, the net interest margin was 5.06% through September of
1995 as compared to 4.88% in 1994. Of the $1,689,000 increase in net
interest income, $646,000 is a result of volume changes and $1,042,000 is a
result of rate differences.
B. Three months ended September 30, 1995 and 1994
Average earning assets have increased by $31,284,000 in the third quarter
of 1995, as compared to the third quarter of 1994 ($28,217,000 as a result
of the Montour acquisition), with a very significant increase in loan
volumes of $61,504,000 ($23,932,000 from Montour).
Since total average deposits increased by only $18,908,000, with Montour
contributing $22,958,000, other sources of funding were needed to support
the earning asset growth. Both short and long-term borrowed funds were
increased in the third quarter.
The third quarter net interest spread increased to 4.95% in 1995, a 19
basis point increase as compared to the third quarter of 1994. On a fully
tax equivalent basis, the margin increased to 5.13% as compared to 4.96% in
1994.
Following are key net interest margin ratios (annualized):
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Yield on average earning assets 8.24% 7.41% 8.06% 7.32%
Yield to fund earning assets 3.29 2.65 3.18 2.65
Net interest spread 4.95 4.76 4.88 4.67
Net interest margin - tax 5.13 4.96 5.06 4.88
equivalent
At September 30, 1995, Omega had $436,395,000 of earning assets scheduled
to reprice over the next twelve months as compared to $431,371,000 in
interest bearing liabilities. This means that if rates rose by 100 basis
points on October 1, Omega's net interest income over a one year period
would increase by $1,255,000, or 2.65%, assuming that the volumes do not
grow and the mix of the balance sheet does not change. Conversely, a
reduction in rates would have a negative impact of a similar magnitude.
Other Income and Expense
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A. Nine months ended September 30, 1995 and 1994
Other income decreased by $3,000 for the first nine months of 1995 when
compared to the same period last year. Although service fees increased by
only $39,000, or 1.1% over 1994, the service fees for 1994 included a one
time $211,000 gain on sale of real estate owned. Trust fees also increased
in 1995, showing a $242,000, or 15.9% increase over 1994 due to a higher
number of estate settlements. Offsetting these increases was a reduction of
net investment security gains of $285,000.
As a percentage of average assets, other income, net of security gains and
losses, annualized was .78% for the first nine months of 1995 as compared
to .75% in 1994.
Other expenses were $325,000, or 1.4% higher for the first nine months of
1995 than for the same period in 1994. Salaries and employee benefits were
increased by only 2.3% while equipment and data processing service expenses
were reduced by a total of $259,000, or 9.7%. These results were achieved
through an effort to minimize these types of costs through bundled fees,
streamlined operations, and consolidation of functions since the merger
with Penn Central Bancorp in the first quarter of 1994 which nearly doubled
Omega's asset size. Expense for FDIC premiums dropped significantly as a
result of a one-time $525,000 refund in September. This refund from the
FDIC represented Omega's portion of the excess in the fund since April
1995. Going forward, Omega expects to continue to see reduced FDIC
insurance premiums, as the base rate has been dropped from 23 cents per
thousand dollars of deposits to 4 cents. Net occupancy expense has
increased by $270,000, or 17.1%, primarily due to increased depreciation
expense in the third quarter. Other non-interest expense was increased by
$583,000. Of this increase, $117,000 was due to increased amortization,
$109,000 was due to acquisition-related expenses at Montour Bank, and
$145,000 due to increased marketing and advertising expenses.
As a percentage of average assets, annualized expenses for the nine month
period ending September 30, 1995 was 3.30% as compared to 3.28% for the
same period in 1994.
B. Three months ended September 30, 1995 and 1994
Other income decreased $41,000, or 2.1% for the third quarter of 1995 as
compared to the same period in 1994. Service fee income in 1995 outpaced
that in 1994 by $62,000, or 5.0%, while trust fee income increased by
$57,000, or 10.8%. Net gains from the sale of investment securities dropped
by $165,000 in 1995.
As a percentage of average assets, other income net of security gains and
losses annualized was .78% for the third quarter of 1995 as compared to
.76% in 1994.
Other expenses were $369,000, or 4.9% higher for the third quarter of 1995
than for the same period in 1994. Salaries and employee benefits were
$98,000, or 2.5% higher in 1995 as in 1994. Net occupancy expense has
increased by 50.8%, while equipment and data processing expense remained
about the same. As a result of the $525,000 refund from the FDIC, FDIC
insurance premium expense for the quarter is $509,000 less than last year.
Additional amortization, and the acquisition of Montour Bank contributed
heavily to the $533,000, or 29.5% increase in other expenses.
As a percentage of average assets, annualized expenses for the quarter
ended September 30, 1995 were 3.25% and for the same period in 1994 were
3.20%.
2. Investment Securities
Management of the investment portfolio entails evaluation and realignment
of the size and mix of the portfolio in order to balance various
characteristics of the balance sheet, including asset quality, liquidity,
yield relationships, maturity and tax planning. The following schedule
describes characteristics of the investment portfolio as of September 30,
1995 and December 31, 1994 (in thousands).
Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 30, 1995 Cost Gains Losses Value
U.S. Treasury securities
and obligations of other U.S.
Government agencies and $21,082 $58 $(18) $21,122
corporations
Obligations of state and 124 - (22) 102
political subdivisions
Equity securities 3,818 2,668 (69) 6,417
Total $25,024 $2,726 $(109) $27,641
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 30, 1995 Cost Gains Losses Value
U.S. Treasury securities
and obligations of other U.S.
Government agencies and $62,556 $131 $(760) $61,927
corporations
Obligations of state and 47,760 317 (514) 47,562
political subdivisions
Corporate securities 24,795 71 (266) 24,601
Mortgage backed securities 48,145 216 (511) 47,850
Equity securities 4,107 - - 4,107
(non-marketable)
Total $187,363 $735 $(2,051) $186,047
Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1994 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S.
Government agencies and $19,314 $ - $(326) $18,988
corporations
Obligations of state and 269 - (52) 217
political subdivisions
Equity securities 4,150 2,333 (78) 6,405
Total $23,733 $2,333 $(456) $25,610
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1994 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S.
Government agencies and $79,736 $25 $(3,297) $76,464
corporations
Obligations of state and 54,788 287 (1,404) 53,671
political subdivisions
Corporate securities 34,138 29 (1,181) 32,986
Mortgage backed securities 29,503 9 (1,573) 27,939
Equity securities (non- 4,047 4,047
marketable)
Total $202,212 $350 $(7,455) $195,107
Total investment securities as a percentage of total assets at September
30, 1995 and December 31, 1994 were 21.7% and 24.2%, respectively.
Securities maturing or repriceable in one year or less comprised 33.9% of
the total investment securities of $215,004,000 as of September 30, 1995,
as compared to 37.9% of total investment securities of $227,822,000 as of
December 31, 1994. There was $35,000 in investments in instruments of
foreign countries on September 30, 1995.
3. Interest Bearing Deposits with Other Financial Institutions
As of September 30, 1995, Omega had $853,000 in interest bearing deposits
with other financial institutions. There were no investments in
instruments issued by U.S. branches of banks of foreign countries or
deposits in banks of foreign countries included in the September 30, 1995
balance.
4. Loans
Net loans for the first nine months increased 9.0% to $694,001,000. Of the
$57,125,000 increase, $35,602,000 was added as a result of the Montour Bank
acquisition. The remaining increase in volumes is a continuation of the
loan demand experienced in the latter part of 1994, particularly in the
commercial loan category. Additionally, Omega is now originating long term
fixed rate mortgage loans to maintain internally rather than selling them
in the secondary market.
Changes in the allowance for loan losses for the nine months ended
September 30, 1995 and 1994 were as follows (in thousands):
1995 1994
-------- --------
Balance at January 1............$11,057 $11,168
Addition of Montour Bank........ 416 --
Charge-offs..................... (573) (675)
Recoveries...................... 237 231
-------- -------
Net charge-offs............. (336) (444)
Provision for loan losses....... 457 474
-------- -------
Balance at September 30......... $11,594 $11,198
======== ========
The allowance for loan losses is considered adequate by management to cover
possible uncollectible loans. Management is also of the opinion that the
level of loan loss provision is adequate to maintain the allowance at an
acceptable level. The allowance for loan losses at September 30, 1995 and
1994 represented 1.64% and 1.77%, respectively, of the total loans
outstanding, net of unearned interest.
Non-performing Loans
--------------------
(In thousands)
September 30, December 31,
1995 1994
------------ ----------
Non-accrual loans................................ $1,642 $1,596
Accruing loans past due 90 days or more.......... 2,013 1,317
Restructured loans............................... - - 44
------------ ----------
Total non-performing loans....................... $3,655 $2,957
============ =========
Non-performing loans as percent of allowance..... 31.5% 26.7%
5. Deposits and Other Sources of Funds
Deposits provide the primary source of funding for loans and investment
securities. During the nine month period ended September 30, 1995, total
deposits increased by $44,393,000 or 5.5%, with interest bearing funds
increasing $47.2 million and non-interest bearing deposits decreasing by
$2.8 million. The acquisition of Montour Bank was responsible for $32.9
million of the interest bearing deposit growth, and added $1.1 million in
non-interest bearing deposits.
6. Regulatory Capital Compliance
Risk-based capital standards are issued by bank regulatory authorities in
the United States. These capital standards relate a banking company's
capital to the risk profile of its assets and provide the basis for which
all banking companies and banks are evaluated in terms of capital adequacy.
The risk-based capital standards require all banks to have Tier 1 capital
of at least 4% and total capital, including Tier 1 capital of at least 8%
of risk-adjusted assets. Tier 1 capital includes common stockholders'
equity and qualifying perpetual preferred stock together with related
surpluses and retained earnings. Total capital is comprised of Tier 1
capital, limited life preferred stock, qualifying debt instruments, and the
reserves for possible loan losses. Banking regulators have also issued
leverage ratio requirements. The leverage ratio requirement is measured as
the ratio of Tier 1 capital to adjusted average assets. The table below
provides a comparison of Omega's and its bank subsidiaries risk-based
capital ratios and leverage ratio to the minimum regulatory requirements
for the periods indicated.
Minimum
September 30,December 31, Regulatory
Omega Financial Corp. 1995 1994 Requirements
--------------------- ---- ---- ------------
Risk based capital ratios:
Tier 1 ................... 17.16% 17.55% 4.00%
Total capital ............ 18.41 18.80 8.00
Leverage ratio............. 11.88 11.76 3.00
Omega Bank, N.A.
----------------
Risk based capital ratios:
Tier 1 ................... 16.04% 15.65% 4.00%
Total capital ............ 17.29 16.90 8.00
Leverage ratio............. 11.07 10.71 3.00
Hollidaysburg Trust Company
---------------------------
Risk based capital ratios:
Tier 1 ................... 14.69% 14.55% 4.00%
Total capital ............ 15.95 15.80 8.00
Leverage ratio............. 10.66 10.12 3.00
Penn Central National Bank
--------------------------
Risk based capital ratios:
Tier 1 ................... 19.06% 19.48% 4.00%
Total capital ............ 20.33 20.73 8.00
Leverage ratio............. 11.50 11.37 3.00
Montour Bank
------------
Risk based capital ratios:
Tier 1 ................... 14.29% - 4.00%
Total capital ............ 15.44 - 8.00
Leverage ratio............. 12.45 - 3.00
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), the FDIC has issued a rule which sets the capital level
for each of the five capital categories established in FDICIA. As required
by FDICIA, the regulations specify the levels at which an insured
institution would be considered "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized", or
critically undercapitalized". At September 30, 1995, Omega and each of its
banking subsidiaries met the regulatory definition of a "well capitalized"
financial institution, i.e., a leverage ratio exceeding 5%, and Tier 1
capital exceeding 6%, and total capital exceeding 10%.
PART II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Debt
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMEGA FINANCIAL
CORPORATION
(Registrant)
By:
Date David B. Lee
Chairman and
Chief Executive Officer
Date JoAnn N. McMinn
Senior Vice President
and
Controller
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Omega
Financial third quarter 1995 10-Q and is qualified in its entirety by reference
to such 10-Q.
</LEGEND>
<CIK> 0000705671
<NAME> OMEGA FINANCIAL CORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 35,836
<INT-BEARING-DEPOSITS> 853
<FED-FUNDS-SOLD> 10,745
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,641
<INVESTMENTS-CARRYING> 187,363
<INVESTMENTS-MARKET> 186,047
<LOANS> 705,595
<ALLOWANCE> 11,594
<TOTAL-ASSETS> 989,617
<DEPOSITS> 846,129
<SHORT-TERM> 2,519
<LIABILITIES-OTHER> 8,522
<LONG-TERM> 10,592
<COMMON> 121,265
0
590
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 989,617
<INTEREST-LOAN> 44,684
<INTEREST-INVEST> 8,619
<INTEREST-OTHER> 499
<INTEREST-TOTAL> 53,802
<INTEREST-DEPOSIT> 20,917
<INTEREST-EXPENSE> 21,206
<INTEREST-INCOME-NET> 32,596
<LOAN-LOSSES> 457
<SECURITIES-GAINS> 446
<EXPENSE-OTHER> 23,385
<INCOME-PRETAX> 14,746
<INCOME-PRE-EXTRAORDINARY> 14,746
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,429
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.64
<YIELD-ACTUAL> 4.88
<LOANS-NON> 1,642
<LOANS-PAST> 2,013
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,057
<CHARGE-OFFS> 573
<RECOVERIES> 237
<ALLOWANCE-CLOSE> 11,594
<ALLOWANCE-DOMESTIC> 11,594
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
