EXHIBIT 13.1

                          OMEGA FINANCIAL CORPORATION
                                      2000


<PAGE>


                                     [LOGO]



<PAGE>

TO OUR SHAREHOLDERS, CUSTOMERS AND FRIENDS:

Your company wrapped up a challenging Year 2000 with a strong showing. Our
fourth quarter performance led to earnings for that period that were 14% higher
than the same period in 1999, significantly narrowing the income shortfall from
earlier in the year. Earnings for 2000 were only 1.3% short of those for 1999, a
year of uncommon financial events for Omega Financial Corporation. The 1999
results included significant proceeds from a series of







non-recurring events, including the sale of the Danville office of Omega Bank,
the sale of a block of mortgages and a substantial recovery of previously
unaccrued interest.

If the effects of these one-time events are extracted, earnings for 2000 would
have increased by 7%. We therefore view the third and fourth quarter results
from last year as more truly indicative of your company's overall performance.
In addition to net income, all the key indicators -- including Return on Average
Assets (ROA), Return on Average Equity (ROE), income from credit activities and
common share dividends -- posted healthy increases in the fourth quarter.

Omega's 2000 net income was $17.129 million, compared to net income for 1999 of
$17.362 million. On a per-share basis, diluted earnings rose by 1.1% to $1.87,
while basic earnings for 2000 were unchanged at $1.92. Common share dividends
increased by 8.4%, from $0.95 to $1.03.

In addition to the positive financial trends in the latter half of the year, we
are also encouraged by a number of initiatives we have taken and the recognition
some of those have garnered.

During the first quarter of 2000, we established a team of mortgage specialists
that works across affiliate banks to provide custom mortgage solutions for a
variety of home financing needs. This team is composed of professionals with
extensive experience in the mortgage field. To enhance customer convenience, we
designated one toll-free



2



<PAGE>




telephone number to reach our team, and we promoted our expertise through a
multimedia marketing campaign in all affiliate markets.

Attempting to capitalize on the growing trend toward electronic banking, we
undertook a major redesign of our company website, www.omegafinancial.com, in
the first quarter. We added a CyberMall to the site to strengthen our ties to
the local businesses served through our merchant card services. The CyberMall
benefits our merchants, our web site visitors, and with listings of non-profit
organizations, our local communities as well.

Further developing our electronic commerce strategy, we completed plans during
the last quarter of 2000 for the introduction of electronic bill payment. With
this service, we now offer customers 24-hour, seven-day-a-week account access
and bill payment. We feel that this service will draw both existing and new
customers to our other product offerings via the Internet while generating
additional fee income.

When you combine these electronic commerce programs with the further development
of our Customer Information Center, you have what we believe is a solid strategy
for pursuing growth without sacrificing outstanding customer service. Our
electronic commerce efforts have been recognized by the information technology
industry. During the final quarter of 2000, the Customer Information Center
received national recognition in the 2000 Microbanker competition for best in
micro-banking. We were acknowledged as a leader in using software solutions for
customer service.

As important as electronic banking is to our customers, financial service
remains a person-to-person business at its heart. In recent months, regional
consumers found their convenience and choices limited by our competitors'
mergers and consolidations of offices. To reap new business from these
opportunities, we have been capitalizing on our Hometown Bank image and our
long-standing reputation for comprehensive product offerings, convenient
locations and outstanding customer service.

As part of our commitment to increased customer convenience, we opened a
Hollidaysburg Trust Company office in Tyrone in the fourth quarter. This marks
Hollidaysburg Trust's initial entry into the Tyrone area. We are pleased with
early results from the new facility.

We have long noted the dedication of our staff to providing the utmost in
customer satisfaction. That attitude pervades the entire Omega family, from
directors and management to front-line personnel.

With that in mind, we would like to acknowledge two of our retiring directors
for that same dedication to excellence and service. Merle Evey is retiring from
the Hollidaysburg Trust Company and Omega Financial Corporation boards, while
Mary Jane Crain is retiring from the Omega Bank board. These two individuals
have contributed greatly to the success of your company with their wisdom and
insight.

The Year 2000 reflects hard work throughout the company. We feel that the
performance in the latter half of this past year reaffirms our core strategies
and sets the table for continued accomplishments in 2001.

Sincerely,



/s/ DAVID B. LEE                           /s/ D. STEPHEN MARTZ
David B. Lee                               D. Stephen Martz
Chairman and Chief Executive Officer       President and Chief Operating Officer


[GRAPHIC]




                                                                               3
<PAGE>

                        CORPORATE DIRECTORS AND OFFICERS

The lists on this page and the following two pages present the directors and
officers of Omega Financial Corporation as of December 31, 2000.

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

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

Merle K. Evey, Esq.
Attorney at Law

Robert T. Gentry
President of Penn Central National Bank

Philip E. Gingerich
Self employed Real Estate Appraiser and Consultant

David B. Lee, Chairman
Chief Executive Officer of Omega Financial Corporation

D. Stephen Martz
President and Chief Operating Officer of Omega Financial Corporation

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
Managing partner, Pennsylvania Financial Group, Inc.
Pension and Insurance Consulting Firm

DIRECTORS EMERITI
Ned C. Cummings
William E. Henry, O.D.
Albert N. Masood
Don C. Meyer
John R. Miller, Jr., Esq.
Samuel D. Zeiders, Jr., D.D.S.
David K. Goodman, Sr.


--------------------------------------------------------------------------------
                                    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, Commercial Sales
David N. Thiel...............................Senior Vice President and Secretary
JoAnn N. McMinn...................Senior Vice President and Corporate Controller
Teresa M. Ciambotti, CFA........................Vice President, Funds Management
Ronald A. Donaldson...........................Vice President, Technical Services
Robert A. Frederick....................Vice President and Director of E-Commerce
William F. Frey............................Vice President and Compliance Officer
Lowell I. Rohrer..................................................Vice President
R. Keith Sipe...................................Vice President and Chief Auditor
Robin R. Weikel...........................Vice President and Regional Controller



                                CORPORATE ADDRESS
                                366 Walker Drive
                                  P.O. Box 619
                     State College, Pennsylvania 16804-0619


              PRINCIPAL SUBSIDIARIES OF OMEGA FINANCIAL CORPORATION


Omega Bank, N.A.
P.O. Box 298
State College, PA 16804

Hollidaysburg Trust Company
224 Allegheny Street
Hollidaysburg, PA 16648

Penn Central National Bank
431 Penn Street
Huntingdon, PA 16652

Central Pennsylvania Investment Company
1105 N. Market Street, Suite 1300
Wilmington, DE 19899

Central Pennsylvania Life Insurance Company
1421 E. Thomas Road
Phoenix, AZ 85014

Central Pennsylvania Leasing, Inc.
117 S. Allen Street
State College, PA 16801



4




<PAGE>

                          BANK DIRECTORS AND OFFICERS

OMEGA BANK, N.A.

BOARD OF DIRECTORS

Raymond F. Agostinelli         Stephen M. Krentzman
Richard L. Campbell, Esq.      David B. Lee
Mary Jane Crain                James W. Powers, Sr.
Philip E. Gingerich            Robert A. Szeyller
Frederick J. Kissinger         Charles H. Zendt, Jr.

DIRECTORS EMERITI

David D. Borland               Jonas B. Kauffman, Jr.
J. Harold Boyer                Nathan H. Krauss
Ned C. Cummings                Don C. Meyer
Herbert C. Graves              John R. Miller, Jr., Esq.
Darl H. Heller                 Richard B. Roush
William E. Henry, O.D.         George R. Smith
H. Richard Ishler, M.D.        Samuel D. Zeiders, Jr., D.D.S.

OFFICERS

David B. Lee........................Chairman, President, Chief Executive Officer
Charles H. Zendt, Jr....................................Executive Vice President
C. Leonard Eby, Jr................................Senior Vice President, Lending
Dennis E. Hampton...................................Senior Vice President, Trust
Ronald S. Haring.......................Senior Vice President, Commercial Lending
William D. Karch..................................Senior Vice President, Lending
David N. Thiel...............................Senior Vice President and Secretary
Kimberly A. Benner.........................................Vice President, Trust
John E. Gravish.................................Vice President, Regional Lending
Ann K. Guss.....................................Vice President, Mortgage Lending
Steven W. Grim................................Vice President, Commercial Lending
Eric F. Kraytz................................Vice President, Commercial Lending
Thomas C. Landis.........................................Vice President, Lending
Susan K. Kratzer...........................Vice President, Branch Administration
Jesse Weaver...............................................Vice President, Trust

REGIONAL BANK BOARDS

CENTRE/CLINTON REGION

Larry R. Breon                 C. Guy Rudy
Charles L. Frazier             Daniel C. Schrack
Jay R. Montgomery              William E. Young, D.O.

MIFFLIN/JUNIATA REGION

Thomas G. Clark                Ronald C. Shearer
Ralph A. Germak                Kenneth O. Stuck, D. Ed.
Jerry Leach                    William S. Taylor, III
Roy A. Leister                 Mervin R. Zendt
Steven L. Palm

DIRECTORS EMERITI

William Bamat
Miles X. Clevenstine           E. J. Straley, V.M.D.
James G. Corman                Jay Struble
C. Richard Dimm                Peter Swistock, Sr.
Robert L. Homan                Elwood A. Way
Lee E. Sausman                 Warren K. Zook

HOLLIDAYSBURG TRUST COMPANY

BOARD OF DIRECTORS

Ralph W. Arthur, Jr.           John P. Kinney
Merle K. Evey, Esq.            D. Stephen Martz
Allan E. Gibboney, Esq.        Stanton R. Sheetz
David C. Hileman               Vincent C. Turiano

DIRECTORS EMERITI

Rex W. Hershberger             Dorothea D. Nelson
Charles I. Kreider             Roy F. Rumbaugh
James J. Madden                Joseph Tanner

OFFICERS

D. Stephen Martz....................Chairman, President, Chief Executive Officer
Vincent C. Turiano.............Executive Vice President, Chief Operating Officer
Bruce R. Erb........................................Senior Vice President, Trust
Richard A. Scholton...............................Senior Vice President, Lending
Dennis C. O'Connor...........................Vice President, Commercial Services
Roger W. Oswald.............................Vice President, Agricultural Manager

PENN CENTRAL NATIONAL BANK

BOARD OF DIRECTORS

Edward J. Anderson             Robert T. Gentry
Phyllis J. Bard                Samuel L. Hinish
Carl H. Baxter                 Robert N. Oliver
Ralph B. Everhart

DIRECTORS EMERITI

Harry M. Enyeart               J. Melvin Isett
John R. Gates                  Albert N. Masood
David K. Goodman, Sr.          William E. Swigart, Jr.

OFFICERS

Samuel L. Hinish........................................................Chairman
Robert T. Gentry............................. President, Chief Executive Officer
John R. Franks.................Executive Vice President, Chief Operating Officer
William J. Bishop.................................................Vice President
Ronald A. Casner..................................................Vice President
Judith G. Fleming..........................................Vice President, Trust
Daniel P. Nead...........................................Vice President, Lending




                                                                               5
<PAGE>


                    COMMON STOCK MARKET PRICES AND DIVIDENDS

The common stock of Omega Financial Corporation is traded on The Nasdaq Stock
Market under the symbol OMEF. As of December 31, 2000, the number of
shareholders of record of the Corporation's common stock was 2,641.

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

<TABLE>
<CAPTION>

                                                   2000                                       1999
                                   -------------------------------------      ----------------------------------
                                                               Dividends                               Dividends
Quarter Ended                       High           Low         Declared        High          Low       Declared
                                    ----           ---         ---------       ----          ---       ---------
<S>                                <C>           <C>             <C>          <C>          <C>           <C>
 March 31........................  $29.38        $23.00          $0.25        $33.88       $29.75        $0.22
 June 30.........................   26.50         20.56           0.26         36.88        33.25         0.24
 September 30....................   31.75         24.88           0.26         34.75        31.63         0.24
 December 31.....................   30.13         24.00           0.26         32.38        28.50         0.25

</TABLE>


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)



                                   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, 2000 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, 2000, 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., Tuesday, April 24, 2001 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.



6

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                            SELECTED FINANCIAL DATA

The following selected financial data of Omega Financial Corporation and
subsidiaries for the five years ended December 31, 2000 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.

                           FIVE-YEAR FINANCIAL SUMMARY

<TABLE>
<CAPTION>


                                                  2000          1999         1998         1997         1996
-------------------------------------------------------------------------------------------------------------
BALANCE SHEET INFORMATION                        (In thousands of dollars, except share and per share data)
at December 31
<S>                                            <C>          <C>          <C>          <C>          <C>
    Assets .................................   $1,113,836   $1,053,403   $1,062,704   $1,015,903   $1,007,345
    Deposits ...............................      889,501      851,595      870,660      840,775      846,030
    Loans, net .............................      751,985      704,948      722,967      691,893      696,597
    Investment securities ..................      242,379      272,669      261,380      249,817      241,846
    Long term debt (including ESOP debt) ...       10,264       10,611        8,837        9,034        9,213
    Shareholders' equity ...................      155,204      151,151      153,980      142,432      135,885
    Number of shares outstanding - common *     8,606,983    8,774,507    8,960,197    8,879,257    9,050,889
    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 ...................   $76,945   $74,493   $75,268   $76,998   $76,720
   Net interest income .....................       45,819       46,788       46,618       47,121       46,400
   Provision for loan losses ...............          428        1,060        1,060        1,030          979
   Income before income taxes ..............       23,112       24,257       24,714       24,465       23,354
   Income tax expense ......................        5,983        6,895        7,622        7,497        7,127
   Net income ..............................       17,129       17,362       17,092       16,968       16,227

PER COMMON SHARE DATA*
    Net income - basic .....................   $1.92   $1.92   $1.87   $1.85   $1.75
    Net income - diluted ...................         1.87         1.85         1.79         1.77         1.69
    Cash dividends - common ................         1.03         0.95         0.80         0.65         0.56
    Book value - common ....................        17.73        16.96        16.95        15.83        14.83

<CAPTION>


FINANCIAL RATIOS

                                                   2000          1999         1998         1997         1996
-------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>          <C>          <C>          <C>
Return on average equity ...................       11.13%       11.30%       11.35%       12.26%       12.51%
Return on average assets ...................        1.59         1.63         1.66         1.67         1.61
Dividend payout - common ...................       52.42        48.29        41.94        34.41        31.26
Average equity to average assets ...........       14.28        14.46        14.67        13.64        12.85
</TABLE>


----------
* Prior period per share information has been restated for the effect of the 3
  for 2 stock split in the form of a dividend in 1997, as well as the adoption
  of SFAS No. 128, Earnings per Share in 1997.


                                                                               7
<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

This discussion concerns Omega Financial Corporation and the consolidated
results of its six active subsidiaries ("Omega" or the "Corporation"), Omega
Bank, N.A. ("Omega Bank"), Hollidaysburg Trust Company ("Hollidaysburg"), Penn
Central National Bank ("Penn Central"), Central Pennsylvania Investment Company
("CPI"), Central Pennsylvania Life Insurance Company ("CPLI") and Central
Pennsylvania Leasing, Inc. The purpose is to focus on information concerning
Omega's financial condition and results of operations which 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, 2000, 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 bank holding company operating primarily in
central Pennsylvania, with the purpose of delivering financial services within
its local market. Consisting of three banks and three active 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. Omega's banks provide 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. The banking affiliates also
provide 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.





8


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                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

                                    OVERVIEW

Omega functions as a financial intermediary and therefore its financial
condition should be viewed in terms of changes in its uses and sources of funds.
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 1.4%, from $1,062,698,000
in 1999 to $1,077,836,000 in 2000. 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 1998 to 1999. In
the fourth quarter of 1999, bank-owned life insurance (BOLI) was purchased in
the amount of $20,112,000. The cash surrender value of this instrument is
included in non-earning assets, and revenues generated are included in
non-interest income.

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

<TABLE>
<CAPTION>

                                             2000                                  1999                                     1998
                                           Average         Increase(Decrease)     Average          Increase(Decrease)      Average
                                           Balance         Amount         %       Balance          Amount          %       Balance
                                        -----------       --------     ------   ----------        --------      ------   -----------
<S>                                     <C>               <C>          <C>      <C>               <C>           <C>      <C>
        FUNDING USES:
Loans ..............................    $  695,469        $13,629        2.0%   $  681,840        $ 5,176         0.8%   $  676,664
Tax-exempt loans ...................        33,399          7,347       28.2        26,052         (1,303)       (4.8)       27,355
Investment securities ..............       182,875         (7,571)      (4.0)      190,446         (3,695)       (1.9)      194,141
Tax-exempt investment securities ...        75,560         (1,032)      (1.3)       76,592         24,115        46.0        52,477
Interest bearing deposits ..........           891         (2,768)     (75.6)        3,659          2,898       380.8           761
Federal funds sold .................        19,522         (4,926)     (20.1)       24,448          8,192        50.4        16,256
Other interest earning assets ......            --         (2,988)    (100.0)        2,988             --          --            --
                                        ----------        -------        ---    ----------        -------         ---    ----------
  Total interest earning assets ....     1,007,716          1,691        0.2     1,006,025         38,371         4.0       967,654
Non-interest earning assets ........        82,071         13,568       19.8        68,503         (2,446)       (3.4)       70,949
Less: Allowance for loan losses ....       (11,951)          (121)       1.0       (11,830)            94        (0.8)      (11,924)
                                        ----------        -------        ---    ----------        -------         ---    ----------
  Total uses .......................    $1,077,836        $15,138        1.4%   $1,062,698        $36,019         3.5%   $1,026,679
                                        ==========        =======        ===    ==========        =======         ===    ==========

        FUNDING SOURCES:
Interest bearing demand deposits ...    $  237,029        $(3,777)      (1.6%)  $  240,806        $11,322         4.9%   $  229,484
Savings deposits ...................       101,524         (4,050)      (3.8)      105,574          2,938         2.9       102,636
Time deposits ......................       403,163          6,824        1.7       396,339           (118)         --       396,457
Repurchase agreements ..............        18,740          1,220        7.0        17,520          3,285        23.1        14,235
Other borrowed funds ...............        28,714         14,301       99.2        14,413          8,546       145.7         5,867
                                        ----------        -------        ---    ----------        -------         ---    ----------
  Total interest bearing liabilities       789,170         14,518        1.9       774,652         25,973         3.5       748,679
Demand deposits ....................       121,541            488        0.4       121,053          6,671         5.8       114,382
Other liabilities ..................        13,251           (123)      (0.9)       13,374            333         2.6        13,041
Shareholders' equity ...............       153,874            255        0.2       153,619          3,042         2.0       150,577
                                        ----------        -------        ---    ----------        -------         ---    ----------
  Total sources ....................    $1,077,836        $15,138        1.4%   $1,062,698        $36,019         3.5%   $1,026,679
                                        ==========        =======        ===    ==========        =======         ===    ==========

</TABLE>

Omega's funding sources have increased over the last two years at rates of 1.4%
and 3.5% in 2000 and 1999, respectively. 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. Also
in 1999, funds were borrowed to support the Omega Stock Repurchase program and
for Year 2000 planning considerations. In 1999, the majority of the growth was
in core transaction accounts (demand and savings). These funds were used for



                                                                               9
<PAGE>




                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

short-term investing purposes, as Year 2000 contingency planning dictated a
larger degree of liquidity than would have normally been necessary.

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

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 customer's
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%.

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.

In 1999, total average loans were $707,892,000 as compared to $704,019,000 in
1998, an increase of $3,873,000, or 0.6%. If the branch sale and the mortgage
loan sale had not taken place, and the $34,142,000 of loans related to these
mortgages and this branch had been outstanding the entire year, loan growth
would have been at 3.3%. During the year, the customer's general preference was
for fixed rate loans as opposed to variable rate. On average, fixed rate loans
increased by $16,150,000, or 3.6%, while variable rate loans declined by
$12,277,000, or 4.8%.

Driving the fixed rate loan increases in 1999 was a $27,883,000 increase in
taxable commercial loans. Absolute levels of fixed rate consumer mortgages
actually declined on average by $2,972,000. However, average mortgage balances
decreased by approximately $13,160,000 in 1999 as a result of the mortgage loan
sale and the sale of the branch office. Thus, actual average new volume of fixed
rate mortgage loans was $10,188,000. Similarly, during 1999 absolute levels of
personal fixed rate loans dropped on average by $5,762,000, while the branch
sale reduced average loans in this category by $8,303,000, resulting in new loan
average increases of $2,541,000. Fixed rate tax-exempt commercial loans declined
on average by $2,999,000 during 1999 as compared to 1998.

Variable rate loan changes in 1999 were made up of decreases of $5,435,000 in
taxable commercial loans, $7,742,000 in personal residential loans, and $794,000
in personal loans. These decreases were slightly offset by an increase in
variable rate tax free commercial loans of $1,694,000. Management believes that
this shift from variable to fixed rate, continuing since 1998, was attributable
to the flat yield curve present during the year, and the customers' perception
of future rate environments.

The loan portfolio as of December 31, 2000 was comprised of 51% consumer loans
and 49% commercial loans (including construction), as compared to 53% and 47%,
respectively, at December 31, 1999. See Note 5 of Notes to Consolidated
Financial Statements.



10


<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

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 aggressively pursue growth in
each of the loan categories again during 2001. A competitive pricing environment
is expected to continue and may force Omega to maintain its relaxed pricing
structure in order to continue 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, 2000
was 1.55% of total loans, net of unearned discount, as compared to 1.68% of
total loans at the end of 1999. The allowance decreased $243,000 from 1999 as
the net charge-offs of $671,000 exceeded the provision of $428,000. Net
charge-offs for 2000 and 1999 were 0.09% and 0.14%, respectively of average
loans. Commercial loans represented 53% of the loans charged off in 2000, as
compared to 55% of the loans charged off in 1999. Because of the decrease in
non-performing loans and the decrease in net charge-offs in 2000, management
decreased the provision for loan losses in 2000. Non-performing loans were 0.29%
of loans as of December 31, 2000, and 0.49% of loans as of December 31, 1999
(see Table 2). All categories of non-performing loans decreased in 2000, most
significantly the non-accrual loans.

                          [REPRESENTATION OF BAR GRAPH]

                        NET CHARGE-OFFS TO AVERAGE LOANS

                         1996                      0.12%
                         1997                      0.15%
                         1998                      0.15%
                         1999                      0.14%
                         2000                      0.09%


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.

                          [REPRESENTATION OF BAR GRAPH]

                          ALLOWANCE FOR LOSSES TO LOANS
                                   at Year End

                         1996                      1.70%
                         1997                      1.70%
                         1998                      1.63%
                         1999                      1.68%
                         2000                      1.55%


At December 31, 2000, non-performing loans (as defined in Table 2) as a
percentage of the allowance for loan losses were 18.6% as compared to 29.0% at
December 31, 1999. Of the $2,165,000 of non-performing loans at December 31,
2000, $1,524,000 were collateralized with real estate, $513,000 with other
assets and $128,000 were unsecured.



                                                                              11

<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

                                     TABLE 2
                              NON-PERFORMING LOANS
<TABLE>
<CAPTION>

                                                                    December 31,
                                                    ------------------------------------------
                                                     2000     1999     1998     1997     1996
                                                     ----     ----     ----     ----     ----
                                                                 (In thousands)
<S>                                                 <C>      <C>      <C>      <C>      <C>
Non-accrual loans ...............................   $1,503   $2,640   $5,627   $4,762   $2,079
Accruing loans past due 90 days or more .........      564      619      682    2,103    1,241
Restructured loans ..............................       98      184      213       47       14
                                                    ------   ------   ------   ------   ------
Total non-performing loans ......................   $2,165   $3,443   $6,522   $6,912   $3,334
                                                    ======   ======   ======   ======   ======

</TABLE>

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 2001 follows (in thousands):

Commercial, financial and agricultural ......................     $ 50
Real estate - commercial ....................................       32
Real estate - mortgage ......................................       --
Personal ....................................................      446
                                                                  ----
Total .......................................................     $528
                                                                  ====



                          [REPRESENTATION OF BAR GRAPH]

                          NON-PERFORMING LOANS TO LOANS
                                   at Year End

                         1996                      0.48%
                         1997                      1.00%
                         1998                      0.90%
                         1999                      0.49%
                         2000                      0.29%


                          [REPRESENTATION OF BAR GRAPH]

                                AVERAGE ASSET MIX

                                Average              Average
                                 Loans             Investments
                                 -----             -----------
                 1996            69.8%               25.0%
                 1997            68.3%               26.7%
                 1998            68.6%               26.5%
                 1999            66.6%               28.6%
                 2000            67.6%               25.9%




                                   INVESTMENTS

Average 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 decreased by $19,285,000, or 6.5%, during 2000,
after increasing by $34,498,000, or 13.1%, during 1999. All categories of
investments were reduced in 2000 as a result of the need for loan funding and
the purchase of other assets. Of the increase in 1999, $24,115,000, or 70% was
tax-exempt investment securities. Although tax-exempt securities carry a lower
rate than taxable securities, the tax exemption of interest income increases the
yield by lowering the tax expense (see Note 11 of Notes to Consolidated
Financial Statements). During 1999, $3,695,000 of taxable investment securities
that matured were re-employed along with remaining available funds into
shorter-term, liquid investments to meet Year 2000 planning needs.




12


<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

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. Prior
to April 1, 1999, the determination of which portfolio to hold a security was
made at the time of purchase, based on management's intent. All marketable
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
these securities until maturity, for matching against longer term funding. On
April 1, 1999, Omega adopted Statement of Financial Accounting Standard (SFAS)
No. 133, which allowed for a one-time reclassification of securities from the
held to maturity portfolio into the available for sale portfolio 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 was reflected as a cumulative effect of a change in
accounting principle. At December 31, 2000 the market value of the entire
securities portfolio exceeded amortized cost by $2,428,000 as compared to
December 31, 1999 when market value was greater than amortized cost by
$1,295,000. The weighted average maturity of the investment portfolio was 1 year
and 7 months as of December 31, 2000 as compared to 1 year and 10 months at the
end of 1999. The weighted average maturity has remained short in order to
achieve a level of liquidity. Table 4 (located on page 19) shows the remaining
maturity or earliest possible repricing for investment securities.


                           NON-INTEREST EARNING ASSETS

Non-interest earning assets (exclusive of unrealized gains on investment
securities) increased $18,930,000, or 37.1% on average in 2000 as compared to an
increase of $548,000, or 1.1% in 1999. Changes occurring in 1999 were the result
of normal operating activities, however late in the fourth quarter 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.


                                    DEPOSITS

Average deposits declined in 2000 by $515,000, or 0.1% to $863,257,000, after an
increase in 1999 of 2.5%, or $20,813,000. It is very important to analyze the
effect that the branch office sale had on the results from both years. Included
in 1999's average deposit balances was $6,321,000 that represented the funds
from that banking office. If these balances were excluded from the growth
analysis, there would be an actual increase in average deposits of $5,806,000,
or 0.7%. In 1999, had the deposit liabilities from the sold branch remained with
Omega, deposit growth would have been approximately 3.8%. Although deposit
growth has been positive in the last two years, the banking industry in general
continues to experience limited deposit growth because of fierce competition in
the marketplace provided by mutual funds and other investment options that
directly compete with traditional bank products. Omega continues to supply the
needs of its customer base by offering insured deposits, but has supplemented
its funding needs with borrowings.

As reflected in Table 3 and the graph at right, the mix of deposit types has
gradually changed over the last five years. Management believes that in 1999,
the rate environment did not entice customers to invest in time deposits and
that consumer Year 2000 concerns for liquidity explained the volume increases in
transaction accounts and the reduction in time deposits. With the Year 2000
concerns behind, Omega's customers have become comfortable with time deposits
once again and have begun to extend maturities to achieve a higher return on
their investments.



                          [REPRESENTATION OF BAR GRAPH]

                               AVERAGE DEPOSIT MIX

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

                    1996            51.20%               48.80%
                    1997            50.90%               49.10%
                    1998            53.00%               47.00%
                    1999            54.10%               45.90%
                    2000            53.30%               46.70%




                                                                              13



<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------




                                     TABLE 3
                              Changes in Deposits
                                ($in thousands)

<TABLE>
<CAPTION>

                                          2000                             1999                            1998
                                        Average     Increase(Decrease)    Average    Increase(Decrease)   Average
                                        Balance      Amount       %       Balance     Amount       %      Balance
                                        --------    -------     ----     --------    -------     ----    --------
<S>                                     <C>         <C>         <C>      <C>         <C>          <C>    <C>
Interest bearing demand deposits ....   $237,029    $(3,777)    (1.6)%   $240,806    $11,322      4.9%   $229,484
Savings deposits ....................    101,524     (4,050)    (3.8)     105,574      2,938      2.9     102,636
Demand deposits .....................    121,541        488      0.4      121,053      6,671      5.8     114,382
                                        --------    -------     ----     --------    -------      ---    --------
 Total core (transaction) accounts ..    460,094     (7,339)    (1.6)     467,433     20,931      4.7     446,502
Time deposits .......................    403,163      6,824      1.7      396,339       (118)      --     396,457
                                        --------    -------     ----     --------    -------      ---    --------
 Total deposits .....................   $863,257    $  (515)    (0.1)%   $863,772    $20,813      2.5%   $842,959
                                        ========    =======     ====     ========    =======      ===    ========

</TABLE>

                       OTHER INTEREST BEARING LIABILITIES

Other interest bearing liabilities on average increased $15,521,000, or 48.6% in
2000, as compared to an increase of $11,831,000, or 58.9% in 1999. The increases
in 2000 and 1999 are primarily due to the addition of $14,301,000 and
$8,546,000, respectively, in the average balances of borrowed funds. In both
years, the sharp increase in borrowed funds was needed to match-fund certain
commercial loans and to fund the stock repurchase program in effect (see Note 8
of Notes to Consolidated Financial Statements). Additionally, average balances
of retail repurchase agreements increased by $1,220,000 and $3,285,000 in 2000
and 1999, respectively.

                              SHAREHOLDERS' EQUITY

Shareholders' equity continued to be an important funding source during 2000,
providing an average balance of $153,874,000, as compared to the $153,619,000
provided in 1999. Dividend payout ratios on the common stock were 52.4% for 2000
and 48.3% for 1999. 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 decreased average equity by
$3,557,000 in 2000 and by $1,886,000 in 1999. At December 31, 2000, Omega held
726,101 shares of stock in treasury at a cost of $22,723,000 as compared to
485,275 in 1999 at a cost of $16,369,000. These increases are a result of the
Omega stock repurchase program in effect during most of 1999 and 2000 (see Note
15 of Notes to Consolidated Financial Statements).

Omega increased the return to shareholders in 2000 by increasing its dividend
8.4% to $1.03 per common share. Per share common dividends in prior years were
$.95 and $.80 in 1999 and 1998, respectively. Omega paid a dividend of $1.80 per
preferred share in each of the years ending 2000, 1999 and 1998. See Note 18 of
Notes to Consolidated Financial Statements regarding restrictions on dividends
from subsidiary banks to the holding company.


                          [REPRESENTATION OF BAR GRAPH]


                           COMMON BOOK VALUE PER SHARE

                         1996                    $14.83
                         1997                    $15.83
                         1998                    $16.95
                         1999                    $16.96
                         2000                    $17.73



                          [REPRESENTATION OF BAR GRAPH]

                              EQUITY TO ASSET RATIO
                                   at Year End

                        1996                     13.49%
                        1997                     14.02%
                        1998                     14.49%
                        1999                     14.35%
                        2000                     13.93%



14


<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

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, 2000 and 1999, Omega's Tier I capital ratio was 20.8% and 21.2%,
respectively, and its Total capital ratio was 22.1% and 22.5%, 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, 2000 and 1999, Omega's
leverage ratio was 14.2% and 14.1%, respectively, against a required leverage
ratio of 4% (see Note 21 of Notes to the Consolidated Financial Statements).


                           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 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, 2000 was $855,000, or 1.87%, of net
interest income, compared to $333,000, or 0.75%, of net interest income at risk
as of December 31, 1999. 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 2000, Omega's rate risk position was
consistently within policy limits.


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

                   Change                       Change        Total 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           $1,561           $946           $44            $2,551
    200              999            681            30             1,710
    100              497            343            17               857
      0                0              0             0                 0
   -100             (490)          (343)          (22)             (855)
   -200             (975)          (682)          (49)           (1,706)
   -300           (1,456)        (1,014)          (80)           (2,550)



                                                                              15


<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

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.


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,
2000, 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, 2000.


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

                   Change                       Change        Total 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         $(22,189)       $15,200        $3,048          $(3,941)
     200          (14,135)         9,360         2,222           (2,553)
     100           (7,259)         4,806         1,260           (1,193)
       0                0              0             0                0
    -100            7,671         (5,051)       (1,878)             742
    -200           15,780        (10,337)       (4,209)           1,234
    -300           24,373        (15,852)       (6,968)           1,553


                                 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 21) shows the
period and cumulative static gaps for various time intervals as of December 31,
2000. 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 $22,274,000 at December
31, 2000, 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, 2000, 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 $497,000. If interest rates would decline by 100 basis points
immediately, repricing risk would cause net interest income to decrease by
$490,000 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.



16


<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

                                   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               Change in             Change in
  Change in     Net Interest Income     Net Interest Income  Net Interest Income
Interest Rates        Due to              Due to Treasury           Due to
(Basis Points)    Prime Basis Risk          Basis Risk         Total Basis Risk
--------------------------------------------------------------------------------
     300              $4,914                 ($3,968)                $946
     200               3,276                  (2,595)                 681
     100               1,638                  (1,295)                 343
       0                   0                       0                    0
    -100              (1,637)                  1,294                 (343)
    -200              (3,273)                  2,591                 (682)
    -300              (4,908)                  3,894               (1,014)

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 $1,638,000 and market value
of equity would decrease by $4,660,000. 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 $1,295,000 and
market value of equity would increase $9,466,000. 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.



                 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            $(13,074)              $28,274                $15,200
     200              (9,008)               18,368                  9,360
     100              (4,660)                9,466                  4,806
       0                   0                     0                      0
    -100               5,011               (10,062)                (5,051)
    -200              10,414               (20,751)               (10,337)
    -300              16,260               (32,112)               (15,852)


                              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 liablility. Prepayment options on loans and
early withdrawal of deposits are two of the most common types of customer
options. 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 enviroment, 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 similiar maturity and rate characteristics.
Customer options resulting from a 100 basis point decrease in interest rates
would cause net interest income to decrease $22,000 and market value of equity
to decrease $1,878,000.



                                                                              17



<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

                                    LIQUIDITY

There is no standardized formula for measuring liquidity. Past methods do not
apply due to the complexity of today's balance sheet. Omega's management 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?

First, total liquid assets are 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 maturities within thirty
days and any other readily marketable assets.

Second, total short-term liabilities are determined. This includes federal funds
purchased, repurchase agreements, certificates of deposit over $100,000
scheduled to mature within thirty days, and an estimated amount of the retail
deposits.

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, 2000, total liquid assets were $159,136,000 while the short-term liabilities
were $61,874,000. This left a surplus of liquid assets of $97,262,000, or 8.70%,
of total assets. Management believes that a surplus of not less than 5% to 7% is
adequate.

Another measure of liquidity is the average loan to deposit ratio. This ratio
was 84.4% at December 31, 2000 and 82.0% at December 31, 1999. Management's
target range for this ratio is 70% to 85%.

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, 2000 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 and capital.

In addition, liquidity can also be provided by off-balance sheet sources. Omega
has federal funds lines totaling $23,000,000 at December 31, 2000. At December
31, 2000, Omega had no amount outstanding against these federal funds lines. In
addition, each of the Corporation's banks are members of the Federal Home Loan
Bank of Pittsburgh which provides overnight or term funding to the banks with a
borrowing limit of $77,274,000. This borrowing limit could be increased to a
maximum amount of $290,829,000 with the purchase of additional FHLB stock. At
December 31, 2000, Omega had $33,395,000 outstanding in term loans and no
overnight advances (See Note 8 of Notes to the Consolidated Financial
Statements). 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, 2000 was $45,404,000.



                          [REPRESENTATION OF BAR GRAPH]


                          AVERAGE LOAN TO DEPOSIT RATIO

                          1996                     82.20%
                          1997                     81.60%
                          1998                     83.50%
                          1999                     82.00%
                          2000                     84.40%




18


<PAGE>


<TABLE>

                                             MANAGEMENT'S DISCUSSION AND ANALYSIS
                                       OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------------

                                                           TABLE 4
                                                    MATURITY DISTRIBUTION
                                                   AS OF DECEMBER 31, 2000
                                                        (IN THOUSANDS)

                                       REMAINING MATURITY / EARLIEST POSSIBLE REPRICING

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

<CAPTION>
                                                                   Over Three   Over Six    Over One
                                                         Three     Months But  Months But   Year But    Over
                                                         Months    Within Six  Within One  Within Five  Five
                                                        or Less      Months       Year       Years      Years       Total
                                                        --------    --------    --------    --------   --------   ----------
<S>                                                     <C>         <C>         <C>         <C>        <C>        <C>
Interest Earning Assets
  Interest bearing deposits .........................   $  1,095    $   --      $   --      $   --     $   --     $    1,095
  Federal funds sold ................................     39,750        --          --          --         --         39,750
  Investment securities:
    U.S. Treasury securities and obligations of
       other U.S. Government agencies and
       corporations .................................      9,501       7,993      34,600      43,622       --         95,716
    Obligations of state and political subdivisions .      2,337       3,640       2,242      67,432      1,406       77,057
    Corporate and other securities ..................     11,730       3,101       5,145      17,679         10       37,665
    Mortgage backed securities ......................      2,753       2,800       5,072       6,976       --         17,601
    Stocks ..........................................       --          --          --          --       11,912       11,912
  Loans:
    Commercial, financial, and agricultural .........     71,478       6,090       8,208      23,299      9,611      118,686
    Real estate - commercial ........................     67,123      15,748      23,359      86,301     36,763      229,294
    Real estate - construction ......................      5,137         582       1,635       7,276      3,675       18,305
    Real estate - mortgage ..........................     11,230      11,925      19,751      95,367     68,591      206,864
    Home equity .....................................     16,661       3,456       6,652      42,803     29,153       98,725
    Personal (net of unearned interest) .............     25,172       5,143       9,429      36,543      2,510       78,797
    Lease financing (net of unearned interest) ......        163         154         254         743       --          1,314
                                                        --------    --------    --------    --------   --------   ----------
  Total Interest Earning Assets .....................    264,130      60,632     116,347     428,041    163,631    1,032,781
                                                        --------    --------    --------    --------   --------   ----------
  Interest Bearing Liabilities
  Demand deposits ...................................     28,619        --          --       162,173       --        190,792
    Savings deposits ................................     88,270        --        20,564      39,099       --        147,933
    Certificates of deposit over $100,000 ...........     23,539      10,471       9,163      24,416       --         67,589
    Time deposits ...................................    106,665      75,814      53,358     117,836         70      353,743
    Short-term borrowings ...........................     30,754      10,000       5,000        --         --         45,754
    ESOP debt .......................................       --          --          --          --        3,369        3,369
    Long-term debt ..................................        126         128         262       2,443      3,936        6,895
    Other interest bearing liabilities ..............        650        --          --          --         --            650
                                                        --------    --------    --------    --------   --------   ----------
  Total Interest Bearing Liabilities ................    278,623      96,413      88,347     345,967      7,375      816,725
                                                        --------    --------    --------    --------   --------   ----------
  Gap ...............................................   $(14,493)   $(35,781)   $ 28,000    $ 82,074   $156,256   $  216,056
                                                        ========    ========    ========    ========   ========   ==========
  Cumulative Gap ....................................   $(14,493)   $(50,274)   $(22,274)   $ 59,800   $216,056
                                                        ========    ========    ========    ========   ========

  Cumulative sensitivity ratio ......................       0.95        0.87        0.95        1.07       1.26

Commercial, financial and agricultural
  loans maturing after one year with:
    Fixed interest rates ............................                                       $  8,268   $  6,180   $   14,448
    Variable interest rates .........................                                         19,457     18,130       37,587
                                                                                            --------   --------   ----------
       Total ........................................                                       $ 27,725   $ 24,310   $   52,035
                                                                                            ========   ========   ==========


                                                                                                                     ==== 19
</TABLE>


<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

                              RESULTS OF OPERATIONS
                       2000 FINANCIAL PERFORMANCE OVERVIEW

At $17,129,000, Omega's net income for 2000 represented a return on average
assets of 1.59%. As with most Corporations, occasional events occur which
trigger a significant effect on earnings. Such was the case in 1999 when one
banking office and a block of mortgage loans were sold for substantial gains.
Additionally other gains or losses realized from the securities portfolio could
skew earnings results. 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 improvement each year in core operating results,
without the effects of these one-time events. In 2000, although net income
declined by 1.4%, or $233,000, 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%. Specifically, 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

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
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, 2000).

                                                       Omega         Peers
                                                       -----         -----
       Return on average assets....................     1.55%        1.10%
       Return on average equity....................    10.87        12.97

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

                               ANNUAL NET INCOME
                                 (IN THOUSANDS)

                          [REPRESENTATION OF BAR GRAPH]


                                                        Non-Recurring Income
                              Net Operating Income         (net of tax)
                              --------------------      --------------------
      1996 ..................       $15,704                   $  523
      1997 ..................       $15,969                   $  999
      1998 ..................       $15,725                   $1,367
      1999 ..................       $16,170                   $1,191
      2000 ..................       $16,946                   $  182

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

                            RETURN ON AVERAGE EQUITY

                          [REPRESENTATION OF BAR GRAPH]

                1996 ....................................   12.51%
                1997 ....................................   12.26%
                1998 ....................................   11.35%
                1999 ....................................   11.30%
                2000 ....................................   11.13%


20 ===


<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

                               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 22-23) shows average asset and liability balances, average interest rates
and interest income and expense for the period 1998 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%. The mix of earning assets changed in 2000, when 72.3% of earning assets
were made up of loans compared to 66.6% in 1999. (See Average Asset Mix chart on
page 11). 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 4.13%  through
September 30, 2000 versus Omega's 4.82%.


                                                                          === 21


<PAGE>


<TABLE>

                                                MANAGEMENT'S DISCUSSION AND ANALYSIS
                                                       OF FINANCIAL CONDITION
                                                      AND RESULTS OF OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------

                                                               TABLE 5
                                       AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
                                                           (IN THOUSANDS)

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

<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%    $       68     $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%
                                                                     ==========         ====                    =======       ====


(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 and $(2) in 1998 from interest rate swap agreements used to hedge prime
     interest rate loans.

(8)  Includes gross unrealized gains on securities available for sale: $154 in 2000, $5,637 in 1999 and $8,537 in 1998.

</TABLE>

22 ===


<PAGE>


<TABLE>

                                             MANAGEMENT'S DISCUSSION AND ANALYSIS
                                                    OF FINANCIAL CONDITION
                                                   AND RESULTS OF OPERATIONS
-------------------------------------------------------------------------------------------------------------------------

                                                            TABLE 5
                                    AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
                                                        (IN THOUSANDS)

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

<CAPTION>
                1998                              2000 Compared to 1999                     1999 Compared to 1998
-------------------------------------         Increase (Decrease) Due To(6)             Increase (Decrease) Due To(6)
 Average                       Yield/      ----------------------------------        ------------------------------------
Balance(1)       Interest       Rate        Volume         Rate         Total        Volume         Rate          Total
----------       -------       ------      -------       -------       -------       -------       -------       -------
<S>              <C>            <C>        <C>           <C>           <C>           <C>           <C>           <C>
$  676,664       $58,711        8.68%      $ 1,141       $ 1,224       $ 2,365       $   450       $(1,958)      $(1,508)
    27,355         1,555        5.68           422            82           504           (73)          (51)         (124)
----------       -------        ----       -------       -------       -------       -------       -------       -------
   704,019        60,266        8.56         1,563         1,306         2,869           377        (2,009)       (1,632)

   194,141        11,769        6.06          (452)          334          (118)         (221)         (477)         (698)
    52,477         2,302        4.39           (44)            8           (36)        1,024           (92)          932
----------       -------        ----       -------       -------       -------       -------       -------       -------
   246,618        14,071        5.71          (496)          342          (154)          803          (569)          234

       761            39        5.12          (164)           39          (125)          143            (1)          142
    16,256           892        5.49          (276)          283             7           417           (81)          336
      --            --           --            (72)          (72)         (145)          145          --             145
----------       -------        ----       -------       -------       -------       -------       -------       -------
   967,654        75,268        7.78           555         1,898         2,452         1,885        (2,660)         (775)


    32,404
   (11,924)
    17,240
    21,305
----------
$1,026,679
==========


$  229,484         4,044        1.76           (54)          133            79           187          (366)         (179)
   102,636         2,309        2.25           (91)         --             (91)           66          --              66
   396,457        21,394        5.40           351         1,696         2,047            (6)       (1,373)       (1,379)

    20,102           903        4.49           839           547         1,386           537            10           547
----------       -------        ----       -------       -------       -------       -------       -------       -------
   748,679        28,650        3.83         1,045         2,376         3,421           784        (1,729)         (945)
                 -------        ----       -------       -------       -------       -------       -------       -------


   114,382
    13,041
   150,577
----------
$1,026,679
==========


                 $46,618                   $  (490)      $  (478)      $  (969)      $ 1,101       $  (931)      $   170
                 =======                   =======       =======       =======       =======       =======       =======
                                4.82%
                                ====

                 $48,695        5.03%
                 =======        ====

                                                                                                                  === 23
</TABLE>


<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

                            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.
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. The ratio of net charge-offs to average loans compared to Omega's
regional peers is as follows:

                                                        Omega     Peers
                                                        -----     -----
          September 30, 2000..........................   .05%      .15%


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


                          [REPRESENTATION OF BAR GRAPH]

                               NET INTEREST YIELD


                            Yield on         Cost to Fund      Net Interest
                         Earning Assets     Earning Assets        Yield
                         --------------     --------------     ------------
    1996 ..............       8.05%              3.18%            4.87%
    1997 ..............       8.03%              3.12%            4.91%
    1998 ..............       7.78%              2.96%            4.82%
    1999 ..............       7.40%              2.75%            4.65%
    2000 ..............       7.64%              3.09%            4.55%


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


Management believes that the allowance for loan losses at December 31, 2000 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 is 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 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. 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 $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. When compared to our regional peers (most current data as of September 30,
2000), Omega's ratio was 1.06% and the peer average was .68%.


24 ===


<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------


                          [REPRESENTATION OF BAR GRAPH]

                               NON-INTEREST INCOME
                                TO AVERAGE ASSETS

               (excluding security gains and non-recurring items)


                        1996 .................    0.82%
                        1997 .................    0.88%
                        1998 .................    0.95%
                        1999 .................    0.98%
                        2000 .................    1.10%


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


                          [REPRESENTATION OF BAR GRAPH]

                              NON-INTEREST EXPENSE
                               TO AVERAGE ASSETS

                        (excluding non-recurring items)


                        1996 .................    3.08%
                        1997 .................    3.13%
                        1998 .................    3.14%
                        1999 .................    3.16%
                        2000 .................    3.19%


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


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

It is Omega's continuing desire to minimize operating expense to produce the
highest levels of income possible. 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 September 30, 2000, Omega's ratio of non-interest
expense to average assets was 3.21%, compared to a regional peer average of
2.68%.

                                  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. See Note 11 of Notes to Consolidated Financial Statements for
further information on income taxes.


                                                                          === 25


<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

                                   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.

                                          2000                   1999
                                ---------------------    -----------------------
                                                % of                     % of
                                               Average                  Average
                                               Assets                   Assets
                                               ------                   ------
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
                                ==========               ==========

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


                          [REPRESENTATION OF BAR GRAPH]

                            RETURN ON AVERAGE ASSETS


                      1996 .......................    1.61%
                      1997 .......................    1.67%
                      1998 .......................    1.66%
                      1999 .......................    1.63%
                      2000 .......................    1.59%


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


                       1999 FINANCIAL PERFORMANCE OVERVIEW

Omega's earnings reached a record $17,362,000 in 1999, an increase of 1.6% over
1998. On a diluted basis, net income per common share improved, reaching $1.85
in 1999, an increase of 3.4%, or $.06, over 1998. Several occurrences took place
in 1999 which management believes significantly influenced the year's financial
performance. They are as follows and are discussed in detail in the following
sections:

o   declining, but solid net interest margin

o   Year 2000 liquidity planning

o   increased fee income on traditional banking services

o   decrease from gains on security sales

o   sales of other assets and liabilities

o   expense associated with technology advancement

o   relief of expense associated with former acquisitions


26 ===


<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

Assets were $1,053,403,000 at December 31, 1999, representing a $9,301,000, or
0.9%, decrease from year-end 1998. The decrease was caused by the sale of a
banking office containing $14,139,000 in assets, as well as a block of mortgage
loans totalling $21,207,000. Without the sales, assets would have increased by
approximately $26,000,000, or 2.4%. Loans (net of unearned interest) were
$704,948,000 compared to $722,967,000 at December 31, 1998, a decrease of 2.5%,
or $18,019,000. Deposits decreased by $19,065,000, or 2.2%, at December 31,1999
when compared to December 31, 1998. Without the sales of the branch and the
mortgage loans, loans would have increased $16,132,000, or 2.2% and deposits
would have decreased by $4,743,000, or 0.5%.

Return on average equity decreased from 11.35% in 1998 to 11.30% in 1999, while
return on average assets decreased to 1.63% from 1.66% in 1998. Omega's
performance can be compared to its Mid-Atlantic regional peer group with
consolidated assets of $1 billion to $5 billion.

                                                        Omega       Peers
                                                        -----       -----
        Return on average assets....................     1.63%       1.16%
        Return on average equity....................    11.30       13.16


                               NET INTEREST INCOME

Total average loans were $707,892,000 in 1999 at an average weighted yield of
8.28% that produced $58,634,000 in interest income. This represented a
$3,873,000, or 0.6%, increase in average volumes from 1998. The yield decreased
28 basis points to 8.28% from 8.56% in 1998 causing a decrease of $2,009,000 in
interest income, partially offsetting an increase of $377,000 of favorable mix
and volume changes for a net decrease of $1,632,000, or 2.7%, when compared to
1998. In order to explain the 28 basis point decline in loan yields in 1999, we
must consider both the effects of Omega's pricing index as well as competitive
pressures that forced spreads down. Omega uses the US Treasury rates as indices
for pricing most of its loans. In 1999, the spread between Treasury and the
prime rate was wider than historical spreads, resulting in lower loan rates for
new loans. In 1999, the weighted average rate of all new loans was 8.30%, 26
basis points lower than the composite rate of the loan portfolio in total during
1998. Additional constraints were placed on loan rates as a result of an
ever-increasing competitive loan pricing environment.

Investment securities averaged $267,038,000 for an increase of $20,420,000, or
8.28% over the average investment securities in 1998. The average weighted yield
decreased to 5.36% from 5.71% in 1998, as Year 2000 liquidity concerns
influenced the types of new investments purchased during 1999. New securities
purchased during 1999 were relatively shorter in term and lower in yield than
would have been the case in a normal funds management situation. Additionally,
tax-exempt investment securities were used to a higher degree in 1999 than in
previous years. Approximately $24,000,000 of maturing taxable investment
securities were replaced with tax-exempt investment securities that carry a
lower rate, but higher tax-equivalent yield. Interest income from securities
increased a total of $234,000. Interest bearing deposits, federal funds sold and
commercial paper, as a group on average, increased a total of 82.7%, or
$14,078,000. These funds, supplied primarily by increases in average deposits,
were employed in these short-term, liquid assets as a direct result of Year 2000
liquidity planning.

Total interest earning assets averaged $1,006,025,000 at a yield of 7.40% and
produced total interest income of $74,493,000 for 1999. The net increase in
average earning assets of $38,371,000 in 1999 over 1998 was funded by increased
deposits and borrowings. The yield decreased 38 basis points from 7.78% due
mainly to the lower yielding fixed rate and tax-free loans, as well as
shorter-term, lower-yielding investments. The mix of earning assets changed
slightly in 1999, when 66.6% of earning assets were made up of loans compared to
68.6% in 1998. (See Average Asset Mix chart on page 12). Interest income
increased $1,885,000 from volume and mix changes and decreased $2,660,000 from
generally lower yields producing a net decrease of 1.0%, or $775,000. On a fully
tax-equivalent basis, interest income decreased by $340,000.

Total interest bearing liabilities averaged $774,652,000 at a cost of
$27,705,000 carrying a composite rate of 3.58%. This represented an increase in
interest bearing liabilities of 3.5%, or $25,973,000, over 1998. The composite
rate decreased from 3.83% in 1998, or 25 basis points. Interest expense
decreased $1,729,000 due to lower rates and increased $784,000 due to volume and
mix changes. These changes resulted in a net decrease of $945,000, or 3.3%, in
interest expense.

Non-interest bearing funding sources, including equity, averaged $288,046,000 in
1999, compared to $278,000,000 in 1998, for an increase of $10,046,000, or 3.6%.
This resulted in a decrease of 21 basis points in the rate to fund interest
earning assets (computed by dividing the total interest expense by the total
average earning assets) from 2.96% in 1998 to 2.75% in 1999.


                                                                          === 27


<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

Net interest income was $46,788,000 for 1999, an increase of $170,000, or 0.4%,
from 1998. This was the result of an increase of $1,101,000 in favorable volume
and mix changes and a decrease of $931,000 as a result of interest rate effects.
Net yield was 4.65% in 1999 and 4.82% in 1998. On a fully tax-equivalent basis,
the net yield decreased from 5.03% to 4.90% in 1999. As a comparison, Omega's
regional peer group reported an average net interest margin of 4.18% through
September 30, 1999 versus Omega's 4.94%.

                            PROVISION FOR LOAN LOSSES

Omega's provision for loan losses was $1,060,000 in 1999 and in 1998. In 1999,
the provision for loan losses exceeded net charge-offs by $93,000, while in 1998
net charge-offs exceeded the provision by $21,000. 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 1999 and 1998 were .14% and .15%, respectively, of average loans
outstanding. The ratio of net charge-offs to average loans reported by Omega's
regional peers is .14%. Non-performing loans as a ratio to the allowance for
loan losses were 29.0% at year-end 1999 and 55.4% at the end of 1998. The
allowance for loan losses as a ratio to net loans was 1.68% and 1.63% at
December 31, 1999 and 1998, respectively.

                               NON-INTEREST INCOME

Service-based fee income (fees on deposits, loans, trust services, and other
services) grew to $10,293,000 during 1999 for an 8.0%, or $766,000 increase when
compared to $9,527,000 for 1998.

As a percentage of average assets, non-interest income (excluding securities
gains and other non-recurring gains) was .98% for 1999, as compared to .95% in
1998. The same ratio as reported by our regional peers as of December 31, 1999
was .69%.

In 1999, net gains from investment securities decreased by $3,215,000, or 90.3%
to $345,000. 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 $1,833,000 in 1999 versus $3,818,000 in 1998, resulting in a
decrease in non-interest income of $1,985,000, or 52.0%. These net gains
represented .17% of average assets in 1999, as compared to .37% in 1998.

                              NON-INTEREST EXPENSE

Total non-interest expenses were $33,597,000 for 1999 as compared to $34,189,000
for 1998, representing a decrease of $592,000, or 1.7%.

Salaries and employee benefits increased by 3.2%, or $577,000 in 1999 as
compared to 1998, as a result of an increase of one full-time equivalent
employee on average and normal salary merit increases. As a comparison, Omega
employed one employee for every $2,040,000 in average assets in 1999, versus
$1,955,000 of average assets in 1998.

In order to achieve Omega's goals for increasing the customer base through
customer satisfaction, management is committed to continual upgrading of its
delivery methods through advanced technology, both of hardware and software.
This has resulted in increased costs in the form of supplies and equipment,
depreciation and operational consolidation costs over the past few years.
Accordingly, equipment expense increased by 7.6%, or $156,000 in 1999 as
compared to 1998, as technology advances and operational consolidation costs
continue.

Other non-interest expenses, totaling $8,997,000 decreased by $1,221,000 in 1999
as compared to 1998. In 1998, Omega recorded a non-recurring charge to
non-interest expense in the amount of $1,944,000. This represented a complete
write-off of all remaining goodwill and core deposit intangibles relating to a
bank that was acquired in 1995.


28 ===


<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

(See later discussion on 1998 for details concerning this item). As a result of
the write-off in 1998, Omega recorded $223,000 less in scheduled amortization of
goodwill and core deposit intangibles in 1999 than in 1998. Exclusive of the
non-recurring charge, other non-interest expense increased $723,000, or 8.7%.
This was due primarily to increased expense for customer MAC transactions,
higher Pennsylvania tax liabilities, and various restructuring costs.

As a percentage of average assets, non-interest expense was 3.16% for 1999 as
compared to 3.33% in 1998. Excluding the non-recurring charge in 1998
(representing .19% of average assets), this ratio was 3.14%. At December 31,
1999, Omega's regional peer group average ratio was 2.76%.

                                  INCOME TAXES

Income tax expense for 1999 amounted to $6,895,000 compared to $7,622,000 in
1998. The effective tax rate was 28.4% in 1999 versus 30.8% in 1998. The
non-recurring charge in 1998, specifically the accelerated amortization of
non-deductible goodwill increased the effective tax rate by 0.7%. Excluding this
item, the effective tax rate in 1998 would have been 30.1%. The improvement in
1999 was due to the change in the mix of tax-exempt investments and loans.
Omega's level of average tax-exempt investments and average tax-exempt loans
increased in 1999 by 28.6% or $22,812,000, decreasing the federal tax rate by
5.9%, as compared to 1998, when the tax rate was decreased by only 4.8% as a
result of tax-exempt assets. Average tax-exempt investments and loans as a
percentage of average assets were 9.7%, 7.8% and 5.6% in 1999, 1998 and 1997,
respectively. Tax-exempt income as a percentage of income before income tax was
19.2%, 15.6% and 12.3% in 1999, 1998 and 1997, respectively.

                                   NET INCOME

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

                                                1999        1998        1997
                                              --------    --------    --------
Net income ..............................     $17,362     $17,092     $16,968
Return on average assets ................        1.63%       1.66%       1.67%
Return on average equity ................       11.30       11.35       12.26

Summarized below are the components of net income and the contribution of each
to return on assets for 1999 and 1998.

                                          1999                   1998
                                ---------------------    -----------------------
                                                % of                     % of
                                               Average                  Average
                                               Assets                   Assets
                                               ------                   ------

Net interest income ..........  $   46,788      4.40%    $   46,618      4.54%
Loan loss provision ..........      (1,060)    (0.10)       (1,060)     (0.10)

Trust fees ...................       2,976      0.28          2,904      0.28
Deposit service fees .........       3,585      0.34          3,427      0.33
Other fees ...................       3,732      0.35          3,196      0.31
Security gains ...............         345      0.03          3,560      0.35
Gains on sale of other assets.       1,488      0.14            258      0.03
                                ----------      ----     ----------      ----
Total non-interest income ....      12,126      1.14         13,345      1.30

Employee expense .............     (18,609)    (1.75)       (18,032)    (1.76)
Occupancy and equipment ......      (4,370)    (0.41)        (4,220)    (0.41)
Other non-interest expense ...     (10,618)    (1.00)        (9,993)    (0.97)
Non-recurring expense ........        --        --           (1,944)    (0.19)
                                ----------      ----     ----------      ----
Total non-interest expense ...     (33,597)    (3.16)       (34,189)    (3.33)

Income tax expense ...........      (6,895)    (0.65)        (7,622)    (0.74)
                                ----------      ----     ----------      ----
Net income ...................  $   17,362      1.63%    $   17,092      1.66%
                                ==========      ====     ==========      ====
Average assets ...............  $1,062,698               $1,026,679
                                ==========               ==========



                                                                          === 29


<PAGE>


<TABLE>

                                      CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------------------------

                                         CONSOLIDATED BALANCE SHEETS
                                      (In thousands, except share data)
<CAPTION>
                                                                                        DECEMBER 31,
                                                                                  -------------------------
                                                                                     2000           1999
                                                                                  ----------     ----------
<S>                                                                               <C>            <C>
ASSETS
Cash and due from banks (Notes 2 and 3) ......................................    $   40,340     $   36,580
Interest bearing deposits with other financial institutions ..................         1,095            872
Federal funds sold ...........................................................        39,750          1,975
Investment securities held to maturity
    (market value -- $5,044 and $4,951 respectively) (Notes 1 and 4) .........         5,044          4,951
Investment securities available for sale (Notes 1 and 4) .....................       237,335        267,718

Total loans (Notes 1, 5, 6 and 18) ...........................................       752,108        705,241
Less: Unearned discount ......................................................          (123)          (293)
          Allowance for loan losses ..........................................       (11,622)       (11,865)
                                                                                  ----------     ----------
                                                                                     740,363        693,083

Premises and equipment,net (Notes 1 and 7) ...................................        14,284         14,644
Other assets (Note 1) ........................................................        35,625         33,580
                                                                                  ----------     ----------
TOTAL ASSETS .................................................................    $1,113,836     $1,053,403
                                                                                  ==========     ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
    Non-interest bearing .....................................................    $  129,444     $  119,391
    Interest bearing .........................................................       760,057        732,204
                                                                                  ----------     ----------
                                                                                     889,501        851,595

Short-term borrowings (Note 8) ...............................................        45,754         28,527
Other liabilities ............................................................        12,463         10,919
ESOP debt (Note 12) ..........................................................         3,369          3,611
Long-term debt (Note 8) ......................................................         6,895          7,000
Other interest bearing liabilities ...........................................           650            600
TOTAL LIABILITIES ............................................................       958,632        902,252

Commitments and Contingent Liabilities (Notes 10, 13 and 14)

Shareholders' Equity (Note 15) 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 ...................................        (2,375)        (2,625)
Common stock, par value $5.00 per share:
  Authorized -- 25,000,000 shares;
  Issued --
    9,333,084 shares at December 31, 2000;
    9,259,782 shares at December 31, 1999
  Outstanding --
    8,606,983 shares at December 31, 2000;
    8,774,507 shares at December 31, 1999 ....................................        46,665         46,299
Capital surplus ..............................................................         5,944          4,825
Retained earnings ............................................................       121,108        113,204
Accumulated other comprehensive income (Note 17) .............................         1,585            817
Cost of common stock in treasury:
   726,101 shares at December 31, 2000;
   485,275 shares at December 31, 1999; ......................................       (22,723)       (16,369)
                                                                                  ----------     ----------
TOTAL SHAREHOLDERS' EQUITY ...................................................       155,204        151,151
                                                                                  ----------     ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...................................    $1,113,836     $1,053,403
                                                                                  ==========     ==========
</TABLE>


The accompanying notes are an integral part of these statements.


30 ===



<PAGE>


<TABLE>
                                    CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------------

                                   CONSOLIDATED STATEMENTS OF INCOME
                                   (In thousands, except share data)

<CAPTION>
                                                                         YEARS ENDED DECEMBER 31,
                                                                  -------------------------------------
                                                                   2000           1999           1998
                                                                  -------        -------        -------
<S>                                                               <C>            <C>            <C>
INTEREST INCOME:
Interest and fees on loans ..................................     $61,503        $58,634        $60,266
Interest and dividends on investment securities:
  Taxable interest income ...................................      10,321         10,449         11,148
  Tax-exempt interest income ................................       3,198          3,234          2,302
  Dividend income ...........................................         632            622            621
Other interest income .......................................       1,291          1,554            931
                                                                  -------        -------        -------
TOTAL INTEREST INCOME .......................................      76,945         74,493         75,268

INTEREST EXPENSE:
Interest on deposits ........................................      28,290         26,255         27,747
Interest on short-term borrowings ...........................       2,240          1,089            783
Interest on long-term debt and
  other interest bearing liabilities ........................         596            361            120
TOTAL INTEREST EXPENSE ......................................      31,126         27,705         28,650
                                                                  -------        -------        -------
NET INTEREST INCOME .........................................      45,819         46,788         46,618
Provision for loan losses (Note 6) ..........................         428          1,060          1,060
                                                                  -------        -------        -------
INCOME FROM CREDIT ACTIVITIES ...............................      45,391         45,728         45,558

OTHER INCOME:
Trust fees ..................................................       3,258          2,976          2,904
Service fees on deposit accounts ............................       3,675          3,585          3,427
Investment securities gains, net (Note 4)
  Investment securities available for sale ..................         332            345          3,560
Gain (loss) on sale of loans and other assets ...............         (53)         1,488            258
Other .......................................................       4,892          3,732          3,196
                                                                  -------        -------        -------
TOTAL OTHER INCOME ..........................................      12,104         12,126         13,345

OTHER EXPENSE:
Salaries and employee benefits (Note 12) ....................      19,265         18,609         18,032
Net occupancy expense .......................................       2,132          2,171          2,177
Equipment expense ...........................................       2,208          2,199          2,043
Data processing service .....................................       1,470          1,521          1,618
FDIC insurance premiums .....................................         174            100            101
Other .......................................................       9,134          8,997         10,218
                                                                  -------        -------        -------
TOTAL OTHER EXPENSE .........................................      34,383         33,597         34,189
                                                                  -------        -------        -------

INCOME BEFORE INCOME TAXES ..................................      23,112         24,257         24,714
Income tax expense  (Notes 1 and 11) ........................       5,983          6,895          7,622
                                                                  -------        -------        -------
NET INCOME ..................................................     $17,129        $17,362        $17,092
                                                                  =======        =======        =======

EARNINGS PER SHARE (NOTES 1 AND 9)
Basic .......................................................     $  1.92        $  1.92        $  1.87
Diluted .....................................................        1.87           1.85           1.79
WEIGHTED AVERAGE SHARES AND EQUIVALENTS:
Basic .......................................................       8,725          8,838          8,949
Diluted .....................................................       9,144          9,315          9,475


     The accompanying notes are an integral part of these statements.


                                                                                                 === 31
</TABLE>


<PAGE>


<TABLE>
                                                  CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------------------------------------------------

                                           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                  (In thousands, except share data)

<CAPTION>
                                                                 YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
                                               ------------------------------------------------------------------------------------
                                                                                                    Accumulated
                                                                                                      Other    Cost of
                                                           Unearned                                   Compre-   Common
                                               Preferred   Compen-    Common     Capital   Retained   hensive  Stock in
                                                 Stock     sation      Stock     Surplus   Earnings   Income   Treasury      Total
                                                 ------    -------    -------    -------   --------   -------  --------    --------
<S>                                              <C>       <C>        <C>        <C>       <C>        <C>       <C>        <C>
Balance at December 31, 1997 .................   $5,000    $(3,125)   $45,258    $ 1,822   $ 94,426   $ 4,998   $ (5,947)  $142,432
Comprehensive income:
Net income ...................................                                    17,092
Change in unrealized securities gains, net ...                                                          (285)
Total comprehensive income ...................                                                                               16,807
Common dividends declared -- $.80 per share ..                                               (7,169)                         (7,169)
Cash dividends, preferred -- $1.80 per share .                                                 (396)                           (396)
Amortization of unearned compensation ........                 250                                                              250
Tax benefit from employee stock options ......                                                  245                             245
Tax benefit from preferred stock
  dividends paid to ESOP .....................                                                   87                              87
Purchase of treasury stock --
  23,300 shares ..............................                                                                     (705)       (705)
Exercised employee stock options --
  87,530 shares ..............................                            428      1,387                                      1,815
Issuance of treasury stock to ESOP --
  17,700 shares ..............................                                                                      614         614
                                                 ------    -------    -------    -------   --------   -------  --------    --------
Balance at December 31, 1998 .................    5,000     (2,875)    45,686      3,209    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                                                              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 .............................                            613      1,616                                      2,229
                                                 ------    -------    -------    -------   --------   -------  --------    --------
Balance at December 31, 1999 .................    5,000     (2,625)    46,299      4,825    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                                                              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 ..............................                            366      1,119                                      1,485
                                                 ------    -------    -------    -------   --------   -------  --------    --------
Balance at December 31, 2000 .................   $5,000    $(2,375)   $46,665    $ 5,944   $121,108   $ 1,585  $(22,723)   $155,204
                                                 ======    =======    =======    =======   ========   =======  ========    ========
</TABLE>


The accompanying notes are an integral part of these statements.


32 ===


<PAGE>


<TABLE>
                                       CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------------------------------------

                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (In thousands)

<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
                                                                            ---------------------------------
                                                                              2000        1999         1998
                                                                            --------    ---------    --------
<S>                                                                         <C>         <C>          <C>
Cash flows from operating activities:
  Net income ............................................................   $ 17,129    $  17,362    $ 17,092
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization .....................................      2,048        2,221       4,522
      Provision for loan losses .........................................        428        1,060       1,060
      Gain on sale of investment securities .............................       (271)        (189)     (2,913)
      Non-monetary exchange of cost-method investments ..................        (61)        (156)       (421)
      (Gain) loss on sale of fixed assets and other property owned ......        (24)           5        (214)
      Loss (gain) on sale of loans ......................................         80          (83)        (45)
      Gain on sale of branch ............................................       --         (1,410)       --
      Increase in deferred tax asset ....................................       (391)        (229)       (427)
      Increase in cash surrender value of bank owned life insurance .....     (1,013)        --          --
      (Increase) decrease in interest receivable and other assets .......     (1,252)       1,937        (132)
      Increase (decrease) in interest payable ...........................        240           73        (384)
      Increase (decrease) in taxes payable ..............................        732         (631)         78
      Amortization of deferred net loan costs (fees) ....................        102         (217)        157
      Deferral of net loan fees (costs) .................................        112          257         476
      Increase in accounts payable and accrued expenses .................        588          338       1,730
                                                                            --------    ---------    --------
        Total adjustments ...............................................      1,318        2,976       3,487
                                                                            --------    ---------    --------
Net cash provided by operating activities ...............................     18,447       20,338      20,579

Cash flows from investing activities:
  Proceeds from the sale or maturity of:
    Interest bearing deposits with other financial institutions .........     32,284       39,002       1,622
    Commercial paper ....................................................       --          5,000        --
    Investment securities available for sale - sales and maturities .....     79,956       80,132      64,824
    Investment securities held to maturity - maturities .................       --         10,486      42,824
  Purchase of:
    Interest bearing deposits with other financial institutions .........    (32,507)     (38,419)     (2,477)
    Commercial paper ....................................................       --         (4,855)       --
    Investment securities available for sale ............................    (48,240)    (106,739)    (76,237)
    Investment securities held to maturity ..............................       (104)      (1,212)    (42,814)
  Proceeds from sale of branch ..........................................       --          1,000        --
  Incease in loans ......................................................    (48,062)     (18,642)    (34,479)
  Gross proceeds from sale of loans .....................................         60       22,802       1,736
  Capital expenditures ..................................................     (1,472)      (1,118)     (1,177)
  Sale of fixed assets and other property owned .........................        143          644         908
  (Increase) decrease in federal funds sold .............................    (37,775)      16,375       4,300
  Purchase of bank-owned life insurance .................................       --        (20,112)       --
                                                                            --------    ---------    --------
Net cash used in investing activities ...................................    (55,717)     (15,656)    (40,970)

Cash flows from financing activities:
  Increase (decrease) in deposits, net ..................................     37,906       (4,743)     29,885
  Increase in borrowings, net ...........................................     17,122       12,889       4,378
  Net change in other interest bearing liabilities ......................         50           15          (1)
  Dividends paid ........................................................     (9,328)      (8,563)     (7,185)
  Tax benefit from preferred stock dividend and stock option activity ...        149          336         332
  Issuance of common stock ..............................................      1,485        2,229       1,815
  Acquisition of treasury stock .........................................     (6,354)     (10,331)       (705)
                                                                            --------    ---------    --------
Net cash provided by (used in) financing activities .....................     41,030       (8,168)     28,519
                                                                            --------    ---------    --------
Net increase (decrease) in cash and due from banks ......................   $  3,760    $  (3,486)   $  8,128
                                                                            ========    =========    ========
Cash and due from banks at beginning of period ..........................   $ 36,580    $  40,066    $ 31,938
Cash and due from banks at end of period ................................     40,340       36,580      40,066
                                                                            --------    ---------    --------
Net increase (decrease) in cash and due from banks ......................   $  3,760    $  (3,486)   $  8,128
                                                                            ========    =========    ========

Interest paid ...........................................................   $ 30,886    $  27,632    $ 29,079
Income taxes paid .......................................................      5,496        7,124       7,517


                       The accompanying notes are an integral part of these statements.



                                                                                                       === 33
</TABLE>

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                  OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

NATURE OF OPERATIONS

Omega Financial Corporation is a bank holding company operating primarily in
central Pennsylvania, for the purpose of delivering financial services within
its local market. Consisting of three banks 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. Its banks provide a full range of
banking services including 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 subsidiaries also provide 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 generally accepted accounting  principles 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"),
Hollidaysburg Trust Company ("Hollidaysburg"), Penn Central National Bank ("Penn
Central"), 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
17).


34


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


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).


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 periodically
and as adjustments become necessary, they 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, 2000 and 1999, the carrying
value of other real estate owned and held for investment was $200,000 and
$273,000, respectively.



                                                                              35


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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.


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 maturity of these instruments.

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

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
negative spread of approximately 75 to 125 basis points at December 31, 2000 and
a positive spread of 0 to 75 basis points at December 31, 1999. Loans tied to
the U.S. Treasury rate carry a spread of approximately 390 to 415 basis points
at December 31, 2000 and a spread of 200 to 220 basis points at December 31,
1999. 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 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 225 to 290 basis points at December 31, 2000
and a spread of 165 to 265 basis points at December 31, 1999. The current market
rate for the fixed rate mortgages ranged from 7.30% to 8.15% at December 31,
2000 and from 8.29% to 8.59% at December 31, 1999.



36


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


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 175 to 245 basis points as of December 31, 2000 and 0 to 230 basis
points as of December 31, 1999. 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 100 basis
points. This rate was 9.62% and 8.93% on December 31, 2000 and 1999,
respectively. Personal lines of credit are on a floating basis and approximate
current market rates.

Demand and savings accounts - The fair value of these deposits is the amount
payable on demand.

Time deposits - The estimated fair value is determined by discounting the
contractual 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 negative
100 to positive 60 basis points at December 31, 2000 and a negative spread of 25
to 45 basis points at December 31, 1999.

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, 2000, the appropriate FHLB
borrowing rate was 6.03%. 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 - This category reprices semi-annually and
fair value is arrived at by discounting the future contractual cash flows at a
rate equivalent to the 3 month U.S. Treasury rate.

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

                                                                              37


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                              FINANCIAL INSTRUMENTS
                                                                   (in thousands)
                                                   December 31, 2000           December 31, 1999
                                            --------------------------   --------------------------
                                                  Book          Fair          Book            Fair
                                                  Value         Value         Value           Value
                                            ------------   ------------  ------------   -----------
<S>                                         <C>            <C>           <C>            <C>
Cash and due from banks .................   $    40,340    $    40,340   $    36,580    $    36,580
Interest bearing deposits ...............         1,095          1,095           872            872
Federal funds sold ......................        39,750         39,750         1,975          1,975
Investment securities held to maturity ..         5,044          5,044         4,951          4,951
Investment securities available for sale        237,335        237,335       267,718        267,718
Loans (net of unearned interest):
   Commercial, financial and agricultural       118,686        117,758       107,093        105,450
   Real estate -- commercial ............       229,294        227,895       204,809        200,757
   Real estate -- construction ..........        18,305         18,070        16,039         15,802
   Real estate -- mortgage ..............       206,864        204,909       200,561        195,305
   Home equity ..........................        98,725         99,242        91,711         90,580
   Personal .............................        78,797         77,966        82,077         83,536
   Lease financing ......................         1,314          1,301         2,658          2,672
   Allowance for loan losses ............       (11,622)          --         (11,865)          --
                                            -----------    -----------   -----------    -----------
Total loans .............................       740,363        747,141       693,083        694,102
Interest receivable .....................         8,657          8,657         7,870          7,870
                                            -----------    -----------   -----------    -----------
Total financial assets ..................   $ 1,072,584    $ 1,079,362   $ 1,013,049    $ 1,014,068
                                            ===========    ===========   ===========    ===========


Demand deposits .........................   $   320,236    $   320,236   $   297,586    $   297,586
Savings deposits ........................       147,933        147,933       154,937        154,937
Time deposits ...........................       421,332        423,680       399,072        397,889
Short-term borrowings ...................        45,754         45,754        28,527         28,527
ESOP debt ...............................         3,369          3,306         3,611          3,608
Long-term debt ..........................         6,895          7,121         7,000          6,999
Other interest bearing liabilities ......           650            651           600            588
Interest payable ........................         2,482          2,482         2,048          2,048
                                            -----------    -----------   -----------    -----------
Total financial liabilities .............   $   948,651    $   951,163   $   893,381    $   892,182
                                            ===========    ===========   ===========    ===========
</TABLE>




38


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

3.  RESTRICTIONS ON CASH AND DUE FROM BANKS

Omega's banking subsidiaries are required to maintain cash reserve balances with
the Federal Reserve Bank. The total required  reserve  balances were $11,350,000
and $10,381,000 as of December 31, 2000 and 1999, respectively.


4.  INVESTMENT SECURITIES (IN THOUSANDS)
<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          $      -          -
                                                    =========  =======     ==========   ===========  ==========

                                                                        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
--------------------------------------------        ---------  -------     ----------   -----------  ----------
U.S. Treasury securities and obligations
  of other U.S. Government agencies
  and corporations
-----------------------------------------------
  Within one year .............................     $ 52,094     $ 52,082        55.65  %   $   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     $(1,102)
                                                    ========     ========         ====      ======     =======
</TABLE>



                                                                              39


<PAGE>


<TABLE>
<CAPTION>

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------------------


                                                                        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     $    --


                                                                        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
--------------------------------------------        ---------  -------     ----------   -----------  ----------
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>




40


<PAGE>


<TABLE>
<CAPTION>

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------------------



                                                                        December 31, 1998
                                                    -----------------------------------------------------------
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>
U.S. Treasury securities and obligations of other
 U.S. Government agencies and corporations
-----------------------------------------------
  Within one year .............................     $  6,018     $  6,068         6.35%     $   50          $-
  After one year but within five years ........       20,473       20,697         6.08         234         (10)
  After five years but within ten years .......         --           --                                    --
  After ten years .............................         --           --                       --           --

Obligations of state and political subdivisions
-----------------------------------------------
  Within one year .............................          927          937         6.24          10         --
  After one year but within five years ........        2,174        2,228         6.25          54         --
  After five years but within ten years .......        1,883        1,997         6.69         114         --
  After ten years .............................         --           --            --         --           --

Corporate and other securities
-----------------------------------------------
  Within one year .............................        7,667        7,692         5.99          26          (1)
  After one year but within five years ........       41,484       41,959         6.13         483          (8)
  After five years but within ten years .......        1,801        1,807         6.15          16         (10)
  After ten years .............................        2,099        2,102         6.24           3         --

Mortgage-backed securities
-----------------------------------------------
  Within one year .............................        2,537        2,543         6.16           8          (2)
  After one year but within five years ........        8,599        8,652         6.29          53         --
  After five years but within ten years .......        5,874        5,904         5.96          33          (3)
  After ten years .............................       10,544       10,619         5.81          81          (6)

Investment in low income housing projects .....          541          541                      N/M         --

Non-marketable stock ..........................        4,208        4,208          N/M         --          --
                                                    --------     --------         ----      ------     -------
Total .........................................     $116,829     $117,954         6.11%     $1,165        $(40)
                                                    ========     ========         ====      ======     =======
<CAPTION>

                                                                        December 31, 1998
                                                    -----------------------------------------------------------
Securities classified as Available for Sale                                               Gross        Gross
                                                    Amortized   Market     Weighted      Unrealized  Unrealized
Type and maturity                                   Cost        Value      Avg. Yield      Gains       Losses
--------------------------------------------------  ---------  -------     ----------   -----------  ----------
 U.S. Treasury securities and obligations of other
  U.S. Government agencies and corporations
--------------------------------------------------
  Within one year ................................  $ 29,039     $ 29,173         5.98%     $  134     $  --
  After one year but within five years ...........    29,168       29,312         5.37         160         (16)
  After five years but within ten years ..........      --           --           --          --          --
  After ten years ................................      --           --           --          --          --

Obligations of state and political subdivisions
--------------------------------------------------
  Within one year ................................     3,870        3,894         6.55          26          (2)
  After one year but within five years ...........    61,427       62,500         6.26       1,116         (43)
  After five years but within ten years ..........     6,310        6,387         5.94          77        --
  After ten years ................................     1,724        1,732         6.74          14          (6)

Common stock .....................................     5,773       11,553         N/M        5,812         (32)
                                                    --------     --------         ----      ------     -------
Total ............................................  $137,311     $144,551         6.00%     $7,339     $   (99)
                                                    ========     ========         ====      ======     =======
</TABLE>

N/M = Not meaningful



                                       41


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



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 $106,659,000,  $107,690,000
and $89,598,000 at December 31, 2000, 1999 and 1998, 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,
                                                --------------------------------
                                                  2000        1999        1998
Gross proceeds from securities transactions     $79,956     $90,618     $107,648
Securities available for sale:
  Realized gains ..........................         575         286        2,913
  Realized losses .........................        --            97         --


5. LOANS

Loans  outstanding  at the end of  each  year  consisted  of the  following  (in
thousands):
<TABLE>
<CAPTION>

                                                                   December 31,
                                           ------------------------------------------------------------
                                             2000         1999         1998         1997         1996
                                           --------     --------     --------     --------     --------
<S>                                        <C>          <C>          <C>          <C>          <C>
Commercial, financial and agricultural     $118,686     $107,093     $ 97,901     $126,740     $131,147
Real estate - commercial .............      229,294      204,809      198,987      141,485      136,250
Real estate - construction ...........       18,305       16,039       15,890       21,167       19,680
Real estate - mortgage ...............      206,864      200,561      227,846      212,780      206,653
Home equity ..........................       98,725       91,711       83,800       63,905       45,182
Personal .............................       78,797       82,079       95,060      121,813      154,587
Lease financing ......................        1,314        2,949        4,001        4,971        4,824
                                           --------     --------     --------     --------     --------
     Total ...........................     $751,985     $705,241     $723,485     $692,861     $698,323
                                           ========     ========     ========     ========     ========
</TABLE>


Non-accrual loans at December 31, 2000 and 1999 were $1,503,000 and $2,640,000,
respectively, representing .20% and .37% of loans. Interest income not recorded
on non-accrual loans in 2000, 1999 and 1998 was $191,000, $268,000 and $542,000,
respectively. Gross interest income that would have been recorded on non-accrual
loans had these loans been in a performing status was $222,000 in 2000, of which
$31,000 was included in interest income for the year ended December 31, 2000.




42


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

6.  ALLOWANCE FOR LOAN LOSSES

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

                                                                    Years Ended December 31,
                                                -----------------------------------------------------------
                                                  2000         1999         1998         1997         1996
                                                -------      -------      -------      -------      -------
<S>                                            <C>          <C>          <C>           <C>         <C>
Balance of allowance - beginning of period      $11,865      $11,772      $11,793      $11,820      $11,668
                                                -------      -------      -------      -------      -------
Loans charged off:
  Commercial, financial and agricultural ..         329          465          463           70          428
  Real estate -
     Commercial ...........................         114          154          283          348           77
     Mortgage .............................        --           --           --           --           --
   Personal ...............................         398          509          682          984          671
                                                -------      -------      -------      -------      -------
         Total charge-offs ................         841        1,128        1,428        1,402        1,176

Recoveries of loans previously charged off:
  Commercial, financial and agricultural ..          45           63          146          225          181
  Real estate -
     Commercial ...........................           6           15           96            6           38
     Mortgage .............................        --           --           --           --           --
  Personal ................................         119           83          105          114          130
                                                -------      -------      -------      -------      -------
         Total recoveries .................         170          161          347          345          349

Net charge-offs ...........................         671          967        1,081        1,057          827
Provision for loan losses .................         428        1,060        1,060        1,030          979
                                                -------      -------      -------      -------      -------
Balance of allowance - end of period ......     $11,622      $11,865      $11,772      $11,793      $11,820
                                                =======      =======      =======      =======      =======

Ratio of net charge-offs during period to
loans outstanding .........................        0.09%        0.14%        0.15%        0.15%        0.12%
                                                =======      =======      =======      =======      =======
</TABLE>

As of December 31, 2000, 1999 and 1998, 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 $336,000, $1,237,000 and $3,907,000, respectively. The total
allowance for loan losses related to those impaired loans is $132,000, $374,000
and $890,000, at December 31, 2000, 1999 and 1998, respectively. 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

<TABLE>
<CAPTION>

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

                                        Estimated          December 31,
                                        Useful Life      2000         1999
                                        -----------------------------------
<S>                                     <C>          <C>           <C>
Land ..............................             --    $  2,188      $ 2,188
Premises and leasehold improvements     5-40 years      18,753       18,496
Furniture, computer software
  and equipment ...................     3-20 years      19,806       19,136
Construction in progress ..........             --         500         --
                                                      --------      -------
                                                        41,247       39,820
Less: accumulated depreciation ....                    (26,963)     (25,176)
                                                      --------      -------
                                                      $ 14,284      $14,644
                                                      ========      =======
</TABLE>


Depreciation  expense  on  premises  and  equipment  charged to  operations  was
$1,836,000 in 2000, $1,913,000 in 1999 and $1,950,000 in 1998.



                                                                              43
<PAGE>

8. BORROWINGS
<TABLE>
<CAPTION>
Borrowings consist of the following (in thousands):
                                                                        December 31,
                                                                    -------------------
                                                                     2000        1999
     SHORT-TERM BORROWINGS:                                         -------     -------

<S>                                                                 <C>         <C>
     Retail repurchase agreements .............................     $19,254     $18,527
     Notes payable to Federal Home Loan Bank, with fixed rates       16,500        --
     Note payable to Federal Home Loan Bank, with variable rate
       payable at prime minus 275 basis points ................       5,000        --
     Note payable to Federal Home Loan Bank, with variable rate
       payable at  Libor plus 5 basis points ..................       5,000      10,000
                                                                    -------     -------
                                                                    $45,754     $28,527
                                                                    =======     =======
     LONG-TERM DEBT:
     Notes payable to Federal Home Loan Bank, with fixed rates      $ 6,895     $ 5,000
                                                                    =======     =======
</TABLE>


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, 2000, in the amount
of $16,500,000 with the Federal Home Loan Bank are scheduled to mature between
January and June of 2001 and were initiated to match fund commercial loans. The
remaining two $5,000,000 Federal Home Loan Bank short-term notes payable will
mature in March and August 2001, respectively, with the full principal balance
payable upon maturity.

Omega also has credit with the Federal Home Loan Bank of Pittsburgh with a total
borrowing capacity of $77,274,000 (including overnight borrowing) as of December
31, 2000. If the Corporation were to purchase additional Federal Home Loan Bank
stock, the maximum borrowing capacity could be increased to $290,829,000. 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
$23,000,000 and $18,000,000 in 2000 and 1999, respectively, with interest
payable at the daily federal funds rate. There were no borrowings on December
31, 2000 or December 31, 1999 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, 2000, 1999 and 1998 (in thousands, except per share data).

<TABLE>
<CAPTION>


                                                                        Year Ended December 31,
                                                   2000                           1999                           1998
                                      ---------------------------------------------------------------------------------------------
                                                              Per-                            Per-                             Per-
                                       Income     Shares      Share     Income    Shares      Share   Income     Shares       Share
                                      Numerator  Denominator  Amount   Numerator Denominator  Amount  Numerator Denominator  Amount
                                      ---------  -----------  ------   --------- -----------  ------  --------- -----------  ------
<S>                                   <C>            <C>      <C>        <C>           <C>      <C>     <C>        <C>       <C>
Net income .......................... $ 17,129                           $17,362                        $17,092
Less: Preferred stock dividends .....     (396)                             (396)                          (396)
                                      --------                           -------                        -------
BASIC EPS
Income available to common
    Shareholders ....................   16,733       8,725    $1.92       16,966       8,838    $1.92    16,696    8,949     $ 1.87
                                      ========       =====    =====      =======       =====    =====   =======    =====     ======
EFFECT OF DILUTIVE SECURITIES
Impact of :
   Assumed conversion of
       preferred to common stock ....                  346                               346                         346
   Assumed exercises of
       outstanding options ..........                   73                               131                         180
     Preferred stock dividends
        available to common
        Shareholders ................      396                               396                            396
     Elimination of tax benefit of
        allocated preferred dividends      (66)                              (59)                           (51)
     Additional expense required to
        fund ESOP debt ..............      (26)                              (44)                           (77)
                                      --------                           -------                        -------
DILUTED EPS
Income available to common
     shareholders plus assumed
     conversions .................... $ 17,037       9,144    $1.87      $17,259       9,315    $1.85   $16,964    9,475     $ 1.79
                                      ========       =====    =====      =======       =====    =====   =======    =====     ======

</TABLE>


44


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

10.  OPERATING LEASE OBLIGATIONS

The Corporation has entered into a number of leasing arrangements which are
classified as operating leases. The operating leases are for several branch
locations, automatic teller machines (ATM), computer equipment and automobiles.
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, 2000 (in
thousands):

          Years ending December 31,
                   2001                                   $ 330
                   2002                                     301
                   2003                                     269
                   2004                                     227
                   2005                                     203
                   Later years                            1,180
                                                         ------
                   Total minimum payments required       $2,510
                                                         ======


Rental expense charged to operations, net of sublease income, was $125,000,
$133,000 and $106,000 in 2000, 1999 and 1998, respectively, which includes
short-term cancellable leases.


11.  INCOME TAXES

The components of income tax expense for the three years ended December 31, 2000
were (in thousands):

                                 2000         1999         1998
                               -------      -------      -------
Current tax expense ........   $ 6,210      $ 6,994      $ 7,948
Deferred tax expense .......      (227)         (99)        (326)
                               -------      -------      -------
Total tax expense ..........   $ 5,983      $ 6,895      $ 7,622
                               =======      =======      =======

Income tax expense related to realized securities gains was $201,000 in 2000,
$66,000 in 1999 and $1,020,000 in 1998.


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:

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                         --------------------------------
                                                           2000         1999         1998
                                                         ------       ------       ------
<S>                                                        <C>          <C>          <C>
     Federal tax at statutory rate .....................   35.0%        35.0%        35.0%
     Tax exempt income .................................   (6.7)        (5.9)        (4.8)
     Bank-owned life insurance earnings ................   (1.5)         --           --
     Low income housing credits ........................   (0.4)        (0.4)        (0.4)
     Other, net ........................................   (0.4)        (0.3)         1.0
                                                          ------       ------       ------
     Effective rate ....................................   26.0%        28.4%        30.8%
                                                          ======       ======       ======
</TABLE>


                                                                              45


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------




Deductible temporary  differences and taxable temporary differences gave rise to
a net  deferred  tax asset  for  Omega as of  December  31,  2000 and 1999.  The
components  giving rise to the net  deferred  tax asset are  detailed  below (in
thousands):

<TABLE>
<CAPTION>

                                                                    December 31,
                                                                  2000         1999
                                                                -------      -------
<S>                                                             <C>          <C>
     Deferred Tax Assets
              Loan loss reserve ...........................     $ 4,068      $ 4,153
              Deferred compensation .......................         845          702
              Employee benefits ...........................         426          435
              Interest on non-accrual loans ...............          50           77
              Other .......................................           3            2
                                                                -------      -------
                Total .....................................       5,392        5,369

          Deferred Tax Liabilities
              Depreciation ................................        (116)        (194)
              Unrealized net gains on securities ..........        (907)        (578)
              Auto leases (net) ...........................        (357)        (519)
              Low income housing investments ..............        (172)        (139)
              Other .......................................        (376)        (311)
                                                                -------      -------
                Total .....................................      (1,928)      (1,741)


           Net deferred tax asset  included in other assets     $ 3,464      $ 3,628
                                                                =======      =======

</TABLE>

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>

                                                      2000        1999         1998
                                                    -------      -------     -------
<S>                                                 <C>          <C>         <C>
Net income ........................ As reported ... $17,129      $17,362     $17,092
                                    Pro forma .....  16,437       16,705      16,350

Basic earnings per share .......... As reported ... $  1.92      $  1.92       $1.87
                                    Pro forma .....    1.84         1.85        1.79

Diluted earnings per share ........ As reported ... $  1.87      $  1.85       $1.79
                                    Pro forma .....    1.79         1.78        1.71

</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.

The above computations were derived using the Black-Scholes option pricing model
with the following weighted average assumptions used for options granted in
2000, 1999 and 1998:




46


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

Options Granted in 2000       Employee               Employee                    Director
                           Stock Purchase    Plan Stock Option Plan (1996)   Stock Option Plan
                           --------------    -----------------------------   -----------------
<CAPTION>
<S>                            <C>                   <C>                        <C>
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%

Options Granted in 1999      Employee                Employee                    Director
                           Stock Purchase    Plan Stock Option Plan (1996)   Stock Option Plan
                           --------------    -----------------------------   -----------------
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%

Options Granted in 1998      Employee               Employee                   Director
                           Stock Purchase    Plan Stock Option Plan (1996)   Stock Option Plan
                           --------------    -----------------------------   -----------------
Expected life of options       1 year                6 years                    6 years
Risk-free interest rate        4.52%                  4.62%                       4.62%
Expected volatility           27.41%                 17.54%                      17.54%
Expected dividend yield        2.59%                  2.59%                       2.59%
</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, 2005. 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, 2000 have current exercise prices of
$24.30 and a weighted average remaining contractual life of 3.90 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, 2010. The aggregate number of
shares which may be issued upon the exercise of options under the 1996 Plan is
1,500,000 shares. The SOPs options outstanding at December 31, 2000 have
exercise prices between $10.00 and $33.50, with a weighted average exercise
price of $24.56 and a weighted average remaining contractual life of 6.08 years.
374,440 of these options are exercisable; their weighted average exercise price
is $23.83.

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, 2010. The aggregate number of shares which may be issued
upon the exercise of options under this plan is 30,000. DSOP options outstanding
at December 31, 2000 have exercise prices between $16.33 and $38.13, with a
weighted average exercise price of $27.50 and a weighted average remaining
contractual life of 6.78 years. 15,400 of these options are exercisable; their
weighted average exercise price is $28.06.



                                                                              47


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


A summary of the status of Omega's  four  stock-based  compensation  plans as of
December 31, 2000,  1999 and 1998,  and changes during the years ending on those
dates is presented below:

<TABLE>

                                                         2000                         1999                        1998
                                          -------------------------   --------------------------  ----------------------------
Employee Stock Purchase Plan                       Weighted-Average             Weighted-Average              Weighted-Average
                                          Shares    Exercise Price     Shares    Exercise Price    Shares      Exercise Price
                                          -------  ----------------   -------   ----------------  -------     ----------------
<S>                                       <C>          <C>            <C>          <C>            <C>          <C>
Outstanding at beginning of year ...      190,080      $25.65         183,423      $  27.01       169,175      $    25.28
Granted ............................       68,350       24.30          82,670         25.65        86,929           27.23
Exercised ..........................      (59,152)      22.16         (73,997)        24.80       (69,346)          22.91
Forfeited ..........................       (4,582)      27.22          (2,016)        28.61        (3,335)          25.10
                                          -------       -----         -------         -----       -------           -----
Outstanding at end of year .........      194,696       24.30         190,080         25.65       183,423           27.01
                                          =======       =====         =======         =====       =======           =====

Options exercisable at year-end ....      194,696                     190,080                     183,423
Weighted-average fair value of
     options granted during the year     $   8.56                    $   6.23      $                 7.48
</TABLE>

<TABLE>
<CAPTION>

                                                         2000                         1999                        1998
Employee Stock Option Plan                         Weighted-Average             Weighted-Average              Weighted-Average
                                          Shares    Exercise Price     Shares    Exercise Price    Shares      Exercise Price
                                          -------  ----------------   -------   ----------------  -------     ----------------
<S>                                       <C>          <C>            <C>           <C>           <C>          <C>
Outstanding at beginning of year ...      393,496      $23.52         380,065       $ 20.63       321,897      $    17.33
Granted ............................       71,487       28.50          75,877         30.25        73,952           33.50
Exercised ..........................      (16,806)      15.14         (60,196)        13.54       (15,784)          13.87
Forfeited ..........................       (4,500)      31.00          (2,250)        30.25           --              --
                                          -------       -----         -------         -----       -------           -----
Outstanding at end of year .........      443,677       24.56         393,496         23.52       380,065           20.63
                                          =======       =====         =======         =====       =======           =====

Options exercisable at year-end ....      374,440                     319,869                     306,113
Weighted-average fair value of
     options granted during the year      $  6.60                      $ 6.40                      $ 6.35


<CAPTION>

                                                         2000                         1999                        1998
Director Stock Option Plan                        Weighted-Average             Weighted-Average              Weighted-Average
                                          Shares    Exercise Price     Shares    Exercise Price    Shares      Exercise Price
                                          -------  ----------------   -------   ----------------  -------     ----------------

Outstanding at beginning of year ...       15,400   $   28.06          11,900      $  25.87        10,800      $    20.78
Granted ............................        3,500       25.00           3,500         35.50         3,500           38.13
Exercised ..........................         --           --             --             --         (2,400)          20.77
Forfeited ..........................         --                                        --           --
                                          -------       -----          ------         -----        ------           -----
Outstanding at end of year .........       18,900       27.49          15,400         28.06         11,90           25.87
                                           ======       =====          ======         =====        ======           =====
Options exercisable at year-end ....       15,400                      11,900                       8,400
Weighted-average fair value of
     options granted during the year      $  5.76                    $   7.51                    $   7.15
</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,
2000, 1999 and 1998, expenses incurred under this plan were $1,537,000,
$1,515,000 and $1,521,000, respectively. The level of annual contributions are
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 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. In 1999, 29,919 shares of Omega common stock were acquired at a
cost of $947,000 and $93,000 was applied to debt service. At December 31, 2000
the ESOP holds 519,561 shares of Omega common stock and 219,781 shares of
preferred stock. Of the preferred stock, 115,807 of the shares have been
allocated to participants of the plan as of December 31, 2000, 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.



48


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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
2000, the debt service required was $489,000, of which $247,000 represented
interest expense incurred by the ESOP. In 1999, the debt service required was
$489,000, of which $263,000 represented interest expense incurred by the ESOP.
Outstanding ESOP debt as of December 31, 2000 was $3,369,000. Scheduled
principal repayments on the ESOP debt are as follows:


                     2001...........................    $ 259,000
                     2002...........................      278,000
                     2003...........................      298,000
                     2004...........................      319,000
                     2005...........................      342,000
                     Later years....................    1,873,000

DEFINED CONTRIBUTION PLAN

Omega maintains a defined contribution plan for eligible employees as defined.
Employer contributions to the plan totaled $162,000, $152,000 and $160,000 for
the years ended December 31, 2000, 1999 and 1998, 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 replaces the former Executive Supplemental Income Plan. The present
value of the supplemental retirement benefits to be paid under the ESI 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, 2000 the liability for these
future obligations was $1,765,000. The liability for the former plan was
$1,405,000 at December 31, 1999. For the years ended December 31, 2000, 1999 and
1998, $383,000, $129,000 and $131,000, respectively, were 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
$43,554,000 and $42,937,000 at December 31, 2000 and 1999, respectively. In
addition, the Corporation had $93,832,000 and $97,849,000 outstanding in unused
lines of credit commitments extended to its customers at December 31, 2000 and
1999, respectively.



                                                                              49


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


There were no financial guarantees or options outstanding at December 31, 2000.
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 a portion 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 counterparty.

Standby letters of credit are instruments issued by the Corporation which
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, 2000 and 1999, standby letters of credit issued and outstanding
amounted to $18,026,000 and $17,022,000, respectively.

As of December 31, 2000, 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 canceled 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 with a decreasing premium over the first ten years.
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 is authorized to buy back up to 5% of its common stock
over a twelve-month period. The program may 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.


16.  SUBSEQUENT EVENTS

In January of 2001, the stock repurchase program was competed after reaching
100% of the approved level. Subsequently, the Board approved a new share
repurchase program to begin on February 26, 2001, authorizing management ot 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 will remain in effect through December 31, 2001, or until the 10% limit
is reached, however, it may be discontinued at any time.




50


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

17. OTHER COMPREHENSIVE INCOME

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

<TABLE>
<CAPTION>

                                                                   Year ended December 31, 2000
                                                               -------------------------------------
                                                               Before     Tax (Expense)
                                                                Tax             or        Net-of-Tax
                                                               Amount        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 (Expense)
                                                                Tax             or         Net-of-Tax
                                                               Amount        Benefit         Amount
                                                               ------     -------------    ----------
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)

<CAPTION>

                                                                   Year ended December 31, 1998
                                                               -------------------------------------
                                                               Before     Tax (Expense)
                                                                Tax            or          Net-of-Tax
                                                               Amount        Benefit         Amount
                                                               ------     -------------    ----------
Unrealized gains on available for sale securities:
Unrealized holding gains arising during the period ........   $ 3,122        $(1,093)       $ 2,029
Less reclassification adjustment for
  gains included in net income ............................    (3,560)         1,246         (2,314)
Other comprehensive income (loss) .........................   $  (438)       $   153        $  (285)


</TABLE>


18.  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 $12,801,000, $13,461,000 and $13,873,000 at
December 31, 2000, 1999 and 1998, respectively. During 2000, $3,935,000 of new
loans were made and repayments totaled $4,595,000. None of these loans were past
due, in non-accrual status or restructured at December 31, 2000.






                                                                              51


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



19.  OMEGA FINANCIAL CORPORATION (PARENT COMPANY ONLY)
Financial information (in thousands):


                            CONDENSED BALANCE SHEETS
                                  (UNAUDITED)
                                                               December 31,
                                                          ----------------------
                                                            2000           1999
                                                          --------      --------
ASSETS:
     Cash                                                 $  3,692      $  3,217
     Investment in bank subsidiaries                       140,180       137,803
     Investment in non-bank subsidiaries                    10,474        10,946
     Premises and equipment, net                             6,278         6,848
     Other assets                                            1,697         1,508
                                                          --------      --------
TOTAL ASSETS                                              $162,321      $160,322

LIABILITIES:
     Dividends payable                                    $  2,238      $  2,192
     Accounts payable and other liabilities                  1,510         1,368
     Long-term debt                                           --           2,000
     ESOP debt                                               3,369         3,611
                                                          --------      --------
TOTAL LIABILITIES                                            7,117         9,171
SHAREHOLDERS' EQUITY                                       155,204       151,151
                                                          --------      --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                $162,321      $160,322
                                                          ========      ========

<TABLE>
<CAPTION>

                         CONDENSED STATEMENTS OF INCOME
                                  (UNAUDITED)

                                                               Years ended December 31,
                                                          ---------------------------------
                                                             2000        1999       1998
                                                          --------      --------    -------
INCOME:
     Dividends from:
<S>                                                       <C>           <C>         <C>
          Bank subsidiaries ............................  $ 16,024      $ 10,706    $ 7,739
          Non-bank subsidiaries ........................      --            --         --
     Management fees from subsidiaries .................    11,500        10,820     10,038
     Other income ......................................      --               1       --
TOTAL INCOME ...........................................    27,524        21,527     17,777
                                                          --------      --------    -------
EXPENSE:
     Interest expense ..................................       126            73          6
     Other .............................................    11,500        10,968     10,038
                                                          --------      --------    -------
TOTAL EXPENSE ..........................................    11,626        11,041     10,044
                                                          --------      --------    -------
INCOME BEFORE INCOME TAXES AND EQUITY
  IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES ..........    15,898        10,486      7,733
Income tax expense (benefit) ...........................       (94)         (126)        93
                                                          --------      --------    -------
                                                            15,992        10,612      7,640
Equity in undistributed net income of subsidiaries .....     1,137         6,750      9,452
                                                          --------      --------    -------
NET INCOME .............................................  $ 17,129      $ 17,362    $17,092
                                                          ========      ========    =======

</TABLE>



52


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

CONDENSED
 STATEMENTS OF CASH FLOWS
(Unaudited)                                                                  YEARS ENDED DECEMBER 31,
                                                                        --------------------------------
                                                                           2000       1999       1998
                                                                        --------    --------    ---------
Cash flows from operating activities:
<S>                                                                     <C>         <C>         <C>
  Net income .......................................................    $ 17,129    $ 17,362    $ 17,092
  Adjustments to reconcile net income to net cash
          provided by operating activities:
    Depreciation and amortization ..................................       1,079       1,072       1,040
    (Increase) decrease in tax receivable ..........................        (197)         81          (9)
    Decrease (increase) in interest and other receivable ...........           8        (364)        184
    (Decrease) increase in taxes payable ...........................         (42)        (77)        351
    Increase in accounts payable and accrued expenses ..............         144           8         673
    Undistributed earnings of subsidiaries .........................      (1,137)     (6,751)    (10,453)
                                                                          ------      ------     -------
      Total adjustments ............................................        (145)     (6,031)     (8,214)
Net cash provided by operating activities ..........................      16,984      11,331       8,878

Cash flows from investing activities:
  Capital expenditures .............................................        (501)       (843)       (758)
Net cash used in investing activities ..............................        (501)       (843)       (758)

Cash flows from financing activities:
  Dividends paid ...................................................      (9,328)     (8,563)     (7,185)
  Net change in interest bearing liabilities .......................          40          16           5
  (Deccrease) increase in borrowings ...............................      (2,000)      2,000        --
  Tax benefit from preferred stock dividend
    and stock option activity ......................................         149         336         332
  Issuance of common stock .........................................       1,485       2,229       1,815
  Acquisition of treasury stock ....................................      (6,354)    (10,331)       (705)
Net cash used in financing activities ..............................     (16,008)    (14,313)     (5,738)

Net increase (decrease) in cash and due from banks .................    $    475    $ (3,825)   $  2,382

Cash and due from banks at beginning of period .....................    $  3,217    $  7,042    $  4,660
Cash and due from banks at end of period ...........................       3,692       3,217       7,042
Net increase (decrease) in cash and due from banks .................    $    475    $ (3,825)   $  2,382

Income taxes paid ..................................................       5,392       6,981       7,364
Interest paid ......................................................         126          73           6

</TABLE>


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, 2000, the total dividends which could
be paid to Omega without permission from the Comptroller of the Currency was
$25,694,000.

Under Federal Reserve restrictions, the banking subsidiaries are limited in the
amount they may loan to their affiliates, including Omega. At December 31, 2000,
Omega's banks had an aggregate lending limit to affiliates of $22,692,000 and no
amount was outstanding with Omega.



                                                                              53


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

20.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The unaudited  quarterly  results of operations for the years ended December 31,
2000 and 1999 follow (in thousands, except per share data).

<TABLE>
<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
Applicable income taxes ............      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

<CAPTION>
                                                   1999 Quarter ended
                                        ---------------------------------------------
                                        March 31   June 30  September 30  December 31
                                        --------  --------    ----------  -----------
Total interest income ..............    $19,006    $18,506    $18,609      $18,372
Net interest income ................     12,261     11,588     11,596       11,343
Provision for loan losses ..........        265        340        265          190
Income before income taxes .........      6,359      6,909      5,729        5,260
Applicable income taxes ............      1,880      1,969      1,597        1,449
Net income .........................      4,479      4,940      4,132        3,811
Basic earnings per share ...........    $   .49    $   .55    $   .46      $   .42
Diluted earnings per share .........        .47        .53        .44          .41

</TABLE>





21.  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
subsidiaries must meet specific capital guidelines that involve quantitative
measures of the Corporation's and bank subsidiaries' assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Corporation's and bank subsidiaries' capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and bank subsidiaries 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, 2000 and 1999, that Omega and its bank subsidiaries meet all
capital adequacy requirements to which they were subject.

As of December 31, 2000, 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 subsidiaries 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.



54


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>

                                                                                   MINIMUM REQUIREMENT        MINIMUM REGULATORY
                                                                                        FOR CAPITAL           REQUIREMENTS TO BE
                                                              ACTUAL                 ADEQUACY PURPOSES         "WELL CAPITALIZED"
                                                       ----------------------      ---------------------      ---------------------
                                                        AMOUNT          RATIO      AMOUNT          RATIO      AMOUNT         RATIO
                                                       -------          -----      ------          -----      -------        ------
OMEGA FINANCIAL CORPORATION
As of December 31, 2000:
<S>                                                    <C>              <C>        <C>              <C>       <C>              <C>
    Total Capital                                      162,824          22.1%      $59,007          8.0%      $73,759          10.0%
        (to Risk Weighted Assets)
    Tier I Capital                                     153,571          20.8        29,504          4.0        44,255           6.0
        (to Risk Weighted Assets)
    Tier I Capital                                     153,571          14.2        43,113          4.0        53,892           5.0
        (to Average Assets)

As of December 31, 1999:
    Total Capital                                      158,528          22.5       $56,420          8.0       $70,525          10.0
        (to Risk Weighted Assets)
    Tier I Capital                                     149,671          21.2        28,210          4.0        42,315           6.0
        (to Risk Weighted Assets)
    Tier I Capital                                     149,671          14.1        42,508          4.0        53,135           5.0
        (to Average Assets)

OMEGA BANK
As of December 31, 2000:
    Total Capital                                       85,788          20.3       $33,865          8.0       $42,331          10.0
        (to Risk Weighted Assets)
    Tier I Capital                                      80,495          19.0        16,932          4.0        25,398           6.0
        (to Risk Weighted Assets)
    Tier I Capital                                      80,495          13.4        23,965          4.0        29,957           5.0
        (to Average Assets)
As of December 31, 1999:
    Total Capital                                       85,099          21.3       $31,976          8.0       $39,970          10.0
        (to Risk Weighted Assets)
    Tier I Capital                                      80,097          20.0        15,988          4.0        23,982           6.0
        (to Risk Weighted Assets)
    Tier I Capital                                      80,097          13.6        23,536          4.0        29,420           5.0
        (to Average Assets)

HOLLIDAYSBURG TRUST COMPANY
As of December 31, 2000:
    Total Capital                                       38,542          20.4       $15,089          8.0       $18,861          10.0
        (to Risk Weighted Assets)
    Tier I Capital                                      36,172          19.2         7,544          4.0        11,317           6.0
        (to Risk Weighted Assets)
    Tier I Capital                                      36,172          13.0        11,093          4.0        13,867           5.0
        (to Average Assets)

As of December 31, 1999:
    Total Capital                                       37,171          20.5       $14,536          8.0       $18,170          10.0
        (to Risk Weighted Assets)
    Tier I Capital                                      34,885          19.2         7,268          4.0        10,902           6.0
        (to Risk Weighted Assets)
    Tier I Capital                                      34,885          12.9        10,780          4.0        13,476           5.0
        (to Average Assets)

PENN CENTRAL NATIONAL BANK
As of December 31, 2000:
    Total Capital                                       24,359          22.5       $ 8,654          8.0       $10,817          10.0
        (to Risk Weighted Assets)
    Tier I Capital                                      22,988          21.3         4,327          4.0         6,490           6.0
        (to Risk Weighted Assets)
    Tier I Capital                                      22,988          12.6         7,304          4.0         9,130           5.0
        (to Average Assets)

As of December 31, 1999:
    Total Capital                                       25,452          24.0       $ 8,502          8.0       $10,627          10.0
        (to Risk Weighted Assets)
    Tier I Capital                                      24,105          22.7         4,251          4.0         6,376           6.0
        (to Risk Weighted Assets)
    Tier I Capital                                      24,105          13.1         7,349          4.0         9,186           5.0
        (to Average Assets)
</TABLE>




                                                                              55

<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,
2000 and 1999, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 2000. 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, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States.


/s/ ARTHUR ANDERSEN
-----------------------
    Arthur Andersen LLP
    Lancaster, Pa.
    January 19, 2001



(except with respect to the matter discussed in Note 16, as to which the date is
February 27, 2001)


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