Attached files
Exhibit 99.1
| NEWS RELEASE | FOR IMMEDIATE RELEASE |
Alliance Financial Announces Fourth Quarter and Record Full Year Earnings
Syracuse, NY, January 26, 2011 - Alliance Financial Corporation (“Alliance” or the “Company”) (NasdaqGM: ALNC), the holding company for Alliance Bank, N.A., announced today its net income for the quarter ended December 31, 2010 was $2.8 million or $0.59 per diluted common share, compared with $3.5 million or $0.75 per diluted common share in the year-ago quarter. Securities gains, net of non-recurring expenses, positively impacted the fourth quarter of 2009 by $0.09 per diluted share.
Net income was $11.6 million for the year ended December 31, 2010, compared with $11.4 million in 2009. Net income available to common shareholders was $11.6 million or $2.48 per diluted share in 2010, compared with $10.4 million or $2.24 per diluted share in 2009. Preferred dividends and the accretion of the discount on preferred stock issued under the U.S. Department of the Treasury’s Capital Purchase Program was $1.1 million or $0.24 per diluted share in 2009. The Company redeemed the preferred stock in May 2009.
Jack H. Webb, President and CEO of Alliance said, “For the fourth consecutive year we set a record for net income while also achieving substantial increases in deposits and commercial loan originations in a difficult operating environment for financial institutions. Our community banking business model, which focuses on delivering responsive customer service and local decision making, has clearly established Alliance as an alternative to the larger financial institutions.”
Webb added, “The investment we made to enhance our commercial banking team contributed to a 55 percent increase in commercial loan originations in 2010 over 2009. Our commercial lending business finished the year strongly, with originations in the fourth quarter up 104 percent over the fourth quarter of 2009 and up 97 percent over the third quarter of 2010. Deposit levels were up strongly in 2010 as well, placing Alliance fourth by total deposits in the Syracuse MSA. Local customer deposit growth of $114 million in 2010 provided the funding for us to continue lending to credit worthy borrowers throughout Central New York.”
Balance Sheet Highlights
Total assets were $1.5 billion at December 31, 2010, an increase of $7.8 million or 0.5% from September 30, 2010. Securities available-for-sale increased $18.7 million in the fourth quarter to $414.4 million at the end of 2010. Total loans and leases (net of unearned income) decreased $3.4 million to $898.5 million at December 31, 2010. This decrease in loan balances resulted from the continued amortization of our lease portfolio combined with the sale of most residential mortgage originations in the fourth quarter, the effects of which were substantially offset by strong commercial loan growth in the fourth
quarter. Loan origination volumes in the fourth quarter increased $33.3 million or 56.2% compared with the year-ago quarter and increased $14.2 million or 18.1% compared with the third quarter of 2010, with commercial loan originations driving much of the increase in originations.
Commercial loans and mortgages increased $23.1 million or 10.2% in the fourth quarter and totaled $249.9 million at December 31, 2010. Originations of commercial loans and mortgages in the fourth quarter (excluding lines of credit) totaled $38.5 million, compared with $19.6 million in the third quarter of 2010 and $18.9 million in the year-ago quarter. Commercial originations increased 55.4% in 2010 compared to 2009 and totaled $80.4 million.
Residential mortgages outstanding decreased $13.5 million in the fourth quarter primarily as a result of our plan to sell most of our residential originations on the secondary market to manage our overall portfolio balance. Originations of residential mortgages totaled $38.6 million in the fourth quarter of 2010, compared with $34.7 million in the third quarter of 2010 and $25.7 million in the year-ago quarter. Residential originations decreased 24.8% in 2010 and totaled $119.7 million, as modestly higher interest rates in 2010 reduced mortgage refinancing demand.
Indirect auto loan balances were $176.1 million at the end of the fourth quarter, which was a decrease of $7.5 million from the end of the third quarter. The Company originated $14.5 million of indirect auto loans in the fourth quarter, compared with $22.5 million in the third quarter of 2010 and $11.9 million in the year-ago quarter. Indirect originations decreased 12.5% to $79.5 million in 2010 compared with 2009 due to competitive pressures. 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 $5.0 million in the fourth quarter and $25.8 million for the year to $42.5 million as a result of the Company’s previously announced decision to cease new lease originations.
The Company’s investment securities portfolio totaled $414.4 million at December 31, 2010, compared with $395.8 million at September 30, 2010. The Company’s portfolio is comprised entirely of investment grade securities, the majority of which are rated “AAA” by one or more of the nationally recognized rating agencies. The breakdown of the securities portfolio at December 31, 2010 was 79% government-sponsored entity guaranteed mortgage-backed securities, 19% municipal securities and 1% obligations of U.S. Government-sponsored corporations. Mortgage-backed securities, which totaled $329.0 million at December 31, 2010, 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 United States government. The Company’s municipal securities portfolio, which totaled $78.2 million at the end of 2010, is primarily comprised of highly rated general obligation bonds issued by local municipalities in New York State.
Deposits increased $9.5 million in the fourth quarter, and were $1.1 billion at December 31, 2010. Since the end of 2009 deposits increased $58.9 million, with transaction accounts (checking, savings, and money market) up $91.7 million as a result of growth in each of our retail, commercial and municipal lines of business. Time accounts decreased $32.8 million in 2010 as growth in transaction accounts allowed for the reduction of wholesale brokered deposits by $54.8 million in 2010. Deposits, net of wholesale brokered accounts, increased $113.8 million in 2010. Low cost transaction accounts comprised 69.9% of total deposits at the end of 2010, compared with 69.7% at September 30, 2010 and 65.2% at December 31, 2009.
Shareholders’ equity was $133.1 million at December 31, 2010, compared with $134.5 million at September 30, 2010 and $123.9 million at December 31, 2009. Net income for the quarter increased shareholders’ equity by $2.8 million and was partially offset by common stock dividends declared of $1.4 million or $0.30 per common share. Unrealized gains on securities available for sale, net of taxes, decreased $3.5 million in the fourth quarter due to changes in market interest rates and other market conditions.
The Company’s Tier 1 leverage ratio was 8.28% and its total risk-based capital ratio was 14.63% at the end of the fourth quarter, both of which comfortably exceeded the regulatory thresholds required to be classified as a well-capitalized institution, which are 5.0% and 10.0%, respectively. The Company’s tangible common equity capital ratio (a non-GAAP financial measure) was 6.62% at December 31, 2010.
Asset Quality and the Provision for Credit Losses
Delinquent loans and leases (including non-performing) decreased to $16.3 million at December 31, 2010, compared to $17.6 million at September 30, 2010 and $18.7 million at the end of 2009. The severity of the Company’s delinquencies as measured by the number of days past due on all delinquent loans and leases has remained relatively stable throughout 2010. Approximately 41% of all delinquent loans and leases at the end of the fourth quarter were past due less than sixty days, compared with 39% at September 30, 2010 and 42% at the end of 2009.
Nonperforming assets were $9.1 million or 0.63% of total assets at December 31, 2010, compared with $8.5 million or 0.59% of total assets at September 30, 2010 and $9.0 million or 0.64% of total assets at December 31, 2009. Included in nonperforming assets at the end of the fourth quarter are nonperforming loans and leases totaling $8.5 million, compared with $7.8 million and $8.6 million at September 30, 2010 and December 31, 2009, respectively.
Conventional residential mortgages comprised $3.5 million (47 loans) or 41.7% of nonperforming loans and leases at December 31, 2010. Nonperforming commercial loans totaled $3.3 million (29 loans) or 38.8% of nonperforming loans and leases and leases on nonperforming status totaled $697,000 (22 leases) or 8.2% of nonperforming loans and leases at the end of the fourth quarter.
The provision for credit losses in the quarter and year ended December 31, 2010 was down sharply from the year-ago periods on the Company’s strong asset quality and lower charge-offs. The provision
expense was $800,000 and $4.1 million in the quarter and year ended December 31, 2010, respectively, compared with $1.4 million and $6.1 million in the year-ago periods. Net charge-offs were $583,000 and $2.8 million in the three months and year ended December 31, 2010, respectively, compared with $2.0 million and $5.8 million in the year-ago periods. Charge-offs in the Company’s lease portfolio dropped sharply in 2010 as the losses in 2009 were generally isolated to four segments of the lease portfolio which stabilized in 2010. The aggregate remaining balance of these four lease segments is $2.4 million at the end of 2010. Charge-offs in the lease portfolio totaled $1.3 million or 37.3% of gross charge-offs in 2010, down from $4.0 million or 56.7% of gross charge-offs in 2009.
Net charge-offs, annualized, equaled 0.26% and 0.31%, respectively, of average loans and leases during the three months and year ended December 31, 2010, compared with 0.88% and 0.63%, respectively, in the year-ago periods. The provision for credit losses as a percentage of net charge-offs was 137% and 145%, respectively, in the quarter and year ended December 31, 2010, compared with 71% and 104%, respectively, in the comparable 2009 time periods.
The allowance for credit losses was $10.7 million at December 31, 2010, compared with $10.5 million at September 30, 2010 and $9.4 million at December 31, 2009. The ratio of the allowance for credit losses to total loans and leases was 1.19% at December 31, 2010, compared with 1.17% at September 30, 2010 and 1.03% at December 31, 2009. The ratio of the allowance for credit losses to nonperforming loans and leases was 126% at December 31, 2010, compared with 134% at September 30, 2010 and 110% at December 31, 2009.
Net Interest Income
Net interest income totaled $10.8 million in the three months ended December 31, 2010, which was a decrease of $666,000 or 5.8% compared with the fourth quarter of 2009. Net interest income decreased $342,000 or 3.1% compared with the third quarter of 2010. The tax-equivalent net interest margin decreased 23 basis points in the fourth quarter compared with the year-ago quarter, and was 12 basis points lower than the third quarter of 2010 due to the effect of persistently low interest rates on the Company’s interest-earning assets.
The net interest margin on a tax-equivalent basis was 3.45% in the fourth quarter of 2010, compared with 3.68% in the fourth quarter of 2009 and 3.57% in the third quarter of 2010. The decrease in the net interest margin was the result of a decrease in the tax-equivalent earning asset yield of 54 basis points in the fourth quarter compared with the year-ago quarter, which was partially offset by a decrease in its cost of funds of 34 basis points over the same period. The Company’s yield on earning assets decreased 24 basis points in the fourth quarter of 2010 compared with the third quarter of 2010, which was partially offset by a decrease in its cost of funds of 13 basis points during the same period.
Average interest-earning assets were $1.3 billion in the fourth quarter, which was relatively unchanged compared to the year-ago quarter and compared to the third quarter of 2010.
Net interest income for 2010 totaled $44.3 million, which was an increase of $908,000 or 2.1% compared with $43.4 million in the year-ago period. Average earning assets increased $18.1 million in 2010 compared with 2009, with a $45.2 million increase in securities offsetting a $22.8 million decrease in loans and leases. The tax-equivalent net interest margin was 3.55% in 2010 and 2009. A decrease of 37 basis points in the Company’s tax-equivalent earning assets yield in 2010 compared with 2009 was offset by a 43 basis point decrease in its cost of funds over the same period.
The Company’s net interest margin is expected to compress further in coming quarters as the persistently low interest rate environment continues to negatively affect the return on the Company’s loans and investments.
Non-Interest Income and Non-Interest Expenses
Non-interest income was $5.9 million in the fourth quarter of 2010, which was unchanged from the fourth quarter of 2009. Gains on the sale of loans increased $414,000 or 170.4% in the fourth quarter of 2010 compared to the year-ago period on an increased volume of residential mortgage sales. The Company did not sell securities in the fourth quarter and therefore gains on sales of investment securities decreased $1.2 million compared with the fourth quarter of 2009. In December 2010, the Company sold substantially all of the assets of its insurance agency subsidiary, Ladd’s Inc. and discontinued its operations, which resulted in a decrease in insurance agency income of $170,000 or 47.2% in the fourth quarter compared to the year-ago period. The discontinuation of Ladd’s operations will have no net effect on the Company’s future financial results. A gain of $815,000 was recognized on the sale of Ladd’s and is included in other non-interest income. The gain was nearly entirely offset by taxes of $806,000 resulting from a difference in the tax basis of such assets versus the book value.
Non-interest income (excluding gains on sales of securities and gain on Ladd’s sale) comprised 32.2% of total revenue in the fourth quarter of 2010 compared with 29.4% in the year-ago quarter and 30.2% in the third quarter of 2010. The increase in this ratio was driven largely by higher gains on the sale of loans in 2010.
Non-interest income totaled $20.5 million in 2010, which is a decrease of $306,000 from $20.8 million in 2009. Service charges on deposit accounts decreased $528,000 or 10.5% primarily due to the impact of a new regulation covering overdraft protection programs, which took effect in the third quarter. Gains on sales of loans increased $646,000 or 86.4% as a result of a higher volume of residential mortgage sales in 2010. Gains on sales of investment securities decreased $1.9 million or 85.8% on a sharply lower volume of sales in 2010. Other non-interest income increased $1.0 million in 2010 due primarily to the sale of substantially all of the assets of Ladd’s. Non-interest income (excluding securities gains and gain on Ladd’s sale) comprised 30.4% of total revenue in 2010 compared with 30.1% in 2009.
Non-interest expenses were $11.3 million in the quarter ended December 31, 2010, which was unchanged from the fourth quarter of 2009. Professional fees increased $192,000 or 26.4% due primarily to outside consulting services related to various Company projects. Other non-interest expenses decreased $259,000 or 15.6% due largely to recoveries of write offs which were recorded in previous quarters.
Non-interest expenses were $44.5 million in 2010, compared with $43.2 million in 2009. Salaries and benefits expense increased $1.9 million or 9.3% compared with 2009. Approximately $1.3 million or 67% of this increase represents incremental recurring expense from a combination of new customer service and business development positions and normal salary increases. As required under generally accepted accounting principles, the deferral of salaries and benefits expense in connection with successfully originated loans comprised approximately $317,000 or 17% of the increase in salaries and benefits in 2010 compared with the same period in 2009, due to the substantially higher residential mortgage origination volume in 2009. Professional fees increased $357,000 or 12.3% in 2010 due primarily to outside consulting services related to various Company projects. The FDIC insurance premium decreased $683,000 or 29.9% in 2010 due to a special assessment required of all FDIC-insured banks in 2009. The assessment for Alliance was $676,000 in the second quarter of 2009.
The Company’s efficiency ratio was 71.1% in the fourth quarter of 2010 compared with 69.8% in the year-ago quarter and 70.1% in the third quarter of 2010. The Company’s efficiency ratio was 69.9% in 2010 compared with 69.7% in 2009.
The Company’s effective tax rate (excluding the gain and related tax on the Ladd’s transaction) was 26.7% and 24.6% for the quarter and year ended December 31, 2010 compared with 24.6% and 23.1% in the year-ago periods.
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, 2009 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 December 31, |
Twelve months
ended December 31, |
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| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (Dollars in thousands, except share and per share data) | ||||||||||||||||
| Interest income: |
||||||||||||||||
| Loans, including fees |
$ | 11,165 | $ | 12,227 | $ | 46,168 | $ | 49,832 | ||||||||
| Federal funds sold and interest bearing deposits |
5 | — | 8 | 15 | ||||||||||||
| Securities |
3,236 | 3,842 | 14,166 | 14,115 | ||||||||||||
| Total interest income |
14,406 | 16,069 | 60,342 | 63,962 | ||||||||||||
| Interest expense: |
||||||||||||||||
| Deposits: |
||||||||||||||||
| Savings accounts |
78 | 115 | 377 | 454 | ||||||||||||
| Money market accounts |
528 | 774 | 2,675 | 3,347 | ||||||||||||
| Time accounts |
1,584 | 2,099 | 7,216 | 9,622 | ||||||||||||
| NOW accounts |
91 | 127 | 490 | 531 | ||||||||||||
| Total |
2,281 | 3,115 | 10,758 | 13,954 | ||||||||||||
| Borrowings: |
||||||||||||||||
| Repurchase agreements |
212 | 232 | 833 | 955 | ||||||||||||
| FHLB advances |
934 | 1,077 | 3,817 | 4,864 | ||||||||||||
| Junior subordinated obligations |
161 | 161 | 645 | 808 | ||||||||||||
| Total interest expense |
3,588 | 4,585 | 16,053 | 20,581 | ||||||||||||
| Net interest income |
10,818 | 11,484 | 44,289 | 43,381 | ||||||||||||
| Provision for credit losses |
800 | 1,425 | 4,085 | 6,100 | ||||||||||||
| Net interest income after provision for credit losses |
10,018 | 10,059 | 40,204 | 37,281 | ||||||||||||
| Non-interest income: |
||||||||||||||||
| Investment management income |
1,876 | 1,845 | 7,316 | 7,134 | ||||||||||||
| Service charges on deposit accounts |
1,135 | 1,279 | 4,509 | 5,037 | ||||||||||||
| Card-related fees |
670 | 594 | 2,563 | 2,248 | ||||||||||||
| Insurance agency income |
190 | 360 | 1,283 | 1,387 | ||||||||||||
| Income from bank-owned life insurance |
262 | 261 | 1,058 | 1,014 | ||||||||||||
| Gain on the sale of loans |
657 | 243 | 1,394 | 748 | ||||||||||||
| Gain on sale of securities available-for-sale |
— | 1,153 | 308 | 2,168 | ||||||||||||
| Other non-interest income |
1,156 | 188 | 2,074 | 1,075 | ||||||||||||
| Total non-interest income |
5,946 | 5,923 | 20,505 | 20,811 | ||||||||||||
| Non-interest expense: |
||||||||||||||||
| Salaries and employee benefits |
5,804 | 5,700 | 22,319 | 20,428 | ||||||||||||
| Occupancy and equipment expense |
1,924 | 1,768 | 7,375 | 7,047 | ||||||||||||
| Communication expense |
172 | 162 | 664 | 756 | ||||||||||||
| Office supplies and postage expense |
284 | 366 | 1,158 | 1,337 | ||||||||||||
| Marketing expense |
177 | 205 | 1,068 | 932 | ||||||||||||
| Amortization of intangible asset |
258 | 290 | 1,127 | 1,453 | ||||||||||||
| Professional fees |
920 | 728 | 3,250 | 2,893 | ||||||||||||
| FDIC insurance premium |
407 | 464 | 1,601 | 2,284 | ||||||||||||
| Other operating expense |
1,400 | 1,659 | 5,918 | 6,078 | ||||||||||||
| Total non-interest expense |
11,346 | 11,342 | 44,480 | 43,208 | ||||||||||||
| Income before income tax expense |
4,618 | 4,640 | 16,229 | 14,884 | ||||||||||||
| Income tax expense |
1,825 | 1,143 | 4,605 | 3,436 | ||||||||||||
| Net income |
$ | 2,793 | $ | 3,497 | $ | 11,624 | $ | 11,448 | ||||||||
| Dividend and accretion of discount on preferred stock |
— | — | — | (1,084 | ) | |||||||||||
| Net income available to common shareholders |
$ | 2,793 | $ | 3,497 | $ | 11,624 | $ | 10,364 | ||||||||
| Share and Per Share Data |
||||||||||||||||
| Basic average common shares outstanding |
4,646,934 | 4,546,819 | 4,619,718 | 4,514,268 | ||||||||||||
| Diluted average common shares outstanding |
4,660,463 | 4,585,800 | 4,640,097 | 4,543,069 | ||||||||||||
| Basic earnings per common share |
$ | 0.59 | $ | 0.76 | $ | 2.49 | $ | 2.25 | ||||||||
| Diluted earnings per common share |
$ | 0.59 | $ | 0.75 | $ | 2.48 | $ | 2.24 | ||||||||
| Cash dividends declared |
$ | 0.30 | $ | 0.28 | $ | 1.16 | $ | 1.08 | ||||||||
Alliance Financial Corporation
Consolidated Balance Sheets (Unaudited)
| December 31, 2010 | December 31, 2009 | |||||||
| (Dollars in thousands, except share and per share data) | ||||||||
| Assets |
||||||||
| Cash and due from banks |
$ | 32,501 | $ | 26,696 | ||||
| Securities available-for-sale |
414,410 | 362,158 | ||||||
| Federal Home Loan Bank of NY (“FHLB”) Stock and Federal Reserve Bank (“FRB”) Stock |
8,652 | 10,074 | ||||||
| Loans and leases held for sale |
2,940 | 1,023 | ||||||
| Total loans and leases, net of unearned income |
898,537 | 914,162 | ||||||
| Less allowance for credit losses |
10,683 | 9,414 | ||||||
| Net loans and leases |
887,854 | 904,748 | ||||||
| Premises and equipment, net |
18,975 | 20,086 | ||||||
| Accrued interest receivable |
4,149 | 4,167 | ||||||
| Bank-owned life insurance |
28,412 | 27,354 | ||||||
| Goodwill |
30,844 | 32,073 | ||||||
| Intangible assets, net |
8,638 | 10,075 | ||||||
| Other assets |
17,247 | 18,790 | ||||||
| Total assets |
$ | 1,454,622 | $ | 1,417,244 | ||||
| Liabilities and shareholders’ equity |
||||||||
| Liabilities: |
||||||||
| Deposits: |
||||||||
| Non-interest bearing |
179,918 | 159,149 | ||||||
| Interest bearing |
954,680 | 916,522 | ||||||
| Total deposits |
1,134,598 | 1,075,671 | ||||||
| Borrowings |
142,792 | 172,707 | ||||||
| Accrued interest payable |
1,391 | 1,745 | ||||||
| Other liabilities |
16,936 | 17,412 | ||||||
| Junior subordinated obligations issued to unconsolidated subsidiary trusts |
25,774 | 25,774 | ||||||
| Total liabilities |
1,321,491 | 1,293,309 | ||||||
| Shareholders’ equity: |
||||||||
| Common stock |
5,051 | 4,937 | ||||||
| Surplus |
45,620 | 43,013 | ||||||
| Undivided profits |
92,380 | 86,194 | ||||||
| Accumulated other comprehensive income |
1,713 | 946 | ||||||
| Directors’ stock-based deferred compensation plan |
(2,977 | ) | (2,499 | ) | ||||
| Treasury stock |
(8,656 | ) | (8,656 | ) | ||||
| Total shareholders’ equity |
133,131 | 123,935 | ||||||
| Total liabilities and shareholders’ equity |
$ | 1,454,622 | $ | 1,417,244 | ||||
| Common shares outstanding |
4,729,035 | 4,614,921 | ||||||
| Book value per common share |
$ | 28.15 | $ | 26.86 | ||||
| Tangible book value per common share |
$ | 19.80 | $ | 17.72 | ||||
Alliance Financial Corporation
Consolidated Average Balances (Unaudited)
| Three months
ended December 31, |
Twelve months ended December 31, |
|||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Earning assets: |
||||||||||||||||
| Federal funds sold and interest bearing deposits |
$ | 19,101 | $ | 940 | $ | 8,823 | $ | 13,084 | ||||||||
| Securities(1) |
401,250 | 391,342 | 397,732 | 352,542 | ||||||||||||
| Loans and leases receivable: |
||||||||||||||||
| Residential real estate loans(2) |
343,312 | 356,798 | 351,922 | 344,707 | ||||||||||||
| Commercial loans |
231,151 | 206,698 | 218,213 | 211,469 | ||||||||||||
| Leases, net of unearned income(2) |
44,347 | 71,433 | 53,886 | 84,806 | ||||||||||||
| Indirect loans |
180,136 | 189,415 | 182,085 | 187,919 | ||||||||||||
| Other consumer loans |
92,404 | 92,718 | 91,389 | 91,387 | ||||||||||||
| Loans and leases receivable, net of unearned income |
891,350 | 917,062 | 897,495 | 920,288 | ||||||||||||
| Total earning assets |
1,311,701 | 1,309,344 | 1,304,050 | 1,285,914 | ||||||||||||
| Non-earning assets |
139,606 | 135,003 | 137,043 | 133,434 | ||||||||||||
| Total assets |
$ | 1,451,307 | $ | 1,444,347 | $ | 1,441,093 | $ | 1,419,348 | ||||||||
| Interest bearing liabilities: |
||||||||||||||||
| Interest bearing checking accounts |
$ | 151,770 | $ | 120,128 | $ | 141,124 | $ | 117,113 | ||||||||
| Savings accounts |
101,433 | 93,429 | 99,799 | 92,114 | ||||||||||||
| Money market accounts |
367, 999 | 326,470 | 357,572 | 303,344 | ||||||||||||
| Time deposits |
335,452 | 384,955 | 359,532 | 382,420 | ||||||||||||
| Borrowings |
144,423 | 189,781 | 146,296 | 193,648 | ||||||||||||
| Junior subordinated obligations issued to unconsolidated trusts |
25,774 | 25,774 | 25,774 | 25,774 | ||||||||||||
| Total interest bearing liabilities |
1,126,851 | 1,140,537 | 1,130,097 | 1,114,413 | ||||||||||||
| Non-interest bearing deposits |
178,342 | 161,841 | 167,912 | 156,396 | ||||||||||||
| Other non-interest bearing liabilities |
16,059 | 16,246 | 16,383 | 16,685 | ||||||||||||
| Total liabilities |
1,321,252 | 1,318,624 | 1,314,392 | 1,287,494 | ||||||||||||
| Shareholders’ equity |
130,055 | 125,723 | 126,701 | 131,854 | ||||||||||||
| Total liabilities and shareholders’ equity |
$ | 1,451,307 | $ | 1,444,347 | $ | 1,441,093 | $ | 1,419,348 | ||||||||
| (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, 2010 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||
| Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
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| (Dollars in thousands) | ||||||||||||||||||||||||
| Securities available-for-sale |
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| Debt securities: |
||||||||||||||||||||||||
| U.S. Treasury obligations |
$ | — | $ | — | $ | 3,350 | $ | 3,350 | $ | 100 | $ | 101 | ||||||||||||
| Obligations of U.S. government- sponsored corporations |
4,020 | 4,186 | 4,765 | 5,008 | 5,864 | 6,129 | ||||||||||||||||||
| Obligations of states and political subdivisions |
77,246 | 78,212 | 73,612 | 77,106 | 75,104 | 77,147 | ||||||||||||||||||
| Mortgage-backed securities(1) |
324,294 | 329,010 | 299,458 | 307,216 | 273,499 | 275,680 | ||||||||||||||||||
| Total debt securities |
405,560 | 411,408 | 381,185 | 392,680 | 354,567 | 359,057 | ||||||||||||||||||
| Stock investments: |
||||||||||||||||||||||||
| Equity securities |
1,852 | 1,995 | 1,932 | 2,046 | 1,958 | 2,104 | ||||||||||||||||||
| Mutual funds |
1,000 | 1,007 | 1,000 | 1,030 | 1,000 | 997 | ||||||||||||||||||
| Total stock investments |
2,852 | 3,002 | 2,932 | 3,076 | 2,958 | 3,101 | ||||||||||||||||||
| Total available-for-sale |
$ | 408,412 | $ | 414,410 | $ | 384,117 | $ | 395,756 | $ | 357,525 | $ | 362,158 | ||||||||||||
| (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:
| December 31, 2010 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Loan portfolio composition |
||||||||||||||||||||||||
| Residential real estate loans |
$ | 334,967 | 37.4 | % | $ | 348,443 | 38.8 | % | $ | 356,906 | 39.2 | % | ||||||||||||
| Commercial loans |
133,787 | 14.9 | % | 116,887 | 13.0 | % | 111,243 | 12.2 | % | |||||||||||||||
| Commercial real estate |
116,066 | 13.0 | % | 109,876 | 12.2 | % | 96,753 | 10.7 | % | |||||||||||||||
| Leases, net of unearned income |
42,466 | 4.8 | % | 47,451 | 5.3 | % | 68,224 | 7.5 | % | |||||||||||||||
| Indirect loans |
176,125 | 19.7 | % | 183,594 | 20.4 | % | 184,947 | 20.3 | % | |||||||||||||||
| Other consumer loans |
91,619 | 10.2 | % | 91,885 | 10.3 | % | 92,022 | 10.1 | % | |||||||||||||||
| Total loans and leases |
895,030 | 100.0 | % | 898,136 | 100.0 | % | 910,095 | 100.0 | % | |||||||||||||||
| Net deferred loan costs |
3,507 | 3,755 | 4,067 | |||||||||||||||||||||
| Allowance for credit losses |
(10,683 | ) | (10,466 | ) | (9,414 | ) | ||||||||||||||||||
| Net loans and leases |
$ | 887,854 | $ | 891,425 | $ | 904,748 | ||||||||||||||||||
| The following table sets forth the composition of the Company’s deposits at the dates indicated: | ||||||||||||||||||||||||
| December 31, 2010 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
| Deposit composition |
||||||||||||||||||||||||
| Non-interest bearing checking |
$ | 179,918 | 15.9 | % | $ | 175,272 | 15.6 | % | $ | 159,149 | 14.8 | % | ||||||||||||
| Interest bearing checking |
151,894 | 13.3 | % | 143,976 | 12.8 | % | 130,368 | 12.1 | % | |||||||||||||||
| Total checking |
331,812 | 29.2 | % | 319,248 | 28.4 | % | 289,517 | 26.9 | % | |||||||||||||||
| Savings |
103,099 | 9.1 | % | 101,356 | 9.0 | % | 94,524 | 8.8 | % | |||||||||||||||
| Money market |
357,885 | 31.5 | % | 363,847 | 32.3 | % | 317,051 | 29.5 | % | |||||||||||||||
| Time deposits |
341,802 | 30.2 | % | 340,672 | 30.3 | % | 374,579 | 34.8 | % | |||||||||||||||
| Total deposits |
$ | 1,134,598 | 100.0 | % | $ | 1,125,123 | 100.0 | % | $ | 1,075,671 | 100.0 | % | ||||||||||||
Alliance Financial Corporation
Asset Quality (Unaudited)
The following table represents a summary of delinquent loans and leases grouped by the number of days delinquent at the dates indicated:
| Delinquent loans and leases |
December 31, 2010 | September 30, 2010 | December 31, 2009 | |||||||||||||||||||||
| $ | %(1) | $ | %(1) | $ | %(1) | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| 30 days past due |
$ | 6,711 | 0.75 | % | $ | 6,922 | 0.78 | % | $ | 7,883 | 0.87 | % | ||||||||||||
| 60 days past due |
1,083 | 0.12 | % | 2,894 | 0.32 | % | 2,271 | 0.25 | % | |||||||||||||||
| 90 days past due and still accruing |
19 | — | % | 43 | — | % | — | — | % | |||||||||||||||
| Non-accrual |
8,474 | 0.95 | % | 7,749 | 0.86 | % | 8,582 | 0.94 | % | |||||||||||||||
| Total |
$ | 16,287 | 1.82 | % | $ | 17,608 | 1.96 | % | $ | 18,736 | 2.06 | % | ||||||||||||
| (1) | As a percentage of total loans and leases, excluding deferred costs |
The following table represents information concerning the aggregate amount of non-performing assets:
| Non-performing assets |
December 31, 2010 | September 30, 2010 | December 31, 2009 | |||||||||
| (Dollars in thousands) | ||||||||||||
| Non-accruing loans and leases |
||||||||||||
| Residential real estate loans |
$ | 3,543 | $ | 3,116 | $ | 2,843 | ||||||
| Commercial loans |
1,212 | 1,225 | 2,167 | |||||||||
| Commercial real estate |
2,084 | 1,888 | 1,846 | |||||||||
| Leases |
697 | 802 | 1,418 | |||||||||
| Indirect loans |
212 | 157 | 109 | |||||||||
| Other consumer loans |
726 | 561 | 199 | |||||||||
| Total non-accruing loans and leases |
8,474 | 7,749 | 8,582 | |||||||||
| Accruing loans and leases delinquent 90 days or more |
19 | 43 | — | |||||||||
| Total non-performing loans and leases |
8,493 | 7,792 | 8,582 | |||||||||
| Other real estate and repossessed assets |
652 | 694 | 445 | |||||||||
| Total non-performing assets |
$ | 9,145 | $ | 8,486 | $ | 9,027 | ||||||
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 December 31, |
Twelve months
ended December 31, |
||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Allowance for credit losses, beginning of period |
$ | 10,466 | $ | 10,006 | $ | 9,414 | $ | 9,161 | ||||||||
| Loans and leases charged-off |
(772 | ) | (2,281 | ) | (3,607 | ) | (7,272 | ) | ||||||||
| Recoveries of loans and leases previously charged-off |
189 | 264 | 791 | 1,425 | ||||||||||||
| Net loans and leases charged-off |
(583 | ) | (2,017 | ) | (2,816 | ) | (5,847 | ) | ||||||||
| Provision for credit losses |
800 | 1,425 | 4,085 | 6,100 | ||||||||||||
| Allowance for credit losses, end of period |
$ | 10,683 | $ | 9,414 | $ | 10,683 | $ | 9,414 | ||||||||
Alliance Financial Corporation
Consolidated Financial Information (Unaudited)
| Key Ratios |
At or for the three months ended December 31, |
At or for the twelve months ended December 31, |
||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Return on average assets |
0.77 | % | 0.97 | % | 0.81 | % | 0.81 | % | ||||||||
| Return on average equity |
8.59 | % | 11.13 | % | 9.17 | % | 8.68 | % | ||||||||
| Return on average common equity |
8.59 | % | 11.13 | % | 9.17 | % | 8.46 | % | ||||||||
| Return on average tangible common equity |
12.51 | % | 16.76 | % | 13.64 | % | 13.02 | % | ||||||||
| Yield on earning assets |
4.54 | % | 5.08 | % | 4.78 | % | 5.15 | % | ||||||||
| Cost of funds |
1.27 | % | 1.61 | % | 1.42 | % | 1.85 | % | ||||||||
| Net interest margin (tax equivalent) (1) |
3.45 | % | 3.68 | % | 3.55 | % | 3.55 | % | ||||||||
| Non-interest income to total income (2) |
32.17 | % | 29.35 | % | 30.44 | % | 30.06 | % | ||||||||
| Efficiency ratio (3) |
71.14 | % | 69.77 | % | 69.86 | % | 69.66 | % | ||||||||
| Common dividend payout ratio (4) |
50.85 | % | 37.33 | % | 46.77 | % | 48.21 | % | ||||||||
| Net loans and leases charged-off to average loans and leases, annualized |
0.26 | % | 0.88 | % | 0.31 | % | 0.63 | % | ||||||||
| Provision for credit losses to average loans and leases, annualized |
0.36 | % | 0.62 | % | 0.46 | % | 0.66 | % | ||||||||
| Allowance for credit losses to total loans and leases |
1.19 | % | 1.03 | % | 1.19 | % | 1.03 | % | ||||||||
| Allowance for credit losses to non-performing loans and leases |
125.8 | % | 109.7 | % | 125.8 | % | 109.7 | % | ||||||||
| Non-performing loans and leases to total loans and leases |
0.95 | % | 0.94 | % | 0.95 | % | 0.94 | % | ||||||||
| Non-performing assets to total assets |
0.63 | % | 0.64 | % | 0.63 | % | 0.64 | % | ||||||||
| (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 items) 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)
| 2010 | 2009 | |||||||||||||||||||
| Fourth | Third | Second | First | Fourth | ||||||||||||||||
| (Dollars in thousands, except share and per share data) | ||||||||||||||||||||
| Interest income |
$ | 14,406 | $ | 15,102 | $ | 15,378 | $ | 15,456 | $ | 16,069 | ||||||||||
| Interest expense |
3,588 | 3,942 | 4,188 | 4,335 | 4,585 | |||||||||||||||
| Net interest income |
10,818 | 11,160 | 11,190 | 11,121 | 11,484 | |||||||||||||||
| Provision for credit losses |
800 | 1,095 | 1,095 | 1,095 | 1,425 | |||||||||||||||
| Net interest income after provision for credit losses |
10,018 | 10,065 | 10,095 | 10,026 | 10,059 | |||||||||||||||
| Other non-interest income |
5,946 | 5,139 | 4,859 | 4,561 | 5,923 | |||||||||||||||
| Other non-interest expense |
11,346 | 11,210 | 10,963 | 10,961 | 11,342 | |||||||||||||||
| Income before income tax expense |
4,618 | 3,994 | 3,991 | 3,626 | 4,640 | |||||||||||||||
| Income tax expense |
1,825 | 904 | 999 | 877 | 1,143 | |||||||||||||||
| Net income |
$ | 2,793 | $ | 3,090 | $ | 2,992 | $ | 2,749 | $ | 3,497 | ||||||||||
| Stock and related per share data |
||||||||||||||||||||
| Basic earnings per common share |
$ | 0.59 | $ | 0.66 | $ | 0.64 | $ | 0.59 | $ | 0.76 | ||||||||||
| Diluted earnings per common share |
$ | 0.59 | $ | 0.66 | $ | 0.64 | $ | 0.59 | $ | 0.75 | ||||||||||
| Basic weighted average common shares outstanding |
4,646,934 | 4,624,819 | 4,622,660 | 4,583,617 | 4,546,819 | |||||||||||||||
| Diluted weighted average common shares outstanding |
4,660,463 | 4,646,889 | 4,643,679 | 4,614,060 | 4,585,800 | |||||||||||||||
| Cash dividends paid per common share |
$ | 0.30 | $ | 0.30 | $ | 0.28 | $ | 0.28 | $ | 0.28 | ||||||||||
| Common dividend payout ratio (1) |
50.85 | % | 45.45 | % | 43.75 | % | 47.46 | % | 37.33 | % | ||||||||||
| Common book value |
$ | 28.15 | $ | 28.63 | $ | 28.46 | $ | 27.38 | $ | 26.86 | ||||||||||
| Tangible common book value (2) |
$ | 19.80 | $ | 19.84 | $ | 19.55 | $ | 18.39 | $ | 17.72 | ||||||||||
| Capital Ratios |
||||||||||||||||||||
| Holding Company |
||||||||||||||||||||
| Tier 1 leverage ratio |
8.28 | % | 8.07 | % | 7.87 | % | 7.86 | % | 7.55 | % | ||||||||||
| Tier 1 risk based capital |
13.41 | % | 13.06 | % | 12.69 | % | 12.56 | % | 12.06 | % | ||||||||||
| Tier 1 risk based common capital (3) |
10.54 | % | 10.17 | % | 9.84 | % | 9.68 | % | 9.22 | % | ||||||||||
| Total risk based capital |
14.63 | % | 14.27 | % | 13.88 | % | 13.69 | % | 13.13 | % | ||||||||||
| Tangible common equity to tangible assets(4) |
6.62 | % | 6.63 | % | 6.44 | % | 6.10 | % | 5.95 | % | ||||||||||
| Bank |
||||||||||||||||||||
| Tier 1 leverage ratio |
7.72 | % | 7.67 | % | 7.48 | % | 7.38 | % | 7.14 | % | ||||||||||
| Tier 1 risk based capital |
12.54 | % | 12.47 | % | 12.12 | % | 11.85 | % | 11.47 | % | ||||||||||
| Total risk based capital |
13.78 | % | 13.70 | % | 13.32 | % | 12.99 | % | 12.55 | % | ||||||||||
| Selected ratios |
||||||||||||||||||||
| Return on average assets |
0.77 | % | 0.86 | % | 0.83 | % | 0.77 | % | 0.97 | % | ||||||||||
| Return on average equity |
8.59 | % | 9.57 | % | 9.62 | % | 8.93 | % | 11.13 | % | ||||||||||
| Return on average tangible common equity |
12.51 | % | 14.09 | % | 14.48 | % | 13.55 | % | 16.76 | % | ||||||||||
| Yield on earning assets |
4.54 | % | 4.78 | % | 4.83 | % | 4.96 | % | 5.08 | % | ||||||||||
| Cost of funds |
1.27 | % | 1.40 | % | 1.46 | % | 1.54 | % | 1.61 | % | ||||||||||
| Net interest margin (tax equivalent) (5) |
3.45 | % | 3.57 | % | 3.56 | % | 3.61 | % | 3.68 | % | ||||||||||
| Non-interest income to total income (6) |
32.17 | % | 30.21 | % | 30.28 | % | 29.08 | % | 29.35 | % | ||||||||||
| Efficiency ratio (7) |
71.14 | % | 70.10 | % | 68.31 | % | 69.90 | % | 69.77 | % | ||||||||||
| Asset quality ratios |
||||||||||||||||||||
| Net loans and leases charged off to average loans and leases, annualized |
0.26 | % | 0.41 | % | 0.23 | % | 0.35 | % | 0.88 | % | ||||||||||
| Provision for credit losses to average loans and leases, annualized |
0.36 | % | 0.49 | % | 0.49 | % | 0.49 | % | 0.62 | % | ||||||||||
| Allowance for credit losses to total loans and leases |
1.19 | % | 1.17 | % | 1.12 | % | 1.07 | % | 1.03 | % | ||||||||||
| Allowance for credit losses to non-performing loans and leases |
125.8 | % | 134.3 | % | 106.3 | % | 101.3 | % | 109.7 | % | ||||||||||
| Non-performing loans and leases to total loans and leases |
0.95 | % | 0.87 | % | 1.06 | % | 1.06 | % | 0.94 | % | ||||||||||
| Non-performing assets to total assets |
0.63 | % | 0.59 | % | 0.71 | % | 0.69 | % | 0.64 | % | ||||||||||
| (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: |
| (in thousands) | December 31, 2010 |
September 30, 2010 |
June 30, 2010 |
March 31, 2010 |
December 31, 2009 |
|||||||||||||||
| Total assets |
$ | 1,454,622 | $ | 1,446,839 | $ | 1,456,731 | $ | 1,445,326 | $ | 1,417,244 | ||||||||||
| Less: Goodwill and intangible assets, net |
39,482 | 41,279 | 41,568 | 41,858 | 42,148 | |||||||||||||||
| Tangible assets (non-GAAP) |
$ | 1,415,140 | $ | 1,405,560 | $ | 1,415,163 | $ | 1,403,468 | $ | 1,375,096 | ||||||||||
| Total Common Equity |
133,131 | 134,503 | 132,712 | 127,487 | 123,935 | |||||||||||||||
| Less: Goodwill and intangible assets, net |
39,482 | 41,279 | 41,568 | 41,858 | 42,148 | |||||||||||||||
| Tangible Common Equity (non-GAAP) |
93,649 | 93,224 | 91,144 | 85,629 | 81,787 | |||||||||||||||
| Total Equity/Total Assets |
9.15 | % | 9.30 | % | 9.11 | % | 8.82 | % | 8.74 | % | ||||||||||
| Tangible Common Equity/Tangible Assets (non-GAAP) |
6.62 | % | 6.63 | % | 6.44 | % | 6.10 | % | 5.95 | % | ||||||||||
| (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) |