ALLIANCE FINANCIAL CORPORATION 
By 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 Nine months ended
September 30, 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 7,983 8,478
Federal Reserve Bank
("FRB") Stock
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 25,774 25,774
unconsolidated
subsidiary trusts
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 Nine months ended
September 30,
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 25,774 25,774 25,774 25,774
trusts
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 Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Securities available-for-sale (Dollars in thousands)
Debt securities:
Obligations of U.S. government- $1,489 $1,499 $1,614 $1,636 $3,134 $3,190
sponsored corporations
Obligations of states and 68,900 73,959 69,067 73,692 77,541 82,299
political subdivisions
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:
Three months ended Nine months ended
Allowance for credit losses September 30, 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)
At or for the three months At or for the nine months
Key Ratios ended September 30, 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 0.18% 0.06% 0.30% 0.08%
and leases, annualized
Provision for credit losses to average loans and -% 0.34% (0.05)% 0.17%
leases, annualized
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 206.7% 92.6% 206.7% 92.6%
and leases
Non-performing loans and leases to total loans and 0.46% 1.40% 0.46% 1.40%
leases
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 0.18% 0.08% 0.66% 0.61% 0.06%
and leases, annualized
Provision for credit losses to average loans and - (0.14)% - 0.37% 0.34%
leases, annualized
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 206.7% 133.5% 105.0% 95.6% 92.6%
and leases
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, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 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 37,873 38,094 38,317 38,538 38,760
assets, net
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 37,873 38,094 38,317 38,538 38,760
assets, net
Tangible Common Equity (non- 110,505 108,750 106,675 105,459 104,377
GAAP)
Total Equity/Total Assets 10.26% 10.32% 10.24% 10.22% 10.00%
Tangible Common Equity/Tangible 7.85% 7.85% 7.75% 7.69% 7.50%
Assets (non-GAAP)
(5) Tax equivalent net interest
income divided by average
earning assets
Non-interest income (net
of realized gains and
losses on securities and
other non-recurring
items) divided by the sum
(6) of net interest
income and non-interest
income (as adjusted)
Non-interest expense
divided by the sum of net
interest income and non-
interest income (as
(7) adjusted)
SOURCE Alliance Financial Corporation
