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, 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 November 1, 1996:
Common Stock, $5.00 par value - 6,032,752 shares
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 1996 1995
Cash and due from banks $37,929 $38,796
Interest bearing deposits with other banks 528 843
Federal funds sold 6,950 12,460
Investment securities held to maturity
(Market value:
$114,774 and $98,207, respectively) 115,420 97,863
Investment securities available for sale 128,106 121,845
Total loans 706,743 706,640
Less: Unearned discount (1,969) (3,515)
Allowance for loan losses (11,851) (11,668)
Net loans 692,923 691,457
Premises and equipment, net 17,772 17,153
Other assets 14,828 14,423
TOTAL ASSETS $1,014,456 $994,840
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $113,049 $116,729
Interest bearing 745,315 733,453
Total deposits 858,364 850,182
Short-term borrowings 3,960 1,545
Other liabilities 10,551 8,339
ESOP debt 4,255 4,373
Long-term debt 5,350 5,700
Other interest bearing liabilities 544 530
TOTAL LIABILITIES 883,024 870,669
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 (4,255) (4,373)
Common stock, par value $5.00 per share:
Authorized - 25,000,000 shares;
Issued -
6,104,246 shares at September 30, 1996;
6,048,966 shares at December 31, 1995
Outstanding -
6,032,079 shares at September 30, 1996;
6,022,966 shares at December 31, 1995 30,521 30,245
Capital surplus 5,698 5,134
Retained earnings 94,852 86,778
Cost of common stock in treasury
72,167 shares at September 30, 1996;
26,000 shares at December 31, 1995 (2,319) (822)
Net unrealized gain on securities available 1,935 2,209
for sale
TOTAL SHAREHOLDERS' EQUITY 131,432 124,171
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,014,456 $994,840
<TABLE>
<CAPTION>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
INTEREST INCOME:
Interest and fees on loans $15,757 $15,853 $47,170 $44,684
Interest and dividends on investment 3,374 2,991 9,456 8,619
securities
Other interest income 296 156 848 499
TOTAL INTEREST INCOME. 19,427 19,000 57,474 53,802
INTEREST EXPENSE:
Interest on deposits 7,518 7,502 22,467 20,917
Interest on short-term borrowings 38 71 83 217
Interest on long-term debt and
other interest bearing liabilities 81 47 241 72
TOTAL INTEREST EXPENSE 7,637 7,620 22,791 21,206
NET INTEREST INCOME 11,790 11,380 34,683 32,596
Provision for loan losses 302 109 754 457
INCOME FROM CREDIT ACTIVITIES 11,488 11,271 33,929 32,139
OTHER INCOME:
Service fees 1,419 1,300 4,052 3,750
Trust fees 618 586 1,921 1,768
Gain on sale of loans 19 13 28
Investment securities gains and losses,
net:
Investment securities held to maturity - 3 - 4
Investment securities available for 137 33 561 442
sale
TOTAL OTHER INCOME 2,174 1,941 6,547 5,992
OTHER EXPENSE:
Salaries and employee benefits 4,295 4,042 12,553 12,026
Net occupancy expense 510 757 1,650 1,847
Equipment expense 421 465 1,342 1,330
Data processing service 378 368 1,156 1,092
FDIC insurance premiums 2 (52) 6 852
Other 2,209 2,340 6,752 6,238
TOTAL OTHER EXPENSE 7,815 7,920 23,459 23,385
Income before taxes 5,847 5,292 17,017 14,746
Income tax expense 1,766 1,532 5,133 4,317
NET INCOME $4,081 $3,760 $11,884 $10,429
NET INCOME PER COMMON SHARE:
Primary $0.66 $0.61 $1.91 $1.69
Fully diluted $0.64 $0.59 $1.86 $1.64
WEIGHTED AVERAGE SHARES AND EQUIVALENTS:
Primary 6,103 6,057 6,107 6,033
Fully diluted 6,334 6,291 6,338 6,274
</TABLE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
Cash flows from operating activities:
Net income $11,884 $10,429
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,902 2,362
Provision for loan losses 754 457
Gain on sale of investment securities (561) (446)
Gain on sale of fixed assets
and other property owned (8) (7)
Gain on sale of loans (13) (28)
Increase in tax asset (121) (91)
Decrease (Increase) in interest receivable and other (313) 1,684
assets
Increase (decrease) in interest payable (409) 294
Decrease in taxes payable 64 123
Amortization of deferred net loan fees (464) (301)
Deferral of net loan fees 98 819
Increase in accounts payable
and accrued expenses 1,289 -
Total adjustments 2,218 4,866
Net cash provided by operating activities 14,102 15,295
Cash flows from investing activities:
Proceeds from the sale or maturity of:
Interest bearing deposits with other banks 2,719 5,448
Investment securities available for sale 33,824 10,916
Investment securities held to maturity 22,606 49,475
Purchase of:
Interest bearing deposits with other banks (2,404) (1,218)
Investment securities held to maturity (41,475) (34,997)
Investment securities available for sale (39,076) (11,620)
Increase in loans (12,633) (27,312)
Gross proceeds from sale of loans 10,792 4,772
Capital expenditures (2,120) (1,246)
Sale of fixed assets and other property owned 226 56
Decrease (Increase) in federal funds sold 5,510 (10,336)
Acquisition of bank (net of $562 cash received in - (1,880)
acquisition)
Net cash used in investing activities (22,031) (17,942)
Cash flows from financing activities:
Increase in deposits 8,182 9,467
Decrease (increase) in short-term borrowings, net 2,415 (12,299)
Principal payment on long-term debt (350) (350)
Proceeds from long-term debt - 5,000
Net change in other interest bearing liabilities 14 14
Dividends paid (2,714) (3,465)
Tax benefit from preferred stock dividend
and stock option activity 172 102
Issuance of common stock 840 741
Acquisition of treasury stock (2,221) (2,878)
Proceeds from sale of treasury stock 724 -
Net cash provided by (used in) financing activities 7,062 (3,668)
Net decrease in cash and due from banks $(867) $(6,315)
Cash and due from banks at beginning of period $38,796 $42,151
Cash and due from banks at end of period 37,929 35,836
Net decrease in cash and due from banks $(867) $(6,315)
Interest paid $23,200 $20,912
Income taxes paid 5,189 4,222
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE AND THREE MONTHS ENDED SEPTEMBER 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 nine months and three months
ended September 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 September 30, 1996 and
December 31, 1995 standby letters of credit issued and outstanding amounted
to $15,128,000 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 September 30, 1996, the Corporation had $103,511,000 outstanding in
unused lines of credit commitments extended to its customers. Of this
amount, $28,689,000, or 27.7%, are commitments to consumers for home equity
lines of credit and credit card limits. The remainder, $74,822,000, 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.
<TABLE>
<CAPTION>
Computations of Per Share Earnings
(In thousands, except per share amounts)
(Unaudited)
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
PRIMARY EARNINGS PER SHARE
Net income................................. $4,081 $3,760 $11,884 $10,429
Dividend requirements for preferred stock,
net of tax benefits...................... (74) (72) (222) (216)
Net earnings applicable to common stock.... 4,007 3,688 11,662 10,123
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding....................... 6,038 5,990 6,040 5,973
Common stock equivalents - options......... 65 67 67 60
Weighted average of common shares
outstanding and equivalents.............. 6,103 6,057 6,107 6,033
Primary earnings per common share.......... $0.66 $0.61 $1.91 $1.69
FULLY DILUTED EARNINGS PER SHARE
Net income................................. $4,081 $3,760 $11,884 $10,429
Additional cash contribution required to
service
debt on assumed conversion of preferred
stock (tax effected)..................... (42) (45) (130) (129)
Net earnings applicable to common stock.... 4,039 3,715 11,754 10,300
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding....................... 6,038 5,990 6,040 5,973
Common stock equivalents - options......... 65 70 67 70
Assumed conversion of preferred stock
outstanding and equivalents.............. 231 231 231 231
Weighted average of common shares
outstanding and equivalents.............. 6,334 6,291 6,338 6,274
Fully diluted earnings per common share $0.64 $0.59 $1.86 $1.64
</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 settle the vested benefits of the plan's participants. 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 received notification of the Internal Revenue Service's
approval of the termination in September 1996. 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 defined benefit plan and settlement of the active
employees' vested benefits in 1996. The active employees have several
options regarding the settlement of their vested benefits. These options
include a lump sum payment, an annuity purchase, a transfer of their vested
benefits to a defined contribution plan or a transfer of their vested
benefits to an individual retirement account. In completing the remaining
settlement of the defined benefit 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 Nine and Three Months Ended September 30, 1996 and 1995
Operations
----------
A. Nine months ended September 30, 1996 and 1995
For the first nine months of 1996, income before taxes increased by
$2,271,000, or 15.4%, compared to the same period in 1995. A $1,790,000, or
5.6% increase in the corporation's income from credit activities was a
significant factor in this achievement.
Non-interest income increased $555,000, or 9.3%, while non-interest expense
increased by $74,000, or 0.3%, resulting in a $481,000 decrease in net
operating expense for the period.
The tax provision for the first nine months of 1996 increased by $816,000,
or 18.9% when compared to the first nine months of 1995. The effective tax
rate rose to 30.2% in 1996 from 29.3% 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.
B. Three months ended September 30, 1996 and 1995
The third quarter's income before income taxes increased $555,000, or
10.5%, when compared to the same period in 1995. A $410,000 increase in
net interest income was primarily responsible for the earnings improvement.
After the income tax provision (which increased by $234,000, or 15.3%
compared to the same period in 1995) was deducted from earnings, net income
improved $321,000, or 8.5%, over the third quarter of 1995. The effective
tax rate for the third quarter of 1996 increased to 30.2% from 28.9% in the
third quarter of 1995 as levels of tax exempt investments have fallen
slightly.
Following are selected key ratios for the period:
Three Months Ended Nine Months Ended
September 30 September 30
----------------- ----------------
1996 1995 1996 1995
------- ------- -------- -----
Return on average assets (annualized).. 1.60% 1.54% 1.57% 1.47%
Return on average equity (annualized)..12.50 12.58 12.34 11.94
Dividend payout ratio (common).........31.07 28.91 31.01 30.38
Average equity to average assets.......12.82 12.25 12.72 12.32
Net Interest Income
-------------------
A. Nine months ended September 30, 1996 and 1995
Omega's net interest income for the first nine months of 1996 improved by
$2,087,000, or 6.4%, with most of the improvement due to volume increases.
Average earning assets grew by $60,710,000 since September of 1995.
Approximately 47%, or $28,777,000, of the increase resulted from the
purchase of Montour Bank, which was consummated in the third quarter of
1995. The remaining increase of $31,933,000 resulted from other growth.
Average deposits increased by $48,687,000, or 6.0% (with Montour Bank's
$24,973,000), in 1996 as compared to the previous year. Total funding
sources cost 3.19% in 1996, compared to 3.18% in 1995, while earning assets
yielded 8.06% in 1996 and in 1995, resulting in a 1 basis point decrease in
net interest margin.
B. Three months ended September 30, 1996 and 1995
The net interest margin, at 4.88% for the third quarter of 1996, was 7
basis points lower than in the third quarter of 1995. As the prime rate was
50 basis points lower during the third quarter of 1996 than in the third
quarter of 1995, yields on prime-based loans were generally lower in 1996.
As a result, yields on average earning assets were 22 basis points lower in
1996 than in 1995, while the cost to fund earning assets fell by only 15
basis points.
Following are key net interest margin ratios (annualized):
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Yield on average earning assets.... 8.02% 8.24% 8.06% 8.06%
Cost to fund earning assets........ 3.14 3.29 3.19 3.18
Net interest margin................ 4.88 4.95 4.87 4.88
Net interest margin-tax equivalent. 5.04 5.13 5.03 5.06
At September 30, 1996, Omega had $415,621,000 of earning assets scheduled
to reprice over the next twelve months as compared to $414,123,000 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 $1,093,000, 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.. Nine months ended September 30, 1996 and 1995
Other income increased by $555,000 for the first nine months of 1996 when
compared to the same period last year. Service fees increased by $302,000,
or 8.1%, and trust fees increased in 1996 by $153,000, or 8.7% over 1995.
Net security gains, at $561,000 through September of 1996, were $115,000,
or 25.8% ahead of 1995.
As a percentage of average assets, other income, net of security gains and
losses, annualized was .79% for the first nine months of 1996 as compared
to .78% in 1995.
Other expenses were $74,000, or 0.3% higher for the first nine months of
1996 than for the same period in 1995. Salaries and employee benefits
increased by $527,000, or 4.4% while occupancy, equipment and data
processing service expenses decreased by a total of $121,000, or 2.8%.
Approximately one half of the net increase of $406,000 is 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 a decrease in premium expense
of $846,000. Other non-interest expenses have increased by $514,000, or
8.2%. Expenses associated with the addition of Montour Bank account for
$269,000, or 52% of the total increase.
As a percentage of average assets, annualized expenses for the nine month
period ending September 30, 1996 was 3.10% as compared to 3.30% for the
same period in 1995.
B. Three months ended September 30, 1996 and 1995
Other income increased $233,000, or 12.0% for the third quarter of 1996 as
compared to the same period in 1995. In 1996 service fee income increased
by $119,000, or 9.2%, and trust fee income increased by $32,000, or 5.5%.
Net gains from the sale of investment securities increased by $101,000 in
1996.
As a percentage of average assets, other income net of security gains and
losses annualized was .80% for the third quarter of 1996 as compared to
.78% in 1995.
Other expenses were $105,000, or 1.3% less for the third quarter of 1996
than for the same period in 1995. Salaries and employee benefits were
$253,000, or 6.3% higher in 1996 as in 1995. Occupancy expense has
decreased by 32.6%, while equipment and data processing expense decreased
by 4.1%. FDIC insurance premiums increased in 1996, as 1995 results
reflected a refund from the FDIC. Other non-interest expenses have
decreased by 5.6%, or $131,000.
As a percentage of average assets, annualized expenses for the quarter
ended September 30, 1996 were 3.07% and for the same period in 1995 were
3.25%.
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,
1996 and December 31, 1995.
<TABLE>
<CAPTION> Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 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 $86,731 $112 $(478) $86,365
Obligations of state and
political subdivisions 33,483 168 (315) 33,336
Equity securities 4,928 3,501 (24) 8,405
Total $125,142 $3,781 $(817) $128,106
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 30, 1996 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $5,044 $ 9 $(22) $5,032
Obligations of state and
political subdivisions 6,907 12 (41) 6,878
Corporate securities 27,214 49 (161) 27,102
Mortgage backed securities 71,724 163 (655) 71,231
Investment in low-income housing 441 - - 441
Equity securities (non-marketable) 4,090 - - 4,090
Total $115,420 $233 $(879) $114,774
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 September
30, 1996 and December 31, 1995 were 24.0% and 22.1%, respectively.
Securities maturing or repriceable in one year or less comprised 38.7% of
the total investment securities of $243,526,000 as of September 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 September 30, 1996.
3. Interest Bearing Deposits with Other Financial Institutions
As of September 30, 1996, Omega had $528,000 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 September 30, 1996 balance.
4. Loans
Net loans in the first nine months remained relatively flat, with only a
modest increase of 0.2%, bringing the total to $692,923,000.
Changes in the allowance for loan losses for the nine months ended
September 30, 1996 and 1995 were as follows (in thousands):
1996 1995
--------- ---------
Balance at January 1.................... $11,668 $11,057
Addition of Montour Bank................ - 416
Charge-offs............................. (866) (573)
Recoveries.............................. 295 237
--------- ---------
Net charge-offs..................... (571) (336)
Provision for loan losses............... 754 457
--------- ---------
Balance at September 30................. $11,851 $11,594
========= =========
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 September 30, 1996 and 1995
represented 1.68% and 1.64%, respectively, of the total loans outstanding,
net of unearned interest.
Non-performing Loans
-------------------
(In thousands)
September 30, December 31,
1996 1995
----------- ----------
Non-accrual loans........................... $1,846 $1,932
Accruing loans past due 90 days or more..... 1,644 2,697
Restructured loans...................... 14 -
----------- ----------
Total non-performing loans.................. $3,504 $4,629
=========== ==========
Non-performing loans as percent of allowance 29.6% 39.7%
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, 1996, total
deposits increased by $8,182,000 or 1.0%, with interest bearing funds
increasing $11.9 million and non-interest bearing deposits decreasing by
$3.7 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 ratios to the minimum regulatory requirements
for the periods indicated.
Minimum
September 30,December 31, Regulatory
Omega Financial Corp 1996 1995 Requirements
-------------------- ---- ---- ------------
Risk based capital ratios:
Tier 1................... 18.35% 17.21% 4.00%
Total capital............ 19.61 18.47 8.00
Leverage ratio............. 12.39 11.85 3.00
Omega Bank, N.A.
----------------
Risk based capital ratios:
Tier 1................... 17.91% 16.48% 4.00%
Total capital............ 19.16 17.73 8.00
Leverage ratio............. 11.86 11.38 3.00
Hollidaysburg Trust Company
---------------------------
Risk based capital ratios:
Tier 1................... 15.60% 14.98% 4.00%
Total capital............ 16.86 16.24 8.00
Leverage ratio............. 10.98 10.58 3.00
Penn Central National Bank
--------------------------
Risk based capital ratios:
Tier 1................... 20.28% 19.02% 4.00%
Total capital............ 21.55 20.29 8.00
Leverage ratio............. 12.18 11.74 3.00
Montour Bank
------------
Risk based capital ratios:
Tier 1................... 10.01% 9.71% 4.00%
Total capital............ 11.18 10.97 8.00
Leverage ratio............. 8.27 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 September 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%,
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
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Omega
Financial Corporation's third quarter 1996 10-Q and is qualified in its entirety
to such 10-Q.
</LEGEND>
<CIK> 0000705671
<NAME> OMEGA FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 37,929
<INT-BEARING-DEPOSITS> 528
<FED-FUNDS-SOLD> 6,950
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 128,106
<INVESTMENTS-CARRYING> 115,420
<INVESTMENTS-MARKET> 114,774
<LOANS> 704,774
<ALLOWANCE> 11,851
<TOTAL-ASSETS> 1,014,456
<DEPOSITS> 858,364
<SHORT-TERM> 3,960
<LIABILITIES-OTHER> 11,095
<LONG-TERM> 9,605
0
745
<COMMON> 130,687
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,014,456
<INTEREST-LOAN> 47,170
<INTEREST-INVEST> 9,456
<INTEREST-OTHER> 848
<INTEREST-TOTAL> 57,474
<INTEREST-DEPOSIT> 22,467
<INTEREST-EXPENSE> 22,791
<INTEREST-INCOME-NET> 34,683
<LOAN-LOSSES> 754
<SECURITIES-GAINS> 561
<EXPENSE-OTHER> 23,459
<INCOME-PRETAX> 17,017
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,884
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.86
<YIELD-ACTUAL> 4.87
<LOANS-NON> 1,846
<LOANS-PAST> 1,644
<LOANS-TROUBLED> 14
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,668
<CHARGE-OFFS> 866
<RECOVERIES> 295
<ALLOWANCE-CLOSE> 11,851
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<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
