SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-13599
Omega Financial Corporation
(Exact name of registrant as
specified in its charter)
Pennsylvania 25-1420888
(State or other jurisdiction or (IRS Employer Identification No.)
incorporation of organization)
366 Walker Drive
State College, Pennsylvania 16801
(Address of principal executive (Zip Code)
offices)
Registrant's Telephone Number,
Including Area Code: (814) 231-7680
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months
(or for such shorter period that the registrant was requested to
file such reports), and (2) has been subject to such filing
requirements for the past ninety days. Yes X No
The number of shares outstanding of each of the Registrant's classes of
common stock as of August 1, 1996:
Common Stock, $5.00 par value - 6,041,552 shares
PART I. Financial Information
Item 1. Financial Statements
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
Cash and due from banks $36,709 $38,796
Interest bearing deposits with other banks 672 843
Federal funds sold 16,505 12,460
Investment securities held to maturity
(Market value:
$107,523 and $98,207, respectively) 108,442 97,863
Investment securities available for sale 126,174 121,845
Total loans 708,181 706,640
Less: Unearned discount (2,391) (3,515)
Allowance for loan losses (11,647) (11,668)
Net loans 694,143 691,457
Premises and equipment, net 17,528 17,153
Other assets 15,303 14,423
TOTAL ASSETS $1,015,476 $994,840
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $116,447 $116,729
Interest bearing 747,719 733,453
Total deposits 864,166 850,182
Short-term borrowings 2,302 1,545
Other liabilities 10,169 8,339
ESOP debt 4,296 4,373
Long-term debt 5,350 5,700
Other interest bearing liabilities 518 530
TOTAL LIABILITIES 886,801 870,669
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 (4,296) (4,373)
Common stock, par value $5.00 per share:
Authorized - 25,000,000 shares;
Issued -
6,104,246 shares at June 30, 1996;
6,048,966 shares at December 31, 1995
Outstanding -
6,039,882 shares at June 30, 1996;
6,022,966 shares at December 31, 1995 30,521 30,245
Capital surplus 5,742 5,134
Retained earnings 92,102 86,778
Cost of common stock in treasury
64,364 shares at June 30, 1996;
26,000 shares at December 31, 1995 (2,074) (822)
Net unrealized gain on securities available 1,680 2,209
for sale
TOTAL SHAREHOLDERS' EQUITY 128,675 124,171
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,015,476 $994,840
<TABLE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $15,695 $14,771 $31,413 $28,831
Interest and dividends on investment securities 3,131 2,746 6,082 5,628
Other interest income 317 244 552 343
TOTAL INTEREST INCOME. 19,143 17,761 38,047 34,802
INTEREST EXPENSE:
Interest on deposits 7,465 6,993 14,949 13,415
Interest on short-term borrowings 15 22 45 146
Interest on long-term debt and
other interest bearing liabilities 80 13 160 25
TOTAL INTEREST EXPENSE 7,560 7,028 15,154 13,586
NET INTEREST INCOME 11,583 10,733 22,893 21,216
Provision for loan losses 225 248 452 348
INCOME FROM CREDIT ACTIVITIES 11,358 10,485 22,441 20,868
OTHER INCOME:
Service fees 1,355 1,243 2,633 2,450
Trust fees 633 689 1,303 1,182
Gain on sale of loans 9 9 13 9
Investment securities gains and losses, net:
Investment securities held to maturity - 4 - 1
Investment securities available for sale 212 340 424 409
TOTAL OTHER INCOME 2,209 2,285 4,373 4,051
OTHER EXPENSE:
Salaries and employee benefits 4,110 4,004 8,258 7,984
Net occupancy expense 572 530 1,140 1,090
Equipment expense 439 431 921 865
Data processing service 403 362 778 724
FDIC insurance premiums 2 452 4 904
Other 2,321 1,943 4,543 3,898
TOTAL OTHER EXPENSE 7,847 7,722 15,644 15,465
Income before taxes 5,720 5,048 11,170 9,454
Income tax expense 1,745 1,514 3,367 2,785
NET INCOME $3,975 $3,534 $7,803 $6,669
NET INCOME PER COMMON SHARE:
Primary $0.64 $0.57 $1.25 $1.08
Fully diluted $0.63 $0.56 $1.22 $1.05
WEIGHTED AVERAGE SHARES AND EQUIVALENTS:
Primary 6,110 5,995 6,110 6,023
Fully diluted 6,341 6,226 6,341 6,254
</TABLE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
SIX MONTHS
ENDED
JUNE 30,
1996 1995
[S] [C] [C]
Cash flows from operating activities:
Net income $7,803 $6,669
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,316 1,359
Provision for loan losses 452 348
Gain on sale of investment securities (425) (410)
Gain on sale of fixed assets
and other property owned (3) (7)
Gain on sale of loans (13) (9)
Increase in tax asset (65) (12)
Increase in interest receivable and other assets (658) (387)
Increase (decrease) in interest payable (268 187
Decrease in taxes payable 105 71
Amortization of deferred net loan fees (210) (181)
Deferral of net loan fees 64 514
Increase in accounts payable
and accrued expenses 724 149
Total adjustments 1,019 1,622
Net cash provided by operating activities 8,822 8,291
Cash flows from investing activities:
Proceeds from the sale or maturity of:
Interest bearing deposits with other banks 2,322 3,177
Investment securities available for sale 24,122 4,467
Investment securities held to maturity 16,350 26,381
Purchase of:
Interest bearing deposits with other banks (2,151) (896)
Investment securities held to maturity (26,912) (19,884)
Investment securities available for sale (29,188) (2,449)
Increase in loans (13,375) (18,202)
Gross proceeds from sale of loans 10,396 1,281
Capital expenditures (1,456) (1,030)
Sale of fixed assets and other property owned 226 22
Increase in federal funds sold (4,045) (2,100)
Net cash used in investing activities (23,711) (9,233)
Cash flows from financing activities:
Increase in deposits 13,984 7,771
Decrease (increase) in short-term borrowings, net 757 (6,767)
Principal payment on long-term debt (350) (350)
Net change in other interest bearing liabilities (12) 17
Dividends paid (1,345) (2,279)
Tax benefit from preferred stock dividend
and stock option activity 136 74
Issuance of common stock 884 576
Acquisition of treasury stock (1,825) (2,878)
Proceeds from sale of treasury stock 573 -
Net cash provided by (used in) financing activities 12,802 (3,836)
Net decrease in cash and due from banks $(2,087) $(4,778)
Cash and due from banks at beginning of period $38,796 $42,151
Cash and due from banks at end of period 36,709 37,373
Net decrease in cash and due from banks $(2,087) $(4,778)
Interest paid $12,889 $13,399
Income taxes paid 3,461 2,717
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
A. Basis of Presentation:
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, including
normal recurring accruals, considered necessary for a fair presentation
have been included. Operating results for the six months and three months
ended June 30, 1996, are not necessarily indicative of the results that may
be experienced for the year ending December 31, 1996 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, 1995.
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 for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of - Statement of Financial Accounting Standards No.
121
Omega adopted SFAS 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", as of January 1, 1996. This
statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those
assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. There was no material effect on
the Corporation's financial condition or results of operation upon adoption
of this pronouncement.
Accounting for Mortgage Servicing Rights - Statement of Financial
Accounting Standards No. 122
Omega adopted SFAS 122 "Accounting for Mortgage Servicing Rights", as of
January 1, 1996. This statement prescribes a single procedure for the
capitalization of mortgage servicing rights acquired either through loan
origination or through purchase transactions. There was no material effect
on the Corporation's financial condition or results of operation upon
adoption of this pronouncement.
Accounting for Stock-Based Compensation - Statement of Financial Accounting
Standards No. 123
Omega adopted SFAS 123 "Accounting for Stock-Based Compensation", as of
January 1, 1996. This statement establishes a fair value-based method of
accounting for stock options. It requires the use of that method for
transactions with non-employees and encourages its use for transactions
with employees. The Corporation adopted this method of accounting for only
its Director Stock Option Plan, which resulted in no material effect on
Omega's financial condition or results of operation.
C. Commitments and Contingent Liabilities:
In the ordinary course of business, Omega and its subsidiaries make
commitments to extend credit to their customers. At June 30, 1996 and
December 31, 1995 standby letters of credit issued and outstanding amounted
to $15,424,000 and $15,770,000, respectively. These letters of credit are
not reflected in the accompanying financial statements. Management does
not anticipate any significant losses as a result of these transactions.
At June 30, 1996, the Corporation had $112,914,000 outstanding in unused
lines of credit commitments extended to its customers. Of this amount,
$35,993,000, or 31.9%, are commitments to consumers for home equity lines
of credit and credit card limits. The remainder, $76,921,000, are
commercial commitments.
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)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income................................. $3,975 $3,534 $7,803 $6,669
Dividend requirements for preferred stock,
net of tax benefits...................... (74) (72) (148) (144)
Net earnings applicable to common stock.... 3,901 3,462 6,655 6,525
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding....................... 6,042 5,935 6,041 5,964
Common stock equivalents - options......... 68 60 69 59
Weighted average of common shares
outstanding and equivalents.............. 6,110 5,995 6,110 6,023
Primary earnings per common share.......... $0.64 $0.57 $1.25 $1.08
FULLY DILUTED EARNINGS PER SHARE
Net income................................. $3,975 $3,534 $7,803 $6,669
Additional cash contribution required to
service
debt on assumed conversion of preferred
stock (tax effected)..................... (52) (47) (88) (93)
Net earnings applicable to common stock.... 3,923 3,487 7,715 6,576
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding....................... 6,042 5,935 6,041 5,964
Common stock equivalents - options......... 68 60 69 59
Assumed conversion of preferred stock
outstanding and equivalents.............. 231 231 231 231
Weighted average of common shares
outstanding and equivalents.............. 6,341 6,226 6,341 6,254
Fully diluted earnings per common share.... $0.63 $0.56 $1.22 $1.05
</TABLE>
F. Mergers and 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 $5,727,000 in the aggregate, with
123,957 shares of Omega stock issued and $2,442,000 paid in cash. Montour's
assets at July 31, 1995 were $44,641,000.
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. The termination was approved
by Omega's Board of Directors during 1995 and the Corporation is awaiting
approval from the IRS. During 1995, Omega purchased an annuity contract
which effectively settled the Corporation's obligations to retired
employees receiving benefit. Management expects to complete the termination
of the combined defined benefit plan in 1996. In completing the remaining
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, 1995, a copy of which can be obtained from
David N. Thiel, Senior Vice President, Omega Financial Corporation, 366
Walker Drive, State College, Pennsylvania 16801.
I. Forward Looking Statements
The information contained in this Report on Form 10-Q contains forward
looking statements (as such term is defined in the Securities Exchange Act
of 1934 and the regulations thereunder), including without limitation,
statements as to the future loan and deposit volumes, the allowance and
provision for possible loan losses, future interest rates and their effect
on Omega's financial condition or results of operations, the classification
of Omega's investment portfolio and other statements as to trends or
management's beliefs, expectations or opinions. Such forward looking
statements are subject to risks and uncertainties and may be affected by
various factors which may cause actual results to differ materially from
those in the forward looking statements. Certain of these risks,
uncertainties and other factors are discussed in this Report on Form 10-Q,
the Corporation's 1995 Annual Report or in Omega's Annual Report on Form
10-K for the year ended December 31, 1995, copies of which may be obtained
from Omega upon request and without charge (except for the exhibits
thereto).
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1. Comparison of the Six and Three Months Ended June 30, 1996 and 1995
Operations
A. Six months ended June 30, 1996 and 1995
For the first six months of 1996, income before taxes increased by
$1,716,000, or 18.2%, compared to the same period in 1995. A $1,573,000, or
7.5% increase in the corporation's income from credit activities was a
significant factor in this achievement.
Non-interest income increased $322,000, or 7.9%, while non-interest expense
increased by $179,000, or 1.2%, resulting in a $143,000 decrease in net
operating expense for the period.
The tax provision for the first six months of 1996 increased by $582,000,
or 20.9% when compared to the first six months of 1995. The effective tax
rate rose to 30.1% in 1996 from 29.5% in 1995, as a consequence of a
continued reduction in tax-exempt income resulting from a smaller
percentage of tax-exempt investments to total assets in 1996 than in 1995,
and an increase in the corporate tax rate.
B. Three months ended June 30, 1996 and 1995
The second quarter's income before income taxes increased $672,000, or
13.3%, when compared to the same period in 1995. An $873,000 increase in
income from credit activities was responsible for the increase, while non-
interest income categories declined slightly.
After the income tax provision (which increased by $231,000, or 15.3%
compared to the same period in 1995) was deducted from earnings, net income
improved $441,000, or 12.5%, over the second quarter of 1995. The
effective tax rate for the second quarter of 1996 increased to 30.5% from
30.0% in the second quarter of 1995 as levels of tax exempt investments
have fallen slightly, and the corporate tax rate has increased.
Following are selected key ratios for the period:
Three Months Ended Six Months Ended
June 30 June 30
--------------- --------------
1996 1995 1996 1995
------- ------ ------ ------
Return on average assets (annualized).... 1.57% 1.51% 1.55% 1.43%
Return on average equity (annualized)....12.36 12.28 12.26 11.61
Dividend payout ratio (common)...........31.90 30.08 30.98 31.20
Average equity to average assets.........12.68 12.31 12.68 12.35
Net Interest Income
A. Six months ended June 30, 1996 and 1995
Omega's net interest income for the first six months of 1996 improved by
$1,677,000, or 7.9%, with most of the improvement due to volume increases.
Average earning assets grew by $67,757,000 since June of 1995.
Approximately 56%, or $37,729,000, of the increase resulted from the
purchase of Montour Bank, which was consummated in the third quarter of
1995. The remaining increase of $30,028,000, or 3.4%, resulted from normal
growth. Average deposits increased by $58,586,000, or 7.7% (with Montour
Bank's $33,341,000), in 1996 as compared to the previous year. Total
funding sources cost 3.19% in 1996, compared to 3.12% in 1995, while
earning assets yielded 8.06% in 1996 compared to 7.95% in 1995, resulting
in a 4 basis point increase in net interest margin.
B. Three months ended June 30, 1996 and 1995
The net interest margin, at 4.85% for the second quarter of 1996, was about
the same as the second quarter of 1995, so the 8.2% increase in average
earning assets resulted in a 7.9% increase in net interest income.
Following are key net interest margin ratios (annualized):
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Yield on earning assets............... 8.02% 8.05% 8.06% 7.96%
Yield to fund earning assets.......... 3.17 3.19 3.19 3.12
Net interest margin................... 4.85 4.86 4.87 4.84
Net interest margin - tax equivalent.. 5.00 5.02 5.03 5.01
At June 30, 1996, Omega had $410,587,000 of earning assets scheduled to
reprice over the next twelve months as compared to $416,644,000 in interest
bearing liabilities. This means that if rates rose by 100 basis points on
July 1, Omega's net interest income over a one year period would increase
by $1,102,000, or 2.3%, 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
A.. Six months ended June 30, 1996 and 1995
Other income increased by $322,000 for the first six months of 1996 when
compared to the same period last year. Service fees increased by $183,000,
or 7.5%, and trust fees increased in 1996 by $121,000, or 10.2% over 1995.
Net security gains, at $424,000 through June of 1996, were 3.4% ahead of
1995.
As a percentage of average assets, other income, net of security gains and
losses, annualized was .79% for the first six months of 1996 as compared to
.78% in 1995.
Other expenses were $179,000, or 1.2% higher for the first six months of
1996 than for the same period in 1995. Salaries and employee benefits
increased by $274,000, or 3.4% while occupancy, equipment and data
processing service expenses increased by a total of $160,000, or 6.0%.
Approximately one half of these increases are due to the addition of
Montour Bank. FDIC insurance premium expense has been virtually eliminated
at Omega Financial Corporation in 1996, due to its banks' top ratings
within the FDIC system, resulting in premiums $900,000 less in 1996 than in
1995. Other non-interest expenses have increased by $645,000, or 16.5%.
Expenses associated with the addition of Montour Bank, account for
$207,000, or 32% of the total increase.
As a percentage of average assets, annualized expenses for the six month
period ending June 30, 1996 was 3.12% as compared to 3.33% for the same
period in 1995.
B. Three months ended June 30, 1996 and 1995
Other income decreased $76,000, or 3.3% for the second quarter of 1996 as
compared to the same period in 1995. Service fee income in 1996 outpaced
that in 1995 by $112,000, or 9.0%, but trust fee income decreased by
$56,000, or 8.1%. Net gains from the sale of investment securities dropped
by $132,000 in 1996.
As a percentage of average assets, other income net of security gains and
losses annualized was .79% for the second quarter of 1996 as compared to
.83% in 1995.
Other expenses were $125,000, or 1.6% higher for the second quarter of 1996
than for the same period in 1995. Salaries and employee benefits were
$106,000, or 2.6% higher in 1996 as in 1995. Occupancy expense has
increased by 7.9%, while equipment and data processing expense increased by
6.2%. FDIC insurance premiums have dropped by nearly 100% as a result of
rate declines. Other non-interest expenses have increased by 19.4%, or
$378,000.
As a percentage of average assets, annualized expenses for the quarter
ended June 30, 1996 were 3.09% and for the same period in 1995 were 3.30%.
2. Investment Securities
Management of the investment portfolio entails evaluation and realignment
of the size and mix of the portfolio in order to balance various
characteristics of the balance sheet, including asset quality, liquidity,
yield relationships, maturity and tax planning. The following schedule
describes characteristics of the investment portfolio as of June 30, 1996
and December 31, 1995.
<TABLE>
Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
June 30, 1996 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $83,667 $77 $(675) $83,069
Obligations of state and
political subdivisions 35,257 185 (368) 35,074
Equity securities 4,677 3,386 (32) 8,031
Total $123,601 $3,648 $(1,075) $126,174
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
June 30, 1996 Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $1,088 $ - $(19) $1,069
Obligations of state and
political subdivisions 7,700 13 (76) 7,637
Corporate securities 20,011 38 (189) 19,860
Mortgage backed securities 75,109 150 (836) 74,423
Investment in low-income housing 444 - - 444
Equity securities (non-marketable) 4,090 - - 4,090
Total $108,442 $201 $(1,120) $107,523
Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1995 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $76,031 $402 $(278) $76,155
Obligations of state and
political subdivisions 38,319 328 (348) 38,299
Equity securities 4,108 3,322 (39) 7,391
Total $118,458 $4,052 $(665) $121,845
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1995 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $310 $1 $ (-) $311
Obligations of state and
political subdivisions 6,761 58 (11) 6,808
Corporate securities 25,161 170 (148) 25,183
Mortgage backed securities 61,503 528 (254) 61,777
Investment in low-income housing 387 - - 387
Equity securities (non-marketable) 3,741 - - 3,741
Total $97,863 $757 $(413) $98,207
</TABLE>
Total investment securities as a percentage of total assets at June 30,
1996 and December 31, 1995 were 23.1% and 22.1%, respectively. Securities
maturing or repriceable in one year or less comprised 37.2% of the total
investment securities of $234,616,000 as of June 30, 1996, as compared to
37.9% of total investment securities of $219,708,000 as of December 31,
1995. There was $35,000 in investments in instruments of foreign countries
on June 30, 1996.
3. Interest Bearing Deposits with Other Financial Institutions
As of June 30, 1996, Omega had $672,000 in interest bearing deposits with
other banks. There were no investments in instruments issued by U.S.
branches of banks of foreign countries or deposits in banks of foreign
countries included in the June 30, 1996 balance.
4. Loans
Net loans in the first six months remained relatively flat, with only a
modest increase of 0.4%, bringing the total to $694,143,000.
Changes in the allowance for loan losses for the six months ended June 30,
1996 and 1995 were as follows (in thousands):
1996 1995
--------- ---------
Balance at January 1.................... $11,668 $11,057
Charge-offs............................. (680) (289)
Recoveries.............................. 207 121
--------- ---------
Net charge-offs..................... (473) (168)
Provision for loan losses............... 452 348
--------- ---------
Balance at June 30..................... $11,647 $11,237
========= =========
The allowance for loan losses is considered adequate by management to cover
possible uncollectible loans, as shown in the following table depicting
non-performing loans. Management is also of the opinion that the level of
loan loss provision is adequate to maintain the allowance at an acceptable
level. The allowance for loan losses at June 30, 1996 and 1995 represented
1.69% and 1.78%, respectively, of the total loans outstanding, net of
unearned interest.
Non-performing Loans
-------------------
(In thousands)
June 30, December 31,
1996 1995
--------- -----------
Non-accrual loans................................ $2,093 $1,932
Accruing loans past due 90 days or more.......... 1,583 2,697
Restructured loans.............................. 15 -
-------- -----------
Total non-performing loans....................... $3,691 $4,629
======== ===========
Non-performing loans as percent of allowance..... 31.7% 39.7%
5. Deposits and Other Sources of Funds
Deposits provide the primary source of funding for loans and investment
securities. During the six month period ended June 30, 1996, total
deposits increased by $7,771,000 or 1.0%, with interest bearing funds
increasing $10.0 million and non-interest bearing deposits decreasing by
$2.2 million.
6. Regulatory Capital Compliance
Risk-based capital standards are issued by bank regulatory authorities in
the United States. These capital standards relate a banking company's
capital to the risk profile of its assets and provide the basis for which
all banking companies and banks are evaluated in terms of capital adequacy.
The risk-based capital standards require all banks to have Tier 1 capital
of at least 4% and total capital, including Tier 1 capital of at least 8%
of risk-adjusted assets. Tier 1 capital includes common stockholders'
equity and qualifying perpetual preferred stock together with related
surpluses and retained earnings. Total capital is comprised of Tier 1
capital, limited life preferred stock, qualifying debt instruments, and the
reserves for possible loan losses. Banking regulators have also issued
leverage ratio requirements. The leverage ratio requirement is measured as
the ratio of Tier 1 capital to adjusted average assets. The table below
provides a comparison of Omega's and its bank subsidiaries risk-based
capital ratios and leverage ratio to the minimum regulatory requirements
for the periods indicated.
Minimum
June 30, December 31, Regulatory
Omega Financial Corp 1996 1995 Requirements
-------------------- ---- ---- ------------
Risk based capital ratios:
Tier 1................... 18.11% 17.21% 4.00%
Total capital............ 19.37 18.47 8.00
Leverage ratio............. 12.11 11.85 3.00
Omega Bank, N.A.
----------------
Risk based capital ratios:
Tier 1................... 17.55% 16.48% 4.00%
Total capital............ 18.80 17.73 8.00
Leverage ratio............. 11.63 11.38 3.00
Hollidaysburg Trust Company
---------------------------
Risk based capital ratios:
Tier 1................... 15.70% 14.98% 4.00%
Total capital............ 16.96 16.24 8.00
Leverage ratio............. 10.85 10.58 3.00
Penn Central National Bank
--------------------------
Risk based capital ratios:
Tier 1................... 20.27% 19.02% 4.00%
Total capital............ 21.54 20.29 8.00
Leverage ratio............. 11.93 11.74 3.00
Montour Bank
------------
Risk based capital ratios:
Tier 1................... 9.62% 9.71% 4.00%
Total capital............ 10.84 10.97 8.00
Leverage ratio............. 8.03 7.93 3.00
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), the FDIC has issued a rule which sets the capital level
for each of the five capital categories established in FDICIA. As required
by FDICIA, the regulations specify the levels at which an insured
institution would be considered "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized", or
critically undercapitalized". At June 30, 1996, Omega and each of its
banking subsidiaries met the regulatory definition of a "well capitalized"
financial institution, i.e., a leverage ratio exceeding 5%, and Tier 1
capital exceeding 6%, and total capital exceeding 10%.
PART II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Debt
None
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Omega was held on April 23, 1996. At
the Annual Meeting, the shareholders elected a class of directors for a
term of three years, as described below.
Name For Withhold
Authority
Robert T. Gentry 4,039,242 61,418
Philip E. Gingerich 4,048,557 52,102
David K. Goodman, Sr. 4,045,134 54,525
D. Stephen Martz 4,044,605 55,053
James W. Powers, Sr. 4,049,134 51,535
Samuel D. Zeiders, Jr., 4,044,140 56,518
DDS
The terms of the following directors continued after the annual meeting:
Raymond F. Agostinelli, Merle K. Evey, William E. Henry, O.D., David B.
Lee, Don C. Meyer, Geroge R. Lovette, Robert N. Oliver, Stanton R. Sheetz,
and Robert A. Szeyller.
The shareholders also approved the 1996 Employee Stock Option Plan at the Annual
Meeting, with 3,239,062 votes for, 173,995 withholding authority, and
208,297 broker non-votes.
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
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Omega
Financial Corporation's Second Quarter 1996 10-Q and is qualified in its
entirety by reference to such 10-Q.
</LEGEND>
<CIK> 0000705671
<NAME> OMEGA FINANCIAL CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 36,709
<INT-BEARING-DEPOSITS> 672
<FED-FUNDS-SOLD> 16,505
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 126,174
<INVESTMENTS-CARRYING> 108,442
<INVESTMENTS-MARKET> 107,523
<LOANS> 694,143
<ALLOWANCE> 11,867
<TOTAL-ASSETS> 1,015,476
<DEPOSITS> 864,166
<SHORT-TERM> 2,820
<LIABILITIES-OTHER> 10,169
<LONG-TERM> 9,646
0
704
<COMMON> 127,971
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,015,476
<INTEREST-LOAN> 31,413
<INTEREST-INVEST> 6,082
<INTEREST-OTHER> 552
<INTEREST-TOTAL> 17,761
<INTEREST-DEPOSIT> 14,949
<INTEREST-EXPENSE> 15,154
<INTEREST-INCOME-NET> 22,893
<LOAN-LOSSES> 452
<SECURITIES-GAINS> 424
<EXPENSE-OTHER> 15,644
<INCOME-PRETAX> 11,170
<INCOME-PRE-EXTRAORDINARY> 7,803
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,803
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.22
<YIELD-ACTUAL> 4.87
<LOANS-NON> 2,093
<LOANS-PAST> 1,583
<LOANS-TROUBLED> 15
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,668
<CHARGE-OFFS> 680
<RECOVERIES> 207
<ALLOWANCE-CLOSE> 11,647
<ALLOWANCE-DOMESTIC> 11,647
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
