Market Overview

Alliance Financial Announces Third Quarter Earnings

Share:

SYRACUSE, N.Y., Oct. 29, 2012 /PRNewswire/ -- Alliance Financial Corporation ("Alliance" or the "Company") (NasdaqGM: ALNC), the holding company for Alliance Bank, N.A., announced today net income for the quarter ended September 30, 2012 of $2.3 million or $0.48 per diluted common share, compared with $3.7 million or $0.77 per diluted common share in the year-ago quarter and $2.9 million or $0.61 per diluted common share in the second quarter of 2012. Securities gains in the third quarter of 2011, when netted against a fixed asset write-down, totaled $472,000 after tax or $0.10 per share. Third quarter results for 2012 included costs associated with the recently announced acquisition of the Company by NBT Bancorp Inc. ("NBT") of $598,000 after tax or $0.13 per share.

Net income for the nine months ended September 30, 2012 was $7.8 million or $1.64 per diluted share, compared with $10.5 million or $2.20 per diluted share in the first nine months of 2011.

On October 8, NBT and Alliance announced that they entered into a definitive agreement under which Alliance will merge with and into NBT. The merger is valued at approximately $233.4 million and is expected to close in early 2013 subject to customary closing conditions, including receipt of regulatory approvals and approvals by NBT and Alliance stockholders. Under the terms of the merger agreement, each outstanding share of Alliance common stock will be converted into the right to receive 2.1779 shares of NBT common stock upon completion of the merger. The transaction is valued at $48.00 per Alliance share based on NBT's average closing stock price of $22.04 for the five-day trading period ending on October 5, 2012.

Jack H. Webb, President and CEO of Alliance said, "Throughout the first nine months of this year, our core business units have effectively executed our organic growth strategy resulting in increased originations in all of our business lines in 2012."

Net interest income decreased $1.0 million and $3.5 million in the three and nine month periods ended September 30, 2012, respectively, compared with the year-ago periods due to the continuing pressure on our net interest margin caused by the exceptionally low interest rate environment, which was partially mitigated by strong loan growth.

Balance Sheet Highlights
Total assets were $1.4 billion at September 30, 2012, which was an increase of $23.2 million from June 30, 2012.  Total loans and leases (net of unearned income) increased $7.9 million from the previous quarter to $906.4 million at September 30, 2012.

Loan origination volumes in the third quarter increased $27.0 million, or 45%, to $86.5 million, compared with $59.5 million in the year-ago quarter on increased demand in each of our commercial, residential mortgage and indirect lending businesses.    

Commercial loans and mortgages decreased $8.6 million in the third quarter and totaled $274.5 million at September 30, 2012, as a $4.9 million decrease in existing lines of credit offset a solid quarter of new loan production.  Originations of commercial loans and mortgages in the third quarter (excluding lines of credit) totaled $12.5 million, compared with $10.3 million in the year-ago quarter. 

Residential mortgages outstanding increased $6.6 million in the third quarter to $327.5 million.  Originations of residential mortgages totaled $38.9 million in the third quarter of 2012, compared with $30.5 million in the year-ago quarter.  Alliance retained in portfolio approximately $17.7 million of the third quarter originations that were bi-weekly payment mortgages or monthly payment mortgages with maturities of 15 years or less.

Indirect auto loan balances were $199.4 million at the end of the third quarter, which was an increase of   $10.7 million from the end of the second quarter of 2012.  Alliance originated $33.7 million of indirect auto loans in the third quarter, compared with $17.9 million in the year-ago quarter. The increase in originations this year is attributable to a change in the Company's rate structure designed to increase its market share without lowering its underwriting standards, along with the implementation of an electronic application system. 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.  

The Company's investment securities portfolio totaled $343.2 million at September 30, 2012 which was unchanged from June 30, 2012.  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 September 30, 2012 was 77.1% government-sponsored entity-guaranteed mortgage-backed securities, 21.5% municipal securities and 0.4% obligations of U.S. government-sponsored corporations.  Mortgage-backed securities, which totaled $264.6 million at September 30, 2012, 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 $74.0 million at the end of the third quarter, is primarily comprised of highly rated general obligation bonds issued by local municipalities in New York State. Net unrealized gains on our securities portfolio totaled $12.4 million at the end of the third quarter.

Deposits increased $19.8 million in the third quarter, and were $1.1 billion at September 30, 2012. Low-cost transaction accounts comprised 77.1% of total deposits at the end of the third quarter, compared with 75.7% at June 30, 2012. Alliance's liability mix remained favorably weighted towards transaction accounts in the third quarter as retail and municipal depositors continue to prefer transaction accounts over time accounts in the low interest rate environment, and also because of the buildup of cash on commercial customers' balance sheets.

Shareholders' equity was $148.4 million at September 30, 2012, compared with $146.8 million at the end of the second quarter.  Net income for the quarter increased shareholders' equity by $2.3 million and was partially offset by common stock dividends declared of $1.5 million or $0.32 per common share. 

The Company's Tier 1 leverage ratio was 9.43% and its total risk-based capital ratio was 15.79% at the end of the third quarter.  The Company's tangible common equity capital ratio (a non-GAAP financial measure) was 7.85% at September 30, 2012.

Asset Quality and the Provision for Credit Losses
Delinquent loans and leases (including non-performing) totaled $10.1 million at September 30, 2012, compared with $12.6 million at June 30, 2012 and $17.0 million at December 31, 2011. The largest decline in delinquent loans in the third quarter occurred in loans delinquent 90 days or more or on non-accrual status, which declined $2.6 million or 38.4%.       

Non-performing assets were $5.1 million or 0.35% of total assets at September 30, 2012, compared with $6.7 million or 0.47% of total assets at June 30, 2012 and $11.7 million or 0.83% of total assets at December 31, 2011.  The decline in non-performing assets in the third quarter resulted primarily from non-accrual loans returning to accrual status as a result of satisfactory payment performance, charge-offs and pay-offs of non-performing loans. Included in non-performing assets at the end of the third quarter are non-performing loans and leases totaling $4.1 million, compared with $6.7 million at June 30, 2012 and $11.3 million at December 31, 2011.

Conventional residential mortgages comprised $2.3 million (37 loans) or 56.1% of non-performing loans and leases, and commercial loans and mortgages totaled $1.1 million (17 loans) or 26.4% of non-performing loans and leases at the end of the third quarter. 

Net charge-offs were $409,000 and $2.0 million in the three and nine months ended September 30, 2012, respectively, compared with $139,000 and $499,000 in the year-ago periods.  Charge-offs for the third quarter included a $365,000 write down of a $1.3 million commercial relationship to the real estate collateral's estimated fair value, which was foreclosed on and transferred to other real estate owned in the third quarter.  This commercial relationship was placed on non-performing status in the third quarter of 2011, with a total outstanding balance at that time of $3.6 million.  As was previously disclosed in the Company's 2011 Form 10-K and quarterly reports on Form 10-Q, the Company recorded write-downs on this relationship totaling $2.3 million between the fourth quarter of 2011 and the second quarter of 2012.  Net charge-offs annualized equaled 0.18% and 0.30%, respectively, of average loans and leases during the three months and nine months ended September 30, 2012, compared with 0.06% and 0.08% in the year-ago periods, respectively. Gross charge-offs were $621,000 and recoveries were $212,000 in the third quarter of 2012.       

No provision for credit losses was recorded in the third quarter compared to a negative provision expense of $300,000 in the second quarter, and provision expense of $750,000 in the year-ago quarter. Alliance assesses a number of quantitative and qualitative factors at the individual portfolio level in determining the adequacy of the allowance for credit losses and the required provision expense each quarter.  In addition, Alliance analyzes certain broader, non-portfolio specific factors in assessing the adequacy of the allowance for credit losses, such as the allowance as a percentage of total loans and leases, the allowance as a percentage of non-performing loans and leases and the provision expense as a percentage of net charge-offs.  In doing so, a portion of the allowance has been considered "unallocated", which means it is not based on either quantitative or qualitative factors, but on the broader, non-portfolio specific factors mentioned above.  At September 30, 2012, $698,000 or 8.2% of the allowance for credit losses was considered to be "unallocated," compared to $991,000 or 9% at December 31, 2011.  Consistent with the improvement in the Company's asset quality metrics and net charge-off levels in recent quarters (excluding the charge-offs related to the $3.6 million commercial relationship discussed above), the relative level of unallocated allowance to the total allowance has trended downward each quarter in 2012.  Absent any material deterioration in credit quality or material growth in the loan and lease portfolio, some portion of this "unallocated" allowance may be reduced by future probable credit losses, which would have the effect of lowering the amount of provision expense relative to net charge-offs compared with past quarters, which was the case in the third quarter of 2012.  

The provision for credit losses as a percentage of net charge-offs was 0% in the third quarter compared with 540% in the year-ago quarter. The provision for credit losses as a percentage of net charge-offs was not meaningful in the second quarter of 2012 due to the negative provision that was recorded in that quarter. The high level of provision as a percentage of net charge-offs in the third quarter of 2011 resulted primarily from the establishment of an impairment allowance on the $3.6 million commercial relationship previously discussed. 

The allowance for credit losses was $8.5 million at September 30, 2012, compared with $8.9 million at June 30, 2012 and $10.8 million at December 31, 2011.  The ratio of the allowance for credit losses to total loans and leases was 0.94% at September 30, 2012, compared with 0.99% at June 30, 2012 and 1.24% at December 31, 2011.  The ratio of the allowance for credit losses to non-performing loans and leases was 207% at September 30, 2012, compared with 134% at June 30, 2012 and 96% at December 31, 2011.

Net Interest Income
Net interest income totaled $10.0 million in the three months ended September 30, 2012, compared with $11.0 million in the year-ago quarter, and $10.0 million in the second quarter of 2012.  The tax-equivalent net interest margin decreased 25 basis points in the third quarter compared with the year-ago quarter due to the effect of persistently low interest rates on the Company's interest-earning assets. The net interest margin decreased 3 basis points from the second to the third quarter of 2012 with most of the decrease attributable to the net effect of interest income recognition on non-accrual loans.

The net interest margin on a tax-equivalent basis was 3.23% in the third quarter of 2012, compared with 3.48% in the year-ago quarter and 3.26% in the second quarter of 2012.  The decrease in the net interest margin compared with the third quarter of 2011 was the result of a decrease in the tax-equivalent earning asset yield of 55 basis points in the third quarter compared with the year-ago quarter, which was partially offset by a decrease in the cost of interest-bearing liabilities of 33 basis points over the same period.  On a linked-quarter basis, the decline in our earning-assets yield was 9 basis points in the third quarter, which was offset by a 6 basis point drop in the cost of our interest-bearing liabilities. 

Average interest-earning assets were $1.3 billion in the third quarter, which was a decrease of 2.6% from the year-ago quarter and equaled the second quarter of 2012.  Most of the decline from the year-ago quarter occurred in our securities portfolio, with the average balance down 24% due to our decision to temporarily shrink the portfolio in the second half of 2011 due to the very low yields available on the types of securities in which we invest. Average loans and leases increased $25.2 million or 2.9% in the third quarter compared with the year-ago quarter as growth in our average commercial loan and consumer loan portfolios offset lower average lease balances. Total average loans and leases were 69.8% of total interest-earning assets in the third quarter of 2012, compared with 66.1% in the year-ago quarter and 68.4% in the second quarter of 2012.       

Net interest income for the nine months ended September 30, 2012 totaled $29.8 million, which was down $3.5 million or 10.5% compared with the year-ago period.  The tax equivalent net interest margin was 3.24% for the nine months ended September 30, 2012, compared with 3.49% for the first nine months of 2011.  The tax-equivalent earning asset yield decreased 49 basis points in the first nine months of 2012 compared with the year-ago period, which was partially offset by a decrease of 26 basis points in the cost of interest-bearing liabilities over the same period.

Average interest-earning assets were $1.3 billion in the first nine months of 2012, which was a decrease of 3.5% from the first nine months of 2011.  The changes in the average balances of securities and loans for the first nine months of 2012 compared with the year-ago period were similar to that as discussed above for the third quarter. Total average loans and leases were 68.4% of total interest-earning assets in the first nine months of 2012, compared with 65.8% in the year-ago period.

Net interest margin is expected to remain under pressure in coming quarters as the persistently low interest rate environment continues to negatively affect the return on loan and investment portfolios, while the ability to further reduce funding costs is limited.

Non-Interest Income and Non-Interest Expenses
Non-interest income was $4.6 million in the third quarter of 2012, compared with $5.9 million in the third quarter of 2011 and $4.5 million in the second quarter of 2012. The Company did not sell securities in the third quarter of 2012 and therefore gains on sales of investment securities decreased $1.3 million compared with the third quarter of 2011.  Gains on the sale of loans were $263,000 higher than the third quarter of 2011 due to higher volumes of mortgages originated and sold in 2012.

Non-interest income totaled $13.6 million in the first nine months of 2012, compared with $14.9 million for the same period in the prior year. The $1.4 million decrease from the prior year period resulted from the decrease in gains on sales of securities and other non-interest income partly offset by a $593,000 increase in gains on the sale of loans.

Non-interest income (excluding gains on securities sales) accounted for 31.5% of total revenue in the third quarter of 2012, compared with 29.5% in the year-ago quarter.  Non-interest income (excluding gains on securities sales) accounted for 31.3% of total revenue in the first nine months of 2012, compared with 29.0% in the year-ago period.

Non-interest expenses were $11.7 million in the quarter ended September 30, 2012, compared with $11.1 million in the year-ago quarter and $11.0 million in the second quarter of 2012.  Merger related costs (pre-tax) of $991,000 were accrued in the third quarter and are included in professional fees.  Other operating expenses in the third quarter of 2011 included a $555,000 write-down of a vacant bank-owned building to its estimated fair value.  Non-interest expenses were $33.6 million in the nine months ended September 30, 2012, compared with $32.9 million in the first nine months of 2011.

The Company's efficiency ratio was 80.6% in the third quarter of 2012, compared with 71.5% in the year-ago quarter.  The Company's efficiency ratio was 77.5% in the nine months ended September 30, 2012, compared with 70.2% in the year-ago period.  Excluding the merger related costs, the efficiency ratio was 73.8% and 75.2%, respectively, for the three and nine month period ending September 30, 2012. Excluding the fixed asset write-down, the efficiency ratio was 67.9% and 69.1%, respectively, for the three and nine month period ending September 30, 2011.

The Company's effective tax rate was 19.1% and 22.1% for the three and nine months ended September 30, 2012, respectively, compared with 27.1% and 26.3% in the year-ago periods, respectively.  The decrease in our effective tax rate from 2011 was due to a higher level of tax-exempt income as a percentage to total taxable income.

About Alliance Financial Corporation
Alliance Financial Corporation is a 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, 2011, 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

September 30,


Nine months ended

September 30,



2012


2011


2012


2011



(Dollars in thousands, except share and per share data)

Interest income:









Loans, including fees


$9,727


$10,448


$29,270


$31,731

Federal funds sold and interest bearing deposits


28



103


5

Securities


2,224


3,613


7,286


11,081

Total interest income


11,979


14,061


36,659


42,817










Interest expense:









Deposits:









  Savings accounts


30


54


85


166

  Money market accounts


249


377


779


1,271

  Time accounts


812


1,404


2,843


4,337

  NOW accounts


30


49


96


179

Total


1,121


1,884


3,803


5,953










Borrowings:









  Repurchase agreements


210


206


622


619

  FHLB advances


524


816


1,920


2,486

  Junior subordinated obligations


170


158


514


473

Total interest expense


2,025


3,064


6,859


9,531










Net interest income


9,954


10,997


29,800


33,286

Provision for credit losses



750


(300)


1,110

Net interest income after provision for credit losses


9,954


10,247


30,100


32,176










Non-interest income:









Investment management income


1,831


1,948


5,636


5,850

Service charges on deposit accounts


1,074


1,194


3,167


3,299

Card-related fees


688


687


2,059


2,039

Income from bank-owned life insurance


250


258


742


769

Gain on the sale of loans


508


245


1,214


621

Gain on the sale of securities



1,325



1,325

Other non-interest income


233


262


767


1,037

Total non-interest income


4,584


5,919


13,585


14,940










Non-interest expense:









Salaries and employee benefits


5,761


5,573


17,103


16,407

Occupancy and equipment expense


1,770


1,833


5,365


5,479

Communication expense


153


124


469


448

Office  supplies and postage expense


298


283


905


868

Marketing expense


152


193


651


673

Amortization of intangible asset


222


241


665


722

Professional fees


1,615


736


3,220


2,420

FDIC insurance premium


216


49


642


844

Other operating expense


1,526


2,107


4,598


5,080

Total non-interest expense


11,713


11,139


33,618


32,941










Income before income tax expense


2,825


5,027


10,067


14,175

Income tax expense


540


1,360


2,224


3,723

Net income


$2,285


$3,667


$7,843


$10,452










Share and Per Share Data









Basic average common shares outstanding


4,702,294


4,667,355


4,700,624


4,664,070

Diluted average common shares outstanding


4,702,294


4,673,908


4,700,624


4,671,688

Basic earnings per common share


$  0.48


$  0.77


$  1.64


$  2.20

Diluted earnings per common share


$  0.48


$  0.77


$  1.64


$  2.20

Cash dividends declared


$  0.32


$  0.31


$  0.94


$  0.91

 

Alliance Financial Corporation

Consolidated Balance Sheets (Unaudited)




September 30, 2012


December 31, 2011



(Dollars in thousands, except share and per share data)

Assets





Cash and due from banks


$     88,703


$      52,802

Securities available-for-sale


343,211


374,306

Federal Home Loan Bank of NY ("FHLB") Stock and

  Federal Reserve Bank ("FRB") Stock


7,983


8,478

Loans and leases held for sale


359


1,217

Total loans and leases, net of unearned income


906,383


872,721

Less allowance for credit losses


(8,483)


(10,769)

Net loans and leases


897,900


861,952






Premises and equipment, net


16,879


17,541

Accrued interest receivable


4,134


3,960

Bank-owned life insurance


30,172


29,430

Goodwill


30,844


30,844

Intangible assets, net


7,029


7,694

Other assets


18,826


20,866

Total assets


$1,446,040


$1,409,090






Liabilities and shareholders' equity





Liabilities:





Deposits:





    Non-interest bearing


$   212,437


$   185,736

    Interest bearing


913,966


897,329

Total deposits


1,126,403


1,083,065






Borrowings


127,134


136,310

Accrued interest payable


723


1,578

Other liabilities


17,628


18,366

Junior subordinated obligations issued to

   unconsolidated subsidiary trusts


25,774


25,774

Total liabilities


1,297,662


1,265,093






Shareholders' equity:





Common stock


5,104


5,092

Surplus


47,651


47,147

Undivided profits


103,225


99,879

Accumulated other comprehensive income


4,808


3,951

Directors' stock-based deferred compensation plan


(3,754)


(3,416)

Treasury stock


(8,656)


(8,656)

Total shareholders' equity


148,378


143,997

Total liabilities and shareholders' equity


$1,446,040


$1,409,090











Common shares outstanding


4,782,185


4,769,241

Book value per common share


$31.03


$30.19

Tangible book value per common share


$23.11


$22.11

 

Alliance Financial Corporation

Consolidated Average Balances (Unaudited)




Three months ended

September 30,


Nine months ended September 30,



2012


2011


2012


2011



(Dollars in thousands)

Earning assets:









Federal funds sold and interest bearing deposits


$    50,376


$     3,311


$    58,175


$      8,124

Securities(1)


338,102


444,208


347,000


447,467

Loans and leases receivable:









   Residential real estate loans(2)


325,720


331,977


319,769


331,727

   Commercial loans


146,208


134,508


145,993


130,540

   Commercial real estate loans


128,719


120,059


127,336


118,615

   Leases, net of unearned income(2)


12,391


30,990


16,854


35,255

   Indirect loans


194,717


162,439


179,188


167,649

   Other consumer loans


88,522


91,087


88,608


90,596

Loans and leases receivable, net of unearned income


896,277


871,060


877,748


874,382

Total earning assets


1,284,755


1,318,579


1,282,923


1,329,973










Non-earning assets


138,176


132,081


136,870


129,827

Total assets


$1,422,931


$1,450,660


$1,419,793


$1,459,800










Interest bearing liabilities:









Interest bearing checking accounts


$155,062


$   139,035


$   152,660


$   148,445

Savings accounts


117,732


108,969


113,275


106,527

Money market accounts


358,951


346,779


363,154


368,670

Time deposits


263,632


332,054


276,668


337,480

Borrowings


127,210


160,943


128,820


145,895

Junior subordinated obligations issued to unconsolidated

  trusts


25,774


25,774


25,774


25,774

Total interest bearing liabilities


1,048,361


1,113,554


1,060,351


1,132,791










Non-interest bearing deposits


213,883


183,920


200,399


178,124

Other non-interest bearing liabilities


16,083


15,957


16,545


15,814

Total liabilities


1,278,327


1,313,431


1,277,295


1,326,729

Shareholders' equity


144,604


137,229


142,498


133,071

Total liabilities and shareholders' equity


$1,422,931


$1,450,660


$1,419,793


$1,459,800





(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:




September 30, 2012


June 30, 2012


December 31, 2011



Amortized Cost


Fair Value


Amortized

Cost


Fair

Value


Amortized

Cost


Fair

Value

Securities available-for-sale


(Dollars in thousands)

Debt securities:













Obligations of U.S. government-

sponsored corporations


$    1,489


$    1,499


$    1,614


$    1,636


$    3,134


$    3,190

Obligations of states and

political subdivisions


68,900


73,959


69,067


73,692


77,541


82,299

Mortgage-backed securities(1)


257,435


264,583


256,882


263,376


279,393


285,706

Total debt securities


327,824


340,041


327,563


338,704


360,068


371,195














Stock investments:













Mutual funds


3,000


3,170


3,000


3,145


3,000


3,111

Total stock investments






3,000


3,145


3,000


3,111














Total available-for-sale


$330,824


$343,211


$330,563


$341,849


$363,068


$374,306





(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, 2012


June 30, 2012


December 31, 2011




Amount


Percent


Amount


Percent


Amount


Percent


Loan portfolio composition


(Dollars in thousands)


Residential real estate loans


$327,454


36.3%


$320,899


35.9%


$316,823


36.4%


Commercial loans


147,677


16.4%


153,542


17.2%


151,420


17.4%


Commercial real estate


126,783


14.1%


129,508


14.5%


126,863


14.6%


Leases, net of unearned income


11,811


1.3%


13,563


1.5%


25,636


3.0%


Indirect loans


199,419


22.1%


188,765


21.1%


158,813


18.3%


Other consumer loans


88,739


9.8%


88,092


9.8%


89,776


10.3%


Total loans and leases


901,883


100.0%


894,369


100.0%


869,331


100.0%
















Net deferred loan costs


4,500




4,083




3,390




Allowance for credit losses   


(8,483)




(8,892)




(10,769)




Net loans and leases


$897,900




$889,560




$861,952






















The following table sets forth the composition of the Company's deposits at the dates indicated:
















September 30, 2012


June 30, 2012


December 31, 2011




Amount


Percent


Amount


Percent


Amount


Percent


Deposit composition


(Dollars in thousands)


Non-interest bearing checking


$   212,437


18.9%


$   203,885


18.5%


$   185,736


17.1%


Interest bearing checking


159,680


14.2%


158,701


14.3%


145,885


13.5%


Total checking


372,117


33.1%


362,586


32.8%


331,621


30.6%
















Savings


115,229


10.2%


116,664


10.5%


107,311


9.9%


Money market


380,623


33.8%


358,025


32.4%


330,000


30.5%


Time deposits


258,434


22.9%


269,297


24.3%


314,133


29.0%


Total deposits


$1,126,403


100.0%


$1,106,572


100.0%


$1,083,065


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


September 30, 2012


June 30, 2012


December 31, 2011



$

%(1)


$

%(1)


$

%(1)



(Dollars in thousands)

30 days past due


$ 4,152

0.46%


$ 5,220

0.58%


$ 5,202

0.60%

60 days past due


1,812

0.20%


732

0.08%


584

0.06%

90 days past due and still accruing




Non-accrual


4,104

0.46%


6,660

0.75%


11,261

1.30%

Total


$10,068

1.12%


$12,612

1.41%


$17,047

1.96%



(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


September 30, 2012


June 30, 2012


December 31, 2011



(Dollars in thousands)

Non-accruing loans and leases







   Residential real estate loans


$2,302


$2,549


$  3,062

   Commercial loans


579


1,464


3,375

   Commercial real estate


505


1,879


4,051

   Leases


52


74


107

   Indirect loans


220


288


293

   Other consumer loans


446


406


373

Total non-accruing loans and leases


4,104


6,660


11,261

Accruing loans and leases delinquent 90 days or more




Total non-performing loans and leases


4,104


6,660


11,261

Other real estate and repossessed assets


985


51


485

Total non-performing assets


$5,089


$6,711


$11,746

Troubled debt restructurings not included in above


$2,704


$2,133


$  1,653

 

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

September 30,


Nine months ended

September 30,



2012


2011


2012


2011



(Dollars in thousands)

Allowance for credit losses, beginning of period


$8,892


$10,683


$10,769


$10,683










Loans and leases charged-off


(621)


(511)


(2,978)


(1,564)

Recoveries of loans and leases previously charged-off


212


372


992


1,065

Net loans and leases charged-off


(409)


(139)


(1,986)


(499)










Provision for credit losses



750


(300)


1,110

Allowance for credit losses, end of period


$8,483


$11,294


$8,483


$11,294

 

Alliance Financial Corporation

Consolidated Financial Information (Unaudited)


 

Key Ratios


At or for the three months

ended September 30,


At or for the nine months

 ended September 30,



2012


2011


2012


2011

Return on average assets


0.64%


1.01%


0.74%


0.95%

Return on average equity


6.32%


10.69%


7.34%


10.47%

Return on average tangible equity


8.57%


14.91%


10.02%


14.83%

Yield on earning assets


3.86%


4.41%


3.95%


4.44%

Cost of funds


0.77%


1.10%


0.86%


1.12%

Net interest margin (tax equivalent) (1)


3.23%


3.48%


3.24%


3.49%

Non-interest income to total income (2)


31.54%


29.47%


31.31%


29.03%

Efficiency ratio (3)


80.56%


71.45%


77.49%


70.24%

Common dividend payout ratio (4)


66.67%


40.26%


57.32%


41.36%










Net loans and leases charged-off to average loans

  and leases, annualized


0.18%


0.06%


0.30%


0.08%

Provision for credit losses to average loans and

  leases, annualized


—%


0.34%


(0.05)%


0.17%

Allowance for credit losses to total loans and leases


0.94%


1.30%


0.94%


1.30%

Allowance for credit losses to non-performing loans

  and leases


206.7%


92.6%


206.7%


92.6%

Non-performing loans and leases to total loans and

  leases


0.46%


1.40%


0.46%


1.40%

Non-performing assets to total assets


0.35%


0.90%


0.35%


0.90%





(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)




2012


2011



Third


Second


First


Fourth


Third



(Dollars in thousands, except share and per share data)

Interest income


$11,979


$12,217


$12,463


$12,942


$14,061

Interest expense


2,025


2,212


2,622


2,928


3,064

Net interest income


9,954


10,005


9,841


10,014


10,997

Provision for credit losses



(300)



800


750

Net interest income after provision for credit losses


9,954


10,305


9,841


9,214


10,247

Other non-interest income


4,584


4,524


4,476


5,062


5,919

Other non-interest expense


11,713


11,016


10,888


10,640


11,139

Income before income tax expense


2,825


3,813


3,429


3,636


5,027

Income tax expense


540


895


790


791


1,360

Net income


$ 2,285


$ 2,918


$ 2,639


$ 2,845


$ 3,667












Stock and related per share data











Basic earnings per common share


$   0.48


$   0.61


$   0.55


$   0.60


$   0.77

Diluted earnings per common share


$   0.48


$   0.61


$   0.55


$   0.60


$   0.77

Basic weighted average common shares outstanding


4,702,294


4,700,992


4,698,567


4,687,802


4,667,355

Diluted weighted average common shares outstanding


4,702,294


4,700,992


4,698,567


4,689,427


4,673,908

Cash dividends paid per common share


$  0.32


$   0.31


$   0.31


$   0.31


$   0.31

Common dividend payout ratio (1)


66.67%


50.82%


56.36%


51.67%


40.26%

Common book value


$31.03


$ 30.69


$ 30.30


$ 30.19


$ 30.15

Tangible common book value (2)


$23.11


$ 22.73


$ 22.30


$ 22.11


$ 21.99












Capital Ratios











Holding Company











Tier 1 leverage ratio


9.43%


9.38%


9.26%


9.09%


8.80%

Tier 1 risk based capital


14.82%


14.74%


14.99%


14.71%


14.42%

Tier 1 risk based common capital (3)


11.98%


11.89%


12.05%


11.81%


11.52%

Total risk based capital


15.79%


15.75%


16.09%


15.97%


15.68%

Tangible common equity to tangible assets(4)


7.85%


7.85%


7.75%


7.69%


7.50%












Bank











Tier 1 leverage ratio


8.86%


8.81%


8.68%


8.50%


8.25%

Tier 1 risk based capital


13.96%


13.86%


14.10%


13.80%


13.58%

Total risk based capital


14.94%


14.89%


15.21%


15.05%


14.84%












Selected ratios











Return on average assets


0.64%


0.82%


0.74%


0.80%


1.01%

Return on average equity


6.32%


8.21%


7.51%


8.19%


10.69%

Return on average tangible common equity


8.57%


11.22%


10.33%


11.34%


14.91%

Yield on earning assets


3.86%


3.95%


4.04%


4.15%


4.41%

Cost of funds


0.77%


0.83%


0.98%


1.08%


1.10%

Net interest margin (tax equivalent) (5)


3.23%


3.26%


3.22%


3.24%


3.48%

Non-interest income to total income (6)


31.54%


31.14%


31.26%


33.58%


29.47%

Efficiency ratio (7)


80.56%


75.52%


76.05%


70.58%


71.45%












Asset quality ratios











Net loans and leases charged off to average loans

  and leases, annualized


0.18%


0.08%


0.66%


0.61%


0.06%

Provision for credit losses to average loans and

  leases, annualized



(0.14)%



0.37%


0.34%

Allowance for credit losses to total loans and leases


0.94%


0.99%


1.08%


1.24%


1.30%

Allowance for credit losses to non-performing loans

  and leases


206.7%


133.5%


105.0%


95.6%


92.6%

Non-performing loans and leases to total loans and leases


0.46%


0.74%


1.03%


1.30%


1.40%

Non-performing assets to total assets


0.35%


0.47%


0.65%


0.83%


0.90%



(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:

 



September 30,

 2012


June 30,

 2012


March 31,

2012


December 31,

2011


September 30,

 2011



(Dollars in thousands)

Total assets


$1,446,040


$1,422,838


$1,415,594


$1,409,090


$1,430,783

Less:  Goodwill and intangible

assets, net


37,873


38,094


38,317


38,538


38,760

Tangible assets (non-GAAP)


1,408,167


1,384,744


1,377,277


1,370,552


1,392,023












Total Common Equity


148,378


146,844


144,992


143,997


143,137

Less:  Goodwill and intangible

assets, net


37,873


38,094


38,317


38,538


38,760

Tangible Common Equity (non-

GAAP)


110,505


108,750


106,675


105,459


104,377












Total Equity/Total Assets


10.26%


10.32%


10.24%


10.22%


10.00%

Tangible Common Equity/Tangible

Assets   (non-GAAP) 


7.85%


7.85%


7.75%


7.69%


7.50%



(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

View Comments and Join the Discussion!