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, 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
Registrant's Telephone Number,
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 requiested to file such reports), and (2)
has been subject to fuch 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 5, 1997:
Common Stock, $5.00 par value - 8,855,735 shares
PART I. Financial Information
Item 1. Financial Statements
<TABLE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
<S>
<C>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
Cash and due from banks $34,151 $30,380
Interest bearing deposits with other banks 902 512
Federal funds sold 3,750 18,075
Investment securities held to maturity
(Market value:
$126,476 and $114,171, respectively) 126,012 114,192
Investment securities available for sale 135,120 127,654
Total loans 698,440 698,323
Less: Unearned discount (1,141) (1,726)
Allowance for loan losses (11,775) (11,820)
Net loans 685,524 684,777
Premises and equipment, net 17,978 17,638
Other assets 13,899 14,117
TOTAL ASSETS $1,017,336 $1,007,345
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $113,718 $114,870
Interest bearing 737,035 731,160
Total deposits 850,753 846,030
Short-term borrowings 8,915 5,292
Other liabilities 10,229 10,332
ESOP debt 4,080 4,213
Long-term debt 5,000 5,000
Other interest bearing liabilities 533 593
TOTAL LIABILITIES 879,510 871,460
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 (3,189) (3,375)
Common stock, par value $5.00 per share:
Authorized - 25,000,000 shares
Issued -
9,040,812 shares at September 30, 1997;
9,156,369 shares at December 31, 1996
Outstanding -
8,852,147 shares at September 30, 1997;
9,050,889 shares at December 31, 1996 45,204 30,521
Capital surplus 1,721 5,649
Retained earnings 91,470 97,749
Cost of common stock in treasury
188,665 shares at September 30, 1997;
105,480 shares at December 31, 1996 (6,543) (2,266)
Net unrealized gain on securities available for sale 4,163 2,607
TOTAL SHAREHOLDERS' EQUITY 137,826 135,885
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,017,336 $1,007,345
</TABLE>
All share information has been restated to give effect to the 3 for 2 stock
split on April 30, 1997.
<TABLE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<CAPTION>
<S>
<C>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on loans $15,521 $15,757 $45,954 $47,170
Interest and dividends on investment securities 3,673 3,374 10,663 9,456
Other interest income 301 296 834 848
TOTAL INTEREST INCOME. 19,495 19,427 57,451 57,474
INTEREST EXPENSE:
Interest on deposits 7,487 7,518 21,909 22,467
Interest on short-term borrowings 83 38 217 83
Interest on long-term debt and
other interest bearing liabilities 81 81 233 241
TOTAL INTEREST EXPENSE 7,651 7,637 22,359 22,791
NET INTEREST INCOME 11,844 11,790 35,092 34,683
Provision for loan losses 258 302 773 754
INCOME FROM CREDIT ACTIVITIES 11,586 11,488 34,319 33,929
OTHER INCOME:
Service fees 1,563 1,419 4,466 4,052
Trust fees 623 618 2,037 1,921
Gain on sale of loans (1) 1 13
Investment securities gains and losses, net:
Investment securities held to maturity - - 2 -
Investment securities available for sale 202 137 712 561
TOTAL OTHER INCOME 2,387 2,174 7,218 6,547
OTHER EXPENSE:
Salaries and employee benefits 4,397 4,295 12,922 12,553
Net occupancy expense 554 510 1,622 1,650
Equipment expense 488 421 1,370 1,342
Data processing service 389 378 1,154 1,156
Other 2,169 2,211 6,510 6,758
TOTAL OTHER EXPENSE 7,997 7,815 23,578 23,459
Income before taxes 5,976 5,847 17,959 17,017
Income tax expense 1,808 1,766 5,529 5,133
NET INCOME $4,168 $4,081 $12,430 $11,884
NET INCOME PER COMMON SHARE:
Primary $0.45 $0.44 $1.34 $1.27
Fully diluted $0.43 $0.43 $1.29 $1.24
WEIGHTED AVERAGE SHARES AND EQUIVALENTS:
Primary 9,081 9,155 9,141 9,161
Fully diluted 9,427 9,501 9,514 9,507
All share and per share information has been restated to give effect to
the 3 for 2 stock split on April 30, 1997.
</TABLE>
<TABLE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
<S>
<C>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
Cash flows from operating activities:
Net income $12,430 $11,884
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,867 1,902
Provision for loan losses 773 754
Gain on sale of investment securities (714) (561)
Gain on sale of fixed assets
and other property owned (51) (8)
Gain on sale of loans (1) (13)
Decrease (increase) in deferred tax asset 22 (121)
Increase in interest receivable and other assets (1,117) (313)
Decrease in interest payable (170) (409)
Decrease (increase) in taxes payable (625) 64
Amortization of deferred net loan fees (203) (464)
Deferral of net loan fees (costs) (55) 98
Increase in accounts payable
and accrued expenses 664 1,289
Total adjustments 390 2,218
Net cash provided by operating activities 12,820 14,102
Cash flows from investing activities:
Proceeds from the sale or maturity of:
Interest bearing deposits with other banks 550 2,719
Investment securities available for sale 35,571 33,824
Investment securities held to maturity 28,469 22,606
Purchase of:
Interest bearing deposits with other banks (940) (2,404)
Investment securities held to maturity (40,225) (41,475)
Investment securities available for sale (40,310) (39,076)
Increase in loans (1,559) (12,633)
Gross proceeds from sale of loans 298 10,792
Capital expenditures (1,676) (2,120)
Sale of fixed assets and other property owned 364 226
Decrease in federal funds sold 14,325 5,510
Net cash used in investing activities (5,133) (22,031)
Cash flows from financing activities:
Increase in deposits, net 4,723 8,182
Increase in short-term borrowings, net 3,623 2,415
Principal payment on long-term debt - (350)
Net change in other interest bearing liabilities (60) 14
Dividends paid (4,538) (2,714)
Tax benefit from preferred stock dividend
and stock option activity 302 172
Issuance of common stock 462 840
Acquisition of treasury stock (10,110) (2,221)
Proceeds from reissuance of treasury stock 1,682 724
Net cash provided by (used in) financing activities (3,916) 7,062
Net increase (decrease) in cash and due from banks $3,771 $(867)
Cash and due from banks at beginning of period $30,380 $38,796
Cash and due from banks at end of period 34,151 37,929
Net increase (decrease) in cash and due from banks $3,771 $(867)
Interest paid $22,529 $23,200
Income taxes paid 5,187 5,189
</TABLE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE AND THREE MONTHS ENDED SEPTEMBER 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 nine months and three months
ended September 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 calculation.
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 September 30, 1997 and
December 31, 1996 standby letters of credit issued and outstanding amounted
to $15,426,000 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 September 30, 1997, the Corporation had $126,835,000 outstanding in
unused lines of credit commitments extended to its customers. Of this
amount, $30,211,000, or 23.8%, are commitments to consumers for home equity
lines of credit and credit card limits. The remainder, $96,624,000, 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.
<TABLE>
Computations of Per Share Earnings
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
<S>
<C>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
PRIMARY EARNINGS PER SHARE
Net income $4,168 $4,081 $12,430 $11,884
Dividend requirements for preferred stock,
net of tax benefits (76) (74) (227) (222)
Net earnings applicable to common stock 4,092 4,007 12,203 11,662
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding 8,893 9,057 8,981 9,060
Common stock equivalents - options 188 98 160 101
Weighted average of common shares
outstanding and equivalents 9,081 9,155 9,141 9,161
Primary earnings per common share $0.45 $0.44 $1.34 $1.27
FULLY DILUTED EARNINGS PER SHARE
Net income $4,168 $4,081 $12,430 $11,884
Additional cash contribution required to service
debt on assumed conversion of preferred
stock (tax effected) (40) (42) (121) (130)
Net earnings applicable to common stock 4,128 4,039 12,309 11,754
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding 8,893 9,057 8,981 9,060
Common stock equivalents - options 188 98 187 101
Assumed conversion of preferred stock
outstanding and equivalents 346 346 346 346
Weighted average of common shares
outstanding and equivalents 9,427 9,501 9,514 9,507
Fully diluted earnings per common share $0.43 $0.43 $1.29 $1.24
</TABLE>
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 Nine and Three Months Ended September 30, 1997 and 1996
Operations
A. Nine months ended September 30, 1997 and 1996
For the first nine months of 1997, income before taxes increased by
$942,000, or 5.5%, compared to the same period in 1996. A $671,000, or
10.3% increase in the Corporation's non-interest income was a significant
factor in this achievement.
Income from credit activities increased $390,000, or 1.2%, while non-
interest expense increased by $119,000, or 0.5%.
The tax provision for the first nine months of 1997 increased by $396,000,
or 7.7% when compared to the first nine months of 1996. The effective tax
rate rose to 30.8% in 1997 from 30.2% 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
$546,000, or 4.6%, in the first nine months of 1997 as compared to the same
period in 1996.
B. Three months ended September 30, 1997 and 1996
The third quarter's income before income taxes increased $129,000, or 2.2%,
when compared to the same period in 1996. A $213,000 increase in non-
interest income was primarily responsible for the increase. In addition,
income from credit activities increased by $98,000, or 0.9%, while non-
interest expense increased by $182,000, or 2.3%.
After the income tax provision (which increased by $42,000, or 2.4%
compared to the same period in 1996) was deducted from earnings, net income
improved $87,000, or 2.1%, over the third quarter of 1996. The effective
tax rate for the third quarter of 1997 was 30.2%, the same as in the third
quarter of 1996.
Following are selected key ratios for the period:
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
Return on average assets (annualized). 1.63% 1.60% 1.64% 1.57%
Return on average equity (annualized). 12.10 12.50 12.03 12.34
Dividend payout ratio (common)........ 33.97 31.07 34.14 31.01
Average equity to average assets...... 13.47 12.82 13.59 12.72
Net Interest Income
A. Nine months ended September 30, 1997 and 1996
Omega's net interest income for the first nine months of 1997 improved by
$409,000, or 1.2%, with most of the improvement due to rate changes.
Average earning assets grew by $6,539,000 since September of 1996. The 0.7%
increase in average earning assets resulted primarily from investment
securities activity, as average loans outstanding decreased by $13,434,000,
or 1.9%. 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 $8,188,000, or
1.0%, 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 8.00% in 1997 compared to 8.06% in 1996, resulting in a 2 basis
point increase in net interest margin.
B. Three months ended September 30, 1997 and 1996
The net interest margin, at 4.89% for the third quarter of 1997, was 1
basis point higher than the third quarter of 1996, with a $2,358,000 or
0.2% increase in average earning assets resulting in a 0.5% increase in
net interest income.
Following are key net interest margin ratios (annualized):
Three Months EndedNine Months Ended
September 30, September 30,
1997 1996 1997 1996
Yield on average earning assets 8.03% 8.02% 8.00% 8.06%
Cost to fund earning assets 3.14 3.14 3.11 3.19
Net interest margin 4.89 4.88 4.89 4.87
Net interest margin - tax equivalent 5.06 5.04 5.06 5.03
At September 30, 1997, Omega had $395,743,000 of earning assets scheduled
to reprice over the next twelve months as compared to $436,748,000 in
interest bearing liabilities, resulting in a negative gap of $41,005,000,
or 4% of assets. In order to predict net interest income at risk over the
next twelve months based on hypothetical rate movements, a rate shock
simulation was performed on the balance sheet. Results incidate that
Omega's net interest income over the next twelve months is at risk to an
immediate 100 basis point decline in interest rates, by 1.1%, or $514,000.
Conversely, an increase of 100 basis points indicates an increase in net
interest income of $593,000, or 1.3% over a twelve month period. These
simulations assume no volume or mix changes in the balance sheet.
Other Income and Expense
A. Nine months ended September 30, 1997 and 1996
Other income increased by $671,000 for the first nine months of 1997 when
compared to the same period last year. Service fees increased by $414,000,
or 10.2%, and trust fees increased in 1997 by $116,000, or 6.0% over 1996.
Net security gains, at $714,000 through September of 1997, were 27.3% ahead
of 1996.
As a percentage of average assets, annualized other income, net of security
gains and losses, was .86% for the first nine months of 1997 as compared to
.79% in 1996.
Other expenses were $119,000, or 0.5% lower for the first nine months of
1997 than for the same period in 1996. Salaries and employee benefits
increased by $369,000, or 2.9% while occupancy, equipment, data processing
service and other expenses decreased by a total of $250,000, or 2.3%.
As a percentage of average assets, annualized expenses for the nine month
periods ending September 30, 1997 and 1996 was 3.10%.
B. Three months ended September 30, 1997 and 1996
Other income increased $213,000, or 9.8% for the third quarter of 1997 as
compared to the same period in 1996. Service fee income in 1997 outpaced
that in 1996 by $144,000, or 10.2%, while trust fee income was
approximately the same in the third quarter of 1997 as in the third quarter
of 1996. Net gains from the sale of investment securities increased by
$65,000 in 1997. As a percentage of average assets, annualized other income
net of security gains and losses was .85% for the third quarter of1997 as
compared to .80% in 1996.
Other expenses were $182,000, or 2.3% higher for the third quarter of 1997
than for the same period in 1996. Salaries and employee benefits were
$102,000, or 2.4% higher in 1997 than in 1996. Occupancy expense has
increased by 8.6%, while equipment and data processing expense increased by
9.8%. Other non-interest expenses have decreased by 1.9%, or $42,000.
As a percentage of average assets, annualized expenses for the quarter
ended September 30, 1997 were 3.13% and for the same period in 1996 were
3.07%.
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,
1997 and December 31, 1996.
<TABLE>
<CAPTION>
<S>
<C> Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 30, 1997 Cost Gains Losses Value
U.S. Treasury securities and obligations of other U.S.
Government agencies and corporations $82,169 $192 $(94) $82,267
Obligations of state and political subdivisions 41,577 381 (25) 41,933
Equity securities 4,983 5,937 - 10,920
Total $128,729 $6,510 $(119) $135,120
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 30, 1997 Cost Gains Losses Value
U.S. Treasury securities and obligations of other U.S.
Government agencies and corporations $25,508 $ 168 $(12) $25,664
Obligations of state and political subdivisions 6,051 27 - 6,078
Corporate securities 38,001 232 (45) 38,188
Mortgage backed securities 51,828 239 (145) 51,922
Investment in low-income housing 492 - - 492
Equity securities (non-marketable) 4,132 - - 4,132
Total $126,012 $666 $(202) $126,476
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.
Government 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.
Government 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 September
30, 1997 and December 31, 1996 were 25.6% and 24.0%, respectively.
Securities maturing or repricing in one year or less comprised 39.0% of the
total investment securities of $261,132,000 as of September 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 September 30, 1997.
3. Interest Bearing Deposits with Other Financial Institutions
As of September 30, 1997, Omega had $902,000 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, 1997 balance sheet.
4. Loans
Net loans in the first nine months of 1997 increased by $747,000, or 0.1%,
bringing the total to $685,524,000 at September 30, 1997. Increasing
competitive pressure in consumer lending has caused a slight decrease in
personal loans, offsetting the increase in commercial and real estate
loans.
Changes in the allowance for loan losses for the nine months ended
September 30, 1997 and 1996 were as follows (in thousands):
1997 1996
Balance at January 1.................... $11,820 $11,668
Charge-offs............................. (948) (866)
Recoveries.............................. 130 295
Net charge-offs..................... (818) (571)
Provision for loan losses............... 773 754
Balance at September 30................. $11,775 $11,851
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, 1997 and 1996
represented 1.69% and 1.68%, respectively, of the total loans outstanding,
net of unearned interest.
Set forth below is an analysis of Omega's non-performing loans as of
September 30, 1997 as compared to December 31, 1996
<TABLE>
<CAPTION>
<S>
<C>
Non-performing Loans
(In thousands)
September 30, December 31,
1997 1996
Non-accrual loans......................................................... $4,862 $2,079
Accruing loans past due 90 days or more................................... 1,656 1,241
Restructured loans........................................................ 25 14
Total non-performing loans................................................ $6,543 $3,334
Non-performing loans as percent of allowance.............................. 55.6% 28.2%
</TABLE>
The increase in non-performing loans from December 31, 1996 to September
30, 1997 is primarily due to the addition of one large commercial loan with
a total outstanding balance of $2,516,000 to the non-accrual category.
5. Deposits and Other Sources of Funds
Deposits provide the primary source of funding for loans and investment
securities. As of September 30, 1997, total deposits increased by
$4,723,000 or 0.6%, as compared to December 31, 1996, 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 REQUIREMENT MINIMUM REGULATORY
FOR CAPITAL REQUIREMENTS TO BE
ACTUAL ADEQUACY PURPOSES "WELL CAPITALIZED"
OMEGA FINANCIAL CORPORATION AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
As of September 30, 1997:
Total Capital $139,962 20.4% $54,954 8.0% $68,692 10.0%
(to Risk Weighted Assets)
Tier I Capital 131,304 19.1% 27,477 4.0% 41,215 6.0%
(to Risk Weighted Assets)
Tier I Capital 131,304 13.0% 40,536 4.0% 50,670 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 September 30, 1997:
Total Capital $72,946 18.8% $30,973 8.0% $38,716 10.0%
(to Risk Weighted Assets)
Tier I Capital 68,068 17.6% 15,486 4.0% 23,230 6.0%
(to Risk Weighted Assets)
Tier I Capital 68,068 12.0% 22,625 4.0% 28,281 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 September 30, 1997:
Total Capital $30,231 17.7% $13,698 8.0% $17,123 10.0%
(to Risk Weighted Assets)
Tier I Capital 28,078 16.4% 6,849 4.0% 10,274 6.0%
(to Risk Weighted Assets)
Tier I Capital 28,078 11.4% 9,817 4.0% 12,271 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 September 30, 1997:
Total Capital $24,226 21.8% $8,882 8.0% $11,102 10.0%
(to Risk Weighted Assets)
Tier I Capital 22,818 20.6% 4,441 4.0% 6,661 6.0%
(to Risk Weighted Assets)
Tier I Capital 22,818 12.2% 7,494 4.0% 9,368 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%
</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 September 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
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 FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FORM 10Q.
</LEGEND>
<CIK> 0000705671
<NAME> OMEGA FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 34,151
<INT-BEARING-DEPOSITS> 902
<FED-FUNDS-SOLD> 3,750
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 135,120
<INVESTMENTS-CARRYING> 126,012
<INVESTMENTS-MARKET> 126,476
<LOANS> 697,299
<ALLOWANCE> 11,775
<TOTAL-ASSETS> 1,017,336
<DEPOSITS> 850,753
<SHORT-TERM> 8,915
<LIABILITIES-OTHER> 10,229
<LONG-TERM> 9,613
0
1,811
<COMMON> 136,015
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,017,336
<INTEREST-LOAN> 45,954
<INTEREST-INVEST> 10,663
<INTEREST-OTHER> 834
<INTEREST-TOTAL> 57,451
<INTEREST-DEPOSIT> 21,909
<INTEREST-EXPENSE> 22,359
<INTEREST-INCOME-NET> 35,092
<LOAN-LOSSES> 773
<SECURITIES-GAINS> 714
<EXPENSE-OTHER> 23,578
<INCOME-PRETAX> 17,959
<INCOME-PRE-EXTRAORDINARY> 12,430
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,430
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.29
<YIELD-ACTUAL> 4.89
<LOANS-NON> 4,862
<LOANS-PAST> 1,656
<LOANS-TROUBLED> 25
<LOANS-PROBLEM> 6,543
<ALLOWANCE-OPEN> 11,820
<CHARGE-OFFS> 948
<RECOVERIES> 130
<ALLOWANCE-CLOSE> 11,775
<ALLOWANCE-DOMESTIC> 11,775
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
