------------------------------------
                       Two Thousand and One Annual Report
                      ------------------------------------

                          OMEGA FINANCIAL CORPORATION

                                     [LOGO]

                      STRENGTH o RELIABILITY o CONSISTENCY

                      ------------------------------------
<PAGE>

                                     OMEGA
                                   FINANCIAL
                                  CORPORATION

                               CORPORATE PROFILE

         Omega Financial Corporation serves Central Pennsylvania with a
     commitment to quality service, a wide range of financial products and
    services offering superior consumer value, local market lending authority
          and outstanding personal and corporate community involvement.

                                     [LOGO]

     With a reputation for excellence dating back 150 years, Omega anchors
         its growth through a well-trained, productive workforce, sound
          funds management, vigilant cost containment and the ability
                   to quickly adapt to changing technologies
                             and market conditions.
<PAGE>

--------------------------------------------------------------------------------

                             SELECTED FINANCIAL DATA

The following selected financial data of Omega Financial Corporation and
subsidiaries for the five years ended December 31, 2001 should be read in
conjunction with the consolidated financial statements of Omega Financial
Corporation and the notes thereto, which are set forth elsewhere in the Annual
Report.

<TABLE>
<CAPTION>
                                                     FIVE-YEAR FINANCIAL SUMMARY
-----------------------------------------------------------------------------------------------------------------------------------
       (In thousands of dollars, except share and per share data)   2001          2000          1999          1998          1997
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>           <C>           <C>           <C>           <C>
      Balance Sheet Information at December 31

        Assets ...............................................   $1,158,629    $1,113,836    $1,053,403    $1,062,704    $1,015,903
        Deposits .............................................      931,667       889,501       851,595       870,660       840,775
        Loans, net ...........................................      760,354       751,985       704,948       722,967       691,893
        Investment securities ................................      267,352       242,379       272,669       261,380       249,817
        Long-term debt (including ESOP debt) .................       20,344        10,264        10,611         8,837         9,034
        Shareholders' equity .................................      156,250       155,204       151,151       153,980       142,432
        Number of shares outstanding--common .................    8,222,010     8,606,983     8,774,507     8,960,197     8,879,257
        Number of shares outstanding--preferred ..............      219,781       219,781       219,781       219,781       219,781

      Income Statement Information Years Ended December 31

        Total interest income ................................   $   76,006    $   76,945    $   74,493    $   75,268    $   76,998
        Net interest income ..................................       45,143        45,819        46,788        46,618        47,121
        Provision for loan losses ............................          500           428         1,060         1,060         1,030
        Income before income taxes ...........................       23,532        23,112        24,257        24,714        24,465
        Income tax expense ...................................        5,877         5,983         6,895         7,622         7,497
        Net income ...........................................       17,655        17,129        17,362        17,092        16,968

      Per Common Share Data

        Net income--basic ....................................   $     2.08    $     1.92    $     1.92    $     1.87    $     1.85
        Net income--diluted ..................................         2.01          1.87          1.85          1.79          1.77
        Cash dividends--common ...............................         1.07          1.03          0.95          0.80          0.65
        Book value--common ...................................        18.65         17.73         16.96         16.95         15.83

      Financial Ratios

        Return on average equity .............................        11.50%        11.13%        11.30%        11.35%        12.26%
        Return on average assets .............................         1.56          1.59          1.63          1.66          1.67
        Dividend payout--common ..............................        50.01         52.42         48.29         41.94         34.41
        Average equity to average assets .....................        13.54         14.28         14.46         14.67         13.64

-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   [The following tables were depicted as bar charts in the printed material.]

                               Assets at Year End
                            (in billions of dollars)

                   $1.02    $1.06    $1.05    $1.11    $1.16
                 ----------------------------------------------
                    '97       '98      '99     '00      '01

                              Deposits at Year End
                            (in billions of dollars)

                   $0.84    $0.87    $0.85    $0.89     $0.93
                 ----------------------------------------------
                    '97       '98      '99     '00      '01

                                Diluted Earnings
                                    Per Share

                   $1.77    $1.79    $1.85    $1.87     $2.01
                 ----------------------------------------------
                    '97       '98      '99     '00      '01


                                                            --------------------
                                OMEGA FINANCIAL CORPORATION 2001 ANNUAL REPORT 1
                                                            --------------------
<PAGE>

                   TO OUR SHAREHOLDERS, CUSTOMERS AND FRIENDS:

Looking back on a challenging year in 2001, we are gratified by the results
achieved. A solid balance sheet built on conservative standards continues to be
our foundation. Discussion of our financial condition and results of operations
are presented in the following pages of this report. We believe you will be
pleased as you review these statements that reveal strength and consistency in
performance.

Local Commitment

      Many of the objectives we set for the year were designed to strengthen our
position as central Pennsylvania's Hometown Bank, an institution strongly
committed to the region's diverse communities. During the final quarter of 2001,
the Company's affiliated banks were consolidated into one charter, with the
combined institution called Omega Bank. The Penn Central National Bank and
Hollidaysburg Trust Company affiliates became divisions of Omega Bank, affording
customers holding accounts in any one of the former affiliates the ability to
bank at any one of the offices in the combined Omega Bank network.

      To strengthen that network, we opened two new offices. The first was a new
Bellefonte office on Zion Road. This facility, our second in Bellefonte, further
addresses an important market in this county seat. Located in a high-traffic
area, it has attracted existing and potential customers in nearby residential
developments. As the year concluded, we opened a new office in Centre Hall to
replace our existing facility there. The new office includes Omega's first ATM
at that location, in addition to a larger lobby, safe deposit area, and new
drive-through lanes.

      Throughout the year, we formulated positive marketing messages that took
advantage of changing competitive conditions and the well-deserved reputation
our employees have for outstanding customer service. Among our marketing efforts
we featured the individuals in our commercial banking, investment services and
mortgage product areas to demonstrate the depth and breadth of our locally based
experts and our comprehensive line of financial services. We plan to continue
using this approach in 2002.

      Consistent with our tradition of being involved in local civic affairs, we
have decided to underwrite two upcoming programs in a series produced by
WPSX-TV, the regional PBS affiliate. These "Our Town" broadcasts profile
regional communities using a "day in the life" approach. We will underwrite the
programs on State College and Hollidaysburg. The Hollidaysburg broadcast is a
special look at the town through the eyes of middle-school children.

Solid Performance

      During the year, our performance continued to attract coverage in the
investment community. Among those investment research organizations that
initiated coverage of the company were Janney Montgomery Scott, CIBC World
Markets and Hoover's.

      In addition, we recorded strong showings in several benchmark reports.
Omega Financial was profiled in The Advest Community Bank/Thrift Monitor for
Pennsylvania, published by Advest, Inc., a member of the MONY Group. Omega Bank,
Penn Central and Hollidaysburg Trust all earned the highest designation, an A+
rating, in the Weiss Ratings' list of the nation's strongest banks.
Additionally, Omega Financial was profiled in Pennsylvania Business Central as
one of Central Pennsylvania's Top 100 businesses.

      The year was a challenge to our business because of economic conditions
that were compounded by the national tragedy of September 11th. In spite of
recessionary pressures, we concluded the year with a strong fourth-quarter
performance and year-to-date gains. With these results as our base, we look
forward to capitalizing on the steps we took in 2001 to continue performing well
as our economy strengthens once again.

                                    Strength
                                     -------
                                   Reliability
                                     -------
                                   Consistency
                                     -------

                                 [PHOTO OMITTED]

Sincerely,


/s/ David B. Lee

David B. Lee
Chairman and Chief Executive Officer


/s/ D. Stephen Martz

D. Stephen Martz
President and Chief Operating Officer


------------------------------
2  OMEGA FINANCIAL CORPORATION 2001 ANNUAL REPORT
------------------------------
<PAGE>

                  Omega Financial Corporation and Subsidiaries
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

COMPANY OVERVIEW

      This discussion concerns Omega Financial Corporation and the consolidated
results of its active subsidiaries ("Omega" or the "Corporation"), Omega Bank,
N.A. ("Omega Bank"), Central Pennsylvania Investment Company ("CPI"), Central
Pennsylvania Life Insurance Company ("CPLI") and Central Pennsylvania Leasing,
Inc. In October of 2001, Omega merged its Hollidaysburg Trust Company and Penn
Central National Bank subsidiaries into Omega Bank, but maintains the trade
names of the former banks. The purpose of this discussion is to focus on
information concerning Omega's financial condition and results of operations
that is not readily apparent from the consolidated financial statements. In
order to obtain a clear understanding of this discussion, the reader should
reference the consolidated financial statements, the notes thereto and other
financial information presented in this Annual Report.

FORWARD-LOOKING STATEMENTS

      The information contained in this Annual Report 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 which are not historical facts or as to trends or management's
intentions, plans, 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 including without limitation, the effect of economic
conditions and related uncertainties, the effect of interest rates on the
Corporation, federal and state government regulation and competition. Certain of
these risks, uncertainties and other factors are discussed in this Annual Report
or in Omega's Annual Report on Form 10-K for the year ended December 31, 2001, a
copy of which may be obtained from Omega upon request and without charge (except
for the exhibits thereto).

NATURE OF OPERATIONS

      Omega Financial Corporation is a financial holding company operating
primarily in central Pennsylvania, with the purpose of delivering financial
services within its local market. Consisting of one bank and three active
non-bank subsidiaries, Omega Financial Corporation provides retail and
commercial banking services through 44 offices in Centre, Clinton, Mifflin,
Juniata, Blair, Huntingdon and Bedford counties. Omega Bank provides a full
range of consumer and commercial services. Consumer services include Internet
and telephone banking, an automated teller machine network, personal checking
accounts, interest checking accounts, savings accounts, insured money market
accounts, debit cards, investment certificates, fixed and variable rate
certificates of deposit, club accounts, secured and unsecured installment loans,
construction and mortgage loans, safe deposit facilities, credit lines with
overdraft checking protection, IRA accounts and student loans. Commercial
banking services include small and high-volume business checking accounts,
on-line account management services, ACH origination, payroll direct deposit,
commercial cash management services and repurchase agreements. Omega Bank also
provides a variety of trust and asset management services. Management believes
the Corporation has a relatively stable deposit base with no major seasonal
depositor or group of depositors. Most of the Corporation's commercial customers
are small and mid-sized businesses in central Pennsylvania.

FINANCIAL CONDITION

Balance Sheet Summary

      On December 31, 2001, Omega's balance sheet included $1,158,629,000 in
total assets, compared to $1,113,836,000 at year-end 2000. This 4.0% increase of
$44,793,000 was fueled by a $42,166,000 increase in deposits over the same time
period. Since Omega functions as a financial intermediary, its financial
condition should be viewed in terms of changes in its uses and sources of funds,
and is most meaningful when analyzed in terms of changes in daily average
balances. Table 1 depicts average daily balances, the dollar change and
percentage change for the past two years. This table is referenced for the
discussion in this section.

      Overall, Omega's average assets in total have grown by 5.2%, from
$1,077,836,000 in 2000 to $1,133,495,000 in 2001. In order to optimize its
present and future performance, management must constantly assess its various
risk factors and act accordingly. During 1999, in order to reduce credit risk
and market risk, one banking office was sold. This sale included $12,935,000 in
loans and $14,322,000 in deposit liabilities. Additionally, to reduce interest
rate risk, a block of mortgage loans, totaling $21,207,000 was also sold. Both
sales occurred late in the second quarter of 1999. Because the total loans sold
represented approximately 4.9% of loans outstanding at the time of the sale, and
deposits sold were 1.7% of total deposits, it is important to consider the
effect of the sale when discussing changes in balance sheet positions from 1999
to 2000. In the fourth quarter of 1999, bank-owned life insurance (BOLI) was
purchased in the amount of $20,112,000. In 2001, an additional $8,000,000 BOLI
was purchased. The cash surrender value of this instrument is included in
non-earning assets, and revenues generated are included in non-interest income.
In 2001, a block of mortgage loans was sold, with outstanding balances of
$35,895,000, having the effect of reducing average loan balances in 2001 by
$3,723,000.


                                                            --------------------
                                OMEGA FINANCIAL CORPORATION 2001 Annual Report 3
                                                            --------------------
<PAGE>

                                     Table 1
                      Changes in Uses and Sources of Funds
                                ($ in thousands)

<TABLE>
<CAPTION>
                                                  2001       Increase (Decrease)      2000       Increase (Decrease)      1999
                                                 Average     -------------------     Average     -------------------     Average
                                                 Balance      Amount        %        Balance      Amount        %        Balance
                                               -----------------------------------------------------------------------------------
<S>                                            <C>           <C>        <C>        <C>           <C>         <C>       <C>
FUNDING USES:
Loans .....................................    $   733,318   $ 37,849       5.4%   $   695,469   $ 13,629       2.0%   $   681,840
Tax-exempt loans ..........................         35,879      2,480       7.4         33,399      7,347      28.2         26,052
Investment securities .....................        161,081    (21,794)    (11.9)       182,875     (7,571)     (4.0)       190,446
Tax-exempt investment securities ..........         94,593     19,033      25.2         75,560     (1,032)     (1.3)        76,592
Interest bearing deposits .................          6,181      5,290     593.7            891     (2,768)    (75.6)         3,659
Federal funds sold ........................         26,139      6,617      33.9         19,522     (4,926)    (20.1)        24,448
Other interest earning assets .............             --         --        --             --     (2,988)   (100.0)         2,988
                                               -----------------------------------------------------------------------------------
  Total interest earning assets ...........      1,057,191     49,475       4.9      1,007,716      1,691       0.2      1,006,025
Non-interest earning assets ...............         82,293        376       0.5         81,917     19,051      30.3         62,866
Unrealized gains on investments ...........          5,558      5,404   3,509.1            154     (5,483)    (97.3)         5,637
Less: Allowance for loan losses ...........        (11,547)       404      (3.4)       (11,951)      (121)      1.0        (11,830)
                                               -----------------------------------------------------------------------------------
  Total uses ..............................    $ 1,133,495   $ 55,659       5.2%   $ 1,077,836   $ 15,138       1.4%   $ 1,062,698
                                               ===================================================================================
FUNDING SOURCES:
Interest bearing demand deposits ..........    $   247,177   $ 10,148       4.3%   $   237,029   $ (3,777)     (1.6)%  $   240,806
Savings deposits ..........................        104,250      2,726       2.7        101,524     (4,050)     (3.8)       105,574
Time deposits .............................        433,262     30,099       7.5        403,163      6,824       1.7        396,339
Repurchase agreements .....................         16,827     (1,913)    (10.2)        18,740      1,220       7.0         17,520
Other borrowed funds ......................         39,631     10,917      38.0         28,714     14,301      99.2         14,413
                                               -----------------------------------------------------------------------------------
  Total interest bearing liabilities ......        841,147     51,977       6.6        789,170     14,518       1.9        774,652
Demand deposits ...........................        124,995      3,454       2.8        121,541        488       0.4        121,053
Other liabilities .........................         13,863        612       4.6         13,251       (123)     (0.9)        13,374
Shareholders' equity ......................        153,490       (384)     (0.2)       153,874        255       0.2        153,619
                                               -----------------------------------------------------------------------------------
  Total sources ...........................    $ 1,133,495   $ 55,659       5.2%   $ 1,077,836   $ 15,138       1.4%   $ 1,062,698
                                               ===================================================================================
</TABLE>

      Omega's funding sources have increased over the last two years at rates of
5.2% and 1.4% in 2001 and 2000, respectively. In 2001, the majority of the
growth was time deposits. These funds were used primarily to support loan
activity. In 2000, the majority of the growth was borrowed funds. These funds
were used primarily for match-funding certain commercial loans and to support
the Corporation's stock repurchase program.

      More detailed discussion of Omega's earning assets and interest bearing
liabilities will follow in sections titled Loans, Investments, Deposits and
Asset Liability Management.

Loans

      From year-end 2000 to year-end 2001, total loans outstanding, net of
unearned interest, increased by $8,369,000. The following table summarizes how
the ending balances (in thousands) changed annually in each of the last three
years.

                                           2001           2000           1999
                                         --------------------------------------
New loans, net of repayments ......      $ 45,790       $ 48,062       $ 18,642
Loans sold ........................       (36,092)          (140)       (35,737)
Loans charged off .................        (1,226)          (841)        (1,128)
Other adjustments to
  carrying value ..................          (103)           (44)           204
                                         --------------------------------------
Increase (decrease) in loans ......      $  8,369       $ 47,037       $(18,019)
                                         ======================================

      In 2001, total average loans were $769,198,000 as compared to $728,868,000
in 2000, an increase of $40,330,000, or 5.5%. During the year, the customers'
general preference was for fixed rate loans as opposed to variable rate. On
average, fixed rate loans increased by $28,984,000, or 6.2%, while variable rate
loans increased by $11,346,000, or 4.4%.

      Fixed rate commercial loan business prospered in 2001 as average balances
increased by $26,019,000, or 11.9%. Fixed rate consumer mortgages on average
exceeded the prior year by $7,957,000, or 7.7%, while other fixed rate consumer
loans declined on average by $4,992,000.

      Commercial loan activity led the increase in variable rate loan growth,
accounting for $10,439,000 of the increase. Of the rise in variable rate
commercial loans, 65% were taxable loans, compared to 35% tax-exempt. Variable
rate consumer loans increased on average by $288,000.

      In 2000, total average loans were $728,868,000 as compared to $707,892,000
in 1999, an increase of $20,976,000, or 3.0%. During the year, the customers'
general preference was for variable rate loans as opposed to fixed rate. On
average, fixed rate loans increased by $5,315,000, or 1.1%, while variable rate
loans increased by $15,671,000, or 6.4%.


------------------------------
4  OMEGA FINANCIAL CORPORATION 2001 Annual Report
------------------------------
<PAGE>

      Commercial loan activity led the increase in variable rate loan growth,
accounting for $11,289,000 of the increase. Of the rise in variable rate
commercial loans, 59% were taxable loans, compared to 41% tax-exempt. Variable
rate consumer loans increased on average by $4,371,000.

      Although fixed rate loans increased by only $5,315,000, or 1.1%, it is
important to note that fixed rate consumer mortgage loans decreased by
$12,695,000 on average while fixed rate commercial loans increased by
$12,805,000. In order to analyze real changes in mortgage loans due to new
lending activity, the effect of the mortgage loan sales in 1999 must be taken
into consideration. On average, there were $13,160,000 in mortgage loan
outstanding balances included in the 1999 average balances that were sold in
June of 1999. Excluding these balances for comparative purposes, normal mortgage
lending activity for 2000 actually replaced the loans that were sold. Rather
than a decrease in mortgage loan averages, there was an increase of
approximately $465,000.

      The loan portfolio as of December 31, 2001 was comprised of 46% consumer
loans and 54% commercial loans (including construction), as compared to 51% and
49%, respectively, at December 31, 2000. See Note 5 of Notes to Consolidated
Financial Statements.

      Omega's lending strategy stresses quality growth, diversified by product
and industry. A standardized credit policy is in place throughout the
Corporation, and a special credit committee reviews all large loan requests
prior to approval. Omega's commercial and consumer lenders make credit judgments
based on a customer's existing debt obligations, ability to pay and general
economic trends.

      Management has been monitoring the activity within the loan portfolio very
carefully and successfully competed within its market for both commercial and
residential real estate loans. Omega intends to actively pursue growth in each
of the loan categories again during 2002. Competition will continue to play a
key role in pricing decisions to maintain and build new loan volumes.

      The loan portfolio carries the potential risk of past due, non-performing
or, ultimately, charged-off loans. Omega attempts to manage this risk through
credit approval standards, as discussed above, and aggressive monitoring and
collection policies.

      Loan loss reserves have been established in order to absorb probable
losses on existing loans. An annual provision is charged to current earnings to
maintain the reserve at adequate levels. Charge-offs and recoveries are recorded
as an adjustment to the reserve. The allowance for loan losses at December 31,
2001 was 1.48% of total loans, net of unearned interest, as compared to 1.55% of
total loans at the end of 2000. The allowance decreased $398,000 from 2000 as
the net charge-offs of $898,000 exceeded the provision of $500,000. Net
charge-offs for 2001 and 2000 were 0.12% and 0.09%, respectively of average
loans. Commercial loans represented 48% of the loans charged off in 2001, as
compared to 53% of the loans charged off in 2000. Because of the increase in
non-performing loans and the increase in net charge-offs in 2001, management
increased the provision for loan losses in 2001. Non-performing loans were 0.47%
of loans as of December 31, 2001, and 0.29% of loans as of December 31, 2000
(see Table 2). The increase in non-performing loans in 2001 was primarily due to
one large commercial loan relationship that deteriorated to non-accrual status
during the year. Additionally, there was an increase in levels of consumer loan
delinquency.

   [The following table was depicted as a bar chart in the printed material.]

Net Charge-Offs to Average Loans

---------------------------------------------
'01 ................................     0.1%
'00 ................................    0.09%
'99 ................................    0.14%
'98 ................................    0.15%
'97 ................................    0.15%
---------------------------------------------

      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 following table was depicted as a bar chart in the printed material.]

Allowance for Losses to Loans (at Year End)

---------------------------------------------
'01 ................................    1.48%
'00 ................................    1.55%
'99 ................................    1.68%
'98 ................................    1.63%
'97 ................................    1.70%
---------------------------------------------

      At December 31, 2001, non-performing loans (as defined in Table 2) as a
percentage of the allowance for loan losses were 31.8% as compared to 18.6% at
December 31, 2000. Of the $3,568,000 of non-performing loans at December 31,
2001, $2,541,000 were collateralized with real estate, $877,000 with other
assets and $150,000 were unsecured.

                                    Table 2
                              Non-Performing Loans

                                                   December 31,
                                  ----------------------------------------------
                                   2001      2000      1999      1998      1997
                                  ----------------------------------------------
                                                 (In thousands)
Non-accrual loans ............    $2,327    $1,503    $2,640    $5,627    $4,762
Accruing loans past due
  90 days or more ............     1,209       564       619       682     2,103
Restructured loans ...........        32        98       184       213        47
                                  ----------------------------------------------
Total non-performing
  loans ......................    $3,568    $2,165    $3,443    $6,522    $6,912
                                  ==============================================


                                                            --------------------
                                OMEGA FINANCIAL CORPORATION 2001 Annual Report 5
                                                            --------------------
<PAGE>

      Note 6 to the Consolidated Financial Statements summarizes the allowance
for loan losses for each of the last five years. Management's estimate of net
charge-offs for 2002 follows (in thousands):

Commercial, financial and agricultural .........................            $138
Real estate--commercial ........................................             296
Real estate--mortgage ..........................................              29
Personal .......................................................             437
                                                                            ----
Total ..........................................................            $900
                                                                            ====

   [The following table was depicted as a bar chart in the printed material.]

Non-Performing Loans to Loans (at Year End)

---------------------------------------------
'01 ................................    0.47%
'00 ................................    0.29%
'99 ................................    0.49%
'98 ................................    0.90%
'97 ................................    1.00%
---------------------------------------------

Investments

      Total investments, defined to include all interest earning assets except
loans (i.e. investment securities available for sale (at market value),
investment securities held to maturity, federal funds sold, interest bearing
deposits and other interest-earning assets) totaled $313,614,000 on December 31,
2001, representing an increase of $30,390,000 from year-end 2000. The following
table summarizes how the ending balances (in thousands) changed annually in each
of the last three years.

                                            2001          2000           1999
                                         --------------------------------------
Purchases of investment
  securities .......................     $ 113,559      $ 48,344      $ 107,951
Sales and maturities of
  investment securities ............       (93,500)      (79,685)       (90,429)
Adjustment in market value
  of AFS securities ................         5,271         1,243         (5,838)
Amortization/Accretion .............          (357)         (192)          (395)
Federal funds sold,
  net change .......................       (25,300)       37,775        (16,375)
Interest bearing deposits with
  others, net change ...............        30,717           223           (583)
                                         --------------------------------------
Increase (decrease)
  in investments ...................     $  30,390      $  7,708      $  (5,669)
                                         ======================================

      Average investments increased by $9,146,000, or 3.3%, during 2001, after
decreasing by $19,285,000, or 6.5%, during 2000. Proceeds from maturing
investment securities were used to purchase tax-exempt investment securities
with forward settlement dates, so reserved cash was employed in the liquid
overnight investments of federal funds and interest bearing deposits.
Additionally, increased funds from new deposits intended for loan funding were
invested in liquid instruments until loans were closed.

   [The following table was depicted as a bar chart in the printed material.]

Average Asset Mix

--------------------------------------------------------------------------------
                                          Average Loans      Average Investments

'01 ................................          67.9%                 25.9%
'00 ................................          67.6%                 25.9%
'99 ................................          66.6%                 28.6%
'98 ................................          68.6%                 26.5%
'97 ................................          68.3%                 26.2%
--------------------------------------------------------------------------------

      The investment area is managed according to internally established
guidelines and quality standards. Omega segregates its investment securities
portfolio into two classifications: those held to maturity and those available
for sale. Omega's policy dictates that 100 percent of all marketable investment
securities be classified as available for sale. At December 31, 2001 the market
value of the entire securities portfolio exceeded amortized cost by $7,594,000
as compared to December 31, 2000 when market value was greater than amortized
cost by $2,428,000. The weighted average maturity of the investment portfolio
was 1 year and 10 months as of December 31, 2001 as compared to 1 year and 7
months at the end of 2000. The weighted average maturity has remained short in
order to achieve a level of liquidity. Table 4 (located on page 11) shows the
remaining maturity or earliest possible repricing for investment securities.

Non-Interest Earning Assets

      Non-interest earning assets increased $376,000, or 0.5% on average in 2001
as compared to an increase of $19,051,000, or 30.3% in 2000. Changes occurring
in 2001 were the result of normal operating activities. In December of 1999,
Omega used excess cash to purchase bank-owned life insurance (BOLI) in the
amount of $20,112,000. Average balances included in non-earning assets that
represent the cash surrender value of the BOLI were $20,580,000 in 2000 as
compared to $110,000 in 1999, accounting for the overall increase in
non-interest earning assets in 2000. In December of 2001, an additional
$8,000,000 was added to the BOLI investment, and we should expect to see the
corresponding increase in the average non-earning assets in 2002.

Deposits

      From year-end 2000 to year-end 2001, total deposits increased by
$42,166,000. The following table summarizes how the ending balances (in
thousands) changed annually in each of the last three years.

                                             2001         2000           1999
                                           ------------------------------------
Demand deposits .....................      $ 8,989      $ 10,052       $(11,847)
Interest bearing
  demand deposits ...................       20,776         7,823         (7,180)
Savings deposits ....................        9,889        (2,229)        (1,282)
Time deposits .......................        2,512        22,260         15,567
Deposits sold .......................           --            --        (14,322)
                                           ------------------------------------
Increase (decrease) in deposits .....      $42,166      $ 37,906       $(19,064)
                                           ====================================


------------------------------
6  OMEGA FINANCIAL CORPORATION 2001 Annual Report
------------------------------
<PAGE>

      Average deposits increased in 2001 by $46,427,000, or 5.4% to
$909,684,000, after a decrease in 2000 of $515,000, or 0.1%. In 2000, new
deposits replaced those that were sold with a branch in 1999, and although by
year end 2000 $37,906,000 had been added since December 31, 1999, most of the
increase occurred late in the year, having little impact on the average balance.
The benefit of the increased deposits in 2000 is reflected by the overall 5.4%
increase in average balances for 2001, particularly in the time deposit
category. As reflected in Table 3 and the graph below, the mix of deposit types
remains balanced, with core deposits a little more than half of total average
deposits.

      In the past several years the banking industry in general has experienced
limited deposit growth because of fierce competition in the marketplace provided
by mutual funds and other investment options that directly compete with
traditional banking products. In 2001, however, we believe that public
perception has changed somewhat and the comfort of insured deposits and local
familiarity that our bank can offer to depositors has once again become a
primary consideration for investors. Omega continues to supply the needs of its
customer base by offering insured deposits and financial services, but has
supplemented its funding needs with borrowings.

   [The following table was depicted as a bar chart in the printed material.]

Average Deposit Mix

--------------------------------------------------------------------------------
                                Average Core Deposits      Average Time Deposits

'01 ..................                  52.4%                      47.6%
'00 ..................                  53.3%                      46.7%
'99 ..................                  54.1%                      45.9%
'98 ..................                  53.0%                      47.0%
'97 ..................                  50.9%                      49.1%
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                                     Table 3
                               Changes in Deposits
                                ($ in thousands)

<TABLE>
<CAPTION>
                                                        2001      Increase (Decrease)     2000       Increase (Decrease)     1999
                                                      Average     -------------------   Average     --------------------    Average
                                                      Balance     Amount         %      Balance      Amount          %      Balance
                                                      -----------------------------------------------------------------------------
<S>                                                   <C>         <C>           <C>     <C>         <C>           <C>      <C>
Interest bearing demand deposits ................     $247,177    $10,148       4.3%    $237,029    $(3,777)      (1.6)%   $240,806
Savings deposits ................................      104,250      2,726       2.7      101,524     (4,050)      (3.8)     105,574
Demand deposits .................................      124,995      3,454       2.8      121,541        488        0.4      121,053
                                                      -----------------------------------------------------------------------------
  Total core (transaction) accounts .............      476,422     16,328       3.5      460,094     (7,339)      (1.6)     467,433
Time deposits ...................................      433,262     30,099       7.5      403,163      6,824        1.7      396,339
                                                      -----------------------------------------------------------------------------
  Total deposits ................................     $909,684    $46,427       5.4%    $863,257    $  (515)      (0.1)%   $863,772
                                                      =============================================================================
</TABLE>

Other Interest Bearing Liabilities

      Other interest bearing liabilities on average increased $9,004,000, or
19.0% in 2001, as compared to an increase of $15,521,000, or 48.6% in 2000. The
increases in 2001 and 2000 are primarily due to the addition of $10,917,000 and
$14,301,000, respectively, in the average balances of borrowed funds. In both
years, the increase in borrowed funds was needed to match-fund certain
commercial loans and to fund the stock repurchase programs in effect (see Note 8
of Notes to Consolidated Financial Statements).

Shareholders' Equity

      From year-end 2000 to year-end 2001, total shareholders' equity increased
by $1,046,000. The following table summarizes how the components of equity (in
thousands) changed annually in each of the last three years.

                                           2001           2000           1999
                                         --------------------------------------
Net income ........................      $ 17,655       $ 17,129       $ 17,362
Dividends .........................        (9,225)        (9,374)        (8,779)
Stock options exercised ...........         2,485          1,485          2,229
Repurchase of treasury stock ......       (13,713)        (6,354)       (10,331)
Net change in unrealized
  security gains ..................         3,358            768         (3,896)
Other .............................           486            399            586
                                         --------------------------------------
Increase (decrease) in
  shareholders' equity ............      $  1,046       $  4,053       $ (2,829)
                                         ======================================

      Shareholders' equity continued to be an important funding source during
2001, providing an average balance of $153,490,000, as compared to the
$153,874,000 provided in 2000. Dividend payout ratios on the common stock were
50.0% for 2001 and 52.4% for 2000. Capital has been increased as a result of
employee stock option and purchase plans. Other comprehensive income arising
from unrealized gains (net of tax) on securities available for sale increased
average equity by $3,503,000 in 2001 and decreased average equity by $3,557,000
in 2000. At December 31, 2001, Omega held 1,225,613 shares of stock in treasury
at a cost of $36,436,000 as compared to 726,101 in 2000 at a cost of
$22,723,000. These increases are a result of the Omega stock repurchase program
in effect during most of 2000 and 2001 (see Note 15 of Notes to Consolidated
Financial Statements).

      Omega increased the return to shareholders in 2001 by increasing its
dividend 3.9% to $1.07 per common share. Per share common dividends in prior
years were $1.03 and $.95 in 2000 and 1999, respectively. Omega paid a dividend
of $1.80 per preferred share in each of the years ending 2001, 2000 and 1999.
See Note 20 of Notes to Consolidated Financial Statements regarding restrictions
on dividends from subsidiary banks to the holding company.


                                                            --------------------
                                OMEGA FINANCIAL CORPORATION 2001 Annual Report 7
                                                            --------------------
<PAGE>

   [The following table was depicted as a bar chart in the printed material.]

Common Book Value per share

---------------------------------------------
'01 ................................   $18.65
'00 ................................   $17.73
'99 ................................   $16.96
'98 ................................   $16.95
'97 ................................   $15.83
---------------------------------------------

      Federal banking regulators have established capital adequacy requirements
for banks based on risk factors. All banks and bank holding companies are
required to have a minimum of 4% of risk adjusted assets in Tier I capital and
8% of risk adjusted assets in Total capital (Tier I and Tier II capital). As of
December 31, 2001 and 2000, Omega's Tier I capital ratio was 19.9% and 20.8%,
respectively, and its Total capital ratio was 21.1% and 22.1%, respectively.
Additionally, banking organizations must maintain a minimum Tier I capital to
total average asset (leverage) ratio of 3%. This 3% leverage ratio is a minimum
for the top-rated banking organizations without any supervisory, financial or
operational weaknesses or deficiencies. Other banking organizations are required
to maintain leverage capital ratios 100 to 200 basis points above the minimum
depending on their financial condition. At December 31, 2001 and 2000, Omega's
leverage ratio was 13.3% and 14.2%, respectively, against a required leverage
ratio of 4% (see Note 22 of Notes to the Consolidated Financial Statements).

   [The following table was depicted as a bar chart in the printed material.]

Equity to Asset Ratio (at Year End)

---------------------------------------------
'01 ................................   13.49%
'00 ................................   13.93%
'99 ................................   14.35%
'98 ................................   14.49%
'97 ................................   14.02%
---------------------------------------------

ASSET/LIABILITY MANAGEMENT

      The process by which financial institutions manage their assets and
liabilities is called asset/liability management. This has become very important
in an industry undergoing an ever-changing interest rate environment. The goals
of Omega's asset/ liability management are increasing net interest income
without taking undue interest rate risk or material loss of net market value of
its equity, while maintaining adequate liquidity. Net interest income is
increased by widening the interest spread and by increasing earning assets.
Liquidity is measured by the ability to meet both depositors' and credit
customers' requirements.

Net Interest Income and Interest Rate Risk

      Omega believes that it has managed interest rate risk while achieving
optimal levels of net interest income. Interest rate risk is the risk to net
interest income or capital arising from movements of interest rates. There are
several components of interest rate risk: repricing risk, basis risk and
customer option risk. The two methodologies used by the Corporation to aid in
the management of interest rate risk are gap analysis and economic simulation.
Gap analysis is a tool used by the Corporation primarily to measure repricing
risk while economic simulation is used to measure and manage repricing risk,
basis risk and customer option risk.

      Both tools, gap analysis and rate shock simulations are performed in a
static environment. In reality, Omega's balance sheet is dynamic and in constant
change as are interest rates. Management applies the same techniques using
projected future volumes and various interest rate scenarios to analyze
potential hedging decisions or decisions that involve the acquisition or
investment of funds.

      Economic simulation involves management simulating possible economic
conditions and interest rate scenarios in order to quantify the impact on net
interest income. The effect that changing interest rates has on Omega's net
interest income is simulated by moving interest rates up and down at 100 basis
point increments. This simulation is known as rate shocks.

      As the table below indicates, the Corporation is exposed to a loss of
income if interest rates fall. For example, net interest income at risk for a
100 basis point decrease in rates as of December 31, 2001 was $420,000, or .89%,
of net interest income, compared to $855,000, or 1.87%, of net interest income
at risk as of December 31, 2000. Omega's rate risk policies provide for maximum
limits on net interest income that can be at risk for 100 through 400 basis
point changes in interest rates. During 2001, Omega's rate risk position was
consistently within policy limits.

               Effect of Interest Rate Risk on Net Interest Income
                                (in $ thousands)

                                                                      Total
                     Change                            Change        Change
   Change in         Due to            Change          Due to        Due to
Interest Rates      Repricing          Due to         Customer    Interest Rate
(Basis Points)        Risk           Basis Risk        Options        Risk
-------------------------------------------------------------------------------
      300             $ 822            $ 230            $ 43         $ 1,095
      200               544              185              28             757
      100               271               99              14             384
        0                 0                0               0               0
     -100              (290)             (90)            (40)           (420)
     -200              (360)            (594)            (57)         (1,011)
     -300              (448)          (2,584)            (49)         (3,081)

      Omega's low level of interest rate risk is directly related to the
preference of our customers for fixed rate loans and shorter-term deposits. If
customer preferences change, the same effects could be obtained by changing
investment, lending, funding or pricing strategies; however, these strategies
could reduce liquidity or require maintaining additional capital.


------------------------------
8  OMEGA FINANCIAL CORPORATION 2001 Annual Report
------------------------------
<PAGE>

      In addition to determining the impact on net interest income from various
interest rate changes, the same analysis is applied to determine the change that
interest rate movements would have on Omega's market value of equity (MVE). The
MVE provides an indicator of economic value and is computed by discounting all
contractual future cash flows at current market rates. The effect that changing
interest rates has on Omega's MVE is simulated by moving interest rates up and
down at 100 basis point increments. This provides management with information
necessary to analyze long-term interest rate risk. Management can limit
long-term interest rate risk, but it is generally at the expense of short-term
earnings, which can cause more volatility in the short-term. At December 31,
2001, Omega's net interest income and MVE were within the guidelines established
by management and the Board of Directors. The table below summarizes the results
of rate shocks showing the effect that interest rate risk has on market value of
equity as of December 31, 2001.

             Effect of Interest Rate Risk on Market Value of Equity
                                (in $ thousands)

                                                                       Total
                         Change                       Change          Change
   Change in             Due to         Change        Due to          Due to
Interest Rates         Repricing        Due to       Customer      Interest Rate
(Basis Points)            Risk        Basis Risk      Options          Risk
--------------------------------------------------------------------------------
      300               $(15,999)      $ (2,369)      $ 3,238        $(15,130)
      200                (11,009)        (1,399)        2,367         (10,041)
      100                 (5,685)          (606)        1,353          (4,938)
        0                      0              0             0               0
     -100                  6,073            414        (2,500)          3,987
     -200                 12,563          1,992        (4,514)         10,041
     -300                 19,509         14,668        (5,567)         28,610

Repricing Risk

      Repricing risk arises from differences between the timing of rate changes
and the timing of cash flows that occur in the pricing and maturity of assets
and liabilities. The static gap analysis is one of the tools used to measure and
manage repricing risk. By managing gap, fluctuations in net interest income can
be minimized, thereby achieving consistent growth in net interest income during
periods of changing interest rates. Table 4 (located on page 11) shows the
period and cumulative static gaps for various time intervals as of December 31,
2001. The data in this table is based upon the earliest possible repricing dates
or maturity, whichever comes first. Core deposit accounts, defined as interest
bearing demand deposits and certain savings accounts are considered to have
repricing implications of various intervals between one month and five years.
The gap analysis is used as an indicator of what may happen to net interest
income if interest rates rise or fall. On a cumulative basis, over the next
twelve months, Omega is in a negative gap position of $107,253,000 at December
31, 2001, indicating more interest bearing liabilities than earning assets will
reprice during that period. Over the past several years, the level of our gap
and interest rate risk positions has been affected by both the extension of our
loan portfolio, which reflects our customers' preference for fixed rates, and
the shortening of our certificate of deposit base as customers continue to
prefer shorter term certificates.

      As of December 31, 2001, should interest rates rise by 100 basis points
immediately and Omega's balances do not grow and the mix does not change,
repricing risk would cause net interest income to increase over the next twelve
months by $271,000. If interest rates would decline by 100 basis points
immediately, repricing risk would cause net interest income to decrease by
$290,000 over the next twelve months.

      Omega's management cannot predict the direction of interest rates nor will
the mix remain unchanged, yet management uses this information to help formulate
strategies to minimize any unfavorable effect on net interest income as a result
of interest rate changes. As an example, in 2001, Omega sold $35,895,000 in
long-term fixed rate residential mortgages to a third party in order to decrease
repricing risk.

Basis Risk

      Basis risk is another source of interest rate risk and arises from the
difference in movements of interest rates earned on assets and the interest
rates paid on liabilities with otherwise similar repricing characteristics. The
Corporation analyzed the effects of basis risk on both net interest income and
MVE. This was done through interest rate shocks, which isolated the movements of
the prime rate and treasury rates. The following shows the results of these rate
shocks.

                   Effect of Basis Risk on Net Interest Income
                                (in $ thousands)

                     Change in Net         Change in Net          Change in Net
   Change in        Interest Income       Interest Income        Interest Income
Interest Rates          Due to            Due to Treasury            Due to
(Basis Points)     Prime Basis Risk         Basis Risk          Total Basis Risk
--------------------------------------------------------------------------------
      300               $ 5,107              $(4,877)                  $ 230
      200                 3,405               (3,220)                    185
      100                 1,702               (1,603)                     99
        0                     0                    0                       0
     -100                (1,702)               1,612                     (90)
     -200                (3,405)               2,811                    (594)
     -300                (5,105)               2,521                  (2,584)

      The table above indicates the results of changes in the prime rate or
treasury rates, keeping all other interest rates unchanged. If the prime rate
would increase by 100 basis points, and all other rates remained unchanged, the
Corporation's net interest income would increase by $1,702,000 and market value
of equity would decrease by $4,563,000. The Corporation's prime basis risk has
stabilized over the last several years as a result of customer preference for
fixed rate loans and the fact that the Corporation has increasingly indexed
variable rate loans to rates other than the prime rate. If all points on the
treasury curve would increase 100 basis points and all other rates remained
unchanged, the Corporation's net interest income would decrease $1,603,000 and
market value of equity would increase $3,957,000. This change can be attributed
to the fact that most deposit rates are indexed to the treasury curve;
therefore, an increase in treasury rates would increase interest expense more
than interest income.


                                                            --------------------
                                OMEGA FINANCIAL CORPORATION 2001 Annual Report 9
                                                            --------------------
<PAGE>

                 Effect of Basis Risk on Market Value of Equity
                                (in $ thousands)

                        Change in             Change in             Change in
   Change in          Market Value          Market Value          Market Value
Interest Rates           Due to            Due to Treasury           Due to
(Basis Points)      Prime Basis Risk         Basis Risk         Total Basis Risk
--------------------------------------------------------------------------------
      300              $(12,831)              $10,462              $ (2,369)
      200                (8,830)                7,431                (1,399)
      100                (4,563)                3,957                  (606)
        0                     0                     0                     0
     -100                 4,897                (4,483)                  414
     -200                10,171                (8,179)                1,992
     -300                15,867                (1,199)              $14,668

Customer Option Risk

      Customer option risk arises when a customer has the right to alter the
level and timing of cash flows of an asset or liability. Prepayment options on
loans and early withdrawal of deposits are two of the most common types of
customer options. In a rising rate environment, the Corporation's interest rate
risk is increased as customers transfer deposits from products with lower
interest rates to accounts or other products that offer higher interest rates.
In a declining rate environment, the Corporation's interest rate risk is
increased when a customer prepays or refinances their loan in order to take
advantage of the lower rate environment. The Corporation analyzed the effects of
customer options on net interest income and MVE by using interest rate shocks
that include the effect of estimated prepayments on our mortgage portfolio.
Prepayment levels are dependent on several factors including the current
interest rate environment, the interest rate on the loan as well as other
contractual provisions of the loan. Mortgage prepayment levels were determined
by using estimated prepayments of mortgage-backed securities with similar
maturity and rate characteristics. Customer options resulting from a 100 basis
point decrease in interest rates would cause net interest income to decrease
$40,000 and market value of equity to decrease $2,500,000.

Liquidity

      Liquidity represents the Corporation's ability to efficiently meet
commitments to fund loans, purchase securities and repay deposits or other
liabilities.

      There is no standardized formula for measuring liquidity. Therefore in
order to assess the adequacy of the Corporation's liquidity position, Omega has
adopted a liquidity measurement that answers the following three questions:

      1.    How much cash is on hand and can be raised over the next thirty days
            without any principal loss on the assets?

      2.    If adverse publicity was released about the industry or the
            Corporation, what is the ability of Omega to meet depositor needs?
            This would be the run on the bank or worst-case scenario.

      3.    What are the funding requirements through the next ninety days?

      When measuring liquidity, total liquid assets must be determined. This
includes cash on hand, federal funds sold, market value of U.S. Treasury and
Agency securities not pledged, loans that could be sold within thirty days, cash
from investment or loan maturities within thirty days and any other readily
marketable assets.

      Total short-term liabilities must also be determined to measure liquidity.
This includes federal funds purchased, repurchase agreements, certificates of
deposit over $100,000 scheduled to mature within thirty days, and an estimated
amount of retail deposit withdrawals.

      The short-term liabilities are deducted from the liquid assets to
determine a surplus or deficit and a percentage of total assets is determined.
At December 31, 2001, total liquid assets were $180,181,000 while the short-term
liabilities were $59,814,000. This left a surplus of liquid assets of
$120,367,000, or 10.6%, of total assets.

      Management believes that a surplus of not less than 5% is adequate. The
Corporation actively manages liquidity at this level and has developed
reasonable liquidity contingency plans, including ensuring available alternative
funding sources to maintain adequate liquidity under a variety of business
conditions.

      The investment portfolio, due to its relatively short average life, has
the ability to provide additional liquidity if necessary. When developing
investment strategies, the Corporation considers runoff of assets and expected
future funding needs.

      If required due to unforeseen circumstances, Omega has the ability to
increase its liquidity through the sale of assets, primarily financial
instruments. As disclosed in Note 2 of Notes to the Consolidated Financial
Statements, most of Omega's financial assets at December 31, 2001 have a fair
value in excess of their aggregate book value; therefore, some of these
instruments could be sold if needed for liquidity purposes and their sale would
not negatively affect current earnings or capital.

      In addition, liquidity can also be provided from off-balance sheet
sources. At December 31, 2001, Omega had unsecured federal funds lines totaling
$25,000,000. At December 31, 2001, Omega had no amount outstanding against these
federal funds lines. Another source of liquidity is the Federal Reserve Discount
Window. Omega is able to borrow up to the amount of collateral pledged, which as
of December 31, 2001 was $27,860,000. The Corporation does not consider either
of these to be a source of long-term liquidity; rather they are used to cover
short-term fluctuations in liquidity.

      The Corporation is also a member of the Federal Home Loan Bank of
Pittsburgh, which provides overnight or term funding to the bank with a
borrowing limit of $46,390,000. This borrowing limit could be increased to a
maximum amount of $334,048,000 with the purchase of $14,383,000 worth of
additional FHLB stock. These borrowings are secured by investment securities and
first mortgage residential real estate loans. At December 31, 2001, Omega had
$38,734,000 outstanding in term loans and no overnight advances (See Note 8 of
Notes to the Consolidated Financial Statements).


-------------------------------
10  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

      Since deposits are a primary source of liquidity, another measure of
liquidity is the average loan to deposit ratio. This ratio was 84.6% at December
31, 2001 and 84.4% at December 31, 2000. Management's target range for this
ratio is 70% to 85%.

   [The following table was depicted as a bar chart in the printed material.]

Equity to Asset Ratio (at Year End)

---------------------------------------------
'01 ................................    84.6%
'00 ................................    84.4%
'99 ................................    82.0%
'98 ................................    83.5%
'97 ................................    81.6%
---------------------------------------------

      The Corporation has numerous off-balance sheet loan obligations that exist
in order to meet the financing needs of its customers. These include commitments
to extend credit, unused lines of credit as well as standby letters of credit.
(See Note 13 of Notes to the Consolidated Financial Statements). Since many
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Corporation does not expect that these commitments will have an adverse effect
on its liquidity position.

--------------------------------------------------------------------------------

                                     Table 4
                  Maturity Distribution as of December 31, 2001
                                 (In thousands)
                 Remaining Maturity/Earliest Possible Repricing

<TABLE>
<CAPTION>
                                                                      Over Three    Over Six     Over One
                                                           Three      Months But   Months But    Year But      Over
                                                           Months     Within Six   Within One   Within Five    Five         Total
                                                          or Less       Months        Year         Years       Years       Interest
                                                         ---------------------------------------------------------------------------
<S>                                                      <C>           <C>          <C>           <C>         <C>         <C>
Interest Earning Assets
  Interest bearing deposits .........................    $  31,812     $     --     $      --     $     --    $     --    $   31,812
  Federal funds sold ................................       14,450           --            --           --          --        14,450
  Investment securities:
    U.S. Treasury securities and obligations of other
       U.S. Government agencies and corporations ....       24,703       10,001         9,012       70,545          --       114,261
    Obligations of state and political subdivisions .        2,461        6,122        12,993       85,116         691       107,383
    Corporate and other securities ..................        4,196        2,496         4,676        8,061          10        19,439
    Mortgage-backed securities ......................        2,738        2,151         3,131           --          --         8,020
    Stocks ..........................................           --           --            --           --      10,655        10,655
  Loans:
    Commercial, financial, and agricultural .........       72,491        3,375         9,598       32,903       5,571       123,938
    Real estate--commercial .........................       73,574       17,796        22,803      122,275      26,165       262,613
    Real estate--construction .......................       14,520          108           271        2,664       3,173        20,736
    Real estate--mortgage ...........................        6,472        8,147        16,111       99,550      64,142       194,422
    Home equity .....................................       15,447        3,278         6,284       40,998      26,264        92,271
    Personal (net of unearned interest) .............       20,807        4,398         8,102       30,272       2,292        65,871
    Lease financing (net of unearned interest) ......           53           65           124          261          --           503
                                                         ---------------------------------------------------------------------------
Total Interest Earning Assets .......................      283,724       57,937        93,105      492,645     138,963     1,066,374
                                                         ---------------------------------------------------------------------------
Interest Bearing Liabilities
  Demand deposits ...................................       47,523           --            --      153,339          --       200,862
  Savings deposits ..................................      102,917           --        22,572       43,040          --       168,529
  Certificates of deposit over $100,000 .............       22,028       20,205        15,034       19,146          --        76,413
  Time deposits .....................................      124,157       73,317        69,939       80,009           8       347,430
  Short-term borrowings .............................       37,572           --            --           --          --        37,572
  ESOP debt .........................................           --           --            --           --       3,110         3,110
  Long-term debt ....................................        5,257          261           534        4,927       6,255        17,234
  Other interest bearing liabilities ................          703           --            --           --          --           703
                                                         ---------------------------------------------------------------------------
Total Interest Bearing Liabilities ..................      340,157       93,783       108,079      300,461       9,373       851,853
                                                         ---------------------------------------------------------------------------
Gap .................................................    $ (56,433)    $(35,846)    $ (14,974)    $192,184    $129,590    $  214,521
                                                         ===========================================================================
Cumulative Gap ......................................    $ (56,433)    $(92,279)    $(107,253)    $ 84,931    $214,521
                                                         =============================================================
Cumulative sensitivity ratio ........................         0.83         0.79          0.80         1.10        1.25
Commercial, financial and agricultural loans maturing
  after one year with:
    Fixed interest rates ............................                                             $  7,580    $   5,543   $   13,123
    Variable interest rates .........................                                               25,323           28       25,351
                                                                                                  ----------------------------------
    Total ...........................................                                             $ 32,903    $   5,571   $   38,474
                                                                                                  ==================================
</TABLE>


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 11
                                                           ---------------------
<PAGE>

RESULTS OF OPERATIONS

2001 Financial Performance Overview

      At $17,655,000, Omega's net income for 2001 represented a return on
average assets (ROA) of 1.56%, the sixth consecutive year of ROA's in excess of
1.50%. The management of Omega Financial Corporation strives to attain high
earnings levels consistently each year. The core earnings base is protected with
conservative policies, minimizing risk to shareholders. We believe that this
approach has helped achieve repeating solid performances year after year. As
with most Corporations, however, occasional events occur which trigger a
significant effect on earnings. Such was the case in 2001 when a block of
mortgage loans was sold for substantial gains. Additionally other gains or
losses realized from the securities portfolio could create peaks and valleys in
earnings results from year to year. In order to exhibit a true comparison of
core operating results, the chart presented below shows annual net income in two
parts--net operating income and non-recurring income. In viewing results in this
manner, the reader can easily see the change each year in core operating
results, without the effects of these one-time events. In 2001, while net income
increased by 3.1%, or $526,000, net operating income (defined as net income
reduced by gains on securities and other non-recurring gains, net of tax)
declined by $67,000, or 0.4%. On a diluted basis, net income per common share
improved, reaching $2.01 in 2001, an increase of 7.5%, or $.14 over 2000.

   [The following table was depicted as a bar chart in the printed material.]

Annual Net Income (in thousands)

--------------------------------------------------------------------------------
                                     Net Operating       Non-Recurring Income
                                        Income              (net of tax)
'01 ..................                 $16,879                  $  776
'00 ..................                 $16,946                  $  182
'99 ..................                 $16,170                  $1,191
'98 ..................                 $15,725                  $1,367
'97 ..................                 $15,969                  $  999
--------------------------------------------------------------------------------

The key factors that defined the 2001 results are as follows:

      o     Strong, but declining net interest margin
      o     Increasing service-based fee income
      o     Other non-interest income growth
      o     Ongoing expense control
      o     Loan sales

      A strong balance sheet has again produced good earnings. Assets were
$1,158,629,000 at December 31, 2001, representing a $44,793,000, or 4.0%,
increase from year-end 2000. Loans (net of unearned interest) were $760,354,000
compared to $751,985,000 at December 31, 2000, an increase of 1.1%, or
$8,369,000. Deposits increased by $42,166,000, or 4.7%, at December 31, 2001
when compared to December 31, 2000.

      Return on average equity increased from 11.13% in 2000 to 11.50% in 2001,
while return on average assets decreased slightly to 1.56% from 1.59% in 2000.
Omega's performance can be compared to its Mid-Atlantic regional peer group with
consolidated assets of $1 billion to $5 billion (using the most current data for
September 30, 2001 in each case).

                                                              Omega       Peers
                                                            --------------------
Return on average assets...........................           1.53%       1.11%
Return on average equity...........................          11.22       13.79

   [The following table was depicted as a bar chart in the printed material.]

Return on Average Equity

----------------------------------------------
'01 ................................    11.50%
'00 ................................    11.13%
'99 ................................    11.30%
'98 ................................    11.35%
'97 ................................    12.26%
----------------------------------------------

Net Interest Income

      Net interest income is the amount by which interest income on earning
assets exceeds interest expense on interest bearing liabilities. Net interest
income is the most significant component of revenue, comprising approximately
76% of total revenues for 2001. Net interest margin is the percentage of net
return on average earning assets and provides a measure of comparability of a
financial institution's performance. Because some interest earning assets are
tax-exempt, an adjustment is made for analytical purposes to place all assets on
a fully tax-equivalent basis.

      Both net interest income and net interest margin are impacted by interest
rate changes, changes in the relationships between rates and changes in the
composition of the average balance sheet. Additionally, product pricing, product
mix and customer preferences dictate the composition of the balance sheet and
the resulting net interest income. Table 5 (located on


-------------------------------
12  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

pages 14-15) shows average asset and liability balances, average interest rates
and interest income and expense for the period 1999 to 2001. In addition, it
shows the changes attributable to the volume and rate components of net interest
income.

      Total average loans were $769,197,000 in 2001 at an average weighted yield
of 7.99% that produced $61,433,000 in interest income. This represented a
$40,329,000, or 5.5%, increase in average loan volumes from 2000. The yield
decreased 45 basis points to 7.99% from 8.44% in 2000 resulting in a decrease of
$3,395,000 in interest income, while mix and volume changes increased interest
income $3,325,000 when compared to 2000. The combination of these rate, volume
and mix effects resulted in a decrease of $70,000, or 0.1% in total loan
interest. In order to explain the 45 basis point decrease in loan yields in
2001, we must consider the effects of Omega's pricing index. In 2001, the
weighted average rate of all new loans was 6.54%, 145 basis points lower than
the composite rate of the loan portfolio in total during 2000. In November of
2001, blocks of mortgage loans with total outstanding balances of $35,895,000
were sold. Had these loans been included all year, the average loans for 2001
would have been approximately $772,920,000, an increase of 6.0% over the
previous year. The composite rate on the loans that were sold was 7.07%, 104
basis points less than the composite rate on the remaining taxable loan
portfolio.

      Investment securities averaged $255,674,000, a decrease of $2,761,000, or
1.07% from the average investment securities in 2000. The average weighted yield
decreased to 5.19% from 5.48% in 2000. Maturing taxable investment securities
were replaced for the most part by tax-exempt investment securities in 2001,
because tax-equivalent yields on these vehicles were favorable, and because the
availability of desirable taxable securities was low. Accordingly, interest
income from securities decreased a total of $871,000. Most of the tax-exempt
securities purchased were purchased in the first quarter of 2001 and were
new-issued municipal bonds. Commitments were made to purchase the bonds, which
had forward settlement dates of up to three months. Therefore the cash committed
to these purchases was employed into overnight federal funds sold, or in
interest bearing deposits until needed. Consequently, interest bearing deposits
and federal funds sold, as a group on average, increased a total of 58.3%, or
$11,907,000.

      Total interest earning assets averaged $1,057,191,000 at a yield of 7.19%
and produced total interest income of $76,006,000 for 2001. The net increase in
average earning assets of $49,475,000 in 2001 over 2000 was funded by deposit
growth. The yield decreased by 45 basis points to 7.19% in 2001. On a fully
tax-equivalent basis, yield on earning assets decreased by 42 basis points to
7.49%. Interest income increased $3,347,000 from volume and mix changes and
decreased by $4,286,000 from generally lower yields producing a net decrease of
1.2%, or $939,000. On a fully tax-equivalent basis, interest income decreased by
$571,000, or 0.7%.

      Total interest bearing liabilities averaged $841,147,000 at a cost of
$30,863,000 carrying a composite rate of 3.67%. This represented an increase in
interest bearing liabilities of 6.6%, or $51,977,000, over 2000. The composite
rate decreased by 27 basis points in 2001, from 3.94% in 2000. Interest expense
decreased $2,571,000 due to lower rates and increased $2,308,000 due to volume
and mix changes. These changes resulted in a net decrease of $263,000, or 0.8%,
in interest expense. The most significant change in interest-bearing liabilities
was the increase in time deposits of $30,099,000, or 7.5%. Management believed
that many consumers were interested in pulling funds out of the declining and
uncertain stock market that has existed recently and securing their savings in a
stable insured banking institution, and therefore enticed depositors with
attractive rate specials. Also during the year, borrowings were increased on
average by $9,004,000, or 19.0% to fund the Corporation's stock repurchase
program.

      Non-interest bearing funding sources, including equity, averaged
$292,348,000 in 2001, compared to $288,666,000 in 2000, for an increase of
$3,682,000, or 1.3%. Most of the increase is attributed to non-interest bearing
demand deposit balances. This resulted in a decrease of 17 basis points in the
rate to fund interest-earning assets (computed by dividing the total interest
expense by the total average earning assets) to 2.92% in 2001 from 3.09% in
2000.

      Net interest income was $45,143,000 for 2001, a decrease of $676,000, or
1.5%, from 2000. This was the result of an increase of $1,039,000 due to volume
and mix changes and a decrease of $1,715,000 as a result of interest rate
effects. Net yield was 4.27% in 2001 and 4.55% in 2000. On a fully
tax-equivalent basis, the net yield decreased from 4.82% to 4.57% in 2001. As a
comparison, Omega's regional peer group reported an average net interest margin
of 4.07% through September 30, 2001 versus Omega's 4.62% for the same reporting
period.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 13
                                                           ---------------------
<PAGE>

                                     Table 5
             Average Balance Sheets and Net Interest Income Analysis
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                Year Ended December 31,
                                                                                         -------------------------------------
                                                                                                         2001
                                                                                         -------------------------------------
                                                                                            Average                     Yield/
                                                                                          Balance(1)        Interest     Rate
                                                                                         -------------------------------------
<S>                                                                                      <C>              <C>             <C>
ASSETS
Interest earning assets:
  Loans(5),(7) ............................................................              $   733,318      $    59,498     8.11%
  Tax-exempt loans ........................................................                   35,879            1,935     5.39
                                                                                         -------------------------------------
      Total loans .........................................................                  769,197           61,433     7.99
  Investment securities ...................................................                  161,081            9,399     5.83
  Tax-exempt investment securities ........................................                   94,593            3,881     4.10
                                                                                         -------------------------------------
      Total investment securities .........................................                  255,674           13,280     5.19
  Interest bearing deposits ...............................................                    6,181              161     2.60
  Federal funds sold ......................................................                   26,139            1,132     4.33
  Commercial paper ........................................................
                                                                                         -------------------------------------
Total interest earning assets .............................................                1,057,191           76,006     7.19

Non-interest earning assets:
  Cash and due from banks .................................................                   33,066
  Allowance for loan losses ...............................................                  (11,547)
  Premises and equipment ..................................................                   14,964
  Other assets(8) .........................................................                   39,821
                                                                                         -----------
      Total ...............................................................              $ 1,133,495
                                                                                         ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Interest bearing demand deposits(2) .....................................              $   247,177            3,431     1.39
  Savings deposits ........................................................                  104,250            2,134     2.05
  Time deposits ...........................................................                  433,262           22,677     5.23
  Other, including short-term borrowings, long-term debt,
    and other interest bearing liabilities ................................                   56,458            2,621     4.64
                                                                                         -------------------------------------
Total interest bearing liabilities ........................................                  841,147           30,863     3.67
                                                                                                          -----------
Non-interest bearing liabilities:
  Demand deposits .........................................................                  124,995
  Other ...................................................................                   13,863
Shareholders' equity ......................................................                  153,490
                                                                                         -----------
      Total ...............................................................              $ 1,133,495
                                                                                         ===========
Net interest income .......................................................                               $    45,143
                                                                                                          ===========
Net yield on interest earning assets(3) ...................................                                               4.27%
                                                                                                                          ====
Net interest income and yield--tax equivalent basis(4) ....................                               $    48,275     4.57%
                                                                                                          ====================
</TABLE>


-------------------------------
14  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

                                    Table 5
            Average Balance Sheets and Net Interest Income Analysis
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                     --------------------------------------------------------------
                                                                                     2000                           1999
                                                                     --------------------------------------------------------------
                                                                       Average                Yield/     Average              Yield/
                                                                      Balance(1)   Interest    Rate    Balance(1)   Interest   Rate
                                                                     --------------------------------------------------------------
<S>                                                                  <C>           <C>         <C>     <C>          <C>        <C>
ASSETS
Interest earning assets:
  Loans(5),(7) ..............................................        $   695,469   $ 59,568    8.57%   $  681,840   $57,203    8.39%
  Tax-exempt loans ..........................................             33,399      1,935    5.79        26,052     1,431    5.49
                                                                     --------------------------------------------------------------
      Total loans ...........................................            728,868     61,503    8.44       707,892    58,634    8.28
  Investment securities .....................................            182,875     10,953    5.99       190,446    11,071    5.81
  Tax-exempt investment securities ..........................             75,560      3,198    4.23        76,592     3,234    4.22
                                                                     --------------------------------------------------------------
      Total investment securities ...........................            258,435     14,151    5.48       267,038    14,305    5.36
  Interest bearing deposits .................................                891         56    6.29         3,659       181    4.95
  Federal funds sold ........................................             19,522      1,235    6.33        24,448     1,228    5.02
  Commercial paper ..........................................                                               2,988       145    4.85
                                                                     --------------------------------------------------------------
Total interest earning assets ...............................          1,007,716     76,945    7.64     1,006,025    74,493    7.40
Non-interest earning assets:
  Cash and due from banks ...................................             32,921                           34,952
  Allowance for loan losses .................................            (11,951)                         (11,830)
  Premises and equipment ....................................             14,412                           15,771
  Other assets(8) ...........................................             34,738                           17,780
                                                                     -----------                       ----------
      Total .................................................        $ 1,077,836                       $1,062,698
                                                                     ===========                       ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Interest bearing demand deposits(2) .......................        $   237,029      3,944    1.66    $  240,806     3,865    1.61
  Savings deposits ..........................................            101,524      2,284    2.25       105,574     2,375    2.25
  Time deposits .............................................            403,163     22,062    5.47       396,339    20,015    5.05
  Other, including short-term borrowings, long-term debt,
    and other interest bearing liabilities ..................             47,454      2,836    5.98        31,933     1,450    4.54
                                                                     --------------------------------------------------------------
Total interest bearing liabilities ..........................            789,170     31,126    3.94       774,652    27,705    3.58
                                                                                   --------                         -------
Non-interest bearing liabilities:
  Demand deposits ...........................................            121,541                          121,053
  Other .....................................................             13,251                           13,374
Shareholders' equity ........................................            153,874                          153,619
                                                                     -----------                       ----------
      Total .................................................        $ 1,077,836                       $1,062,698
                                                                     ===========                       ==========

Net interest income .........................................                      $ 45,819                         $46,788
                                                                                   ========                         =======

Net yield on interest earning assets(3) .....................                                  4.55%                           4.65%
                                                                                               ====                            ====

Net interest income and yield--tax equivalent basis(4) ......                      $ 48,583    4.82%                $49,300    4.90%
                                                                                   ================                 ===============

<CAPTION>
                                                                                        Years Ended December 31,
                                                                  -----------------------------------------------------------------
                                                                       2001 Compared to 2000             2000 Compared to 1999
                                                                   Increase (Decrease) Due to(6)      Increase (Decrease) Due to(6)
                                                                  -----------------------------------------------------------------
                                                                   Volume       Rate      Total      Volume       Rate       Total
                                                                  -----------------------------------------------------------------
<S>                                                               <C>         <C>        <C>         <C>        <C>         <C>
ASSETS
Interest earning assets:
  Loans(5),(7) ..............................................     $ 3,186     $(3,256)   $   (70)    $1,141     $  1,224    $ 2,365
  Tax-exempt loans ..........................................         139        (139)         0        422           82        504
                                                                  -----------------------------------------------------------------
      Total loans ...........................................       3,325      (3,395)       (70)     1,563        1,306      2,869
  Investment securities .....................................      (1,269)       (285)    (1,554)      (452)         334       (118)
  Tax-exempt investment securities ..........................         784        (101)       683        (44)           8        (36)
                                                                  -----------------------------------------------------------------
      Total investment securities ...........................        (485)       (386)      (871)      (496)         342       (154)
  Interest bearing deposits .................................         156         (51)       105       (164)          39       (125)
  Federal funds sold ........................................         351        (454)      (103)      (276)         283          7
  Commercial paper ..........................................                                           (72)         (72)      (145)
                                                                  -----------------------------------------------------------------
Total interest earning assets ...............................       3,347      (4,286)      (939)       555        1,898      2,452
Non-interest earning assets:
  Cash and due from banks ...................................
  Allowance for loan losses .................................
  Premises and equipment ....................................
  Other assets(8) ...........................................

      Total .................................................

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Interest bearing demand deposits(2) .......................         159        (672)      (513)       (54)         133         79
  Savings deposits ..........................................          59        (209)      (150)       (91)           0        (91)
  Time deposits .............................................       1,606        (991)       615        351        1,696      2,047
  Other, including short-term borrowings, long-term debt,
   and other interest bearing liabilities ...................         484        (699)      (215)       839          547      1,386
                                                                  -----------------------------------------------------------------
Total interest bearing liabilities ..........................       2,308      (2,571)      (263)     1,045        2,376      3,421
                                                                  -----------------------------------------------------------------
Non-interest bearing liabilities:
  Demand deposits ...........................................
  Other .....................................................
Shareholders' equity ........................................

      Total .................................................

Net interest income .........................................     $ 1,039     $(1,715)   $  (676)    $ (490)    $   (478)   $  (969)
                                                                  =================================================================
Net yield on interest earning assets(3) .....................

Net interest income and yield--tax equivalent basis(4) ......
</TABLE>

1)    Average balances were calculated using a daily average.
2)    Includes NOW and money market accounts.
3)    Net yield on interest earning assets is net interest income divided by
      average interest earning assets.
4)    Interest on obligations of states and municipalities is not subject to
      federal income tax. In order to make the net yield comparable on a fully
      taxable basis, a tax-equivalent adjustment is applied against the
      tax-exempt income utilizing a federal tax rate of 35%.
5)    Non-accruing loans and investments are included in the above table until
      they are charged off.
6)    The change in interest due to rate and volume has been allocated to volume
      and rate changes in proportion to the relationship of the absolute dollar
      amounts of the change in each.
7)    Interest on loans includes income/(loss) of $31 in 1999 from interest rate
      swap agreements used to hedge prime interest rate loans.
8)    Includes gross unrealized gains on securities available for sale: $5,558
      in 2001, $154 in 2000 and $5,637 in 1999.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 15
                                                           ---------------------
<PAGE>

   [The following table was depicted as a bar chart in the printed material.]

Net Interest Yield

--------------------------------------------------------------------------------
                            Yield on           Cost to Fund       Net Interest
                        Earnings Assets       Earnings Assets         Yield
'01 .............            7.19%                 2.92%              4.27%
'00 .............            7.64%                 3.09%              4.55%
'99 .............            7.40%                 2.75%              4.65%
'98 .............            7.78%                 2.96%              4.82%
'97 .............            8.03%                 3.12%              4.91%
--------------------------------------------------------------------------------

Provision for Loan Losses

      Omega's provision for loan losses was $500,000 in 2001 and $428,000 in
2000, an increase of $72,000 or 16.8%. In 2001, net charge-offs exceeded the
provision for loan losses by $398,000, while in 2000 the net charge-offs
exceeded the provision by $243,000. Credit quality is a high priority for Omega
as evidenced by its low ratios of net charge-offs to average loans outstanding
and non-performing loans to the loan loss allowance. Net charge-offs in 2001 and
2000 were .12% and .09%, respectively, of average loans outstanding.
Non-performing loans as a ratio to the allowance for loan losses were 31.8% at
year-end 2001 and 18.6% at the end of 2000. The allowance for loan losses as a
ratio to net loans was 1.48% and 1.55% at December 31, 2001 and 2000,
respectively. The ratio of net charge-offs to average loans for Omega's regional
peers as of September 30, 2001 was .24%. For that same reporting period, Omega's
ratio was .09%.

      Management believes that the allowance for loan losses at December 31,
2001 is adequate based on its analysis of the loan portfolio. Such analysis
considers factors that include historical and anticipated losses, the status of
non-performing delinquent loans, prevailing and anticipated economic conditions
and industry standards.

Non-Interest Income

      Omega remains committed to constantly increasing customer satisfaction by
delivering consumer-preferred services through convenient methods. Success in
this endeavor is evidenced by the increase in income from traditional bank
services over the last three years. In 1998, service-based fee income was 15.9%
of total revenues. In 1999, 2000 and 2001, 17.5%, 18.6% and 20.0%, respectively
of total revenues was derived from service-based fee income. We believe that our
advanced front line delivery systems, our interactive web site with on-line
banking, our customer information center, and our extensive employee training
programs have all contributed to the satisfaction of our customer base.
Technology advances that allow us to be better and more quickly informed about
our clients continue to help us to be responsive to their financial needs
through personalized service and product design. Service-based fee income (fees
on deposits, loans, trust services, and other services) grew to $11,868,000
during 2001 for a 9.9%, or $1,071,000 increase when compared to $10,797,000 for
2000. Plans are in place to unveil two new services in the second quarter of
2002 that we believe will further cater to our customers' needs, and management
expects service fee income to increase as a result.

      Late in the fourth quarter of 2001, Omega purchased additional bank-owned
life insurance (BOLI) in the amount of $8,000,000, bringing the balance to
$30,216,000 at year-end 2001. The BOLI cash surrender value increased by
$1,092,000 in 2001, as compared to $1,028,000 in 2000. These earnings are
included with other non-interest income.

   [The following table was depicted as a bar chart in the printed material.]

Non-Interest Income to Average Assets
(excluding security gains and non-recurring items)

---------------------------------------------------
'01 ................................          1.14%
'00 ................................          1.10%
'99 ................................          0.98%
'98 ................................          0.95%
'97 ................................          0.88%
---------------------------------------------------

      As a percentage of average assets, non-interest income (excluding
securities gains and other non-recurring gains) was 1.14% for 2001, as compared
to 1.10% in 2000. When compared to our regional peers (most current data as of
September 30, 2001), Omega's ratio was 1.13% and the peer average was 1.01%.

      In 2001, net gains from investment securities increased by $140,000, or
42.2% to $472,000. There are many factors considered by management when
opportunities arise to sell investment securities, and therefore, income from
this activity can fluctuate dramatically from year to year.

      Likewise, other non-recurring gains or losses can be realized in a given
year based upon unique circumstances. For example, in 2001 management made a
decision to sell two blocks of mortgage loans in order to reduce interest rate
risk within the balance sheet. Book value of the loans on the dates of the sales
in November of 2001 was $35,895,000, producing a gain of $749,000.

      In total, net gains realized on the sale of investment securities, loans
and other assets was $1,194,000 in 2001 versus $279,000 in 2000, resulting in an
increase in non-interest income of $915,000, or 327.9%. These net gains
represented .10% of average assets in 2001, as compared to .03% in 2000.

Non-Interest Expense

      In order to optimize earnings, Omega's management is challenged to
minimize operating expense where feasible to produce the highest levels of
income possible. Total non-interest expenses were $35,265,000 for 2001 as
compared to $34,383,000 for 2000, representing an increase of $882,000, or 2.6%.


-------------------------------
16  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

      Salaries and employee benefits increased by 0.8%, or $160,000 in 2001 as
compared to 2000. Omega decreased the number of full time equivalent employees,
as well as the cost of certain benefits programs. Omega employed one employee
for every $2,210,000 in average assets in 2001, versus $2,121,000 of average
assets in 2000.

      Occupancy and equipment increased by only $128,000, or 2.9%, even though
three new branch offices have been established since the third quarter of 2000.
All other non-interest expenses of $11,372,000 increased in total by $594,000,
or 5.5% in 2001 as compared to 2000. Data processing fees associated with
providing new services as well as the cost of consolidating three bank charters
accounted for 32% of the increased expenses. As a result of the charter
consolidation, we expect to realize certain efficiencies, which should reduce
future costs.

   [The following table was depicted as a bar chart in the printed material.]

Non-Interest Expense to Average Assets
(excluding non-recurring items)

---------------------------------------------
'01 ................................    3.11%
'00 ................................    3.19%
'99 ................................    3.16%
'98 ................................    3.14%
'97 ................................    3.13%
---------------------------------------------

      As a percentage of average assets, non-interest expense was 3.11% for 2001
as compared to 3.19% in 2000. At September 30, 2001, Omega's ratio of
non-interest expense to average assets was 3.15%, compared to a regional peer
average of 2.84%.

Income Taxes

      Income tax expense for 2001 amounted to $5,877,000 compared to $5,983,000
in 2000. The effective tax rate was 25.0% in 2001 versus 25.9% in 2000. The
improvement in 2001 was due to the increase in the yield of tax-exempt
investments and loans. Omega's level of average tax-exempt investments and
average tax-exempt loans increased in 2001 by 19.7% or $21,513,000, decreasing
the federal tax rate by 7.5%, as compared to 2000, when the tax rate was
decreased by 6.7% as a result of tax-exempt assets. Average tax-exempt
investments and loans as a percentage of average assets were 11.5%, 10.1% and
9.7% in 2001, 2000 and 1999, respectively. Tax-exempt income as a percentage of
income before income tax was 24.7%, 22.1% and 19.2% in 2001, 2000 and 1999,
respectively. See Note 11 of Notes to Consolidated Financial Statements for
further information on income taxes.

Net Income

      For comparative purposes, the following table sets forth earnings (in
thousands of dollars) and certain earnings ratios for the past three years.

                                          2001           2000             1999
                                        ----------------------------------------
Net income .....................        $17,655         $17,129         $17,362
Return on average assets .......           1.56%           1.59%           1.63%
Return on average equity .......          11.50           11.13           11.30

      Summarized below are the components of net income (in thousands of
dollars) and the contribution of each to return on assets for 2001 and 2000.

<TABLE>
<CAPTION>
                                                                    2001                      2000
                                                         -------------------------------------------------
                                                                         % of                       % of
                                                                        Average                    Average
                                                                        Assets                      Assets
                                                         -------------------------------------------------
<S>                                                      <C>               <C>         <C>           <C>
Net interest income ........................             $   45,143       3.98%       $   45,819      4.25%
Loan loss provision ........................                   (500)     (0.04)             (428)    (0.04)
Trust fees .................................                  3,358       0.30             3,258      0.30
Deposit service fees .......................                  4,138       0.37             3,675      0.34
Other fees .................................                  4,372       0.39             3,864      0.36
BOLI .......................................                  1,092       0.10             1,028      0.10
Security gains .............................                    472       0.04               332      0.03
Gains on sale of
  other assets .............................                    722       0.06               (53)       --
                                                         -------------------------------------------------
Total non-interest
  income ...................................                 14,154       1.25            12,104      1.12
Employee expense ...........................                (19,425)     (1.71)          (19,265)    (1.79)
Occupancy and
  equipment ................................                 (4,468)     (0.39)           (4,340)    (0.40)
Other non-interest
  expense ..................................                (11,372)     (1.00)          (10,778)    (1.00)
                                                         -------------------------------------------------
Total non-interest
  expense ..................................                (35,265)     (3.11)          (34,383)    (3.19)
Income tax expense .........................                 (5,877)     (0.52)           (5,983)    (0.56)
                                                         -------------------------------------------------
Net income .................................             $   17,655       1.56%       $   17,129      1.59%
                                                         =================================================
Average Assets .............................             $1,133,495                   $1,077,836
</TABLE>

   [The following table was depicted as a bar chart in the printed material.]

Return on Average Assets

---------------------------------------------
'01 ................................    1.56%
'00 ................................    1.59%
'99 ................................    1.63%
'98 ................................    1.66%
'97 ................................    1.67%
---------------------------------------------

2000 Financial Performance Overview

      At $17,129,000, Omega's net income for 2000 represented a return on
average assets of 1.59%. Although net income declined by 1.4%, or $233,000 in
2000 when compared to 1999, net operating income (defined as net income reduced
by gains on securities and other non-recurring gains, net of tax) rose by
$776,000, or 4.8%. The third and fourth quarters of 2000 had the strongest
improvement, with 11.5% and 14.6% increases respectively, when compared with the
net operating income in the same quarter one year earlier. On a diluted basis,
net income per common share improved, reaching $1.87 in 2000, an increase of
1.1%, or $.02 over 1999.

      The key factors which defined the 2000 results are as follows:

      o     Stable net interest margin
      o     Strong service-based fee income
      o     Other non-interest income growth
      o     Expense control
      o     Loan loss provision reduction as a result of credit quality


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 17
                                                           ---------------------
<PAGE>

      Assets were $1,113,836,000 at December 31, 2000, representing a
$60,433,000, or 5.7%, increase from year-end 1999. Loans (net of unearned
interest) were $751,985,000 compared to $704,948,000 at December 31, 1999, an
increase of 6.7%, or $47,037,000. Deposits increased by $37,906,000, or 4.5%, at
December 31, 2000 when compared to December 31, 1999.

      Return on average equity decreased from 11.30% in 1999 to 11.13% in 2000,
while return on average assets decreased to 1.59% from 1.63% in 1999. Omega's
Mid-Atlantic regional peer group with consolidated assets of $1 billion to $5
billion, as of December 31, 2000 reported return on assets and return on equity
of 1.13% and 14.72%, respectively.

Net Interest Income

      Net interest income is the amount by which interest income on earning
assets exceeds interest expense on interest bearing liabilities. Net interest
income is the most significant component of revenue, comprising approximately
79% of total revenues for 2000. Net interest margin is the percentage of net
return on average earning assets and provides a measure of comparability of a
financial institution's performance. Because some interest earning assets are
tax-exempt, an adjustment is made for analytical purposes to place all assets on
a fully tax-equivalent basis.

      Both net interest income and net interest margin are impacted by interest
rate changes, changes in the relationships between rates and changes in the
composition of the average balance sheet. Additionally, product pricing, product
mix and customer preferences dictate the composition of the balance sheet and
the resulting net interest income. Table 5 (located on pages 14-15) shows
average asset and liability balances, average interest rates and interest income
and expense for the period 1999 to 2000. In addition, it shows the changes
attributable to the volume and rate components of net interest income.

      Total average loans were $728,868,000 in 2000 at an average weighted yield
of 8.44% that produced $61,503,000 in interest income. This represented a
$20,976,000, or 3.0%, increase in average volumes from 1999. The yield increased
16 basis points to 8.44% from 8.28% in 1999 resulting in an increase of
$1,306,000 in interest income, while mix and volume changes increased interest
income $1,563,000 when compared to 1999. The combination of these rate, volume
and mix effects resulted in an increase of $2,869,000, or 4.9% in total loan
interest. In order to explain the 16 basis point increase in loan yields in
2000, we must consider the effects of Omega's pricing index. In 2000, the
weighted average rate of all new loans was 8.97%, 69 basis points higher than
the composite rate of the loan portfolio in total during 1999.

      Investment securities averaged $258,435,000, a decrease of $8,603,000, or
3.22% from the average investment securities in 1999. The average weighted yield
increased to 5.48% from 5.36% in 1999. New securities purchased during 2000 were
relatively longer in term and yield than in 1999, as Year 2000 liquidity
concerns were relieved. Approximately $8,600,000 in funds from maturing
investment securities were re-employed in loans or for other cash needs.
Accordingly, interest income from securities decreased a total of $154,000.
Interest bearing deposits, federal funds sold and commercial paper, as a group
on average, decreased a total of 34.4%, or $10,682,000. This decrease was caused
by cash needs for funding loans and the purchase of other assets.

      Total interest earning assets averaged $1,007,716,000 at a yield of 7.64%
and produced total interest income of $76,945,000 for 2000. The net increase in
average earning assets of $1,691,000 in 2000 over 1999 was funded by increased
borrowings. The yield increased by 24 basis points to 7.64% in 2000. On a fully
tax-equivalent basis, yield on earning assets increased by 26 basis points to
7.91%. Interest income increased $555,000 from volume and mix changes and by
$1,898,000 from generally higher yields producing a net increase of 3.3%, or
$2,452,000. On a fully tax-equivalent basis, interest income increased by
$2,704,000, or 3.5%.

      Total interest bearing liabilities averaged $789,170,000 at a cost of
$31,126,000 carrying a composite rate of 3.94%. This represented an increase in
interest bearing liabilities of 1.9%, or $14,518,000, over 1999. The composite
rate increased by 36 basis points in 2000, from 3.58% in 1999. Interest expense
increased $2,376,000 due to higher rates and increased $1,045,000 due to volume
and mix changes. These changes resulted in a net increase of $3,421,000, or
12.3%, in interest expense. The most significant change in interest-bearing
liabilities was the increase in borrowings. During the year, $14,300,000 was
borrowed to match-fund specific commercial loans, while $6,894,000 was borrowed
to fund the Corporation's stock repurchase program. On average, borrowings were
increased by $15,521,000, or 48.6%.

      Non-interest bearing funding sources, including equity, averaged
$288,666,000 in 2000, compared to $288,046,000 in 1999, for an increase of
$620,000, or 0.2%. This resulted in an increase of 34 basis points in the rate
to fund interest earning assets (computed by dividing the total interest expense
by the total average earning assets) to 3.09% in 2000 from 2.75% in 1999.

      Net interest income was $45,819,000 for 2000, a decrease of $969,000, or
2.1%, from 1999. This was the result of a decrease of $490,000 due to volume and
mix changes and a decrease of $478,000 as a result of interest rate effects. Net
yield was 4.55% in 2000 and 4.65% in 1999. On a fully tax-equivalent basis, the
net yield decreased from 4.90% to 4.82% in 2000. As a comparison, Omega's
regional peer group reported an average net interest margin of 4.14% through
December 31, 2000.

Provision for Loan Losses

      Omega's provision for loan losses was $428,000 in 2000 and $1,060,000 in
1999, a decrease of $632,000 or 59.6%. In 2000, net charge-offs exceeded the
provision for loan losses by $243,000, while in 1999 the provision exceeded net
charge-offs by $93,000. Credit quality is a high priority for Omega as evidenced
by its low ratios of net charge-offs to average loans outstanding and
non-performing loans to the loan loss allowance. Net charge-offs in 2000 and
1999 were .09% and .14%, respectively, of average loans outstanding. Omega's
regional peer group reported charge-offs as .20% of average loans in 2000.
Non-performing loans as a ratio to the allowance for loan losses were 18.6% at
year-end 2000 and 29.0% at the end of 1999. The allowance for loan losses as a
ratio to net loans was 1.54% and 1.68% at December 31, 2000 and 1999,
respectively.


-------------------------------
18  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

Non-Interest Income

      Income from traditional bank services increased each of the last three
years. In 1997, service-based fee income was 15.0% of total revenues. In 1998,
1999 and 2000, 15.9%, 17.5% and 18.6%, respectively of total revenues was in the
form of service-based fee income. Service-based fee income (fees on deposits,
loans, trust services, and other services) grew to $10,797,000 during 2000 for a
4.9%, or $504,000 increase when compared to $10,293,000 for 1999.

      Late in the fourth quarter of 1999, Omega purchased bank-owned life
insurance (BOLI) in the amount of $20,112,000. The cash surrender value on the
BOLI increased by $1,028,000 in 2000, providing Omega with a new source of
non-interest income.

      As a percentage of average assets, non-interest income (excluding
securities gains and other non-recurring gains) was 1.10% for 2000, as compared
to .98% in 1999. The peer average was .99% in 2000.

      In 2000, net gains from investment securities decreased by $13,000, or
3.8% to $332,000. There are many factors considered by management when
opportunities arise to sell investment securities, and therefore, income from
this activity can fluctuate dramatically from year to year.

      Likewise, other non-recurring gains or losses can be realized in a given
year based upon unique circumstances. For example, in 1999 management made a
decision to sell one banking office, based on its performance level, with a
resulting gain of $1,410,000. Additionally, in order to reduce interest rate
risk within the balance sheet, a block of mortgage loans, with book value of
$21,207,000 was sold, producing a gain of $106,000.

      In total, net gains realized on the sale of investment securities, loans
and other assets was $279,000 in 2000 versus $1,833,000 in 1999, resulting in a
decrease in non-interest income of $1,554,000, or 84.8%. These net gains
represented .03% of average assets in 2000, as compared to .17% in 1999.

Non-Interest Expense

      Total non-interest expenses were $34,383,000 for 2000 as compared to
$33,597,000 for 1999, representing an increase of $786,000, or 2.3%.

      Salaries and employee benefits increased by 3.5%, or $656,000 in 2000 as
compared to 1999. Omega decreased the number of full time equivalent employees,
however the cost of certain benefits programs increased. Omega employed one
employee for every $2,121,000 in average assets in 2000, versus $2,040,000 of
average assets in 1999.

      All other non-interest expenses, totaling $15,118,000 increased in total
by only $130,000 in 2000 as compared to 1999.

      As a percentage of average assets, non-interest expense was 3.19% for 2000
as compared to 3.16% in 1999. At December 31, 2000, Omega's regional peers had
an average of 2.76% of non-interest expense to assets.

Income Taxes

      Income tax expense for 2000 amounted to $5,983,000 compared to $6,895,000
in 1999. The effective tax rate was 25.9% in 2000 versus 28.4% in 1999. The
improvement in 2000 was due to the increase in the yield of tax-exempt
investments and loans. Omega's level of average tax-exempt investments and
average tax-exempt loans increased in 2000 by 6.15% or $6,315,000, decreasing
the federal tax rate by 6.7%, as compared to 1999, when the tax rate was
decreased by 5.9% as a result of tax-exempt assets. Average tax-exempt
investments and loans as a percentage of average assets were 10.1%, 9.7% and
7.8% in 2000, 1999 and 1998, respectively. Tax-exempt income as a percentage of
income before income tax was 22.1%, 19.2% and 15.6% in 2000, 1999 and 1998,
respectively.

Net Income

      For comparative purposes, the following table sets forth earnings and
certain earnings ratios for the past three years.

                                         2000            1999            1998
                                        ---------------------------------------
Net income .....................        $17,129         $17,362         $17,092
Return on average assets .......           1.59%           1.63%           1.66%
Return on average equity .......          11.13           11.30           11.35

      Summarized below are the components of net income and the contribution of
each to return on assets for 2000 and 1999.

<TABLE>
<CAPTION>
                                                         2000                       1999
                                               ---------------------------------------------------
                                                                 % of                        % of
                                                                Average                    Average
                                                                Assets                      Assets
                                               ---------------------------------------------------
<S>                                            <C>              <C>          <C>             <C>
Net interest income ..................         $   45,819        4.25%       $   46,788       4.40%
Loan loss provision ..................               (428)      (0.04)           (1,060)     (0.10)
Trust fees ...........................              3,258        0.30             2,976       0.28
Deposit service fees .................              3,675        0.34             3,585       0.34
Other fees ...........................              3,864        0.36             3,732       0.35
BOLI .................................              1,028        0.10                --         --
Security gains .......................                332        0.03               345       0.03
Gains on sale of
  other assets .......................                (53)         --             1,488       0.14
                                               ---------------------------------------------------
Total non-interest
  income .............................             12,104        1.12            12,126       1.14
Employee expense .....................            (19,265)      (1.79)          (18,609)     (1.75)
Occupancy and
  equipment ..........................             (4,340)      (0.40)           (4,370)     (0.41)
Other non-interest
  expense ............................            (10,778)      (1.00)          (10,618)     (1.00)
                                               ---------------------------------------------------
Total non-interest
  expense ............................            (34,383)      (3.19)          (33,597)     (3.16)
Income tax expense ...................             (5,983)      (0.56)           (6,895)     (0.65)
                                               ---------------------------------------------------
Net income ...........................         $   17,129        1.59%       $   17,362       1.63%
                                               ===================================================
Average Assets .......................         $1,077,836                    $1,062,698
</TABLE>


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 19
                                                           ---------------------
<PAGE>

                  Omega Financial Corporation and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                              December 31,
                                                                                                     ------------------------------
                                                                                                         2001              2000
                                                                                                     ------------------------------
<S>                                                                                                  <C>                <C>
ASSETS
Cash and due from banks ......................................................................       $    39,072        $    40,340
Interest bearing deposits with other financial institutions ..................................            31,812              1,095
Federal funds sold ...........................................................................            14,450             39,750
Investment securities held to maturity (market value--$3,851 and $5,044 respectively) ........             3,851              5,044
Investment securities available for sale .....................................................           263,501            237,335
Total loans ..................................................................................           760,395            752,108
Less: Unearned interest ......................................................................               (41)              (123)
  Allowance for loan losses ..................................................................           (11,224)           (11,622)
                                                                                                     ------------------------------
                                                                                                         749,130            740,363
Premises and equipment, net ..................................................................            15,563             14,284
Other assets .................................................................................            41,250             35,625
                                                                                                     ------------------------------
TOTAL ASSETS .................................................................................       $ 1,158,629        $ 1,113,836
                                                                                                     ==============================

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
  Non-interest bearing .......................................................................       $   138,433        $   129,444
  Interest bearing ...........................................................................           793,234            760,057
                                                                                                     ------------------------------
                                                                                                         931,667            889,501
Short-term borrowings ........................................................................            37,572             45,754
Other liabilities ............................................................................            12,093             12,463
ESOP debt ....................................................................................             3,110              3,369
Long-term debt ...............................................................................            17,234              6,895
Other interest bearing liabilities ...........................................................               703                650
                                                                                                     ------------------------------
TOTAL LIABILITIES ............................................................................         1,002,379            958,632

Commitments and Contingent Liabilities

Shareholders' Equity
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 ...................................................            (2,125)            (2,375)
Common stock, par value $5.00 per share:
  Authorized--25,000,000 shares;
  Issued--
    9,447,623 shares at December 31, 2001;
    9,333,084 shares at December 31, 2000
  Outstanding--
    8,222,010 shares at December 31, 2001;
    8,606,983 shares at December 31, 2000 ....................................................            47,238             46,665
Capital surplus ..............................................................................             7,856              5,944
Retained earnings ............................................................................           129,774            121,108
Accumulated other comprehensive income .......................................................             4,943              1,585
Cost of common stock in treasury:
  1,225,613 shares at December 31, 2001;
  726,101 shares at December 31, 2000 ........................................................           (36,436)           (22,723)
                                                                                                     ------------------------------
TOTAL SHAREHOLDERS' EQUITY ...................................................................           156,250            155,204
                                                                                                     ------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...................................................       $ 1,158,629        $ 1,113,836
                                                                                                     ==============================
</TABLE>

The accompanying notes are an integral part of these statements.


-------------------------------
20  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

                  Omega Financial Corporation and Subsidiaries
                       CONSOLIDATED STATEMENTS OF INCOME
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                Years Ended December 31,
                                                                                         -----------------------------------
                                                                                           2001        2000           1999
                                                                                         -----------------------------------
<S>                                                                                      <C>         <C>             <C>
INTEREST INCOME:
Interest and fees on loans ....................................................          $61,433     $ 61,503        $58,634
Interest and dividends on investment securities:
  Taxable interest income .....................................................            8,817       10,321         10,449
  Tax-exempt interest income ..................................................            3,881        3,198          3,234
  Dividend income .............................................................              582          632            622
Other interest income .........................................................            1,293        1,291          1,554
                                                                                         -----------------------------------
TOTAL INTEREST INCOME .........................................................           76,006       76,945         74,493

INTEREST EXPENSE:
Interest on deposits ..........................................................           28,242       28,290         26,255
Interest on short-term borrowings .............................................            1,605        2,240          1,089
Interest on long-term debt and other interest bearing liabilities .............            1,016          596            361
                                                                                         -----------------------------------
TOTAL INTEREST EXPENSE ........................................................           30,863       31,126         27,705
                                                                                         -----------------------------------
NET INTEREST INCOME ...........................................................           45,143       45,819         46,788
Provision for loan losses .....................................................              500          428          1,060
                                                                                         -----------------------------------
INCOME FROM CREDIT ACTIVITIES .................................................           44,643       45,391         45,728

OTHER INCOME:
Trust fees ....................................................................            3,358        3,258          2,976
Service fees on deposit accounts ..............................................            4,138        3,675          3,585
Net gains on investment securities available for sale .........................              472          332            345
Gain (loss) on sale of loans and other assets .................................              722          (53)         1,488
Other .........................................................................            5,464        4,892          3,732
                                                                                         -----------------------------------
TOTAL OTHER INCOME ............................................................           14,154       12,104         12,126

OTHER EXPENSE:
Salaries and employee benefits ................................................           19,425       19,265         18,609
Net occupancy expense .........................................................            2,302        2,132          2,171
Equipment expense .............................................................            2,166        2,208          2,199
Data processing service .......................................................            1,620        1,470          1,521
FDIC insurance premiums .......................................................              165          174            100
Other .........................................................................            9,587        9,134          8,997
                                                                                         -----------------------------------
TOTAL OTHER EXPENSE ...........................................................           35,265       34,383         33,597
                                                                                         -----------------------------------
INCOME BEFORE INCOME TAXES ....................................................           23,532       23,112         24,257
Income tax expense ............................................................            5,877        5,983          6,895
                                                                                         -----------------------------------
NET INCOME ....................................................................          $17,655     $ 17,129        $17,362
                                                                                         ===================================
EARNINGS PER SHARE
Basic .........................................................................          $  2.08     $   1.92        $  1.92
Diluted .......................................................................             2.01         1.87           1.85
Weighted average shares and equivalents:
Basic .........................................................................            8,287        8,725          8,838
Diluted .......................................................................            8,721        9,144          9,315
</TABLE>

The accompanying notes are an integral part of these statements.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 21
                                                           ---------------------
<PAGE>

                  Omega Financial Corporation and Subsidiaries
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                              Years Ended December 31, 1999, 2000 and 2001
                                                             ----------------------------------------------

                                                                          Unearned
                                                             Preferred     Compen-      Common      Capital
                                                               Stock       sation        Stock      Surplus
                                                             ----------------------------------------------
<S>                                                          <C>          <C>           <C>         <C>
Balance at December 31, 1998.......................          $5,000       $(2,875)      $45,686     $ 3,209
Comprehensive income:
  Net income.......................................
  Change in unrealized securities gains, net.......
Total comprehensive income.........................
Common dividends declared--
  $.95 per share...................................
Cash dividends, preferred--$1.80 per share.........
Amortization of unearned compensation..............                           250
Tax benefit from employee stock options............
Tax benefit from preferred stock
  dividends paid to ESOP...........................
Purchase of treasury stock--319,883 shares.........
Exercised employee stock options--
  134,193 shares...................................                                         613       1,616
                                                             ----------------------------------------------
Balance at December 31, 1999.......................           5,000        (2,625)       46,299       4,825
Comprehensive income:
  Net income.......................................
  Change in unrealized securities gains, net.......
Total comprehensive income.........................
Common dividends declared--
  $1.03 per share..................................
Cash dividends, preferred--$1.80 per share.........
Amortization of unearned compensation..............                           250
Tax benefit from employee stock options............
Tax benefit from preferred stock dividends
  paid to ESOP.....................................
Purchase of treasury stock--240,826 shares.........
Exercised employee stock options--
  73,302 shares....................................                                         366       1,119
                                                             ----------------------------------------------
Balance at December 31, 2000.......................           5,000        (2,375)       46,665       5,944
Comprehensive income:
  Net income.......................................
  Change in unrealized securities gains, net.......
Total comprehensive income.........................
Common dividends declared--
  $1.07 per share..................................
Cash dividends, preferred--$1.80 per share.........
Amortization of unearned compensation..............                           250
Tax benefit from employee stock options............
Tax benefit from preferred stock dividends
  paid to ESOP.....................................
Purchase of treasury stock--499,512 shares.........
Exercised employee stock options--
  114,539 shares...................................                                         573       1,912
                                                             ----------------------------------------------

Balance at December 31, 2001.......................          $5,000       $(2,125)      $47,238     $ 7,856
                                                             ==============================================

<CAPTION>
                                                              Years Ended December 31, 1999, 2000 and 2001
                                                           --------------------------------------------------
                                                                         Accumulated     Cost of
                                                                         Other Com-      Common
                                                           Retained      prehensive       Stock
                                                           Earnings        Income      In Treasury     Total
                                                           --------------------------------------------------
<S>                                                        <C>           <C>           <C>           <C>
Balance at December 31, 1998.......................        $104,285      $  4,713      $ (6,038)     $153,980
Comprehensive income:
  Net income.......................................          17,362
  Change in unrealized securities gains, net.......                        (3,896)
Total comprehensive income.........................                                                    13,466
Common dividends declared--
  $.95 per share...................................          (8,383)                                   (8,383)
Cash dividends, preferred--$1.80 per share.........            (396)                                     (396)
Amortization of unearned compensation..............                                                       250
Tax benefit from employee stock options............             256                                       256
Tax benefit from preferred stock
  dividends paid to ESOP...........................              80                                        80
Purchase of treasury stock--319,883 shares.........                                     (10,331)      (10,331)
Exercised employee stock options--
  134,193 shares...................................                                                     2,229
                                                           --------------------------------------------------
Balance at December 31, 1999.......................         113,204           817       (16,369)      151,151
Comprehensive income:
  Net income.......................................          17,129
  Change in unrealized securities gains, net.......                           768
Total comprehensive income.........................                                                    17,897
Common dividends declared--
  $1.03 per share..................................          (8,978)                                   (8,978)
Cash dividends, preferred--$1.80 per share.........            (396)                                     (396)
Amortization of unearned compensation..............                                                       250
Tax benefit from employee stock options............              77                                        77
Tax benefit from preferred stock dividends
  paid to ESOP.....................................              72                                        72
Purchase of treasury stock--240,826 shares.........                                      (6,354)       (6,354)
Exercised employee stock options--
  73,302 shares....................................                                                     1,485
                                                           --------------------------------------------------
Balance at December 31, 2000.......................         121,108         1,585       (22,723)      155,204
Comprehensive income:
  Net income.......................................          17,655
  Change in unrealized securities gains, net.......                         3,358
Total comprehensive income.........................                                                    21,013
Common dividends declared--
  $1.07 per share..................................          (8,829)                                   (8,829)
Cash dividends, preferred--$1.80 per share.........            (396)                                     (396)
Amortization of unearned compensation..............                                                       250
Tax benefit from employee stock options............             171                                       171
Tax benefit from preferred stock dividends
  paid to ESOP.....................................              65                                        65
Purchase of treasury stock--499,512 shares.........                                     (13,713)      (13,713)
Exercised employee stock options--
  114,539 shares...................................                                                     2,485
                                                           --------------------------------------------------

Balance at December 31, 2001.......................        $129,774      $  4,943      $(36,436)     $156,250
                                                           ==================================================
</TABLE>

The accompanying notes are an integral part of these statements.


-------------------------------
22  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

                  Omega Financial Corporation and Subsidiaries
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                     Years Ended December 31,
                                                                                             --------------------------------------
                                                                                                2001          2000          1999
                                                                                             --------------------------------------
<S>                                                                                          <C>            <C>           <C>
Cash flows from operating activities:
  Net income ...........................................................................     $  17,655      $ 17,129      $  17,362
  Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation and amortization ......................................................         2,097         2,048          2,221
    Provision for loan losses ..........................................................           500           428          1,060
    Gain on sale of investment securities ..............................................          (212)         (271)          (189)
    Non-monetary exchange of cost-method investments ...................................           (68)          (61)          (156)
    (Gain) loss on sale of fixed assets and other property owned .......................           (47)          (24)             5
    (Gain) loss on sale of loans .......................................................          (675)           80            (83)
    Gain on sale of branch .............................................................            --            --         (1,410)
    Increase in deferred tax asset .....................................................            (1)         (391)          (229)
    Increase in cash surrender value of bank-owned life insurance ......................        (1,092)       (1,013)            --
    Decrease (increase) in interest receivable and other assets ........................         1,451        (1,252)         1,937
    (Decrease) increase in interest payable ............................................          (635)          240             73
    (Decrease) increase in taxes payable ...............................................          (180)          732           (631)
    Amortization of deferred net loan costs (fees) .....................................          (340)          102           (217)
    Deferral of net loan fees ..........................................................           771           112            257
    Increase in accounts payable and accrued expenses ..................................           464           588            338
                                                                                             --------------------------------------
        Total adjustments ..............................................................         2,033         1,318          2,976
                                                                                             --------------------------------------
Net cash provided by operating activities ..............................................        19,688        18,447         20,338
Cash flows from investing activities:
  Proceeds from the sale or maturity of:
    Interest bearing deposits with other financial institutions ........................       230,046        32,284         39,002
    Commercial paper ...................................................................            --            --          5,000
    Investment securities available for sale--sales and maturities .....................        92,020        79,956         80,132
    Investment securities held to maturity--maturities .................................         1,692            --         10,486
  Purchase of:
    Interest bearing deposits with other financial institutions ........................      (260,763)      (32,507)       (38,419)
    Commercial paper ...................................................................            --            --         (4,855)
    Investment securities available for sale ...........................................      (113,104)      (48,240)      (106,739)
    Investment securities held to maturity .............................................          (455)         (104)        (1,212)
  Proceeds from sale of branch .........................................................            --            --          1,000
  Increase in loans ....................................................................       (45,790)      (48,062)       (18,642)
  Gross proceeds from sale of loans ....................................................        36,767            60         22,802
  Capital expenditures .................................................................        (3,078)       (1,472)        (1,118)
  Sale of fixed assets and other property owned ........................................           269           143            644
  Decrease (increase) in federal funds sold ............................................        25,300       (37,775)        16,375
  Purchase of bank-owned life insurance ................................................        (8,000)           --        (20,112)
                                                                                             --------------------------------------
Net cash used in investing activities ..................................................       (45,096)      (55,717)       (15,656)
Cash flows from financing activities:
  Increase (decrease) in deposits, net .................................................        42,166        37,906         (4,743)
  Increase in borrowings, net ..........................................................         2,157        17,122         12,889
  Net change in other interest bearing liabilities .....................................            53            50             15
  Dividends paid .......................................................................        (9,244)       (9,328)        (8,563)
  Tax benefit from preferred stock dividend and stock option activity ..................           236           149            336
  Issuance of common stock .............................................................         2,485         1,485          2,229
  Acquisition of treasury stock ........................................................       (13,713)       (6,354)       (10,331)
                                                                                             --------------------------------------
Net cash provided by (used in) financing activities ....................................        24,140        41,030         (8,168)
                                                                                             --------------------------------------
Net (decrease) increase in cash and due from banks .....................................     $  (1,268)     $  3,760      $  (3,486)
                                                                                             ======================================
Cash and due from banks at beginning of period .........................................     $  40,340      $ 36,580      $  40,066
Cash and due from banks at end of period ...............................................        39,072        40,340         36,580
                                                                                             --------------------------------------
Net (decrease) increase in cash and due from banks .....................................     $  (1,268)     $  3,760      $  (3,486)
                                                                                             ======================================
Interest paid ..........................................................................     $  31,498      $ 30,886      $  27,632
Income taxes paid ......................................................................         5,786         5,496          7,124
</TABLE>

The accompanying notes are an integral part of these statements.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 23
                                                           ---------------------
<PAGE>

                  Omega Financial Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  Years Ended December 31, 2001, 2000 and 1999

NATURE OF OPERATIONS

      Omega Financial Corporation is a financial holding company operating
primarily in central Pennsylvania, for the purpose of delivering financial
services within its local market. Consisting of one bank and four non-bank
subsidiaries, Omega Financial Corporation provides retail and commercial banking
services through 43 offices in Centre, Clinton, Mifflin, Juniata, Blair,
Huntingdon, and Bedford counties. Each of Omega's entities are part of the same
reporting segment, whose operating results are regularly reviewed and managed by
a centralized executive management group. The bank provides a full range of
banking services including on-line banking, an automatic teller machine network,
checking accounts, NOW accounts, savings accounts, money market accounts,
investment certificates, fixed rate certificates of deposit, club accounts,
secured and unsecured commercial and consumer loans, construction and mortgage
loans, safe deposit facilities, credit loans with overdraft checking protection
and student loans. The bank subsidiary also provides a variety of trust
services. Management believes that Omega Financial Corporation has a relatively
stable deposit base with no major seasonal depositor or group of depositors.
Most of Omega Financial Corporation's commercial customers are small and
mid-sized businesses in central Pennsylvania.

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The accounting policies of Omega Financial Corporation and its wholly
owned subsidiaries conform to accounting principles generally accepted in the
United States and to general industry practices. A summary of the more
significant accounting policies applied in the preparation of the accompanying
consolidated financial statements follows.

Principles of consolidation

      The consolidated financial statements include the accounts of Omega
Financial Corporation and its wholly owned subsidiaries (hereafter collectively
referred to as "Omega" or the "Corporation"): Omega Bank, N.A. ("Omega Bank"),
Central Pennsylvania Investment Co., Central Pennsylvania Life Insurance Co.,
Central Pennsylvania Leasing, Inc. and Central Pennsylvania Real Estate, Inc.
All significant intercompany transactions and balances have been eliminated.

Use of Estimates

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates. The most significant estimate included in the preparation of the
financial statements is related to the allowance for loan losses.

Investment securities

      Investment securities within the Corporation's investment portfolio are
classified as available for sale or held to maturity. Prior to April 1, 1999,
the determination as to which portfolio to hold each security was made at the
time of purchase, based on management's intent. All equity investments were
classified as available for sale. Debt securities were classified as available
for sale when the intent was for the security to be available to be used for
strategic asset/liability management purposes such as to manage interest rate
risk, prepayment risk, or liquidity needs. Securities were classified as held to
maturity when it was management's intent to hold such securities until maturity.
On April 1, 1999, Omega adopted Statement of Financial Accounting Standard
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." Upon adoption, SFAS No. 133 allowed an institution to perform a
one-time reclassification of securities from the held to maturity portfolio into
the available for sale or trading portfolios without calling into question the
intent of the company to hold the remaining securities in the held to maturity
category to maturity. At the date of adoption, Omega transferred investment
securities with a cost basis of $102,672,000 from the held to maturity to the
available for sale portfolio. As a result of this transfer, Omega realized an
increase in accumulated other comprehensive income of $425,000, which is
reflected as a cumulative effect of a change in accounting principle (See Note
18). Since April 1, 1999, one hundred percent of marketable investment
securities are classified as available for sale. All other securities are
classified as held to maturity.

      Securities classified as available for sale are stated at market value,
with the unrealized gains and losses, net of tax, reported as a component of
comprehensive income, until realized. Investment securities classified as held
to maturity are stated at cost, adjusted for amortization of premium and
accretion of discount on a level-yield basis. Interest and dividends on
investment securities held to maturity are recognized as income when earned.
Gains or losses on the disposition of securities are based on the net proceeds
and the adjusted carrying amount of the specific securities sold (See Note 4).


-------------------------------
24  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

Derivative financial instruments

      Omega adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" on April 1, 1999. The statement establishes accounting and
reporting standards requiring that every derivative be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. With the exception of the reclassification of
certain held to maturity investments to available for sale, the adoption had no
other impact on the financial statements of Omega, as Omega has not held any
instruments that meet the definition of a derivative under SFAS No. 133 since
the adoption of the statement.

Loans

      Interest on all loans is accrued over the term of the loans based on the
amount of principal outstanding, except on certain installment loans granted at
Omega Bank, on which interest is recognized as income under a method that
approximates the interest method.

      Loans on which the accrual of interest has been discontinued are
designated as non-accrual loans. Accrual of interest on loans is discontinued
when reasonable doubt exists as to the full, timely collection of principal or
interest. When a loan is placed on non-accrual status, all interest previously
accrued but not collected is reversed against current period income. Income on
such loans is then recognized only to the extent that cash is received and where
the future collection of principal is probable. Accruals are resumed on loans
only when they are brought fully current with respect to interest and principal,
and when, in the judgment of management, the loan is estimated to be fully
collectible as to both principal and interest.

Loan origination fees and costs

      Loan origination fees and related direct origination costs for a given
loan are offset and the net amount is deferred and amortized over the life of
the loan as an adjustment to interest income.

Allowance for loan losses

      For financial reporting purposes, the provision for loan losses charged to
current operating income is based on management's estimates, and ultimate losses
may vary from the current estimates. These estimates are reviewed and adjusted
at least quarterly and are reported in earnings in the periods in which they
become known. The adequacy of the level of the reserve is determined by a
continuing review of the composition and growth of the loan portfolio, overall
portfolio quality, specific problem loans, prior loan loss experience and
current economic conditions that may affect a borrower's ability to pay. The
loan loss provision for federal income tax purposes is based on current income
tax regulations, which allow for deductions equal to net charge-offs.

Other real estate owned and held for investment

      Assets acquired in settlement of mortgage loan indebtedness are recorded
as a part of other real estate owned and held for investment and are included in
other assets at the lower of the estimated value of the asset (fair value minus
estimated costs to sell) or the carrying amount of the loan. Costs to maintain
the assets and subsequent gains and losses attributable to their disposal are
included in other income and other expenses as appropriate. No depreciation or
amortization expense is recognized. At December 31, 2001 and 2000, the carrying
value of other real estate owned and held for investment was $274,000 and
$200,000, respectively.

Premises and equipment and depreciation

      Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using both the straight-line and declining-balance
methods, over the estimated useful lives of the assets (See Note 7).

Income taxes

      Omega and its subsidiaries, except for Central Pennsylvania Life Insurance
Company, file a consolidated federal income tax return. The provision for income
taxes is based upon the results of operations, adjusted principally for
tax-exempt income. Certain items of income or expense are reported in different
periods for financial reporting and tax return purposes. The tax effects of
these temporary differences are recognized currently in the deferred income tax
provision or benefit.

      Deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
using the applicable enacted marginal tax rate. Deferred income tax expenses or
benefits are based on the changes in the deferred tax asset or liability from
period to period.

Accounting pronouncements not yet adopted

      In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets." SFAS No. 141 requires business combinations initiated after June 30,
2001 to be accounted for using the purchase method of accounting, and broadens
the criteria for recording intangible assets separate from goodwill. SFAS No.
142 requires the use of a non-amortization approach to account for purchased
goodwill and certain intangibles. Under a non-amortization approach, goodwill
and certain intangibles will not be amortized into results of operations, but
instead would be reviewed for impairment and written down and charged to results
of operations only in the periods in which the recorded value of goodwill and
certain intangibles is more than its fair value. The provisions of each
statement will be adopted by the Corporation on January 1, 2002. The adoption of
SFAS No.142 will result in the Corporation's discontinuation of amortization of
its goodwill and intangible assets. The adoption of SFAS 142 will not have a
material impact on the Corporation's financial position or its results of
operations.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 25
                                                           ---------------------
<PAGE>

      In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of and supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." However, this Statement retains the fundamental provisions of SFAS No. 121
for (a) recognition and measurement of the impairment of long-lived assets to be
held and used and (b) measurement of long-lived assets to be disposed of by
sale. SFAS No. 144 also supersedes the accounting and reporting provisions of
APB Opinion No. 30, "Reporting the Results of Operations, Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" for segments of a business to be
disposed of, but retains the requirement of Opinion 30 to report discontinued
operations separately from continuing operations. SFAS No. 144 extends that
reporting to a component of an entity that either has been disposed of (by sale,
by abandonment, or in a distribution to owners) or is classified as held for
sale. The provisions of this statement will be adopted by the Corporation on
January 1, 2002. The adoption of SFAS No. 144 will not have a material impact on
the Corporation's financial position or its results of operations.

(2)   FAIR VALUE OF FINANCIAL INSTRUMENTS

      SFAS No. 107, "Disclosure about Fair Value of Financial Instruments,"
requires disclosure of estimated fair values of Omega's financial instruments.
The following describes the estimated fair value of the Corporation's financial
instruments as well as the significant methods and assumptions used to determine
these estimated fair values.

      The fair value disclosures are made based on relevant market information
for similar credit risk and management assumptions. The estimated values do not
reflect any premium or discount that may be realized from offering for sale at
one time Omega's entire holdings of a particular financial instrument. In
addition, the fair value estimates do not consider the potential income taxes or
other expenses that would be incurred in the actual sale of an asset or
settlement of a liability.

      Cash and due from banks, interest bearing deposits with other financial
institutions and Federal funds sold--The carrying amounts approximate fair value
due to the short-term nature of these instruments.

      Investment securities--The fair value of investment securities is
determined by reference to quoted market prices or dealer quotes (see Note 4).

      Commercial, financial and agricultural loans--These loans are made on
either a floating, adjustable or fixed rate basis. The estimated fair value of
these loans is determined by discounting the future contractual cash flows using
rates at which similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturity or repricing period. The discount
rates utilized for these loans are indexed to either the national prime rate or
the comparable U.S. Treasury rate. Loans discounted at the prime rate have a
positive spread of approximately 50 to 250 basis points at December 31, 2001 and
a negative spread of 75 to 125 basis points at December 31, 2000. Loans tied to
the U.S. Treasury rate carry a spread of approximately 325 basis points at
December 31, 2001 and a spread of 390 to 415 basis points at December 31, 2000.
Estimated fair value for commercial real estate and construction loans is
determined on the same basis as the commercial loans listed above.

      Real estate mortgage loans--This category is comprised primarily of
residential mortgages that are adjustable rate mortgages (ARMs) or fixed rate
mortgages. The estimated fair value of these loans is arrived at by discounting
the future contractual cash flows, adjusted for prepayments, at the current
market rate for these loans. Prepayments, or acceleration of cash flows, are
calculated at speeds at which a pool of loans with similar characteristics would
be expected to prepay. The rates utilized for adjustable rate mortgages are
equivalent to the U.S. Treasury rate for the same term plus a spread of
approximately 275 basis points at December 31, 2001 and a spread of 225 to 290
basis points at December 31, 2000. The current market rate for fixed rate
mortgages ranged from 7.00% to 7.75% at December 31, 2001 and from 7.30% to
8.15% at December 31, 2000.

      Home equity loans--This category is comprised primarily of fixed rate
loans, but does include home equity lines of credit which have floating rates.
The fair value of the fixed rate loans is estimated by discounting the future
contractual cash flows using rates at which similar loans would be made to
borrowers for the same remaining maturity. The discount rate utilized for home
equity installment loans is the current national market rate for new mortgages
plus a spread of approximately 45 to 225 basis points as of December 31, 2001
and 175 to 245 basis points as of December 31, 2000. Home equity lines of credit
are on a floating basis and approximate current market rates.

      Personal loans and lease financing--This category is comprised primarily
of fixed rate loans, but does include personal lines of credit which have
floating rates. The fair value of the fixed rate loans is estimated by
discounting the future contractual cash flows. The discount factor for these
loans is the current national market rate for a 48 month automobile loan plus a
spread of 10-375 basis points as of December 31, 2001 and a spread of
approximately 100 basis points as of December 31, 2000. Personal lines of credit
are on a floating basis and approximate current market rates.


-------------------------------
26  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

      Demand and savings accounts--The fair value of these deposits is the
amount payable on demand. In accordance with SFAS No. 107, fair value does not
include the value of Omega's long-term relationships with its depositors or the
value associated with possessing this relatively inexpensive source of funds
that may be available for a considerable length of time.

      Time deposits--The estimated fair value is determined by discounting the
contractual future cash flows, using the rates currently offered for deposits of
similar remaining maturities. The rates utilized for time deposits are
equivalent to the U.S. Treasury rate for the same term with a spread of positive
10 to 40 basis points at December 31, 2001 and a spread of negative 100 to
positive 60 basis points at December 31, 2000.

      Short-term borrowings and long-term debt--The fair value of long-term debt
is determined by discounting the contractual cash flows at rates which
approximate the current FHLB borrowing rate. As of December 31, 2001 the
appropriate FHLB borrowing rate was 5.58%. The carrying amounts of all other
borrowings approximate fair value due to the short-term nature of these
instruments.

      ESOP debt--The estimated fair value is determined by discounting the
contractual cash flows, using rates currently available to Omega for debt with
similar terms and remaining maturities.

      Other interest bearing liabilities--The total amount in this category
reprices semi-annually as of January 1 and July 1; therefore, fair value
approximates carrying value as of December 31, 2001.

      Interest receivable and interest payable--The carrying amounts approximate
fair value due to the short-term nature of these instruments.

--------------------------------------------------------------------------------
                              Financial Instruments
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                        December 31, 2001                   December 31, 2000
                                                                --------------------------------------------------------------------
                                                                    Book            Estimated            Book            Estimated
                                                                    Value           Fair Value           Value           Fair Value
                                                                --------------------------------------------------------------------
<S>                                                             <C>                 <C>               <C>                 <C>
Cash and due from banks ................................        $    39,072         $   39,072        $    40,340         $   40,340
Interest bearing deposits ..............................             31,812             31,812              1,095              1,095
Federal funds sold .....................................             14,450             14,450             39,750             39,750
Investment securities held to maturity .................              3,851              3,851              5,044              5,044
Investment securities available for sale ...............            263,501            263,501            237,335            237,335
Loans (net of unearned interest):
  Commercial, financial and agricultural ...............            123,938            124,435            118,686            117,758
  Real estate--commercial ..............................            262,613            268,183            229,294            227,895
  Real estate--construction ............................             20,736             20,990             18,305             18,070
  Real estate--mortgage ................................            194,422            195,773            206,864            204,909
  Home equity ..........................................             92,271             96,807             98,725             99,242
  Personal .............................................             65,871             66,195             78,797             77,966
  Lease financing ......................................                503                493              1,314              1,301
  Allowance for loan losses ............................            (11,224)                --            (11,622)                --
                                                                --------------------------------------------------------------------
Total loans ............................................            749,130            772,876            740,363            747,141
Interest receivable ....................................              7,544              7,544              8,657              8,657
                                                                --------------------------------------------------------------------
Total financial assets .................................        $ 1,109,360         $1,133,106        $ 1,072,584         $1,079,362
                                                                ====================================================================
Demand deposits ........................................        $   339,294         $  339,294        $   320,236         $  320,236
Savings deposits .......................................            168,529            168,529            147,933            147,933
Time deposits ..........................................            423,844            429,139            421,332            423,680
Short-term borrowings ..................................             37,572             37,572             45,754             45,754
ESOP debt ..............................................              3,110              3,321              3,369              3,306
Long-term debt .........................................             17,234             17,904              6,895              7,121
Other interest bearing liabilities .....................                703                703                650                651
Interest payable .......................................              1,444              1,444              2,482              2,482
                                                                --------------------------------------------------------------------
Total financial liabilities ............................        $   991,730         $  997,906        $   948,651         $  951,163
                                                                ====================================================================
</TABLE>

(3)   RESTRICTIONS ON CASH AND DUE FROM BANKS

      Omega's banking subsidiary is required to maintain cash reserve balances
with the Federal Reserve Bank. The total required reserve balances were
$2,700,000 and $11,350,000 as of December 31, 2001 and 2000, respectively.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 27
                                                           ---------------------
<PAGE>

(4) INVESTMENT SECURITIES (In Thousands)

<TABLE>
<CAPTION>
                                                                                           December 31, 2001
                                                                                   ------------------------------------------------
Securities classified as Held to Maturity                                                                       Gross      Gross
                                                                   Amortized        Market      Weighted     Unrealized  Unrealized
Type and maturity                                                    Cost           Value      Avg. Yield       Gains      Losses
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>           <C>            <C>        <C>
Investment in low income housing projects .................        $    694        $    694      N/M            $   --     $  --
Non-marketable stock ......................................           3,157           3,157      N/M                --        --
                                                                   ----------------------------------------------------------------
Total .....................................................        $  3,851        $  3,851      N/M            $   --     $  --
                                                                   ================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                            December 31, 2001
                                                                   ----------------------------------------------------------------
Securities classified as Available for Sale                                                                     Gross       Gross
                                                                   Amortized        Market      Weighted     Unrealized  Unrealized
Type and maturity                                                    Cost           Value      Avg. Yield       Gains      Losses
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>            <C>           <C>        <C>
U.S. Treasury securities and obligations of other
  U.S. Government agencies and corporations
  Within one year .........................................        $ 43,716        $ 44,267       6.25%         $  551     $  --
  After one year but within five years ....................          70,545          72,221       4.67           1,676        --
  After five years but within ten years ...................              --              --         --              --        --
  After ten years .........................................              --              --         --              --        --
Obligations of state and political subdivisions
  Within one year .........................................          21,576          21,873       6.39             297        --
  After one year but within five years ....................          85,116          86,547       5.85           1,431        --
  After five years but within ten years ...................             691             685       5.94              --        (6)
  After ten years .........................................              --              --         --              --        --
Corporate and other securities
  Within one year .........................................          10,957          11,138       6.33             182        (1)
  After one year but within five years ....................           8,472           8,638       6.08             214       (48)
  After five years but within ten years ...................              10              10       4.94              --        --
  After ten years .........................................              --              --         --              --        --
Mortgage-backed securities
  Within one year .........................................             192             193       6.32               1        --
  After one year but within five years ....................           6,142           6,305       6.91             163        --
  After five years but within ten years ...................              --              --         --              --        --
  After ten years .........................................           1,686           1,734       7.25              48        --
Common stock ..............................................           6,804           9,890        N/M           3,152       (66)
                                                                   ----------------------------------------------------------------
Total .....................................................        $255,907        $263,501       5.70%         $7,715     $(121)
                                                                   ================================================================
</TABLE>


-------------------------------
28  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

<TABLE>
<CAPTION>
                                                                                              December 31, 2000
                                                                     ---------------------------------------------------------------
Securities classified as Held to Maturity                                                                      Gross        Gross
                                                                     Amortized       Market      Weighted    Unrealized   Unrealized
Type and maturity                                                       Cost         Value      Avg. Yield      Gains       Losses
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>             <C>        <C>         <C>
Investment in low income housing projects ....................       $    643       $    643        N/M        $   --      $    --
Non-marketable stock .........................................          4,401          4,401        N/M            --           --
                                                                     ---------------------------------------------------------------
Total ........................................................       $  5,044       $  5,044        N/M        $   --      $    --
                                                                     ===============================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                              December 31, 2000
                                                                     ---------------------------------------------------------------
Securities classified as Available for Sale                                                                    Gross        Gross
                                                                     Amortized       Market      Weighted    Unrealized   Unrealized
Type and maturity                                                       Cost         Value      Avg. Yield      Gains       Losses
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>            <C>         <C>         <C>
U.S. Treasury securities and obligations of other
  U.S. Government agencies and corporations
  Within one year ............................................       $ 52,094       $ 52,082       5.65%       $   40      $   (52)
  After one year but within five years .......................         43,622         44,027       6.31           421          (16)
  After five years but within ten years ......................             --             --         --            --           --
  After ten years ............................................             --             --         --            --           --
Obligations of state and political subdivisions
  Within one year ............................................          8,219          8,231       6.64            14           (2)
  After one year but within five years .......................         67,432         67,440       6.16           200         (192)
  After five years but within ten years ......................          1,406          1,389       6.05            --          (17)
  After ten years ............................................             --             --         --            --           --
Corporate and other securities
  Within one year ............................................         16,608         16,580       5.88             4          (32)
  After one year but within five years .......................         18,660         18,784       6.65           175          (51)
  After five years but within ten years ......................          2,397          2,403       6.22            13           (7)
  After ten years ............................................             --             --         --            --           --
Mortgage-backed securities
  Within one year ............................................            547            546       5.50            --           (1)
  After one year but within five years .......................         11,702         11,746       7.08            47           (3)
  After five years but within ten years ......................            260            259       4.63            --           (1)
  After ten years ............................................          5,092          5,148       7.11            62           (6)

Common stock .................................................          6,868          8,700        N/M         2,554         (722)
                                                                     ---------------------------------------------------------------
Total ........................................................       $234,907       $237,335       6.17%       $3,530      $(1,102)
                                                                     ===============================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                              December 31, 1999
                                                                     ---------------------------------------------------------------
Securities classified as Held to Maturity                                                                      Gross        Gross
                                                                     Amortized       Market      Weighted    Unrealized   Unrealized
Type and maturity                                                       Cost         Value      Avg. Yield      Gains       Losses
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>                        <C>         <C>
Investment in low income housing projects ....................       $    592       $    592        N/M        $   --      $    --
Non-marketable stock .........................................          4,359          4,409        N/M            50           --
                                                                     ---------------------------------------------------------------
Total ........................................................       $  4,951       $  5,001        N/M        $   50      $    --
                                                                     ===============================================================
</TABLE>


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 29
                                                           ---------------------
<PAGE>

<TABLE>
<CAPTION>
                                                                                             December 31, 1999
                                                                     ---------------------------------------------------------------
Securities classified as Available for Sale                                                                     Gross       Gross
                                                                     Amortized       Market      Weighted    Unrealized   Unrealized
Type and maturity                                                       Cost         Value      Avg. Yield      Gains       Losses
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>            <C>         <C>         <C>
U.S. Treasury securities and obligations of other
  U.S. Government agencies and corporations
  Within one year ............................................       $ 43,557       $ 43,443       5.62%       $   12      $  (126)
  After one year but within five years .......................         76,180         75,303       5.73            --         (877)
  After five years but within ten years ......................             --             --         --            --           --
  After ten years ............................................             --             --         --            --           --
Obligations of state and political subdivisions
  Within one year ............................................          3,608          3,611       6.37             3           --
  After one year but within five years .......................         73,250         72,215       6.21            64       (1,099)
  After five years but within ten years ......................          3,333          3,199       6.05             1         (135)
  After ten years ............................................            190            190       6.33            --           --
Corporate and other securities
  Within one year ............................................         10,594         10,574       6.17            17          (37)
  After one year but within five years .......................         31,473         31,262       6.11            51         (262)
  After five years but within ten years ......................          4,968          4,836       5.75            --         (132)
  After ten years ............................................            100            101       6.68             1           --
Mortgage-backed securities
  Within one year ............................................          3,084          3,081       6.36            --           (3)
  After one year but within five years .......................          2,356          2,346       6.24             1          (11)
  After five years but within ten years ......................          2,762          2,756       5.90             6          (12)
  After ten years ............................................          4,252          4,239       5.70            11          (24)

Common stock .................................................          6,766         10,562        N/M         3,998         (202)
                                                                     ---------------------------------------------------------------
Total ........................................................       $266,473       $267,718       5.94%       $4,165      $(2,920)
                                                                     ===============================================================
</TABLE>

N/M = Not meaningful

      Investment yields were computed on a tax equivalent basis (using a 35% tax
rate) for obligations of state and political subdivisions. Total weighted
average yield does not include the common stock holdings.

      Certain obligations of the U.S. Government and state and political
subdivisions are pledged to secure public monies as required by law and for
other purposes. The carrying value of the pledged assets amounted to
$105,567,000, $106,659,000 and $107,690,000 at December 31, 2001, 2000 and 1999,
respectively.

      In addition to cash received from the scheduled maturities of securities,
some investment securities are sold at current market values during the course
of normal operations. Following is a summary of proceeds received from all
investment securities transactions, and the resulting realized gains and losses
(in thousands):

                                                      Years Ended December 31,
                                                   -----------------------------
                                                    2001        2000       1999
                                                   -----------------------------
Gross proceeds from securities transactions ...    $93,712    $79,956    $90,618
Securities available for sale:
  Realized gains ..............................        312        575        286
  Realized losses .............................        247         --         97

(5)   LOANS

      Loans outstanding at the end of each year consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                            ------------------------------------------------------------
                                                             2001          2000         1999         1998         1997
                                                            ------------------------------------------------------------
<S>                                                         <C>          <C>          <C>          <C>          <C>
Commercial, financial and agricultural .............        $123,938     $118,686     $107,093     $ 97,901     $126,740
Real estate--commercial ............................         262,613      229,294      204,809      198,987      141,485
Real estate--construction ..........................          20,736       18,305       16,039       15,890       21,167
Real estate--mortgage ..............................         194,422      206,864      200,561      227,846      212,780
Home equity ........................................          92,271       98,725       91,711       83,800       63,905
Personal ...........................................          65,871       78,797       82,079       95,060      121,813
Lease financing ....................................             544        1,437        2,949        4,001        4,971
                                                            ------------------------------------------------------------
Total ..............................................        $760,395     $752,108     $705,241     $723,485     $692,861
                                                            ============================================================
</TABLE>


-------------------------------
30  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

      Non-accrual loans at December 31, 2001 and 2000 were $2,327,000 and
$1,503,000, respectively, representing .31% and .20% of loans. Interest income
not recorded on non-accrual loans in 2001, 2000 and 1999 was $156,000, $191,000
and $268,000, respectively. Gross interest income that would have been recorded
on non-accrual loans had these loans been in a performing status was $239,000 in
2001, of which $83,000 was included in interest income for the year ended
December 31, 2001.

(6)   ALLOWANCE FOR LOAN LOSSES

      A summary of the transactions in the allowance for loan losses for the
last five years follows (in thousands):

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                            -------------------------------------------------------
                                                                              2001       2000        1999        1998        1997
                                                                            -------------------------------------------------------
<S>                                                                         <C>         <C>         <C>         <C>         <C>
Balance of allowance--beginning of period ..............................    $11,622     $11,865     $11,772     $11,793     $11,820
Loans charged off:
  Commercial, financial and agricultural ...............................        188         329         465         463          70
  Real estate--
    Commercial .........................................................        403         114         154         283         348
    Mortgage ...........................................................         40          --          --          --          --
  Personal .............................................................        595         398         509         682         984
                                                                            -------------------------------------------------------
      Total charge-offs ................................................      1,226         841       1,128       1,428       1,402
Recoveries of loans previously charged off:
  Commercial, financial and agricultural ...............................         28          45          63         146         225
  Real estate--
    Commercial .........................................................        236           6          15          96           6
    Mortgage ...........................................................          3          --          --          --          --
  Personal .............................................................         61         119          83         105         114
                                                                            -------------------------------------------------------
      Total recoveries .................................................        328         170         161         347         345
                                                                            -------------------------------------------------------
Net charge-offs ........................................................        898         671         967       1,081       1,057
Provision for loan losses ..............................................        500         428       1,060       1,060       1,030
                                                                            -------------------------------------------------------
Balance of allowance--end of period ....................................    $11,224     $11,622     $11,865     $11,772     $11,793
                                                                            =======================================================
Ratio of net charge-offs during period to average loans outstanding ....       0.12%       0.09%       0.14%       0.15%       0.15%
                                                                            =======================================================
</TABLE>

      As of December 31, 2001, 2000 and 1999, the recorded investment in the
loans for which impairment has been recognized in accordance with SFAS No. 114
as amended by SFAS No. 118 is $1,923,000, $336,000 and $1,237,000, respectively.
The total allowance for loan losses related to those impaired loans is $836,000,
$132,000 and $374,000, at December 31, 2001, 2000 and 1999, respectively. As of
December 31, 2001, the recorded investment on impaired loans exceeded associated
collateral fair value by $664,000. It is the policy of the Corporation to
recognize income on impaired loans on a cash basis, only to the extent that it
exceeds principal balance recovery.

(7)   PREMISES AND EQUIPMENT

      Premises and equipment consist of the following (in thousands):

                                                               December 31,
                                          Estimated      ----------------------
                                         Useful Life       2001          2000
                                         --------------------------------------
Land .............................               --      $  2,143       $ 2,188
Premises and leasehold
  improvements ...................       5-40 years        19,432        18,753
Furniture, computer
  software and equipment .........       3-20 years        21,257        19,806
Construction in progress .........               --         1,331           500
                                         --------------------------------------
                                                           44,163        41,247
Less: accumulated
  depreciation ...................                        (28,600)      (26,963)
                                         --------------------------------------
                                                         $ 15,563       $14,284
                                         ======================================

      Depreciation expense on premises and equipment charged to operations was
$1,738,000 in 2001, $1,836,000 in 2000 and $1,913,000 in 1999.

(8)   BORROWINGS

      Borrowings consist of the following (in thousands):

                                                                December 31,
                                                           ---------------------
                                                            2001           2000
                                                           ---------------------
Short-Term Borrowings:
Retail repurchase agreements .......................       $16,072       $19,254
Notes payable to Federal Home Loan Bank,
  with fixed rates .................................        16,500        16,500
Note payable to Federal Home Loan Bank,
  with variable rate payable at prime minus
  283 basis points ...................................       5,000         5,000
Note payable to Federal Home Loan Bank,
  with variable rate payable at 3 Month
  Libor plus 5 basis points ..........................          --         5,000
                                                           ---------------------
                                                           $37,572       $45,754
                                                           ---------------------
Long-Term Debt:
Notes payable to Federal Home Loan Bank,
  with fixed rates .................................       $12,234       $ 6,895
Note payable to Federal Home Loan Bank,
  with variable rate payable at Libor plus
  8 basis points .....................................       5,000            --
                                                           ---------------------
                                                           $17,234       $ 6,895
                                                           ---------------------


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 31
                                                           ---------------------
<PAGE>

      Omega has repurchase agreements with several of its depositors, under
which customers' funds are invested daily into an interest bearing account.
These funds are carried by the Corporation as short-term debt and are
collateralized by U.S. Government securities. The interest rate paid on these
funds is variable and subject to change monthly.

      The fixed rate short-term notes payable, as of December 31, 2001, in the
amount of $16,500,000 with the Federal Home Loan Bank are scheduled to mature
between January and February of 2002 and were initiated to match fund commercial
loans. The remaining $5,000,000 Federal Home Loan Bank short-term note payable
will mature in April 2002, with the full principal balance payable upon maturity
and were initiated to provide additional liquidity.

      Omega's total borrowing capacity with the Federal Home Loan Bank of
Pittsburgh was $46,390,000 as of December 31, 2001. If the Corporation were to
purchase additional Federal Home Loan Bank stock, the maximum borrowing capacity
could be increased to $334,048,000. The Federal Home Loan Bank is a source of
both short-term and long-term funding. The Corporation must maintain sufficient
qualifying collateral, as defined, to secure all outstanding advances.

      Omega has lines of credit established with various financial institutions
for overnight funding needs. These lines provided a total availability of
$25,000,000 and $23,000,000 in 2001 and 2000, respectively, with interest
payable at the daily federal funds rate. There were no borrowings on December
31, 2001 or December 31, 2000 under these credit facilities.

--------------------------------------------------------------------------------

(9)   CALCULATION OF EARNINGS PER SHARE

      The following table shows the calculation of earnings per share for the
years ended December 31, 2001, 2000 and 1999 (in thousands, except per share
data).

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                ------------------------------------------------------------------------------
                                                                2001                                       2000
                                                ------------------------------------------------------------------------------
                                                  Income       Shares        Per-Share     Income        Shares      Per-Share
                                                Numerator   Denominator        Amount     Numerator    Denominator     Amount
                                                ------------------------------------------------------------------------------
<S>                                             <C>             <C>            <C>         <C>            <C>          <C>
Net income..................................    $17,655                                    $17,129
Less: Preferred stock dividends.............       (396)                                      (396)
                                                -------                                    -------
Basic EPS
Income available to
  common shareholders.......................     17,259         8,287          $2.08        16,733        8,725        $1.92
                                                                               =====                                   =====
Effect of Dilutive Securities
Impact of:
  Assumed conversion of preferred to
     common stock...........................                      346                                       346
  Assumed exercises of
     outstanding options....................                       88                                        73
  Preferred stock dividends available
     to common shareholders.................        396                                        396
  Elimination of tax benefit of
     allocated preferred dividends..........        (73)                                       (66)
  Additional expense required to
     fund ESOP debt.........................        (16)                                       (26)
                                                --------------------                       --------------------
Diluted EPS
Income available to common share-
  holders plus assumed conversions..........    $17,566         8,721          $2.01       $17,037        9,144        $1.87
                                                ==============================================================================

<CAPTION>
                                                         Years Ended December 31,
                                                ---------------------------------------
                                                                  1999
                                                ---------------------------------------
                                                      Income       Shares     Per-Share
                                                    Numerator    Denominator   Amount
                                                ---------------------------------------
<S>                                                  <C>            <C>          <C>
Net income..................................         $17,362
Less: Preferred stock dividends.............            (396)
                                                     -------
Basic EPS
Income available to
  common shareholders.......................          16,966         8,838       $1.92
                                                                                 =====
Effect of Dilutive Securities
Impact of:
  Assumed conversion of preferred to
    common stock............................                           346
  Assumed exercises of
    outstanding options.....................                           131
  Preferred stock dividends available
    to common shareholders..................             396
  Elimination of tax benefit of
    allocated preferred dividends...........             (59)
  Additional expense required to
    fund ESOP debt..........................             (44)
                                                     ---------------------
Diluted EPS
Income available to common share-
  holders plus assumed conversions..........         $17,259         9,315       $1.85
                                                =======================================
</TABLE>

(10)  OPERATING LEASE OBLIGATIONS

      The Corporation has entered into a number of leasing arrangements that are
classified as operating leases. The operating leases are for several branch
locations, automatic teller machines (ATM) and computer equipment. The majority
of the branch location and ATM leases are renewable at the Corporation's option.
In addition, future rental payments on many of the branch and ATM leases are
subject to change in relation to fluctuations in the Consumer Price Index.
Future minimum lease commitments are based on current rental payments.

      The following is a summary of future minimum rental payments for the next
five years required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of December 31, 2001 (in
thousands):

Years ending December 31,
--------------------------------------------------------------------------------
2002...........................................................           $  325
2003...........................................................              282
2004...........................................................              234
2005...........................................................              224
2006...........................................................              204
Later years....................................................              960
                                                                          ------
Total minimum payments required................................           $2,229
                                                                          ======


-------------------------------
32  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

      Rental expense charged to operations, net of sublease income, was
$201,000, $125,000 and $133,000 in 2001, 2000 and 1999, respectively, which
includes short-term cancellable leases.

(11)  INCOME TAXES

      The components of income tax expense for the three years ended December
31, 2001 were (in thousands):

                                                   2001       2000        1999
                                                  -----------------------------
Current tax expense .....................         $5,857    $ 6,210     $ 6,994
Deferred tax expense ....................             20       (227)        (99)
                                                  -----------------------------
Total tax expense .......................         $5,877    $ 5,983     $ 6,895
                                                  =============================

      Income tax expense related to realized securities gains was $23,000 in
2001, $201,000 in 2000 and $66,000 in 1999.

      The reasons for the differences between the income tax expense and the
amount computed by applying the statutory federal income tax rate to pre-tax
earnings are as follows:

                                                   Years Ended December 31,
                                                -------------------------------
                                                2001         2000         1999
                                                -------------------------------
Federal tax at statutory rate ...........       35.0%        35.0%        35.0%
Tax exempt income .......................       (7.5)        (6.7)        (5.9)
Bank-owned life insurance earnings ......       (1.6)        (1.5)          --
Low income housing credits ..............       (0.4)        (0.4)        (0.4)
Other, net ..............................       (0.5)        (0.4)        (0.3)
                                                -------------------------------
Effective rate ..........................       25.0%        26.0%        28.4%
                                                ===============================

      Deductible temporary differences and taxable temporary differences gave
rise to a net deferred tax asset for Omega as of December 31, 2001 and 2000. The
components giving rise to the net deferred tax asset are detailed below (in
thousands):

                                                               December 31,
                                                         ----------------------
                                                           2001           2000
                                                         ----------------------
Deferred Tax Assets
  Loan loss reserve ..............................       $ 3,928        $ 4,068
  Deferred compensation ..........................           990            845
  Employee benefits ..............................           419            426
  Interest on non-accrual loans ..................            40             50
  Other ..........................................             3              3
                                                         ----------------------
    Total ........................................         5,380          5,392
Deferred Tax Liabilities
  Depreciation ...................................           (98)          (116)
  Unrealized net gains on securities .............        (2,858)          (907)
  Auto leases (net) ..............................          (242)          (357)
  Low income housing investments .................          (189)          (172)
  Other ..........................................          (387)          (376)
                                                         ----------------------
    Total ........................................        (3,774)        (1,928)
                                                         ----------------------
Net deferred tax asset included
  in other assets ................................       $ 1,606        $ 3,464
                                                         ======================

      Omega has concluded that the deferred tax assets are realizable (on a more
likely than not basis) through the combination of future reversals of existing
taxable temporary differences, carryback availability, certain tax planning
strategies and expected future taxable income.

--------------------------------------------------------------------------------

(12)  EMPLOYEE BENEFIT PLANS

      Omega Stock Compensation Plans

      Omega has four stock-based compensation plans, the Employee Stock Purchase
Plan, the Stock Option Plan (1986) (the "1986 Plan"), the 1996 Employee Stock
Option Plan (the "1996 Plan") and the Non-Employee Director Stock Option Plan.
The 1996 Plan replaced the 1986 Plan pursuant to which no options were issuable
after 1996. Omega accounts for these plans under APB Opinion No. 25, under which
no compensation cost has been recognized. Had compensation cost for these plans
been determined consistent with the fair value method under SFAS No. 123,
Omega's net income and earnings per share would have been reduced to the
following pro forma amounts (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                   2001         2000            1999
-----------------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>            <C>
Net income
  As reported ...........................................         $17,655      $17,129        $17,362
  Pro forma .............................................          16,904       16,437         16,705
Basic earnings per share
  As reported ...........................................         $  2.08      $  1.92        $  1.92
  Pro forma .............................................            1.99         1.84           1.85
Diluted earnings per share
  As reported ...........................................         $  2.01      $  1.87        $  1.85
  Pro forma .............................................            1.92         1.79           1.78
</TABLE>

      The SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995. Therefore, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 33
                                                           ---------------------
<PAGE>

      These computations were derived using the Black-Scholes option-pricing
model with the following weighted average assumptions used for options granted
in 2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                                           Employee                   Employee                  Director
                                                      Stock Purchase Plan     Stock Option Plan (1996)      Stock Option Plan
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                       <C>                       <C>
Options Granted in 2001
  Expected life of options.......................           1 year                    6 years                   6 years
  Risk-free interest rate........................            2.20%                      4.45%                     4.45%
  Expected volatility............................           54.92%                     33.66%                    33.66%
  Expected dividend yield........................            3.79%                      3.79%                     3.79%

<CAPTION>
                                                           Employee                   Employee                  Director
                                                      Stock Purchase Plan     Stock Option Plan (1996)      Stock Option Plan
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                       <C>                       <C>
Options Granted in 2000
  Expected life of options.......................           1 year                    6 years                   6 years
  Risk-free interest rate........................            5.50%                      5.09%                     5.09%
  Expected volatility............................           50.83%                     25.62%                    25.62%
  Expected dividend yield........................            3.38%                      3.38%                     3.38%

<CAPTION>
                                                           Employee                   Employee                  Director
                                                      Stock Purchase Plan     Stock Option Plan (1996)      Stock Option Plan
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                       <C>                       <C>
Options Granted in 1999
  Expected life of options.......................           1 year                    6 years                   6 years
  Risk-free interest rate........................            5.96%                      6.44%                     6.44%
  Expected volatility............................           13.99%                     15.35%                    15.35%
  Expected dividend yield........................            2.76%                      2.76%                     2.76%
</TABLE>

      The Employee Stock Purchase Plan ("ESPP") is administered by the
Compensation Committee ("Committee") of the Omega Board of Directors ("Board"),
consisting of members who are not eligible to receive options under the ESPP.
The Committee is authorized to grant options to purchase common stock of Omega
to all employees of Omega and its subsidiaries who meet certain service
requirements. All options granted under the ESPP are immediately vested. For 27
months following the date of the grant, options are exercisable at the lesser of
90% of the fair market value of the shares on the date of grant or 90% of the
fair market value on the date of exercise. After 27 months, the options are
exercisable at 90% of the fair market value on the exercise date. Outstanding
options are scheduled to expire through December 31, 2006. The aggregate number
of shares which may be issued upon the exercise of options under this plan is
1,125,000 shares. All ESPP options outstanding at December 31, 2001 have current
exercise prices between $24.30 and $28.85 and a weighted average remaining
contractual life of 3.61 years. All of these options are exercisable.

      The 1986 Plan and the 1996 Plan (collectively, the "SOPs") are
administered by the Committee, whose members are not eligible to receive options
under the SOPs. The Committee determines, among other things, which officers and
key employees will receive options, the number of shares to be subject to each
option, the option price and the duration of the option. Options vest over one
year and are exercisable at the fair market value of the shares at date of
grant. These options are scheduled to expire through January 1, 2011. The
aggregate number of shares that may be issued upon the exercise of options under
the 1996 Plan is 1,500,000 shares. The SOPs options outstanding at December 31,
2001 have exercise prices between $10.00 and $33.50, with a weighted average
exercise price of $25.58 and a weighted average remaining contractual life of
5.86 years. 392,593 of these options are exercisable; their weighted average
exercise price is $25.36.

      The Non-Employee Director Stock Option Plan ("DSOP") is administered by
the Board. Options are granted automatically on May 1 each year to non-employee
directors of Omega. Options vest over one year and are exercisable at the fair
market value of the shares at the date of grant. These options are scheduled to
expire through May 1, 2011. The aggregate number of shares that may be issued
upon the exercise of options under this plan is 30,000. DSOP options outstanding
at December 31, 2001 have exercise prices between $16.33 and $38.13, with a
weighted average exercise price of $27.95 and a weighted average remaining
contractual life of 6.41 years. 17,200 of these options are exercisable; their
weighted average exercise price is $27.66.


-------------------------------
34  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

      A summary of the status of Omega's four stock-based compensation plans as
of December 31, 2001, 2000 and 1999, and changes during the years ending on
those dates is presented below:

<TABLE>
<CAPTION>
                                                           2001                      2000                        1999
                                                    -------------------------------------------------------------------------------
                                                                  Weighted                  Weighted                    Weighted
                                                                  Average                    Average                     Average
Employee Stock Purchase Plan                         Shares    Exercise Price   Shares    Exercise Price   Shares    Exercise Price
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>         <C>            <C>         <C>            <C>
Outstanding at beginning of year .............       194,696       $24.30       190,080       $25.65       183,423       $27.01
Granted ......................................        68,021        28.85        68,350        24.30        82,670        25.65
Exercised ....................................       (67,159)       24.89       (59,152)       22.16       (73,997)       24.80
Forfeited ....................................        (5,911)       25.00        (4,582)       27.22        (2,016)       28.61
                                                    --------                   --------                   --------
Outstanding at end of year ...................       189,647        27.02       194,696        24.30       190,080        25.65
                                                    ========                   ========                   ========
Options exercisable at year-end ..............       189,647                    194,696                    190,080
Weighted average fair value of
  options granted during the year ............      $  10.10                   $   8.56                   $   6.23

<CAPTION>
                                                           2001                      2000                        1999
                                                    -------------------------------------------------------------------------------
                                                                  Weighted                  Weighted                    Weighted
                                                                  Average                    Average                     Average
Employee Stock Option Plans                          Shares    Exercise Price   Shares    Exercise Price   Shares    Exercise Price
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>         <C>            <C>         <C>            <C>
Outstanding at beginning of year .............       443,677       $24.56       393,496       $23.52       380,065       $20.63
Granted ......................................        65,074        27.00        71,487        28.50        75,877        30.25
Exercised ....................................       (48,834)       17.76       (16,806)       15.14       (60,196)       13.54
Forfeited ....................................        (4,750)       30.08        (4,500)       31.00        (2,250)       30.25
                                                    --------                   --------                   --------
Outstanding at end of year ...................       455,167        25.58       443,677        24.56       393,496        23.52
                                                    ========                   ========                   ========
Options exercisable at year-end ..............       392,593                    374,440                    319,869
Weighted average fair value of options
  granted during the year ....................      $   7.14                   $   6.60                   $   6.40

<CAPTION>
                                                           2001                      2000                        1999
                                                    -------------------------------------------------------------------------------
                                                                  Weighted                  Weighted                    Weighted
                                                                  Average                    Average                     Average
Director Stock Option Plan                          Shares    Exercise Price   Shares    Exercise Price   Shares    Exercise Price
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>         <C>            <C>         <C>            <C>
Outstanding at beginning of year .............        18,900       $27.49        15,400       $28.06        11,900       $25.87
Granted ......................................         3,000        29.65         3,500        25.00         3,500        35.50
Exercised ....................................          (900)       18.28            --           --            --           --
Forfeited ....................................          (800)       34.42            --           --            --           --
                                                    --------                   --------                   --------
Outstanding at end of year ...................        20,200        27.95        18,900        27.49        15,400        28.06
                                                    ========                   ========                   ========

Options exercisable at year-end ..............        17,200                     15,400                     11,900
Weighted average fair value of options
  granted during the year ....................      $   7.69                   $   5.76                   $   7.51
</TABLE>

Omega Employee Stock Ownership Plan

      Omega has an Employee Stock Ownership Plan ("ESOP") for the benefit of
employees that meet certain age and service requirements. For the years ended
December 31, 2001, 2000 and 1999, expenses incurred under this plan were
$1,380,000, $1,537,000 and $1,515,000, respectively. The level of annual
contributions is based upon a percentage of employee salary expense. The
majority of the funds obtained through these contributions were used to purchase
Omega stock or meet debt service on the ESOP debt (see comment below); in 2001,
$93,000 was applied to debt service, and no Omega common stock was acquired. In
2000, 54,724 shares of Omega common stock were acquired at a cost of $1,436,000
and $93,000 was applied to debt service. At December 31, 2001 the ESOP holds
507,459 shares of Omega common stock and 219,781 shares of preferred stock. Of
the preferred stock, 126,752 of the shares have been allocated to participants
of the plan as of December 31, 2001, based upon principal repayment of the debt
outstanding. The ESOP is administered by a Board of Trustees and an
Administrative Committee appointed by the Board. All of the Trustees are
officers, employees, or directors of Omega.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 35
                                                           ---------------------
<PAGE>

      On July 1, 1990, the ESOP entered into a $5,000,000 leveraged transaction
for the purpose of acquiring 219,781 shares of convertible preferred stock from
the Corporation for $22.75 per share. The original term of the loan was for
twenty years and carried a fixed interest rate of 10.65% for the first ten
years. Thereafter, the ESOP had the option to take a fixed rate or various
variable rate options for the remaining term of the loan. On October 1, 1998,
this loan was refinanced at a fixed rate of 7.00% through October 1, 2005. After
October 1, 2005, to and including the date this loan is paid in full (maturity
date is July 1, 2010), the principal balance shall bear interest annually at the
five-year Treasury rate at October 1, 2005 plus 250 basis points. The loan is
collateralized by a mortgage on the Corporation's administration center and the
Corporation's guarantee.

      In order to meet the future annual debt service of $489,000, which
includes principal and interest, the ESOP will receive $396,000 in dividends
from the preferred stock and the remainder in contributions from the
Corporation. In 2001, the debt service required was $489,000, of which $229,000
represented interest expense incurred by the ESOP. In 2000, the debt service
required was $489,000, of which $247,000 represented interest expense incurred
by the ESOP. Outstanding ESOP debt as of December 31, 2001 was $3,110,000.
Scheduled principal repayments on the ESOP debt are as follows:

2002.......................................................           $  278,000
2003.......................................................              298,000
2004.......................................................              319,000
2005.......................................................              342,000
2006.......................................................              367,000
Later years................................................            1,506,000

Defined Contribution Plan

      Omega maintains a defined contribution plan for eligible employees as
defined. Employer contributions to the plan totaled $160,000, $162,000 and
$152,000 for the years ended December 31, 2001, 2000 and 1999, respectively.

Supplemental Executive Retirement Plan

      The Supplemental Executive Retirement Plan ("SERP") is a non-qualified
executive benefit in which the Corporation agrees to pay certain key executives
for a specified period of time after retirement. This plan was established in
2000 and replaced the former Executive Supplemental Income Plan. The present
value of the supplemental retirement benefits to be paid under the SERP program
is being accrued over the estimated remaining service period of the two officers
designated to receive these benefits. Accrued liabilities from the discontinued
plan were transferred to the SERP. At December 31, 2001 the liability for these
future obligations was $2,125,000 as compared to December 31, 2000 when the
liability was $1,765,000. For the years ended December 31, 2001, 2000 and 1999,
$383,000, $383,000 and $129,000, respectively, was charged to operations in
connection with this program.

(13)  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
      CREDIT RISK

      The Corporation is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These financial instruments include commitments to extend credit, financial
guarantees, financial options and interest exchange agreements. These
instruments involve, to varying degrees, elements of credit and interest rate
risk that are not recognized in the consolidated financial statements.

      Exposure to credit loss in the event of non-performance by the other party
to the financial instrument for commitments to extend credit and financial
guarantees written is represented by the contractual notional amount of those
instruments. The Corporation uses the same credit policies in making these
commitments as it does for on-balance sheet instruments. The Corporation
controls the credit risk of its financial options and interest exchange
agreements through credit approvals, limits and monitoring procedures; however,
it does not generally require collateral for such financial instruments since
there is no principal credit risk.

      The Corporation had outstanding loan origination commitments aggregating
$68,893,000 and $43,554,000 at December 31, 2001 and 2000, respectively. In
addition, the Corporation had $86,474,000 and $93,832,000 outstanding in unused
lines of credit commitments extended to its customers at December 31, 2001 and
2000, respectively.

      There were no financial guarantees or options outstanding at December 31,
2001. Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since portions of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Corporation evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained by the Corporation upon extension of credit is based on management's
credit evaluation of the counter party.


-------------------------------
36  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

      Standby letters of credit are instruments issued by the Corporation that
guarantee the beneficiary payment by the bank in the event of default by the
Corporation's customer in the non-performance of an obligation or service. Most
standby letters of credit are extended for one year periods. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Corporation holds collateral
supporting those commitments for which collateral is deemed necessary. At
December 31, 2001 and 2000, standby letters of credit issued and outstanding
amounted to $16,413,000 and $18,026,000, respectively.

      As of December 31, 2001, there were no concentrations of credit to any
particular industry equaling 10% or more of total outstanding loans. Omega's
business activities are geographically concentrated in central Pennsylvania,
within Centre, Blair, Huntingdon, Mifflin, Juniata, Clinton and Bedford
counties. Omega has a diversified loan portfolio; however, a substantial portion
of its debtors' ability to honor their obligations is dependent upon the economy
in central Pennsylvania.

(14)  COMMITMENTS AND CONTINGENT LIABILITIES

      In 1998, the Corporation renewed a five-year agreement to obtain data
processing services from an outside service bureau. The agreement provides for
termination penalties if it is cancelled prior to the end of the commitment
period by the Corporation.

      The Corporation, from time to time, may be a defendant in legal
proceedings relating to the conduct of its banking business. Most of such legal
proceedings are a normal part of the banking business, and in management's
opinion, the financial position and results of operations of the Corporation
would not be materially affected by the outcome of such legal proceedings.

(15)  SHAREHOLDERS' EQUITY

      Five million shares of preferred stock with a par value of $5.00 per share
are authorized for issuance. The Board has the ability to fix the voting,
dividend, redemption and other rights of the preferred stock, which can be
issued in one or more series.

      There are 219,781 shares of Class A cumulative convertible preferred stock
issued to Omega's Employee Stock Ownership Plan (ESOP) for a total of
$5,000,000. The preferred stock is convertible into Omega's common stock at the
current rate of 1.575 common shares for one preferred share in certain events.
The preferred stock is restricted to the ESOP and can be redeemed by the
Corporation at any time. Dividends on the preferred stock are fixed at $1.80 per
share per year, and are required to be paid prior to any dividend payments on
the common stock. The preferred stock has preference in liquidation over the
common stock in the amount of $22.75 per share, plus all dividend arrearages,
prior to payments to common shareholders. Full voting rights are held by the
preferred stock owner.

      During the second quarter of 2000, Omega announced a Board-approved share
repurchase program. Omega was authorized to buy back up to 5% of its common
stock over a twelve-month period. The program could be discontinued at any time.
On May 23, 2000, when the repurchase program was initiated, there were 8,817,427
common shares outstanding, with 440,871 shares eligible to be repurchased
through this program. As of December 31, 2000, 228,526 shares had been
repurchased under this program, representing 52% of the approved level.

      In January of 2001, the stock repurchase program was completed after
reaching 100% of the approved level. Subsequently, the Board approved a new
share repurchase program to begin on February 26, 2001, authorizing management
to buy back an additional 10% of its common stock. At that time, there were
8,356,887 common shares outstanding, with 835,689 shares eligible to be
repurchased. This program remained in effect through December 31, 2001, at which
time 239,212 shares had been repurchased, or 29% of the limit.

(16)  BANK-OWNED LIFE INSURANCE

      In December of 1999, Omega purchased bank-owned life insurance (BOLI) in
the amount of $20,112,000. In December of 2001, an additional $8,000,000 was
added to the BOLI investment. Cash surrender value of the BOLI, included in
other assets at December 31, 2001 and December 31, 2000 was $30,216,000 and
$21,124,000, respectively. The cash surrender value on the BOLI increased by
$1,092,000 in 2001, as compared to $1,028,000 in 2000. These earnings are
included with other non-interest income.

(17)  SUBSEQUENT EVENTS

      In January of 2002, the Board approved a new share repurchase program to
begin immediately, authorizing management to buy back an additional 10% of its
common stock. At that time, there were 8,222,010 common shares outstanding with
822,201 shares eligible to be repurchased. This program will remain in effect
through December 31, 2002, or until the 10% limit is reached, however, it may be
discontinued at any time.


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 37
                                                           ---------------------
<PAGE>

(18)  COMPREHENSIVE INCOME

      Components of other comprehensive income (loss) consist of the following
(in thousands):

<TABLE>
<CAPTION>
                                                                                                  Year Ended December 31, 2001
                                                                                          ------------------------------------------
                                                                                          Before Tax    Tax (Expense)     Net-of-Tax
                                                                                             Amount       or Benefit        Amount
                                                                                          ------------------------------------------
<S>                                                                                       <C>              <C>             <C>
Unrealized gains on available for sale securities:
  Unrealized holding gains arising during the period ............................         $ 5,639          $(1,974)        $ 3,665
  Less reclassification adjustment for gains included in net income .............            (472)             165            (307)
                                                                                          ------------------------------------------
Other comprehensive income ......................................................         $ 5,167          $(1,809)        $ 3,358
                                                                                          ==========================================

<CAPTION>
                                                                                                  Year Ended December 31, 2000
                                                                                          ------------------------------------------
                                                                                          Before Tax    Tax (Expense)     Net-of-Tax
                                                                                             Amount       or Benefit        Amount
                                                                                          ------------------------------------------
<S>                                                                                       <C>              <C>             <C>
Unrealized gains on available for sale securities:
  Unrealized holding gains arising during the period ............................         $ 1,514          $  (530)        $   984
  Less reclassification adjustment for gains included in net income .............            (332)             116            (216)
                                                                                          ------------------------------------------
Other comprehensive income ......................................................         $ 1,182          $  (414)        $   768
                                                                                          ==========================================

<CAPTION>
                                                                                                  Year Ended December 31, 1999
                                                                                          ------------------------------------------
                                                                                          Before Tax    Tax (Expense)     Net-of-Tax
                                                                                             Amount       or Benefit        Amount
                                                                                          ------------------------------------------
<S>                                                                                       <C>              <C>             <C>
Unrealized gains on available for sale securities:
  Unrealized holding losses arising during the period ...........................         $(6,301)         $ 2,205         $(4,096)
  Cumulative effect of change in accounting principle ...........................             653             (228)            425
  Less reclassification adjustment for gains included in net income .............            (346)             121            (225)
                                                                                          ------------------------------------------
Other comprehensive income (loss) ...............................................         $(5,994)         $ 2,098         $(3,896)
                                                                                          ==========================================
</TABLE>

(19)  RELATED-PARTY TRANSACTIONS

      Omega's banks have granted loans to certain officers and directors of
Omega and its subsidiaries and to their associates. These loans were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons, and
in the opinion of management, do not involve more than normal risk of
collection. The aggregate dollar amount of these loans was $24,291,000,
$12,801,000 and $13,461,000 at December 31, 2001, 2000 and 1999, respectively.
In 2001, internal restructuring took place as a result of the bank charter
consolidation. Accordingly, the status of certain directors and officers
formerly classified as related parties has now changed. Of the $12,801,000
outstanding balance at December 31, 2000, $873,000 is associated with
individuals who are now excluded from the related party classification. During
2001, $15,196,000 of new loans were made or re-classified as new related party
relationships and repayments totaled $2,831,000. None of these loans were past
due, in non-accrual status or restructured at December 31, 2001.

(20)  OMEGA FINANCIAL CORPORATION (PARENT COMPANY ONLY)

      Financial information (in thousands):

                            Condensed Balance Sheets
                                   (Unaudited)

                                                              December 31,
                                                         -----------------------
                                                           2001           2000
                                                         -----------------------
ASSETS:
  Cash ...........................................       $  4,597       $  3,692
  Investment in bank subsidiaries ................        137,842        140,180
  Investment in non-bank subsidiaries ............         11,944         10,474
  Premises and equipment, net ....................          6,877          6,278
  Other assets ...................................          2,138          1,697
                                                         -----------------------
TOTAL ASSETS .....................................       $163,398       $162,321
                                                         =======================
LIABILITIES:
  Dividends payable ..............................       $  2,219       $  2,238
  Accounts payable and other liabilities .........          1,819          1,510
  Long-term debt .................................             --             --
  ESOP debt ......................................          3,110          3,369
                                                         -----------------------
TOTAL LIABILITIES ................................          7,148          7,117
SHAREHOLDERS' EQUITY .............................        156,250        155,204
                                                         -----------------------
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY ...........................       $163,398       $162,321
                                                         =======================


-------------------------------
38  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

                         Condensed Statements of Income
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                      Years Ended December 31,
                                                                                               ------------------------------------
                                                                                                 2001          2000          1999
                                                                                               ------------------------------------
<S>                                                                                            <C>           <C>           <C>
INCOME:
  Dividends from:
    Bank subsidiaries ....................................................................     $ 21,821      $ 16,024      $ 10,706
    Non-bank subsidiaries ................................................................           --            --            --
  Management fees from subsidiaries ......................................................       12,460        11,500        10,820
  Other income ...........................................................................           --            --             1
                                                                                               ------------------------------------
TOTAL INCOME .............................................................................       34,281        27,524        21,527
EXPENSE:
  Interest expense .......................................................................            8           126            73
  Other ..................................................................................       12,460        11,500        10,968
                                                                                               ------------------------------------
TOTAL EXPENSE ............................................................................       12,468        11,626        11,041
                                                                                               ------------------------------------
INCOME BEFORE INCOME TAXES AND EQUITY IN
  UNDISTRIBUTED NET INCOME OF SUBSIDIARIES ...............................................       21,813        15,898        10,486
Income tax expense (benefit) .............................................................          (69)          (94)         (126)
                                                                                               ------------------------------------
                                                                                                 21,882        15,992        10,612
Equity in undistributed net income of subsidiaries .......................................       (4,227)        1,137         6,750
                                                                                               ------------------------------------
NET INCOME ...............................................................................     $ 17,655      $ 17,129      $ 17,362
                                                                                               ====================================
</TABLE>

                       Condensed Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                    Years Ended December 31,
                                                                                               ------------------------------------
                                                                                                 2001          2000          1999
                                                                                               ------------------------------------
<S>                                                                                            <C>           <C>           <C>
Cash flows from operating activities:
  Net income .............................................................................     $ 17,655      $ 17,129      $ 17,362
  Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation and amortization ........................................................          823         1,079         1,072
    (Increase) decrease in tax receivable ................................................         (231)         (197)           81
    Decrease (increase) in interest and other receivable .................................         (210)            8          (364)
    Decrease in taxes payable ............................................................          (21)          (42)          (77)
    Increase in accounts payable and accrued expenses ....................................          289           144             8
    Decrease (increase) in undistributed earnings of subsidiaries ........................        4,226        (1,137)       (6,751)
                                                                                               ------------------------------------
      Total adjustments ..................................................................        4,876          (145)       (6,031)
                                                                                               ------------------------------------
Net cash provided by operating activities ................................................       22,531        16,984        11,331
Cash flows from investing activities:
  Capital expenditures ...................................................................       (1,431)         (501)         (843)
                                                                                               ------------------------------------
Net cash used in investing activities ....................................................       (1,431)         (501)         (843)
Cash flows from financing activities:
  Dividends paid .........................................................................       (9,244)       (9,328)       (8,563)
  Net change in interest bearing liabilities .............................................           41            40            16
  (Decrease) increase in borrowings ......................................................           --        (2,000)        2,000
  Tax benefit from preferred stock dividend and stock option activity ....................          236           149           336
  Issuance of common stock ...............................................................        2,485         1,485         2,229
  Acquisition of treasury stock ..........................................................      (13,713)       (6,354)      (10,331)
                                                                                               ------------------------------------
Net cash used in financing activities ....................................................      (20,195)      (16,008)      (14,313)
                                                                                               ------------------------------------
Net increase (decrease) in cash and due from banks .......................................     $    905      $    475      $ (3,825)
                                                                                               ====================================
Cash and due from banks at beginning of period ...........................................     $  3,692      $  3,217      $  7,042
Cash and due from banks at end of period .................................................        4,597         3,692         3,217
                                                                                               ------------------------------------
Net increase (decrease) in cash and due from banks .......................................     $    905      $    475      $ (3,825)
                                                                                               ====================================

Income taxes paid ........................................................................        5,780         5,392         6,981
Interest paid ............................................................................            8           126            73
</TABLE>


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 39
                                                           ---------------------
<PAGE>

Regulatory matters

      Certain restrictions exist regarding the ability of Omega's banking
subsidiaries to transfer funds to Omega in the form of cash dividends, loans and
advances. The approval of the Comptroller of the Currency is required to pay
dividends in excess of earnings retained in the current year plus retained net
profits for the preceding two years. At December 31, 2001, the total dividends
that could be paid to Omega without permission from the Comptroller of the
Currency was $24,220,000. Under Federal Reserve restrictions, the banking
subsidiaries are limited in the amount they may loan to their affiliates,
including Omega. At December 31, 2001, Omega Bank had an aggregate lending limit
to affiliates of $21,915,000 and no amount was outstanding with Omega.

(21)  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

      The unaudited quarterly results of operations for the years ended December
31, 2001 and 2000 follow (in thousands, except per share data).

<TABLE>
<CAPTION>
                                                                                        2001 Quarter Ended
                                                                 ---------------------------------------------------------------
                                                                 March 31         June 30        September 30        December 31
                                                                 ---------------------------------------------------------------
<S>                                                              <C>              <C>              <C>                 <C>
Total interest income ..............................             $19,648          $19,381          $18,881             $18,096
Net interest income ................................              11,317           11,291           11,200              11,335
Provision for loan losses ..........................                  --               --              101                 399
Income before income taxes .........................               5,720            5,882            5,447               6,483
Income tax expense .................................               1,475            1,482            1,283               1,637
Net income .........................................               4,245            4,400            4,164               4,846
Basic earnings per share ...........................             $   .49          $   .52          $   .49             $   .58
Diluted earnings per share .........................                 .47              .50              .48                 .56

<CAPTION>
                                                                                        2000 Quarter Ended
                                                                 ---------------------------------------------------------------
                                                                 March 31         June 30        September 30        December 31
                                                                 ---------------------------------------------------------------
<S>                                                              <C>              <C>              <C>                 <C>
Total interest income ..............................             $18,369          $18,980          $19,734             $19,862
Net interest income ................................              11,185           11,384           11,777              11,473
Provision for loan losses ..........................                 143              142              143                  --
Income before income taxes .........................               5,353            5,738            6,124               5,897
Income tax expense .................................               1,379            1,476            1,577               1,551
Net income .........................................               3,974            4,262            4,547               4,346
Basic earnings per share ...........................             $   .44          $   .47          $   .51             $   .50
Diluted earnings per share .........................                 .43              .46              .50                 .48
</TABLE>

(22)  REGULATORY CAPITAL REQUIREMENT

      The Corporation and its bank subsidiaries are subject to risk-based
capital standards by which all bank holding companies and banks are evaluated in
terms of capital adequacy. These regulatory capital requirements are
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation and its bank subsidiary must meet specific capital guidelines
that involve quantitative measures of the Corporation's and bank subsidiary's
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Corporation's and bank subsidiary's capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.


-------------------------------
40  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

      Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and the bank subsidiary to each maintain minimum amounts
and ratios (set forth in the table below) of Total and Tier I capital (as
defined in the regulations) to risk-weighted assets (as defined), and Tier I
capital (as defined) to average assets (as defined). Management believes, as of
December 31, 2001 and 2000, that Omega and its bank subsidiary meet all capital
adequacy requirements to which they were subject.

      As of December 31, 2001, the most recent notification from the regulatory
banking agencies categorized Omega and its bank subsidiaries as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized Omega and its bank subsidiary must maintain minimum Total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the
table. There are no conditions or events since these notifications that
management believes have changed the institutions' category.

      The table below provides a comparison of Omega and its bank subsidiary's
risk-based capital ratios and leverage ratios to the minimum regulatory
requirements for the periods indicated (in thousands):

<TABLE>
<CAPTION>
                                                                                         Minimum               Minimum
                                                                                       Requirement           Regulatory
                                                                                       For Capital          Requirements
                                                                                        Adequacy                to be
                                                                   Actual               Purposes         "Well Capitalized"
                                                              -------------------------------------------------------------
                                                              Amount     Ratio        Amount   Ratio       Amount     Ratio
                                                              -------------------------------------------------------------
<S>                                                           <C>         <C>        <C>        <C>       <C>         <C>
Omega Financial Corporation
As of December 31, 2001:
  Total Capital (to Risk Weighted Assets).................    160,520     21.1%      $60,792    8.0%      $75,991     10.0%
  Tier I Capital (to Risk Weighted Assets)................    151,290     19.9%       30,396    4.0%       45,594      6.0%
  Tier I Capital (to Average Assets)......................    151,290     13.3%       45,340    4.0%       56,675      5.0%

As of December 31, 2000:
  Total Capital (to Risk Weighted Assets).................    162,824     22.1%      $59,007    8.0%      $73,759     10.0%
  Tier I Capital (to Risk Weighted Assets)................    153,571     20.8%       29,504    4.0%       44,255      6.0%
  Tier I Capital (to Average Assets)......................    153,571     14.2%       43,113    4.0%       53,892      5.0%

Omega Bank
As of December 31, 2001:
  Total Capital (to Risk Weighted Assets).................    144,105     19.6%      $58,913    8.0%      $73,641     10.0%
  Tier I Capital (to Risk Weighted Assets)................    134,875     18.3%       29,456    4.0%       44,185      6.0%
  Tier I Capital (to Average Assets)......................    134,875     12.1%       44,587    4.0%       55,734      5.0%

As of December 31, 2000:
  Total Capital (to Risk Weighted Assets).................    148,689     20.6%      $57,607    8.0%      $72,009     10.0%
  Tier I Capital (to Risk Weighted Assets)................    139,655     19.4%       28,804    4.0%       43,205      6.0%
  Tier I Capital (to Average Assets)......................    139,655     13.2%       42,363    4.0%       52,953      5.0%
</TABLE>


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 41
                                                           ---------------------
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Omega Financial Corporation:

      We have audited the accompanying consolidated balance sheets of Omega
Financial Corporation (a Pennsylvania corporation) and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Omega
Financial Corporation and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States.


/s/ Arthur Andersen LLP

Lancaster, Pa.
January 18, 2002
(except with respect to the matter discussed in Note 17, as to which the date is
January 28, 2002)


-------------------------------
42  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

                  Omega Financial Corporation and Subsidiaries
                    COMMON STOCK MARKET PRICES AND DIVIDENDS

      The common stock of Omega Financial Corporation is traded on The Nasdaq
Stock Markett under the symbol OMEF. As of December 31, 2001, the number of
shareholders of record of the Corporation's common stock was 2,631.

      The following table sets forth, for the periods indicated (1) the high and
low sale prices and (2) dividends declared:

                                                            2001
                                             -----------------------------------
                                                                       Dividends
Quarter Ended                                  High          Low       Declared
--------------------------------------------------------------------------------
March 31............................          $29.50       $23.25       $0.26
June 30..............................          32.30        26.88        0.27
September 30.........................          32.60        27.70        0.27
December 31..........................          33.34        29.65        0.27

                                                              2000
                                             -----------------------------------
                                                                       Dividends
Quarter Ended                                  High          Low       Declared
--------------------------------------------------------------------------------
March 31.............................         $29.38       $23.00       $0.25
June 30.............................           26.50        20.56        0.26
September 30.........................          31.75        24.88        0.26
December 31..........................          30.13        24.00        0.26

      While the Corporation expects to continue its policy of regular quarterly
dividend payments, no assurance of future dividend payments can be given. Future
dividend payments will depend upon maintenance of a strong financial condition,
future earnings and capital and regulatory requirements. Dividends on the common
stock are also subject to the prior payment of dividends on the Corporation's
Series A Preferred Stock. See Note 15 of the Notes to Consolidated Financial
Statements.

      The following firms have chosen to make a market in the stock of the
Corporation. Inquiries concerning their services should be directed to:

J.J.B. Hilliard                                    Janney Montgomery Scott, Inc.
501 South Fourth Street                            1818 Market Street
Louisville, KY 40202                               Philadelphia, PA 19103
(800-627-3557)                                     (800-526-6397)

F. J. Morrissey & Co.                              Ferris, Baker Watts, Inc.
1700 Market St., Suite 1420                        6 Bird Cage Walk
Philadelphia, PA 19103-3913                        Hollidaysburg, PA 16648
(800-842-8928)                                     (800-343-5149)


                                                           ---------------------
                               OMEGA FINANCIAL CORPORATION 2001 Annual Report 43
                                                           ---------------------
<PAGE>

FORM 10-K

      A copy of the Corporation's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 2001 will be supplied
without charge (except for exhibits) upon written request. Please direct all
inquiries to Mr. David N. Thiel, 366 Walker Drive, State College, PA 16801.

INVESTMENT CONSIDERATIONS

      In analyzing whether to make, or to continue, an investment in Omega
Financial Corporation, investors should consider, among other factors, the
information contained in this Annual Report and certain investment
considerations and other information more fully described in Omega's Annual
Report on Form 10-K for the year ended December 31, 2001, a copy of which can be
obtained as described above.

ANNUAL MEETING OF SHAREHOLDERS

      The Annual Meeting of Shareholders of Omega Financial Corporation will be
held at 10:00 a.m., Monday, April 22, 2002 at The Penn Stater, 215 Innovation
Blvd., Penn State Research Park, State College, Pennsylvania.

REGISTRAR AND TRANSFER AGENT

Omega Bank, N.A.
Trust Department
P.O. Box 298
State College, PA 16804-0298
(814-237-7641)

INFORMATION AVAILABILITY

      Omega Financial Corporation news releases are available by fax 24 hours a
day from Company News On-Call at (800) 758-5804, extension 653250. Quarterly and
annual reports, a corporate profile, stock quotes and other financial data can
be retrieved through the Omega Financial Corporation web site at
www.omegafinancial.com.


-------------------------------
44  OMEGA FINANCIAL CORPORATION 2001 Annual Report
-------------------------------
<PAGE>

                          OMEGA FINANCIAL CORPORATION

-------------------------------BOARD OF DIRECTORS-------------------------------

David B. Lee
Chairman and Chief Executive Officer

Raymond F. Agostinelli
President and Owner, McLanahan Drug Store Management Co., Inc.

Philip E. Gingerich
Self-employed Real Estate Appraiser and Consultant

D. Stephen Martz
President and Chief Operating Officer

Robert N. Oliver
Owner, Oliver Farms

James W. Powers, Sr.
Retired President, Polestar Plastics
Manufacturing Company

Stanton R. Sheetz
President and C.E.O., Sheetz, Inc.
Retail Convenience Stores

Robert A. Szeyller
Retired Managing Partner,
Pennsylvania Financial Group, Inc.
Pension and Insurance Consulting Firm

------------------------------------OFFICERS------------------------------------

David B. Lee
Chairman and Chief Executive Officer

D. Stephen Martz
President and Chief Operating Officer

Daniel L. Warfel, CPA
Executive Vice President and
Chief Financial Officer

Donita R. Koval
Executive Vice President and
Chief Credit Officer

David T. Thiel
Senior Vice President and Secretary

JoAnn N. McMinn
Senior Vice President and
Corporate Controller

                                   OMEGA BANK

-------------------------------BOARD OF DIRECTORS-------------------------------

David B. Lee
Chairman and
Chief Executive Officer

D. Stephen Martz
President and
Chief Operating Officer

Raymond F. Agostinelli

Edward J. Anderson

Ralph W. Arthur, Jr.

Carl H. Baxter

Richard L. Campbell, Esq.

Allen E. Gibboney, Esq.

Philip E. Gingerich

Frederick J. Kissinger

Stephen M. Krentzman

Robert N. Oliver

James W. Powers, Sr.

Stanton R. Sheetz

Robert A. Szeyller

------------------------------------OFFICERS------------------------------------

               David B. Lee, Chairman and Chief Executive Officer

            D. Stephen Martz, President and Chief Operating Officer

                          o Executive Vice Presidents o

Daniel L. Warfel, CPA
Chief Financial Officer

Donita R. Koval
Chief Credit Officer

Charles H. Zendt, Jr.
Omega Banking Region and
CRA Officer

Vincent C. Turiano
Hollidaysburg Trust
Banking Region

John R. Franks, Jr.
Penn Central Banking Region

                           o Senior Vice Presidents o

David T. Thiel
Secretary

JoAnn N. McMinn
Corporate Controller

Bruce R. Erb
Trust

Dennis E. Hampton
Trust

Ronald S. Haring
Commercial Lending

Richard A. Scholton
Commercial Lending

                               o Vice Presidents o

Kimberly A. Benner
Trust

William J. Bishop
Trust

Teresa M. Ciambotti, CFA
Funds Management

Ronald A. Donaldson
Operations

Judith G. Fleming
Trust

Robert A. Frederick
E-Commerce

William F. Frey
Compliance

John E. Gravish
Consumer Lending

Stephen W. Grim
Commercial Lending

Ann K. Guss
Mortgage Lending

Samuel L. Hinish
Retail Sales

Susan K. Kratzer
Retail Sales

Thomas C. Landis
Commercial Lending

Larry D. Muck
Mortgage Lending

Daniel P. Nead
Commercial Lending

Dennis C. O'Connor
Commercial Lending

Roger W. Oswald
Commercial Lending

Lowell I. Rohrer
Technical Services

R. Keith Sipe
Audit

Jesse Weaver
Trust

Robin R. Weikel
Bank Controller

Richard E. Winstead
Commercial Lending
<PAGE>

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                   366 Walker Drive o State College, PA 16801
                             www.omegafinancial.com