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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-13599
 OMEGA FINANCIAL CORPORATION
  Pennsylvania
    
    25-1420888(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 366 Walker Drive, State College, PA 16801
  (814) 231-7680
  Not applicable
  þ o
  o þ o
  o þ




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##### 



INDEX TO QUARTERLY REPORT ON FORM 10-Q
OMEGA FINANCIAL CORPORATION
 FORWARD LOOKING STATEMENTS DISCLOSURE
    
    
    3PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets  March 31, 2007 (unaudited) and December 31, 2006
    
    
    4Consolidated Statements of Income (unaudited)  for the three-month periods ended March 31, 2007 and 2006
    
    
    6Consolidated Statements of Cash Flows (unaudited)  for the three-month periods ended March 31, 2007 and 2006
    
    
    8Notes to the Consolidated Financial Statements (unaudited)
    
    
    10Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    30Item 1A.
    
    Risk Factors
    
    
    30Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3.
    
    Defaults Upon Senior Securities
    
    
    31Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    31Item 5.
    
    Other Information
    
    
    32Item 6.
    
    Exhibits
    
    
    32SIGNATURES
    
    
    33EXHIBIT INDEX
    
    
    34FORM OF RESTRICTED STOCK UNIT AWARD AGREEMENTCERTIFICATION OF CHIEF EXECUTIVE OFFICERCERTIFICATION OF CHIEF FINANCIAL OFFICERCERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350
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OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)
    
    
    (Note A)AssetsCash and due from banks
    
    $
    49,798
    
    
    $
    56,225Interest bearing deposits with other banks
    
    
    10,695
    
    
    
    12,073Federal funds sold
    
    
    11,400
    
    
    
    Trading securities
    
    
    51
    
    
    
    48Investment securities available for sale
    
    
    278,437
    
    
    
    291,807Other investments
    
    
    12,152
    
    
    
    12,087Investment in unconsolidated subsidiary
    
    
    1,625
    
    
    
    1,625Loans held for sale
    
    
    
    
    
    
    204Total portfolio loans
    
    
    1,150,670
    
    
    
    1,152,188Less: Allowance for loan losses
    
    
    (17,679
    )
    
    
    (17,344
    )Net portfolio loans
    
    
    1,132,991
    
    
    
    1,134,844Premises and equipment, net
    
    
    30,324
    
    
    
    30,861Other real estate owned
    
    
    548
    
    
    
    512Bank-owned life insurance
    
    
    76,981
    
    
    
    76,341Investment in limited partnerships
    
    
    5,606
    
    
    
    5,763Core deposit intangibles
    
    
    5,457
    
    
    
    5,641Other intangibles
    
    
    1,057
    
    
    
    1,085Goodwill
    
    
    159,408
    
    
    
    159,387Other assets
    
    
    27,025
    
    
    
    27,315TOTAL ASSETS
    
    $
    1,803,555
    
    
    $
    1,815,818
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OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)
    
    
    (Note A)Liabilities and Shareholders EquityDeposits:Non-interest bearing
    
    $
    230,482
    
    
    $
    232,335Interest bearing
    
    
    1,079,323
    
    
    
    1,093,428Total deposits
    
    
    1,309,805
    
    
    
    1,325,763Short-term borrowings
    
    
    64,006
    
    
    
    65,712ESOP debt
    
    
    1,385
    
    
    
    1,481Junior subordinated debentures
    
    
    56,069
    
    
    
    56,193Long-term debt
    
    
    32,524
    
    
    
    27,877Other interest bearing liabilities
    
    
    853
    
    
    
    858Other liabilities
    
    
    11,196
    
    
    
    12,723TOTAL LIABILITIES
    
    
    1,475,838
    
    
    
    1,490,607Shareholders EquityPreferred stock, par value $5.00 per share: Authorized - 5,000,000 shares, none issuedCommon 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
    
    
    
    64,133Outstanding

12,645,736 shares at March 31, 2007;
12,622,802 shares at December 31, 2006Capital surplus
    
    
    103,888
    
    
    
    103,149Retained earnings
    
    
    166,332
    
    
    
    164,653Accumulated other comprehensive income
    
    
    454
    
    
    
    313Unearned 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
    
    
    
    325,211TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,803,555
    
    
    $
    1,815,818
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OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Interest Income:Interest and fees on loans
    
    $
    19,823
    
    
    $
    19,837Interest and dividends on investment securities
    
    
    3,345
    
    
    
    3,104Other interest income
    
    
    172
    
    
    
    101TOTAL INTEREST INCOME
    
    
    23,340
    
    
    
    23,042Interest Expense:Interest on deposits
    
    
    6,452
    
    
    
    5,895Interest on short-term borrowings
    
    
    723
    
    
    
    771Interest on long-term debt and
other interest bearing liabilities
    
    
    1,241
    
    
    
    1,264TOTAL INTEREST EXPENSE
    
    
    8,416
    
    
    
    7,930NET INTEREST INCOME
    
    
    14,924
    
    
    
    15,112Provision for loan losses
    
    
    610
    
    
    
    120INCOME FROM CREDIT ACTIVITIES
    
    
    14,314
    
    
    
    14,992Other Income:Service fees on deposit accounts
    
    
    2,397
    
    
    
    2,354Service fees on loans
    
    
    327
    
    
    
    382Earnings on bank-owned life insurance
    
    
    640
    
    
    
    607Trust fees
    
    
    1,093
    
    
    
    1,120Investment and insurance product sales
    
    
    851
    
    
    
    923Gain on sale of loans and other assets
    
    
    78
    
    
    
    57Net gains on the sale of investment securities
    
    
    375
    
    
    
    62Other
    
    
    1,368
    
    
    
    1,166TOTAL OTHER INCOME
    
    
    7,129
    
    
    
    6,671Other Expense:Salaries and employee benefits
    
    
    7,217
    
    
    
    7,484Net occupancy expense
    
    
    1,055
    
    
    
    1,105Equipment expense
    
    
    1,135
    
    
    
    1,128Data processing service
    
    
    610
    
    
    
    645Pennsylvania shares tax
    
    
    786
    
    
    
    712Amortization of intangible assets
    
    
    211
    
    
    
    221Other
    
    
    3,034
    
    
    
    3,579TOTAL OTHER EXPENSE
    
    
    14,048
    
    
    
    14,874Income before income taxes and discontinued
operations
    
    
    7,395
    
    
    
    6,789Income tax expense
    
    
    1,812
    
    
    
    1,483Income from continuing operations
    
    
    5,583
    
    
    
    5,306Discontinued operations:Income from discontinued operations, net of tax
    
    
    
    
    
    
    37NET INCOME
    
    $
    5,583
    
    
    $
    5,343
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OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
 Three Months EndedMarch 31,2007
    
    2006Net income per common shareBasic
    
    $
    0.44
    
    
    $
    0.42Diluted
    
    $
    0.44
    
    
    $
    0.42Net income per common share from continuing operationsBasic
    
    $
    0.44
    
    
    $
    0.42Diluted
    
    $
    0.44
    
    
    $
    0.42Net income per common share from discontinued
operationsBasic
    
    $
    0.00
    
    
    $
    0.00Diluted
    
    $
    0.00
    
    
    $
    0.00Weighted average shares and equivalentsBasic
    
    
    12,642
    
    
    
    12,586Diluted
    
    
    12,665
    
    
    
    12,634Dividends declared per shareCommon
    
    $
    0.31
    
    
    $
    0.31
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OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 312007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    5,583
    
    
    $
    5,343Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    1,486
    
    
    
    1,319Provision for loan losses and off-balance sheet reserve
    
    
    595
    
    
    
    139Gain on sale of investment securities
    
    
    (375
    )
    
    
    (62
    )Gain on sale of fixed assets and other property owned
    
    
    (78
    )
    
    
    (34
    )Provision for deferred income tax
    
    
    241
    
    
    
    1,427Increase in cash surrender value of bank owned life insurance
    
    
    (640
    )
    
    
    (607
    )Increase in interest receivable and other assets
    
    
    (1,504
    )
    
    
    (3,698
    )Decrease in interest payable
    
    
    (556
    )
    
    
    (1,688
    )Increase in taxes payable
    
    
    1,522
    
    
    
    51Amortization of deferred net loan fees
    
    
    (62
    )
    
    
    (80
    )Deferral of net loan fees
    
    
    30
    
    
    
    53Decrease in accounts payable and accrued expenses
    
    
    (1,006
    )
    
    
    (35
    )Total adjustments
    
    
    (347
    )
    
    
    (3,215
    )Net cash provided by operating activities
    
    
    5,236
    
    
    
    2,128Cash flows from investing activities:Investment securities available for sale:Proceeds from sales
    
    
    496
    
    
    
    1,770Proceeds from maturities
    
    
    53,156
    
    
    
    11,205Cash used for purchases
    
    
    (39,796
    )
    
    
    (679
    )Proceeds from sale of Trading Securities
    
    
    
    
    
    
    435Net change in interest bearing deposits with other banks
    
    
    1,378
    
    
    
    (1,286
    )Decrease in loans and leases
    
    
    527
    
    
    
    11,433Gross proceeds from sale of loans and leases
    
    
    795
    
    
    
    2,312(Investment in) return of capital from limited partnership
    
    
    (45
    )
    
    
    32Capital expenditures
    
    
    (429
    )
    
    
    (409
    )Proceeds from sale of fixed assets and other property owned
    
    
    141
    
    
    
    96Increase in federal funds sold
    
    
    (11,400
    )
    
    
    (6,275
    )Net cash provided by investing activities
    
    
    4,823
    
    
    
    18,634
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OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 312007
    
    
    2006Cash flows from financing activities:Net change in demand deposits, checking with interest and savings
    
    
    4,826
    
    
    
    (6,730
    )Net Change in time deposits
    
    
    (20,940
    )
    
    
    8,495Decrease in short-term borrowings, net
    
    
    (1,706
    )
    
    
    (22,386
    )Issuance of long term debt
    
    
    5,000
    
    
    
    1,500Principal payment on long term debt
    
    
    (353
    )
    
    
    (331
    )Net change in other interest bearing liabilities
    
    
    (5
    )
    
    
    (70
    )Dividends paid
    
    
    (3,923
    )
    
    
    (3,936
    )Proceeds from exercise of stock options
    
    
    904
    
    
    
    1,931Acquisition of treasury stock
    
    
    (289
    )
    
    
    (2,648
    )Net cash used in financing activities
    
    
    (16,486
    )
    
    
    (24,175
    )Net decrease in cash and cash equivalents
    
    $
    (6,427
    )
    
    $
    (3,413
    )Cash and cash equivalents at beginning of period
    
    $
    56,225
    
    
    $
    56,194Cash and cash equivalents at end of period
    
    
    49,798
    
    
    
    52,781Net decrease in cash and cash equivalents
    
    $
    (6,427
    )
    
    $
    (3,413
    )Supplemental InformationInterest paid
    
    $
    8,972
    
    
    $
    9,618Income taxes paid
    
    
    40
    
    
    
    26Supplemental schedule of non-cash investing and financing activities:Transfers of loans to other real estate owned
    
    $
    75
    
    
    $
    355
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OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
 
   A.
    
    Basis of PresentationThe accompanying Consolidated Financial Statements include Omega Financial Corporation
(Omega, the Company or the Corporation), a financial holding company, and the combined
results of its wholly owned banking and non-banking subsidiaries. The accompanying unaudited
financial statements have been prepared in accordance with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, including normal recurring
accruals, considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2007 are not necessarily indicative of the
results that may be experienced for the fiscal year ending December 31, 2007 or any other
interim period. The consolidated balance sheet as of December 31, 2006 has been extracted
from the audited financial statements included in the Companys 2006 Annual Report on Form
10-K. For further information, refer to the Consolidated Financial Statements and Footnotes
included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2006.B.
    
    Significant Accounting PoliciesThe following significant accounting policies should be read in conjunction with the Summary
of Significant Accounting Policies included in the notes to consolidated financial
statements included in the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2006.Allowance for loan lossesFor financial reporting purposes, the provision for loan losses charged to current operating
income is based on managements estimates, and actual losses may vary from estimates. These
estimates are reviewed and adjusted at least quarterly and are reported in earnings in the
periods in which they become known. In determining the adequacy of the allowance for loan
losses, management makes specific allocations to watch list loans and pools of non-watch
list loans for various credit risk factors, including the composition and growth of the loan
portfolio, overall portfolio quality, levels of delinquent loans, specific problem loans,
prior loan loss experience and current economic conditions that may affect a borrowers
ability to pay. The loan loss provision for federal income tax purposes is based on current
income tax regulations, which allow for deductions equal to net charge-offs.Goodwill and other intangible assetsGoodwill represents the excess of the cost of an acquisition over the fair value of the net
assets acquired. Other intangible assets represent purchased assets that also lack physical
substance but can be separately distinguished from goodwill because of contractual or other
legal rights or because the asset is capable of being sold or exchanged either on its own or
in combination with a related contract, asset or liability. It is Omegas policy that
goodwill be tested at least annually for impairment at the reporting unit level. Goodwill
impairment is measured by comparing the implied fair value of goodwill to its carrying
value.Intangible assets with finite lives include core deposits and customer relationships.
Intangible assets are subject to impairment testing whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Core deposit and
customer relationship intangibles are amortized over a period of time that represents their
expected life using a method of amortization that reflects the pattern of economic benefit.
Impairment of intangible assets is measured as the difference between present value of
future cash flows and its carrying value.
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Stock-based compensationIn December 2004, the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards No. 123 (revised 2004), Share-Based Payments (SFAS 123R), an
amendment to SFAS 123, Accounting for StockBased Compensation. SFAS 123R establishes
accounting requirements for share-based compensation to employees and carries forward prior
guidance on accounting for awards to non-employees. The provisions of this statement became
effective January 1, 2006 for all equity awards granted after the effective date and for
vesting or modifications of previously issued awards. SFAS 123R requires an entity to
recognize compensation expense based on an estimate of the number of awards expected to
vest, exclusive of awards expected to be forfeited. The Corporation adopted SFAS 123R on
January 1, 2006, on a modified prospective basis. At December 31, 2005, all awards
previously granted by Omega were fully vested and no additional grants were awarded as of
December 31, 2006; therefore, there was no related expense recognized in 2006. Omega granted
awards in 2007, resulting in the recognition of $18,000 in compensation expense.Omega has six stock-based compensation plans, which provide for the granting of stock
options and other stock-based awards to both employees and/or directors. The plans include
the Employee Stock Purchase Plan (ESPP), the Stock Option Plan (1986) (the 1986 Plan),
the 1996 Employee Stock Option Plan (the 1996 Plan), the 2006 Equity Incentive Plan (the
2006 Plan), the Non-Employee Director Stock Option Plan (1994) (the 1994 Plan) and the
2004 Stock Option Plan for Non-Employee Directors (the 2004 Plan).No options have been issued under any of these plans in 2006 and all options previously
issued were vested prior to January 1, 2006. Therefore, no compensation expense was
recognized in 2006.The ESPP provides for options to purchase common stock of Omega to all employees of Omega
and its subsidiaries who meet certain service requirements. ESPP
options outstanding at March 31, 2007 have a current weighted-average exercise price of
$32.02 and a weighted average remaining contractual life of 2.05 years. There were 94,779
options outstanding as of March 31, 2007 and all of these options are exercisable.The 1986 Plan, the 1996 Plan and the 2006 Plan (collectively, the SOPs or the Plans)
provide options to purchase common stock of Omega to officers and key employees. Awards
under the 2006 Plan can also be granted to Omegas directors. The 2006 Plan also authorizes
awards of stock, restricted stock, restricted stock units and other equity awards. No
additional grants will be made under the 1986 and 1996 Plans because future grants will be
made only under the 2006 Plan. The SOPs options outstanding at March
31, 2007 had a weighted average exercise price of $33.16 and a weighted average remaining
contractual life of 4.36 years. As of March 31, 2007, there are 422,210 options outstanding
under these plans and all are exercisable. In 2007, 2,553 restricted stock units were issued
under the 2006 Plan.The 1994 Plan and the 2004 Plan (collectively, the Director Plans) provide options to
purchase common stock of Omega to the Corporations directors. No additional awards will be
granted under the Director Plans as future options to directors will be granted under the
2006 Plan. Director Plan options outstanding at March 31, 2007 had a weighted average
exercise price of $32.31 and an average remaining contractual life of 4.65 years. As of
March 31, 2007, 23,264 of these options were outstanding and exercisable.
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A summary of the status of Omegas stock-based compensation plans as of March 31, 2007 is
presented below:
 ESPP
    
    
    SOPsWeighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding, December 31, 2006
    
    
    107,284
    
    
    $
    31.85
    
    
    
    455,887
    
    
    $
    32.94Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (8,050
    )
    
    
    26.80
    
    
    
    (24,889
    )
    
    
    27.64Forfeited
    
    
    (4,455
    )
    
    
    31.37
    
    
    
    (8,788
    )
    
    
    37.57Outstanding, March 31, 2007
    
    
    94,779
    
    
    $
    32.02
    
    
    
    422,210
    
    
    $
    33.16Options exercisable at March 31, 2007
    
    
    94,779
    
    
    
    
    
    
    
    422,210
 Director PlansWeighted-AverageExerciseShares
    
    
    PriceOutstanding, December 31, 2006
    
    
    23,264
    
    
    $
    32.31Granted
    
    
    Exercised
    
    
    Forfeited
    
    
    Outstanding, March 31, 2007
    
    
    23,264
    
    
    $
    32.31Options exercisable at March 31, 2007
    
    
    23,264
 The following table summarized information about Restricted Stock Unit (RSU) activity for the three
months ended March 31, 2007:
 WeightedNumber of
    
    
    AverageRestricted
    
    
    Grant DateStock
    
    
    Fair ValueUnits
    
    
    Per ShareOutstanding but not vested at December 31, 2006
    
    
    
    
    
    $
    Awarded
    
    
    2,553
    
    
    
    28.59Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding but not vested at March 31, 2007
    
    
    2,553
    
    
    $
    28.59
 At March 31, 2007, there was approximately $54,000 of total unrecognized compensation cost related
to non-vested RSUs granted under our stock plan which is expected to be recognized by December 31,
2007. Compensation expense related to RSUs for the three months ended March 31, 2007 was $18,000
And is included in compensation expense.
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ReclassificationCertain amounts in the Consolidated Statements of Income for period ended March 31, 2006
have been reclassified to segregate results associated with discontinued operations and to
conform to the 2007 presentation. The reclassification had no impact on net income.C.
    
    Discontinued OperationsOn September 15, 2006, the Corporation completed the sale of Sentry Trust Company, a
non-depository trust company. The results of Sentry Trust are presented as discontinued operations on the consolidated
statements of income. The following is a summary of the income from discontinued operations
for the three months ended March 31, 2006 (in thousands).
 March 31,2006Other Income:Trust fees
    
    $
    463Investment and insurance product sales
    
    
    22Total other Income
    
    
    485Other expense:Salaries and employee benefits
    
    
    269Net occupancy expense
    
    
    5Equipment expense
    
    
    11Pennsylvania shares tax
    
    
    21Amortization of intangible assets
    
    
    40Other
    
    
    80Total other expense
    
    
    426Income from discontinued operations before taxes
    
    
    59Income tax expense
    
    
    22Income from discontinued operations
    
    $
    37
 The following is a summary of the cash flows from discontinued operations for the three
months ended March 31, 2006 (in thousands).
 March 31,2006Net cash provided by operating activities
    
    $
    153Net cash used in investing activities
    
    
    (547
    )Net cash provided by (used in) financing activities
    
    
    Net decrease in cash and cash
equivalents of discontinued operations
    
    $
    (394
    )
 D.
    
    Commitments, Contingent Liabilities and GuaranteesThe Corporation has numerous off-balance sheet loan obligations that exist in order to meet
the financing needs of its customers. These include commitments to extend credit, unused
lines of credit, and standby letters of credit.Standby letters of credit are instruments issued by the Corporations bank subsidiary that
guarantee the beneficiary payment by the bank in the event of default by the banks customer
in the non-performance of an obligation or service. Most standby letters of credit are
issued for one-year periods. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers. The bank
holds collateral supporting those commitments for which collateral is deemed necessary. At
March 31, 2007, standby letters of credit issued and outstanding amounted to $29.3 million
compared to $29.9 million on December 31, 2006. The fair market value of the standby letters
of credit at
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both March 31, 2007 and December 31, 2006 was $0.2 million. The fair market
value of standby letters of credit is recorded as a liability in accordance with FIN 45.
 At March 31, 2007, the bank had $277.8 million outstanding in loan commitments and other
unused lines of credit extended to its customers. Of this amount $198.5 million, or 71.4%,
were commercial commitments. The remaining amounts of $79.4 million were commitments to
consumers for mortgage and home equity loans and personal lines of credit.Omegas Employee Stock Ownership Plan (ESOP) incurred debt in 1990 of $5.0 million, which
is collateralized by a mortgage on the Corporations administrative center and the
Corporations guarantee. As of March 31, 2007, the balance of the ESOP debt was $1.4 million
as compared to $1.5 million at December 31, 2006.E.
    
    Investment SecuritiesThe following schedule presents the composition of the investment portfolio as of March 31,
2007 and December 31, 2006 (in thousands).
 Securities Classified as Available for SaleGross
    
    
    Gross
    
    
    EstimatedMarch 31, 2007
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury securities and obligations of other
U.S. Government agencies and corporations
    
    $
    177,354
    
    
    $
    292
    
    
    $
    (825
    )
    
    $
    176,821Obligations of state and political subdivisions
    
    
    4,540
    
    
    
    
    
    
    
    (35
    )
    
    
    4,505Corporate and other securities
    
    
    3,185
    
    
    
    7
    
    
    
    (19
    )
    
    
    3,173Mortgage-backed securities
    
    
    86,757
    
    
    
    112
    
    
    
    (940
    )
    
    
    85,929Common Stock
    
    
    5,901
    
    
    
    2,140
    
    
    
    (32
    )
    
    
    8,009Total
    
    $
    277,737
    
    
    $
    2,551
    
    
    $
    (1,851
    )
    
    $
    278,437
 Securities Classified as Available for SaleGross
    
    
    Gross
    
    
    EstimatedDecember 31, 2006
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury securities and obligations of other
U.S. Government agencies and corporations
    
    $
    188,205
    
    
    $
    102
    
    
    $
    (1,327
    )
    
    $
    186,980Obligations of state and political subdivisions
    
    
    4,540
    
    
    
    2
    
    
    
    (46
    )
    
    
    4,496Corporate and other securities
    
    
    3,257
    
    
    
    7
    
    
    
    (25
    )
    
    
    3,239Mortgage-backed securities
    
    
    90,377
    
    
    
    111
    
    
    
    (1,129
    )
    
    
    89,359Common Stock
    
    
    4,947
    
    
    
    2,805
    
    
    
    (19
    )
    
    
    7,733Total
    
    $
    291,326
    
    
    $
    3,027
    
    
    $
    (2,546
    )
    
    $
    291,807
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The following table shows gross unrealized losses and fair value, aggregated by category and
length of time that individual investment securities have been in a continuous unrealized
loss position, at March 31, 2007 and December 31, 2006 (in thousands):
 March 31, 2007
    
    Less Than 12 Months
    
    
    12 Months or LongerFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Treasury securities and obligations of other
U.S. Government agencies and corporations
    
    $
    14,962
    
    
    $
    (57
    )
    
    $
    87,896
    
    
    $
    (768
    )Obligations of state and political subdivisions
    
    
    1,033
    
    
    
    (12
    )
    
    
    1,472
    
    
    
    (23
    )Corporate and other securities
    
    
    551
    
    
    
    (2
    )
    
    
    1,403
    
    
    
    (17
    )Mortgage-backed securities
    
    
    7,439
    
    
    
    (21
    )
    
    
    54,188
    
    
    
    (919
    )Debt securities
    
    
    23,985
    
    
    
    (92
    )
    
    
    144,959
    
    
    
    (1,727
    )Common stock
    
    
    231
    
    
    
    (7
    )
    
    
    114
    
    
    
    (25
    )Total temporarily impaired securities
    
    $
    24,216
    
    
    $
    (99
    )
    
    $
    145,073
    
    
    $
    (1,752
    )
 December 31, 2006
    
    Less Than 12 Months
    
    
    12 Months or LongerFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Treasury securities and obligations of other
U.S. Government agencies and corporations
    
    $
    25,512
    
    
    $
    (96
    )
    
    $
    136,818
    
    
    $
    (1,231
    )Obligations of state and political subdivisions
    
    
    1,178
    
    
    
    (17
    )
    
    
    1,316
    
    
    
    (29
    )Corporate and other securities
    
    
    102
    
    
    
    (2
    )
    
    
    1,586
    
    
    
    (23
    )Mortgage-backed securities
    
    
    17,283
    
    
    
    (42
    )
    
    
    56,078
    
    
    
    (1,087
    )Debt securities
    
    
    44,075
    
    
    
    (157
    )
    
    
    195,798
    
    
    
    (2,370
    )Common stock
    
    
    144
    
    
    
    (19
    )
    
    
    
    
    
    
    Total temporarily impaired securities
    
    $
    44,219
    
    
    $
    (176
    )
    
    $
    195,798
    
    
    $
    (2,370
    )
 The unrealized losses at March 31, 2007 are considered to be temporary, as the majority of
the investments are debt securities whose decline in value is due primarily to interest rate
fluctuations. As a result, management believes the payment of contractual cash flows,
including principal repayment, is not at risk. Management has the intent and ability to hold
these investments until market recovery or maturity. Debt securities with unrealized losses
for a period of less than 12 months include 6 investments in U.S. Government agency debt
securities, 4 investments in mortgage-backed securities, 4 investments in corporate
securities and 2 investments in obligations of state and municipal subdivisions. Debt
securities with unrealized losses for a period of 12 months or longer include 39 investments
in U.S. Government agency debt securities, 9 investments in corporate securities, 5
investments in obligations of state and municipal subdivisions and 36 investments in
mortgage-backed securities. Debt securities included in the above table have maturity or
pre-refund dates ranging from April 2007 to September 2022. The unrealized loss position
for each individual security ranges from .01% to 4.21% of the securities amortized cost as
of March 31, 2007. Common stock with unrealized losses for a period of less than 12 months
includes 3 investments. Unrealized losses on common stock for a period over 12 months
reflect one investment, which has been at an unrealized loss for 13 months. At this time,
management believes the impairment of this investment is temporary.
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Omegas policy requires quarterly reviews of all impaired securities. This review
includes analyzing the length of the time and the extent to which the market value has been
less than cost, the financial condition and near-term prospects of the Company, including
any specific events which may influence the operations of the issuer and the intent and
ability of the Corporation to hold its investment for a period of time sufficient to allow
for any anticipated recovery in market value.Trading securities consist of assets held in Rabbi Trusts, including mutual funds and cash
equivalents.Other investments primarily include Federal Reserve Bank and Federal Home Loan Bank stock.F.
    
    Allowance for Loan LossesAt March 31, 2007, $6.2 million of the allowance for loan losses of $17.7 million was
specifically allocated to one large commercial borrower who is working through the
bankruptcy re-organization process. This represents an increase of $0.9 million in the
amount allocated to this lending relationship, from $5.3 million at December 31, 2006.
Omega has estimated and provided for probable losses related to this $16.8 million credit.
However, evaluations of this credit are ongoing. Further developments and the resultant
analysis may cause our allocation to change in the future, and actual losses resulting from
this credit may differ significantly from current estimates.Based on the results of our analysis of the allowance for loan losses at March 31, 2007,
management believes that the allowance is adequate to provide for probable losses inherent
in the portfolio.G.
    
    Long-term DebtThe following schedule shows the composition of long-term debt (in thousands).
 March 31,
    
    
    December 312007
    
    
    2006Notes payable to Federal Home Loan Bank, with fixed rates
between 3.65% and 6.80%
    
    $
    32,524
    
    
    $
    27,877Total Long Term Debt
    
    $
    32,524
    
    
    $
    27,877ESOP Debt Guarantee
    
    $
    1,385
    
    
    $
    1,481
 H.
    
    Junior Subordinated Debt and Trust Preferred SecuritiesThe following schedule shows the composition of junior subordinated debt and trust preferred
securities. (in thousands).
 As of March 31, 2007Capital Trust I
    
    Sun Trust ITrust preferred securities
    
    $
    36,000
    
    
    $
    16,500Common securities
    
    
    1,114
    
    
    
    511Junior subordinated debt
    
    
    37,114
    
    
    
    18,955Stated maturity date
    
    
    10/18/2034
    
    
    
    2/22/2031Optional redemption date
    
    
    10/18/2009
    
    
    Annually beginning 2/22/2011At various redemption prices
 Rate
    
    5.98% until October 2009, then LIBORplus 219 basis points
    
    
    8.64
    %
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I.
    
    Comprehensive IncomeComponents of other comprehensive income consist of the following (in thousands):
 Three Months March 31, 2007
    
    
    Three Months March 31, 2006Tax
    
    
    
    
    
    
    
    
    
    
    TaxBefore
    
    
    Expense
    
    
    
    
    
    
    Before
    
    
    ExpenseTax
    
    
    or
    
    
    Net-of-Tax
    
    
    Tax
    
    
    or
    
    
    Net-of-TaxAmount
    
    
    (Benefit)
    
    
    Amount
    
    
    Amount
    
    
    (Benefit)
    
    
    AmountIncome from continuing operations
    
    $
    7,395
    
    
    
    1,812
    
    
    $
    5,583
    
    
    $
    6,789
    
    
    
    1,483
    
    
    $
    5,306Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    22
    
    
    
    37Income
    
    
    7,395
    
    
    
    1,812
    
    
    
    5,583
    
    
    
    6,848
    
    
    
    1,505
    
    
    
    5,343Other comprehensive income:Unrealized gains on available for sale securities :Unrealized holding gains (losses) arising during the period
    
    
    593
    
    
    
    208
    
    
    
    385
    
    
    
    (481
    )
    
    
    (168
    )
    
    
    (313
    )Less reclassification adjustment for gains included in net income
    
    
    (375
    )
    
    
    (131
    )
    
    
    (244
    )
    
    
    (62
    )
    
    
    (22
    )
    
    
    (40
    )Other comprehensive income (loss)
    
    
    218
    
    
    
    76
    
    
    
    142
    
    
    
    (543
    )
    
    
    (190
    )
    
    
    (353
    )Total comprehensive income
    
    $
    7,613
    
    
    $
    1,888
    
    
    $
    5,725
    
    
    $
    6,246
    
    
    $
    1,293
    
    
    $
    4,953
 J.
    
    Earnings Per ShareBasic earnings per share are computed by dividing income available to common stockholders by
the weighted average number of shares outstanding for the period. On a diluted basis, shares
outstanding are adjusted to assume the conversion of all potentially dilutive securities
into common stock (in thousands, except per share amounts.)
 Three Months EndedMarch 31,2007
    
    
    2006NumeratorIncome from continuing operations
    
    $
    5,583
    
    
    $
    5,306Income from discontinued operations
    
    
    
    
    
    
    37Net Income
    
    $
    5,583
    
    
    $
    5,343DenominatorBasic weighted-average shares outstanding
    
    
    12,642
    
    
    
    12,586Potential dilutive shares from stock-basked compensation
    
    
    19
    
    
    
    44Potential Shares required for contract settlement
    
    
    4
    
    
    
    4Dilutive weighted-average shares outstanding
    
    
    12,665
    
    
    
    12,634Earnings per share  BasicIncome from continuing operations
    
    $
    0.44
    
    
    $
    0.42Income from discontinued operations
    
    
    
    
    
    
    Net Income
    
    $
    0.44
    
    
    $
    0.42Earnings per share  DilutedIncome from continuing operations
    
    $
    0.44
    
    
    $
    0.42Income from discontinued operations
    
    
    
    
    
    
    Net Income
    
    $
    0.44
    
    
    $
    0.42
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K.
    
    Goodwill and Other Intangible AssetsThe recorded goodwill balance at March 31, 2007 was $159.4 million. A summary of intangible
assets at March 31, 2007 and December 31, 2006 follows (in thousands):
 March 31,
    
    December 31,2007
    
    2006Core deposit intangibleGross carrying amount
    
    $
    7,480
    
    
    $
    7,480Less: accumulated amortization
    
    
    2,023
    
    
    
    1,839Net carrying amount
    
    
    5,457
    
    
    
    5,641Customer relationship intangiblesGross carrying amount
    
    
    1,200
    
    
    
    1,200Less: accumulated amortization
    
    
    273
    
    
    
    245Net carrying amount
    
    
    927
    
    
    
    955Total finite-lived intangiblesGross carrying amount
    
    
    8,680
    
    
    
    8,680Less: accumulated amortization
    
    
    2,296
    
    
    
    2,084Net carrying amount
    
    $
    6,384
    
    
    $
    6,596Trade name intangible with infinite lifeGross carrying amount
    
    $
    130
    
    
    $
    130
 L.
    
    New Accounting Pronouncements
  In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157,
Fair Value Measurements (SFAS No. 157 or the Statement). The Statement was issued to
define fair value, establish a framework for measuring fair value in generally accepted
accounting principles (GAAP), and to expand fair value disclosure requirements. Prior to
issuance of this Statement, different definitions of fair value existed within GAAP and
there was limited guidance available on applying existing fair value definitions. The
statement does not require any new fair value measurements. SFAS No. 157 is effective for
fiscal years beginning after November 15, 2007, and interim periods within those fiscal
years. Management does not expect the adoption of this Statement to have a material impact
on our consolidated financial condition, results of operations or cash flows.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities, which permits entities to choose to measure eligible financial
instruments and certain other items at fair value that are not currently required to be
measured at fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings at each subsequent reporting date. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. The Company will adopt this
pronouncement in the first quarter of 2008 and is currently evaluating the impact of this
pronouncement on our consolidated financial condition, results of operations, and cash
flows.
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M.
    
    Implementation of FIN 48The Company adopted the provisions of FIN 48  Accounting for Uncertainty in Income Taxes 
an interpretation of FASB Statement No. 109, as of January 1, 2007. As a result of
implementing FIN 48, the Company completed a comprehensive review of its portfolio of
uncertain tax positions in accordance with recognition standards established by FIN 48. In
this regard, an uncertain tax position represents the Companys expected treatment of a tax
position taken in a filed tax return, or planned to be taken in a future tax return, that
has not been reflected in measuring income tax expense for financial reporting purposes. As
a result of this review, the Company adjusted the estimated value of its uncertain tax
positions by recognizing additional liabilities totaling $0.03 million through a charge to
retained earnings, and increased the carrying value of uncertain tax positions resulting
from prior acquisitions by $0.02 million through an increase of goodwill. Upon the adoption
of FIN 48, the estimated value of the Companys uncertain tax positions is a liability of
$0.36 million resulting from unrecognized net tax benefits. The liability for uncertain tax
positions is carried in other liabilities in the consolidated condensed statement of
financial position as of March 31, 2007. If the Companys positions are sustained by the
taxing authority in favor of the Company, approximately $0.33 million would be treated as a
reduction of goodwill, and the balance of $0.03 million would reduce the Companys effective
tax rate. The Company does not expect material changes to the estimated amount of liability
associated with its uncertain tax positions through January 1, 2008.The Company recognizes accrued interest and penalties related to uncertain tax
positions in other expenses on its consolidated statements of income. As of January 1, 2007,
the Company did not accrue any penalties and had accrued approximately $0.03 million for the
payment of tax-related interest.The Company files income tax returns in the U.S. federal jurisdiction, and various
state jurisdictions. The Company is no longer subject to examination by U.S. Federal taxing
authorities for years before 2002 and for all state income taxes through 2000. As of March
31, 2007, there have been no material changes to the liability for uncertain tax positions
other than to accrue an additional $0.003 million for interest expense.N.
    
    Subsequent EventOn April 30, 2007, the Federal Bankruptcy Court approved a reorganization plan for the
previously disclosed commercial borrower who was working through the bankruptcy
reorganization process. As of March 31, 2007, outstanding balances for this customer totaled
$16.8 million and $6.3 million of the allowance for loan losses was specifically allocated
to this borrower. The allowance allocated to this borrower appears adequate to cover
probable losses based on the current facts and circumstances surrounding the customers
emergence from bankruptcy. The Company continues to monitor this credit and actual losses
could be materially different from the Companys current estimate.
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OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Investment Considerations
 In analyzing whether to make, or to continue to make, an investment in Omega, investors
should consider among other factors, certain investment considerations more particularly
described in Item 1A of Part II Risk Factors in this Quarterly Report on Form 10-Q and in
the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
 Application of Critical Accounting Policies and Estimates
 The Corporations consolidated financial statements are prepared based upon the application
of U.S. generally accepted accounting principles, the most significant of which are
described in Note B to the consolidated financial statements included in this Quarterly
Report on Form 10-Q. Certain of these policies require numerous estimates and economic
assumptions, based upon information available as of the date of the financial statements. As
such, over time, they may prove inaccurate or vary and may significantly affect the
Corporations reported results and financial position for the period or in future periods.
The accounting policy for establishing the allowance for loan losses has a greater reliance
on the use of estimates, and as such has a greater possibility of producing results that
could be different than originally reported. Changes in underlying factors, assumptions or
estimates in the allowance for loan losses could have a material impact on the Corporations
future financial condition and results of operations.The allowance for loan losses is maintained at a level believed adequate by management to
absorb probable losses in the loan portfolio. Managements determination of the adequacy of
the allowance for loan losses is based upon an evaluation of individual credits in the loan
portfolio, historical loan loss experience, current economic conditions, and other relevant
factors. This determination is inherently subjective, as it requires material estimates
including the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change. The allowance for loan losses related
to loans considered to be impaired is generally evaluated based on the discounted cash flows
using the impaired loans initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans.Omegas accounting policy for goodwill and other intangibles also places significant
reliance on the use of estimates. Goodwill represents the excess of the cost of an
acquisition over the fair value of the net assets acquired. Other intangible assets
represent purchased assets that lack physical substance but that can be separately
distinguished from goodwill because of contractual or other legal rights, or because the
asset is capable of being sold or exchanged either on its own or in combination with a
related contract, asset or liability. It is Omegas policy that goodwill be tested at least
annually for impairment. Managements current analysis indicates that as of March 31, 2007,
a 9.1% decline in Omegas market capitalization would trigger further analysis of the
carrying value of goodwill, which could result in a reduction to its value and a charge to
earnings.Intangible assets with finite lives include core deposits and customer relationships.
Intangible assets are subject to impairment testing whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Core deposit and
customer relationship intangibles are amortized over a period of time that represents their
expected life using method of amortization that reflects the pattern of economic benefit.
Management estimates that consecutive annual declines of more than 10% of the acquired
customer base subsequent to March 31, 2007 could result in an impairment of the core deposit
intangible and affect Omegas operating results in future years.
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1. Operations Overview
 Three Months Ended March 31, 2007 and 2006
 Net income for the first quarter of 2007 was $5.6 million, a 4.5% increase, compared to the
same period of 2006. The increased earnings are attributable an increase in other income and
a decrease in other expense which is offset by a decrease in income from credit activities.
The decrease in income from credit activities for the first quarter of 2007 compared to the
first quarter of 2006 was due primarily to an increase in our provision for loan losses.
Other income increased when compared to the first quarter 2006 primarily due to higher
investment securities gains as well as increases in safe deposit rentals, debit card fees,
lease sales income and miscellaneous income all included in other income. Other expense
declined primarily due to lower employee costs, examination fees and professional fees.First quarter 2007 income from continuing operations before income taxes and discontinued
operations increased by $0.6 million over the same period for 2006 due to the reasons cited
above. The effective income tax rate on continuing operations increased to 24.5% in the
first quarter of 2007, versus 21.1% for the year ended December 31, 2006.During the third quarter of 2006, the Corporation finalized its disposition of Sentry Trust,
which has been accounted for as discontinued operations. First quarter 2006 income from
discontinued operations, net of tax, was $0.04 million.The following are selected key ratios for the periods indicated:
 Three Months Ended
    
    Year EndedMarch 31,
    
    December 31,2007
    
    2006
    
    2006Return on average assets (annualized)
    
    
    1.24
    %
    
    
    1.11
    %
    
    
    1.08
    %Return on average tangible assets (annualized)
    
    
    1.37
    
    
    
    1.22
    
    
    
    1.18Return on average stated equity (annualized)
    
    
    6.78
    
    
    
    6.65
    
    
    
    6.32Return on average tangible equity (annualized)
    
    
    13.68
    
    
    
    14.12
    
    
    
    13.22Dividend payout ratio
    
    
    70.22
    
    
    
    73.05
    
    
    
    76.59Average equity to average assets (stated)
    
    
    18.27
    
    
    
    16.76
    
    
    
    17.07Average equity to average assets (tangible)
    
    
    9.98
    
    
    
    8.66
    
    
    
    8.96
 Net Interest Income
 Net interest income is the largest source of operating revenue to the Corporation, and is
the difference between interest earned on interest-earning assets and the interest expense
incurred on interest-bearing liabilities. For discussion purposes, net interest margin is
adjusted to a fully taxable equivalent basis to facilitate performance comparison between
taxable and tax-exempt assets by increasing tax-exempt income by an amount equal to the
federal income taxes that would have been paid if this income had been taxable at the
applicable statutory rate.
 Three Months Ended March 31, 2007 and 2006
 Net interest income for the first quarter of 2007 was $14.9 million, a decrease of $0.2
million or 1.2% from $15.1 million in the first quarter of 2006. Net interest income
for the first quarter of 2006 included net interest earnings from the three branches sold
during the fourth quarter of 2006 of approximately $0.3 million. Despite the decline in the
level of net interest income, our net interest margin on a fully taxable equivalent basis
increased to 4.19% for the first quarter of 2007 when compared to 4.01% for the first
quarter of 2006.
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Average interest earning assets decreased by $101.8 million or 6.5% during the three months
ended March 31, 2007 compared to the same period of 2006, partially due to the sale of three
branch locations in the fourth quarter of 2006. The decreased level of interest earning
assets in the quarter ended March 31, 2007 reduced our interest income by $1.2 million.
However, this decrease was offset by a $1.5 million increase in interest income due to the
higher level of interest rates in first quarter 2007 versus first quarter 2006. The yield
on average earning assets was 50 basis points higher in the first quarter of 2007 in
comparison to the same period of 2006. Interest income was also negatively affected by lost
interest earnings of $0.3 million related to one commercial borrowing arrangement of $16.8
million which is currently on non-accrual status.Our cost of funds increased by 28 basis points in the first quarter of 2007 when compared to
the first quarter of 2006, resulting in higher interest expense of $0.5 million. Interest
expense increased $1.1 million due to the higher level of interest rates in the first
quarter of 2007 versus first quarter 2006. This increase in our cost of funds was offset, in
part, by interest savings of $0.6 million from a decrease in our average interest bearing
liabilities.The following are key net interest margin ratios (annualized):
 Three Months Ended
    
    Year EndedMarch 31,
    
    December 31,2007
    
    2006
    
    2006Yield on average earning assets
    
    
    6.42
    %
    
    
    5.92
    %
    
    
    6.14
    %Cost to fund earning assets
    
    
    2.33
    
    
    
    2.05
    
    
    
    2.18Net interest margin
    
    
    4.09
    
    
    
    3.87
    
    
    
    3.95Net interest margin  tax equivalent
    
    
    4.19
    
    
    
    4.01
    
    
    
    4.07
 Effects of Interest Rate Changes on Net Interest Income
 At March 31, 2007, Omega had $612.5 million of earning assets scheduled to reprice over the
next twelve months as compared to $713.2 million in interest-sensitive liabilities,
resulting in a negative gap of $100.7 million, or 5.6% of assets. In order to predict net
interest income at risk over the next twelve months based on hypothetical rate movements, a
rate shock simulation was performed on the balance sheet, assuming that interest rates would
increase and decrease by 100 and 200 basis points. These simulations assume no volume or mix
changes in the balance sheet. As the table below indicates, Omega is exposed to a possible
loss of income over the next twelve months if interest rates fall. There have been no
material changes in the potential amount of interest rate risk since December 31, 2006. For
example, net interest income at risk for an immediate 100 basis point decrease in rates was
$1.0 million, or 1.5%, of net interest income, as of March 31, 2007 compared to $1.0
million, or 1.6%, of net interest income at risk on December 31, 2006. Conversely, the
results suggest that an immediate 100 basis point increase in interest rates would increase
net interest income by approximately $1.0 million, or 1.6%, over a 12-month period at both
March 31, 2007 and December 31, 2006. There is no guarantee however, that the changes in net
interest income shown in this table will occur as predicted as a result of changes in
interest rates.
 
 As of
    
    As ofMarch 31, 2007
    
    December 31, 2006Change in
    
    Change in Net
    
    
    
    Change in
    
    Change in NetInterest Rates
    
    Interest
    
    Percent
    
    Interest Rates
    
    Interest
    
    Percent(Basis points)
    
    Income $
    
    Change
    
    (Basis points)
    
    Income $
    
    Change200
    
    2,045
    
    3.1%
    
    200
    
    2,133
    
    3.2%100
    
    1,021
    
    1.6%
    
    100
    
    1,068
    
    1.6%0
    
    0
    
    0
    
    0
    
    0
    
    0(100)
    
    (974)
    
    (1.5)%
    
    (100)
    
    (1,023)
    
    (1.6)%(200)
    
    (2,061)
    
    (3.1)%
    
    (200)
    
    (2,162)
    
    (3.3)%
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Loan Loss Provision
 The provision for loan losses is reflective of changes in credit quality, including activity
in non-performing loans in each quarter, as compared to the previous quarter and in
conjunction with an analysis of the overall adequacy of the allowance for loan losses.During the three months ended March 31, 2007, a loan loss provision of $0.6 million was
recorded, a $0.5 million increase over the same period of 2006. Charge offs during the
first quarter of 2007 were $0.1 million less than first quarter of 2006, while recoveries
were approximately the same for both periods. An increase in the level of non-performing
loans of $3.4 million from December 31, 2006, further deterioration in the credit quality of
a significant commercial loan, and managements quarterly analysis of the allowance for loan
losses resulted in a provision of $0.6 million in the first quarter of 2007 in order to
adequately provide for probable losses in the loan portfolio.
 Other Income and Expense
 Three months ended March 31, 2007 and 2006
 Other Income
 Total other income increased $0.5 million, or 6.9% in the first quarter of 2007 compared to
the same period of 2006, driven primarily by $0.4 million of securities gains and a $0.2
million increase in miscellaneous income (primarily debit card income and other
miscellaneous fee income). The three branch locations sold during the fourth quarter of
2006 had contributed approximately $0.1 million in non-interest income during the first
quarter of 2006.As a percentage of average assets, annualized other income (net of gains on sales of
securities, loans and other assets) was 1.58% for the first quarter of 2007, compared to
1.37% for the first quarter of 2006.
 Other Expense
 Total other expenses decreased by $0.8 million, or 5.6%, in the first quarter of 2007 when
compared to the first quarter of 2006. Primary contributions to this decrease were lower
salaries and employee benefits expenses as a result of the sale of the branch locations and
the effects of the minor workforce reductions that occurred in the fourth quarter of 2006.
The effects of the branches sold reduced non-interest expense by approximately $0.2 million
in the first quarter of 2007 compared to the same period of 2006. Additionally, during the
first quarter of 2007 the Corporation began to realize the benefits of contract savings
negotiated late in the fourth quarter of 2006 for various purchased services such as
information systems services and courier services and professional fees, such as examination
fees (which decreased due to the change by our subsidiary, Omega Bank, from a national bank
charter to a state bank charter).The Corporations efficiency ratio decreased from 67.4% for the first quarter of 2006 to
64.0% for the first quarter of 2007. As a percentage of average assets, annualized other
expenses were 3.12% and 3.10% for the quarters ended March 31, 2007 and 2006, respectively.
 Income Taxes
 Three months ended March 31, 2007 and year ended December 31, 2006
 Our effective tax rate for the three months ended March 31, 2007 increased to 24.5% from
23.9% for the year ended December 31, 2006. This increase is primarily attributable to a
decrease in the amount of tax-exempt investment income, as a result of repositioning our
investment portfolio and selling all of our tax-exempt municipal securities during the
fourth quarter of 2006. The effective tax rate remains lower than the federal statutory
rate due to some tax-exempt income on investments, the generation of income tax credits from
our investments in low-income housing partnerships and the earnings on our investments in
bank owned life insurance policies, which is non-taxable.
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##### Table of Contents



2.
    
    Consolidated Balance Sheet Review
 Overview
 Total assets at March 31, 2007 decreased by $12.3 million, a 0.7% decrease since December
31, 2006. A variety of factors resulted in this decrease, including:
 
    
    a $13.3 million decline in the investment portfolio, due to scheduled
maturities of investment securities;
    
    a decrease in our loan portfolio of $1.6 million and
    
    a $15.9 million decline in deposits, due to rate sensitive consumers
moving funds into other investment options in response to the increasing interest
rate environment.
 A.
    
    Investment Securities
 Management of the investment portfolio entails evaluation and realignment of the size and
composition of the portfolio in order to accomplish various corporate objectives, including
ensuring high asset quality, satisfying liquidity needs, achievement of desired yields and
maturities, and tax planning.Investments securities available for sale decreased by approximately $13.3 million, due
primarily to scheduled maturities in the investment portfolio. A majority of the proceeds
of the maturing investments were invested short-term in federal funds sold and in interest
bearing deposits with other banks.Total investment securities as a percentage of total assets at March 31, 2007 and December
31, 2006 were 16.2% and 16.8%, respectively. Amortized cost of securities maturing or
re-pricing in one year or less comprised 33% of the total amortized cost of investment
securities as of March 31, 2007, as compared to 43% of total investment securities as of
December 31, 2006. There was $0.7 million in investments in instruments of foreign countries
on March 31, 2007 and December 31, 2006.Trading securities consist of assets held in Rabbi Trusts, including mutual funds and cash
equivalents.Other investments primarily include Federal Reserve Bank and Federal Home Loan Bank stock.
 B.
    
    Loans
 Net loans, including loans held for sale, decreased by $1.8 million in the three month
period ended March 31, 2007, or 0.2%, when compared to net loans at December 31, 2006,
reducing the total loan portfolio, net of the allowance for loan losses, to $1.1 billion at
March 31, 2007. This slight decrease in loans is due to scheduled loan maturities, the
payoff of some non-performing loans and reduced new loan originations in some loan types in
comparison to the prior year. Increases in commercial loans and real-estate based
commercial loans were consistent with management expectations. Mortgage loans declined by
$4.7 million, as a result of scheduled repayments, some prepayments, and limited new
mortgage loan originations being held for portfolio purposes. Omega Financial Mortgage
Solutions, LLC, our joint venture with American Home Bank, became fully operational in the
first quarter of 2007. This joint venture provides the bank with the ability to offer more
mortgage products to prospective borrowers in our market areas.
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The following table shows the composition of the loan portfolio (in thousands) at March 31,
2007 in comparison to our most recent year-end, December 31, 2006 (in thousands).
 March 31,
    
    
    December 31,2007
    
    
    2006Commercial, financial and agricultural
    
    $
    253,012
    
    
    $
    250,906Real estate  commercial
    
    
    439,481
    
    
    
    432,062Real estate  construction
    
    
    16,270
    
    
    
    21,562Real estate  mortgage
    
    
    213,388
    
    
    
    218,104Home equity
    
    
    162,685
    
    
    
    164,800Personal
    
    
    44,600
    
    
    
    45,602Lease financing
    
    
    25,362
    
    
    
    23,143Unearned interest
    
    
    (4,128
    )
    
    
    (3,787
    )Total loans
    
    $
    1,150,670
    
    
    $
    1,152,392Nonaccrual loans
    
    $
    21,168
    
    
    $
    21,001
 Changes in the allowance for loan losses for the three months ended March 31, 2007 and 2006
were as follows (in thousands):
 March 31,2007
    
    
    2006Balance of allowance  beginning of period
    
    $
    17,344
    
    
    $
    15,482Loans charged off:Commercial, financial and agricultural
    
    
    86
    
    
    
    307Real estate  commercial
    
    
    
    
    
    
    Real estate  mortgage
    
    
    177
    
    
    
    25Personal and lease financing loans
    
    
    42
    
    
    
    110Total charge-offs
    
    
    305
    
    
    
    442Recoveries of loans previously charged off:Commercial, financial and agricultural
    
    
    1
    
    
    
    14Real estate  commercial
    
    
    
    
    
    
    Real estate  mortgage
    
    
    1
    
    
    
    Personal and lease financing loans
    
    
    28
    
    
    
    36Total recoveries
    
    
    30
    
    
    
    50Net charge-offs
    
    
    275
    
    
    
    392Provision for loan losses
    
    
    610
    
    
    
    120Balance of allowance, loan portfolio
    
    $
    17,679
    
    
    $
    15,210
 Omega has certain loans in its portfolio that are considered to be impaired in accordance
with SFAS No. 114 (and as amended by SFAS No. 118.) It is the policy of the Corporation to
recognize income on impaired loans on a cash basis, only to the extent that it exceeds
principal balance recovery. Following is a summary of impaired loan data as of the date of
each balance sheet presented (in thousands):
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In the table below, $16.8 million of the amount indicated for recorded investment at period
end as well as the impaired loan balance for which there is a related allowance, relates to
one large commercial borrower who is working through the bankruptcy reorganization process.
Of the $7.4 million of allowance for impaired loans as of March 31, 2007, $6.2 million was
allocated to this borrower. The total amount of allowance for impaired loans as of December
31, 2006 was $6.7 million, of which $5.3 million was allocated to this borrower.
 March 31,
    
    December 31,2007
    
    2006Impaired loans:Recorded investment at period end
    
    $
    20,400
    
    
    $
    20,272Impaired loan balance for which there is a related allowance
    
    
    20,400
    
    
    
    20,272Amount of allowance for impaired loans
    
    
    7,413
    
    
    
    6,678Impaired loan balance for which there is no related allowance
    
    
    
    
    
    
    Average recorded investment
    
    
    20,336
    
    
    
    21,867Interest income recognized (on a cash basis)
    
    $
    95
    
    
    $
    1,189
 Management performs a quantitative analysis to support the adequacy of the allowance for
loan losses. This analysis includes review of historical loss rates for loan categories,
fluctuations and trends in the amount of classified loans and economic factors. Significant
to this analysis is any change in observable trends that may be occurring relative to loans
in order to assess potential credit weaknesses. Current economic factors and trends in risk
ratings are considered in the determination and allocation of the allowance for loan losses.
The allowance for loan losses at March 31, 2007 and December 31, 2006 represented 1.54% and
1.51%, respectively, of the total loans outstanding, net of unearned interest.Set forth below is an analysis of Omegas non-performing loans as of March 31, 2007 as
compared to December 31, 2006.
 Non-performing Loans(Dollars in thousands)March 31
    
    
    December 312007
    
    
    2006Non-accrual loans
    
    $
    21,168
    
    
    $
    21,001Accruing loans past due 90 days or more
    
    
    5,796
    
    
    
    2,327Total non-performing loans
    
    $
    26,964
    
    
    $
    23,328Non-performing loans as percent of allowance
    
    
    152.5
    %
    
    
    134.5
    %
 At March 31, 2007, $6.2 million of the allowance for loan losses of $17.7 million was
specifically allocated to one large commercial borrower who is working through the
bankruptcy re-organization process. This represents an increase of $0.9 million in the
amount allocated to this lending relationship, from $5.3 million at December 31, 2006.
Omega has estimated and provided for probable losses related to this $16.8 million credit in
prior periods. However, as a result of changes in the bankruptcy proceedings, evaluations
of this credit are ongoing. Further developments and the resultant analysis may cause our
allocation to change in the future, and actual losses resulting from this credit may differ
significantly from current estimates. The total $16.8 million in outstanding loan balances
for this customer are included in the non-accrual totals above for both March 31, 2007 and
December 31, 2006.Based on the results of our analysis of the allowance for loan losses at March 31, 2007,
management believes that the allowance is adequate to provide for probable losses inherent
in the portfolio.
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C.
    
    Deposits and Other Sources of Funds
 Deposits provide the primary source of funding for loans and investment securities. As of
March 31, 2007, total deposits decreased by $16.0 million, or 1.2% as compared to December
31, 2006. The decrease in deposits since year-end 2006 has primarily been due to the
competitive rate environment for time deposits. Rate-sensitive consumers continue to take
advantage of the aggressive pricing offered by competitors in this area. Deposit balances
related to savings, money market accounts and other interest bearing checking accounts
increased since December 31, 2006, while non-interest bearing demand deposits decreased
slightly.As of March 31, 2007, non-interest bearing deposits, decreased by $1.9 million, or 0.8%.
Interest bearing accounts, including demand, savings and money market accounts, increased
by $6.7 million, or 1.2% when compared to December 31, 2006. For the same period, time
deposits decreased by $20.8 million or 3.8%.
 March 31, 2007
    
    December 31, 2006Non-interest bearing demand deposits
    
    $
    230,482
    
    
    
    17.597
    %
    
    $
    232,334
    
    
    
    17.525
    %Interest bearing demand deposits
    
    
    301,097
    
    
    
    22.988
    
    
    
    299,919
    
    
    
    22.622Savings and money market
    
    
    255,064
    
    
    
    19.473
    
    
    
    249,563
    
    
    
    18.824Time deposits less than $100,000
    
    
    436,986
    
    
    
    33.363
    
    
    
    450,882
    
    
    
    34.009Time deposits greater than $100,000
    
    
    86,177
    
    
    
    6.579
    
    
    
    93,065
    
    
    
    7.020Total Deposits
    
    $
    1,309,805
    
    
    
    100.000
    %
    
    $
    1,325,763
    
    
    
    100.000
    %
 The following table shows the composition of deposits ($ in thousands):Borrowed funds are used as an additional source of funding for loans and investment
securities. As of March 31, 2007, Omega had short-term borrowings (maturities within one
year) in the amount of $64.0 million as compared to $65.7 million at December 31, 2006,
representing a decrease of $1.7 million or 2.6%.The balance of junior subordinated debt was $56.1 million and $56.2 million at March 31,
2007 and December 31, 2006, respectively.
 D.
    
    Liquidity and Capital Resources
 Omega derives liquidity through increased customer deposits, maturities in the investment
portfolio, loan repayments and income from earning assets. When deposits are not adequate
to fund customer loan demand, liquidity needs can be met in the short-term fund market
through arrangements with our correspondent banks or through the purchase of brokered
certificates of deposit. The Bank is also a member of the Federal Home Loan Bank of
Pittsburgh, which provides another source of liquidity. The Company may from time to time
access capital markets and/or borrow funds from private investors to meet liquidity needs.
Omega actively manages its liquidity position through the Asset and Liability Management
Committee. Monthly reviews by management and quarterly reviews by the committee under
prescribed policies and procedures are designed to ensure that we will maintain adequate
levels of available funds.Management believes that the Company has adequate liquidity available to respond to current
and anticipated demands and is unaware of any trends or demands, commitments, events or
uncertainties that will materially affect the ability to maintain liquidity at satisfactory
levels for the next twelve months.The Corporation paid a cash dividend of $.31 per share on January 1 and April 1, 2007.
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3.
    
    Regulatory Capital Compliance
 Bank regulatory authorities in the United States issue risk-based capital standards. These
capital standards relate a banking companys capital to the risk profile of its assets and
provide the basis by which all banking companies and banks are evaluated in terms of capital
adequacy. The risk-based capital standards require all banks to have Tier 1 capital of at
least 4% and total capital, including Tier 1 capital, of at least 8% of risk-adjusted
assets. Tier 1 capital includes common stockholders equity and qualifying perpetual
preferred stock together with related surpluses and retained earnings. Total capital is
comprised of Tier 1 capital, limited life preferred stock, qualifying debt instruments, and
the reserves for possible loan losses. Banking regulators have also issued leverage ratio
requirements. The leverage ratio requirement is measured as the ratio of Tier 1 capital to
adjusted average assets.At March 31, 2007, Omega and Omega Bank, its banking subsidiary, each met the regulatory
definition of a well capitalized financial institution, i.e., a leverage ratio exceeding
5%, Tier 1 capital exceeding 6% and total capital exceeding 10%.
 4.
    
    Share Repurchase Program
 On January 23, 2006, the Board of Directors of Omega approved a share repurchase program
authorizing the purchase of up to 10% of Omegas outstanding common stock in the open
market. At that time there were 12,604,477 common shares outstanding with 1,260,447 shares
eligible to be repurchased. The program will remain in effect until the 10% limit is
reached; however, the Board of Directors may discontinue it at any time. During the first
quarter of 2007, 10,000 shares of stock were repurchased at an average cost of $28.17 per
share. As of March 31, 2007, 143,600 shares have been repurchased in conjunction with this
program, at an average cost of $31.17 per share.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Omega is impacted by market risks, and has procedures in place to evaluate and mitigate
these risks. These market risks and Omegas procedures are described in the Managements
Discussion and Analysis of Financial Condition and Results of Operations  Market Risk
section of the 2006 Annual Report to Shareholders attached as Exhibit 13.1 to the Companys
Form 10-K for the fiscal year ended December 31, 2006. There have been no known material
changes in the market risks that impact Omega, or its procedures relative to these risks,
since December 31, 2006.
 
 Item 4. Controls and Procedures
  The Companys management, with the participation of its chief executive officer and chief
financial officer, conducted an evaluation, as of March 31, 2007, of the effectiveness of
the Companys disclosure controls and procedures (as defined in Exchange Act Rule
13a-15(e)). Based on this evaluation, the Companys chief executive officer and chief
financial officer concluded that, as of the end of the period covered by this quarterly
report, the Companys disclosure controls and procedures were effective in reaching a
reasonable level of assurance that (i) information required to be disclosed by the Company
in the reports that it files or submits under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commissions rules and forms and (ii) information required to
be disclosed by the Company in its reports that it files or submits under the Securities
Exchange Act of 1934, as amended, is accumulated and communicated to its management,
including its principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosure.
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The Companys management, with the participation of the Companys chief executive officer
and chief financial officer, also conducted an evaluation of the Companys internal control
over financial reporting, as defined in Exchange Act Rule 13a-15(f), to determine whether
any changes occurred during the quarter ended March 31, 2007 that have materially affected,
or are reasonably likely to materially affect, the Companys internal control over financial
reporting. Based on that evaluation, there was no such change during the quarter ended
March 31, 2007.A control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within the Corporation have been
detected. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
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PART
II. Other Information
 
 Item 1. Legal Proceedings
 The Company and Omega Bank (Bank) are involved in various legal proceedings incidental to
their business. Neither the Company, the Bank nor any of their properties are subject to
any material legal proceedings, nor are any such proceedings known to be contemplated by any
governmental authority.
 
 Item 1A. Risk Factors
 Unless the context indicates otherwise, all references to we, us, our in this
subsection Risk Factors refer to the Company and the Bank. In addition to the other
information set forth in this Quarterly Report on Form 10-Q, you should carefully consider
the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2006, referred to as Form 10-K in this filing,
which could materially affect our business, financial condition or future results. The risk
factors in our Form 10-K have not materially changed other than those risk factors that are
set forth below. These changes should be read in conjunction with the risk factors included
in our Form 10-K. The risks described in our Form 10-K, as amended below, are not the only
risks we face. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our business, financial
condition and/or operating results.This Quarterly Report on Form 10-Q contains forward-looking statements that involve risk and
uncertainties. Our actual results could differ materially from those anticipated in the
forward-looking statements as a result of many factors, including the risks faced by us
described below and in our Annual Report on Form 10-K.Changes in interest rates could adversely affect our financial condition and results of
operations.The operations of financial institutions, such as us, are dependent to a large degree on net
interest income, which is the difference between interest income from loans and investments
and interest expense on deposits and borrowings. Our net interest income is significantly
affected by market rates of interest that in turn are affected by prevailing economic
conditions, by the fiscal and monetary policies of the federal government and by the
policies of various regulatory agencies. At March 31, 2007, total interest bearing
liabilities maturing or re-pricing within one year exceeded total interest earning assets
maturing or re-pricing during the same time period by $100.7 million representing a
cumulative one-year sensitivity ratio of .86. Simulation of interest rate changes suggests
that if interest rates immediately decreased 100 basis points, our net interest income would
likely decrease 1.5% over the next twelve months. Like all financial institutions, our
balance sheet is affected by fluctuations in interest rates. We closely monitor the
sensitivity of our net interest income to changes in interest rates and attempt to limit the
variability. We attempt to manage such risk by modifying investment, lending, funding or
pricing strategies. Volatility in interest rates can also result in disintermediation,
which is the flow of funds away from financial institutions into direct investments, such as
US Government and corporate securities and other investment vehicles, including mutual
funds, which, because of the absence of federal insurance premiums and reserve requirements,
generally pay higher rates of return than financial institutions.Most of our loans are secured by real estate located in our market area. If there is a
downturn in our real estate market, these borrowers may default on their loans and we may
not be able to fully recover our loans.A downturn in the real estate market could hurt our business because most of our loans are secured
by real estate. As of March 31, 2007, approximately 72.3% of the book value of our loan portfolio
consisted of loans collateralized by various types of real estate. Substantially all of our real
property collateral is located in central and northeastern Pennsylvania. Real estate values and
real estate markets are generally affected by changes in national, regional or local economic
conditions, fluctuations in interest rates and the availability of loans to potential purchasers,
changes in tax laws and other governmental statutes, regulations and policies and acts of nature.
If real estate prices decline, the value of real estate collateral securing our loans could be
reduced. Our ability to recover on defaulted loans by foreclosing and selling the real estate
collateral would then be diminished and we would be more likely to suffer losses on defaulted
loans. Any such downturn could have a material adverse effect on our business, financial condition
and results of operations.
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We have established an allowance for loan losses based on our managements estimate.
Actual losses could differ significantly from those estimates. If the allowance is not
adequate, it could have a material adverse effect on our earnings and the price of our
stock.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   (d) Maximum Number(c) Total Number
    
    (or Approximate(a) Total
    
    
    
    
    
    of Shares (or
    
    Dollar Value) ofNumber of
    
    (b) Average
    
    Units) Purchased
    
    Shares (or Units) thatShares (or
    
    Price Paid
    
    as Part of Publicly
    
    May Yet BeUnits)
    
    per Share (or
    
    Announced Plans
    
    Purchased Under thePeriod
    
    Purchased
    
    Unit)
    
    or Programs
    
    Plans or ProgramsJanuary 1, 2007 to
January 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,126,847February 1, 2007 to
February 28, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,126,847March 1, 2007 to
March 31, 2007
    
    
    10,000
    
    
    $
    28.17
    
    
    
    10,000
    
    
    
    1,116,847Total
    
    
    10,000
    
    
    $
    28.17
    
    
    
    10,000
    
    
    
    1,116,847
 
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Page 31




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##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits
 ExhibitNumber
    
    Description10.1
    
    Form of Restricted Stock Unit Awards Agreement10.2
    
    Employment Agreement with Maureen Bufalino *31.1
    
    Chief Executive Officers Rule 13a-14(a)/15d-14(a) (Section 302)
Certification31.2
    
    Chief Financial Officers Rule 13a-14(a)/15d-14(a) (Section 302)
Certification32.1
    
    Section 1350 (Section 906) Certification by Chief Executive Officer32.2
    
    Section 1350 (Section 906) Certification by Chief Financial Officer
 
 *
    
    Incorporated by reference from Exhibit 10.24 to Omegas Annual Report on
Form 10-K for the year ended December 31, 2006. Page 32




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##### Table of Contents



SIGNATURES
  OMEGA FINANCIAL CORPORATION(Registrant)May 10, 2007
    
    
    
    By:
    
    /s/ Donita R. KovalDate
    
    
    
    
    
    Donita R. KovalPresident andChief Executive OfficerMay 10, 2007
    
    
    
    
    
    /s/ Daniel L. WarfelDate
    
    
    
    
    
    Daniel L. WarfelExecutive Vice President andChief Financial Officer
 Page 33




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##### Table of Contents



10.1
    
    Form of Restricted Stock Unit Award Agreement
    
    
    3510.2
    
    Employment Agreement with Maureen Bufalino
    
    
    *31.1
    
    Chief Executive Officers Rule 13a-14(a)/15d-14(a) (Section 302) Certification
    
    
    4031.2
    
    Chief Financial Officers Rule 13a-14(a)/15d-14(a) (Section 302) Certification
    
    
    4132.1
    
    Section 1350 (Section 906) Certification by Chief Executive Officer
    
    
    4232.2
    
    Section 1350 (Section 906) Certification by Chief Financial Officer
    
    
    43
 
 *
    
    Incorporated by reference form Exhibit 10.24 to Omegas Annual Report on Form 10-K for the
year ended December 31, 2006. Page 34