Attached files
| file | filename |
|---|---|
| 8-K - 8-K - ALLIANCE FINANCIAL CORP /NY/ | d8k.htm |
Exhibit 99.1
| NEWS RELEASE | FOR IMMEDIATE RELEASE |
Alliance Financial Announces Second Quarter Earnings
Syracuse, NY, July 14, 2011 - Alliance Financial Corporation (“Alliance” or the “Company”) (NasdaqGM: ALNC), the holding company for Alliance Bank, N.A., announced today a 16.3% increase in net income for the quarter ended June 30, 2011, compared with the second quarter of 2010. Net income was $3.5 million or $0.73 per diluted common share in the second quarter of 2011, compared with $3.0 million or $0.64 per diluted common share in the year-ago quarter and $3.3 million in the first quarter of 2011.
Net income for the six months ended June 30, 2011 increased 18.2% to $6.8 million or $1.43 per diluted share, compared with $5.7 million or $1.23 per common share in the first half of 2010.
Net interest income was virtually unchanged in the three and six months ended June 30, 2011 compared with the year-ago periods, while the provision for credit losses dropped sharply on lower net charge-offs and continuing strong credit metrics. The provision for credit losses decreased $935,000 and $1.8 million in the three months and six months ended June 30, 2011, respectively, compared with the respective year-ago periods.
Jack H. Webb, President and CEO of Alliance said, “Our second quarter earnings were favorably impacted by the exceptionally low levels of credit losses we’ve experienced in the first half of 2011. Our disciplined lending philosophy has served our shareholders and markets well throughout the financial crisis. Our credit quality metrics have remained stable and continue to compare favorably with industry averages. Net charge-offs in the first half were down 72% from the same period in 2010.”
Webb added, “The investment that we made to expand our commercial banking team provided loan growth that partially offset lower consumer loan originations as overall loan demand has weakened.”
Balance Sheet Highlights
Total assets were $1.5 billion at June 30, 2011, which was an increase of $6.2 million from the end of the first quarter. Total loans and leases (net of unearned income) increased $4.8 million to $883.2 million at June 30, 2011.
Loan originations (excluding lines of credit) totaled $53.8 million in the second quarter, compared with $67.0 million in the year-ago quarter and $50.9 million in the first quarter of 2011. Originations of residential mortgages and indirect auto loans were down in the second quarter compared with the year-ago
quarter due to soft market conditions, while commercial loan originations were up 33.4% over the year-ago quarter as the result of the bank’s efforts to increase commercial market share.
Commercial loans and mortgages increased $13.9 million or 5.7% in the second quarter and totaled $259.9 million at June 30, 2011. Originations of commercial loans and mortgages in the second quarter (excluding lines of credit) totaled $17.7 million, compared with $16.5 million in the first quarter of 2011 and $13.3 million in the year-ago quarter.
Residential mortgages outstanding at June 30, 2011 were $330.1 million, which was unchanged from the end of the first quarter of 2011. Originations of residential mortgages totaled $18.0 million in the second quarter of 2011, compared with $18.2 million in the first quarter of 2011 and $27.1 million in the year-ago quarter.
Indirect auto loan balances were $165.4 million at the end of the second quarter, which was a decrease of $4.8 million from the end of the first quarter of 2011. The Company originated $17.3 million of indirect auto loans in the second quarter, compared with $15.6 million in the first quarter of 2011 and $25.3 million in the year-ago quarter. 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 $4.3 million in the second quarter as a result of the Company’s previously announced decision to cease new lease originations.
The Company’s investment securities portfolio totaled $459.8 million at June 30, 2011. The Company’s portfolio is comprised mainly 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 June 30, 2011 was 80% government-sponsored entity guaranteed mortgage-backed securities, 18% municipal securities and 1% obligations of U.S. government-sponsored corporations. Mortgage-backed securities, which totaled $368.0 million at June 30, 2011, are comprised primarily of pass-through securities backed by conventional residential mortgages and guaranteed by Fannie-Mae, Freddie-Mac or Ginnie Mae, which in turn are backed by the U.S. government. The Company’s municipal securities portfolio, which totaled $83.1 million at the end of the second quarter, is primarily comprised of highly rated general obligation bonds issued by local municipalities in New York State.
Deposits decreased $52.8 million, or 4.5%, to $1.1 billion at June 30, 2011. Municipal deposits declined $47.0 million in the second quarter due to normal seasonal municipal cash flows.
Shareholders’ equity was $140.1 million at June 30, 2011, compared with $135.0 million at the end of the first quarter. Net income for the quarter increased shareholders’ equity by $3.5 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, increased $4.7 million in the second quarter due to lower interest rates during the quarter and other market factors.
The Company’s Tier 1 leverage ratio was 8.52% and its total risk-based capital ratio was 15.26% at the end of the second quarter. The Company’s tangible common equity capital ratio (a non-GAAP financial measure) was 7.04% at June 30, 2011.
Asset Quality and the Provision for Credit Losses
Delinquent loans and leases (including non-performing) totaled $16.0 million at June 30, 2011, compared to $15.5 million at March 31, 2011 and $16.3 million at December 31, 2010. Approximately 37% of all delinquent loans and leases at the end of the second quarter were past due less than sixty days, compared with 42% at March 31, 2011 and 41% at December 31, 2010.
Nonperforming assets were $9.3 million or 0.63% of total assets at June 30, 2011, compared with $8.7 million or 0.59% of total assets at March 31, 2011 and $9.1 million or 0.63% of total assets at December 31, 2010. Included in nonperforming assets at the end of the second quarter are nonperforming loans and leases totaling $8.3 million, compared with $8.1 million and $8.5 million at March 31, 2011 and December 31, 2010, respectively.
Conventional residential mortgages comprised $2.7 million (37 loans) or 31.8% of nonperforming loans and leases at June 30, 2011. Nonperforming commercial loans and mortgages totaled $4.3 million (32 loans) or 51.2% of nonperforming loans and leases and nonperforming leases totaled $311,000 (12 leases) or 3.7% of nonperforming loans and leases at the end of the second quarter.
The provision for credit losses in the second quarter was down sharply from the year-ago period on the Company’s strong asset quality metrics, including lower charge-offs in the current and most recent quarters which are factors considered in management’s quarterly estimate of loan loss provisions and the adequacy of the allowance for credit losses. The provision for credit losses was $160,000 and $360,000 in the quarter and six months ended June 30, 2011, respectively, compared to $1.1 million and $2.2 million in the year-ago periods, respectively.
Net charge-offs were $155,000 and $360,000 in the three months and six months ended June 30, 2011, respectively, compared with $519,000 and $1.3 million in the year-ago periods, respectively. Net charge-offs, annualized, equaled 0.07% and 0.08%, respectively, of average loans and leases during the three months and six months ended June 30, 2011, compared to 0.23% and 0.29%, in the year-ago periods, respectively. The provision for credit losses as a percentage of net charge-offs was 103.2% and 100.0%,
respectively, in the quarter and six months ended June 30, 2011, compared with 211.0% and 167.0%, respectively, in the year-ago periods.
The allowance for credit losses was $10.7 million at June 30, 2011, which was unchanged from the balance at March 31, 2011 and at December 31, 2010. The ratio of the allowance for credit losses to total loans and leases was 1.21% at June 30, 2011, compared with 1.22% at March 31, 2011 and 1.19% at December 31, 2010. The ratio of the allowance for credit losses to nonperforming loans and leases was 128% at June 30, 2011, compared with 133% at March 31, 2011 and 126% at December 31, 2010.
Net Interest Income
Net interest income totaled $11.3 million in the three months ended June 30, 2011, compared to $11.2 million in the year-ago quarter and $11.0 million in first quarter of 2011. The tax-equivalent net interest margin decreased 2 basis points in the second quarter compared with the second quarter of 2010 but was up 9 basis points from the first quarter of 2011. Approximately 5 basis points of the increase in the net interest margin from the first quarter resulted from lower amortization of purchase premiums on securities in the second quarter due to a decreased rate of prepayments in our CMO and mortgage-backed securities portfolios during the quarter compared with that of the first quarter.
The net interest margin on a tax-equivalent basis was 3.53% in the second quarter of 2011, compared with 3.56% in the year-ago quarter and 3.44% in the first quarter of 2011. The tax-equivalent earning asset yield declined 34 basis points in the second quarter compared with the year-ago quarter, but was offset by a 34 basis point decrease in the cost of interest-bearing liabilities over the same period. The tax-equivalent earning asset yield increased 6 basis points in the second quarter compared with the first quarter of 2011, and the cost of interest-bearing liabilities decreased 3 basis points over the same period.
Average interest-earning assets were $1.3 billion in the second quarter, which was an increase of 1.7% from the year-ago quarter and unchanged from the first quarter of 2011. Total average loans and leases were 65.6% of total interest-earning assets in the second quarter of 2011, compared to 68.6% in the second quarter of 2010 and 65.7% in the first quarter of 2011. Competition, soft demand and low market interest rates have all been contributing factors to the decline in our loan portfolios, along with the planned wind down of the lease portfolio.
Net interest income for the six months ended June 30, 2011 totaled $22.3 million, which was unchanged from the year-ago period. The tax-equivalent net interest margin was 3.49% for the six months ended June 30, 2011, compared to 3.58% in the first half of 2010. The tax-equivalent earning asset yield declined 43 basis points in the first half of 2011 compared with the year-ago period, which was partially offset by a decrease in the cost of interest-bearing liabilities of 37 basis points over the same period.
Average interest-earning assets were $1.3 billion in the first half of 2011, which was an increase of 2.6% from the first half of 2010. Total average loans and leases were 65.7% of total interest-earning assets in the first half of 2011, compared with 69.3% in the year-ago period.
The general downward trend in our net interest margin over the past three quarters is expected to continue in coming quarters as persistently low interest rates continue to negatively affect the return on the Company’s loan and investment portfolios.
Non-Interest Income and Non-Interest Expenses
Non-interest income was $4.4 million in the second quarter of 2011, compared with $4.9 million in the year-ago quarter and $4.6 million in the first quarter of 2011. Investment management income increased $158,000 or 8.6% in the second quarter compared with the year-ago quarter as a result of the impact of the gains in equity markets over the past year on the value of assets under management. Insurance agency income decreased $420,000 in the second quarter compared with the second quarter of 2010 as we discontinued the operations of our insurance subsidiary upon the sale of substantially all of the insurance subsidiary’s assets in December 2010. Gains on the sale of loans decreased $133,000 compared with the second quarter of 2010, and were down $200,000 from the first quarter of 2011 due to a drop in residential mortgage demand in the market.
Non-interest income totaled $9.0 million in the first six months of 2011 compared with $9.4 million in the year-ago period. Investment management income increased $267,000 or 7.3% in the first half of 2011 compared with the year-ago period as a result of the impact of the gains in equity markets over the past year increasing the value of assets under management. Insurance agency income decreased $766,000 in the first half of 2011 compared with the year-ago period due to the discontinuation of our insurance agency operations. The elimination of the operating expenses associated with our insurance agency substantially offset the revenue decline in 2011, resulting in no significant net effect on our financial results.
Non-interest income comprised 28.2% of total revenue in the second quarter, compared with 30.3% in the year-ago quarter. Non-interest income comprised 28.8% of total revenue in the first half of 2011 compared with 29.7% in the year-ago period.
Non-interest expenses were $10.8 million in the quarter second quarter of 2011, compared with $11.0 million in the year-ago period and $11.0 million in the first quarter of 2011.
Non-interest expenses were $21.8 million in the six months ended June 30, 2011, compared with $21.9 million in the first half of 2010.
The Company’s efficiency ratio was 68.8% in the second quarter of 2011, compared with 68.3% in the year-ago period and 70.5% in the first quarter of 2011. The Company’s efficiency ratio was 69.6% in the six months ended June 30, 2011, compared with 69.1% in the year-ago period.
The Company’s effective tax rate was 26.9% and 25.8% for the three months and six months ended June 30, 2011, respectively, compared with 25.0% and 24.6% in the year-ago periods, respectively.
About Alliance Financial Corporation
Alliance Financial Corporation is an independent financial holding company with Alliance Bank, N.A. as its principal subsidiary that provides retail, commercial and municipal banking, and trust and investment services through 29 offices in Cortland, Madison, Oneida, Onondaga and Oswego counties. Alliance also operates an investment management administration center in Buffalo, N.Y. and an equipment lease financing company, Alliance Leasing, Inc.
Forward-Looking Statements
This press release contains certain forward-looking statements with respect to the financial condition, results of operations and business of Alliance Financial Corporation. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: an increase in competitive pressure in the banking industry; changes in the interest rate environment which may affect the net interest margin; changes in the regulatory environment; general economic conditions, either nationally or regionally, resulting, among other things, in a deterioration in credit quality; changes in business conditions and inflation; changes in the securities markets; changes in technology used in the banking business; our ability to maintain and increase market share and control expenses; increases in FDIC insurance premiums may cause earnings to decrease; and other risks set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and in subsequent filings with the Securities and Exchange Commission.
| Contact: | Alliance Financial Corporation | |
| J. Daniel Mohr, Executive Vice President and CFO | ||
| (315) 475-4478 |
Alliance Financial Corporation
Consolidated Statements of Income (Unaudited)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (Dollars in thousands, except share and per share data) | ||||||||||||||||
| Interest income: |
||||||||||||||||
| Loans, including fees |
$ | 10,621 | $ | 11,632 | $ | 21,283 | $ | 23,453 | ||||||||
| Federal funds sold and interest bearing deposits |
1 | 1 | 5 | 3 | ||||||||||||
| Securities |
3,872 | 3,745 | 7,468 | 7,378 | ||||||||||||
| Total interest income |
14,494 | 15,378 | 28,756 | 30,834 | ||||||||||||
| Interest expense: |
||||||||||||||||
| Deposits: |
||||||||||||||||
| Savings accounts |
55 | 97 | 113 | 203 | ||||||||||||
| Money market accounts |
447 | 729 | 894 | 1,502 | ||||||||||||
| Time accounts |
1,446 | 1,923 | 2,933 | 3,894 | ||||||||||||
| NOW accounts |
61 | 129 | 129 | 272 | ||||||||||||
| Total |
2,009 | 2,878 | 4,069 | 5,871 | ||||||||||||
| Borrowings: |
||||||||||||||||
| Repurchase agreements |
203 | 200 | 410 | 403 | ||||||||||||
| FHLB advances |
818 | 951 | 1,673 | 1,936 | ||||||||||||
| Junior subordinated obligations |
158 | 159 | 315 | 313 | ||||||||||||
| Total interest expense |
3,188 | 4,188 | 6,467 | 8,523 | ||||||||||||
| Net interest income |
11,306 | 11,190 | 22,289 | 22,311 | ||||||||||||
| Provision for credit losses |
160 | 1,095 | 360 | 2,190 | ||||||||||||
| Net interest income after provision for credit losses |
11,146 | 10,095 | 21,929 | 20,121 | ||||||||||||
| Non-interest income: |
||||||||||||||||
| Investment management income |
1,986 | 1,828 | 3,902 | 3,635 | ||||||||||||
| Service charges on deposit accounts |
1,096 | 1,146 | 2,106 | 2,196 | ||||||||||||
| Card-related fees |
699 | 652 | 1,352 | 1,243 | ||||||||||||
| Insurance agency income |
— | 420 | — | 766 | ||||||||||||
| Income from bank-owned life insurance |
255 | 266 | 509 | 535 | ||||||||||||
| Gain on the sale of loans |
88 | 221 | 376 | 414 | ||||||||||||
| Other non-interest income |
311 | 326 | 776 | 631 | ||||||||||||
| Total non-interest income |
4,435 | 4,859 | 9,021 | 9,420 | ||||||||||||
| Non-interest expense: |
||||||||||||||||
| Salaries and employee benefits |
5,305 | 5,370 | 10,835 | 10,939 | ||||||||||||
| Occupancy and equipment expense |
1,816 | 1,840 | 3,646 | 3,680 | ||||||||||||
| Communication expense |
173 | 157 | 323 | 333 | ||||||||||||
| Office supplies and postage expense |
301 | 300 | 585 | 569 | ||||||||||||
| Marketing expense |
217 | 391 | 480 | 684 | ||||||||||||
| Amortization of intangible asset |
241 | 290 | 482 | 580 | ||||||||||||
| Professional fees |
860 | 829 | 1,684 | 1,569 | ||||||||||||
| FDIC insurance premium |
401 | 404 | 794 | 806 | ||||||||||||
| Other operating expense |
1,509 | 1,382 | 2,973 | 2,765 | ||||||||||||
| Total non-interest expense |
10,823 | 10,963 | 21,802 | 21,925 | ||||||||||||
| Income before income tax expense |
4,758 | 3,991 | 9,148 | 7,616 | ||||||||||||
| Income tax expense |
1,279 | 999 | 2,363 | 1,875 | ||||||||||||
| Net income |
$ | 3,479 | $ | 2,992 | $ | 6,785 | $ | 5,741 | ||||||||
| Share and Per Share Data |
||||||||||||||||
| Basic average common shares outstanding |
4,662,752 | 4,622,660 | 4,662,400 | 4,603,291 | ||||||||||||
| Diluted average common shares outstanding |
4,670,530 | 4,643,679 | 4,670,611 | 4,629,341 | ||||||||||||
| Basic earnings per common share |
$ | 0.73 | $ | 0.64 | $ | 1.43 | $ | 1.24 | ||||||||
| Diluted earnings per common share |
$ | 0.73 | $ | 0.64 | $ | 1.43 | $ | 1.23 | ||||||||
| Cash dividends declared |
$ | 0.30 | $ | 0.28 | $ | 0.60 | $ | 0.56 | ||||||||
Alliance Financial Corporation
Consolidated Balance Sheets (Unaudited)
| June 30, 2011 | December 31, 2010 | |||||||
| (Dollars in thousands, except share and per share data) | ||||||||
| Assets |
||||||||
| Cash and due from banks |
$ | 23,712 | $ | 32,501 | ||||
| Securities available-for-sale |
459,836 | 414,410 | ||||||
| Federal Home Loan Bank of NY (“FHLB”) Stock and Federal Reserve Bank (“FRB”) Stock |
10,547 | 8,652 | ||||||
| Loans and leases held for sale |
899 | 2,940 | ||||||
| Total loans and leases, net of unearned income |
883,185 | 898,537 | ||||||
| Less allowance for credit losses |
(10,683 | ) | (10,683 | ) | ||||
| Net loans and leases |
872,502 | 887,854 | ||||||
| Premises and equipment, net |
18,528 | 18,975 | ||||||
| Accrued interest receivable |
4,415 | 4,149 | ||||||
| Bank-owned life insurance |
28,921 | 28,412 | ||||||
| Goodwill |
30,844 | 30,844 | ||||||
| Intangible assets, net |
8,156 | 8,638 | ||||||
| Other assets |
17,065 | 17,247 | ||||||
| Total assets |
$ | 1,475,425 | $ | 1,454,622 | ||||
| Liabilities and shareholders’ equity |
||||||||
| Liabilities: |
||||||||
| Deposits: |
||||||||
| Non-interest bearing |
$ | 173,325 | $ | 179,918 | ||||
| Interest bearing |
937,240 | 954,680 | ||||||
| Total deposits |
1,110,565 | 1,134,598 | ||||||
| Borrowings |
181,343 | 142,792 | ||||||
| Accrued interest payable |
1,430 | 1,391 | ||||||
| Other liabilities |
16,179 | 16,936 | ||||||
| Junior subordinated obligations issued to unconsolidated subsidiary trusts |
25,774 | 25,774 | ||||||
| Total liabilities |
1,335,291 | 1,321,491 | ||||||
| Shareholders’ equity: |
||||||||
| Common stock |
5,068 | 5,051 | ||||||
| Surplus |
46,114 | 45,620 | ||||||
| Undivided profits |
96,318 | 92,380 | ||||||
| Accumulated other comprehensive income |
4,558 | 1,713 | ||||||
| Directors’ stock-based deferred compensation plan |
(3,268 | ) | (2,977 | ) | ||||
| Treasury stock |
(8,656 | ) | (8,656 | ) | ||||
| Total shareholders’ equity |
140,134 | 133,131 | ||||||
| Total liabilities and shareholders’ equity |
$ | 1,475,425 | $ | 1,454,622 | ||||
| Common shares outstanding |
4,745,291 | 4,729,035 | ||||||
| Book value per common share |
$ | 29.53 | $ | 28.15 | ||||
| Tangible book value per common share |
$ | 21.31 | $ | 19.80 | ||||
Alliance Financial Corporation
Consolidated Average Balances (Unaudited)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Earning assets: |
||||||||||||||||
| Federal funds sold and interest bearing deposits |
$ | 2,590 | $ | 6,022 | $ | 9,243 | $ | 6,769 | ||||||||
| Securities(1) |
457,076 | 407,316 | 449,123 | 392,425 | ||||||||||||
| Loans and leases receivable: |
||||||||||||||||
| Residential real estate loans(2) |
330,713 | 354,604 | 331,601 | 355,603 | ||||||||||||
| Commercial loans |
252,950 | 215,501 | 246,404 | 211,636 | ||||||||||||
| Leases, net of unearned income(2) |
35,427 | 57,332 | 37,422 | 60,646 | ||||||||||||
| Indirect loans |
167,679 | 183,178 | 170,297 | 182,487 | ||||||||||||
| Other consumer loans |
89,923 | 90,517 | 90,347 | 90,964 | ||||||||||||
| Loans and leases receivable, net of unearned income |
876,692 | 901,132 | 876,071 | 901,336 | ||||||||||||
| Total earning assets |
1,336,358 | 1,314,470 | 1,334,437 | 1,300,530 | ||||||||||||
| Non-earning assets |
130,353 | 133,936 | 130,009 | 135,470 | ||||||||||||
| Total assets |
$ | 1,466,711 | $ | 1,448,406 | $ | 1,464,446 | $ | 1,436,000 | ||||||||
| Interest bearing liabilities: |
||||||||||||||||
| Interest bearing checking accounts |
$ | 148,821 | $ | 135,393 | $ | 153,228 | $ | 133,720 | ||||||||
| Savings accounts |
107,897 | 100,385 | 105,286 | 97,584 | ||||||||||||
| Money market accounts |
380,558 | 366,088 | 379,797 | 357,639 | ||||||||||||
| Time deposits |
339,578 | 373,358 | 340,238 | 371,958 | ||||||||||||
| Borrowings |
139,863 | 143,425 | 138,246 | 148,552 | ||||||||||||
| Junior subordinated obligations issued to unconsolidated trusts |
25,774 | 25,774 | 25,774 | 25,774 | ||||||||||||
| Total interest bearing liabilities |
1,142,491 | 1,144,423 | 1,142,569 | 1,135,227 | ||||||||||||
| Non-interest bearing deposits |
175,565 | 163,554 | 175,179 | 160,360 | ||||||||||||
| Other non-interest bearing liabilities |
15,490 | 16,049 | 15,741 | 16,643 | ||||||||||||
| Total liabilities |
1,333,546 | 1,324,026 | 1,333,489 | 1,312,230 | ||||||||||||
| Shareholders’ equity |
133,165 | 124,380 | 130,957 | 123,770 | ||||||||||||
| Total liabilities and shareholders’ equity |
$ | 1,466,711 | $ | 1,448,406 | $ | 1,464,446 | $ | 1,436,000 | ||||||||
| (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:
| June 30, 2011 | March 31, 2011 | December 31, 2010 | ||||||||||||||||||||||
| Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Securities available-for-sale |
||||||||||||||||||||||||
| Debt securities: |
||||||||||||||||||||||||
| Obligations of U.S. government-sponsored corporations |
$ | 3,509 | $ | 3,619 | $ | 3,725 | $ | 3,876 | $ | 4,020 | $ | 4,186 | ||||||||||||
| Obligations of states and political subdivisions |
80,743 | 83,083 | 80,341 | 81,195 | 77,246 | 78,212 | ||||||||||||||||||
| Mortgage-backed securities(1) |
360,196 | 368,039 | 358,785 | 363,370 | 324,294 | 329,010 | ||||||||||||||||||
| Total debt securities |
444,448 | 454,741 | 442,851 | 448,441 | 405,560 | 411,408 | ||||||||||||||||||
| Stock investments: |
||||||||||||||||||||||||
| Equity securities |
1,852 | 2,046 | 1,852 | 2,082 | 1,852 | 1,995 | ||||||||||||||||||
| Mutual funds |
3,000 | 3,049 | 3,000 | 3,007 | 1,000 | 1,007 | ||||||||||||||||||
| Total stock investments |
4,852 | 5,095 | 4,852 | 5,089 | 2,852 | 3,002 | ||||||||||||||||||
| Total available-for-sale |
$ | 449,300 | $ | 459,836 | $ | 447,703 | $ | 453,530 | $ | 408,412 | $ | 414,410 | ||||||||||||
| (1) | Comprised of pass-through debt securities collateralized by conventional residential mortgages and guaranteed by either Fannie Mae, Freddie Mac or Ginnie Mae, which are, in turn, backed by the United States government. |
The following table sets forth the composition of the Company’s loan and lease portfolio at the dates indicated:
| June 30, 2011 | March 31, 2011 | December 31, 2010 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Loan portfolio composition |
||||||||||||||||||||||||
| Residential real estate loans |
$ | 330,059 | 37.5 | % | $ | 330,330 | 37.7 | % | $ | 334,967 | 37.4 | % | ||||||||||||
| Commercial loans |
140,264 | 15.9 | % | 128,461 | 14.7 | % | 133,787 | 14.9 | % | |||||||||||||||
| Commercial real estate |
119,628 | 13.6 | % | 117,500 | 13.4 | % | 116,066 | 13.0 | % | |||||||||||||||
| Leases, net of unearned income |
33,591 | 3.9 | % | 37,926 | 4.3 | % | 42,466 | 4.8 | % | |||||||||||||||
| Indirect loans |
165,440 | 18.8 | % | 170,239 | 19.5 | % | 176,125 | 19.7 | % | |||||||||||||||
| Other consumer loans |
90,921 | 10.3 | % | 90,617 | 10.4 | % | 91,619 | 10.2 | % | |||||||||||||||
| Total loans and leases |
879,903 | 100.0 | % | 875,073 | 100.0 | % | 895,030 | 100.0 | % | |||||||||||||||
| Net deferred loan costs |
3,282 | 3,329 | 3,507 | |||||||||||||||||||||
| Allowance for credit losses |
(10,683 | ) | (10,678 | ) | (10,683 | ) | ||||||||||||||||||
| Net loans and leases |
$ | 872,502 | $ | 867,724 | $ | 887,854 | ||||||||||||||||||
The following table sets forth the composition of the Company’s deposits at the dates indicated:
| June 30, 2011 | March 31, 2011 | December 31, 2010 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Deposit composition |
||||||||||||||||||||||||
| Non-interest bearing checking |
$ | 173,325 | 15.6 | % | $ | 170,354 | 14.6 | % | $ | 179,918 | 15.9 | % | ||||||||||||
| Interest bearing checking |
143,716 | 12.9 | % | 152,058 | 13.1 | % | 151,894 | 13.3 | % | |||||||||||||||
| Total checking |
317,041 | 28.5 | % | 322,412 | 27.7 | % | 331,812 | 29.2 | % | |||||||||||||||
| Savings |
109,739 | 9.9 | % | 105,799 | 9.1 | % | 103,099 | 9.1 | % | |||||||||||||||
| Money market |
347,184 | 31.3 | % | 392,988 | 33.8 | % | 357,885 | 31.5 | % | |||||||||||||||
| Time deposits |
336,601 | 30.3 | % | 342,151 | 29.4 | % | 341,802 | 30.2 | % | |||||||||||||||
| Total deposits |
$ | 1,110,565 | 100.0 | % | $ | 1,163,350 | 100.0 | % | $ | 1,134,598 | 100.0 | % | ||||||||||||
Alliance Financial Corporation
Asset Quality (Unaudited)
The following table represents a summary of delinquent loans and leases grouped by the number of days delinquent at the dates indicated:
| Delinquent loans and leases |
June 30, 2011 | March 31, 2011 | December 31, 2010 | |||||||||||||||||||||
| $ | %(1) | $ | %(1) | $ | %(1) | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| 30 days past due |
$ | 5,893 | 0.67 | % | $ | 6,538 | 0.75 | % | $ | 6,711 | 0.75 | % | ||||||||||||
| 60 days past due |
1,788 | 0.20 | % | 940 | 0.11 | % | 1,083 | 0.12 | % | |||||||||||||||
| 90 days past due and still accruing |
78 | 0.01 | % | 5 | — | % | 19 | — | % | |||||||||||||||
| Non-accrual |
8,262 | 0.94 | % | 8,056 | 0.92 | % | 8,474 | 0.95 | % | |||||||||||||||
| Total |
$ | 16,021 | 1.82 | % | $ | 15,539 | 1.78 | % | $ | 16,287 | 1.82 | % | ||||||||||||
| (1) | As a percentage of total loans and leases, excluding deferred costs |
The following table represents information concerning the aggregate amount of non-performing assets:
| Non-performing assets |
June 30, 2011 | March 31, 2011 | December 31, 2010 | |||||||||
| (Dollars in thousands) | ||||||||||||
| Non-accruing loans and leases |
||||||||||||
| Residential real estate loans |
$ | 2,650 | $ | 3,544 | $ | 3,543 | ||||||
| Commercial loans |
1,277 | 1,275 | 1,212 | |||||||||
| Commercial real estate |
2,992 | 1,639 | 2,084 | |||||||||
| Leases |
311 | 635 | 697 | |||||||||
| Indirect loans |
338 | 292 | 212 | |||||||||
| Other consumer loans |
694 | 671 | 726 | |||||||||
| Total non-accruing loans and leases |
8,262 | 8,056 | 8,474 | |||||||||
| Accruing loans and leases delinquent 90 days or more |
78 | 5 | 19 | |||||||||
| Total non-performing loans and leases |
8,340 | 8,061 | 8,493 | |||||||||
| Other real estate and repossessed assets |
945 | 650 | 652 | |||||||||
| Total non-performing assets |
$ | 9,285 | $ | 8,711 | $ | 9,145 | ||||||
| Troubled debt restructurings not included in above |
$ | 1,373 | $ | 1,041 | $ | 1,131 | ||||||
The following table summarizes changes in the allowance for credit losses arising from loans and leases charged off, recoveries on loans and leases previously charged off and additions to the allowance which have been charged to expense:
| Allowance for credit losses |
Three months ended June 30, |
Six months
ended June 30, |
||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Allowance for credit losses, beginning of period |
$ | 10,678 | $ | 9,717 | $ | 10,683 | $ | 9,414 | ||||||||
| Loans and leases charged-off |
(571 | ) | (724 | ) | (1,053 | ) | (1,715 | ) | ||||||||
| Recoveries of loans and leases previously charged-off |
416 | 205 | 693 | 404 | ||||||||||||
| Net loans and leases charged-off |
(155 | ) | (519 | ) | (360 | ) | (1,311 | ) | ||||||||
| Provision for credit losses |
160 | 1,095 | 360 | 2,190 | ||||||||||||
| Allowance for credit losses, end of period |
$ | 10,683 | $ | 10,293 | $ | 10,683 | $ | 10,293 | ||||||||
Alliance Financial Corporation
Consolidated Financial Information (Unaudited)
| Key Ratios |
At or for the three months ended June 30, |
At or for the six months ended June 30, |
||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Return on average assets |
0.95 | % | 0.83 | % | 0.93 | % | 0.80 | % | ||||||||
| Return on average equity |
10.45 | % | 9.62 | % | 10.36 | % | 9.28 | % | ||||||||
| Return on average tangible equity |
14.80 | % | 14.48 | % | 14.79 | % | 14.02 | % | ||||||||
| Yield on earning assets |
4.49 | % | 4.83 | % | 4.46 | % | 4.89 | % | ||||||||
| Cost of funds |
1.12 | % | 1.46 | % | 1.13 | % | 1.50 | % | ||||||||
| Net interest margin (tax equivalent) (1) |
3.53 | % | 3.56 | % | 3.49 | % | 3.58 | % | ||||||||
| Non-interest income to total income (2) |
28.17 | % | 30.28 | % | 28.81 | % | 29.69 | % | ||||||||
| Efficiency ratio (3) |
68.76 | % | 68.31 | % | 69.63 | % | 69.10 | % | ||||||||
| Common dividend payout ratio (4) |
41.10 | % | 43.75 | % | 41.96 | % | 45.53 | % | ||||||||
| Net loans and leases charged-off to average loans and leases, annualized |
0.07 | % | 0.23 | % | 0.08 | % | 0.29 | % | ||||||||
| Provision for credit losses to average loans and leases, annualized |
0.07 | % | 0.49 | % | 0.08 | % | 0.49 | % | ||||||||
| Allowance for credit losses to total loans and leases |
1.21 | % | 1.12 | % | n/a | n/a | ||||||||||
| Allowance for credit losses to non-performing loans and leases |
128.1 | % | 106.3 | % | n/a | n/a | ||||||||||
| Non-performing loans and leases to total loans and leases |
0.95 | % | 1.06 | % | n/a | n/a | ||||||||||
| Non-performing assets to total assets |
0.63 | % | 0.71 | % | n/a | n/a | ||||||||||
| (1) | Tax equivalent net interest income divided by average earning assets |
| (2) | Non-interest income (excluding net realized gains and losses on securities and other non-recurring gains and losses) divided by the sum of net interest income and non-interest income (as adjusted) |
| (3) | Non-interest expense divided by the sum of net interest income and non-interest income (as adjusted) |
| (4) | Cash dividends declared per share divided by diluted earnings per share |
Alliance Financial Corporation
Selected Quarterly Financial Data (Unaudited)
| 2011 | 2010 | |||||||||||||||||||
| Second | First | Fourth | Third | Second | ||||||||||||||||
| (Dollars in thousands, except share and per share data) | ||||||||||||||||||||
| Interest income |
$ | 14,494 | $ | 14,262 | $ | 14,406 | $ | 15,102 | $ | 15,378 | ||||||||||
| Interest expense |
3,188 | 3,279 | 3,588 | 3,942 | 4,188 | |||||||||||||||
| Net interest income |
11,306 | 10,983 | 10,818 | 11,160 | 11,190 | |||||||||||||||
| Provision for credit losses |
160 | 200 | 800 | 1,095 | 1,095 | |||||||||||||||
| Net interest income after provision for credit losses |
11,146 | 10,783 | 10,018 | 10,065 | 10,095 | |||||||||||||||
| Other non-interest income |
4,435 | 4,586 | 5,946 | 5,139 | 4,859 | |||||||||||||||
| Other non-interest expense |
10,823 | 10,979 | 11,346 | 11,210 | 10,963 | |||||||||||||||
| Income before income tax expense |
4,758 | 4,390 | 4,618 | 3,994 | 3,991 | |||||||||||||||
| Income tax expense |
1,279 | 1,084 | 1,825 | 904 | 999 | |||||||||||||||
| Net income |
$ | 3,479 | $ | 3,306 | $ | 2,793 | $ | 3,090 | $ | 2,992 | ||||||||||
| Stock and related per share data |
||||||||||||||||||||
| Basic earnings per common share |
$ | 0.73 | $ | 0.70 | $ | 0.59 | $ | 0.66 | $ | 0.64 | ||||||||||
| Diluted earnings per common share |
$ | 0.73 | $ | 0.70 | $ | 0.59 | $ | 0.66 | $ | 0.64 | ||||||||||
| Basic weighted average common shares outstanding |
4,662,752 | 4,662,044 | 4,646,934 | 4,624,819 | 4,622,660 | |||||||||||||||
| Diluted weighted average common shares outstanding |
4,670,530 | 4,670,674 | 4,660,463 | 4,646,889 | 4,643,679 | |||||||||||||||
| Cash dividends paid per common share |
$ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.28 | ||||||||||
| Common dividend payout ratio(1) |
41.10 | % | 42.86 | % | 50.85 | % | 45.45 | % | 43.75 | % | ||||||||||
| Common book value |
$ | 29.53 | $ | 28.45 | $ | 28.15 | $ | 28.63 | $ | 28.46 | ||||||||||
| Tangible common book value(2) |
$ | 21.31 | $ | 20.18 | $ | 19.80 | $ | 19.84 | $ | 19.55 | ||||||||||
| Capital Ratios |
||||||||||||||||||||
| Holding Company |
||||||||||||||||||||
| Tier 1 leverage ratio |
8.52 | % | 8.37 | % | 8.28 | % | 8.07 | % | 7.87 | % | ||||||||||
| Tier 1 risk based capital |
14.02 | % | 13.80 | % | 13.41 | % | 13.06 | % | 12.69 | % | ||||||||||
| Tier 1 risk based common capital(3) |
11.13 | % | 10.90 | % | 10.54 | % | 10.17 | % | 9.84 | % | ||||||||||
| Total risk based capital |
15.26 | % | 15.03 | % | 14.63 | % | 14.27 | % | 13.88 | % | ||||||||||
| Tangible common equity to tangible assets(4) |
7.04 | % | 6.70 | % | 6.62 | % | 6.63 | % | 6.44 | % | ||||||||||
| Bank |
||||||||||||||||||||
| Tier 1 leverage ratio |
7.94 | % | 7.79 | % | 7.72 | % | 7.67 | % | 7.48 | % | ||||||||||
| Tier 1 risk based capital |
13.12 | % | 12.90 | % | 12.54 | % | 12.47 | % | 12.12 | % | ||||||||||
| Total risk based capital |
14.37 | % | 14.15 | % | 13.78 | % | 13.70 | % | 13.32 | % | ||||||||||
| Selected ratios |
||||||||||||||||||||
| Return on average assets |
0.95 | % | 0.90 | % | 0.77 | % | 0.86 | % | 0.83 | % | ||||||||||
| Return on average equity |
10.45 | % | 10.27 | % | 8.59 | % | 9.57 | % | 9.62 | % | ||||||||||
| Return on average tangible common equity |
14.80 | % | 14.80 | % | 12.51 | % | 14.09 | % | 14.48 | % | ||||||||||
| Yield on earning assets |
4.49 | % | 4.43 | % | 4.54 | % | 4.78 | % | 4.83 | % | ||||||||||
| Cost of funds |
1.12 | % | 1.15 | % | 1.27 | % | 1.40 | % | 1.46 | % | ||||||||||
| Net interest margin (tax equivalent)(5) |
3.53 | % | 3.44 | % | 3.45 | % | 3.57 | % | 3.56 | % | ||||||||||
| Non-interest income to total income(6) |
28.17 | % | 29.46 | % | 32.17 | % | 30.21 | % | 30.28 | % | ||||||||||
| Efficiency ratio(7) |
68.76 | % | 70.52 | % | 71.14 | % | 70.10 | % | 68.31 | % | ||||||||||
| Asset quality ratios |
||||||||||||||||||||
| Net loans and leases charged off to average loans and leases, annualized |
0.07 | % | 0.09 | % | 0.26 | % | 0.41 | % | 0.23 | % | ||||||||||
| Provision for credit losses to average loans and leases, annualized |
0.07 | % | 0.09 | % | 0.36 | % | 0.49 | % | 0.49 | % | ||||||||||
| Allowance for credit losses to total loans and leases |
1.21 | % | 1.22 | % | 1.19 | % | 1.17 | % | 1.12 | % | ||||||||||
| Allowance for credit losses to non-performing loans and leases |
128.1 | % | 132.5 | % | 125.8 | % | 134.3 | % | 106.3 | % | ||||||||||
| Non-performing loans and leases to total loans and leases |
0.95 | % | 0.92 | % | 0.95 | % | 0.87 | % | 1.06 | % | ||||||||||
| Non-performing assets to total assets |
0.63 | % | 0.59 | % | 0.63 | % | 0.59 | % | 0.71 | % | ||||||||||
| (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: |
| June 30, 2011 |
March 31, 2011 |
December 31, 2010 |
September 30, 2010 |
June 30, 2010 |
||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Total assets |
$ | 1,475,425 | $ | 1,469,176 | $ | 1,454,622 | $ | 1,446,839 | $ | 1,456,731 | ||||||||||
| Less: Goodwill and intangible assets, net |
39,000 | 39,241 | 39,482 | 41,279 | 41,568 | |||||||||||||||
| Tangible assets (non-GAAP) |
1,436,425 | 1,429,935 | 1,415,140 | 1,405,560 | 1,415,163 | |||||||||||||||
| Total Common Equity |
140,134 | 135,028 | 133,131 | 134,503 | 132,712 | |||||||||||||||
| Less: Goodwill and intangible assets, net |
39,000 | 39,241 | 39,482 | 41,279 | 41,568 | |||||||||||||||
| Tangible Common Equity (non-GAAP) |
101,134 | 95,787 | 93,649 | 93,224 | 91,144 | |||||||||||||||
| Total Equity/Total Assets |
9.50 | % | 9.19 | % | 9.15 | % | 9.30 | % | 9.11 | % | ||||||||||
| Tangible Common Equity/Tangible Assets (non-GAAP) |
7.04 | % | 6.70 | % | 6.62 | % | 6.63 | % | 6.44 | % | ||||||||||
| (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) |