ALLIANCE FINANCIAL CORPORATION 
By The fourth quarter's results were most impacted by continued growth in net interest income which offset higher credit costs and a decrease in non-interest income. The Company attributed the increase in net interest income to a higher net interest margin which resulted from lower funding costs. Credit costs were up in the fourth quarter due largely to deterioration in specific segments of the Company's equipment lease portfolio. Non-interest income decreased in the fourth quarter largely due to lower fee income in the Company's investment management business due to the sharp drop in the equity markets over the past six months.
Webb continued, "Alliance is solidly positioned as we enter 2009, with a strong balance sheet and the highest regulatory capital ratios in our history, and we will continue to meet the retail and commercial credit needs of our market in what we expect will be another challenging year."
Balance Sheet Highlights
Total assets were
Residential mortgages increased
Indirect auto loans decreased
Leases (net of unearned income) decreased
The Company's investment securities portfolio totaled
The Company had net unrealized gains of approximately
Total deposits were
Shareholders' equity was
The Company's Tier 1 leverage ratio was 9.6% and its total risk-based capital ratio was 15.1% at the end of the fourth quarter, both of which exceeded the regulatory thresholds required to be classified as a well-capitalized institution, which are 5.0% and 10.0%, respectively.
Asset Quality and the Provision for Credit Losses
Weaknesses in the local, state and national economies contributed to an increase in delinquent loans and leases in the fourth quarter. Loans and leases past due 30 days or more totaled
Nonperforming assets were
The provision for credit losses was
Net charge-offs equaled 0.74% and 0.53%, respectively, of average loans and leases during the three months and year ended
The allowance for credit losses was
Net Interest Income
Net interest income totaled
The Company's tax-equivalent net interest margin increased by 48 basis points in the fourth quarter compared with the year-ago quarter, and was up 3 basis points compared to the third quarter of 2008. The net interest margin on a tax-equivalent basis was 3.46% in the fourth quarter of 2008, compared with 2.98% in the fourth quarter of 2007 and 3.43% in the third quarter of 2008. The increase in the Company's net interest margin compared with the year-ago quarter was the result of a decrease in the Company's tax-equivalent earning asset yield of 61 basis points, which was more than offset by a decrease in its cost of funds of 122 basis points over the same period.
Net interest income for the year ended
The overall net interest margin growth in 2008 is primarily the result of the Company's ongoing balance sheet management and deposit pricing strategies and the effects of those strategies in the interest rate environment of the past year. The rate of growth in the Company's net interest margin slowed in the second half of 2008 as interest rates on a substantial portion of the Company's interest-bearing liabilities have adjusted to the lower rates in effect during the period.
Non-Interest Income and Non-Interest Expenses
Non-interest income was
Other non-interest income declined
Non-interest income comprised 32.4% of total revenue in the fourth quarter of 2008 compared with 40.0% in the year-ago quarter and 34.9% in the third quarter of 2008.
Non-interest income totaled
Non-interest expenses were
Non-interest expenses were
The Company's efficiency ratio was 67.0% in the fourth quarter of 2008, compared with 69.9% in the year-ago quarter and 67.3% in the third quarter of 2008. The Company's efficiency ratio improved to 67.6% in 2008, compared with 70.4% in the year-ago period.
The Company's effective tax rate was 17.0% for the fourth quarter and 23.2% for the year ended
Alliance Financial Corporation is an independent financial holding company with Alliance Bank, N.A. as its principal subsidiary that provides retail and commercial banking, and trust and investment services through 29 offices in
This press release contains certain forward-looking statements with respect to the financial condition, results of operations and business of Alliance Financial Corporation. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: an increase in competitive pressure in the banking industry; changes in the interest rate environment which may affect the net interest margin; changes in the regulatory environment; general economic conditions, either nationally or regionally, resulting, among other things, in a deterioration in credit quality; changes in business conditions and inflation; changes in the securities markets; changes in technology used in the banking business; our ability to maintain and increase market share and control expenses; the possibility that our investment management business will fail to perform as currently anticipated; and other factors detailed from time to time in our SEC filings.
Contact: Alliance Financial Corporation
J. Daniel Mohr, Treasurer and CFO (315) 475-4478
Alliance Financial Corporation
Consolidated Statements of Income (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007
(In thousands, except share and per share data)
Interest income:
Loans, including fees $13,525 $14,713 $54,946 $58,992
Federal funds sold and
interest bearing deposits 1 12 100 28
Securities 3,262 3,253 13,007 12,012
Total interest income 16,788 17,978 68,053 71,032
Interest expense:
Deposits:
Savings accounts 131 125 492 474
Money market accounts 1,117 1,649 4,732 6,322
Time accounts 3,247 5,205 15,277 20,547
NOW accounts 169 246 733 911
Total 4,664 7,225 21,234 28,254
Borrowings:
Repurchase agreements 312 675 1,584 2,790
FHLB advances 1,546 1,438 6,050 5,546
Junior subordinated
obligations 333 494 1,399 1,960
Total interest expense 6,855 9,832 30,267 38,550
Net interest income 9,933 8,146 37,786 32,482
Provision for credit losses 1,976 1,200 5,502 3,790
Net interest income after provision
for credit losses 7,957 6,946 32,284 28,692
Non-interest income:
Investment management income 1,953 2,348 8,670 9,180
Service charges on deposit
accounts 1,295 1,372 5,164 5,296
Card-related fees 528 521 2,106 1,942
Insurance agency income 379 520 1,583 1,855
Income from bank-owned life
insurance 250 162 856 635
Gain on the sale of loans 35 63 252 192
Gain (Loss) on sale of securities
available for sale - (12) 137 (12)
Other non-interest income 310 731 1,592 2,204
Total non-interest income 4,750 5,705 20,360 21,292
Non-interest expense:
Salaries and employee benefits 4,930 4,650 19,955 18,281
Occupancy and equipment
expense 1,878 1,677 7,032 6,765
Communication expense 193 245 791 827
Office supplies and postage
expense 276 327 1,137 1,236
Marketing expense 243 225 1,090 1,237
Amortization of intangible
assets 388 410 1,622 1,729
Professional fees 695 748 2,661 2,845
Other operating expense 1,233 1,214 4,875 4,718
Total non-interest expense 9,836 9,496 39,163 37,638
Income before income tax
expense 2,871 3,155 13,481 12,346
Income tax expense 487 715 3,124 2,869
Net income $2,384 $2,440 $10,357 $9,477
Dividends on preferred shares 47 - 47 -
Net income available to common
shareholders $2,337 $2,440 $10,310 $9,477
Share and Per Share Data
Basic average common shares
outstanding 4,492,810 4,699,106 4,542,957 4,710,530
Diluted average common
shares outstanding 4,546,099 4,752,112 4,597,624 4,775,883
Basic earnings per common
share $0.52 $0.52 $2.27 $2.01
Diluted earnings per common
share $0.51 $0.51 $2.24 $1.98
Cash dividends declared $0.26 $0.24 $1.00 $0.90
Alliance Financial Corporation
Consolidated Balance Sheets (Unaudited)
December 31, 2008 December 31, 2007
Assets (Dollars in thousands, except share and per share data)
Cash and due from banks $21,172 $30,704
Federal funds sold 26,918 -
Securities available-for-sale 299,149 272,713
Federal Home Loan Bank of NY ("FHLB")
Stock and Federal Reserve Bank ("FRB")
Stock 11,844 9,507
Loans and leases held for sale 875 3,163
Total loans and leases, net of
unearned income 910,810 895,533
Less allowance for credit losses 9,161 8,426
Net loans and leases 901,649 887,107
Premises and equipment, net 21,202 21,560
Accrued interest receivable 4,218 4,501
Bank-owned life insurance 24,940 17,084
Assets held-for-sale - 801
Goodwill 32,073 32,187
Intangible assets, net 11,528 13,183
Other assets 11,790 14,504
Total assets $1,367,358 $1,307,014
Liabilities and shareholders' equity
Liabilities:
Deposits:
Non-interest bearing 140,845 138,691
Interest bearing 797,037 806,539
Total deposits 937,882 945,230
Borrowings 238,972 200,757
Accrued interest payable 3,037 3,903
Other liabilities 17,212 15,790
Junior subordinated obligations issued
to unconsolidated subsidiary trusts 25,774 25,774
Total liabilities 1,222,877 1,191,454
Shareholders' equity:
Preferred stock 25,785 -
Common stock 4,901 4,889
Surplus 42,468 38,847
Undivided profits 81,110 75,844
Accumulated other comprehensive income 971 1,205
Directors' stock-based deferred
compensation plan (2,098) -
Treasury stock (8,656) (5,225)
Total shareholders' equity 144,481 115,560
Total liabilities and shareholders'
equity $1,367,358 $1,307,014
Common shares outstanding 4,578,910 4,710,885
Common book value per share $25.67 $24.53
Tangible common book value per share $16.15 $14.90
Alliance Financial Corporation
Consolidated Average Balances (Unaudited)
Three months Twelve months
ended December 31, ended December 31,
2008 2007 2008 2007
Earning assets: (Dollars in thousands)
Federal funds sold and interest
bearing deposits $3,882 $896 $4,856 $362
Securities(1) 301,049 280,307 288,894 268,447
Loans and leases receivable:
Residential real estate
loans(2) 310,012 273,192 294,829 263,180
Commercial loans 215,369 217,147 216,549 220,491
Leases, net of unearned
income 109,279 128,669 120,010 130,441
Indirect loans 186,058 179,306 179,762 180,688
Other consumer loans 90,644 94,454 90,675 91,502
Loans and leases receivable,
net of unearned income 911,362 892,768 901,825 886,302
Total earning assets 1,216,293 1,173,971 1,195,575 1,155,111
Non-earning assets 127,993 123,401 126,961 123,063
Total assets $1,344,286 $1,297,372 $1,322,536 $1,278,174
Interest bearing liabilities:
Interest bearing checking
accounts $108,048 $99,947 $107,204 $97,740
Savings accounts 87,145 82,525 86,239 84,764
Money market accounts 237,114 200,442 225,590 197,079
Time deposits 361,229 430,883 385,275 432,652
Borrowings 243,723 194,983 223,230 182,051
Junior subordinated obligations
issued to unconsolidated trusts 25,774 25,774 25,774 25,774
Total interest bearing
Liabilities 1,063,033 1,034,554 1,053,312 1,020,060
Non-interest bearing deposits 140,944 127,878 133,997 126,698
Other non-interest bearing
Liabilities 15,932 19,908 17,138 19,688
Total liabilities 1,219,909 1,182,340 1,204,447 1,166,446
Shareholders' equity 124,377 115,032 118,089 111,728
Total liabilities and
shareholders' equity $1,344,286 $1,297,372 $1,322,536 $1,278,174
(1) The amounts shown are amortized cost and include FHLB and FRB stock.
(2) Includes loans held for sale.
Alliance Financial Corporation
Investments, Loan and Leases, and Deposit Composition (Unaudited)
The following table sets forth the amortized cost and fair value of the
Company's available-for-sale securities portfolio:
December 30, 2008 September 30, 2008 December 31, 2007
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
Securities available-
for-sale (Dollars in thousands)
Debt securities:
U.S. Treasury
obligations $101 $102 $100 $101 $100 $101
Obligations of U.S.
government-sponsored
corporations 34,489 35,143 38,094 38,137 60,902 60,942
Obligations of states
and political
Subdivisions 89,154 91,033 90,353 90,120 87,028 88,580
Mortgage-backed
securities(1) 167,753 169,960 159,378 158,947 120,258 120,155
Total debt
securities 291,497 296,238 287,925 287,305 268,288 269,778
Stock investments:
Equity securities 1,958 1,923 1,958 1,956 1,934 1,946
Mutual funds 1,000 988 1,000 987 1,000 989
Total stock
investments 2,958 2,911 2,958 2,943 2,934 2,935
Total available-
for-sale $294,455 $299,149 $290,883 $290,248 $271,222 $272,713
(1) Comprised of pass-through debt securities collateralized by
conventional residential mortgages and guaranteed by either Fannie Mae,
Freddie Mac or Ginnie Mae, which are in turn backed by the full faith and
credit of the federal government.
The following table sets forth the composition of the Company's loan and
Lease portfolio at the dates indicated:
December 31, 2008 September 30, 2008 December 31, 2007
Amount Percent Amount Percent Amount Percent
Loan and lease composition (Dollars in thousands)
Residential real
estate loans $314,039 34.6% $305,302 33.5% $273,465 30.6%
Commercial loans 214,315 23.6% 215,527 23.6% 217,136 24.4%
Leases, net of
unearned income 104,710 11.6% 115,007 12.6% 131,300 14.7%
Indirect loans 182,807 20.2% 185,377 20.3% 176,115 19.7%
Other consumer
loans 90,906 10.0% 90,877 10.0% 94,246 10.6%
Total loans and
leases $906,777 100.0% $912,090 100.0% $892,262 100.0%
Net deferred
loan costs 4,033 3,940 3,271
Allowance for
credit losses (9,161) (8,875) (8,426)
Net loans and
leases $901,649 $907,155 $887,107
The following table sets forth the composition of the Company's deposits
at the dates indicated:
December 31, 2008 September 30, 2008 December 31, 2007
Amount Percent Amount Percent Amount Percent
Deposit composition
Non-interest bearing
checking $140,845 15.0% $135,359 14.3% $138,691 14.6%
Interest bearing
checking 106,292 11.3% 111,404 11.8% 101,793 10.8%
Total checking 247,137 26.3% 246,763 26.1% 240,484 25.4%
Savings 88,242 9.4% 86,419 9.1% 82,326 8.7%
Money market 247,392 26.4% 243,944 25.8% 203,074 21.5%
Time deposits 355,111 37.9% 368,283 39.0% 419,346 44.4%
Total deposits $937,882 100.0% $945,409 100.0% $945,230 100.0%
Alliance Financial Corporation
Asset Quality (Unaudited)
The following table represents a summary of delinquent loans and leases
grouped by the number of days delinquent at the dates indicated:
Delinquent loans and December 31, September 30, December 31,
leases 2008 2008 2007
$ %(1) $ %(1) $ %(1)
(Dollars in thousands)
30 days past due $11,124 1.22% $5,623 0.62% $8,633 0.97%
60 days past due 4,736 0.52% 554 0.06% 1,042 0.12%
90 days past due and
still accruing 126 0.01% 217 0.02% 39 -
Non-accrual 4,352 0.48% 4,507 0.50% 6,667 0.75%
Total $20,338 2.23% $10,901 1.20% $16,381 1.84%
(1) As a percentage of total loans and leases, excluding deferred costs
The following table represents information concerning the aggregate
amount of non-performing assets:
Non-performing assets December 31, September 30, December 31,
2008 2008 2007
Non-accruing loans and leases:
Residential real estate loans $1,506 $1,336 $1,118
Commercial loans 1,997 2,674 4,988
Leases 595 159 320
Indirect loans 101 107 83
Other consumer loans 153 231 158
Total non-accruing
loans and leases 4,352 4,507 6,667
Accruing loans and leases
delinquent 90 days or more 126 217 39
Total non-performing
loans and leases 4,478 4,724 6,706
Other real estate and
repossessed assets 657 328 229
Total non-performing assets $5,135 $5,052 $6,935
The following table summarizes changes in the allowance for credit losses
arising from loans and leases charged off, recoveries on loans and leases
previously charged off, and additions to the allowance which have been
charged to expense:
Allowance for credit losses Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007
Allowance for credit losses,
beginning of period $8,875 $7,863 $8,426 $7,029
Loans and leases
charged-off (1,877) (850) (5,639) (3,227)
Recoveries of loans and leases
previously charged-off 187 213 872 834
Net loans and leases
charged-off (1,690) (637) (4,767) (2,393)
Provision for credit losses 1,976 1,200 5,502 3,790
Allowance for credit losses,
end of period $9,161 $8,426 $9,161 $8,426
Alliance Financial Corporation
Consolidated Financial Information (Unaudited)
At or for the three At or for the twelve
months ended months ended
Key Ratios December 31, December 31,
2008 2007 2008 2007
Return on average assets 0.70% 0.75% 0.78% 0.74%
Return on average equity 7.52% 8.49% 8.73% 8.48%
Return on average common
equity 7.74% 8.49% 8.80% 8.48%
Yield on earning assets 5.72% 6.33% 5.89% 6.36%
Cost of funds 2.58% 3.80% 2.87% 3.78%
Net interest margin (tax
equivalent) (1) 3.46% 2.98% 3.36% 3.02%
Non-interest income to
total income (2) 32.35% 40.01% 34.81% 39.29%
Efficiency ratio (3) 66.99% 69.93% 67.57% 70.35%
Common dividend payout
ratio (4) 50.98% 47.06% 44.64% 45.45%
Net loans and leases
charged-off to average
loans and leases,
annualized 0.74% 0.29% 0.53% 0.27%
Provision for credit losses
to average loans and
leases, annualized 0.87% 0.54% 0.61% 0.43%
Allowance for credit losses
to total loans and leases 1.01% 0.94% n/a n/a
Allowance for credit losses
to nonperforming loans
and leases 204.6% 125.7% n/a n/a
Nonperforming loans and
leases to total loans and
leases 0.49% 0.75% n/a n/a
Nonperforming assets to
total assets 0.38% 0.53% n/a n/a
(1) Tax equivalent net interest income divided by average earning assets
(2) Non-interest income (net of realized gains and losses on securities
and Gain on lease prepayment) divided by the sum of net interest
income and non-interest income (net of realized gains and losses on
securities and gain on lease prepayment)
(3) Non-interest expense divided by the sum of net interest income and
non-interest income (net of realized gains and losses on securities)
(4) Cash dividends declared per common share divided by diluted earnings
per common share
Alliance Financial Corporation
Selected Quarterly Financial Data (Unaudited)
2008 2007
Fourth Third Second First Fourth
(Dollars in thousands, except share and per share data)
Interest income $16,788 $16,734 $16,980 $17,551 $17,978
Interest expense 6,855 7,155 7,473 8,784 9,832
Net interest income 9,933 9,579 9,507 8,767 8,146
Provision for credit
Losses 1,976 849 1,311 1,366 1,200
Net interest income
after provision for
credit losses 7,957 8,730 8,196 7,401 6,946
Other non-interest
income 4,750 5,134 5,287 5,185 5,705
Other non-interest
Expense 9,836 9,899 9,630 9,794 9,496
Income before income
tax expense 2,871 3,965 3,853 2,792 3,155
Income tax expense 487 955 966 716 715
Net income $2,384 $3,010 $2,887 $2,076 $2,440
Net income available to
common shareholders $2,337 $3,010 $2,887 $2,076 $2,440
Stock and related per share data
Basic earnings per
common share $0.52 $0.66 $0.63 $0.45 $0.52
Diluted earnings per
common share $0.51 $0.65 $0.63 $0.45 $0.51
Basic weighted average
common shares
outstanding 4,492,810 4,545,357 4,556,157 4,578,027 4,699,106
Diluted weighted
average common
shares
outstanding 4,546,099 4,597,452 4,613,726 4,636,012 4,752,112
Cash dividends
paid per common
share $0.26 $0.26 $0.24 $0.24 $0.24
Common dividend
payout ratio (1) 50.98% 40.00% 38.10% 53.33% 47.06%
Common book value $25.67 $25.14 $24.84 $24.94 $24.53
Tangible common book
value (2) $16.15 $15.54 $15.21 $15.27 $14.90
Capital Ratios
Holding Company
Tier 1 leverage ratio 9.62% 7.58% 7.41% 7.37% 7.53%
Tier 1 risk based
capital 14.05% 10.72% 10.73% 10.36% 10.64%
Total risk based
capital 15.08% 11.71% 11.71% 11.27% 11.59%
Bank
Tier 1 leverage ratio 8.97% 7.25% 7.00% 6.92% 7.26%
Tier 1 risk based
capital 13.15% 10.28% 10.18% 9.85% 10.34%
Total risk based
capital 14.19% 11.27% 11.17% 10.78% 11.30%
Selected ratios
Return on average
assets 0.70% 0.92% 0.87% 0.63% 0.75%
Return on average
equity 7.52% 10.42% 9.93% 7.15% 8.49%
Return on average
common equity 7.74% 10.42% 9.93% 7.15% 8.49%
Yield on earning assets 5.72% 5.85% 5.89% 6.12% 6.33%
Cost of funds 2.58% 2.75% 2.82% 3.35% 3.80%
Net interest margin
(tax equivalent) (3) 3.46% 3.43% 3.39% 3.15% 2.98%
Non-interest income
to total income (4) 32.35% 34.89% 35.74% 36.32% 40.01%
Efficiency ratio (5) 66.99% 67.28% 65.09% 71.14% 69.93%
Asset quality ratios
Net loans and leases
charged off to average
loans and leases,
annualized 0.74% 0.28% 0.37% 0.72% 0.29%
Provision for credit
losses to average loans
and leases, annualized 0.87% 0.38% 0.58% 0.61% 0.54%
Allowance for credit
losses to total loans
and leases 1.01% 0.97% 0.96% 0.93% 0.94%
Allowance for credit
losses to non-performing
loans and leases 204.6% 187.9% 148.4% 176.7% 125.7%
Non-performing loans
and leases to total
loans and leases 0.49% 0.52% 0.65% 0.52% 0.75%
Non-performing assets
to total assets 0.38% 0.37% 0.45% 0.36% 0.53%
(1) Cash dividends declared per common share divided by diluted earnings
per common share
(2) Shareholders' equity, excluding preferred shareholders' equity, less
goodwill and intangible assets divided by common shares outstanding
(3) Tax equivalent net interest income divided by average earning assets
(4) Non-interest income (net of realized gains and losses on securities)
divided by the sum of net interest income and non-interest income
(net of realized gains and losses on securities and gain on lease
prepayment)
(5) Non-interest expense divided by the sum of net interest income and
non-interest income (net of realized gains and losses on securities)
SOURCE Alliance Financial Corporation
