ALLIANCE FINANCIAL CORPORATION 
By SYRACUSE, N.Y., Jan. 28, 2013 /PRNewswire/ -- Alliance Financial Corporation ("Alliance" or the "Company") (NasdaqGM: ALNC), the holding company for Alliance Bank, N.A., announced today net income for the quarter ended December 31, 2012 of $1.3 million or $0.28 per diluted common share, compared with $2.8 million or $0.60 per diluted common share in the year-ago quarter and $2.3 million or $0.48 per diluted common share in the third quarter of 2012. Expenses related to the pending acquisition of the Company by NBT Bancorp Inc. ("NBT") totaled $1.4 million after tax or $0.31 per share.
Net income for the year ended December 31, 2012 was $9.2 million or $1.92 per diluted share, compared with $13.3 million or $2.80 per diluted share in 2011. Expenses related to the Company's pending acquisition totaled $2.0 million after tax or $0.43 per share in 2012.
Jack H. Webb, President and CEO of Alliance said, "Our fourth quarter loan originations increased 6.6% over the fourth quarter of 2011, capping off a strong year of originations in 2012. Our core business units continue to effectively execute our business strategy of growing organically through meeting the credit needs of qualified borrowers in Central New York. In 2012, we supported the Central New York economy by providing approximately $362 million in loans to consumers and businesses in our markets."
Balance Sheet Highlights
Total assets were $1.4 billion at December 31, 2012. Loans and leases (net of unearned income) were $928.1 million at the end of 2012, representing growth of $21.7 million from September 30, 2012 and $55.4 million from the end of 2011. The growth in our loan portfolio was funded primarily through cash generated from amortization and maturities of investment securities.
Loan origination volumes in the fourth quarter increased $6.0 million, or 6.6%, to $97.0 million, compared with $91.0 million in the year-ago quarter on increased demand in each of our commercial and indirect lending businesses. Loan originations in 2012 totaled $361.9 million, compared with $255.3 million in 2011.
Commercial loans and mortgages increased $22.8 million in the fourth quarter and totaled $297.3 million at December 31, 2012. Originations of commercial loans and mortgages in the fourth quarter (excluding lines of credit) totaled $34.7 million, compared with $31.3 million in the year-ago quarter and $12.5 million in the third quarter of 2012. Originations in 2012 totaled $76.5 million compared with $75.9 million in 2011.
Residential mortgages outstanding totaled $329.0 million at December 31, 2012. Originations of residential mortgages totaled $38.2 million in the fourth quarter of 2012, compared with $40.8 million in the year-ago quarter. Originations in 2012 totaled $151.2 million compared with $107.5 million in 2011.
Indirect auto loan balances were $199.3 million at the end of the fourth quarter. Alliance originated $22.9 million of indirect auto loans in the fourth quarter, compared with $17.9 million in the year-ago quarter. Originations in 2012 totaled $129.6 million compared with $68.8 million in 2011. 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 $336.5 million at December 31, 2012. The securities portfolio decreased $37.8 million in 2012 as the Company reinvested cash flows from the portfolio in new loan originations, which provided higher yields than those on securities in which the Company typically invests. Net unrealized gains on our securities portfolio totaled $10.4 million at the end of the fourth quarter.
Deposits totaled $1.1 billion at December 31, 2012 and were relatively unchanged throughout 2012. Low-cost transaction accounts comprised 78.4% of total deposits at the end of the fourth quarter, compared with 77.1% at September 30, 2012 and 71.0% at December 31, 2011. Alliance's liability mix remained favorably weighted toward transaction accounts in the fourth quarter as retail and municipal depositors continue to prefer transaction accounts over time accounts in the low interest rate environment, and also because of the buildup of cash on commercial customers' balance sheets.
Shareholders' equity was $146.9 million at December 31, 2012, compared with $148.4 million at the end of the third quarter. Net income for the quarter increased shareholders' equity by $1.3 million and was offset by common stock dividends declared of $1.5 million or $0.32 per common share.
The Company's Tier 1 leverage ratio was 9.37% and its total risk-based capital ratio was 15.27% at the end of the fourth quarter. The Company's tangible common equity capital ratio (a non-GAAP financial measure) was 7.98% at December 31, 2012.
Asset Quality and the Provision for Credit Losses
Delinquent loans and leases (including non-performing) totaled $12.2 million at December 31, 2012, compared with $10.1 million at September 30, 2012 and $17.0 million at December 31, 2011.
Non-performing assets were $5.5 million or 0.39% of total assets at December 31, 2012, compared with $5.1 million or 0.35% of total assets at September 30, 2012 and $11.7 million or 0.83% of total assets at December 31, 2011. The decline in non-performing assets in 2012 resulted primarily from non-accrual loans returning to accrual status as a result of satisfactory payment performance, charge-offs and pay-offs of non-performing loans. Included in non-performing assets at the end of the fourth quarter are non-performing loans and leases totaling $4.8 million, compared with $4.1 million at September 30, 2012 and $11.3 million at December 31, 2011.
Conventional residential mortgages comprised $2.5 million (43 loans) or 52.7% of non-performing loans and leases, and commercial loans and mortgages totaled $938,000 (16 loans) or 19.5% of non-performing loans and leases at the end of the fourth quarter.
There were $88,000 in net recoveries of loans previously charged-off in the fourth quarter of 2012 and net charge-offs were $1.9 million in the year ended December 31, 2012, compared with net charge-offs of $1.3 million and $1.8 in the year-ago periods, respectively. As was previously disclosed in the Company's 2012 quarterly reports on Form 10-Q, the Company recorded write-downs totaling $2.7 million on one commercial relationship between the fourth quarter of 2011 and the third quarter of 2012. Approximately $1.7 million or 51% of the gross charge-offs recognized in 2012 were on this one relationship, which was transferred to real estate owned at a net amount of $898,000 in the third quarter of 2012. Net charge-offs annualized equaled (0.04)% and 0.21%, respectively, of average loans and leases during the quarter and year ended December 31, 2012, compared with 0.61% and 0.21% in the year-ago periods, respectively.
No provision for credit losses was recorded in the fourth quarter of 2012, compared to provision expense of $800,000 in the year-ago quarter. A negative provision expense of $300,000 was recorded in 2012, compared to provision expense of $1.9 million in 2011. Alliance assesses a number of quantitative and qualitative factors at the individual portfolio level in determining the adequacy of the allowance for credit losses and the required provision expense each quarter. In addition, Alliance analyzes certain broader, non-portfolio specific factors in assessing the adequacy of the allowance for credit losses, such as the allowance as a percentage of total loans and leases, the allowance as a percentage of non-performing loans and leases and the provision expense as a percentage of net charge-offs. In doing so, a portion of the allowance has been considered "unallocated", which means it is not based on either quantitative or qualitative factors, but on the broader, non-portfolio specific factors mentioned above. At December 31, 2012, $279,000 or 3% of the allowance for credit losses was considered to be "unallocated," compared to $698,000 or 8% at September 30, 2012 and $991,000 or 9% at December 31, 2011. Consistent with the improvement in the Company's asset quality metrics and net charge-off levels in recent quarters (excluding the charge-offs related to the one commercial relationship discussed above), the relative level of unallocated allowance to the total allowance has trended downward in 2012. Absent any material deterioration in credit quality or material growth in the loan and lease portfolio, some portion of this "unallocated" allowance may be reduced by future probable credit losses, which would have the effect of lowering the amount of provision expense relative to net charge-offs compared with past quarters, which was the case in the fourth quarter of 2012.
The provision for credit losses as a percentage of net charge-offs was 0% in the fourth quarter compared with 60% in the year-ago quarter. The provision for credit losses as a percentage of net charge-offs was not meaningful in the year-ended December 31, 2012 due to the negative provision that was recorded for the year. The provision for credit losses as a percentage of net charge-offs was 105% in 2011.
The allowance for credit losses was $8.6 million at December 31, 2012 compared with $8.5 million at September 30, 2012 and $10.8 million at December 31, 2011. The ratio of the allowance for credit losses to total loans and leases was 0.93% at December 31, 2012, compared with 0.94% at September 30, 2012 and 1.24% at December 31, 2011. The ratio of the allowance for credit losses to non-performing loans and leases was 178% at December 31, 2012, compared with 207% at September 30, 2012 and 96% at December 31, 2011.
Net Interest Income
Net interest income totaled $9.6 million in the three months ended December 30, 2012, compared with $10.0 million in the year-ago quarter and in the third quarter of 2012. The tax-equivalent net interest margin decreased 12 basis points in the fourth quarter compared with the year-ago quarter, and decreased 11 basis points from the third quarter of 2012 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 3.12% in the fourth quarter of 2012, compared with 3.24% in the year-ago quarter and 3.23% in the third quarter of 2012. The decrease in the net interest margin compared with the fourth quarter of 2011 was the result of a decrease in the tax-equivalent earning asset yield of 43 basis points in the fourth quarter compared with the year-ago quarter, which was partially offset by a decrease in the cost of interest-bearing liabilities of 34 basis points over the same period. On a linked-quarter basis, the decline in our earning-assets yield was 14 basis points in the fourth quarter, which was offset by a 3 basis point drop in the cost of our interest-bearing liabilities.
Average interest-earning assets were $1.3 billion in the fourth quarter, which was relatively unchanged from the year-ago quarter and from the third quarter of 2012. The average balance of our securities portfolio decreased $43.4 million compared with the year-ago quarter, and was offset by a $40.5 million increase in the average balance of loans and leases as we reinvested cash flows from our securities portfolio in higher yielding loans. Total average loans and leases were 70.2% of total interest-earning assets in the fourth quarter of 2012, compared with 66.9% in the year-ago quarter and 69.8% in the third quarter of 2012.
Net interest income for the year ended December 31, 2012 totaled $39.4 million, which was down $3.9 million or 8.9% compared with 2011. The tax equivalent net interest margin was 3.21% in 2012, compared with 3.43% in 2011. The tax-equivalent earning asset yield decreased 48 basis points in 2012 compared with 2011, which was partially offset by a decrease of 28 basis points in the cost of interest-bearing liabilities over the same period.
Average interest-earning assets were $1.3 billion in 2012, which was a decrease of 2.6% from 2011. The changes in the average balances of securities and loans in 2012 compared with 2011 were similar to that as discussed above for the fourth quarter. Total average loans and leases were 68.9% of total interest-earning assets in 2012, compared with 66.1% in 2011.
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 $5.3 million in the fourth quarter of 2012, compared with $5.1 million in the fourth quarter of 2011 and $4.6 million in the third quarter of 2012. The increase resulted from proceeds from the settlement of a bank-owned life insurance contract during the fourth quarter of 2012.
Non-interest income totaled $18.9 million in 2012, compared with $20.0 million in 2011. The $1.2 million decrease from the prior year period resulted largely from $1.3 million in gains on sales of securities recognized in 2011, which were partly offset by a $526,000 increase in gains on the sale of loans during 2012.
Non-interest income (excluding gains on securities sales) accounted for 35.3% of total revenue in the fourth quarter of 2012, compared with 33.6% in the year-ago quarter. Non-interest income (excluding gains on securities sales) accounted for 32.3% of total revenue in 2012, compared with 30.1% in the year-ago period.
Non-interest expenses were $12.8 million in the fourth quarter of 2012, compared with $10.6 million in the year-ago quarter and $11.7 million in the third quarter of 2012. Merger related expenses (pre-tax) of $2.4 million and $991,000 were accrued in the fourth and third quarters of 2012, respectively. Non-interest expenses were $46.4 million in 2012, compared with $43.6 million in 2011. Merger related expenses totaled $3.4 million in 2012, and included $2.7 million for professional fees and $676,000 for employee related accruals for estimated severance payments, retention awards and merger related bonuses.
The Company's efficiency ratio was 86.0% in the fourth quarter of 2012, compared with 70.6% in the year-ago quarter. The Company's efficiency ratio was 79.7% in 2012, compared with 70.4% in 2011. Excluding merger related expenses and other non-recurring items, the efficiency ratio was 70.1% and 73.9%, respectively, for the quarter and year ended December 31, 2012.
The Company's effective tax rate was 35.5% and 24.4% for the quarter and year ended December 31, 2012, respectively, compared with 21.7% and 25.3% in the year-ago periods, respectively. The decrease in our effective tax rate from 2011 was due to a higher level of tax-exempt income as a percentage to total taxable income.
About Alliance Financial Corporation
Alliance Financial Corporation is a financial holding company with Alliance Bank, N.A. as its principal subsidiary that provides retail, commercial and municipal banking, and trust and investment services through 29 offices in Cortland, Madison, Oneida, Onondaga and Oswego counties. Alliance also operates an investment management administration center in Buffalo, N.Y. and an equipment lease financing company, Alliance Leasing, Inc.
Forward-Looking Statements
This press release contains certain forward-looking statements with respect to the financial condition, results of operations and business of Alliance Financial Corporation. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: an increase in competitive pressure in the banking industry; changes in the interest rate environment which may affect the net interest margin; changes in the regulatory environment; general economic conditions, either nationally or regionally, resulting, among other things, in a deterioration in credit quality; changes in business conditions and inflation; changes in the securities markets; changes in technology used in the banking business; our ability to maintain and increase market share and control expenses; increases in FDIC insurance premiums may cause earnings to decrease; and other risks set forth under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and in subsequent filings with the Securities and Exchange Commission.
Contact: Alliance Financial Corporation
J. Daniel Mohr, Executive Vice President and CFO
(315) 475-4478
Alliance Financial Corporation
Consolidated Statements of Income (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------ ------------
2012 2011 2012 2011
---- ---- ---- ----
(Dollars in thousands, except share and per share
data)
Interest income:
Loans, including fees $9,501 $10,144 $38,772 $41,877
Federal funds sold and interest bearing deposits 33 18 136 22
Securities 2,058 2,780 9,343 13,860
----- ----- ----- ------
Total interest income 11,592 12,942 48,251 55,759
Interest expense:
Deposits:
Savings accounts 38 43 123 210
Money market accounts 260 338 1,038 1,609
Time accounts 720 1,335 3,564 5,673
NOW accounts 31 49 127 225
--- --- --- ---
Total 1,049 1,765 4,852 7,717
Borrowings:
Repurchase agreements 210 206 831 825
FHLB advances 523 791 2,445 3,279
Junior subordinated obligations 164 166 677 638
--- --- --- ---
Total interest expense 1,946 2,928 8,805 12,459
Net interest income 9,646 10,014 39,446 43,300
Provision for credit losses - 800 (300) 1,910
--- --- ---- -----
Net interest income after provision for credit losses 9,646 9,214 39,746 41,390
Non-interest income:
Investment management income 1,967 1,895 7,603 7,746
Service charges on deposit accounts 1,110 1,164 4,277 4,463
Card-related fees 713 664 2,772 2,701
Income from bank-owned life insurance 515 250 1,258 1,018
Gain on the sale of loans 595 661 1,809 1,283
Gain on the sale of securities - - - 1,325
Other non-interest income 367 428 1,132 1,466
--- --- ----- -----
Total non-interest income 5,267 5,062 18,851 20,002
Non-interest expense:
Salaries and employee benefits 6,528 5,494 23,631 21,902
Occupancy and equipment expense 1,701 1,804 7,066 7,283
Communication expense 154 151 623 599
Office supplies and postage expense 277 275 1,182 1,142
Marketing expense 121 225 772 898
Amortization of intangible asset 203 222 867 944
Professional fees 2,152 667 5,372 3,087
FDIC insurance premium 224 217 866 1,061
Other operating expense 1,465 1,585 6,063 6,665
----- ----- ----- -----
Total non-interest expense 12,825 10,640 46,442 43,581
Income before income tax expense 2,088 3,636 12,155 17,811
Income tax expense 742 791 2,967 4,514
--- --- ----- -----
Net income $1,346 $2,845 $9,188 $13,297
====== ====== ====== =======
Share and Per Share Data
Basic average common shares outstanding 4,704,855 4,687,802 4,701,687 4,670,052
Diluted average common shares outstanding 4,704,855 4,689,427 4,701,687 4,675,212
Basic earnings per common share $0.28 $0.60 $1.92 $2.80
Diluted earnings per common share $0.28 $0.60 $1.92 $2.80
Cash dividends declared $0.32 $0.31 $1.26 $1.22
Alliance Financial Corporation
Consolidated Balance Sheets (Unaudited)
December 31, 2012 December 31, 2011
----------------- -----------------
(Dollars in thousands,
except share and per share
data)
Assets
Cash and due from banks $33,673 $52,802
Securities available-
for-sale 336,493 374,306
Federal Home Loan Bank
of NY ("FHLB") Stock
and 7,987 8,478
Federal Reserve Bank
("FRB") Stock
Loans and leases held
for sale 2,133 1,217
Total loans and leases,
net of unearned income 928,094 872,721
Less allowance for
credit losses (8,571) (10,769)
------ -------
Net loans and leases 919,523 861,952
Premises and equipment,
net 16,438 17,541
Accrued interest
receivable 3,467 3,960
Bank-owned life
insurance 30,175 29,430
Goodwill 30,844 30,844
Intangible assets, net 6,827 7,694
Other assets 18,797 20,866
------ ------
Total assets $1,406,357 $1,409,090
========== ==========
Liabilities and
shareholders' equity
Liabilities:
Deposits:
Non-interest bearing $230,555 $185,736
Interest bearing 864,438 897,329
------- -------
Total deposits 1,094,993 1,083,065
Borrowings 121,169 136,310
Accrued interest payable 754 1,578
Other liabilities 16,722 18,366
Junior subordinated
obligations issued to 25,774 25,774
unconsolidated
subsidiary trusts
Total liabilities 1,259,412 1,265,093
Shareholders' equity:
Common stock 5,104 5,092
Surplus 47,932 47,147
Undivided profits 103,041 99,879
Accumulated other
comprehensive income 3,418 3,951
Directors' stock-based
deferred compensation
plan (3,894) (3,416)
Treasury stock (8,656) (8,656)
------ ------
Total shareholders'
equity 146,945 143,997
------- -------
Total liabilities and
shareholders' equity $1,406,357 $1,409,090
========== ==========
Common shares
outstanding 4,782,185 4,769,241
Book value per common
share $30.73 $30.19
Tangible book value per
common share $22.85 $22.11
Alliance Financial Corporation
Consolidated Average Balances (Unaudited)
Three months ended Twelve months ended
December 31,
December 31,
------------
2012 2011 2012 2011
---- ---- ---- ----
(Dollars in thousands)
Earning assets:
Federal funds sold
and interest bearing
deposits $38,882 $38,935 $53,325 $15,890
Securities(1) 345,828 389,248 346,706 431,407
Loans and leases
receivable:
Residential real
estate loans(2) 330,385 323,976 322,438 329,773
Commercial loans 146,448 142,923 146,107 133,662
Commercial real
estate loans 131,068 121,757 128,274 119,407
Leases, net of
unearned income(2) 11,017 26,863 15,387 33,140
Indirect loans 200,366 160,633 184,511 165,880
Other consumer loans 88,139 90,696 88,490 90,621
------ ------ ------ ------
Loans and leases
receivable, net of
unearned income 907,423 866,848 885,207 872,483
------- ------- ------- -------
Total earning assets 1,292,133 1,295,031 1,285,238 1,319,780
Non-earning assets 140,242 134,597 137,717 132,415
------- ------- ------- -------
Total assets $1,432,375 $1,429,628 $1,422,955 $1,452,195
========== ========== ========== ==========
Interest bearing
liabilities:
Interest bearing
checking accounts $157,830 $143,643 $153,960 $147,236
Savings accounts 116,006 105,545 113,961 106,279
Money market accounts 375,637 353,317 366,292 364,800
Time deposits 247,604 320,256 269,363 333,138
Borrowings 125,328 136,151 127,941 143,439
Junior subordinated
obligations issued
to unconsolidated 25,774 25,774 25,774 25,774
trusts
Total interest
bearing liabilities 1,048,179 1,084,686 1,057,291 1,120,666
Non-interest bearing
deposits 220,820 189,685 205,532 181,039
Other non-interest
bearing liabilities 16,435 16,225 16,517 15,917
------ ------ ------ ------
Total liabilities 1,285,434 1,290,596 1,279,340 1,317,622
Shareholders' equity 146,941 139,032 143,615 134,573
------- ------- ------- -------
Total liabilities and
shareholders' equity $1,432,375 $1,429,628 $1,422,955 $1,452,195
========== ========== ========== ==========
(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, 2012 September 30, 2012 December 31, 2011
----------------- ------------------ -----------------
Amortized Cost Fair Value Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Securities available-for-sale (Dollars in thousands)
Debt securities:
Obligations of U.S. government- sponsored corporations $15,147 $15,148 $1,489 $1,499 $3,134 $3,190
Obligations of states and political subdivisions 66,479 71,230 68,900 73,959 77,541 82,299
Mortgage-backed securities(1) 241,482 246,982 257,435 264,583 279,393 285,706
------- ------- ------- ------- ------- -------
Total debt securities 323,108 333,360 327,824 340,041 360,068 371,195
Stock investments:
Mutual funds 3,000 3,133 3,000 3,170 3,000 3,111
----- ----- ----- ----- ----- -----
Total stock investments 3,000 3,133 3,000 3,170 3,000 3,111
Total available-for-sale $326,108 $336,493 $330,824 $343,211 $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:
December 31, 2012 September 30, 2012 December 31, 2011
----------------- ------------------ -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Loan portfolio composition (Dollars in thousands)
Residential real estate loans $329,009 35.6% $327,454 36.3% $316,823 36.4%
Commercial loans 155,512 16.8% 147,677 16.4% 151,420 17.4%
Commercial real estate 141,760 15.4% 126,783 14.1% 126,863 14.6%
Leases, net of unearned income 10,247 1.1% 11,811 1.3% 25,636 3.0%
Indirect loans 199,284 21.6% 199,419 22.1% 158,813 18.3%
Other consumer loans 87,572 9.5% 88,739 9.8% 89,776 10.3%
------ --- ------ --- ------ ----
Total loans and leases 923,384 100.0% 901,883 100.0% 869,331 100.0%
===== ===== =====
Net deferred loan costs 4,710 4,500 3,390
Allowance for credit losses (8,571) (8,483) (10,769)
------ ------ -------
Net loans and leases $919,523 $897,900 $861,952
======== ======== ========
The following table sets forth the composition of the Company's deposits at the dates indicated:
December 31, 2012 September 30, 2012 December 31, 2011
----------------- ------------------ -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Deposit composition (Dollars in thousands)
Non-interest bearing checking $230,555 21.1% $212,437 18.9% $185,736 17.1%
Interest bearing checking 157,903 14.4% 159,680 14.2% 145,885 13.5%
------- ---- ------- ---- ------- ----
Total checking 388,458 35.5% 372,117 33.1% 331,621 30.6%
Savings 117,741 10.8% 115,229 10.2% 107,311 9.9%
Money market 352,320 32.1% 380,623 33.8% 330,000 30.5%
Time deposits 236,474 21.6% 258,434 22.9% 314,133 29.0%
------- ---- ------- ---- ------- ----
Total deposits $1,094,993 100.0% $1,126,403 100.0% $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 December 31, 2012 September 30, 2012 December 31, 2011
--------------------------- ----------------- ------------------ -----------------
$%(1) $%(1) $%(1)
---- ---- ----
(Dollars in thousands)
30 days past due $6,280 0.68% $4,152 0.46% $5,202 0.60%
60 days past due 1,116 0.12% 1,812 0.20% 584 0.06%
90 days past due and still accruing 35 - - - - -
Non-accrual 4,769 0.52% 4,104 0.46% 11,261 1.30%
Total $12,200 1.32% $10,068 1.12% $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 December 31, 2012 September 30, 2012 December 31, 2011
--------------------- ----------------- ------------------ -----------------
(Dollars in thousands)
Non-accruing loans and leases
Residential real estate loans $2,533 $2,302 $3,062
Commercial loans 435 579 3,375
Commercial real estate 503 505 4,051
Leases 677 52 107
Indirect loans 226 220 293
Other consumer loans 395 446 373
Total non-accruing loans and leases 4,769 4,104 11,261
Accruing loans and leases delinquent 90 days or more 35 - -
--- --- ---
Total non-performing loans and leases 4,804 4,104 11,261
Other real estate and repossessed assets 725 985 485
--- --- ---
Total non-performing assets $5,529 $5,089 $11,746
====== ====== =======
Troubled debt restructurings not included in above $2,792 $2,704 $1,653
The following table summarizes changes in the allowance for credit losses arising from loans and leases charged off, recoveries on loans and leases previously charged off and additions to the
allowance which have been charged to expense:
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Three months ended Twelve months ended
Allowance for credit losses December 31, December 31,
--------------------------- ------------ ------------
2012 2011 2012 2011
---- ---- ---- ----
(Dollars in thousands)
Allowance for credit losses, beginning of period $8,483 $11,294 $10,769 $10,683
Loans and leases charged-off (286) (1,608) (3,264) (3,171)
Recoveries of loans and leases previously charged-off 374 283 1,366 1,347
--- --- ----- -----
Net loans and leases charged-off 88 (1,325) (1,898) (1,824)
Provision for credit losses - 800 (300) 1,910
--- --- ---- -----
Allowance for credit losses, end of period $8,571 $10,769 $8,571 $10,769
====== ======= ====== =======
Alliance Financial Corporation
------------------------------
Consolidated Financial Information (Unaudited)
---------------------------------------------
At or for the three months At or for the twelve months
Key Ratios ended December 31, ended December 31,
---------- ------------------ ------------------
2012 2011 2012 2011
---- ---- ---- ----
Return on average assets 0.38% 0.80% 0.65% 0.92%
Return on average equity 3.66% 8.19% 6.40% 9.88%
Return on average tangible equity 4.93% 11.34% 8.71% 13.91%
Yield on earning assets 3.72% 4.15% 3.89% 4.37%
Cost of funds 0.74% 1.08% 0.83% 1.11%
Net interest margin (tax equivalent) (1) 3.12% 3.24% 3.21% 3.43%
Non-interest income to total income (2) 35.32% 33.58% 32.34% 30.10%
Efficiency ratio (3) 86.00% 70.58% 79.66% 70.35%
Common dividend payout ratio (4) 114.29% 51.67% 65.63% 43.57%
Net loans and leases charged-off to average loans (0.04)% 0.61% 0.21% 0.21%
and leases, annualized
Provision for credit losses to average loans and -% 0.37% (0.03)% 0.22%
leases, annualized
Allowance for credit losses to total loans and leases 0.93% 1.24% 0.93% 1.24%
Allowance for credit losses to non-performing loans 178.4% 95.6% 178.4% 95.6%
and leases
Non-performing loans and leases to total loans and 0.52% 1.30% 0.52% 1.30%
leases
Non-performing assets to total assets 0.39% 0.83% 0.39% 0.83%
(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)
Non-interest expense
divided by the sum of net
interest income and non-
interest income (as
(3) adjusted)
(4) Cash dividends declared per
share divided by diluted
earnings per share
Alliance Financial Corporation
Selected Quarterly Financial Data (Unaudited)
--------------------------------------------
2012 2011
---- ----
Fourth Third Second First Fourth
------ ----- ------ ----- ------
(Dollars in thousands, except share and per share data)
Interest income $11,592 $11,979 $12,217 $12,463 $12,942
Interest expense 1,946 2,025 2,212 2,622 2,928
----- ----- ----- ----- -----
Net interest income 9,646 9,954 10,005 9,841 10,014
Provision for credit losses - - (300) ? 800
--- --- ---- --- ---
Net interest income after provision for credit losses 9,646 9,954 10,305 9,841 9,214
Other non-interest income 5,267 4,584 4,524 4,476 5,062
Other non-interest expense 12,825 11,713 11,016 10,888 10,640
------ ------ ------ ------ ------
Income before income tax expense 2,088 2,825 3,813 3,429 3,636
Income tax expense 742 540 895 790 791
--- --- --- --- ---
Net income $1,346 $2,285 $2,918 $2,639 $2,845
====== ====== ====== ====== ======
Stock and related per share data
Basic earnings per common share $0.28 $0.48 $0.61 $0.55 $0.60
Diluted earnings per common share $0.28 $0.48 $0.61 $0.55 $0.60
Basic weighted average common shares outstanding 4,704,855 4,702,294 4,700,992 4,698,567 4,687,802
Diluted weighted average common shares outstanding 4,704,855 4,702,294 4,700,992 4,698,567 4,689,427
Cash dividends paid per common share $0.32 $0.32 $0.31 $0.31 $0.31
Common dividend payout ratio (1) 114.29% 66.67% 50.82% 56.36% 51.67%
Common book value $30.73 $31.03 $30.69 $30.30 $30.19
Tangible common book value (2) $22.85 $23.11 $22.73 $22.30 $22.11
Capital Ratios
Holding Company
---------------
Tier 1 leverage ratio 9.37% 9.43% 9.38% 9.26% 9.09%
Tier 1 risk based capital 14.32% 14.82% 14.74% 14.99% 14.71%
Tier 1 risk based common capital (3) 11.58% 11.98% 11.89% 12.05% 11.81%
Total risk based capital 15.27% 15.79% 15.75% 16.09% 15.97%
Tangible common equity to tangible assets(4) 7.98% 7.85% 7.85% 7.75% 7.69%
Bank
----
Tier 1 leverage ratio 8.91% 8.86% 8.81% 8.68% 8.50%
Tier 1 risk based capital 13.65% 13.96% 13.86% 14.10% 13.80%
Total risk based capital 14.60% 14.94% 14.89% 15.21% 15.05%
Selected ratios
Return on average assets 0.38% 0.64% 0.82% 0.74% 0.80%
Return on average equity 3.66% 6.32% 8.21% 7.51% 8.19%
Return on average tangible common equity 4.93% 8.57% 11.22% 10.33% 11.34%
Yield on earning assets 3.72% 3.86% 3.95% 4.04% 4.15%
Cost of funds 0.74% 0.77% 0.83% 0.98% 1.08%
Net interest margin (tax equivalent) (5) 3.12% 3.23% 3.26% 3.22% 3.24%
Non-interest income to total income (6) 35.32% 31.54% 31.14% 31.26% 33.58%
Efficiency ratio (7) 86.00% 80.56% 75.52% 76.05% 70.58%
Asset quality ratios
Net loans and leases charged off to average loans (0.04)% 0.18% 0.08% 0.66% 0.61%
and leases, annualized
Provision for credit losses to average loans and - - (0.14)% - 0.37%
leases, annualized
Allowance for credit losses to total loans and leases 0.93% 0.94% 0.99% 1.08% 1.24%
Allowance for credit losses to non-performing loans 178.4% 206.7% 133.5% 105.0% 95.6%
and leases
Non-performing loans and leases to total loans and leases 0.52% 0.46% 0.74% 1.03% 1.30%
Non-performing assets to total assets 0.39% 0.35% 0.47% 0.65% 0.83%
(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:
December 31, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
---- ---- ---- ---- ----
(Dollars in thousands)
Total assets $1,406,357 $1,446,040 $1,422,838 $1,415,594 $1,409,090
Less: Goodwill and intangible assets, net 37,671 37,873 38,094 38,317 38,538
------ ------ ------ ------ ------
Tangible assets (non-GAAP) 1,368,686 1,408,167 1,384,744 1,377,277 1,370,552
Total Common Equity 146,945 148,378 146,844 144,992 143,997
Less: Goodwill and intangible assets, net 37,671 37,873 38,094 38,317 38,538
------ ------ ------ ------ ------
Tangible Common Equity (non-GAAP) 109,274 110,505 108,750 106,675 105,459
Total Equity/Total Assets 10.45% 10.26% 10.32% 10.24% 10.22%
Tangible Common Equity/Tangible Assets (non-GAAP) 7.98% 7.85% 7.85% 7.75% 7.69%
(5) Tax equivalent net interest
income divided by average
earning assets
(6) Non-interest income (net
of realized gains and
losses on securities and
other non-recurring
items) divided by the sum
of net interest income and
non-interest income (as
adjusted)
(7) Non-interest expense
divided by the sum of net
interest income and non-
interest income (as
adjusted)
SOURCE Alliance Financial Corporation
