OMEF Omega Financial (MM)

STATE COLLEGE, Pa., April 23 /PRNewswire-FirstCall/ -- First quarter earnings for Omega Financial Corporation (NASDAQ:OMEF) were up 4.5% over the same period last year, company officials announced. (Logo: http://www.newscom.com/cgi-bin/prnh/19990921/OMFCLOGO ) The company reported net income of $5.583 million for the first three months of 2007, compared to $5.343 million, an increase of $240,000, said Donita R. Koval, OFC's president and chief executive officer. Koval noted that the strong results, driven by continued cost control across the organization, came in spite of an increase in the loan loss provision of $490,000 compared to the first quarter of 2006. The increase in the provision is due primarily to changes in the risk profile of one large commercial customer that filed for bankruptcy protection in 2006. Omega increased the amount of allowance for loan losses allocated to this borrower by $904,000 in the first quarter to a total of $6.2 million as of March 31, 2007 from $5.3 million at December 31, 2006. Omega has estimated and provided for known exposures related to this credit; however, evaluations of the credit continue based on changes in the bankruptcy proceedings. The total impact on earnings in the first quarter of 2007 for this credit, including the added provisions of $904,000, lost interest of $284,000, and other related expenses, was $775,000 after tax, which negatively affected earnings by 12% or $0.06 per diluted share. On a per share basis, diluted earnings were up 4.8%, rising to $0.44 from $0.42. Per share earnings were also 25.7% higher than those recorded for the fourth quarter of 2006. Common share dividends declared were unchanged from the fourth quarter of 2006 at $0.31. Net interest margin on a fully taxable equivalent basis rose by 18 basis points in the quarter to 4.19% compared to the same period in 2006. Koval explained that the increase was achieved despite a continued challenging rate environment and flat yield curve. The margin for the quarter also represents an increase of five basis points over the fourth quarter of last year. Although first quarter net interest income declined by 1.3%, when compared to the first quarter of 2006, last year's same-period results included net interest income from three branches that were sold in the fourth quarter of 2006 as Omega realigned its geographic footprint. Net interest income on a comparable basis rose by $92,000 or 0.62%. Excluding gains on the sale of assets, other income increased $124,000 or 1.9%. The branches sold in 2006 contributed $51,000 in non-interest income in the first quarter of 2006. The Company's continued focus on expense control in a variety of operating areas resulted in a decline in other expense of $825,000 or 5.6%. The three branches locations sold in 2006 accounted for $216,000 of this decrease. "We are pleased that these solid results have reaffirmed our strategy to become increasingly customer-focused," Koval said. She added, "Omega is starting to see earnings momentum from the benefits of the 20 plus new products and services developed in 2006." Among these initiatives is Omega's DEPOSIT PRO, which allows business customers to bring the bank right into their office, along with the company's new "Bank to Business" initiative which has shown great promise in fee income derived from Omega's cash management division. Omega's other new venture, Omega Financial Mortgage Solutions, has grown rapidly in the first few months of operation. This new undertaking features a number of cutting edge mortgage products including their signature, HOME ONE, which allows the customer to break ground on construction loans within 21 days of application. In other company developments, Omega Bank was named to US Banker's list of top 200 mid-tier banks ranked by three-year average return on equity (ROE). Omega ranked 10th among banks in Pennsylvania. During the quarter, Omega Financial was also added to NASDAQ's Dividend Achievers Index effective with the market open on Feb 1. The NASDAQ Dividend Achievers Index was launched in February of 2006 and is designed to offer a unique approach for NASDAQ investors seeking a long-term portfolio of higher risk-adjusted returns. Members of this index are typically companies with strong cash reserves, solid balance sheets and a proven record of consistent earnings growth. Quarterly and annual reports, a corporate profile, stock quotes and other financial data can be accessed through the Omega web site at http://www.omegafinancial.com/. Financial statements and selected financial highlights are summarized on the following pages. OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) (In thousands, except as indicated*) 1st Qtr 1st Qtr % 1st Qtr 4th Qtr % 2007 2006 Change 2007 2006 Change Earnings: Net income $5,583 $5,343 4.5% $5,583 $4,386 27.3% Per share statistics: * Diluted earnings $.44 $.42 4.8% $.44 $.35 25.7% Dividends declared - common .31 .31 - .31 .31 - Book value - common 25.92 25.33 2.3 25.92 25.76 0.6 Book value - tangible 12.79 11.73 9.0 12.79 12.61 1.4 Market value - High 34.49 34.21 0.8 34.49 33.50 3.0 Low 27.14 27.88 (2.7) 27.14 29.48 (7.9) Financial position at period end: Assets $1,803,555 $1,918,992 (6.0)% $1,803,555 $1,815,818 (0.7)% Net loans 1,132,991 1,185,191 (4.4) 1,132,991 1,135,048 (0.2) Deposits 1,309,805 1,424,027 (8.0) 1,309,805 1,325,763 (1.2) Shareholders' equity 327,717 318,900 2.8 327,717 325,211 0.8 Average Balances: Assets $1,802,015 $1,918,888 (6.1)% $1,802,015 $1,846,561 (2.4)% Net loans 1,132,564 1,188,889 (4.7) 1,132,563 1,147,555 (1.3) Deposits 1,302,265 1,407,864 (7.5) 1,302,265 1,359,209 (4.2) Shareholders' equity 329,301 321,555 2.4 329,301 327,203 0.6 Non-Performing Loans at period end: Non-accrual loans $21,168 $24,352 (13.1)% $21,168 $21,001 0.8% Accruing loans past due 90 days or more 5,796 2,955 96.1 5,796 2,327 149.1 Profitability ratios - annualized: * Return on average assets 1.24% 1.11% 11.3% 1.24% 0.95% 30.4% Return on tangible assets 1.37 1.22 12.3 1.37 1.04 31.7 Return on average stated equity(1) 6.78 6.65 2.0 6.78 5.36 26.5 Return on average tangible equity(2) 13.68 14.12 (3.1) 13.68 10.91 25.4 Net interest margin - fully tax equivalent 4.19 4.01 4.5 4.19 4.14 1.2 Shares outstanding at period end: * Common 12,645,736 12,591,314 0.4% 12,645,736 12,622,802 0.2% (1) Average stated equity is equal to average shareholders' equity. (2) Average tangible equity represents average shareholders' equity less average intangibles and goodwill. OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (unaudited) March 31, December 31, 2007 2006 Assets Cash and due from banks 49,798 56,225 Interest bearing deposits with other banks 10,695 12,073 Federal funds sold 11,400 - Trading securities 51 48 Investment securities available for sale 278,437 291,807 Other investments 12,152 12,087 Investment in unconsolidated subsidiary 1,625 1,625 Loans held for sale - 204 Total portfolio loans 1,150,670 1,152,188 Less: Allowance for loan losses (17,679) (17,344) Net portfolio loans 1,132,991 1,134,844 Premises and equipment, net 30,324 30,861 Other real estate owned 548 512 Bank-owned life insurance 76,981 76,341 Investment in limited partnerships 5,606 5,763 Core deposit intangibles 5,457 5,641 Other intangibles 1,057 1,085 Goodwill 159,408 159,387 Other assets 27,025 27,315 TOTAL ASSETS $1,803,555 $1,815,818 Liabilities and Shareholders' Equity Deposits: Non-interest bearing $230,482 $232,335 Interest bearing 1,079,323 1,093,428 Total deposits 1,309,805 1,325,763 Short-term borrowings 64,006 65,712 ESOP debt 1,385 1,481 Junior subordinated debentures 56,069 56,193 Long-term debt 32,524 27,877 Other interest bearing liabilities 853 858 Other liabilities 11,196 12,723 TOTAL LIABILITIES 1,475,838 1,490,607 Shareholders' Equity Preferred stock, par value $5.00 per share: Authorized - 5,000,000 shares, none issued Common stock, par value $5.00 per share: Authorized - 25,000,000 shares; Issued - 12,860,632 shares at March 31, 2007; 12,823,471 shares at December 31, 2006 64,298 64,133 Outstanding - 12,645,736 shares at March 31, 2007; 12,622,802 shares at December 31, 2006 Capital surplus 103,888 103,149 Retained earnings 166,332 164,653 Accumulated other comprehensive income 454 313 Unearned compensation related to ESOP debt (788) (859) Cost of common stock in treasury: 214,896 shares at March 31, 2007; 200,669 shares at December 31, 2006 (6,467) (6,178) TOTAL SHAREHOLDERS' EQUITY 327,717 325,211 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,803,555 $1,815,818 OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) (Unaudited) Three Months Ended March 31, 2007 2006 Interest Income: Interest and fees on loans $19,823 $19,837 Interest and dividends on investment securities 3,345 3,104 Other interest income 172 101 TOTAL INTEREST INCOME. 23,340 23,042 Interest Expense: Interest on deposits 6,452 5,895 Interest on short-term borrowings 723 771 Interest on long-term debt and other interest bearing liabilities 1,241 1,264 TOTAL INTEREST EXPENSE 8,416 7,930 NET INTEREST INCOME 14,924 15,112 Provision for loan losses 610 120 INCOME FROM CREDIT ACTIVITIES 14,314 14,992 Other Income: Service fees on deposit accounts 2,397 2,354 Service fees on loans 327 382 Earnings on bank-owned life insurance 640 607 Trust fees 1,093 1,120 Investment and insurance product sales 851 923 Gain (loss) on sale of loans and other assets 78 57 Net gains on the sale of investment securities 375 62 Other 1,368 1,166 TOTAL OTHER INCOME 7,129 6,671 Other Expense: Salaries and employee benefits 7,217 7,484 Net occupancy expense 1,055 1,105 Equipment expense 1,135 1,128 Data processing service 610 645 Pennsylvania shares tax 786 712 Amortization of intangible assets 211 221 Other 3,034 3,579 TOTAL OTHER EXPENSE 14,048 14,874 Income before income taxes and discontinued operations 7,395 6,789 Income tax expense 1,812 1,483 Income from continuing operations 5,583 5,306 Discontinued operations: Income from discontinued operations, net of tax - 37 NET INCOME $5,583 $5,343 Net income per common share Basic $0.44 $0.42 Diluted $0.44 $0.42 Net income per common share from continuing operations Basic $0.44 $0.42 Diluted $0.44 $0.42 Net income per common share from discontinued operations Basic $ - $ - Diluted $ - $ - Weighted average shares and equivalents Basic 12,642 12,586 Diluted 12,665 12,634 Dividends declared per share Common $0.31 $0.31 Omega Financial Corporation Consolidated Net Interest Income Analysis First Quarter 2007 vs. First Quarter 2006 (In thousands) Increase/ First Quarter 2007 First Quarter 2006 (Decrease) Due Net Average Income/ Average Income/ Due To To Cha- Balance Rate Expense Balance Rate Expense Volume Rate nge INTEREST EARNING ASSETS Money Market Investments Interest Bearing Deposits 11,584 4.13% 118 9,200 3.09% 70 21 27 48 Federal Funds Sold 4,104 5.34% 54 2,736 4.60% 31 17 6 23 Total Money Market Investments 15,688 4.45% 172 11,936 3.43% 101 38 33 71 Investment Securities U.S. Treasuries and Agencies 273,045 4.43% 2,980 282,200 3.64% 2,535 (85) 530 445 State and Municipals- Tax Free 1,495 2.94% 11 52,148 2.90% 378 (372) 5(367) Corporate Securities 4,050 6.62% 67 1,111 7.92% 22 49 (4) 45 Stock 19,513 5.27% 257 13,772 4.04% 139 68 50 118 Investment in Subsidiaries 1,625 7.38% 30 1,625 7.38% 30 - - - Total Investment Securities 299,728 4.52% 3,345 350,856 3.58% 3,104 (340) 581 241 Loans Commercial Loans 246,952 7.58% 4,613 270,088 7.23% 4,814 (426) 225(201) Tax Free Commercial Loans 17,614 4.86% 211 19,551 4.75% 229 (23) 5 (18) Real Estate Loans 653,047 6.80% 11,104 716,955 6.49% 11,640 (1,063) 527(536) Tax Free Real Estate Loans 39,911 4.30% 429 40,200 4.11% 413 (3) 19 16 Personal Loans and Leases 192,324 7.31% 3,466 157,487 7.06% 2,741 625 100 725 Total Loans 1,149,848 6.94% 19,823 1,204,281 6.62% 19,837 (890) 876 (14) Total Earning Assets 1,465,264 6.42% 23,340 1,567,073 5.92% 23,042 (1,192) 1,490 298 FUNDING SOURCES Interest Bearing Liabilities Checking with Interest 293,568 0.79% 569 322,413 0.65% 514 (49) 104 55 Money Market Deposits 74,069 1.51% 275 89,348 1.40% 309 (57) 23 (34) Savings Deposits 177,791 0.55% 241 202,170 0.55% 274 (33) - (33) CD'S, $100,000 and Over 91,136 4.32% 970 95,338 3.88% 911 (41) 100 59 Other Time Deposits 442,046 4.03% 4,397 469,770 3.36% 3,887 (238) 748 510 Total Interest Bearing Deposits 1,078,610 2.43% 6,452 1,179,039 2.03% 5,895 (418) 975 557 Short-Term Borrowings 69,207 4.24% 723 85,173 3.67% 771 (157) 109 (48) Long-Term Debt 87,662 5.62% 1,232 89,302 5.63% 1,256 (22) (2)(24) Other Interest Bearing Liabilities 857 4.20% 9 870 3.68% 8 - 1 1 Demand Deposits 223,655 228,825 Cash (48,054) (50,441) Other 53,327 34,305 Total Funding Sources 1,465,264 2.33% 8,416 1,567,073 2.05% 7,930 (597) 1,083 486 Net Int Spread - Net Int Income 4.09% 14,924 3.87% 15,112 (594) 406(188) Net Int Spread - Tax Equivalent 4.19% 4.01% Net Int Income - Tax Equivalent 15,275 15,661 (386) Tax Rate 35.00% 35.00% http://www.newscom.com/cgi-bin/prnh/19990921/OMFCLOGO http://photoarchive.ap.org/ DATASOURCE: Omega Financial Corporation CONTACT: Teresa Ciambotti, SVP, Director of Investor Relations, +1-814-231-6401 Web site: http://www.omegafinancial.com/

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