EX-99.1 2 d381690dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

NEWS RELEASE   FOR IMMEDIATE RELEASE

 

 

Alliance Financial Announces Second Quarter Earnings

Syracuse, NY, July 17, 2012 - 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 June 30, 2012 of $2.9 million or $0.61 per diluted common share, compared with $3.5 million or $0.73 per diluted common share in the year-ago quarter and $2.6 million or $0.55 per diluted common share in the first quarter of 2012.

Net income for the six months ended June 30, 2012 was $5.6 million or $1.16 per diluted share, compared with $6.8 million or $1.43 per diluted share in the first half of 2011.

Net interest income decreased $1.3 million and $2.4 million in the three and six month periods ended June 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.

Jack H. Webb, President and CEO of Alliance said, “Our loan portfolio grew at an annualized rate of 13% in the second quarter with broad-based loan growth in each of our commercial, residential, and indirect portfolios as we continue to capture market share. Loan originations across all our business lines totaled more than $106 million in the second quarter, which was an increase of 98% from the second quarter of 2011, and was up 47% from the first quarter of this year.”

Webb added, “While we grew our loan portfolio, we also continued to improve on our already low levels of non-performing and delinquent loans. Our non-performing loans dropped 25% in the second quarter as a direct result of successful workouts and payoffs of non-performing loans. Total loan delinquencies were also down 12% in the second quarter.”

Balance Sheet Highlights

Total assets were $1.4 billion at June 30, 2012, which was an increase of $7.2 million from March 31, 2012. Total loans and leases (net of unearned income) increased $28.6 million from the previous quarter to $898.5 million at June 30, 2012.

Loan origination volumes in the second quarter increased $52.5 million, or 97.5%, to $106.4 million, compared with $53.8 million in the year-ago quarter and $72.5 million in the first quarter of 2012 on strong origination growth in each of our commercial, residential mortgage and indirect lending businesses.


Commercial loans and mortgages increased $9.3 million in the second quarter and totaled $283.1 million at June 30, 2012. Originations of commercial loans and mortgages in the second quarter (excluding lines of credit) totaled $21.6 million, compared with $8.3 million in the first quarter of 2012 and $17.7 million in the year-ago quarter. The $13.3 million increase in commercial originations during the second quarter resulted from the capture of additional market share through a sustained sales effort.

Residential mortgages outstanding increased $7.1 million in the second quarter to $320.9 million. Originations of residential mortgages totaled $44.2 million in the second quarter of 2012, compared with $30.0 million in the first quarter of 2012 and $18.0 million in the year-ago quarter. Alliance retained in portfolio approximately $22.0 million of the second quarter originations that were bi-weekly payment mortgages or monthly payment mortgages with maturities of 15 years or less.

Indirect auto loan balances were $188.8 million at the end of the second quarter, which was an increase of $16.9 million from the end of the first quarter of 2012. Alliance originated $39.8 million of indirect auto loans in the second quarter, compared with $33.2 million in the first quarter of 2012 and $17.3 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 $341.8 million at June 30, 2012, compared with $346.4 million at March 31, 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 June 30, 2012 was 77.0% government-sponsored entity-guaranteed mortgage-backed securities, 21.6% municipal securities and 0.5% obligations of U.S. government-sponsored corporations. Mortgage-backed securities, which totaled $263.4 million at June 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 $73.7 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. Net unrealized gains on our securities portfolio totaled $11.3 million at the end of the second quarter.

Deposits increased $5.6 million in the second quarter, and were $1.1 billion at June 30, 2012. Low-cost transaction accounts comprised 75.6% of total deposits at the end of the second quarter, compared with 75.7% at March 31, 2012 and 69.7% at June 30, 2011. Alliance’s liability mix remained favorably weighted towards transaction accounts in the second quarter as retail and municipal depositors continue to refrain from locking up funds in time accounts in the low interest rate environment, and also because of the buildup of cash on commercial customers’ balance sheets.


Shareholders’ equity was $146.8 million at June 30, 2012, compared with $145.0 million at the end of the first quarter. Net income for the quarter increased shareholders’ equity by $2.9 million and was partially offset by common stock dividends declared of $1.5 million or $0.31 per common share.

The Company’s Tier 1 leverage ratio was 9.38% and its total risk-based capital ratio was 15.75% at the end of the second quarter. The Company’s tangible common equity capital ratio (a non-GAAP financial measure) was 7.85% at June 30, 2012.

Asset Quality and the Provision for Credit Losses

Delinquent loans and leases (including non-performing) totaled $12.6 million at June 30, 2012, compared with $14.4 million at March 31, 2012 and $17.0 million at December 31, 2011. The largest decline in delinquent loans in the second quarter occurred in loans delinquent 90 days or more or on non-accrual status, which declined $2.3 million or 25.3%.

Non-performing assets were $6.7 million or 0.47% of total assets at June 30, 2012, compared with $9.2 million or 0.65% of total assets at March 31, 2012 and $11.7 million or 0.83% of total assets at December 31, 2011. The decline in non-performing assets in the second quarter resulted primarily from non-accrual loans returning to accrual status as a result of satisfactory payment performance and to pay-offs of non-performing loans. Included in non-performing assets at the end of the second quarter are non-performing loans and leases totaling $6.7 million, compared with $8.9 million at March 31, 2012 and $11.3 million at December 31, 2011.

Conventional residential mortgages comprised $2.5 million (39 loans) or 38.3% of non-performing loans and leases, and commercial loans and mortgages totaled $3.3 million (25 loans) or 50.2% of non-performing loans and leases at the end of the second quarter.

Net charge-offs were $166,000 and $1.6 million in the three and six months ended June 30, 2012, respectively, compared with $155,000 and $360,000 in the year-ago periods. Net charge-offs annualized equaled 0.08% and 0.36%, respectively, of average loans and leases during the three months and six months ended June 30, 2012, compared with 0.07% and 0.08% in the year-ago periods, respectively. Gross charge-offs were $460,000 and recoveries were $294,000 in the second quarter of 2012.

A negative provision expense resulted in $300,000 of income being recorded in the second quarter, compared with provision expense of $160,000 in the year-ago quarter and no provision expense in the first quarter of 2012. 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. As the Company’s asset quality metrics and net charge-off levels have improved in recent quarters (excluding the charge-offs related to a $3.6 million commercial relationship previously discussed in the Company’s Form 10-Q for the first quarter of 2012), an increasing portion of the allowance for credit losses has been considered “unallocated,” which means it is not based on either quantitative or qualitative factors, but on the broader, non-portfolio specific factors. At June 30, 2012, $1.3 million or 14% of the allowance for credit losses was considered to be “unallocated,” compared to $991,000 or 9% at December 31, 2011. 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 credit losses and/or negative credit loss provisions, which would have the effect of lowering the amount of provision expense relative to net charge-offs compared with past quarters (i.e. provision expense being less than net charge-offs), or a negative provision expense, which was the case in the second quarter of 2012.

The provision for credit losses as a percentage of net charge-offs was not meaningful in the second quarter due to the negative provision that was recorded. The provision for credit losses as a percentage of net charge-offs was 103% in the year-ago quarter and 0% in the first quarter of 2012.

The allowance for credit losses was $8.9 million at June 30, 2012, compared with $9.4 million at March 31, 2012 and $10.8 million at December 31, 2011. The ratio of the allowance for credit losses to total loans and leases was 0.99% at June 30, 2012, compared with 1.08% at March 31, 2012 and 1.24% at December 31, 2011. The ratio of the allowance for credit losses to non-performing loans and leases was 134% at June 30, 2012, compared with 105% at March 31, 2012 and 96% at December 31, 2011.

Net Interest Income

Net interest income totaled $10.0 million in the three months ended June 30, 2012, compared with $11.3 million in the year-ago quarter, and $9.8 million in the first quarter of 2012. The tax-equivalent net interest margin decreased 27 basis points in the second quarter compared with the year-ago quarter due to the effect of persistently low interest rates on the Company’s interest-earning assets. The rate of margin decline slowed considerably in the first quarter of 2012 in large part due to a slowing in prepayments on our mortgage-backed securities portfolio. The net interest margin increased 4 basis points from the first to the second quarter of 2012 with most of the increase attributable to the accrual of $133,000 of interest on non-accrual loans which were returned to performing status in the second quarter.

The net interest margin on a tax-equivalent basis was 3.26% in the second quarter of 2012, compared with 3.53% in the year-ago quarter of 2011 and 3.22% in the first quarter of 2012. The net interest margin in the second quarter adjusted for the accrual of non-accrual interest was 3.22%. The decrease in the net interest margin compared with the second quarter of 2011 was the result of a decrease in the tax-equivalent earning asset yield of 54 basis points in the second quarter compared with the year-ago


quarter, which was partially offset by a decrease in the cost of interest-bearing liabilities of 29 basis points over the same period. On a linked-quarter basis, the decline in our earning-assets yield was 9 basis points in the second quarter, which was offset by a 15 basis-point drop in the cost of our interest-bearing liabilities. Adjusted for the recovery of non-accrual interest in the second quarter, our tax-equivalent earning asset yield declined 58 basis points and 13 basis points, compared with the year-ago quarter and the first quarter of 2012, respectively.

Average interest-earning assets were $1.3 billion in the second quarter, which was a decrease of 4.0% from the year-ago quarter but was unchanged from the first quarter of 2012. Most of the decline from the year-ago quarter occurred in our securities portfolio, with the average balance down 25% 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 was roughly equal in the second 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 68.4% of total interest-earning assets in the second quarter of 2012, compared with 65.6% in the year-ago quarter and 67.1% in the first quarter of 2012.

Net interest income for the six months ended June 30, 2012 totaled $19.8 million, which was down $2.4 million or 11.0% compared with the year-ago period. The tax equivalent net interest margin was 3.24% for the six months ended June 30, 2012, compared to 3.49% for the first half of 2011. The tax-equivalent earning asset yield decreased 46 basis points in the first half of 2012 compared with the year-ago period, which was partially offset by a decrease of 22 basis points in the cost of interest-bearing liabilities of basis points over the same period.

Average interest-earning assets were $1.3 billion in the first half of 2012, which was a decrease of 3.9% from the first half of 2011. The changes in the average balances of securities and loans for the first half of 2012 compared with the year-ago period were similar to that as discussed above for the second quarter. Total average loans and leases were 67.7% of total interest-earning assets in the first half of 2012, compared with 65.7% 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 $4.5 million in the second quarter of 2012, compared with $4.4 million in the second quarter of 2011 and $4.5 million in the first quarter of 2012. Gains on the sale of loans increased $259,000 compared with the second quarter of 2011 due to higher volumes of mortgages originated and sold in 2012.


Non-interest income totaled $9.0 million in the first six months of 2012 and 2011. Gains on the sale of loans increased $330,000, compared with the first half of 2011 and were partially offset by a $243,000 decrease in other non-interest income.

Non-interest income accounted for 31.1% of total revenue in the second quarter of 2012, compared with 28.2% in the year-ago quarter. Non-interest income accounted for 31.2% of total revenue in the first half of 2012, compared with 28.8% in the year-ago period.

Non-interest expenses were $11.0 million in the quarter ended June 30, 2012, compared with $10.8 million in the year-ago quarter and $10.9 million in the first quarter of 2012. Non-interest expenses were $21.9 million in the six months ended June 30, 2012, compared with $21.8 million in the first half of 2011.

The Company’s efficiency ratio was 75.8% in the second quarter of 2012, compared with 68.8% in the year-ago quarter. The Company’s efficiency ratio was 75.9% in the six months ended June 30, 2012, compared with 69.6% in the year-ago period.

The Company’s effective tax rate was 23.5% and 23.3% for the three and six months ended June 30, 2012, respectively, compared with 26.9% and 25.8% 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 June 30,      Six months ended June 30,  
     2012     2011      2012     2011  
     (Dollars in thousands, except share and per share data)  

Interest income:

         

Loans, including fees

   $ 9,718      $ 10,621       $ 19,543      $ 21,283   

Federal funds sold and interest bearing deposits

     41        1         75        5   

Securities

     2,458        3,872         5,062        7,468   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total interest income

     12,217        14,494         24,680        28,756   

Interest expense:

         

Deposits:

         

Savings accounts

     24        55         55        113   

Money market accounts

     252        447         530        894   

Time accounts

     891        1,446         2,032        2,933   

NOW accounts

     28        61         66        129   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

     1,195        2,009         2,683        4,069   

Borrowings:

         

Repurchase agreements

     202        203         405        410   

FHLB advances

     645        818         1,403        1,673   

Junior subordinated obligations

     170        158         343        315   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total interest expense

     2,212        3,188         4,834        6,467   

Net interest income

     10,005        11,306         19,846        22,289   

Provision for credit losses

     (300     160         (300     360   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net interest income after provision for credit losses

     10,305        11,146         20,146        21,929   

Non-interest income:

         

Investment management income

     1,949        1,986         3,804        3,902   

Service charges on deposit accounts

     1,050        1,096         2,093        2,106   

Card-related fees

     720        699         1,371        1,352   

Income from bank-owned life insurance

     246        255         493        509   

Gain on the sale of loans

     347        88         706        376   

Other non-interest income

     212        311         533        776   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total non-interest income

     4,524        4,435         9,000        9,021   

Non-interest expense:

         

Salaries and employee benefits

     5,651        5,305         11,342        10,835   

Occupancy and equipment expense

     1,694        1,816         3,595        3,646   

Communication expense

     157        173         316        323   

Office supplies and postage expense

     325        301         607        585   

Marketing expense

     262        217         499        480   

Amortization of intangible asset

     222        241         444        482   

Professional fees

     828        860         1605        1,684   

FDIC insurance premium

     211        401         426        794   

Other operating expense

     1,666        1,509         3,070        2,973   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total non-interest expense

     11,016        10,823         21,904        21,802   

Income before income tax expense

     3,813        4,758         7,242        9,148   

Income tax expense

     895        1,279         1,684        2,363   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income

   $ 2,918      $ 3,479       $ 5,558      $ 6,785   
  

 

 

   

 

 

    

 

 

   

 

 

 

Share and Per Share Data

         

Basic average common shares outstanding

     4,700,992        4,662,752         4,699,780        4,662,400   

Diluted average common shares outstanding

     4,700,992        4,670,530         4,699,780        4,670,611   

Basic earnings per common share

   $ 0.61      $ 0.73       $ 1.16      $ 1.43   

Diluted earnings per common share

   $ 0.61      $ 0.73       $ 1.16      $ 1.43   

Cash dividends declared

   $ 0.31      $ 0.30       $ 0.62      $ 0.60   


Alliance Financial Corporation

Consolidated Balance Sheets (Unaudited)

 

     June 30, 2012     December 31, 2011  
     (Dollars in thousands, except share and per share data)  

Assets

    

Cash and due from banks

   $ 70,908      $ 52,802   

Securities available-for-sale

     341,849        374,306   

Federal Home Loan Bank of NY (“FHLB”) Stock and Federal Reserve Bank (“FRB”) Stock

     7,974        8,478   

Loans and leases held for sale

     1,149        1,217   

Total loans and leases, net of unearned income

     898,452        872,721   

Less allowance for credit losses

     (8,892     (10,769
  

 

 

   

 

 

 

Net loans and leases

     889,560        861,952   

Premises and equipment, net

     17,094        17,541   

Accrued interest receivable

     3,733        3,960   

Bank-owned life insurance

     29,923        29,430   

Goodwill

     30,844        30,844   

Intangible assets, net

     7,250        7,694   

Other assets

     22,554        20,866   
  

 

 

   

 

 

 

Total assets

   $ 1,422,838      $ 1,409,090   
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Liabilities:

    

Deposits:

    

Non-interest bearing

   $ 203,885      $ 185,736   

Interest bearing

     902,687        897,329   
  

 

 

   

 

 

 

Total deposits

     1,106,572        1,083,065   

Borrowings

     125,318        136,310   

Accrued interest payable

     874        1,578   

Other liabilities

     17,456        18,366   

Junior subordinated obligations issued to unconsolidated subsidiary trusts

     25,774        25,774   
  

 

 

   

 

 

 

Total liabilities

     1,275,994        1,265,093   

Shareholders’ equity:

    

Common stock

     5,107        5,092   

Surplus

     47,517        47,147   

Undivided profits

     102,471        99,879   

Accumulated other comprehensive income

     4,096        3,951   

Directors’ stock-based deferred compensation plan

     (3,691     (3,416

Treasury stock

     (8,656     (8,656
  

 

 

   

 

 

 

Total shareholders’ equity

     146,844        143,997   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,422,838      $ 1,409,090   
  

 

 

   

 

 

 

Common shares outstanding

     4,784,698        4,769,241   

Book value per common share

   $ 30.69      $ 30.19   

Tangible book value per common share

   $ 22.73      $ 22.11   


Alliance Financial Corporation

Consolidated Average Balances (Unaudited)

 

     Three months ended June 30,      Six months ended June 30,  
     2012      2011      2012      2011  
     (Dollars in thousands)  

Earning assets:

           

Federal funds sold and interest bearing deposits

   $ 60,602       $ 2,590       $ 62,117       $ 9,243   

Securities(1)

     344,608         457,076         351,499         449,123   

Loans and leases receivable:

           

Residential real estate loans(2)

     319,128         330,713         316,761         331,601   

Commercial loans

     273,100         252,950         272,521         246,404   

Leases, net of unearned income(2)

     15,663         35,427         19,110         37,422   

Indirect loans

     181,277         167,679         171,338         170,297   

Other consumer loans

     88,124         89,923         88,651         90,347   
  

 

 

    

 

 

    

 

 

    

 

 

 

Loans and leases receivable, net of unearned income

     877,292         876,692         868,381         876,071   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total earning assets

     1,282,502         1,336,358         1,281,997         1,334,437   

Non-earning assets

     136,538         130,353         136,209         130,009   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,419,040       $ 1,466,711       $ 1,418,206       $ 1,464,446   
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest bearing liabilities:

           

Interest bearing checking accounts

   $ 151,199       $ 148,821       $ 151,446       $ 153,228   

Savings accounts

     114,261         107,897         111,022         105,286   

Money market accounts

     371,722         380,558         365,279         379,797   

Time deposits

     271,898         339,578         283,258         340,238   

Borrowings

     127,020         139,863         129,633         138,246   

Junior subordinated obligations issued to unconsolidated trusts

     25,774         25,774         25,774         25,774   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest bearing liabilities

     1,061,874         1,142,491         1,066,412         1,142,569   

Non-interest bearing deposits

     198,538         175,565         193,583         175,179   

Other non-interest bearing liabilities

     16,393         15,490         16,777         15,741   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     1,276,805         1,333,546         1,276,772         1,333,489   

Shareholders’ equity

     142,235         133,165         141,434         130,957   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 1,419,040       $ 1,466,711       $ 1,418,206       $ 1,464,446   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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, 2012      March 31, 2012      December 31, 2011  
     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

   $ 1,614       $ 1,636       $ 1,794       $ 1,835       $ 3,134       $ 3,190   

Obligations of states and political subdivisions

     69,067         73,692         76,776         80,919         77,541         82,299   

Mortgage-backed securities(1)

     256,882         263,376         253,728         260,546         279,393         285,706   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities

     327,563         338,704         332,298         343,300         360,068         371,195   

Stock investments:

                 

Mutual funds

     3,000         3,145         3,000         3,105         3,000         3,111   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock investments

     3,000         3,145         3,000         3,105         3,000         3,111   

Total available-for-sale

   $ 330,563       $ 341,849       $ 335,298       $ 346,405       $ 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:

 

     June 30, 2012     March 31, 2012     December 31, 2011  
     Amount     Percent     Amount     Percent     Amount     Percent  
     (Dollars in thousands)  

Loan portfolio composition

            

Residential real estate loans

   $ 320,899        35.9   $ 313,803        36.2   $ 316,823        36.4

Commercial loans

     153,542        17.2     147,334        17.0     151,420        17.4

Commercial real estate

     129,508        14.5     126,456        14.6     126,863        14.6

Leases, net of unearned income

     13,563        1.5     18,339        2.1     25,636        3.0

Indirect loans

     188,765        21.1     171,822        19.9     158,813        18.3

Other consumer loans

     88,092        9.8     88,607        10.2     89,776        10.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans and leases

     894,369        100.0     866,361        100.0     869,331        100.0
    

 

 

     

 

 

     

 

 

 

Net deferred loan costs

     4,083          3,532          3,390     

Allowance for credit losses

     (8,892       (9,358       (10,769  
  

 

 

     

 

 

     

 

 

   

Net loans and leases

   $ 889,560        $ 860,535        $ 861,952     
  

 

 

     

 

 

     

 

 

   

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

 

     June 30, 2012     March 31, 2012     December 31, 2011  
     Amount      Percent     Amount      Percent     Amount      Percent  
     (Dollars in thousands)  

Deposit composition

               

Non-interest bearing checking

   $ 203,885         18.5   $ 190,566         17.3   $ 185,736         17.1

Interest bearing checking

     158,701         14.3     148,850         13.5     145,885         13.5
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total checking

     362,586         32.8     339,416         30.8     331,621         30.6

Savings

     116,664         10.5     110,667         10.1     107,311         9.9

Money market

     358,025         32.4     383,167         34.8     330,000         30.5

Time deposits

     269,297         24.3     267,674         24.3     314,133         29.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total deposits

   $ 1,106,572         100.0   $ 1,100,924         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

   June 30, 2012     March 31, 2012     December 31, 2011  
     $      %(1)     $      %(1)     $      %(1)  
     (Dollars in thousands)  

30 days past due

   $ 5,220         0.58   $ 4,481         0.52   $ 5,202         0.60

60 days past due

     732         0.08     966         0.11     584         0.06

90 days past due and still accruing

     —           —          12         —          —           —     

Non-accrual

     6,660         0.75     8,904         1.03     11,261         1.30
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 12,612         1.41   $ 14,363         1.66   $ 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

   June 30, 2012      March 31, 2012      December 31, 2011  
     (Dollars in thousands)  

Non-accruing loans and leases

        

Residential real estate loans

   $ 2,549       $ 2,649       $ 3,062   

Commercial loans

     1,464         1,787         3,375   

Commercial real estate

     1,879         3,847         4,051   

Leases

     74         83         107   

Indirect loans

     288         270         293   

Other consumer loans

     406         268         373   
  

 

 

    

 

 

    

 

 

 

Total non-accruing loans and leases

     6,660         8,904         11,261   

Accruing loans and leases delinquent 90 days or more

     —           12         —     
  

 

 

    

 

 

    

 

 

 

Total non-performing loans and leases

     6,660         8,916         11,261   

Other real estate and repossessed assets

     51         317         485   
  

 

 

    

 

 

    

 

 

 

Total non-performing assets

   $ 6,711       $ 9,233       $ 11,746   
  

 

 

    

 

 

    

 

 

 

Troubled debt restructurings not included in above

   $ 2,133       $ 1,949       $ 1,653   

The following table summarizes changes in the allowance for credit losses arising from loans and leases charged off, recoveries on loans and leases previously charged off and additions to the allowance which have been charged to expense:

 

Allowance for credit losses

   Three months ended
June  30,
    Six months ended
June 30,
 
     2012     2011     2012     2011  
     (Dollars in thousands)  

Allowance for credit losses, beginning of period

   $ 9,358      $ 10,678      $ 10,769      $ 10,683   

Loans and leases charged-off

     (460     (571     (2,357     (1,053

Recoveries of loans and leases previously charged-off

     294        416        780        693   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loans and leases charged-off

     (166     (155     (1,577     (360

Provision for credit losses

     (300     160        (300     360   
  

 

 

   

 

 

   

 

 

   

 

 

 

Allowance for credit losses, end of period

   $ 8,892      $ 10,683      $ 8,892      $ 10,683   
  

 

 

   

 

 

   

 

 

   

 

 

 


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,
 
     2012     2011     2012     2011  

Return on average assets

     0.82     0.95     0.78     0.93

Return on average equity

     8.21     10.45     7.86     10.36

Return on average tangible equity

     11.22     14.80     10.78     14.79

Yield on earning assets

     3.95     4.49     4.00     4.46

Cost of funds

     0.83     1.12     0.91     1.13

Net interest margin (tax equivalent) (1)

     3.26     3.53     3.24     3.49

Non-interest income to total income (2)

     31.14     28.17     31.20     28.81

Efficiency ratio (3)

     75.82     68.76     75.93     69.63

Common dividend payout ratio (4)

     50.82     41.10     53.45     41.96

Net loans and leases charged-off to average loans and leases, annualized

     0.08     0.07     0.36     0.08

Provision for credit losses to average loans and leases, annualized

     (0.14 )%      0.07     (0.07 )%      0.08

Allowance for credit losses to total loans and leases

     0.99     1.21     0.99     1.21

Allowance for credit losses to non-performing loans and leases

     133.5     128.1     133.5     128.1

Non-performing loans and leases to total loans and leases

     0.74     0.95     0.74     0.95

Non-performing assets to total assets

     0.47     0.63     0.47     0.63

 

(1) Tax equivalent net interest income divided by average earning assets
(2) Non-interest income (excluding net realized gains and losses on securities and other non-recurring gains and losses) divided by the sum of net interest income and non-interest income (as adjusted)
(3) Non-interest expense divided by the sum of net interest income and non-interest income (as adjusted)
(4) Cash dividends declared per share divided by diluted earnings per share


Alliance Financial Corporation

Selected Quarterly Financial Data (Unaudited)

 

     2012     2011  
     Second     First     Fourth     Third     Second  
     (Dollars in thousands, except share and per share data)  

Interest income

   $ 12,217      $ 12,463      $ 12,942      $ 14,061      $ 14,494   

Interest expense

     2,212        2,622        2,928        3,064        3,188   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     10,005        9,841        10,014        10,997        11,306   

Provision for credit losses

     (300     —          800        750        160   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for credit losses

     10,305        9,841        9,214        10,247        11,146   

Other non-interest income

     4,524        4,476        5,062        5,919        4,435   

Other non-interest expense

     11,016        10,888        10,640        11,139        10,823   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

     3,813        3,429        3,636        5,027        4,758   

Income tax expense

     895        790        791        1,360        1,279   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 2,918      $ 2,639      $ 2,845      $ 3,667      $ 3,479   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stock and related per share data

          

Basic earnings per common share

   $ 0.61      $ 0.55      $ 0.60      $ 0.77      $ 0.73   

Diluted earnings per common share

   $ 0.61      $ 0.55      $ 0.60      $ 0.77      $ 0.73   

Basic weighted average common shares outstanding

     4,700,992        4,698,567        4,687,802        4,667,355        4,662,752   

Diluted weighted average common shares outstanding

     4,700,992        4,698,567        4,689,427        4,673,908        4,670,530   

Cash dividends paid per common share

   $ 0.31      $ 0.31      $ 0.31      $ 0.31      $ 0.30   

Common dividend payout ratio (1)

     50.82     56.36     51.67     40.26     41.10

Common book value

   $ 30.69      $ 30.30      $ 30.19      $ 30.15      $ 29.53   

Tangible common book value (2)

   $ 22.73      $ 22.30      $ 22.11      $ 21.99      $ 21.31   

Capital Ratios

          

Holding Company

          

Tier 1 leverage ratio

     9.38     9.26     9.09     8.80     8.52

Tier 1 risk based capital

     14.74     14.99     14.71     14.42     14.02

Tier 1 risk based common capital (3)

     11.89     12.05     11.81     11.52     11.13

Total risk based capital

     15.75     16.09     15.97     15.68     15.26

Tangible common equity to tangible assets (4)

     7.85     7.75     7.69     7.50     7.04

Bank

          

Tier 1 leverage ratio

     8.81     8.68     8.50     8.25     7.94

Tier 1 risk based capital

     13.86     14.10     13.80     13.58     13.12

Total risk based capital

     14.89     15.21     15.05     14.84     14.37

Selected ratios

          

Return on average assets

     0.82     0.74     0.80     1.01     0.95

Return on average equity

     8.21     7.51     8.19     10.69     10.45

Return on average tangible common equity

     11.22     10.33     11.34     14.91     14.80

Yield on earning assets

     3.95     4.04     4.15     4.41     4.49

Cost of funds

     0.83     0.98     1.08     1.10     1.12

Net interest margin (tax equivalent) (5)

     3.26     3.22     3.24     3.48     3.53

Non-interest income to total income (6)

     31.14     31.26     33.58     29.47     28.17

Efficiency ratio (7)

     75.52     76.05     70.58     71.45     68.76

Asset quality ratios

          

Net loans and leases charged off to average loans and leases, annualized

     0.08     0.66     0.61     0.06     0.07

Provision for credit losses to average loans and leases, annualized

     (0.14 )%      —          0.37     0.34     0.07

Allowance for credit losses to total loans and leases

     0.99     1.08     1.24     1.30     1.21

Allowance for credit losses to non-performing loans and leases

     133.5     105.0     95.6     92.6     128.1

Non-performing loans and leases to total loans and leases

     0.74     1.03     1.30     1.40     0.95

Non-performing assets to total assets

     0.47     0.65     0.83     0.90     0.63

 

(1) Cash dividends declared per common share divided by diluted earnings per common share
(2) Common shareholders’ equity less goodwill and intangible assets divided by common shares outstanding


(3) Tier 1 capital excluding junior subordinated obligations issued to unconsolidated trusts divided by total risk-adjusted assets
(4) The Company uses certain non-GAAP financial measures, such as the Tangible Common Equity to Tangible Assets ratio (TCE), to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. The Company believes TCE is useful because it is a measure utilized by regulators, market analysts and investors in evaluating a company’s financial condition and capital strength. TCE, as defined by the Company, represents common equity less goodwill and intangible assets. A reconciliation from the Company’s GAAP Total Equity to Total Assets ratio to the Non-GAAP Tangible Common Equity to Tangible Assets ratio is presented below:

 

     June 30,
2012
    March 31,
2012
    December 31,
2011
    September 30,
2011
    June 30,
2011
 
     (Dollars in thousands)  

Total assets

   $ 1,422,838      $ 1,415,594      $ 1,409,090      $ 1,430,783      $ 1,475,425   

Less: Goodwill and intangible assets, net

     38,094        38,317        38,538        38,760        39,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible assets (non-GAAP)

     1,384,744        1,377,277        1,370,552        1,392,023        1,436,425   

Total Common Equity

     146,844        144,992        143,997        143,137        140,134   

Less: Goodwill and intangible assets, net

     38,094        38,317        38,538        38,760        39,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible Common Equity (non-GAAP)

     108,750        106,675        105,459        104,377        101,134   

Total Equity/Total Assets

     10.32     10.24     10.22     10.00     9.50

Tangible Common Equity/Tangible Assets (non-GAAP)

     7.85     7.75     7.69     7.50     7.04

 

(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)