ALLIANCE FINANCIAL CORPORATION 
By SYRACUSE, N.Y., Jan. 26 /PRNewswire-FirstCall/ -- Alliance Financial Corporation ("Alliance", or the "Company") (Nasdaq: ALNC), the holding company for Alliance Bank, N.A., announced today that it recorded record levels of net income for the fourth quarter and full year 2009.
Net income for the quarter ended December 31, 2009 was $3.5 million or $0.75 per diluted common share, compared with $2.4 million or $0.51 per diluted common share in the year-ago quarter. The results for the fourth quarter of 2009 included gains on sales of securities totaling $707,000 after taxes or $0.15 per diluted share which offset non-recurring expenses incurred in the quarter of approximately $265,000 after taxes or $0.06 per diluted share.
Net income was $11.4 million for the year ended December 31, 2009, compared with $10.4 million in 2008. Net income available to common shareholders was $10.4 million or $2.24 per diluted share in 2009, compared with $10.3 million or $2.21 per diluted share in 2008. Net income for 2009 included gains on sales of securities totaling $1.3 million after taxes or $0.29 per diluted share which offset non-recurring expenses of approximately $482,000 after taxes or $0.11 per diluted share. Preferred stock dividends and the accretion of the preferred stock discount were $1.1 million or $0.24 per diluted share in 2009.
Jack H. Webb, President and CEO of Alliance said, "Despite the significant increase in the expense associated with FDIC Insurance Premiums and unprecedented economic factors in 2009, Alliance achieved record net income through our continued focus on delivering quality financial products and services in Central New York, and a growth strategy designed to capitalize on the opportunities presented by the distractions and credit issues affecting many of the competitors operating in our market. In 2009, we originated more than $300 million of residential, consumer and commercial loans, which was up about 23% over 2008. Our deposit growth exceeded $137 million in 2009, and was distributed among each of our commercial, municipal and retail lines of business."
Webb continued, "We are pleased with our credit quality metrics, particularly our credit losses which have been significantly lower than industry averages over the past two years. However, as market conditions in Central New York remain weak, we will continue our high level of focus on credit quality both in originations and loan portfolio administration."
Balance Sheet Highlights
Total assets were $1.4 billion at December 31, 2009, an increase of $49.9 million or 3.6% from December 31, 2008. Securities available-for-sale increased $63.0 million in 2009 to $362.2 million at the end of 2009. Total loans and leases (net of unearned income) increased $3.4 million to $914.2 million at December 31, 2009, compared with $910.8 million at December 31, 2008. The Company's overall loan and lease portfolio growth was restrained by the planned and actively managed runoff of the lease portfolio, which decreased $36.4 million in 2009.
Residential mortgages totaled $356.9 million at December 31, 2009, compared with $314.0 million at the end of 2008. The Company originated a record $159.1 million in residential mortgages in 2009, which was a 54% increase from 2008's originations of $103.2 million. Fourth quarter originations were $25.7 million which was up 14.5% from the year-ago quarter. The Company has achieved strong residential mortgage growth over the last two years, capturing a larger share of the local conventional residential mortgage market, through a planned expansion of loan origination and servicing functions. This growth was accomplished while maintaining our commitment to traditional underwriting standards.
Indirect auto loan balances were $184.9 million as of December 31, 2009, compared with $182.8 million at the end of 2008. The Company originated $90.9 million of indirect auto loans in 2009, compared with $95.0 million in 2008. Alliance originates auto loans through a network of reputable, well established automobile dealers located in Central and Western New York. Applications received through the Company's indirect lending program are subject to the same comprehensive underwriting criteria and procedures as are employed in its direct lending programs. Credit quality metrics within this portfolio remain stable and compare favorably to the industry.
Leases (net of unearned income) continued to decrease in the quarter as a result of the Company's previously announced decision to cease new lease originations. The Company's lease portfolio decreased $36.4 million or 34.8% in 2009 to $68.2 million at the end of the year. Leases are expected to continue to run-off at the rate of approximately $6 million per quarter over the next twelve months.
Commercial loans and mortgages increased slightly in the fourth quarter and totaled $208.0 million at December 31, 2009. Originations of commercial loans (excluding lines of credit) in the fourth quarter totaled $18.9 million, compared with $17.5 million in the year-ago quarter. The Company has recently invested in the growth of the commercial business through the hiring of experienced bankers with the expectation of increasing its originations and related deposit gathering in 2010. The Company believes that the dislocation caused by the financial crisis at the nation's large banks will create opportunity for it to increase its market share in Central New York.
The Company's investment securities portfolio totaled $362.2 million at December 31, 2009, compared with $299.1 million at December 31, 2008. The Company's portfolio is comprised entirely of investment grade securities, the majority of which are rated "AAA" by one or more of the nationally recognized rating agencies. The breakdown of the securities portfolio at December 31, 2009 was 76% government-sponsored entity guaranteed mortgage-backed securities, 21% municipal securities and 2% obligations of U.S. Government-sponsored corporations. Mortgage-backed securities, which totaled $276 million at December 31, 2009, are comprised primarily of pass-through securities backed by conventional residential mortgages and guaranteed by Fannie-Mae, Freddie-Mac or Ginnie Mae, which in turn are backed by the full faith and credit of the federal government. The Company does not invest in any private-label mortgage-backed securities or securities backed by sub-prime, Alt-A or other high-risk mortgages. The Company also does not hold any preferred stock, corporate debt or trust preferred securities in its investment portfolio.
Total deposits were $1.1 billion at December 31, 2009, which was an increase of $137.8 million or 14.7% compared with December 31, 2008. Approximately 78% of the deposit increase, or $108.0 million, resulted from growth across all of our retail, commercial and municipal business lines. The Company's deposit mix continued to be weighted heavily in lower cost demand, savings and money market accounts (transaction accounts), which comprised 65.2% of total deposits at the end of the fourth quarter, compared with 62.1% at December 31, 2008. The balance of the increase in deposits in 2009 resulted from the acquisition of wholesale time deposits to fund investment portfolio growth.
Shareholders' equity was $123.9 million at December 31, 2009, compared with $124.8 million at September 30, 2009 and $144.5 million at December 31, 2008. Net income for the quarter increased shareholders' equity by $3.5 million and was partially offset by common stock dividends declared of $1.3 million or $0.28 per common share. The redemption of the preferred stock and repurchase of the warrant in connection with the Company's exit from the Treasury Department's Capital Purchase Program reduced shareholders' equity by $28.1 million in the second quarter of 2009.
The Company's Tier 1 leverage ratio was 7.55% and its total risk-based capital ratio was 13.13% at the end of the fourth quarter, both of which comfortably exceeded the regulatory thresholds required to be classified as a well-capitalized institution, which are 5.0% and 10.0%, respectively. The Company's tangible common equity capital ratio (a non-GAAP financial measure) was 5.95% at December 31, 2009.
Asset Quality and the Provision for Credit Losses
Delinquent loans and leases (including non-performing) decreased in the fourth quarter through a combination of charge-offs and customer payments. The commercial loan and lease portfolios exhibited the largest declines in past-due levels during the quarter as the Company continued to reduce its exposure to certain segments of these portfolios that have experienced disproportionately higher levels of delinquencies. Delinquent commercial loans decreased $2.3 million or 26.9% and delinquent leases decreased $1.2 million or 25.3% in the fourth quarter. Residential mortgage delinquencies were virtually unchanged in the fourth quarter.
Loans and leases past due 30 days or more totaled $18.7 million or 2.06% of total loans and leases at December 31, 2009, compared with $22.3 million or 2.42% at September 30, 2009 and $20.3 million or 2.23% of total loans and leases at December 31, 2008. Approximately 42% of all delinquent loans and leases at the end of the fourth quarter were past due less than sixty days, compared with 45% at September 30, 2009 and 55% at the end of 2008.
Nonperforming assets decreased 14.4% from September 30, 2009 and were $9.0 million or 0.64% of total assets at December 31, 2009, compared with $10.6 million or 0.72% of total assets at September 30, 2009 and $5.1 million or 0.38% of total assets at December 31, 2008. Included in nonperforming assets at the end of the fourth quarter are nonperforming loans and leases totaling $8.6 million, compared with $10.2 million and $4.5 million at September 30, 2009 and December 31, 2008, respectively.
The Company's exposure to any individual nonperforming credit is low with an average balance of approximately $67,000 for each individual nonperforming loan and lease. Conventional residential mortgages comprised $2.8 million (35 loans) or 33% of nonperforming loans and leases at December 31, 2009. Nonperforming commercial loans totaled $4.0 million (39 loans) or 47% of nonperforming loans and leases at the end of the fourth quarter. Leases on nonperforming status totaled $1.4 million (26 leases) or 17% of nonperforming loans and leases at the end of the fourth quarter.
The provision for credit losses was $1.4 million and $6.1 million in the quarter and year ended December 31, 2009, respectively, compared with $2.0 million and $5.5 million in the year-ago periods, respectively. Net charge-offs were $2.0 million and $5.8 million in the three months and year ended December 31, 2009, respectively, compared with $1.7 million and $4.8 million in the year-ago periods, respectively. The charge-offs in the fourth quarter of 2009 were concentrated in three distinct segments of the commercial loan and lease portfolios, which together accounted for approximately $1.5 million or 65% of gross charge-offs in the quarter. Substantially all of the loans and leases that were charged down in the fourth quarter were classified as substandard or worse as of September 30, 2009.
Net charge-offs, annualized, equaled 0.88% and 0.63%, respectively, of average loans and leases during the three months and year ended December 31, 2009, compared with 0.74% and 0.53%, respectively, in the year-ago periods. The provision for credit losses as a percentage of net charge-offs was 71% and 104%, respectively, in the quarter and twelve months ended December 31, 2009, compared with 117% and 115%, respectively, in the comparable 2008 time periods. The provision as a percentage of net charge-offs declined in the fourth quarter as allowances for a substantial portion of the fourth quarter charge-offs were previously provided for in prior quarters. After giving consideration to loan loss allowances that were previously set aside on loans and leases charged-down in the fourth quarter, the provision for credit losses as a percent of the remaining fourth quarter net charge-offs was 141%.
Net charge-offs in the Company's lease portfolio comprised 68% of total net charge-offs in 2009, compared with 38% in 2008. The charge-offs in the Company's lease portfolio in 2009 have been concentrated in four distinct segments of the portfolio, in which the aggregate balances (net of charge-downs) have been reduced to $6.4 million at the end of the year. Net charge-offs in these four segments totaled $3.1 million or 78% of all lease net charge-offs in 2009. Approximately $1.8 million or 28.7% of the leases in these segments was past due at the end of 2009, including $1.3 million (net of charge-downs to estimated collectible amounts) which are on nonaccrual status. The allowance for credit losses allocated to these four segments totaled $1.2 million or 19.0% of the net remaining balances. The remaining balance of the lease portfolio totaling approximately $61.8 million is performing well, with a delinquency and non-accrual rate of only 2.6% at December 31, 2009. As noted previously herein, the Company ceased originating leases in the third quarter of 2008.
The allowance for credit losses was $9.4 million at December 31, 2009, compared with $10.0 million at September 30, 2009 and $9.2 million at December 31, 2008. The ratio of the allowance for credit losses to total loans and leases was 1.03% at December 31, 2009, compared with 1.08% at September 30, 2009 and 1.01% at December 31, 2008. The ratio of the allowance for credit losses to nonperforming loans and leases was 110% at December 31, 2009, compared with 98% at September 30, 2009 and 205% at December 31, 2008.
Net Interest Income
Net interest income totaled $11.5 million in the three months ended December 31, 2009, which was an increase of $1.6 million or 16.7% compared with the fourth quarter of 2008. Net interest income increased $254,000 or 2.3% compared with the third quarter of 2009. The increases in net interest income were driven by higher net interest margin and growth in the Company's loan and securities portfolios.
Average earning assets increased $93.1 million in the fourth quarter compared with the year-ago quarter, with much of the growth in the Company's residential mortgage and investment portfolios.
The Company's tax-equivalent net interest margin increased 25 basis points in the fourth quarter compared with the year-ago quarter, and was 6 basis points higher than the third quarter of 2009. The net interest margin on a tax-equivalent basis was 3.68% in the fourth quarter of 2009, compared with 3.43% in the fourth quarter of 2008 and 3.62% in the third quarter of 2009. The increase in the net interest margin was the result of a decrease in the tax-equivalent earning asset yield of 61 basis points in the fourth quarter compared with the year-ago quarter, which was more than offset by a decrease in its cost of funds of 97 basis points over the same period. The Company's yield on earning assets decreased 4 basis points in the fourth quarter of 2009 compared with the third quarter of 2009, which was offset by a decrease in its cost of funds of 11 basis points during the same period.
Net interest income for 2009 totaled $43.4 million, which was an increase of $5.7 million or 15.1% compared with $37.7 million in the year-ago period. Average earning assets increased $90.3 million in 2009 compared with 2008. The tax-equivalent net interest margin was 3.55% in 2009, compared with 3.35% in 2008. A decrease of 73 basis points in the Company's tax-equivalent earning assets yield in 2009 compared with 2008 was more than offset by a 102 basis point decrease in its cost of funds over the same period.
The rate of decline in the Company's cost of funds slowed in the fourth quarter as a substantial part of the Company's interest-bearing liabilities have repriced at or near current rates. The Company expects its ability to continue to reduce its cost of funds from current levels will be limited, which ultimately will cause a leveling off or reversal of the growth in its net interest margin.
Non-Interest Income and Non-Interest Expenses
Non-interest income was $5.9 million in the fourth quarter of 2009, which was an increase of $1.2 million or 24.7% from the fourth quarter of 2008 related to gains on sales of securities.
Non-interest income (excluding gains on sales of securities) comprised 29.4% of total revenue in the fourth quarter of 2009 compared with 32.6% in the year-ago quarter and 29.8% in the third quarter of 2009. The decrease in this ratio was driven largely by higher net interest income.
Non-interest income totaled $20.8 million in 2009, which is an increase of $451,000 from $20.4 million in 2008. A $2.0 million increase in gains on sales of securities in 2009 offset a $1.5 million decrease in investment management income and a $517,000 decrease in other non-interest income. The decrease in investment management income resulted from the decline in the performance of the public equity markets in 2008 and early 2009. Investment management income increased 4.8% in the fourth quarter of 2009 from the first quarter low due largely to the recovery in the equity markets. Other non-interest income is down largely as the result of fewer, individually immaterial, non-recurring items in 2009. Non-interest income (excluding securities gains) comprised 30.1% of total revenue in 2009 compared with 34.9% for 2008.
Non-interest expenses were $11.3 million in the quarter ended December 31, 2009, compared to $10.1 million in the fourth quarter of 2008. Salaries and employee benefits increased $902,000 or 18.8% due to differences in the timing and amounts of quarterly incentive compensation accruals in 2009 compared with 2008. Salaries and benefits expense for the full year 2009 was up a modest $605,000 or 3.1% compared with 2008. Other non-interest expenses increased $532,000 or 47.2% due largely to non-recurring items in the fourth quarter of 2009, including $280,000 of professional fees related to the Company's cancelled secondary equity offering.
Non-interest expenses were $43.2 million in the twelve months ended December 31, 2009, compared to $39.4 million in 2008. The most significant factor influencing the increase of $3.8 million or 9.7% was the increase in FDIC insurance expense of $1.7 million as a result of the special assessment in the second quarter and on higher FDIC assessment rates for all banks in 2009. Other non-interest expense increased $1.4 million or 30.3% due to a combination of growth related expenses, increased loan collection costs and approximately $786,000 of miscellaneous non-recurring items.
The Company's efficiency ratio was 69.8% in the fourth quarter of 2009 compared with 68.9% in the year-ago quarter and 68.2% in the third quarter of 2009. The Company's efficiency ratio was 69.7% in 2009 compared with 68.0% in 2008.
The Company's effective tax rate was 24.6% and 23.1% for the quarter and year ended December 31, 2009 compared with 7.1% and 21.4% in the year-ago periods.
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 Cortland, Madison, Oneida, Onondaga and Oswego counties. Alliance also operates an investment management administration center in Buffalo, N.Y., an equipment lease financing company, Alliance Leasing, Inc., and a multi-line insurance agency, Ladd's Agency, Inc.
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; 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,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(Dollars in thousands, except share and per
share data)
Interest
income:
Loans,
including
fees $12,227 $13,436 $49,832 $54,857
Federal funds
sold and
interest
bearing
deposits - 1 15 100
Securities 3,842 3,262 14,115 13,007
----- ----- ------ ------
Total interest
income 16,069 16,699 63,962 67,964
Interest
expense:
Deposits:
Savings
accounts 115 131 454 492
Money market
accounts 774 1,117 3,347 4,732
Time accounts 2,099 3,247 9,622 15,277
NOW accounts 127 169 531 733
--- --- --- ---
Total 3,115 4,664 13,954 21,234
Borrowings:
Repurchase
agreements 232 312 955 1,584
FHLB advances 1,077 1,546 4,864 6,050
Junior
subordinated
obligations 161 333 808 1,399
--- --- --- -----
Total interest
expense 4,585 6,855 20,581 30,267
Net interest
income 11,484 9,844 43,381 37,697
Provision for
credit losses 1,425 1,976 6,100 5,502
----- ----- ----- -----
Net interest
income after
provision for
credit losses 10,059 7,868 37,281 32,195
Non-interest
income:
Investment
management
income 1,845 1,953 7,134 8,670
Service
charges on
deposit
accounts 1,279 1,295 5,037 5,164
Card-related
fees 594 528 2,248 2,106
Insurance
agency income 360 379 1,387 1,583
Income from
bank-owned
life
insurance 261 250 1,014 856
Gain on the
sale of loans 243 35 748 252
Gain on sale
of securities
available-
for-sale 1,153 -- 2,168 137
Other non-
interest
income 188 310 1,075 1,592
--- --- ----- -----
Total non-
interest
income 5,923 4,750 20,811 20,360
Non-interest
expense:
Salaries and
employee
benefits 5,700 4,798 20,428 19,823
Occupancy and
equipment
expense 1,768 1,878 7,047 7,032
Communication
expense 162 193 756 791
Office
supplies and
postage
expense 366 276 1,337 1,137
Marketing
expense 205 243 932 1,090
Amortization
of intangible
assets 290 388 1,453 1,622
Professional
fees 728 695 2,893 2,661
FDIC insurance
premium 464 453 2,284 557
Other non-
interest
expense 1,659 1,127 6,078 4,665
----- ----- ----- -----
Total non-
interest
expense 11,342 10,051 43,208 39,378
Income before
income tax
expense 4,640 2,567 14,884 13,177
Income tax
expense 1,143 183 3,436 2,820
----- --- ----- -----
Net income 3,497 2,384 11,448 10,357
===== ===== ====== ======
Dividend and
accretion of
discount on
preferred
stock - 47 1,084 47
--- --- ----- ---
Net income
available to
common
shareholders 3,497 2,337 10,364 10,310
Share and Per
Share Data
Basic average
common shares
outstanding 4,546,819 4,492,810 4,514,268 4,542,957
Diluted
average
common shares
outstanding 4,585,800 4,510,483 4,543,069 4,565,709
Basic earnings
per common
share $0.76 $0.51 $2.25 $2.23
Diluted
earnings per
common share $0.75 $0.51 $2.24 $2.21
Cash dividends
declared $0.28 $0.26 $1.08 $1.00
Alliance Financial Corporation
Consolidated Balance Sheets (Unaudited)
December 31,
2009 December 31, 2008
------------- -----------------
(Dollars in thousands, except share
Assets and per share data)
Cash and due from banks $26,696 $21,172
Federal funds sold -- 26,918
Securities available-for-
sale 362,158 299,149
Federal Home Loan Bank of NY
("FHLB") Stock and Federal
Reserve Bank ("FRB") Stock 10,074 11,844
Loans and leases held for
sale 1,023 875
Total loans and leases, net
of unearned income 914,162 910,755
Less allowance for credit
losses 9,414 9,161
----- -----
Net loans and leases 904,748 901,594
Premises and equipment, net 20,086 21,202
Accrued interest receivable 4,167 4,218
Bank-owned life insurance 27,354 24,940
Goodwill 32,073 32,073
Intangible assets, net 10,075 11,528
Other assets 18,790 11,845
------ ------
Total assets $1,417,244 $1,367,358
========== ==========
Liabilities and
shareholders' equity
Liabilities:
Deposits:
Non-interest bearing 159,149 140,845
Interest bearing 916,522 797,037
------- -------
Total deposits 1,075,671 937,882
Borrowings 172,707 238,972
Accrued interest payable 1,745 3,037
Other liabilities 17,413 17,212
Junior subordinated
obligations issued to 25,774 25,774
unconsolidated subsidiary
trusts ------ ------
Total liabilities 1,293,309 1,222,877
Shareholders' equity:
Preferred stock -- 26,331
Common stock 4,937 4,901
Surplus 43,013 41,922
Undivided profits 86,194 81,110
Accumulated other
comprehensive income 946 971
Directors' stock-based
deferred compensation plan (2,499) (2,098)
Treasury stock (8,656) (8,656)
------ ------
Total shareholders' equity 123,935 144,481
------- -------
Total liabilities and
shareholders' equity $1,417,244 $1,367,358
========== ==========
Common shares outstanding 4,614,921 4,578,910
Book value per common share $26.86 $25.67
Tangible book value per
common share $17.72 $16.15
Alliance Financial Corporation
Consolidated Average Balances (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(Dollars in thousands)
Earning assets:
Federal funds
sold and interest
bearing deposits $940 $3,882 $13,084 $4,856
Securities(1) 391,342 301,049 352,542 288,894
Loans and
leases receivable:
Residential
real
estate
loans(2) 356,798 310,012 344,707 294,829
Commercial
loans 206,698 215,369 211,469 216,549
Leases,
net of
unearned
income(2) 71,433 109,279 84,806 120,010
Indirect
loans 189,415 186,058 187,919 179,762
Other
consumer
loans 92,718 90,644 91,387 90,675
------ ------ ------ ------
Loans
and
leases
receivable,
net of
unearned
income 917,062 911,362 920,288 901,825
------- ------- ------- -------
Total
earning
assets 1,309,344 1,216,293 1,285,914 1,195,575
Non-
earning
assets 135,003 127,993 133,434 126,961
------- ------- ------- -------
Total
assets $1,444,347 $1,344,286 $1,419,348 $1,322,536
========== ========== ========== ==========
Interest
bearing
liabilities:
Interest
bearing
checking
accounts $120,128 $108,048 $117,113 $107,204
Savings
accounts 93,429 87,145 92,114 86,239
Money
market
accounts 326,470 237,114 303,344 225,590
Time
deposits 384,955 361,229 382,420 385,275
Borrowings 189,781 243,723 193,648 223,230
Junior
subordinated
obligations
issued
to
unconsolidated
trusts 25,774 25,774 25,774 25,774
------ ------ ------ ------
Total
interest
bearing
liabilities 1,140,537 1,063,033 1,114,413 1,053,312
Non-
interest
bearing
deposits 161,841 140,944 156,396 133,997
Other
non-
interest
bearing
liabilities 16,246 15,932 16,685 17,138
------ ------ ------ ------
Total
liabilities 1,318,624 1,219,909 1,287,494 1,204,447
Shareholders'
equity 125,723 124,377 131,854 118,089
------- ------- ------- -------
Total
liabilities
and
shareholders'
equity $1,444,347 $1,344,286 $1,419,348 $1,322,536
========== ========== ========== ==========
(1) The amounts shown are amortized cost and include FHLB and FRB stock
(2) Includes loans and leases held for sale
Alliance Financial Corporation
Investments, Loans and Leases, and Deposits (Unaudited)
The following table sets forth the amortized cost and fair value of the
Company's available-for-sale securities portfolio:
December 31, 2009 September 30, 2009
----------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ----- ---------- ----
(Dollars in thousands)
Securities
available-for-
sale
Debt securities:
U.S. Treasury
obligations $100 $101 $100 $100
Obligations of U.S.
government-
sponsored
corporations 5,864 6,129 6,189 6,509
Obligations of
states and
political
subdivisions 75,104 77,147 82,762 86, 131
Mortgage-backed
securities(1) 273,499 275,680 295,025 300,828
------- ------- ------- -------
Total debt
securities 354,567 359,057 384,076 393,568
Stock investments:
Equity securities 1,958 2,104 1,958 2,151
Mutual funds 1,000 997 1,000 1,011
----- --- ----- -----
Total stock
investments 2,958 3,101 2,958 3,162
Total available-
for-sale $357,525 $362,158 $387,034 $396,730
======== ======== ======== ========
December 31, 2008
-----------------
Amortized Fair
Cost Value
---------- -----
(Dollars in thousands)
Securities
available-for-
sale
Debt securities:
U.S. Treasury
obligations $101 $102
Obligations of U.S.
government-
sponsored
corporations 34,489 35,143
Obligations of
states and
political
subdivisions 89,154 91,033
Mortgage-backed
securities(1) 167,753 169,960
------- -------
Total debt
securities 291,497 296,238
Stock investments:
Equity securities 1,958 1,923
Mutual funds 1,000 988
----- ---
Total stock
investments 2,958 2,911
Total available-
for-sale $294,455 $299,149
======== ========
(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, 2009 September 30, 2009
----------------- ------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in thousands)
Loan portfolio
composition
Residential real
estate loans $356,906 39.2% $353,721 38.3%
Commercial loans 207,996 22.9% 206,472 22.4%
Leases, net of
unearned income 68,224 7.5% 76,117 8.2%
Indirect loans 184,947 20.3% 194,267 21.0%
Other consumer loans 92,022 10.1% 92,953 10.1%
------ ---- ------ ----
Total loans and
leases 910,095 100.0% 923,530 100.0%
===== =====
Net deferred loan
costs 4,067 4,202
Allowance for credit
losses (9,414) (10,006)
------ -------
Net loans and leases $904,748 $917,726
======== ========
December 31, 2008
-----------------
Amount Percent
------ -------
(Dollars in thousands)
Loan portfolio
composition
Residential real
estate loans $314,039 34.6%
Commercial loans 214,315 23.6%
Leases, net of
unearned income 104,655 11.6%
Indirect loans 182,807 20.2%
Other consumer loans 90,906 10.0%
------ ----
Total loans and
leases 906,722 100.0%
=====
Net deferred loan
costs 4,033
Allowance for credit
losses (9,161)
------
Net loans and leases $901,594
========
The following table sets forth the composition of the Company's deposits
at the dates indicated:
December 31, 2009 September 30, 2009
----------------- ------------------
Amount Percent Amount Percent
------ ------- ------ -------
Deposit composition
Non-interest bearing
checking $159,149 14.8% $151,998 14.0%
Interest bearing
checking 130,368 12.1% 119,048 11.0%
------- ---- ------- ----
Total checking 289,517 26.9% 271,046 25.0%
Savings 94,524 8.8% 93,329 8.6%
Money market 317,051 29.5% 330,345 30.4%
Time deposits 374,579 34.8% 390,191 36.0%
------- ---- ------- ----
Total deposits $1,075,671 100.0% $1,084,911 100.0%
========== ===== ========== =====
December 31, 2008
-----------------
Amount Percent
------ -------
Deposit composition
Non-interest bearing
checking $140,845 15.0%
Interest bearing
checking 106,292 11.3%
------- ----
Total checking 247,137 26.3%
Savings 88,242 9.4%
Money market 247,392 26.4%
Time deposits 355,111 37.9%
------- ----
Total deposits $937,882 100.0%
======== =====
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
leases December 31, 2009 September 30, 2009 December 31, 2008
----------- ----------------- ------------------ -----------------
$ %(1) $ %(1) $ %(1)
(Dollars in thousands)
30 days
past due $7,883 0.87% $9,993 1.08% $11,124 1.22%
60 days
past due 2,271 0.25% 2,141 0.23% 4,736 0.52%
90 days
past due
and still
accruing - -% 127 0.01% 126 0.01%
Non-
accrual 8,582 0.94% 10,084 1.10% 4,352 0.48%
------ ---- ------ ---- ------ ----
Total $18,736 2.06% $22,345 2.42% $20,338 2.23%
====== ==== ====== ==== ====== ====
(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 December 31, September 30, December 31,
assets 2009 2009 2008
-------------- ------------- -------------- -------------
(Dollars in thousands)
Non-accruing
loans and
leases
Residential real
estate loans $2,843 $2,878 $1,506
Commercial loans 4,013 4,926 1,997
Leases 1,418 1,976 595
Indirect loans 109 116 101
Other consumer
loans 199 188 153
--- --- ---
Total non-
accruing loans
and leases 8,582 10,084 4,352
Accruing loans
and leases
delinquent - 127 126
90 days or more --- --- ---
Total non-
performing
loans and
leases 8,582 10,211 4,478
Other real
estate and
repossessed
assets 445 340 657
--- --- ---
Total non-
performing
assets $9,027 $10,551 $5,135
====== ======= ======
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:
Three months ended Twelve months ended
Allowance for
credit losses December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
(Dollars in thousands)
Allowance for
credit losses,
beginning of
period $10,006 $8,875 $9,161 $8,426
Loans and leases
charged-off (2,281) (1,877) (7,272) (5,639)
Recoveries of
loans and leases
previously
charged-off 264 187 1,425 872
--- --- ----- ---
Net loans and
leases charged-
off (2,017) (1,690) (5,847) (4,767)
Provision for
credit losses 1,425 1,976 6,100 5,502
----- ----- ----- -----
Allowance for
credit losses,
end of period $9,414 $9,161 $9,414 $9,161
====== ====== ====== ======
Alliance Financial Corporation
Consolidated Financial Information (Unaudited)
At or for the three At or for the twelve
months months
------------------- --------------------
Key Ratios ended December 31, ended December 31,
---------- ------------------ ------------------
2009 2008 2009 2008
---- ---- ---- ----
Return on average assets 0.97% 0.71% 0.81% 0.78%
Return on average equity 11.13% 7.67% 8.68% 8.77%
Return on average common
equity 11.13% 7.74% 8.46% 8.80%
Return on average
tangible common equity 16.76% 12.14% 13.02% 14.19%
Yield on earning assets 5.08% 5.69% 5.15% 5.88%
Cost of funds 1.61% 2.58% 1.85% 2.87%
Net interest margin (tax
equivalent) (1) 3.68% 3.43% 3.55% 3.35%
Non-interest income to
total income (2) 29.35% 32.55% 30.06% 34.86%
Efficiency ratio (3) 69.77% 68.87% 69.66% 68.04%
Common dividend payout
ratio (4) 37.33% 50.98% 48.21% 44.64%
Net loans and leases
charged-off to average 0.88% 0.74% 0.63% 0.53%
loans and leases,
annualized
Provision for credit
losses to average loans
and 0.62% 0.87% 0.66% 0.61%
leases, annualized
Allowance for credit
losses to total loans
and 1.03% 1.01% 1.03% 1.01%
leases
Allowance for credit
losses to non-
performing 109.7% 204.6% 109.7% 204.6%
loans and leases
Non-performing loans
and leases to total
loans 0.94% 0.49% 0.94% 0.49%
and leases
Non-performing assets
to total assets 0.64% 0.38% 0.64% 0.38%
(1) Tax equivalent net interest income divided by average earning assets
(2) Non-interest income (excluding net realized gains and losses on
securities and other non-recurring gains and losses) divided by the
sum of net interest income and non-interest income (as adjusted)
(3) Non-interest expense divided by the sum of net interest income
and non-interest income (as adjusted)
(4) Cash dividends declared per share divided by diluted earnings per
share
Alliance Financial Corporation
Selected Quarterly Financial Data (Unaudited)
2009
----
Fourth Third Second First
(Dollars in thousands, except share and per share data)
Interest
income $16,069 $16,129 $15,875 $15,889
Interest
expense 4,585 4,899 5,253 5,844
----- ----- ----- -----
Net interest
income 11,484 11,230 10,622 10,045
Provision
for credit
losses 1,425 1,125 1,800 1,750
----- ----- ----- -----
Net interest
income
after
provision
for credit
losses 10,059 10,105 8,822 8,295
Other non-
interest
income 5,923 4,762 4,766 5,360
Other non-
interest
expense 11,342 10,900 10,899 10,067
------ ------ ------ ------
Income
before
income tax
expense 4,640 3,967 2,689 3,588
Income tax
expense 1,143 1,009 653 631
----- ----- --- ---
Net income $3,497 $2,958 $2,036 $2,957
====== ====== ====== ======
Net income
available
to common
shareholders $3,497 $2,958 $1,310 $2,599
====== ====== ====== ======
Stock and
related per
share data
Basic
earnings
per common
share $0.76 $0.64 $0.29 $0.57
Diluted
earnings
per common
share $0.75 $0.64 $0.28 $0.57
Basic
weighted
average
common
shares
outstanding 4,546,819 4,521,331 4,495,439 4,492,810
Diluted
weighted
average
common
shares
outstanding 4,585,800 4,563,168 4,518,827 4,495,787
Cash
dividends
paid per
common
share $0.28 $0.28 $0.26 $0.26
Common
dividend
payout
ratio (1) 37.33% 43.75% 92.86% 45.61%
Common book
value $26.86 $27.04 $26.02 $26.04
Tangible
common book
value (2) $17.72 $17.84 $16.72 $16.63
Capital
Ratios(6)
Holding
Company
--------
Tier 1
leverage
ratio 7.55% 7.42% 7.30% 9.52%
Tier 1 risk
based
capital 12.06% 11.53% 11.13% 14.17%
Total risk
based
capital 13.13% 12.64% 12.22% 15.26%
Tangible
common
equity to
tangible
assets (7) 5.95% 5.82% 5.50% 5.57%
Bank
----
Tier 1
leverage
ratio 7.14% 6.95% 6.87% 9.01%
Tier 1 risk
based
capital 11.47% 10.84% 10.51% 13.47%
Total risk
based
capital 12.55% 11.97% 11.61% 14.57%
Selected
ratios
Return on
average
assets 0.97% 0.82% 0.58% 0.86%
Return on
average
equity 11.13% 9.68% 5.82% 8.07%
Return on
average
common
equity 11.13% 9.68% 4.33% 8.69%
Return on
average
tangible
common
equity 16.76% 14.85% 6.71% 13.65%
Yield on
earning
assets 5.08% 5.12% 5.13% 5.30%
Cost of
funds 1.61% 1.72% 1.88% 2.20%
Net interest
margin (tax
equivalent)
(3) 3.68% 3.62% 3.50% 3.42%
Non-
interest
income to
total
income (4) 29.35% 29.78% 30.97% 30.19%
Efficiency
ratio (5) 69.77% 68.17% 70.83% 69.96%
Asset
quality
ratios
Net loans
and leases
charged off
to average 0.88% 0.42% 0.71% 0.53%
loans and
leases,
annualized
Provision
for credit
losses to
average
loans 0.62% 0.49% 0.77% 0.77%
and leases,
annualized
Allowance
for credit
losses to
total loans
and leases 1.03% 1.08% 1.05% 1.05%
Allowance
for credit
losses to
non-
performing 109.7% 98.0% 129.5% 164.0%
loans and
leases
Non-
performing
loans and
leases to
total loans 0.94% 1.10% 0.81% 0.64%
and leases
Non-
performing
assets to
total
assets 0.64% 0.72% 0.55% 0.48%
2008
Fourth
(Dollars in thousands, except share and per share data)
Interest income $16,699
Interest expense 6,855
-----
Net interest income 9,844
Provision for credit losses 1,976
-----
Net interest income after provision for credit losses 7,868
Other non-interest income 4,750
Other non-interest expense 10,051
------
Income before income tax expense 2,567
Income tax expense 183
---
Net income $2,384
======
Net income available to common shareholders $2,337
======
Stock and related per share data
Basic earnings per common share $0.51
Diluted earnings per common share $0.51
Basic weighted average common shares outstanding 4,492,810
Diluted weighted average common shares outstanding 4,510,483
Cash dividends paid per common share $0.26
Common dividend payout ratio (1) 50.98%
Common book value $25.67
Tangible common book value (2) $16.15
Capital Ratios(6)
Holding Company
--------
Tier 1 leverage ratio 9.59%
Tier 1 risk based capital 14.05%
Total risk based capital 15.08%
Tangible common equity to tangible assets (7) 5.59%
Bank
----
Tier 1 leverage ratio 8.97%
Tier 1 risk based capital 13.15%
Total risk based capital 14.19%
Selected ratios
Return on average assets 0.71%
Return on average equity 7.67%
Return on average common equity 7.74%
Return on average tangible common equity 12.14%
Yield on Earning assets 5.69%
Cost of funds 2.58%
Net interest margin (tax equivalent)(3) 3.43%
Non-interest income to total income (4) 32.55%
Efficiency ratio (5) 68.87%
Asset quality ratios
Net loans and leases charged off to average loans and leases,
annualized 0.74%
Provision for credit losses to average loans and leases,
annualized 0.87%
Allowance for credit losses to total loans and leases 1.01%
Allowance for credit losses to non-performing loans and
leases 204.6%
Non-performing loans and leases to total loans and leases 0.49%
Non-performing assets to total assets 0.38%
(1) Cash dividends declared per common share divided by diluted earnings
per common share
(2) Common 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
and other non-recurring items) divided by the sum of net interest
income and non-interest income (as adjusted)
(5) Non-interest expense divided by the sum of net interest income and
non-interest income (as adjusted)
(6) The changes in the Company's and the Bank's Tier 1 and risk based
capital ratios in the fourth quarter of 2008 and the second quarter of
2009 resulted from the participation and subsequent withdrawal from
the U.S. Treasury's Capital Purchase Program.
(7) The Company uses certain non-GAAP financial measures, such as the
Tangible Common Equity to Tangible Assets ratio (TCE), to provide
information for investors to effectively analyze financial trends of
ongoing business activities, and to enhance comparability with peers
across the financial sector. The Company believes TCE is useful
because it is a measure utilized by regulators, market analysts and
investors in evaluating a company's financial condition and capital
strength. TCE, as defined by the Company, represents common equity
less goodwill and intangible assets. A reconciliation from the
Company's GAAP Total Equity to Total Assets ratio to the Non-GAAP
Tangible Common Equity to Tangible Assets ratio is presented below:
December September June
31, 30, 30,
(in thousands) --------- ---------- -----
2009 2009 2009
---- ---- ----
Total assets $1,417,244 $1,456,276 $1,442,705
Less: Goodwill and intangible
assets, net 42,148 42,438 42,826
------ ------ ------
Tangible assets (non-GAAP) $1,375,096 $1,413,838 $1,399,879
Total Common Equity 123,935 124,770 119,768
Less: Goodwill and intangible
assets, net 42,148 42,438 42,826
------ ------ ------
Tangible Common Equity (non-
GAAP) 81,787 82,332 76,942
Total Equity/Total Assets 8.74% 8.57% 8.30%
Tangible Common Equity/
Tangible Assets (non-GAAP) 5.95% 5.82% 5.50%
March December
31, 31,
(in thousands) ------ ---------
2009 2008
---- ----
Total assets $1,413,339 $1,367,358
Less: Goodwill and intangible
assets, net 43,213 43,601
------ ------
Tangible assets (non-GAAP) $1,370,126 $1,323,757
Total Common Equity 119,549 117,563
Less: Goodwill and intangible
assets, net 43,213 43,601
------ ------
Tangible Common Equity (non-
GAAP) 76,336 73,962
Total Equity/Total Assets 8.46% 8.60%
Tangible Common Equity/
Tangible Assets (non-GAAP) 5.57% 5.59%
SOURCE Alliance Financial Corporation
