STATE COLLEGE, Pa., Jan. 22 /PRNewswire-FirstCall/ -- Omega Financial Corporation 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.
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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 http://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 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 December 31,
2006 2005 % Change
Earnings:
Net income $4,386 $5,352 (18.0)%
Per share statistics: *
Diluted earnings $.35 $.42 (16.7)%
Dividends declared - common .31 .31 -
Book value - common 25.76 25.28 1.9
Book value - tangible 12.61 11.76 7.2
Market value - High 33.50 30.94 8.3
Low 29.48 25.42 16.0
Financial position at period end:
Assets $1,815,818 $1,939,979 (6.4)%
Net loans 1,135,048 1,199,373 (5.4)
Deposits 1,325,763 1,422,530 (6.8)
Shareholders' equity 325,211 318,490 2.1
Average Balances:
Assets $1,846,561 $1,950,003 (5.3)%
Net loans 1,147,555 1,222,302 (6.1)
Deposits 1,359,209 1,431,788 (5.1)
Shareholders' equity 327,203 321,525 1.8
Non-Performing Loans at period end:
Non-accrual loans $21,001 6,562 220.0%
Accruing loans past due 90 days or
more 2,327 2,616 (11.0)
Profitability ratios - annualized: *
Return on average assets 0.95% 1.10% (13.5)%
Return on tangible assets 1.04 1.20 (13.3)
Return on average stated equity (1) 5.36 6.65 (19.4)
Return on average tangible equity (2) 10.91 14.14 (22.8)
Net interest margin - fully tax
equivalent 4.14 4.03 2.7
Shares outstanding at period end: *
Common 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 FINANCIAL HIGHLIGHTS
(Unaudited)
(In thousands, except as indicated * )
Twelve Months Ended December 31,
2006 2005 % Change
Earnings:
Net income $20,431 $22,875 (10.7)%
Per share statistics: *
Diluted earnings $1.62 $1.81 (10.5)%
Dividends declared - common 1.24 1.24 -
Book value - common 25.76 25.28 1.9
Book value - tangible 12.61 11.76 7.2
Market value - High 34.21 34.50 (0.8)
Low 27.88 25.42 9.7
Financial position at period end:
Assets $1,815,818 $1,939,979 (6.4)%
Net loans 1,135,048 1,199,373 (5.4)
Deposits 1,325,763 1,422,530 (6.8)
Shareholders' equity 325,211 318,490 2.1
Average Balances:
Assets $1,893,973 $1,997,460 (5.2)%
Net loans 1,172,034 1,247,360 (6.0)
Deposits 1,397,649 1,485,048 (5.9)
Shareholders' equity 323,370 320,535 0.9
Non-Performing Loans at period end:
Non-accrual loans $21,001 6,562 220.0%
Accruing loans past due 90 days or
more 2,327 2,616 (11.0)
Profitability ratios - annualized: *
Return on average assets 1.08% 1.15% (5.8)%
Return on tangible assets 1.18 1.25 (5.60)
Return on average stated equity (1) 6.32 7.13 (11.4)
Return on average tangible equity
(2) 13.22 15.33 (13.8)
Net interest margin - fully tax
equivalent 4.07 3.92 3.8
Shares outstanding at period end: *
Common 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
Federal funds sold - -
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
Average Income/ Average Income/
Balance Rate Expense Balance Rate Expense
INTEREST EARNING ASSETS
Money Market Investments
Interest Bearing
Deposits 11,738 4.36% 129 6,902 3.08% 53
Federal Funds Sold 13,489 5.32% 179 18 0.00% -
Total Money Market
Investments 25,227 4.90% 308 6,920 3.07% 53
Investment Securities
U.S. Treasuries and
Agencies 276,502 4.11% 2,835 285,866 3.60% 2,567
State and Municipals-
Tax Free 16,265 2.31% 94 58,316 2.95% 430
Corporate Securities 24,331 6.00% 365 16,915 4.78% 202
Total Investment
Securities 317,098 4.16% 3,294 361,097 3.55% 3,199
Loans
Commercial Loans 247,984 7.60% 4,699 268,637 7.17% 4,804
Tax Free Commercial
Loans 17,839 4.86% 216 19,690 4.89% 240
Real Estate Loans 665,012 6.90% 11,477 736,583 6.37% 11,738
Tax Free Real Estate
Loans 40,463 4.34% 439 38,957 4.16% 405
Personal Loans and
Leases 191,730 7.20% 3,442 158,436 7.28% 2,875
Total Loans 1,163,028 6.98% 20,273 1,222,303 6.57% 20,062
Total Earning Assets 1,505,353 6.35% 23,875 1,590,320 5.87% 23,314
FUNDING SOURCES
Interest Bearing
Liabilities
Checking with Interest 298,946 0.79% 586 331,951 0.62% 516
Money Market Accounts 78,236 1.52% 297 98,761 1.43% 351
Savings Accounts 181,884 0.55% 251 208,061 0.56% 288
CD'S, $100,000 and Over 97,569 4.33% 1,053 93,342 3.69% 859
Other Time Deposits 470,560 3.97% 4,652 463,403 3.18% 3,672
Total Interest Bearing
Deposits 1,127,195 2.44% 6,839 1,195,518 1.91% 5,686
Other Borrowed Funds-
Short Term 61,838 3.82% 589 88,840 3.76% 833
Long Term Debt 84,303 5.90% 1,244 92,999 5.67% 1,318
Other Interest Bearing
Liabilities 814 3.93% 8 847 4.25% 9
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
Net Int Spread - Net
Int Income 4.03% 15,195 3.89% 15,468
Net Int Spread-Tax
Equivalent 4.14% 4.04%
Tax Equivalent Net Int
Income 15,598 16,047
Omega Financial Corporation
Consolidated Net Interest Income Analysis
Fourth Quarter 2006 vs. Fourth Quarter 2005
(In thousands)
Increase/(Decrease)
Due To Due To Net
Volume Rate Change
INTEREST EARNING ASSETS
Money Market Investments
Interest Bearing Deposits 47.7 28.3 76
Federal Funds Sold - 179.0 179
Total Money Market Investments 47.7 207.3 255
Investment Securities
U.S. Treasuries and Agencies (86.2) 354.2 268
State and Municipals-Tax Free (258.3) (77.7) (336)
Corporate Securities 103.0 60.0 163
Total Investment Securities (241.5) 336.5 95
Loans
Commercial Loans (382.6) 277.6 (105)
Tax Free Commercial Loans (22.5) (1.5) (24)
Real Estate Loans (1,189.2) 928.2 (261)
Tax Free Real Estate Loans 16.0 18.0 34
Personal Loans and Leases 598.9 (31.9) 567
Total Loans (979.4) 1,190.4 211
Total Earning Assets (1,173.2) 1,734.2 561
FUNDING SOURCES
Interest Bearing Liabilities
Checking with Interest (56.2) 126.2 70
Money Market Accounts (75.5) 21.5 (54)
Savings Accounts (32.4) (4.6) (37)
CD'S, $100,000 and Over 40.2 153.8 194
Other Time Deposits 57.3 922.7 980
Total Interest Bearing Deposits (66.6) 1,219.6 1,153
Other Borrowed Funds-Short Term (257.1) 13.1 (244)
Long Term Debt (126.2) 52.2 (74)
Other Interest Bearing Liabilities (0.4) (0.6) (1)
Demand Deposits
Cash
Other
Total Funding Sources (450.3) 1,284.3 834
Net Int Spread - Net Int Income (722.9) 449.9 (273)
Net Int Spread-Tax Equivalent
Tax Equivalent Net Int Income
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