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, 1997
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)
(814) 231-7680
Registant's Telephone Numer,
Including Area Code
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, 1997:
Common Stock, $5.00 par value - 8,911,156 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 1997 1996
Cash and due from banks $40,065 $30,380
Interest bearing deposits with other banks 737 512
Federal funds sold 14,525 18,075
Investment securities held to maturity
(Market value:
$119,935 and $114,171, respectively) 119,971 114,192
Investment securities available for sale 133,326 127,654
Total loans 691,227 698,323
Less: Unearned discount (1,353) (1,726)
Allowance for loan losses (11,739) (11,820)
Net loans 678,135 684,777
Premises and equipment, net 17,812 17,638
Other assets 14,789 14,117
TOTAL ASSETS $1,019,360 $1,007,345
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $114,904 $114,870
Interest bearing 738,278 731,160
Total deposits 853,182 846,030
Short-term borrowings 6,295 5,292
Other liabilities 10,693 10,332
ESOP debt 4,125 4,213
Long-term debt 5,000 5,000
Other interest bearing liabilities 539 593
TOTAL LIABILITIES 879,834 871,460
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 (3,252) (3,375)
Common stock, par value $5.00 per share:
Authorized - 25,000,000 shares
Issued -
9,021,899 shares at June 30, 1997;
6,104,246 shares at December 31, 1996
Outstanding -
8,996,038 shares at June 30, 1997;
6,033,926 shares at December 31, 1996 45,109 30,521
Capital surplus 1,519 5,649
Retained earnings 88,718 97,749
Cost of common stock in treasury
25,861 shares at June 30, 1997;
70,320 shares at December 31, 1996 (796) (2,266)
Net unrealized gain on securities available for sale 3,228 2,607
TOTAL SHAREHOLDERS' EQUITY 139,526 135,885
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,019,360 $1,007,345
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
Three Months Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on loans $15,373 $15,695 $30,433 $31,413
Interest and dividends on investment 3,606 3,131 6,990 6,082
securities
Other interest income 229 317 533 552
TOTAL INTEREST INCOME. 19,208 19,143 37,956 38,047
INTEREST EXPENSE:
Interest on deposits 7,270 7,465 14,422 14,949
Interest on short-term borrowings 68 15 134 45
Interest on long-term debt and
other interest bearing liabilities 76 80 152 160
TOTAL INTEREST EXPENSE 7,414 7,560 14,708 15,154
NET INTEREST INCOME 11,794 11,583 23,248 22,893
Provision for loan losses 257 225 515 452
INCOME FROM CREDIT ACTIVITIES 11,537 11,358 22,733 22,441
OTHER INCOME:
Service fees 1,514 1,355 2,903 2,633
Trust fees 631 633 1,414 1,303
Gain on sale of loans 2 9 2 13
Investment securities gains and losses,
net:
Investment securities held to maturity 2 - 2 -
Investment securities available for 348 212 510 424
sale
TOTAL OTHER INCOME 2,497 2,209 4,831 4,373
OTHER EXPENSE:
Salaries and employee benefits 4,287 4,110 8,525 8,258
Net occupancy expense 517 572 1,068 1,140
Equipment expense 448 439 882 921
Data processing service 375 403 765 778
Other 2,094 2,323 4,341 4,547
TOTAL OTHER EXPENSE 7,721 7,847 15,581 15,644
Income before taxes 6,313 5,720 11,983 11,170
Income tax expense 1,952 1,745 3,721 3,367
NET INCOME $4,361 $3,975 $8,262 $7,803
NET INCOME PER COMMON SHARE:
Primary $0.47 $0.43 $0.88 $0.84
Fully diluted $0.45 $0.41 $.086 $0.81
WEIGHTED AVERAGE SHARES AND EQUIVALENTS:
Primary 9,166 9,165 9,175 9,166
Fully diluted 9,537 9,511 9,564 9,512
All share and per share information has been restated to give effect to the 3
for 2 stock split on April 30, 1997.
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
SIX MONTHS
ENDED
JUNE 30,
1997 1996
Cash flows from operating activities:
Net income $8,262 $7,803
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,262 1,316
Provision for loan losses 515 452
Gain on sale of investment securities (512) (425)
Gain on sale of fixed assets
and other property owned (25) (3)
Gain on sale of loans (2) (13)
Increase in deferred tax asset (15) (65)
Increase in interest receivable and other assets (1,251) (658)
Decrease in interest payable (214) (268)
Increase in taxes payable (615) 105
Amortization of deferred net loan fees (112) (210)
Deferral of net loan fees 120 64
Increase in accounts payable
and accrued expenses 1,137 724
Total adjustments 288 1,019
Net cash provided by operating activities 8,550 8,822
Cash flows from investing activities:
Proceeds from the sale or maturity of:
Interest bearing deposits with other banks 511 2,322
Investment securities available for sale 21,648 24,122
Investment securities held to maturity 16,814 16,350
Purchase of:
Interest bearing deposits with other banks (736) (2,151)
Investment securities held to maturity (22,574) (26,912)
Investment securities available for sale (26,112) (29,188)
Decrease (increase) in loans 5,890 (13,375)
Gross proceeds from sale of loans 230 10,396
Capital expenditures (1,053) (1,456)
Sale of fixed assets and other property owned 178 226
Decrease (increase) in federal funds sold 3,550 (4,045)
Net cash used in investing activities (1,654) (23,711)
Cash flows from financing activities:
Increase in deposits, net 7,152 13,984
Increase in short-term borrowings, net 1,003 757
Principal payment on long-term debt - (350)
Net change in other interest bearing liabilities (54) (12)
Dividends paid (2,998) (1,345)
Tax benefit from preferred stock dividend
and stock option activity 203 136
Issuance of common stock 164 884
Acquisition of treasury stock (4,285) (1,825)
Proceeds from sale of treasury stock 1,604 573
Net cash used in financing activities 2,789 12,802
Net increase in cash and due from banks $9,685 $(2,087)
Cash and due from banks at beginning of period $30,380 $38,796
Cash and due from banks at end of period 40,065 36,709
Net increase in cash and due from banks $9,685 $(2,087)
Interest paid $14,922 $12,889
Income taxes paid 3,925 3,461
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
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, 1997, are not necessarily indicative of the results that may
be experienced for the year ending December 31, 1997 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, 1996.
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. Common Stock Split
On March 25, 1997, the Board of Directors declared a three for two stock
split on the Company's common stock, effected in the form of a dividend to
shareholders of record on April 18, 1997. The split was paid on April 30,
1997, first via the reissuance of shares in treasury, to the extent
available, with the remainder of the split paid via authorized but unissued
shares. All share and per share data presented has been restated to reflect
the split.
C. Current and Pending Accounting Changes
Statement of Financial Accounting Standards No. 125 - Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities
Omega adopted Statement of Financial Accounting Standards (SFAS) No. 125
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", as of January 1, 1997. This statement
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishment of liabilities. These standards are
based on a consistent application of a financial-components approach that
focuses on control. The Financial Accounting Standards Board (FASB) has
also issued Statement No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125", which delays adoption of certain
components of Statement No. 125 until January 1, 1998. There was no
material effect on the Corporation's financial condition or results of
operation upon the partial adoption of this pronouncement, and management
expects no material effect on the Corporation's financial condition or
results of operation upon complete adoption.
Statement of Financial Accounting Standards No. 128 - Earnings per Share
The FASB has issued Statement No. 128, "Earnings per Share", which is
effective for financial statements for both interim and annual periods
ending after December 15, 1997. Early adoption is prohibited. The statement
replaces primary earnings per share (EPS) with basic EPS and changes the
presentation requirements of per-share amounts relating to accounting
changes, discontinued operations and extraordinary items. Management
believes that the adoption of this statement will not have a material
effect on Omega's EPS.
Statement of Financial Accounting Standards No. 130 - Reporting
Comprehensive Income
The FASB has issued Statement No. 130, "Reporting of Comprehensive Income",
which is effective for fiscal years beginning after December 15, 1997. This
statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. Comprehensive income, as defined by Statement 130, is the total
of net income and all other nonowner changes in equity. Management believes
that the adoption of this statement will not have a material effect on the
Corporation's financial condition or results of operations.
D. 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, 1997 and
December 31, 1996 standby letters of credit issued and outstanding amounted
to $15,530,000 and $15,197,000, 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, 1997, the Corporation had $121,471,000 outstanding in unused
lines of credit commitments extended to its customers. Of this amount,
$30,125,000, or 24.8%, are commitments to consumers for home equity lines
of credit and credit card limits. The remainder, $91,346,000, are
commercial commitments.
E. Earnings Per Share Data:
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 during each period. 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. All
share and per share data presented has been restated to give effect to the
three for two stock split paid on April 30, 1997.
Computations of Per Share Earnings
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
PRIMARY EARNINGS PER SHARE
Net income $4,361 $3,975 $8,262 $7,803
Dividend requirements for
preferred stock, net of tax
benefits (76) (74) (151) (148)
Net earnings applicable to common
stock 4,285 3,901 8,111 7,655
Shares and equivalents
outstanding:
Weighted average number of common
shares outstanding 8,999 9,063 9,026 9,062
Common stock equivalents - options 167 102 149 104
Weighted average of common shares
outstanding and equivalents 9,166 9,165 9,175 9,166
Primary earnings per common share $0.47 $0.43 $0.88 $0.84
FULLY DILUTED EARNINGS PER SHARE
Net income $4,361 $3,975 $8,262 $7,803
Additional cash contribution
required to service debt on
assumed conversion of preferred
stock (tax effected) (51) (52) (81) (88)
Net earnings applicable to common
stock 4,310 3,923 8,181 7,715
Shares and equivalents
outstanding:
Weighted average number of common
shares outstanding 8,999 9,063 9,026 9,062
Common stock equivalents - options 192 102 192 104
Assumed conversion of preferred
stock outstanding and equivalents 346 346 346 346
Weighted average of common shares
outstanding and equivalents 9,537 9,511 9,564 9,512
Fully diluted earnings per common
share $0.45 $0.41 $0.86 $0.81
F. 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, 1996. A copy of this report can be obtained
from David N. Thiel, Senior Vice President, Omega Financial Corporation,
366 Walker Drive, State College, Pennsylvania 16801.
G. Forward Looking Statements
The information 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 1996
Annual Report or in Omega's Annual Report on Form 10-K for the year ended
December 31, 1996. Copies of these reports may be obtained from Omega upon
request and without charge (except for the exhibits thereto) as described
in Note F above.
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, 1997 and 1996
Operations
A. Six months ended June 30, 1997 and 1996
For the first six months of 1997, income before taxes increased by
$813,000, or 7.3%, compared to the same period in 1996. A $458,000, or
10.5% increase in the Corporation's non-interest income was a significant
factor in this achievement.
Income from credit activities increased $292,000, or 1.3%, while non-
interest expense decreased by $63,000, or 0.4%.
The tax provision for the first six months of 1997 increased by $354,000,
or 10.5% when compared to the first six months of 1996. The effective tax
rate rose to 31.1% in 1997 from 30.1% in 1996, as a consequence of a
continued reduction in tax-exempt income resulting from a lower level of
tax-exempt investments in 1997 than in 1996. Net income increased by
$459,000, or 5.9%, in the first six months of 1997 as compared to the same
period in 1996.
B. Three months ended June 30, 1997 and 1996
The second quarter's income before income taxes increased $593,000, or
10.4%, when compared to the same period in 1996. A $288,000 increase in
non-interest income was partially responsible for the increase. In
addition, income from credit activities increased by $179,000, or 1.6%,
while non-interest expense decreased by $126,000, or 1.6%.
After the income tax provision (which increased by $207,000, or 11.9%
compared to the same period in 1996) was deducted from earnings, net income
improved $386,000, or 9.7%, over the second quarter of 1996. The effective
tax rate for the second quarter of 1997 increased to 30.9% from 30.5% in
the second quarter of 1996 as levels of tax exempt investments have fallen
slightly.
Following are selected key ratios for the period:
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
Return on average assets (annualized).... 1.72% 1.57% 1.64% 1.55%
Return on average equity (annualized).... 12.64 12.36 12.00 12.26
Dividend payout ratio (common)........... 33.04 31.90 34.22 30.98
Average equity to average assets......... 13.62 12.68 13.65 12.65
Net Interest Income
A. Six months ended June 30, 1997 and 1996
Omega's net interest income for the first six months of 1997 improved by
$355,000, or 1.6%, with most of the improvement due to rate changes.
Average earning assets grew by $8,931,000 since June of 1996. The 0.9%
increase in average earning assets resulted primarily from investment
securities activity, as average loans outstanding decreased by $13,763,000,
or 2.0%. While the Corporation has experienced growth in the commercial
loan portfolio, outstanding consumer loans have declined, particularly
those secured by real estate. Average deposits decreased by $9,136,000, or
1.1%, in 1997 as compared to the previous year. Total cost to fund earning
assets was 3.11% in 1997, compared to 3.19% in 1996, while earning assets
yielded 7.99% in 1997 compared to 8.06% in 1996, resulting in a 1 basis
point increase in net interest margin.
B. Three months ended June 30, 1997 and 1996
The net interest margin, at 4.94% for the second quarter of 1997, was 9
basis points higher than the second quarter of 1996, with a $1,260,000 or
0.1% increase in average earning assets resulting in a 1.8% increase in net
interest income.
Following are key net interest margin ratios (annualized):
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Yield on average earning assets 8.04% 8.02% 7.99% 8.06%
Cost to fund earning assets 3.10 3.17 3.11 3.19
Net interest margin 4.94 4.85 4.88 4.87
Net interest margin - tax equivalent 5.11 5.00 5.04 5.03
At June 30, 1997, Omega had $435,194,000 of earning assets scheduled to
reprice over the next twelve months as compared to $433,374,000 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 $1,026,000, or 2.2%, assuming that the volumes do not grow and the mix
of the balance sheet does not change. Conversely, a reduction in rates of
100 basis points would have a negative impact of $941,000, or 2.0%.
Other Income and Expense
A.. Six months ended June 30, 1997 and 1996
Other income increased by $458,000 for the first six months of 1997 when
compared to the same period last year. Service fees increased by $270,000,
or 10.3%, and trust fees increased in 1997 by $111,000, or 8.5% over 1996.
Net security gains, at $510,000 through June of 1997, were 20.8% ahead of
1996.
As a percentage of average assets, annualized other income, net of security
gains and losses, was .86% for the first six months of 1997 as compared to
.79% in 1996.
Other expenses were $63,000, or 0.4% lower for the first six months of 1997
than for the same period in 1996. Salaries and employee benefits increased
by $267,000, or 3.2% while occupancy, equipment, data processing service
and other expenses decreased by a total of $330,000, or 4.5%.
As a percentage of average assets, annualized expenses for the six month
period ending June 30, 1997 was 3.09% as compared to 3.12% for the same
period in 1996.
B. Three months ended June 30, 1997 and 1996
Other income increased $288,000, or 13.0% for the second quarter of 1997 as
compared to the same period in 1996. Service fee income in 1997 outpaced
that in 1996 by $159,000, or 11.7%, while trust fee income was
approximately the same in the second quarter of 1997 as in the second
quarter of 1996. Net gains from the sale of investment securities increased
by $138,000 in 1997.
As a percentage of average assets, annualized other income net of security
gains and losses was .85% for the second quarter of 1997 as compared to
.79% in 1996.
Other expenses were $126,000, or 1.6% lower for the second quarter of 1997
than for the same period in 1996. Salaries and employee benefits were
$177,000, or 4.3% higher in 1997 than in 1996. Occupancy expense has
decreased by 9.6%, while equipment and data processing expense decreased by
2.3%. Other non-interest expenses have decreased by 9.9%, or $229,000.
As a percentage of average assets, annualized expenses for the quarter
ended June 30, 1997 were 3.05% and for the same period in 1996 were 3.09%.
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, 1997
and December 31, 1996.
<TABLE>
<CAPTION>
<S> Securities Classified as Available for Sale
Gross Gross Estimated
<C> Amortized Unrealized Unrealized Market
June 30, 1997 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $83,696 $118 $(210) $83,604
Obligations of state and
political subdivisions 39,681 200 (82) 39,799
Equity securities 4,995 4,933 (5) 9,923
Total $128,372 $5,251 $(297) $133,326
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
June 30, 1997 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $19,580 $ 54 $(20) $19,614
Obligations of state and
political subdivisions 6,105 7 (18) 6,094
Corporate securities 31,623 108 (87) 31,644
Mortgage backed securities 58,036 226 (306) 57,956
Investment in low-income housing 495 - - 495
Equity securities (non-marketable) 4,132 - - 4,132
Total $119,971 $395 $(431) $119,935
Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1996 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $86,363 $142 $(313) $86,192
Obligations of state and
political subdivisions 32,243 192 (206) 32,229
Equity securities 5,049 4,231 (47) 9,233
Total $123,655 $4,565 $(566) $127,654
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1996 Cost Gains Losses Value
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations $7,047 $24 $(22) $7,049
Obligations of state and
political subdivisions 6,815 12 (20) 6,807
Corporate securities 27,880 96 (111) 27,865
Mortgage backed securities 67,921 297 (297) 67,921
Investment in low-income housing 438 - - 438
Equity securities (non-marketable) 4,091 - - 4,091
Total $114,192 $429 $(450) $114,171
</TABLE>
Total investment securities as a percentage of total assets at June 30,
1997 and December 31, 1996 were 24.8% and 24.0%, respectively. Securities
maturing or repricing in one year or less comprised 50.6% of the total
investment securities of $253,297,000 as of June 30, 1997, as compared to
40.1% of total investment securities of $241,846,000 as of December 31,
1996. There was $215,000 in investments in instruments of foreign countries
on June 30, 1997.
3. Interest Bearing Deposits with Other Financial Institutions
As of June 30, 1997, Omega had $737,000 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, 1997 balance.
4. Loans
Net loans in the first six months of 1997 fell by $6,642,000, or 1.0%,
bringing the total to $678,135,000 at June 30, 1997. The primary cause of
this decrease was increasing competitive pressure in consumer lending.
Changes in the allowance for loan losses for the six months ended June 30,
1997 and 1996 were as follows (in thousands):
1997 1996
Balance at January 1.................... $11,820 $11,668
Charge-offs............................. (671) (680)
Recoveries.............................. 75 207
Net charge-offs..................... (596) (473)
Provision for loan losses............... 515 452
Balance at June 30...................... $11,739 $11,647
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, 1997 and 1996 represented
1.70% and 1.65%, respectively, of the total loans outstanding, net of
unearned interest.
Set forth below is an analysis of Omega's non-performing loans as of June
30, 1997 as compared to December 31, 1996.
Non-performing Loans
(In thousands)
June 30, December 31,
1997 1996
Non-accrual loans....................... $4,826 $2,079
Accruing loans past due 90 days or more. 1,153 1,241
Restructured loans...................... 34 14
Total non-performing loans.............. $6,013 $3,334
Non-performing loans as percent
of allowance........................... 51.2% 28.2%
The increase in non-performing loans from December 31, 1996 to June 30,
1997 is primarily due to the addition of one large commercial loan with a
total outstanding balance of $2,632,000 to the non-accrual category.
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, 1997, total
deposits increased by $7,152,000 or 0.9%, with essentially the entire
increase consisting of 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.
<TABLE>
<CAPTION>
<S>
<C>
MINIMUM MINIMUM
REQUIREMENT REGULATORY
FOR CAPITAL REQUIREMENTS TO BE
ACTUAL ADEQUACY PURPOSES "WELL CAPITALIZED"
OMEGA FINANCIAL CORPORATION AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
As of June 30, 1997:
Total Capital $142,405 21.0% $54,188 8.0% $67,735 10.0%
(to Risk Weighted
Assets)
Tier I Capital 133,865 19.8% 27,094 4.0% 40,641 6.0%
(to Risk Weighted
Assets)
Tier I Capital 133,865 13.3% 40,350 4.0% 50,438 5.0%
(to Average Assets)
As of December 31, 1996:
Total Capital $139,411 20.3% $54,898 8.0% $68,622 10.0%
(to Risk Weighted
Assets)
Tier I Capital 130,759 19.1% 27,449 4.0% 41,173 6.0%
(to Risk Weighted
Assets)
Tier I Capital 130,759 13.0% 40,363 4.0% 50,453 5.0%
(to Average Assets)
OMEGA BANK
As of June 30, 1997:
Total Capital $74,954 19.6% $30,612 8.0% $38,265 10.0%
(to Risk Weighted
Assets)
Tier I Capital 70,131 18.3% 15,306 4.0% 22,959 6.0%
(to Risk Weighted
Assets)
Tier I Capital 70,131 12.5% 22,531 4.0% 28,164 5.0%
(to Average Assets)
As of December 31, 1996:
Total Capital $73,644 18.9% $31,177 8.0% $38,971 10.0%
(to Risk Weighted
Assets)
Tier I Capital 68,732 17.6% 15,588 4.0% 23,383 6.0%
(to Risk Weighted
Assets)
Tier I Capital 68,732 12.0% 22,902 4.0% 28,627 5.0%
(to Average Assets)
HOLLIDAYSBURG TRUST COMPANY
As of June 30, 1997:
Total Capital $30,746 18.0% $13,660 8.0% $17,076 10.0%
(to Risk Weighted
Assets)
Tier I Capital 28,599 16.8% 6,830 4.0% 10,245 6.0%
(to Risk Weighted
Assets)
Tier I Capital 28,599 11.7% 9,775 4.0% 12,218 5.0%
(to Average Assets)
As of December 31, 1996:
Total Capital $29,786 17.5% $13,602 8.0% $17,002 10.0%
(to Risk Weighted
Assets)
Tier I Capital 27,648 16.3% 6,801 4.0% 10,201 6.0%
(to Risk Weighted
Assets)
Tier I Capital 27,648 11.4% 9,687 4.0% 12,108 5.0%
(to Average Assets)
PENN CENTRAL NATIONAL BANK
As of June 30, 1997:
Total Capital $25,095 23.3% $8,625 8.0% $10,781 10.0%
(to Risk Weighted
Assets)
Tier I Capital 23,727 22.0% 4,312 4.0% 6,468 6.0%
(to Risk Weighted
Assets)
Tier I Capital 23,727 12.7% 7,473 4.0% 9,341 5.0%
(to Average Assets)
As of December 31, 1996:
Total Capital $24,943 22.2% $9,000 8.0% $11,251 10.0%
(to Risk Weighted
Assets)
Tier I Capital 23,516 20.9% 4,500 4.0% 6,750 6.0%
(to Risk Weighted
Assets)
Tier I Capital 23,516 12.6% 7,444 4.0% 9,306 5.0%
(to Average Assets)
</TABLE>
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, 1997, 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
The Annual Meeting of Shareholders of Omega was held on April 29, 1997. At
the Annual Meeting, the shareholders elected a class of directors for a
term of three years, as described below.
Name For Withhold
Authority
Raymond F. Agostinelli 4,593,284 45,789
Merle K. Evey 4,602,548 36,525
David B. Lee 4,602,460 36,613
The terms of the following directors continued after the annual meeting:
Robert T. Gentry, Philip E. Gingerich, David K. Goodman, Sr., D. Stephen
Martz, James W. Powers, Sr., George R. Lovette, Robert N. Oliver, Stanton
R. Sheetz, and Robert A. Szeyller.
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 2ND QUARTER 1997 FORM 10-Q AND IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q FILING.
</LEGEND>
<CIK> 0000705671
<NAME> OMEGA FINANCIAL CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 40,065
<INT-BEARING-DEPOSITS> 737
<FED-FUNDS-SOLD> 14,525
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 133,326
<INVESTMENTS-CARRYING> 119,971
<INVESTMENTS-MARKET> 119,935
<LOANS> 689,874
<ALLOWANCE> 11,739
<TOTAL-ASSETS> 1,019,360
<DEPOSITS> 853,182
<SHORT-TERM> 6,295
<LIABILITIES-OTHER> 10,693
<LONG-TERM> 9,125
0
1,748
<COMMON> 137,778
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,019,360
<INTEREST-LOAN> 30,433
<INTEREST-INVEST> 6,990
<INTEREST-OTHER> 533
<INTEREST-TOTAL> 37,956
<INTEREST-DEPOSIT> 14,422
<INTEREST-EXPENSE> 14,708
<INTEREST-INCOME-NET> 23,248
<LOAN-LOSSES> 515
<SECURITIES-GAINS> 512
<EXPENSE-OTHER> 15,581
<INCOME-PRETAX> 11,983
<INCOME-PRE-EXTRAORDINARY> 8,262
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,262
<EPS-PRIMARY> .88
<EPS-DILUTED> .86
<YIELD-ACTUAL> 4.88
<LOANS-NON> 4,826
<LOANS-PAST> 1,153
<LOANS-TROUBLED> 34
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,820
<CHARGE-OFFS> 671
<RECOVERIES> 75
<ALLOWANCE-CLOSE> 11,739
<ALLOWANCE-DOMESTIC> 11,739
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
