OMEF Omega Financial (MM)

STATE COLLEGE, Pa., Oct. 22 /PRNewswire-FirstCall/ -- Third quarter 2007 net income rose just over 9% for Omega Financial Corporation (NASDAQ:OMEF) compared to the prior year quarter, company officials said. Donita R. Koval, Omega's president and chief executive officer, noted that the $5.846 million in net income for the third quarter 2007 represents an increase of $489,000 or 9.1% over the $5.357 million achieved during the same period last year. For the year-to-date, net income rose to $16.392 million from $16.045 million, an increase of $347,000 or 2.12%. "The strong performance we've turned in for the third quarter indicates the soundness of our basic strategies of managing the net interest margin, continuing diligent cost controls and ongoing efforts to grow non-interest income," Koval said. On a per-share basis, fully-diluted earnings for the third quarter 2007 were $0.46, an increase of 7.0% over the $0.43 of last year's third quarter. The company's Return on Average Assets for the third quarter 2007 was 1.30% and Return on Equity was 7.06%, representing an increase of 15.3% and 6.4%, respectively from last year's third quarter. Common share dividends declared were $0.31 for the quarter, unchanged from 2006. For the year to date period, fully-diluted earnings were $1.30 per share, an increase of 2.4% from $1.27 in 2006. Return on Average Assets was 1.21% and Return on Average Equity was 6.62% compared to 1.12% and 6.64% in 2006. The company's third quarter provision for loan loss dropped significantly when compared to the same quarter in 2006, falling more than 77%. The large provision in the third quarter of 2006 related to one commercial borrower who had filed for bankruptcy protection. For the year to date period, the provision has increased by nearly 40%, as the company provided for several problem loans during the first three quarters of 2007. Despite slight increases in delinquencies and non-performing loans since June 30, 2007, the allowance for loan losses remained steady at $12.8 million as several improving credits on the watchlist offset these negative impacts. The company does not have any direct exposure in the sub-prime lending markets, however, management is continuing to monitor economic trends in the markets in which Omega has exposure. The company's net interest margin (NIM) continued to grow, reflecting Omega's disciplined approach in pricing both loans and deposits, Koval said. For the third quarter of 2007, NIM was 4.20% compared to 4.08% in 2006 .The NIM grew by 13 basis points for the year to date period, rising to 4.18% compared to 4.05% in 2006, all on a fully tax equivalent basis. Net interest income decreased $388,000 or 2.52% in the third quarter 2007 versus the same period in 2006. For the year to date period, net interest income decreased just over $1 million, or 2.18%. The decrease in net interest income in 2007 can be attributed to declines in earning assets and liabilities as well as the fact that the 2006 amounts included interest income earned from the three branches that were sold in the final quarter of the year. These branches contributed $257,000 in net interest income in the third quarter of 2006 and $804,000 for year to date period in 2006. Excluding gains on the sale of investments, loans or other assets, non- interest income increased $630,000 or 9.7% for the third quarter 2007 compared to 2006. The increase was fueled by gains in service fees on deposits and trust fees as well as receipt of $367,000 in interest received on a tax refund. For the year to date, the increase was $1,125 million or 5.8%. The three branch locations sold in 2006, contributed $58,000 in non-interest income in the third quarter of 2006 and $171,000 year to date as of September 30, 2006. The Company's continued focus on expense control in a variety of operating areas was reflected in the decline in non-interest expense of $170,000 or 1.17% and $1,620,000 or 3.64% for the quarter and year to date periods, respectively. The three branch locations, which were sold in 2006 accounted for $149,000 in non-interest expense in the third quarter 2006 and $555,000 year to date through September 30, 2006. "Our strategies of diversifying our revenue stream and maintaining vigilance on costs continue to enhance our earnings," Koval observed. 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 * ) Three Months Ended September 30, 2007 2006 % Change Earnings: Net income $5,846 $5,357 9.1% Per share statistics: * Diluted earnings $.46 $.43 7.0% Dividends declared - common .31 .31 - Book value - common 26.22 25.64 2.3 Book value - tangible 13.10 12.39 5.8 Market value - High 29.74 32.38 (8.2) Low 20.97 28.12 (25.4) Financial position at period end: Assets $1,782,381 $1,876,105 (5.0)% Net loans 1,114,169 1,136,362 (2.0) Deposits 1,292,494 1,355,125 (4.6) Shareholders' equity 331,205 322,389 2.7 Average Balances: Assets $1,800,447 $1,902,284 (5.4)% Net loans 1,120,763 1,171,326 (4.3) Deposits 1,306,812 1,407,941 (7.2) Shareholders' equity 331,132 322,896 2.6 Non-Performing Loans at period end: Non-accrual loans $22,019 $23,263 (5.3)% Accruing loans past due 90 days or more 2,494 2,943 (15.3) Profitability ratios - annualized: * Return on average assets 1.30% 1.13% 15.3% Return on tangible assets 1.43 1.24 15.3 Return on average stated equity (1) 7.06 6.64 6.4 Return on average tangible equity (2) 14.13 13.94 1.4 Net interest margin - fully tax equivalent 4.20 4.08 2.9 Shares outstanding at period end: * Common 12,632,627 12,573,916 0.5% Nine Months Ended September 30, 2007 2006 % Change Earnings: Net income $16,392 $16,045 2.2% Per share statistics: * Diluted earnings $1.30 $1.27 2.4% Dividends declared - common .93 .93 - Book value - common 26.22 25.64 2.3 Book value - tangible 13.10 12.39 5.8 Market value - High 34.49 34.21 0.8 Low 20.97 27.88 (24.8) Financial position at period end: Assets $1,782,381 $1,876,105 (5.0)% Net loans 1,114,169 1,136,362 (2.0) Deposits 1,292,494 1,355,125 (4.6) Shareholders' equity 331,205 322,389 2.7 Average Balances: Assets $1,801,188 $1,909,950 (5.7)% Net loans 1,129,082 1,180,283 (4.3) Deposits 1,305,168 1,410,603 (7.5) Shareholders' equity 330,274 322,078 2.5 Non-Performing Loans at period end: Non-accrual loans $22,019 $23,263 (5.3)% Accruing loans past due 90 days or more 2,494 2,943 (15.3) Profitability ratios - annualized: * Return on average assets 1.21% 1.12% 8.3% Return on tangible assets 1.34 1.23 8.9 Return on average stated equity (1) 6.62 6.64 (0.3) Return on average tangible equity (2) 13.29 14.04 (5.3) Net interest margin - fully tax equivalent 4.18 4.05 3.2 Shares outstanding at period end: * Common 12,632,627 12,573,916 0.5% (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) September 30, December 31, 2007 2006 Assets Cash and due from banks 51,904 56,225 Interest bearing deposits with other banks 11,163 12,073 Federal funds sold 17,760 - Trading securities 60 48 Investment securities available for sale 274,871 291,807 Other investments 12,104 12,087 Investment in unconsolidated subsidiary 1,625 1,625 Loans held for sale - 204 Total portfolio loans 1,126,974 1,152,188 Less: Allowance for loan losses (12,805) (17,344) Net portfolio loans 1,114,169 1,134,844 Premises and equipment, net 29,428 30,861 Other real estate owned 945 512 Bank-owned life insurance 75,156 76,341 Investment in limited partnerships 5,202 5,763 Core deposit intangibles 5,089 5,641 Other intangibles 1,003 1,085 Goodwill 159,567 159,387 Other assets 22,335 27,315 TOTAL ASSETS $1,782,381 $1,815,614 Liabilities and Shareholders' Equity Deposits: Non-interest bearing $237,436 $232,335 Interest bearing 1,055,058 1,093,428 Total deposits 1,292,494 1,325,763 Short-term borrowings 62,880 65,712 ESOP debt 1,189 1,481 Junior subordinated debentures 55,820 56,193 Long-term debt 26,803 27,877 Other interest bearing liabilities 864 858 Other liabilities 11,126 12,723 TOTAL LIABILITIES 1,451,176 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 - 12,867,243 shares at September 30, 2007; 12,823,471 shares at December 31, 2006 64,352 64,133 Outstanding - 12,632,627 shares at September 30, 2007; 12,622,802 shares at December 31, 2006 Capital surplus 104,078 103,149 Retained earnings 169,321 164,653 Accumulated other comprehensive income 1,234 313 Unearned compensation related to ESOP debt (642) (859) Cost of common stock in treasury: 234,616 shares at September 30, 2007; 200,669 shares at December 31, 2006 (7,138) (6,178) TOTAL SHAREHOLDERS' EQUITY 331,205 325,211 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,782,381 $1,815,818 OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Interest Income: Interest and fees on loans $19,877 $20,621 $59,600 $60,830 Interest and dividends on investment securities 3,433 3,043 10,260 9,224 Other interest income 459 516 772 858 TOTAL INTEREST INCOME 23,769 24,180 70,632 70,912 Interest Expense: Interest on deposits 6,882 6,824 19,981 19,128 Interest on short-term borrowings 620 708 2,019 2,142 Interest on long-term debt and other interest bearing liabilities 1,266 1,259 3,763 3,771 TOTAL INTEREST EXPENSE 8,768 8,791 25,763 25,041 NET INTEREST INCOME 15,001 15,389 44,869 45,871 Provision for loan losses 205 900 1,560 1,120 INCOME FROM CREDIT ACTIVITIES 14,796 14,489 43,309 44,751 Other Income: Service fees on deposit accounts 2,640 2,594 7,691 7,546 Service fees on loans 350 445 1,107 1,270 Earnings on bank-owned life insurance 643 620 1,929 1,779 Trust fees 1,063 919 3,257 3,064 Investment and insurance product sales 687 668 2,239 2,210 Gain (loss) on sale of loans and other assets (25) 112 5 233 Net gains on the sale of investment securities 153 577 491 815 Other 1,719 1,226 4,378 3,607 TOTAL OTHER INCOME 7,230 7,161 21,097 20,524 Other Expense: Salaries and employee benefits 7,233 7,396 21,332 22,189 Net occupancy expense 995 1,019 3,146 3,207 Equipment expense 1,155 1,111 3,485 3,382 Data processing service 607 683 1,816 2,001 Pennsylvania shares tax 661 598 2,233 2,038 Amortization of intangible assets 211 221 634 664 Other 3,514 3,518 10,182 10,967 TOTAL OTHER EXPENSE 14,376 14,546 42,828 44,448 Income before income taxes and discontinued operations 7,650 7,104 21,578 20,827 Income tax expense 1,804 1,638 5,186 4,689 Income from continuing operations 5,846 5,466 16,392 16,138 Discontinued operations: Income from discontinued operations, net of tax - 284 - 446 Loss on disposal of discontinued operations, net of tax - (393) - (539) Loss from discontinued operations - (109) - (93) NET INCOME $5,846 $5,357 $16,392 $16,045 Net income per common share Basic $0.46 $0.43 $1.30 $1.28 Diluted $0.46 $0.43 $1.30 $1.27 Net income per common share from continuing operations Basic $0.46 $0.44 $1.30 $1.28 Diluted $0.46 $0.43 $1.30 $1.28 Net income per common share from discontinued operations Basic $- $- $- $- Diluted $- $- $- $- Weighted average shares and equivalents Basic 12,625 12,560 12,628 12,573 Diluted 12,638 12,592 12,644 12,615 Dividends declared per share Common $0.31 $0.31 $0.93 $0.93 Omega Financial Corporation Consolidated Net Interest Income Analysis Third Quarter 2007 vs. Third Quarter 2006 (In thousands) Third Quarter 2007 Average Income/ Balance Rate Expense INTEREST EARNING ASSETS Money Market Investments Interest Bearing Deposits 20,232 4.31% 220 Federal Funds Sold 18,472 5.13% 239 Total Money Market Investments 38,704 4.71% 459 Investment Securities U.S. Treasuries and Agencies 263,460 4.62% 3,065 State and Municipals-Tax Free 995 3.22% 8 Corporate Securities & Stock 26,392 5.46% 360 Total Investment Securities 290,847 4.69% 3,433 Loans Commercial Loans 226,979 7.76% 4,439 Tax Free Commercial Loans 16,836 4.93% 209 Real Estate Loans 644,965 6.77% 10,915 Tax Free Real Estate Loans 38,048 4.34% 413 Personal Loans and Leases 206,661 7.49% 3,902 Total Loans 1,133,489 7.01% 19,878 Total Earning Assets 1,463,040 6.49% 23,770 FUNDING SOURCES Interest Bearing Liabilities Checking with Interest 295,529 0.76% 568 Money Market Deposits 68,573 1.49% 258 Savings Deposits 176,658 0.55% 245 CD'S, $100,000 and Over 88,868 4.48% 1,003 Other Time Deposits 444,530 4.29% 4,808 Total Interest Bearing Deposits 1,074,158 2.54% 6,882 Short-Term Borrowings 66,120 3.73% 621 Long-Term Debt 82,865 6.07% 1,257 Other Interest Bearing Liabilities 868 4.15% 9 Demand Deposits 232,654 Cash (47,190) Other 53,565 Total Funding Sources 1,463,040 2.38% 8,769 Net Int Spread - Net Int Income 4.11% 15,001 Net Int Spread - Tax Equivalent 4.20% Net Int Income - Tax Equivalent 15,340 Tax Rate 35% Third Quarter 2006 Average Income/ Balance Rate Expense INTEREST EARNING ASSETS Money Market Investments Interest Bearing Deposits 19,627 3.96% 196 Federal Funds Sold 24,033 5.28% 320 Total Money Market Investments 43,660 4.74% 516 Investment Securities U.S. Treasuries and Agencies 271,150 3.77% 2,580 State and Municipals-Tax Free 26,803 2.25% 151 Corporate Securities & Stock 21,573 5.79% 312 Total Investment Securities 319,526 3.78% 3,043 Loans Commercial Loans 256,460 7.49% 4,840 Tax Free Commercial Loans 18,615 4.77% 224 Real Estate Loans 685,903 6.88% 11,798 Tax Free Real Estate Loans 40,487 4.41% 446 Personal Loans and Leases 184,790 7.11% 3,313 Total Loans 1,186,255 6.93% 20,621 Total Earning Assets 1,549,441 6.22% 24,180 FUNDING SOURCES Interest Bearing Liabilities Checking with Interest 308,275 0.80% 620 Money Market Deposits 83,756 1.51% 318 Savings Deposits 196,299 0.55% 272 CD'S, $100,000 and Over 98,731 4.19% 1,042 Other Time Deposits 478,506 3.79% 4,572 Total Interest Bearing Deposits 1,165,567 2.32% 6,824 Short-Term Borrowings 71,891 3.95% 708 Long-Term Debt 84,774 5.90% 1,250 Other Interest Bearing Liabilities 819 4.40% 9 Demand Deposits 242,375 Cash (50,363) Other 34,378 Total Funding Sources 1,549,441 2.25% 8,791 Net Int Spread - Net Int Income 3.97% 15,389 Net Int Spread - Tax Equivalent 4.08% Net Int Income - Tax Equivalent 15,831 Tax Rate 35% Increase/(Decrease) Due To Due To Net Volume Rate Change INTEREST EARNING ASSETS Money Market Investments Interest Bearing Deposits 6 18 24 Federal Funds Sold (72) (9) (81) Total Money Market Investments (66) 9 (57) Investment Securities U.S. Treasuries and Agencies (74) 559 485 State and Municipals-Tax Free (189) 46 (143) Corporate Securities & Stock 67 (19) 48 Total Investment Securities (196) 586 390 Loans Commercial Loans (568) 167 (401) Tax Free Commercial Loans (22) 7 (15) Real Estate Loans (696) (187) (883) Tax Free Real Estate Loans (26) (7) (33) Personal Loans and Leases 406 183 589 Total Loans (907) 164 (743) Total Earning Assets (1,169) 759 (410) FUNDING SOURCES Interest Bearing Liabilities Checking with Interest (24) (29) (52) Money Market Deposits (56) (4) (60) Savings Deposits (27) 0 (27) CD'S, $100,000 and Over (107) 68 (39) Other Time Deposits (335) 571 236 Total Interest Bearing Deposits (549) 607 58 Short-Term Borrowings (51) (36) (87) Long-Term Debt (29) 36 7 Other Interest Bearing Liabilities 1 (1) 0 Demand Deposits Cash Other Total Funding Sources (628) 606 (22) Net Int Spread - Net Int Income (541) 153 (388) Net Int Spread - Tax Equivalent Net Int Income - Tax Equivalent Tax Rate 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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