ALLIANCE FINANCIAL CORPORATION 
By SYRACUSE, N.Y., Jan. 26, 2012 /PRNewswire/ -- Alliance Financial Corporation ("Alliance" or the "Company") (NasdaqGM: ALNC), the holding company for Alliance Bank, N.A., announced today net income of $2.8 million or $0.60 per diluted share for the quarter ended December 31, 2011, compared with the $2.8 million or $0.59 per diluted share in the year-ago quarter. Net income was $3.7 million or $0.77 per diluted common share in the third quarter of 2011. Net income in the third quarter of 2011 included securities gains, netted against a fixed asset write-down, of $472,000 after tax or $0.10 per diluted share.
Net income for the year ended December 31, 2011 increased 14.4% to $13.3 million or $2.80 per diluted share, compared with $11.6 million or $2.48 per diluted share in 2010.
Jack H. Webb, President and CEO of Alliance said, "We set a record for net income in 2011 for the fifth year in a row, while at the same time maintaining a strong balance sheet with very good asset quality and capital ratios. Revenues were pressured in 2011 due to a decline in assets and net interest margin; however, our disciplined expense control combined with lower loan loss provisions more than offset the impact of lower revenue in 2011. Our capital ratios increased in 2011 through earnings retention and effective capital management, and are well above regulatory minimums for well-capitalized institutions."
Webb added, "We originated more than $250 million of credit to consumers and businesses in Central New York in 2011. In the aggregate, over the past four years we provided more than $1 billion in loans to qualified borrowers in Central New York, in what continues to be a challenging lending environment. We remain committed to meeting the credit needs of qualified borrowers in our market; however, consistent with the financial sector as a whole, loan growth and revenue growth in the current operating environment will likely remain under pressure as weak economic conditions and low interest rates are expected to continue to weigh on loan demand and our net interest margin."
Balance Sheet Highlights
Total assets were $1.4 billion at December 30, 2011, which was a decrease of $21.7 million from the end of the third quarter. Total loans and leases (net of unearned income) were virtually unchanged in the fourth quarter, as a decrease in our residential mortgages and continuing amortization of our lease portfolio was offset by growth in commercial loans and mortgages. Securities available-for-sale decreased $34.8 million during the quarter as we did not reinvest cash flows from the portfolio.
Total assets decreased $45.5 million or 3.1% from the end of 2010 as loans and leases, net, decreased $25.8 million and securities available-for-sale decreased $40.1 million. The Company's commercial lending business performed well in 2011, with the commercial portfolio increasing $28.4 million or 11.4% during the year. The residential mortgage and indirect auto loan portfolios declined approximately $18 million and $17 million, respectively, in 2011 due to soft market conditions and low interest rates, while our lease portfolio decreased $17 million as we continue to wind down this portfolio.
Loan originations (excluding lines of credit) totaled $91.0 million in the fourth quarter, compared with $92.5 million in the year-ago quarter and $59.5 million in the third quarter of 2011. Loan originations in 2011 totaled $255.3 million, compared with $284.1 million in 2010.
Commercial loans and mortgages increased $19.0 million in the fourth quarter and totaled $278.3 million at December 31, 2011. Originations of commercial loans and mortgages in the fourth quarter (excluding lines of credit) totaled $31.3 million, compared with $38.5 million in the year-ago quarter and $10.3 million in the third quarter of 2011. Originations in 2011 totaled $75.9 million compared with $80.4 million in 2010.
Residential mortgages outstanding at December 31, 2011 were $316.8 million, which was a decrease of $12.0 million from the end of the third quarter of 2011. Originations of residential mortgages totaled $40.8 million in the fourth quarter of 2011, compared with $38.6 million in the year-ago quarter and $30.5 million in the third quarter of 2011. Originations totaled $107.5 million in 2011, compared with $119.7 million in 2010. The Company sold approximately 57% of its 2011 residential mortgage originations in connection with its balance sheet management activities.
Indirect auto loan balances were $158.8 million at the end of the fourth quarter, which was a decrease of $2.8 million from the end of the third quarter of 2011. The Company originated $17.9 million of indirect auto loans in the fourth quarter, compared with $14.5 million in the year-ago quarter and $17.9 million in the third quarter of 2011. 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 employed in its direct lending programs.
Leases (net of unearned income) decreased $3.2 million in the fourth quarter and $16.8 million for the year as a result of the Company's previously announced decision to cease new lease originations.
The Company's investment securities portfolio totaled $374.3 million at December 31, 2011, which was a decrease of $34.8 million from the end of the third quarter. The Company substantially reduced new securities purchases to manage our interest-rate risk, given the very low yields available for the types of shorter-duration, non-corporate securities in which the Company invests. The securities portfolio is expected to decline in coming quarters absent an upturn in interest rates that would make the returns on shorter-duration securities more attractive.
The breakdown of the securities portfolio at December 31, 2011 was 76% government-sponsored entity- guaranteed mortgage-backed securities, 22% municipal securities, and 1% obligations of U.S. government-sponsored corporations. Mortgage-backed securities, which totaled $285.7 million at December 31, 2011, 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 U.S. government. The Company's municipal securities portfolio, which totaled $82.3 million at the end of the fourth quarter, is primarily comprised of highly rated general obligation bonds issued by local municipalities in New York State.
Deposits decreased $25.0 million in the fourth quarter due to seasonal municipal deposit outflows, and totaled $1.1 billion at December 30, 2011.
Shareholders' equity was $144.0 million at December 31, 2011, compared with $143.1 million at the end of the third quarter. Net income for the quarter increased shareholders' equity by $2.8 million and was partially offset by common stock dividends declared of $1.5 million or $0.31 per common share.
The Company's Tier 1 leverage ratio was 9.09% and its total risk-based capital ratio was 15.97% at the end of the fourth quarter. The Company's tangible common equity capital ratio (a non-GAAP financial measure) was 7.69% at December 30, 2011.
Asset Quality and the Provision for Credit Losses
Delinquent loans and leases (including non-performing) totaled $17.0 million at December 31, 2011, compared with $17.9 million at September 30, 2011 and $16.3 million at December 31, 2010.
Non-performing assets were $11.7 million or 0.83% of total assets at December 31, 2011, compared with $12.9 million or 0.90% of total assets at September 30, 2011 and $9.1 million or 0.63% of total assets at December 31, 2010. Included in non-performing assets at the end of the fourth quarter are non-performing loans and leases totaling $11.3 million, compared with $12.2 million and $8.5 million at September 30, 2011 and December 31, 2010, respectively. As disclosed in our third quarter 2011 earnings release and Form 10-Q, one commercial relationship totaling $3.6 million was placed on non-performing status during the third quarter. During the fourth quarter, the borrower's business continued to weaken, which led to an increase in our impairment reserve on this relationship by $400,000 to $2.1 million, of which $1.0 million was charged off in the fourth quarter. Our exposure to this borrower, net of the write-down recorded in the fourth quarter and included in non-performing assets, was $2.0 million at December 31, 2011, and the impairment reserve remaining on this net exposure was $1.1 million at the end of the fourth quarter.
Conventional residential mortgages comprised $3.1 million (48 loans) or 27.2% of non-performing loans and leases at the end of the fourth quarter. Non-performing commercial loans and mortgages totaled $7.4 million (38 loans) or 65.9% of non-performing loans and leases and non-performing leases totaled $107,000 (5 leases) or 1.0% of non-performing loans and leases at the end of the fourth quarter.
The provision for credit losses was $800,000 in the fourth quarter, which was unchanged from the year-ago quarter and slightly higher than the third quarter of 2011. The provision for credit losses was $1.9 million in 2011, compared with $4.1 million in 2010, as net charge-offs dropped 35.2% in 2011.
Net charge-offs were $1.3 million and $1.8 million in the three months and twelve months ended December 31, 2011, respectively, compared with $583,000 and $2.8 million in the year-ago periods, respectively. Net charge-offs, annualized, equaled 0.61% and 0.21%, respectively, of average loans and leases during the three months and twelve months ended December 31, 2011, compared with 0.26% and 0.31%, in the year-ago periods, respectively. The provision for credit losses as a percentage of net charge-offs was 60% and 105%, respectively, in the quarter and year ended December 31, 2011, compared with 137% and 145%, respectively, in the year-ago periods.
The allowance for credit losses was $10.8 million at December 31, 2011, compared with $11.3 million at September 30, 2011 and $10.7 million at December 31, 2010. The ratio of the allowance for credit losses to total loans and leases was 1.24% at December 31, 2011, compared with 1.30% at September 30, 2011 and 1.19% at December 31, 2010. The ratio of the allowance for credit losses to non-performing loans and leases was 96% at December 31, 2011, compared with 93% at September 30, 2011 and 126% at December 31, 2010.
Net Interest Income
Net interest income was lower in the fourth quarter compared with the year-ago period and with the third quarter of 2011 due to a decrease in interest-earning assets and lower net interest margin, both of which were affected by weak economic conditions and low interest rates.
Net interest income totaled $10.0 million in the three months ended December 31, 2011, compared with $10.8 million in the year-ago quarter and $11.0 million in third quarter of 2011. Average interest-earning assets were $1.3 billion in the fourth quarter, which was a decrease of $16.7 million compared with the year-ago quarter, and a decrease of $22.4 million compared with the third quarter of 2011. Average securities available-for-sale decreased $12.0 million compared with the year-ago quarter, and was $55.0 million lower than the third quarter of 2011 due to a reduction in purchases of securities as a consequence of the low yields currently available in the market and a sale of securities near the end of the third quarter of 2011.
Total average loans and leases were $866.8 million or 66.9% of total interest-earning assets in the fourth quarter of 2011, compared with $891.4 million or 68.0% in the fourth quarter of 2010 and $871.1 million or 66.1% in the third quarter of 2011. Average loans and leases have been little changed in 2011 as the Company continues to sell the majority of its fixed-rate residential mortgage originations due to the exceptionally low market interest rates. Loan growth has also been constrained as weak economic conditions, coupled with business and consumer reluctance to take on additional debt, curbed loan demand. Average balances for all of the Company's portfolios were lower in the fourth quarter compared with the year-ago quarter, except for commercial loans, which were up $33.5 million or 14.5% compared with the year-ago quarter as the Company has grown its market share.
The net interest margin on a tax-equivalent basis was 3.24% in the fourth quarter of 2011, compared with 3.45% in the year-ago quarter and 3.48% in the third quarter of 2011. A sharp increase in prepayments on the Company's mortgage-backed securities portfolio accounted for approximately 9 and 6 basis points of the decline in margin from the third quarter and from the year-ago quarter, respectively. The Company's interest-earning assets yield continued to decline in the third quarter as amortization of our loans and leases were reinvested at lower market yields. The Company's cost of funds also declined, but not to the same extent as the earning assets yield because of the limited ability to further reduce deposit rates. The tax-equivalent earning assets yield declined 39 basis points in the fourth quarter compared with the year-ago quarter, and was partially offset by a 19 basis-point decrease in the cost of interest-bearing liabilities over the same period. The tax-equivalent interest-earning assets yield decreased 26 basis points in the fourth quarter compared with the third quarter of 2011, and the cost of interest-bearing liabilities decreased 2 basis points over the same period.
Net interest income for the year ended December 31, 2011 totaled $43.3 million, which was a decrease of $1.0 million compared with 2010. Average interest-earning assets were $1.3 billion in 2011, which was an increase of $15.7 million compared with 2010. Average securities available-for-sale increased $33.7 million compared with the year-ago period, which offset a decline in average loans and leases of $25.0 million.
Total average loans and leases were $872.5 million or 66.1% of total interest-earning assets in 2011 compared with $897.5 million or 68.8% in 2010. Average commercial loans outstanding increased $34.9 million or 16.0% in 2011 compared with 2010, which partially offset declines in the Company's residential mortgage, consumer and lease portfolios.
The tax-equivalent net interest margin was 3.43% in 2011, compared with 3.55% in 2010. The tax-equivalent earning assets yield declined 41 basis points in 2011 compared with 2010, which was partially offset by a decrease in the cost of interest-bearing liabilities of 31 basis points over the same period.
Net interest income is expected to remain under pressure in coming quarters as weak economic conditions and exceptionally low interest rates will likely continue to weigh on loan growth and net interest margin.
Non-interest Income and Non-interest Expenses
Non-interest income was $5.1 million in the fourth quarter of 2011, compared with $5.9 million in the year-ago quarter and $5.9 million in the third quarter of 2011. Non-interest income in the third quarter of 2011 included gains on the sale of securities of $1.3 million, while the fourth quarter of 2010 included a gain of $815,000 on the sale of substantially all of the assets of the Company's insurance agency subsidiary ("Agency"). Excluding security gains and the gain on the sale of the assets of the Agency, non-interest income was virtually unchanged in the fourth quarter compared with the year-ago period, but was up $468,000 compared to the third quarter of 2011, due primarily to an increase in gains on the sales of loans. Gains on the sale of loans was nearly unchanged from the year-ago quarter, but increased $416,000 from the third quarter of 2011 due to fluctuations in the volume of originations and sales of residential mortgages.
Non-interest income totaled $20.0 million in 2011 compared with $20.5 million in 2010. Investment management income increased $430,000 or 5.9% in 2011 compared with 2010 primarily as a result of the impact of changes in equity and debt markets over the past two years on the value of assets under management. Insurance agency income decreased $1.3 million due to the discontinuation of our insurance agency operations. The elimination of the operating expenses associated with our insurance agency substantially offset the revenue decline in 2011, resulting in no significant net effect on our financial results. Gains on the sale of securities available-for-sale increased to $1.3 million in 2011, compared with $308,000 in 2010 due to increased sale activity in 2011. Other non-interest income decreased $610,000 in 2011 compared to 2010 due primarily to the gain of $815,000 recognized on the sale of the Agency in 2010.
Non-interest income (excluding securities gains and the Agency sale) comprised 33.6% of total revenue in the fourth quarter, compared with 32.2% in the year-ago quarter. Non-interest income comprised 30.1% of total revenue in 2011 compared with 30.4% in the year-ago period.
Non-interest expenses were $10.6 million in the fourth quarter of 2011, compared with $11.3 million in the year-ago period and $11.1 million in the third quarter of 2011. Salaries and benefits expense decreased $310,000 or 5.3% due primarily to the discontinuation of salaries and benefits for the Agency's employees in 2011. Professional fees decreased $253,000 or 27.5% due to a number of one-time consulting engagements in the fourth quarter of 2010. FDIC insurance expense decreased $190,000 or 46.7% compared with the fourth quarter of 2010 due to the impact of the change by the FDIC to an asset-based assessment system, which became effective in the second quarter of 2011.
Non-interest expenses were $43.6 million in 2011 compared with $44.5 million in 2010. Salaries and benefits expense decreased $417,000 or 1.9% due to the discontinuation of salaries and benefits for the Agency's employees in 2011 partially offset by normal base salary increases and higher incentive compensation. FDIC insurance expense decreased $540,000 or 33.7% in 2011 compared with 2010 primarily due to the change implemented by the FDIC in the basis for calculating insurance premiums. Other non-interest expense increased $747,000 or 12.6% in 2011 compared with 2010 due primarily to the $555,000 write-down of bank-owned property recorded in the third quarter of 2011.
The Company's efficiency ratio was 70.6% in the fourth quarter of 2011, compared with 71.1% in the year-ago period and 71.5% in the third quarter of 2011. The Company's efficiency ratio was 70.4% in 2011, compared with 69.9% in 2010. The efficiency ratio, excluding the fixed asset write-down, was 69.4% in 2011.
The Company's effective tax rate was 21.7% and 25.3% for the three months and twelve months ended December 30, 2011, respectively, compared with 26.7% and 24.6% in the year-ago periods, respectively. The Company's effective tax rates for the three months and twelve months ended December 31, 2010 excludes the $815,000 gain on the sale of the assets of the Agency and the related tax expense of $806,000 which result from a difference in the tax basis of such assets versus the book value.
About Alliance Financial Corporation
Alliance Financial Corporation is an independent financial holding company with Alliance Bank, N.A. as its principal subsidiary that provides retail, commercial and municipal 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. and an equipment lease financing company, Alliance Leasing, Inc.
Forward-Looking Statements
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; increases in FDIC insurance premiums may cause earnings to decrease; and other risks set forth under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and in subsequent filings with the Securities and Exchange Commission.
Contact: Alliance Financial Corporation
J. Daniel Mohr, Executive Vice
President and CFO
(315) 475-4478
Alliance Financial Corporation
Consolidated Statements of Income (Unaudited)
Three months ended Twelve months ended
------------------ -------------------
December 31, December 31,
------------ ------------
2011 2010 2011 2010
---- ---- ---- ----
(Dollars in thousands, except share and per
share data)
Interest
income:
Loans,
including
fees $10,144 $11,165 $41,877 $46,168
Federal
funds
sold and
interest
bearing
deposits 18 5 22 8
Securities 2,780 3,236 13,860 14,166
----- ----- ------ ------
Total
interest
income 12,942 14,406 55,759 60,342
Interest
expense:
Deposits:
Savings
accounts 43 78 210 377
Money
market
accounts 338 528 1,609 2,675
Time
accounts 1,335 1,584 5,673 7,216
NOW
accounts 49 91 225 490
--- --- --- ---
Total 1,765 2,281 7,717 10,758
Borrowings:
Repurchase
agreements 206 212 825 833
FHLB
advances 791 934 3,279 3,817
Junior
subordinated
obligations 166 161 638 645
--- --- --- ---
Total
interest
expense 2,928 3,588 12,459 16,053
Net
interest
income 10,014 10,818 43,300 44,289
Provision
for
credit
losses 800 800 1,910 4,085
--- --- ----- -----
Net
interest
income
after
provision
for
credit
losses 9,214 10,018 41,390 40,204
Non-
interest
income:
Investment
management
income 1,895 1,876 7,746 7,316
Service
charges
on
deposit
accounts 1,164 1,135 4,463 4,509
Card-
related
fees 664 670 2,701 2,563
Insurance
agency
income - 190 - 1,283
Income
from
bank-
owned
life
insurance 250 262 1,018 1,058
Gain on
the sale
of loans 661 657 1,283 1,394
Gain on
sale of
securities
available-
for-sale - - 1,325 308
Other non-
interest
income 428 1,156 1,466 2,074
--- ----- ----- -----
Total non-
interest
income 5,062 5,946 20,002 20,505
Non-
interest
expense:
Salaries
and
employee
benefits 5,494 5,804 21,902 22,319
Occupancy
and
equipment
expense 1,804 1,924 7,283 7,375
Communication
expense 151 172 599 664
Office
supplies
and
postage
expense 275 284 1,142 1,158
Marketing
expense 225 177 898 1,068
Amortization
of
intangible
asset 222 258 944 1,127
Professional
fees 667 920 3,087 3,250
FDIC
insurance
premium 217 407 1,061 1,601
Other
operating
expense 1,585 1,400 6,665 5,918
----- ----- ----- -----
Total non-
interest
expense 10,640 11,346 43,581 44,480
Income
before
income
tax
expense 3,636 4,618 17,811 16,229
Income tax
expense 791 1,825 4,514 4,605
--- ----- ----- -----
Net income $2,845 $2,793 $13,297 $11,624
====== ====== ======= =======
Share and
Per Share
Data
Basic
average
common
shares
outstanding 4,687,802 4,646,934 4,670,052 4,619,718
Diluted
average
common
shares
outstanding 4,689,427 4,660,463 4,675,212 4,640,097
Basic
earnings
per
common
share $0.60 $0.59 $2.80 $2.49
Diluted
earnings
per
common
share $0.60 $0.59 $2.80 $2.48
Cash
dividends
declared $0.31 $0.30 $1.22 $1.16
Alliance Financial Corporation
Consolidated Balance Sheets (Unaudited)
December 31, 2011 December 31, 2010
----------------- -----------------
(Dollars in thousands, except share
Assets and per share data)
Cash and due from
banks $52,802 $32,501
Securities available-
for-sale 374,306 414,410
Federal Home Loan
Bank of NY ("FHLB")
Stock and 8,478 8,652
Federal Reserve Bank
("FRB") Stock
Loans and leases held
for sale 1,217 2,940
Total loans and
leases, net of
unearned income 872,721 898,537
Less allowance for
credit losses (10,769) (10,683)
------- -------
Net loans and leases 861,952 887,854
Premises and
equipment, net 17,541 18,975
Accrued interest
receivable 3,960 4,149
Bank-owned life
insurance 29,430 28,412
Goodwill 30,844 30,844
Intangible assets,
net 7,694 8,638
Other assets 20,866 17,247
------ ------
Total assets $1,409,090 $1,454,622
========== ==========
Liabilities and
shareholders' equity
Liabilities:
Deposits:
Non-interest bearing $185,736 $179,918
Interest bearing 897,329 954,680
------- -------
Total deposits 1,083,065 1,134,598
Borrowings 136,310 142,792
Accrued interest
payable 1,578 1,391
Other liabilities 18,366 16,936
Junior subordinated
obligations issued
to 25,774 25,774
unconsolidated
subsidiary trusts ------ ------
Total liabilities 1,265,093 1,321,491
Shareholders' equity:
Common stock 5,092 5,051
Surplus 47,147 45,620
Undivided profits 99,879 92,380
Accumulated other
comprehensive income 3,951 1,713
Directors' stock-
based deferred
compensation plan (3,416) (2,977)
Treasury stock (8,656) (8,656)
------ ------
Total shareholders'
equity 143,997 133,131
------- -------
Total liabilities and
shareholders' equity $1,409,090 $1,454,622
========== ==========
Common shares
outstanding 4,769,241 4,729,035
Book value per common
share $30.19 $28.15
Tangible book value
per common share $22.11 $19.80
Alliance Financial Corporation
Consolidated Average Balances (Unaudited)
Three months ended Twelve months ended
------------------ -------------------
December 31, December 31,
------------ ------------
2011 2010 2011 2010
---- ---- ---- ----
(Dollars in thousands)
Earning
assets:
Federal
funds
sold
and
interest
bearing
deposits $38,935 $19,101 $15,890 $8,823
Securities(1) 389,248 401,250 431,407 397,732
Loans
and
leases
receivable:
Residential
real
estate
loans(2) 323,976 343,312 329,773 351,922
Commercial
loans 264,680 231,151 253,069 218,213
Leases,
net of
unearned
income(2) 26,863 44,347 33,140 53,886
Indirect
loans 160,633 180,136 165,880 182,085
Other
consumer
loans 90,696 92,404 90,621 91,389
------ ------ ------ ------
Loans
and
leases
receivable,
net of
unearned
income 866,848 891,350 872,483 897,495
------- ------- ------- -------
Total
earning
assets 1,295,031 1,311,701 1,319,780 1,304,050
Non-
earning
assets 134,597 139,606 132,415 137,043
------- ------- ------- -------
Total
assets $1,429,628 $1,451,307 $1,452,195 $1,441,093
========== ========== ========== ==========
Interest
bearing
liabilities:
Interest
bearing
checking
accounts $143,643 $151,770 $147,236 $141,124
Savings
accounts 105,545 101,433 106,279 99,799
Money
market
accounts 353,317 367,999 364,800 357,572
Time
deposits 320,256 335,452 333,138 359,532
Borrowings 136,151 144,423 143,439 146,296
Junior
subordinated
obligations
issued
to
unconsolidated 25,774 25,774 25,774 25,774
trusts ------ ------ ------ ------
Total
interest
bearing
liabilities 1,084,686 1,126,851 1,120,666 1,130,097
Non-
interest
bearing
deposits 189,685 178,342 181,039 167,912
Other
non-
interest
bearing
liabilities 16,225 16,059 15,917 16,383
------ ------ ------ ------
Total
liabilities 1,290,596 1,321,252 1,317,622 1,314,392
Shareholders'
equity 139,032 130,055 134,573 126,701
------- ------- ------- -------
Total
liabilities
and
shareholders'
equity $1,429,628 $1,451,307 $1,452,195 $1,441,093
========== ========== ========== ==========
(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, 2011 September 30, 2011 December 31, 2010
----------------- ------------------ -----------------
Amortized Fair Amortized Fair Amortized Fair
--------- ---- --------- ---- --------- ----
Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- -----
Securities
available-
for-sale (Dollars in thousands)
Debt
securities:
Obligations
of U.S.
government-
sponsored
corporations $3,134 $3,190 $3,320 $3,411 $4,020 $4,186
Obligations
of states
and
political
subdivisions 77,541 82,299 80,297 83,937 77,246 78,212
Mortgage-
backed
securities(1) 279,393 285,706 309,191 316,780 324,294 329,010
------- ------- ------- ------- ------- -------
Total debt
securities 360,068 371,195 392,808 404,128 405,560 411,408
Stock
investments:
Equity
securities - - 1,852 1,899 1,852 1,995
Mutual
funds 3,000 3,111 3,000 3,128 1,000 1,007
----- ----- ----- ----- ----- -----
Total
stock
investments 3,000 3,111 4,852 5,027 2,852 3,002
Total
available-
for-sale $363,068 $374,306 $397,660 $409,155 $408,412 $414,410
======== ======== ======== ======== ======== ========
(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 United States
government.
The following table sets forth the composition of the Company's loan
and lease portfolio at the dates indicated:
September 30,
December 31, 2011 2011 December 31, 2010
----------------- -------------- -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Loan
portfolio
composition (Dollars in thousands)
Residential
real
estate
loans $316,823 36.4% $328,862 37.8% $334,967 37.4%
Commercial
loans 151,420 17.4% 137,751 15.8% 133,787 14.9%
Commercial
real
estate 126,863 14.6% 121,553 14.0% 116,066 13.0%
Leases,
net of
unearned
income 25,636 3.0% 28,820 3.3% 42,466 4.8%
Indirect
loans 158,813 18.3% 161,623 18.6% 176,125 19.7%
Other
consumer
loans 89,776 10.3% 91,289 10.5% 91,619 10.2%
------ ---- ------ ---- ------ ----
Total
loans and
leases 869,331 100.0% 869,898 100.0% 895,030 100.0%
===== ===== =====
Net
deferred
loan
costs 3,390 3,268 3,507
Allowance
for
credit
losses (10,769) (11,294) (10,683)
------- ------- -------
Net loans
and
leases $861,952 $861,872 $887,854
======== ======== ========
The following table sets forth the composition of the Company's
deposits at the dates indicated:
September 30,
December 31, 2011 2011 December 31, 2010
----------------- -------------- -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Deposit
composition (Dollars in thousands)
Non-
interest
bearing
checking $185,736 17.1% $182,103 16.4% $179,918 15.9%
Interest
bearing
checking 145,885 13.5% 135,878 12.3% 151,894 13.3%
------- ---- ------- ---- ------- ----
Total
checking 331,621 30.6% 317,981 28.7% 331,812 29.2%
Savings 107,311 9.9% 104,800 9.5% 103,099 9.1%
Money
market 330,000 30.5% 359,034 32.4% 357,885 31.5%
Time
deposits 314,133 29.0% 326,246 29.4% 341,802 30.2%
------- ---- ------- ---- ------- ----
Total
deposits $1,083,065 100.0% $1,108,061 100.0% $1,134,598 100.0%
========== ===== ========== ===== ========== =====
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:
December 31, September 30, December 31,
Delinquent loans and leases 2011 2011 2010
--------------------------- ------------- -------------- -------------
$%(1) $%(1) $%(1)
---- ---- ----
(Dollars in thousands)
30 days past due $5,202 0.60% $4,535 0.52% $6,711 0.75%
60 days past due 584 0.06% 1,171 0.14% 1,083 0.12%
90 days past due and still accruing - - - - 19 -
Non-accrual 11,261 1.30% 12,192 1.40% 8,474 0.95%
Total $17,047 1.96% $17,898 2.06% $16,287 1.82%
(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 2011 2011 2010
----------- ------------- -------------- -------------
(Dollars in thousands)
Non-
accruing
loans
and
leases
Residential
real
estate
loans $3,062 $3,033 $3,543
Commercial
loans 3,375 4,748 1,212
Commercial
real
estate 4,051 3,458 2,084
Leases 107 150 697
Indirect
loans 293 301 212
Other
consumer
loans 373 502 726
Total
non-
accruing
loans
and
leases 11,261 12,192 8,474
Accruing
loans
and
leases
delinquent
90 days
or more - - 19
--- --- ---
Total
non-
performing
loans
and
leases 11,261 12,192 8,493
Other
real
estate
and
repossessed
assets 485 672 652
--- --- ---
Total
non-
performing
assets $11,746 $12,864 $9,145
======= ======= ======
Troubled
debt
restructurings
not
included
in above $4,001 $1,005 $1,131
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,
--------- ------------ ------------
2011 2010 2011 2010
---- ---- ---- ----
(Dollars in thousands)
Allowance
for
credit
losses,
beginning
of
period $11,294 $10,466 $10,683 $9,414
Loans
and
leases
charged-
off (1,608) (772) (3,171) (3,607)
Recoveries
of
loans
and
leases
previously
charged-
off 283 189 1,347 791
--- --- ----- ---
Net
loans
and
leases
charged-
off (1,325) (583) (1,824) (2,816)
Provision
for
credit
losses 800 800 1,910 4,085
--- --- ----- -----
Allowance
for
credit
losses,
end of
period $10,769 $10,683 $10,769 $10,683
======= ======= ======= =======
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,
---------- ------------------ ------------------
2011 2010 2011 2010
---- ---- ---- ----
Return on
average
assets 0.80% 0.77% 0.92% 0.81%
Return on
average
equity 8.19% 8.59% 9.88% 9.17%
Return on
average
tangible
equity 11.34% 12.51% 13.91% 13.64%
Yield on
earning
assets 4.15% 4.54% 4.37% 4.78%
Cost of funds 1.08% 1.27% 1.11% 1.42%
Net interest
margin (tax
equivalent)
(1) 3.24% 3.45% 3.43% 3.55%
Non-interest
income to
total income
(2) 33.58% 32.17% 30.10% 30.44%
Efficiency
ratio (3) 70.58% 71.14% 70.35% 69.86%
Common
dividend
payout ratio
(4) 51.67% 50.85% 43.57% 46.77%
Net loans and
leases
charged-off
to average
loans 0.61% 0.26% 0.21% 0.31%
and leases,
annualized
Provision for
credit
losses to
average
loans and 0.37% 0.36% 0.22% 0.46%
leases,
annualized
Allowance for
credit
losses to
total loans
and leases 1.24% 1.19% 1.24% 1.19%
Allowance for
credit
losses to
non-
performing
loans 95.6% 125.8% 95.6% 125.8%
and leases
Non-
performing
loans and
leases to
total loans
and 1.30% 0.95% 1.30% 0.95%
leases
Non-
performing
assets to
total assets 0.83% 0.63% 0.83% 0.63%
(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)
2011 2010
---- ----
Fourth Third Second First Fourth
------ ----- ------ ----- ------
(Dollars in thousands, except share and per share data)
Interest income $12,942 $14,061 $14,494 $14,262 $14,406
Interest expense 2,928 3,064 3,188 3,279 3,588
----- ----- ----- ----- -----
Net interest income 10,014 10,997 11,306 10,983 10,818
Provision for credit
losses 800 750 160 200 800
--- --- --- --- ---
Net interest income
after provision for
credit losses 9,214 10,247 11,146 10,783 10,018
Other non-interest
income 5,062 5,919 4,435 4,586 5,946
Other non-interest
expense 10,640 11,139 10,823 10,979 11,346
------ ------ ------ ------ ------
Income before income
tax expense 3,636 5,027 4,758 4,390 4,618
Income tax expense 791 1,360 1,279 1,084 1,825
--- ----- ----- ----- -----
Net income $2,845 $3,667 $3,479 $3,306 $2,793
====== ====== ====== ====== ======
Stock and related per
share data
Basic earnings per
common share $0.60 $0.77 $0.73 $0.70 $0.59
Diluted earnings per
common share $0.60 $0.77 $0.73 $0.70 $0.59
Basic weighted average
common shares
outstanding 4,687,802 4,667,355 4,662,752 4,662,044 4,646,934
Diluted weighted
average common shares
outstanding 4,689,427 4,673,908 4,670,530 4,670,674 4,660,463
Cash dividends paid
per common share $0.31 $0.31 $0.30 $0.30 $0.30
Common dividend payout
ratio (1) 51.67% 40.26% 41.10% 42.86% 50.85%
Common book value $30.19 $30.15 $29.53 $28.45 $28.15
Tangible common book
value (2) $22.11 $21.99 $21.31 $20.18 $19.80
Capital Ratios
Holding Company
---------------
Tier 1 leverage ratio 9.09% 8.80% 8.52% 8.37% 8.28%
Tier 1 risk based
capital 14.71% 14.42% 14.02% 13.80% 13.41%
Tier 1 risk based
common capital (3) 11.81% 11.52% 11.13% 10.90% 10.54%
Total risk based
capital 15.97% 15.68% 15.26% 15.03% 14.63%
Tangible common equity
to tangible assets
(4) 7.69% 7.50% 7.04% 6.70% 6.62%
Bank
----
Tier 1 leverage ratio 8.50% 8.25% 7.94% 7.79% 7.72%
Tier 1 risk based
capital 13.80% 13.58% 13.12% 12.90% 12.54%
Total risk based
capital 15.05% 14.84% 14.37% 14.15% 13.78%
Selected ratios
Return on average
assets 0.80% 1.01% 0.95% 0.90% 0.77%
Return on average
equity 8.19% 10.69% 10.45% 10.27% 8.59%
Return on average
tangible common
equity 11.34% 14.91% 14.80% 14.80% 12.51%
Yield on earning
assets 4.15% 4.41% 4.49% 4.43% 4.54%
Cost of funds 1.08% 1.10% 1.12% 1.15% 1.27%
Net interest margin
(tax equivalent) (5) 3.24% 3.48% 3.53% 3.44% 3.45%
Non-interest income
to total income (6) 33.58% 29.47% 28.17% 29.46% 32.17%
Efficiency ratio (7) 70.58% 71.45% 68.76% 70.52% 71.14%
Asset quality ratios
Net loans and leases
charged off to
average loans 0.61% 0.06% 0.07% 0.09% 0.26%
and leases, annualized
Provision for credit
losses to average
loans and 0.37% 0.34% 0.07% 0.09% 0.36%
leases, annualized
Allowance for credit
losses to total loans
and leases 1.24% 1.30% 1.21% 1.22% 1.19%
Allowance for credit
losses to non-
performing loans 95.6% 92.6% 128.1% 132.5% 125.8%
and leases
Non-performing loans
and leases to total
loans and leases 1.30% 1.40% 0.95% 0.92% 0.95%
Non-performing assets
to total assets 0.83% 0.90% 0.63% 0.59% 0.63%
(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) Tier 1 capital excluding junior subordinated obligations issued to unconsolidated
trusts divided by total risk-adjusted assets
(4) 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 December
31, 30, June 30, March 31, 31,
--------- ---------- -------- --------- ---------
2011 2011 2011 2010 2010
---- ---- ---- ---- ----
(Dollars in thousands)
Total assets $1,409,090 $1,430,783 $1,475,425 $1,469,176 $1,454,622
Less: Goodwill and
intangible assets,
net 38,538 38,760 39,000 39,241 39,482
------ ------ ------ ------ ------
Tangible assets (non-
GAAP) 1,370,552 1,392,023 1,436,425 1,429,935 1,415,140
Total Common Equity 143,997 143,137 140,134 135,028 133,131
Less: Goodwill and
intangible assets,
net 38,538 38,760 39,000 39,241 39,482
------ ------ ------ ------ ------
Tangible Common Equity
(non-GAAP) 105,459 104,377 101,134 95,787 93,649
Total Equity/Total
Assets 10.22% 10.00% 9.50% 9.19% 9.15%
Tangible Common
Equity/Tangible
Assets (non-GAAP) 7.69% 7.50% 7.04% 6.70% 6.62%
(5) Tax equivalent net interest income divided by average earning assets
(6) 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)
(7) Non-interest expense divided by the sum of net interest income and non-interest
income (as adjusted)
SOURCE Alliance Financial Corporation
