================================================================================
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 March 31, 2000
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 (IRS Employer Identification No.)
or incorporation of organization)
366 Walker Drive
State College, Pennsylvania 16801
---------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
(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 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 May 8, 2000:
Common Stock, $5.00 par value -- 8,815,204 shares
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
ASSETS
Cash and due from banks .......................... $ 37,865 $ 36,580
Interest bearing deposits with other banks ....... 758 872
Federal funds sold ............................... 25,650 1,975
Investment securities held to maturity
(Market value:
$4,948 and $4,951, respectively) .............. 4,948 4,951
Investment securities available for sale ......... 259,374 267,718
Total loans ...................................... 714,530 705,241
Less: Unearned discount ........................ (247) (293)
Allowance for loan losses ................ (11,935) (11,865)
----------- -----------
Net loans ........................................ 702,348 693,083
Premises and equipment, net ...................... 14,568 14,644
Other assets ..................................... 35,497 33,580
----------- -----------
TOTAL ASSETS ..................................... $ 1,081,008 $ 1,053,403
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing ........................... $ 122,786 $ 119,391
Interest bearing ............................... 742,496 732,204
----------- -----------
Total deposits ................................... 865,282 851,595
Short-term borrowings ............................ 38,191 28,527
Other liabilities ................................ 14,293 10,919
ESOP debt ........................................ 3,552 3,611
Long-term debt ................................... 7,000 7,000
Other interest bearing liabilities ............... 583 600
----------- -----------
TOTAL LIABILITIES ................................ 928,901 902,252
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 ....... (2,564) (2,625)
Common stock, par value $5.00 per share:
Authorized -- 25,000,000 shares
Issued --
9,297,199 shares at March 31, 2000;
9,259,782 shares at December 31, 1999
Outstanding --
8,802,624 shares at March 31, 2000;
8,774,507 shares at December 31, 1999 ........ 46,486 46,299
Capital surplus .................................. 5,486 4,825
Retained earnings ................................ 114,898 113,204
Accumulated other comprehensive income (loss) .... (587) 817
Cost of common stock in treasury
494,575 shares at March 31, 2000;
485,275 shares at December 31, 1999 .......... (16,612) (16,369)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY ....................... 152,107 151,151
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....... $ 1,081,008 $ 1,053,403
=========== ===========
<PAGE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
Three Months Ended
March 31,
2000 1999
-------- -------
INTEREST INCOME:
Interest and fees on loans ........................ $14,602 $15,348
Interest and dividends on investment securities ... 3,576 3,453
Other interest income ............................. 191 205
------- -------
TOTAL INTEREST INCOME ............................. 18,369 19,006
INTEREST EXPENSE:
Interest on deposits .............................. 6,655 6,487
Interest on short-term borrowings ................. 411 188
Interest on long-term debt and
other interest bearing liabilities .............. 118 70
------- -------
TOTAL INTEREST EXPENSE ............................ 7,184 6,745
------- -------
NET INTEREST INCOME ............................... 11,185 12,261
Provision for loan losses ......................... 143 265
------- -------
INCOME FROM CREDIT ACTIVITIES ..................... 11,042 11,996
OTHER INCOME:
Service fees on deposit accounts .................. 877 840
Trust fees ........................................ 903 759
Gain on sale of loans and other assets ............ (29) 2
Net gains on investment securities ................ -- 201
Other ............................................. 1,142 818
------- -------
TOTAL OTHER INCOME ................................ 2,893 2,620
OTHER EXPENSE:
Salaries and employee benefits .................... 4,747 4,614
Net occupancy expense ............................. 554 587
Equipment expense ................................. 567 514
Data processing service ........................... 363 381
Other ............................................. 2,351 2,161
------- -------
TOTAL OTHER EXPENSE ............................... 8,582 8,257
------- -------
Income before taxes ............................... 5,353 6,359
Income tax expense ................................ 1,379 1,880
------- -------
NET INCOME ........................................ $ 3,974 $ 4,479
======= =======
NET INCOME PER COMMON SHARE:
Basic .......................................... $ .44 $ .49
Diluted ........................................ $ .43 $ .47
WEIGHTED AVERAGE SHARES AND EQUIVALENTS:
Basic .......................................... 8,789,153 8,953,772
Diluted ........................................ 9,220,930 9,445,046
<PAGE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................... $ 3,974 $ 4,479
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .......................................... 578 613
Provision for loan losses .............................................. 143 265
Gain on sale of investment securities .................................. -- (201)
Gain on sale of fixed assets
and other property owned ............................................ (2) (11)
Loss on sale of loans .................................................. 31 9
Increase in deferred tax asset ......................................... (84) (437)
Increase in cash surrender value of bank owned life insurance .......... (252) --
(Increase) decrease in interest receivable and other assets ............ (837) 1,719
Decrease in interest payable ........................................... (1,056) (132)
Increase in taxes payable .............................................. 1,446 1,992
Amortization of deferred net loan (fees) costs ......................... 39 202
Deferral of net loan fees (costs) ...................................... 19 (106)
Increase (decrease) in accounts payable
and accrued expenses ................................................ 2,976 (981)
-------- --------
Total adjustments .................................................... 3,001 2,932
-------- --------
Net cash provided by operating activities .................................. 6,975 7,411
Cash flows from investing activities: Proceeds from the sale or maturity of:
Interest bearing deposits with other banks ............................. 11,110 2,875
Investment securities available for sale .............................. 24,128 12,715
Investment securities held to maturity ................................ -- 10,512
Purchase of:
Interest bearing deposits with other banks ............................. (10,996) (13,028)
Investment securities available for sale ............................... (18,020) (13,096)
Investment securities held to maturity ................................. -- (1,113)
(Increase) decrease in loans ............................................ (9,533) (11,540)
Gross proceeds from sale of loans ........................................ 36 1,082
Capital expenditures ..................................................... (418) (311)
Sale of fixed assets and other property owned ............................ 11 115
Increase in federal funds sold ........................................... (23,675) (7,550)
-------- --------
Net cash used in investing activities ...................................... (27,357) (19,339)
Cash flows from financing activities:
Increase (decrease) in deposits, net ..................................... 13,687 (5,646)
Increase in short-term borrowings, net ................................... 9,664 12,274
Net change in other interest bearing liabilities ......................... (17) (53)
Dividends paid ........................................................... (2,291) (2,068)
Tax benefit from preferred stock dividend
and stock option activity ............................................. 19 20
Issuance of common stock ................................................. 848 1,030
Acquisition of treasury stock ............................................ (243) (4,281)
-------- --------
Net cash provided by financing activities .................................. 21,667 1,276
-------- --------
Net increase (decrease) in cash and due from banks ......................... $ 1,285 $(10,652)
======== ========
Cash and due from banks at beginning of period ............................. $ 36,580 $ 40,066
Cash and due from banks at end of period ................................... 37,865 29,414
-------- --------
Net increase (decrease) in cash and due from banks ......................... $ 1,285 $(10,652)
======== ========
Interest paid .............................................................. $ 8,243 $ 6,877
Income taxes paid .......................................................... 1,680 298
</TABLE>
<PAGE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
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
three months ended March 31, 2000 are not necessarily indicative of the
results that may be experienced for the year ending December 31, 2000
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,
1999.
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. Commitments and Contingent Liabilities:
In the ordinary course of business, Omega and its subsidiaries make
commitments to extend credit to their customers. At March 31, 2000 and
December 31, 1999 standby letters of credit issued and outstanding
amounted to $16,109,000 and $17,022,000, 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 March 31, 2000, the Corporation had $135,056,000 outstanding in
unused lines of credit commitments extended to its customers. Of this
amount, $37,685,000, or 27.9%, are commitments to consumers for home
equity and other lines of credit. The remaining $97,371,000 are commercial
commitments.
C. Comprehensive Income:
Components of other comprehensive income (loss) consist of the
following:
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
--------------------------------------------
Before Tax (Expense)
Tax or Net-of-Tax
Amount Benefit Amount
-------- ------------- -----------
<S> <C> <C> <C>
Net income ................................................................... $ 5,353 $(1,379) $ 3,974
Other comprehensive income:
Unrealized gains on available for sale securities :
Unrealized holding gains (losses) arising during the period .................. (2,159) 755 (1,404)
------- ------- -------
Other comprehensive income (loss) ............................................ (2,159) 755 (1,404)
------- ------- -------
Total comprehensive income ................................................... $ 3,194 $ (624) $ 2,570
======= ======= =======
</TABLE>
<PAGE>
D. Earnings Per Share Data:
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of shares
outstanding for the period. On a diluted basis, both earnings and
shares outstanding are adjusted to assume the conversion of all
potentially dilutive securities into common stock.
Computations of Earnings per Share
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31, 2000 Quarter Ended March 31, 1999
-------------------------------------- ---------------------------------------
Per- Per-
Income Shares Share Income Shares Share
Numerator Denominator Amount Numerator Denominator Amount
---------- ----------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income ......................... $ 3,974 $ 4,479
Less: Preferred stock dividends .... (99) (99)
-------- ---------
BASIC EPS
Income available to common
shareholders ................... 3,875 8,789 $ 0.44 4,380 8,954 $ 0.49
====== ======
EFFECT OF DILUTIVE SECURITIES
Impact of :
Assumed conversion of preferred
to common stock .............. 346 346
Assumed exercises of outstanding
options ...................... 86 145
Preferred stock dividends
available to common
shareholders ................... 99 99
Elimination of tax benefit of
allocated preferred dividends .. (16) (15)
Additional expense required to
fund ESOP debt, net of
tax impact ..................... (8) (15)
-------- ----- --------- ------
DILUTED EPS
Income available to common
shareholders plus assumed
conversions ................... $ 3,950 9,221 $ 0.43 $ 4,449 9,445 $ 0.47
</TABLE>
<PAGE>
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
================================================================================
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Investment Considerations
In analyzing whether to make, or to continue to make, 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, 1999. 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.
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 or as to trends or
management's beliefs, expectations or opinions and other statements
other than historical facts. 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. In addition to the factors discussed
in this report, certain risks, uncertainties and other factors,
including without limitation, risks arising from economic conditions
and related uncertainties, changes in interest rates, federal and state
regulation, competition and the adequacy of the allowance and provision
for loan losses, are discussed in this Report on Form 10-Q, the
Corporation's 1999 Annual Report or in Omega's Annual Report on Form
10-K for the year ended December 31, 1999. Copies of these reports may
be obtained from Omega upon request and without charge (except for the
exhibits thereto) as described above.
- --------------------------------------------------------------------------------
1. Comparison of the Three Months Ended March 31, 2000 and 1999
Operations
----------
Three months ended March 31, 2000 and 1999
The first quarter's income before income taxes decreased $1,006,000, or
15.8%, when compared to the same period in 1999. Results from the first
quarter of 1999 were inflated by $450,000 interest received on large
non-accrual loans, as well as $201,000 in security gains. Excluding
these items, income before taxes decreased by $355,000, or 6.2%. After
the income tax provision (which decreased by $501,000, or 26.7%
compared to the same period in 1999) was deducted from earnings, net
income decreased $505,000, or 11.3%, from the first quarter of 1999.
The effective tax rate for the first quarter of 2000 was 25.8%,
compared to 29.6% in the first quarter of 1999.
Following are selected key ratios for the period:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------------------
2000 1999
----------- ------------
<S> <C> <C>
Return on average assets (annualized).................... 1.50% 1.71%
Return on average equity (annualized).................... 10.35 11.50
Dividend payout ratio (common)........................... 55.36 43.96
Average equity to average assets......................... 14.52 14.83
</TABLE>
<PAGE>
Net Interest Income
-------------------
Three months ended March 31, 2000 and 1999
The net interest margin, at 4.53% for the first quarter of 2000, was 41
basis points lower than the first quarter of 1999, with a $4,236,000 or
0.4% decrease in average earning assets resulting in an 8.8% decrease
in net interest income. Of the 41 basis point decrease in net interest
margin, 19 basis points was attributable to the $450,000 collection of
previously unaccrued interest in the first quarter of 1999 as discussed
in the previous secion.
Following are key net interest margin ratios (annualized):
Three Months Ended
March 31,
--------------------
2000 1999
------ -------
Yield on average earning assets ..................... 7.45% 7.69%
Cost to fund earning assets ......................... 2.92 2.75
Net interest margin ................................. 4.53 4.94
Net interest margin - tax equivalent ................ 4.80 5.19
At March 31, 2000, Omega had $378,262,000 of earning assets scheduled
to reprice over the next twelve months as compared to $471,841,000 in
interest bearing liabilities, resulting in a negative gap of
$93,579,000, or 8.7% of total 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.
In the event that interest rates would decrease immediately by 100
basis points, results of the rate shock simulation indicate that
Omega's net interest income over the next twelve months would decrease
by approximately 1.3%, or $587,000. Conversely, the results of a rate
shock simulation of an immediate 100 basis point increase in interest
rates indicates an increase in net interest income of approximately
$594,000, or 1.3% over a twelve-month period. These simulations assume
no volume or mix changes in the balance sheet.
Other Income and Expense
------------------------
Three months ended March 31, 2000 and 1999
Total other income increased $273,000, or 10.4% in the first quarter of
2000 as compared to the same period in 1999. Excluding gains on sales
of assets which was $232,000 less in the first quarter of 2000 than in
the first quarter of 1999, other income increased by $505,000, or
20.9%. Fees on trust services increased by $144,000 or 19.0%, when
compared to the first quarter of 1999, while fees on deposits increased
by $37,000, or 4.4%. In the fourth quarter of 1999, a Bank Owned Life
Insurance (BOLI) policy was purchased. Proceeds from this policy will
be used to fund supplemental retirement plans for certain key
executives. Earnings on the cash surrender value were $251,000 in the
first quarter of 2000, contributing to the increase in other operating
income of $324,000, or 39.6%.
As a percentage of average assets, annualized other income net of
security gains and losses was 1.09% for the first quarter of 2000 as
compared to .92% in 1999.
Other expenses were $325,000, or 3.9% higher for the first quarter of
2000 than for the same period in 1999. Salaries and employee benefits
were $133,000, or 2.9% higher in 2000 than in 1999. All other expenses
increased by a total of $192,000, or 5.3%, due, in part, because legal
and other professional service fees were $112,000 higher in 2000 than
in the first quarter of 1999.
As a percentage of average assets, annualized expenses for the
quarter ended March 31, 2000 were 3.25% as compared to 3.15%
in 1999.
<PAGE>
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 details characteristics of the investment portfolio
as of March 31, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
Securities Classified as Available for Sale
-------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
March 31, 2000 Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations ....... $114,731 $4 $(1,215) $113,520
Obligations of state and
political subdivisions ............... 79,185 34 (1,561) 77,658
Corporate securities ..................... 48,092 12 (463) 47,641
Mortgage backed securities ............... 11,206 6 (192) 11,020
Equity securities ........................ 7,074 2,954 (493) 9,535
-------- ------ ------- --------
Total .................................... $260,288 $3,010 $(3,924) $259,374
======== ====== ======= ========
Securities Classified as Available for Sale
-------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
March 31, 2000 Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------
Investment in low-income housing ......... 589 - - 589
Equity securities (non-marketable) ....... 4,359 - - 4,359
-------- ------ ------- ------
Total .................................... $4,948 $- $- $4,948
======== ====== ======= ======
Securities Classified as Available for Sale
-------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1999 Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------
U.S. Treasury securities and
obligations of other U.S. Govern-
ment agencies and corporations ....... $119,737 $ 12 $(1,003) $118,746
Obligations of state and
political subdivisions ............... 80,381 68 (1,234) 79,215
Corporate securities ..................... 47,135 69 (431) 46,773
Mortgage backed securities ............... 12,454 18 (50) 12,422
Equity securities ........................ 6,766 3,998 (202) 10,562
-------- ------ ------- --------
Total .................................... $266,473 $4,165 $(2,920) $267,718
======== ====== ======= ========
Securities Classified as Available for Sale
-------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1999 Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------
Investment in low-income housing ......... 592 - - 592
Equity securities (non-marketable) ....... 4,359 - - 4,359
-------- ------ ------- ------
Total .................................... $4,951 $- $- $4,951
======== ====== ======= ======
</TABLE>
<PAGE>
Total investment securities as a percentage of total assets at March
31, 2000 and December 31, 1999 were 24.5% and 25.9%, respectively.
Securities maturing or repricing in one year or less comprised 28.2% of
the total investment securities of $264,322,000 as of March 31, 2000,
as compared to 26.9% of total investment securities of $272,669,000 as
of December 31, 1999. There was $215,000 in investments in instruments
of foreign countries on March 31, 2000.
3. Interest Bearing Deposits with Other Financial Institutions
As of March 31, 2000, Omega had $758,000 in interest bearing deposits
with other financial institutions. There were no investments in
instruments issued by U.S. branches of banks of foreign countries or
deposits in banks of foreign countries included in the March 31, 2000
Consolidated Balance Sheet.
4. Loans
Net loans in the first three months of 2000 increased by $9,265,000, or
1.3% from the balance at December 31, 1999, bringing the total to
$702,348,000 at March 31, 2000. All types of loans have increased, with
commercial loans leading the growth.
Changes in the allowance for loan losses for the three months ended
March 31, 2000 and 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
------------- --------------
<S> <C> <C>
Balance at January 1..................................... $11,865 $11,772
Charge-offs.............................................. (120) (174)
Recoveries............................................... 47 36
------- -------
Net charge-offs...................................... (73) (138)
Provision for loan losses................................ 143 265
-------- -------
Balance at March 31...................................... $11,935 $11,899
======= =======
</TABLE>
Management believes that the allowance for loan losses is adequate,
based upon its analysis of the loans, current economic conditions and
certain risk characteristics of the loan portfolio. This determination
is made through a structured review of impaired loans, non-performing
loans and certain performing loans designated as potential problems.
The allowance for loan losses at March 31, 2000 and 1999 represented
1.67% and 1.62%, respectively, of the total loans outstanding, net of
unearned interest.
Set forth below is an analysis of Omega's non-performing loans as of
March 31, 2000 as compared to December 31, 1999.
<TABLE>
<CAPTION>
Non-performing Loans
--------------------
(In thousands)
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Non-accrual loans........................................ $2,094 $2,640
Accruing loans past due 90 days or more.................. 251 619
Restructured loans....................................... 178 184
------ ------
Total non-performing loans............................... $2,523 $3,443
====== ======
Non-performing loans as percent of allowance............. 21.1% 29.0%
</TABLE>
<PAGE>
The decrease in non-performing loans from December 31, 1999 to March
31, 2000 is primarily due to the significant recovery of principal on
several non-accrual loans and a 59.5% reduction in delinquent loans.
5. Deposits and Other Sources of Funds
Deposits provide the primary source of funding for loans and investment
securities. As of March 31, 2000, total deposits increased by
$13,687,000 or 1.6%, as compared to December 31, 1999. Interest bearing
deposits have increased by $10,292,000 and non-interest bearing
accounts have increased by $3,395,000, or 2.8%. For additional funding,
short term borrowings have been increased by $9,664,000.
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 by 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>
MINIMUM REQUIREMENT MINIMUM REGULATORY
FOR CAPITAL REQUIREMENTS TO BE
ACTUAL ADEQUACY PURPOSES "WELL CAPITALIZED"
-------------------- ----------------------- ----------------------
OMEGA FINANCIAL CORPORATION AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 2000:
Total Capital 160,714 22.5% $57,025 8.0% $71,282 10.0%
(to Risk Weighted Assets)
Tier I Capital 151,763 21.3% 28,513 4.0% 42,769 6.0%
(to Risk Weighted Assets)
Tier I Capital 151,763 14.4% 42,299 4.0% 52,874 5.0%
(to Average Assets)
As of December 31, 1999:
Total Capital 158,528 22.5% $56,420 8.0% $70,525 10.0%
(to Risk Weighted Assets)
Tier I Capital 149,671 21.2% 28,210 4.0% 42,315 6.0%
(to Risk Weighted Assets)
Tier I Capital 149,671 14.1% 42,508 4.0% 53,135 5.0%
(to Average Assets)
OMEGA BANK
As of March 31, 2000:
Total Capital 85,999 21.4% $32,088 8.0% $40,110 10.0%
(to Risk Weighted Assets)
Tier I Capital 80,978 20.2% 16,044 4.0% 24,066 6.0%
(to Risk Weighted Assets)
Tier I Capital 80,978 13.7% 23,567 4.0% 29,458 5.0%
(to Average Assets)
As of December 31, 1999:
Total Capital 85,099 21.3% $31,976 8.0% $39,970 10.0%
(to Risk Weighted Assets)
Tier I Capital 80,097 20.0% 15,988 4.0% 23,982 6.0%
(to Risk Weighted Assets)
Tier I Capital 80,097 13.6% 23,536 4.0% 29,420 5.0%
(to Average Assets)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
HOLLIDAYSBURG TRUST COMPANY
As of March 31, 2000:
Total Capital 37,866 20.4% $14,864 8.0% $18,580 10.0%
(to Risk Weighted Assets)
Tier I Capital 35,530 19.1% 7,432 4.0% 11,148 6.0%
(to Risk Weighted Assets)
Tier I Capital 35,530 13.2% 10,766 4.0% 13,457 5.0%
(to Average Assets)
As of December 31, 1999:
Total Capital 37,171 20.5% $14,536 8.0% $18,170 10.0%
(to Risk Weighted Assets)
Tier I Capital 34,885 19.2% 7,268 4.0% 10,902 6.0%
(to Risk Weighted Assets)
Tier I Capital 34,885 12.9% 10,780 4.0% 13,476 5.0%
(to Average Assets)
PENN CENTRAL NATIONAL BANK
As of March 31, 2000:
Total Capital 25,454 23.6% $8,635 8.0% $10,794 10.0%
(to Risk Weighted Assets)
Tier I Capital 24,086 22.3% 4,318 4.0% 6,477 6.0%
(to Risk Weighted Assets)
Tier I Capital 24,086 13.3% 7,225 4.0% 9,031 5.0%
(to Average Assets)
As of December 31, 1999:
Total Capital 25,452 24.0% $8,502 8.0% $10,627 10.0%
(to Risk Weighted Assets)
Tier I Capital 24,105 22.7% 4,251 4.0% 6,376 6.0%
(to Risk Weighted Assets)
Tier I Capital 24,105 13.1% 7,349 4.0% 9,186 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 March 31, 2000, 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%.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omega is impacted by market risks, and has procedures in place to
evaluate and mitigate these risks. These market risks and Omega's
procedures are described in the Management's Discussion and Analysis
section of the 1999 Annual Report to Shareholders. There have been no
material changes in the market risks that impact Omega or their
procedures relative to these risks, since December 31, 1999.
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
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
<PAGE>
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
<CIK> 0000705671
<NAME> OMEGA FINANCIAL CORP
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<PERIOD-TYPE> Year
<CASH> 37,865
<INT-BEARING-DEPOSITS> 758
<FED-FUNDS-SOLD> 25,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 4,948
<INVESTMENTS-MARKET> 259,374
<LOANS> 714,283
<ALLOWANCE> 11,935
<TOTAL-ASSETS> 1,081,008
<DEPOSITS> 865,282
<SHORT-TERM> 38,191
<LIABILITIES-OTHER> 14,293
<LONG-TERM> 7,000
149,671
0
<COMMON> 2,436
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,081,008
<INTEREST-LOAN> 14,602
<INTEREST-INVEST> 3,576
<INTEREST-OTHER> 191
<INTEREST-TOTAL> 18,369
<INTEREST-DEPOSIT> 6,655
<INTEREST-EXPENSE> 7,184
<INTEREST-INCOME-NET> 11,185
<LOAN-LOSSES> 143
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,582
<INCOME-PRETAX> 5,353
<INCOME-PRE-EXTRAORDINARY> 5,353
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,974
<EPS-BASIC> 0.44
<EPS-DILUTED> 0.43
<YIELD-ACTUAL> 4.53
<LOANS-NON> 2,094
<LOANS-PAST> 251
<LOANS-TROUBLED> 178
<LOANS-PROBLEM> 2,523
<ALLOWANCE-OPEN> 11,865
<CHARGE-OFFS> 120
<RECOVERIES> 47
<ALLOWANCE-CLOSE> 11,935
<ALLOWANCE-DOMESTIC> 11,935
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
