BEOB BEO Bancorp (PK)

BEO Bancorp (OTCBB:BEOB), parent company of Bank of Eastern Oregon, reported an 87% increase in earnings in the first quarter of 2007. Earnings for 1Q2007 at $455,000, compared to $243,000 1Q2006. Loan growth up 8% year over year. Total revenue increases 16% year over year. Loan quality strong with past due loans at 0.06% of outstanding loans. Loan Loss Reserve increases to 1.26% of outstanding loans. For further information on the Company or to access Internet banking, please visit our website at http://www.beobank.com. Financial Performance: BEO Bancorp delivered record earnings in the first quarter of 2007 with net income of $455,000. This is an 87% increase over the $243,000 earned in 1Q2006. Earnings per share for the first quarter were $1.03, compared to earnings per share of $.55 in 1Q2006. �We are very pleased that the company is performing at this level. Our employees are delivering the impressive results you see in this release,� said President and CEO E. George Koffler. ROAA improved from .57% in the first quarter of 2006 to .98% in 2007 on an annualized basis. ROAE also improved year over year, increasing from 12.37% to 18.93%. Revenue and Expense Total revenue growth was a bright spot with total income of $3,658,000 in 1Q2007, compared to $3,154,000 in 1Q2006, an increase of 16%. Leading the way was total fee income, which grew from $171,000 to $237,000, a 39% increase. Both the mortgage division and the financial services division had good results adding to that total. Expenses grew at a slower pace, increasing from $2,911,000 to $3,203,000, a 10% increase. Salaries, employee benefits, and interest expense show the largest increases. Loan Growth and Credit Quality The loan portfolio showed steady growth year over year, growing from $108,954,000 to $117,968,000, an 8% increase. �There was some softness in loan growth we didn�t anticipate in the first quarter and some unexpected loan payoffs stunting totals. However, our pipeline is improving, and we are hopeful we will perform at budgeted numbers for the next three quarters,� said EVP and CCO Jeff Bailey. Credit quality remained strong with past due loans at 0.06% as a percentage of loans at quarter end, compared to no past due loans at the same time last year. Charge offs for the first quarter were minimal at $1,280. The loan loss reserve continued to strengthen with $260,000 added to the LLR in the past year and the LLR to total loans ending at 1.26% of loans, or $1,507,000. Non-accrual loans were at $121,000 at the end of the quarter. Deposit Growth and Operations Deposits increased at a modest pace year over year, growing from $162,910,000 to $165,226,000. �We continue to look for efficiencies in the operation and negotiate terms with vendors to obtain pricing advantages. We have also launched a debit card usage campaign that we believe will add to the bottom line,� said Gary Propheter, EVP and COO. Net Interest Margin and Interest Rate Risk The bank�s interest rate risk is very manageable with RSA to RSL ratios within policy limits. Regarding net interest margin, the bank is bucking the trend of NIM compression experienced by many banks. 1Q2007 NIM was 5.15%. This compares to NIM of 4.59% in 1Q2006. �We have been on a year-long cost of funds reduction initiative and it is paying dividends. We are hopeful that any market changes in the future can be managed to preserve the margin we now have,� said Mark Lemmon, EVP and CFO. Capital and Equity All measures of capital ratios at the bank and the holding company improved year over year and linked quarters. At the bank level, Tier 1 capital improved from 7.87% to 8.55% year over year. The equity of the company has grown from $8,206,000 to $9,879,000, an increase of $1,673,000, or 20% year over year. About BEO Bancorp BEO Bancorp is the holding company for Bank of Eastern Oregon, which operates 11 branches in six eastern Oregon counties. Branches are located in Arlington, Ione, Heppner, Condon, Irrigon, Boardman, Burns, John Day, Prairie City, Fossil and Moro. Bank of Eastern Oregon also operates a mortgage division, has loan production offices in Hermiston and Ontario, and offers brokerage services through BEO Financial Services. The bank�s web site is www.beobank.com. BEO BANCORP CONSOLIDATED FINANCIAL HIGHLIGHTS (DOLLAR AMOUNTS IN THOUSANDS--except earnings per share) � CONDENSED BALANCE SHEET (Unaudited) � � 03/31/07� � 03/31/06� % Change� � ASSETS Cash and due from banks $ 10,385� $ 13,269� -21.7% Federal funds sold 6,620� 3,945� 67.8% Securities, at fair value 42,250� 45,873� -7.9% Net loans 117,968� 108,954� 8.3% Premises and equipment 5,120� 5,012� 2.2% Other real estate owned -� 104� -100.0% Other assets � 6,000� � 5,965� 0.6% TOTAL ASSETS $ 188,343� $ 183,122� 2.9% � LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits Noninterest bearing $ 25,963� $ 25,497� 1.8% Interest bearing � 139,263� � 137,413� 1.3% Total deposits 165,226� 162,910� 1.4% Borrowed funds/Repurchase Accounts 4,676� 4,032� 16.0% Other liabilities � 8,562� � 7,974� 7.4% TOTAL LIABILITIES 178,464� 174,916� 2.0% � SHAREHOLDERS' EQUITY Common stock 2,202� 2,202� 0.0% Additional paid-in capital 1,487� 1,487� 0.0% Retained earnings and accumulated other comprehensive income � 6,190� � 4,517� 37.0% TOTAL SHAREHOLDERS' EQUITY � 9,879� � 8,206� 20.4% TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 188,343� $ 183,122� 2.9% � � CONDENSED STATEMENT OF INCOME (Unaudited) � Results of Operation Three Months Ending � � 03/31/07� � 03/31/06� % Change� � Interest income $ 3,170� $ 2,713� 16.8% Interest expense � 1,146� � 1,061� 8.0% Net interest income 2,024� 1,652� 22.5% Provision for possible loan losses � 60� � 50� 20.0% Net interest income after provision for possible loan losses 1,964� 1,602� 22.6% � Noninterest income 488� 441� 10.7% Noninterest expense � 1,858� � 1,776� 4.6% Income before taxes 594� 267� 122.5% Income taxes � 139� � 24� 479.2% NET INCOME $ 455� $ 243� 87.2% � Earnings per share $ 1.03� $ 0.55� 87.2% Return on Average Assets 0.98% 0.57% 71.3% Return on Average Equity 18.93% 12.37% 53.0%