EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1
     
CONTACT:
  Teresa Ciambotti, SVP, Director of Investor Relations
(814) 231-6401
 
    
HEADLINE:
  Omega Reports 2006 Earnings

FOR IMMEDIATE RELEASE ¾¾ January 22, 2007

STATE COLLEGE, PA – Omega Financial Corporation (NASDAQ:OMEF) reported $20.4 million in net income, or $1.62 per diluted share, for 2006, after a $4.8 million provision for loan loss, or $0.25 per diluted share after tax, for two large commercial relationships. Net income in 2005 was $22.9 million, or $1.81 per diluted share. For the fourth quarter of 2006, net income was $4.4 million compared to $5.4 million for the same period last year, while per diluted share earnings were $0.35 and $0.42, respectively. “Both the fourth quarter and full-year earnings were significantly impacted by an increase in loan loss provision needed for these large commercial credits” said Donita R. Koval, Omega Financial’s president and chief executive officer. Favorable resolutions of other problem credits helped offset the total provision required for all loans, resulting in a provision for loan losses for 2006 of $3.9 million, versus $1.2 million in 2005.

Koval noted that the total impact on earnings in 2006 related to these two credits, including the added provisions of $4.8 million, $1 million of lost interest, and other related expenses, was just over $4 million after tax for the year, which negatively affected earnings by 16% or $0.32 per diluted share.

The level of loan loss provision in 2006 is due primarily to one commercial borrower who filed for bankruptcy protection in 2006. In the first quarter of 2006, approximately $20 million in loans for this borrower were placed on non-accrual status; a $2.8 million principal reduction payment was received in the fourth quarter of 2006. These transactions resulted in an increase to the loan loss reserve for this borrower of $1.8 million and $3.8 million for the fourth quarter and the year, respectively, and lost interest income of $1 million.

A further increase in the loan loss provision for $90,000 in the fourth quarter and $990,000 for the year was recorded for another commercial borrower who also filed for bankruptcy protection. This loan was sold in the fourth quarter and the company does not expect any additional loss.

Nonperforming loans totaled $23.3 million as of December 31, 2006, including the $16.8 million for the previously mentioned commercial relationship. At December 31, 2005, nonperforming loans totaled $9.1 million.

The company remained focused on achieving positive operating trends in a variety of areas. The net interest margin improved 15 basis points to 4.07% for 2006, compared to 3.92% for 2005. For the fourth quarter, the margin improved to 4.14% from 4.03% for the same period last year.

Omega recorded increases in other income as well, particularly in deposit and loan fees, which rose 8.4% and 18.5% respectively for the year. Total other income went up to $28.8 million for the year and $8.4 million for the fourth quarter, compared to $27.9 million and $6.9 million for the same periods last year. In addition, the company kept its expenses in tight control, with total non-interest expense essentially flat for the year.

“Increasing our net interest margin while maintaining expenses at last year’s level are strong indicators that our basic strategies are sound,” Koval said. “We are also encouraged that the further development of our customer relationship management sales culture has continued to diversify our revenue stream beyond traditional products and we expect that to continue into 2007 with the release of several of our new initiatives including remote deposit capture technology, Professional Club account segmentation and New Opportunity Checking.” More details on all of these service initiatives are available on the company’s website at www.omegafinancial.com.

In the fourth quarter, Omega completed the sale of three branch locations acquired in the 2004 merger with Sun Bancorp that did not fit the company’s long-term strategy. These branch sales included sales of $21 million in loans and $33.1 million in deposits. The company further restructured its balance sheet in the fourth quarter with the sale of $22 million in tax-free instruments. Asset sales increased the fourth quarter pretax earnings from continuing operations by $1.7 million and the year by $2.8 million. The sale of the branches will allow the company to concentrate the deployment of capital into its core markets, while the sale of tax-free securities will allow Omega to reinvest in higher yielding assets.

Quarterly and annual reports, a corporate profile, stock quotes and other financial data can be accessed through the Omega web site at 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 December 31,           Twelve Months Ended December 31,
    2006   2005   % Change   2006   2005   % Change
 
                                                
Earnings:
                                                
Net income
   $ 4,386     $ 5,352       (18.0 )%   $ 20,431     $ 22,875       (10.7 )%
 
                                                
Per share statistics: *
                                                
Diluted earnings
   $ .35     $ .42       (16.7 )%   $ 1.62     $ 1.81       (10.5 )%
Dividends declared — common
     .31       .31       —       1.24       1.24       —  
Book value — common
     25.76       25.28       1.9       25.76       25.28       1.9  
Book value — tangible
     12.61       11.76       7.2       12.61       11.76       7.2  
Market value — High
     33.50       30.94       8.3       34.21       34.50       (0.8 )
Low
     29.48       25.42       16.0       27.88       25.42       9.7  
 
                                                
Financial position at period end:
                                                
Assets
   $ 1,815,818     $ 1,939,979       (6.4 )%   $ 1,815,818     $ 1,939,979       (6.4 )%
Net loans
     1,135,048       1,199,373       (5.4 )     1,135,048       1,199,373       (5.4 )
Deposits
     1,325,763       1,422,530       (6.8 )     1,325,763       1,422,530       (6.8 )
Shareholders’ equity
     325,211       318,490       2.1       325,211       318,490       2.1  
 
                                                
Average Balances:
                                
Assets
   $ 1,846,561     $ 1,950,003       (5.3 )%   $ 1,893,973     $ 1,997,460       (5.2 )%
Net loans
     1,147,555       1,222,302       (6.1 )     1,172,034       1,247,360       (6.0 )
Deposits
     1,359,209       1,431,788       (5.1 )     1,397,649       1,485,048       (5.9 )
Shareholders’ equity
     327,203       321,525       1.8       323,370       320,535       0.9  
 
                                                
Non-Performing Loans at period end:
                                                
Non-accrual loans
   $ 21,001       6,562       220.0 %   $ 21,001       6,562       220.0 %
Accruing loans past due 90 days or more
     2,327       2,616       (11.0 )     2,327       2,616       (11.0 )
 
                                                
Profitability ratios — annualized: *
                                                
Return on average assets
     0.95 %     1.10 %     (13.5 )%     1.08 %     1.15 %     (5.8 )%
Return on tangible assets
     1.04       1.20       (13.3 )     1.18       1.25       (5.6 )
Return on average stated equity (1)
     5.36       6.65       (19.4 )     6.32       7.13       (11.4 )
Return on average tangible equity (2)
     10.91       14.14       (22.8 )     13.22       15.33       (13.8 )
Net interest margin — fully tax equivalent
     4.14       4.03       2.7       4.07       3.92       3.8  
 
                                                
Shares outstanding at period end: *
                                                
Common
     12,622,802       12,599,508       0.2 %     12,622,802       12,599,508       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)    
    December 31,   December 31,
Assets   2006   2005
Cash and due from banks
   $ 56,225     $ 56,194  
Interest bearing deposits with other banks
     12,073       8,908  
Trading securities
     48       468  
Investment securities available for sale
     291,862       347,300  
Other investments
     12,032       6,055  
Investment in unconsolidated subsidiary
     1,625       1,625  
Loans held for sale
     204       264  
Total portfolio loans
     1,152,188       1,214,591  
Less: Allowance for loan losses
     (17,344 )     (15,482 )
 
                
Net portfolio loans
     1,134,844       1,199,109  
Premises and equipment, net
     30,861       35,997  
Other real estate owned
     512       956  
Bank-owned life insurance
     76,341       75,144  
Investment in limited partnerships
     5,763       6,612  
Core deposit intangibles
     5,641       6,729  
Other intangibles
     1,085       1,193  
Goodwill
     159,387       159,191  
Assets of discontinued operations
     —       4,599  
Other assets
     27,315       29,635  
TOTAL ASSETS
   $ 1,815,818     $ 1,939,979  
 
                
Liabilities and Shareholders’ Equity
                
Deposits:
                
Non-interest bearing
   $ 232,335     $ 236,683  
Interest bearing
     1,093,428       1,185,847  
 
                
Total deposits
     1,325,763       1,422,530  
Short-term borrowings
     65,712       90,153  
ESOP debt
     1,481       1,845  
Junior subordinated debentures
     56,193       56,692  
Long-term debt
     27,877       36,322  
Other interest bearing liabilities
     858       882  
Liabilities of discontinued operations
     —       156  
Other liabilities
     12,723       12,909  
 
                
TOTAL LIABILITIES
     1,490,607       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 -
                
12,823,471 shares at December 31, 2006;
                
12,670,323 shares at December 31, 2005;
     64,133       63,368  
Outstanding -
                
12,622,802 shares at December 31, 2006;
                
12,599,508 shares at December 31, 2005;
                
Capital surplus
     103,149       99,874  
Retained earnings
     164,653       159,583  
Accumulated other comprehensive income
     313       (1,226 )
Unearned compensation related to ESOP debt
     (859 )     (1,125 )
Cost of common stock in treasury:
                
200,669 shares at December 31, 2006;
                
70,815 shares at December 31, 2005;
     (6,178 )     (1,984 )
 
                
TOTAL SHAREHOLDERS’ EQUITY
     325,211       318,490  
 
                
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 1,815,818     $ 1,939,979  
 
                
                                 
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF INCOME        
(In thousands, except share data)        
(Unaudited)        
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2006   2005   2006   2005
Interest Income:
                                
Interest and fees on loans
   $ 20,273     $ 20,061     $ 81,103     $ 78,907  
Interest and dividends on investment securities
     3,294       3,200       12,518       11,231  
Other interest income
     308       53       1,166       1,037  
 
                                
TOTAL INTEREST INCOME.
     23,875       23,314       94,787       91,175  
Interest Expense:
                                
Interest on deposits
     6,838       5,686       25,966       21,691  
Interest on short-term borrowings
     589       832       2,731       2,336  
Interest on long-term debt and
                                
other interest bearing liabilities
     1,253       1,327       5,024       5,478  
 
                                
TOTAL INTEREST EXPENSE
     8,680       7,845       33,721       29,505  
 
                                
NET INTEREST INCOME
     15,195       15,469       61,066       61,670  
Provision for loan losses
     2,776       590       3,896       1,202  
 
                                
INCOME FROM CREDIT ACTIVITIES
     12,419       14,879       57,170       60,468  
Other Income:
                                
Service fees on deposit accounts
     2,584       2,487       10,130       9,344  
Service fees on loans
     365       391       1,635       1,380  
Earnings on bank-owned life insurance
     634       579       2,413       2,299  
Trust fees
     999       952       4,063       4,140  
Investment and insurance product sales
     732       622       2,942       3,051  
Gain on the early extinguishment of debt
     —       —       —       1,043  
Gain (loss) on sale of loans and other assets
     2,147       3       2,380       (376 )
Net gain(loss) on the sale of investment securities
     (426 )     656       389       2,327  
Other
     1,327       1,240       4,934       4,681  
 
                                
TOTAL OTHER INCOME
     8,362       6,930       28,886       27,889  
Other Expense:
                                
Salaries and employee benefits
     7,209       7,336       29,398       29,382  
Net occupancy expense
     1,111       1,103       4,318       4,208  
Equipment expense
     1,189       1,071       4,571       4,195  
Data processing service
     641       642       2,642       2,521  
Pennsylvania shares tax
     727       505       2,765       1,780  
Amortization of intangible assets
     218       234       882       825  
Other
     4,066       4,116       15,033       16,470  
 
                                
TOTAL OTHER EXPENSE
     15,161       15,007       59,609       59,381  
 
                                
Income before income taxes and discontinued operations
     5,620       6,802       26,447       28,976  
Income tax expense
     1,013       1,442       5,702       6,213  
 
                                
Income from continuing operations
     4,607       5,360       20,745       22,763  
Discontinued operations:
                                
Income from discontinued operations, net of tax
     —       (8 )     446       112  
Loss on disposal of discontinued operations, net of tax
     (221 )     —       (760 )     —  
 
                                
Income (Loss) from discontinued operations
     (221 )     (8 )     (314 )     112  
NET INCOME
   $ 4,386     $ 5,352     $ 20,431     $ 22,875  
 
                                
Net income per common share
                                
Basic
   $ 0.35     $ 0.43     $ 1.62     $ 1.82  
Diluted
   $ 0.35     $ 0.42     $ 1.62     $ 1.81  
Net income per common share from continuing operations
                                
Basic
   $ 0.37     $ 0.43     $ 1.65     $ 1.81  
Diluted
   $ 0.36     $ 0.42     $ 1.65     $ 1.80  
Net income (loss) per common share from discontinued operations
                                
Basic
     ($0.02 )     ($0.00 )     ($0.02 )   $ 0.01  
Diluted
     ($0.02 )     ($0.00 )     ($0.02 )   $ 0.01  
Weighted average shares and equivalents
                                
Basic
     12,591       12,586       12,577       12,601  
Diluted
     12,627       12,624       12,610       12,645  
Dividends declared per share
                                
Common
   $ 0.31     $ 0.31     $ 1.24     $ 1.24  
                                                                         
Omega Financial Corporation        
Consolidated Net Interest Income Analysis        
Fourth Quarter 2006 vs. Fourth Quarter 2005        
(In thousands)        
    Fourth Quarter 2006   Fourth Quarter 2005   Increase/(Decrease)
    Average           Income/   Average           Income/   Due To   Due To   Net
    Balance   Rate   Expense   Balance   Rate   Expense   Volume   Rate   Change
INTEREST EARNING ASSETS
                                                                        
Money Market Investments
                                                                        
 
                                                                        
Interest Bearing Deposits
     11,738       4.36 %     129       6,902       3.08 %     53       47.7       28.3       76  
Federal Funds Sold
     13,489       5.32 %     179       18       0.00 %     —       —       179.0       179  
 
                                                                        
Total Money Market Investments
     25,227       4.90 %     308       6,920       3.07 %     53       47.7       207.3       255  
Investment Securities
                                                                        
 
                                                                        
U.S. Treasuries and Agencies
     276,502       4.11 %     2,835       285,866       3.60 %     2,567       (86.2 )     354.2       268  
State and Municipals-Tax Free
     16,265       2.31 %     94       58,316       2.95 %     430       (258.3 )     (77.7 )     (336 )
Corporate Securities
     24,331       6.00 %     365       16,915       4.78 %     202       103.0       60.0       163  
 
                                                                        
Total Investment Securities
     317,098       4.16 %     3,294       361,097       3.55 %     3,199       (241.5 )     336.5       95  
Loans
                                                                        
 
                                                                        
Commercial Loans
     247,984       7.60 %     4,699       268,637       7.17 %     4,804       (382.6 )     277.6       (105 )
Tax Free Commercial Loans
     17,839       4.86 %     216       19,690       4.89 %     240       (22.5 )     (1.5 )     (24 )
Real Estate Loans
     665,012       6.90 %     11,477       736,583       6.37 %     11,738       (1,189.2 )     928.2       (261 )
Tax Free Real Estate Loans
     40,463       4.34 %     439       38,957       4.16 %     405       16.0       18.0       34  
Personal Loans and Leases
     191,730       7.20 %     3,442       158,436       7.28 %     2,875       598.9       (31.9 )     567  
 
                                                                        
Total Loans
     1,163,028       6.98 %     20,273       1,222,303       6.57 %     20,062       (979.4 )     1,190.4       211  
Total Earning Assets
     1,505,353       6.35 %     23,875       1,590,320       5.87 %     23,314       (1,173.2 )     1,734.2       561  
FUNDING SOURCES
                                                                        
Interest Bearing Liabilities
                                                                        
 
                                                                        
Checking with Interest
     298,946       0.79 %     586       331,951       0.62 %     516       (56.2 )     126.2       70  
Money Market Accounts
     78,236       1.52 %     297       98,761       1.43 %     351       (75.5 )     21.5       (54 )
Savings Accounts
     181,884       0.55 %     251       208,061       0.56 %     288       (32.4 )     (4.6 )     (37 )
CD’S, $100,000 and Over
     97,569       4.33 %     1,053       93,342       3.69 %     859       40.2       153.8       194  
Other Time Deposits
     470,560       3.97 %     4,652       463,403       3.18 %     3,672       57.3       922.7       980  
 
                                                                        
Total Interest Bearing Deposits
     1,127,195       2.44 %     6,839       1,195,518       1.91 %     5,686       (66.6 )     1,219.6       1,153  
Other Borrowed Funds-Short Term
     61,838       3.82 %     589       88,840       3.76 %     833       (257.1 )     13.1       (244 )
Long Term Debt
     84,303       5.90 %     1,244       92,999       5.67 %     1,318       (126.2 )     52.2       (74 )
Other Interest Bearing Liabilities
     814       3.93 %     8       847       4.25 %     9       (0.4 )     (0.6 )     (1 )
Demand Deposits
     232,014                       236,269                                          
Cash
     (49,442 )                     (53,639 )                                        
Other
     48,631                       29,486                                          
 
                                                                        
Total Funding Sources
     1,505,353       2.32 %     8,680       1,590,320       1.98 %     7,846       (450.3 )     1,284.3       834  
Net Int Spread — Net Int Income
             4.03 %     15,195               3.89 %     15,468       (722.9 )     449.9       (273 )
Net Int Spread-Tax Equivalent
             4.14 %                     4.04 %                                
Tax Equivalent Net Int Income
                     15,598                       16,047