OMEF Omega Financial (MM)

STATE COLLEGE, Pa., Aug. 1 /PRNewswire-FirstCall/ -- Omega Financial Corporation (NASDAQ:OMEF) reported second quarter net income of $5.345 million, compared to $5.381 million for the same period last year, company officials said. Diluted earnings per share for the quarter were $0.42. (Logo: http://www.newscom.com/cgi-bin/prnh/19990921/OMFCLOGO) Donita R. Koval, Omega's president and chief executive officer, said the company's net interest margin for the quarter rose to 4.09% on a fully tax- equivalent basis from 3.90% in the same period last year in spite of a flat yield curve and a challenging rate environment. She noted that the net interest margin has also increased this quarter from the 4.01% recorded in this year's first quarter, with net interest income rising by 1.71%. In the non-interest income area service fees on loans and deposit accounts contributed solid increases, while non-interest expenses decreased less than one half of one percent when comparing this quarter to second quarter 2005. "The increase in the net interest margin comes at a time when all financial institutions are challenged to simply maintain their margin," Koval said. "We continue to manage our balance sheet in order to achieve a margin increase, and that strategy has paid off. At the same time, our continued focus on expense control has aided our bottom line." In year-to-date figures, net income for 2006 is $10.688 million, compared to $11.958 million in 2005, while diluted earnings per share are $0.85 compared to $0.95. Excluding gains on securities and early extinguishment of debt in 2005's first six months results in net income year-to-date essentially unchanged. Common share dividends declared were $0.31 and $0.62 for the quarter and year to date, respectively, unchanged from the same periods last year. In the first quarter of 2006, approximately $20 million in loans for one commercial borrower was placed on non-accrual status. Omega continues to evaluate this credit and has increased the amount of loan loss allowance allocated to this borrower to $3 million as of June 30, 2006. The remainder of the Corporation's loan portfolio has shown improvement during the second quarter in both non-accrual levels and delinquencies. As a result of this improving trend, the provision for loan losses necessary to maintain the allowance for loan losses at an adequate level was $100,000. The company recently announced the sale of its Sentry Trust affiliate which it acquired in the 2004 merger with Sun Bancorp. The results of Sentry Trust are reflected as discontinued operations in the consolidated statements of income and the related assets and liabilities of Sentry Trust have been segregated as such on the consolidated balance sheets. Additionally, on July 31, 2006, the Company agreed to sell three branch locations as it continues refining its retail network in the wake of the merger. The assets and liabilities of these branches are classified as held for sale on the June 30, 2006 consolidated balance sheet. The branch sales are expected to close before December 31, 2006 and result in a total pre-tax gain of approximately $2.3 million. In the second quarter, Omega Bank, the company's principal subsidiary received a Pillars of the Community award from the Federal Home Loan Bank of Pittsburgh (FHLB) for sustained and outstanding commitment to projects that provide affordable housing and community and economic development. Omega is the only financial institution in Central Pennsylvania to receive the award this year and one of only four in Pennsylvania, Delaware and West Virginia among 340 institutions eligible to compete for the designation. 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 June 30, 2006 2005 % Change Earnings: Net income $5,345 $5,381 (0.7)% Per share statistics: * Diluted earnings $.42 $.43 (2.3)% Dividends declared - common .31 .31 0.0 Book value - common 25.41 25.25 0.6 Book value - tangible 11.89 11.69 1.7 Market value - High 34.10 31.54 8.1 Low 28.19 27.05 4.2 Financial position at period end: Assets $1,908,401 $1,993,745 (4.3)% Net loans (1) 1,178,251 1,238,548 (4.9) Deposits (1) 1,420,652 1,511,334 (6.0) Shareholders' equity 318,819 318,329 0.2 Average Balances: Assets $1,908,861 $2,003,840 (4.7)% Net loans (1) 1,180,827 1,256,198 (6.0) Deposits (1) 1,416,002 1,515,209 (6.5) Shareholders' equity 321,768 319,986 0.6 Non-Performing Loans at period end: Non-accrual loans $22,922 5,144 345.6% Accruing loans past due 90 days or more 2,769 3,525 (21.4) Restructured loans - 218 (100.0) Profitability ratios - annualized: * Return on average assets 1.12% 1.07% 4.3% Return on tangible assets 1.23 1.17 5.1 Return on average stated equity (2) 6.64 6.73 (1.2) Return on average tangible equity (3) 14.06 14.47 (2.8) Net interest margin - fully tax equivalent 4.09 3.90 4.9 Shares outstanding at period end: * Common 12,548,843 12,609,174 (0.5) (1) Includes amounts classified as held for sale (2) Average stated equity is equal to average shareholders' equity. (3) Average tangible equity represents average shareholders' equity less average intangibles and goodwill. OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) (In thousands, except as indicated*) Six Months Ended June 30, 2006 2005 % Change Earnings: Net income $10,688 $11,958 (10.6)% Per share statistics: * Diluted earnings $.85 $.95 (10.5)% Dividends declared - common .62 .62 0.0 Book value - common 25.41 25.25 0.6 Book value - tangible 11.89 11.69 1.7 Market value - High 34.21 34.50 (0.8) Low 27.88 27.05 3.1 Financial position at period end: Assets $1,908,401 $1,993,745 (4.3)% Net loans (1) 1,178,251 1,238,548 (4.9) Deposits (1) 1,420,652 1,511,334 (6.0) Shareholders' equity 318,819 318,329 0.2 Average Balances: Assets $1,913,847 $2,025,803 (5.5)% Net loans (1) 1,215,252 1,292,943 (6.0) Deposits (1) 1,411,955 1,506,197 (6.3) Shareholders' equity 321,662 319,292 0.7 Non-Performing Loans at period end: Non-accrual loans $22,922 5,144 345.6% Accruing loans past due 90 days or more 2,769 3,525 (21.4) Restructured loans - 218 (100.0) Profitability ratios - annualized: * Return on average assets 1.12% 1.18% (5.4)% Return on tangible assets 1.23 1.29 (4.7) Return on average stated equity (2) 6.65 7.49 (11.3) Return on average tangible equity (3) 14.09 16.28 (13.5) Net interest margin - fully tax equivalent 4.04 3.84 5.2 Shares outstanding at period end: * Common 12,548,843 12,609,174 (0.5)% (1) Includes amounts classified as held for sale (2) Average stated equity is equal to average shareholders' equity. (3) 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) June 30, December 31, Assets 2006 2005 Cash and due from banks $55,460 $56,194 Interest bearing deposits with other banks 10,164 8,908 Federal funds sold 16,275 - Trading securities 40 468 Investment securities available for sale 313,549 347,300 Other investments 12,013 6,055 Investment in unconsolidated subsidiary 1,625 1,625 Loans held for sale 292 264 Total portfolio loans 1,165,346 1,214,591 Less: Allowance for loan losses (14,625) (15,482) Net portfolio loans 1,150,721 1,199,109 Premises and equipment, net 31,743 35,997 Other real estate owned 1,425 956 Bank-owned life insurance 76,304 75,144 Investment in limited partnerships 6,165 6,612 Core deposit intangibles 6,009 6,729 Other intangibles 1,139 1,193 Goodwill 159,184 159,191 Assets held for sale 31,749 - Assets of discontinued operations 5,260 4,599 Other assets 29,284 29,635 TOTAL ASSETS $1,908,401 $1,939,979 Liabilities and Shareholders' Equity Deposits: Non-interest bearing $238,406 $236,683 Interest bearing 1,145,457 1,185,847 Total deposits 1,383,863 1,422,530 Short-term borrowings 68,934 90,153 ESOP debt 1,665 1,845 Junior subordinated debentures 56,443 56,692 Long-term debt 28,565 36,322 Other interest bearing liabilities 825 882 Liabilities held for sale 36,762 - Liabilities of discontinued operations 329 156 Other liabilities 12,196 12,909 TOTAL LIABILITIES 1,589,582 1,621,489 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 - 12,756,257 shares at June 30, 2006; 12,670,323 shares at December 31, 2005; 63,782 63,368 Outstanding - 12,551,842 shares at June 30, 2006; 12,599,508 shares at December 31, 2005; Capital surplus 101,605 99,874 Retained earnings 162,638 159,583 Accumulated other comprehensive income (2,034) (1,226) Unearned compensation related to ESOP debt (994) (1,125) Cost of common stock in treasury: 204,415 shares at June 30, 2006 70,815 shares at December 31, 2005 (6,178) (1,984) TOTAL SHAREHOLDERS' EQUITY 318,819 318,490 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,908,401 $1,939,979 OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) Unaudited Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Interest Income: Interest and fees on loans $20,372 $19,612 $40,209 $38,959 Interest and dividends on investment securities 3,077 2,689 6,181 5,056 Other interest income 241 338 342 696 TOTAL INTEREST INCOME. 23,690 22,639 46,732 44,711 Interest Expense: Interest on deposits 6,409 5,559 12,304 10,251 Interest on short-term borrowings 663 438 1,434 928 Interest on long-term debt and other interest bearing liabilities 1,248 1,292 2,512 2,940 TOTAL INTEREST EXPENSE 8,320 7,289 16,250 14,119 NET INTEREST INCOME 15,370 15,350 30,482 30,592 Provision for loan losses 100 180 220 322 INCOME FROM CREDIT ACTIVITIES 15,270 15,170 30,262 30,270 Other Income: Service fees on deposit accounts 2,598 2,308 4,952 4,448 Service fees on loans 443 315 825 627 Earnings on bank-owned life insurance 552 574 1,159 1,149 Trust fees 1,025 1,079 2,145 2,171 Investment and insurance product sales 618 757 1,542 1,810 Gain on the early extinguishment of debt - - - 1,043 Gain (loss) on sale of loans and other assets 64 (39) 121 (378) Net gains on the sale of investment securities 176 549 238 1,537 Other 1,215 1,149 2,381 2,178 TOTAL OTHER INCOME 6,691 6,692 13,363 14,585 Other Expense: Salaries and employee benefits 7,308 7,324 14,793 14,519 Net occupancy expense 1,083 1,029 2,188 2,102 Equipment expense 1,143 1,019 2,271 2,097 Data processing service 673 621 1,318 1,247 Pennsylvania shares tax 728 549 1,440 1,168 Amortization of intangible assets 222 234 443 357 Other 3,870 4,309 7,449 7,970 TOTAL OTHER EXPENSE 15,027 15,085 29,902 29,460 Income before income taxes and discontinued operations 6,934 6,777 13,723 15,395 Income tax expense 1,568 1,343 3,051 3,383 Income from continuing operations 5,366 5,434 10,672 12,012 Discontinued operations: Income (Loss) from discontinued operations, net of tax 125 (53) 162 (54) Loss on disposal of discontinued operations, net of tax (146) - (146) - Income (Loss) from discontinued operations (21) (53) 16 (54) NET INCOME $5,345 $5,381 $10,688 $11,958 Net income per common share: Basic $0.43 $0.43 $0.85 $0.95 Diluted $0.42 $0.43 $0.85 $0.95 Net income per common share from continuing operations Basic $0.43 $0.43 $0.85 $0.95 Diluted $0.43 $0.43 $0.85 $0.95 Net income per common share from discontinued operations Basic $0.00 $0.00 $0.00 $0.00 Diluted $0.00 $0.00 $0.00 $0.00 Weighted average shares and equivalents: Basic 12,572 12,607 12,579 12,601 Diluted 12,616 12,660 12,624 12,659 Dividends declared per share: Common 0.31 0.31 0.62 0.62 OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED NET INTEREST INCOME ANALYSIS 2nd Quarter 2006 vs. 2nd Quarter 2005 (In thousands) Second Qtr 2006 Second Qtr 2005 Average Income/ Average Income/ Balance Rate Expense Balance Rate Expense INTEREST EARNING ASSETS Money Market Investments Interest Bearing Deposits 11,158 4.13% 115 25,224 2.59% 163 Federal Funds Sold 10,237 4.94% 126 24,735 2.85% 176 Total Money Market Investments 21,395 4.52% 241 49,959 2.72% 339 Investment Securities U.S. Treasuries and Agencies 279,381 3.64% 2,537 234,197 3.38% 1,973 State and Municipals- Tax Free 39,609 2.63% 260 66,337 2.82% 467 Corporate Securities 19,201 5.83% 280 15,756 6.32% 249 Total Investment Securities 338,191 3.65% 3,077 316,290 3.41% 2,689 Loans Commercial Loans 265,236 7.31% 4,835 258,485 6.37% 4,107 Tax Free Commercial Loans 19,315 4.76% 229 21,655 4.78% 258 Real Estate Loans 706,380 6.73% 11,892 791,630 6.08% 12,037 Tax Free Real Estate Loans 40,507 4.30% 435 39,894 4.08% 407 Personal Loans and Leases 164,415 7.27% 2,981 159,848 7.03% 2,802 Total Loans 1,195,853 6.82% 20,372 1,271,512 6.18% 19,611 Total Earning Assets 1,555,439 6.10% 23,690 1,637,761 5.54% 22,639 FUNDING SOURCES Interest Bearing Liabilities Checking with Interest 314,395 0.73% 572 383,600 0.73% 694 Money Market Accounts 88,131 1.50% 330 107,690 1.42% 381 Savings Accounts 200,977 0.55% 275 221,124 0.55% 303 CD'S, $100,000 and Over 97,755 4.04% 984 99,424 3.41% 846 Other Time Deposits 476,046 3.58% 4,248 475,872 2.81% 3,335 Total Interest Bearing Deposits 1,177,304 2.18% 6,409 1,287,710 1.73% 5,559 Other Borrowed Funds - Short Term 71,576 3.71% 662 59,301 2.96% 438 Long Term Debt 85,236 5.82% 1,240 94,479 5.44% 1,286 Other Interest Bearing Liabilities 806 4.47% 9 843 2.85% 6 Demand Deposits 238,698 227,500 Cash (50,685) (54,221) Other 32,504 22,149 Total Funding Sources 1,555,439 2.14% 8,320 1,637,761 1.78% 7,289 Net Int Spread - Net Int Income 3.96% 15,370 3.75% 15,350 Net Int Spread-Tax Equivalent 4.09% 3.90% Tax Equivalent Net Int Income 15,868 15,960 CONSOLIDATED NET INTEREST INCOME ANALYSIS 2nd Quarter 2006 vs. 2nd Quarter 2005 (In thousands) Increase/(Decrease) Due To Due To Net Volume Rate Change INTEREST EARNING ASSETS Money Market Investments Interest Bearing Deposits (117.1) 69.1 (48) Federal Funds Sold (136.7) 86.7 (50) Total Money Market Investments (253.8) 155.8 (98) Investment Securities U.S. Treasuries and Agencies 401.8 162.2 564 State and Municipals-Tax Free (177.3) (29.7) (207) Corporate Securities 51.3 (20.3) 31 Total Investment Securities 275.8 112.2 388 Loans Commercial Loans 109.6 618.4 728 Tax Free Commercial Loans (27.7) (1.3) (29) Real Estate Loans (1,362.3) 1,217.3 (145) Tax Free Real Estate Loans 6.3 21.7 28 Personal Loans and Leases 81.3 97.7 179 Total Loans (1,192.8) 1,953.8 761 Total Earning Assets (1,170.7) 2,221.7 1,051 FUNDING SOURCES Interest Bearing Liabilities Checking with Interest (125.9) 3.9 (122) Money Market Accounts (72.3) 21.3 (51) Savings Accounts (27.6) (0.4) (28) CD'S, $100,000 and Over (14.4) 152.4 138 Other Time Deposits 1.2 911.8 913 Total Interest Bearing Deposits (238.9) 1,088.9 850 Other Borrowed Funds-Short Term 101.0 123.0 224 Long Term Debt (130.9) 84.9 (46) Other Interest Bearing Liabilities (0.3) 3.3 3 Demand Deposits Cash Other Total Funding Sources (269.1) 1,300.1 1,031 Net Int Spread - Net Int Income (901.6) 921.6 20 Net Int Spread-Tax Equivalent Tax Equivalent Net Int Income DATASOURCE: Omega Financial Corporation CONTACT: Teresa Ciambotti, SVP, Director of Investor Relations of Omega Financial Corporation, +1-814-231-6401 Web site: http://www.omegafinancial.com/

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