SYRACUSE, N.Y., Jan. 28 /PRNewswire-FirstCall/ -- Alliance Financial Corporation ("Alliance", or the "Company"), the holding company for Alliance Bank, N.A., announced today its net income for the quarter and year ended December 31, 2007. Net income increased 17.4% to $2.4 million, or $0.51 per diluted share in the fourth quarter, compared to $2.1 million, or $0.43 per diluted share in the year-ago quarter. Net income in 2007 increased 29.6% to $9.5 million or $1.98 per diluted share, compared to $7.3 million or $1.88 per share in 2006.
The increases in net income and diluted earnings per share for the fourth quarter and year ended December 31, 2007 compared with the year-ago periods resulted from the impact of the acquisition of Bridge Street Financial, Inc. ("Bridge Street"), a $219.3 million bank holding company, in October 2006, along with higher non-interest income and close attention to expense control, all of which offset higher loan loss provisions.
Jack H. Webb, President and CEO of Alliance said, "We showed meaningful improvement in net income and earnings per share compared with the year-ago periods despite an extremely difficult operating environment for the financial services sector. Loan demand was strong in the fourth quarter, especially for commercial and residential loans, for which our originations during the quarter reached highs for the year. As a locally based community bank with a strong balance sheet, we remain well positioned and committed to serving the credit needs of our Central New York market."
Total assets were $1.3 billion at December 31, 2007, an increase of $34.4 million or 2.7% from December 31, 2006. Total loans and leases (net of unearned income) were $895.5 million at December 31, 2007, compared with $890.8 million and $881.4 million at September 30, 2007 and December 31, 2006, respectively.
Residential mortgages totaled $273.5 million or 30.6% of total loans and leases at December 31, 2007, reflecting increases of $5.2 million and $21.3 million compared with September 30, 2007 and December 31, 2006, respectively. The growth in residential mortgages has come entirely from conventional mortgages originated in our local markets as the result of our long established plan to grow our mortgage origination operations. The Company does not originate sub-prime, Alt-A, negative amortizing or other higher risk residential mortgages in its portfolio.
Commercial loans totaled $217.1 million or 24.4% of total loans and leases at December 31, 2007, compared with $214.2 million or 24.1% and $223.6 million or 25.4% of total loans and leases at September 30, 2007 and December 31, 2006, respectively.
The Company's commercial lease portfolio (net of unearned income) totaled $131.3 million or 14.7% of total loans and leases at December 31, 2007, compared with $130.2 million or 14.7% and $131.0 million or 14.9% at September 30, 2007 and December 31, 2006, respectively.
Total deposits were $944.2 million at December 31, 2007, virtually unchanged from September 30, 2007 but an increase of $8.6 million from December 31, 2006. Retail checking accounts increased $8.4 million and $17.2 million in the quarter and year ended December 31, 2007, respectively, due to a combination of organic deposit growth and the timing and volumes of account activity. Money market accounts increased $10.7 million during the fourth quarter of 2007 due primarily to a seasonal increase in municipal deposits. Time deposits decreased $18.0 million in the fourth quarter of 2007 as we have elected to not pay the premium rates that would have been necessary to retain certain rate sensitive accounts. We expect the intense competition for deposits in our market area will continue for the foreseeable future, which may cause time deposit rates to stay at elevated levels in spite of recent reductions in the federal funds rate.
Shareholders' equity was $115.4 million at December 31, 2007, compared with $113.4 million and $109.5 million at September 30, 2007 and December 31, 2006, respectively. Net income of $2.4 million in the fourth quarter of 2007 was partially offset by dividends declared of $1.1 million and share repurchases totaling $1.3 million. In November 2007, the Company announced that its Board of Directors declared a quarterly dividend of $0.24 per common share, an increase of $0.02 per share or 9.1% over the previous quarter. The Company also announced in November that its Board of Directors authorized the repurchase of up to three percent of the Company's outstanding common stock, or approximately 144,000 shares. A total of 52,100 shares were repurchased in December at an average price of $25.58 per share. Management will continue to exercise discretion in determining the timing of the repurchases and the prices at which buybacks will be made. The extent to which shares are repurchased will depend on a number of factors including market trends and prices, economic conditions, internal and regulatory trading, quiet periods and alternative uses for capital.
Also impacting shareholders' equity in the fourth quarter was a $2.5 million increase in accumulated other comprehensive income, from an accumulated loss position of $1.5 million at September 30. This change resulted primarily from a significant rally in securities prices that changed an unrealized loss position on securities available-for-sale from $565,000 at September 30 to unrealized gains of $932,000 at December 31, 2007. The securities available-for-sale portfolio is predominantly comprised of investment grade mortgage-backed securities, securities issued by U.S. government-sponsored corporations and municipal securities. Our mortgage- backed securities portfolio is comprised of pass-through securities guaranteed by either Fannie Mae, Freddie Mac or Ginnie Mae, and does not include any securities backed by subprime or other high-risk mortgages. Further increasing accumulated other comprehensive income in the fourth quarter was the reversal of a $1.0 million liability (net of deferred taxes) upon the termination in the fourth quarter of the Company's post-retirement medical plan for current employees.
Loans and leases past due 30 days or more, which generally includes nonperforming and potential problem loans, totaled $16.4 million or 1.83% of total loans and leases at December 31, 2007, compared with $12.9 million or 1.45% at September 30, 2007 and $16.3 million or 1.85% at December 31, 2006. Delinquencies at December 31, 2006 were impacted by the acquisition of the Bridge Street loan portfolio.
Nonperforming assets increased in the fourth quarter to $6.9 million or 0.53% of total assets at December 31, 2007, compared with $4.8 million or 0.37% of total assets at September 30, 2007 and $2.6 million or 0.21% of total assets at December 31, 2006. Commercial loans on nonaccrual status increased $2.4 million in the fourth quarter due primarily to one relationship totaling $1.6 million (net of a charge-off of $285,000). The borrower, whose payment status was less than 30 days past due on December 31, experienced a rapid deterioration in its financial condition in early January 2008. As a result the Company elected to place the loan on nonaccrual status as of December 31, 2007. In addition to the $285,000 charge-off, the Company allocated to this relationship $259,000 of the allowance for credit losses as of the end of 2007, reflecting our current internal risk rating of this relationship. The rest of the increase in nonaccrual commercial loans is comprised of six loans with an average balance of $138,000. Subsequent to December 31, one commercial relationship totaling $323,000 that was on nonaccrual status at year-end was paid in full. Residential mortgage loans on nonaccrual status increased $824,000 due primarily to a change in how the Company accounts for mortgages past due 90 days or more. Residential mortgages are now placed on nonaccrual status when they reach 90 days past due, whereas the Company's prior practice was to continue to accrue interest beyond 90 days past due if the loan was in the process of collection and no loss was anticipated. As a result, accruing loans and leases delinquent 90 days or more decreased $1.0 million and interest income was reduced by $40,000 in the fourth quarter.
As a recurring part of its portfolio management program, the Company has identified approximately $5.4 million in potential problem loans at December 31, 2007, as compared to $10.5 million at September 30, 2007 and $6.7 million at December 31, 2006. The average balance of such potential problem loans was $208,000, $308,000 and $267,000 at December 31, 2007, September 30, 2007 and December 31, 2006, respectively. Potential problem loans are loans that are currently performing, but where the borrower's operating performance or other relevant factors could result in potential credit problems, and are typically classified by our loan rating system as "substandard." At December 31, 2007, potential problem loans primarily consisted of commercial real estate and commercial loans. There can be no assurance that additional loans will not become nonperforming, require restructuring, or require increased provision for loan losses.
The provision for credit losses was $1.2 million and $3.8 million in the quarter and year ended December 31, 2007, respectively, compared with $510,000 and $2.5 million in the year-ago periods, respectively. Net charge-offs were $637,000 and $2.4 million in the three months and year ended December 31, 2007, respectively, compared with $180,000 and $1.7 million in the year-ago periods, respectively. The increased level of provisions in 2007 is a reflection of generally higher levels of loan delinquencies and charge-offs in 2007, a higher level of classified loans, and management's assessment of the potential impact on the Company's portfolio of macroeconomic factors and credit market conditions affecting the financial institution sector generally.
Webb added, "We have no direct exposure to the types of high risk mortgages currently impacting the financial sector, however we felt it was prudent to continue to build our loan loss reserves over the course of 2007 in response to higher net charge-offs and delinquencies, and the general weakening of economic and credit conditions, especially in the fourth quarter." The provision for credit losses as a percentage of net charge-offs was 188% and 158%, respectively, in the quarter and year-ended December 31, 2007.
The allowance for credit losses was $8.4 million at December 31, 2007, compared with $7.9 million at September 30, 2007 and $7.0 million at December 31, 2006. The ratio of the allowance for credit losses to total loans and leases was 0.94% at December 31, 2007, compared with 0.88% at September 30, 2007 and 0.80% at December 31, 2006. The ratio of the allowance for credit losses to nonperforming loans and leases was 126% at December 31, 2007, compared with 176% at September 30, 2007 and 266% at December 31, 2006.
Net interest income totaled $8.1 million in the three months ended December 31, 2007, which was unchanged from the fourth quarter of 2006. Growth in average earning assets of $38.0 million in the fourth quarter compared with the year-ago quarter offset the effect of a 11 basis point decrease in the Company's net interest margin compared with the year-ago quarter.
Net interest income totaled $32.5 million for the year ended December 31, 2007, compared to $27.7 million in 2006, reflecting the favorable impact of the net interest income resulting from the Bridge Street acquisition.
The net interest margin on a tax-equivalent basis was 2.98% in the fourth quarter of 2007, compared with 3.09% in the fourth quarter of 2006 and 3.04% in the third quarter of 2007. The Company's net interest margin was reduced by approximately 2 basis points as a result of loans placed on nonaccrual status in the fourth quarter of 2007. The Company's earning asset yield decreased one basis point in the fourth quarter of 2007 compared with the year ago period, while its cost of funds increased 10 basis points compared with the year-ago quarter. Lower market interest rates and recent Federal Reserve rate cuts have affected certain earning-assets such as home equity loans, quicker than our cost of funds. This is due largely to the lagged repricing of time deposits and borrowings relative to these immediately repricing assets. In addition, competitive pressures have thus far hindered our ability to reduce time deposit rates in step with changes in market interest rates, though the Company has proactively reduced time deposit rates in an attempt to lower its cost of funds. Our full-year tax-equivalent net interest margin was 3.02% in 2007 and in 2006.
Non-interest income was $5.8 million in the fourth quarter of 2007, which was an increase of $305,000 or 5.6% compared with $5.5 million in the fourth quarter of 2006. Higher investment management income and increased customer service and transaction fees offset lower rental income on leases resulting from a planned reduction in the size of the Company's operating lease portfolio. Other non-interest income increased $389,000 in the fourth quarter of 2007 compared with the year-ago quarter due primarily to a $283,000 gain on the prepayment of a lease. Non-interest income was $21.6 million in 2007, which was an increase of $3.8 million or 21.2% compared with $17.8 million in 2006. The increase in non-interest income in the full year 2007 compared with 2006 is due primarily to the effect of the Bridge Street acquisition, along with higher investment management income and organic growth in customer service charges and transaction fees. Non-interest income (excluding loss on sales of securities and gain on lease prepayment) comprised 40.4% and 39.6% of revenue in the quarter and year ended December 31, 2007 up from 40.1% and 39.1% in the year-ago periods.
Non-interest expenses were $9.6 million in the quarter ended December 31, 2007, which was a decrease of $1.2 million or 11.0% compared to $10.8 million in the fourth quarter of 2006. Substantially all of the decrease occurred as a result of acquisition related expenses incurred in the fourth quarter of 2006 totaling approximately $1.1 million, including salaries and benefits of approximately $350,000, stationery expense of $130,000, and professional fees of $585,000. In addition, the Company recorded an impairment writedown of $174,000 in the fourth quarter of 2006 on a bank-owned property which is included in occupancy and equipment expense. Non-interest expenses were virtually unchanged in the fourth quarter of 2007 compared with the year-ago period after giving effect to these non-recurring items. Non-interest expenses were $37.9 million in the year ended December 31, 2007, which was an increase of $3.9 million or 11.6% compared with $34.0 million in 2006. The increase in non-interest expense in the full year period resulted primarily from the incremental costs associated with the operation of Bridge Street's branches and its insurance agency, the costs associated with processing the increased volume of customer transactions and amortization of intangible assets recorded in connection with the acquisition. The Company's efficiency ratio was 70.1% in the fourth quarter of 2007, compared with 78.7% in the year-ago quarter and 68.7% in the third quarter of 2007. The efficiency ratio was 70.5% in 2007, compared with 74.6% in 2006.
The Company's effective tax rate was 22.6% for the quarter and 23.2% for the year ended December 31, 2007, compared with 13.2% and 19.4%, respectively, in the year-ago periods. The increase in the effective tax rate in 2007 primarily reflects a decline in the percentage of non-taxable income to pre- tax income.
Alliance Financial Corporation is an independent financial holding company with Alliance bank, N.A. as a subsidiary that provides banking, commercial leasing, and trust and investment services through 29 office locations in Cortland, Madison, Oneida, Onondaga and Oswego counties. The Bank also operates a trust administration center in Buffalo, NY and offers lease financing through its wholly-owned subsidiary, Alliance Leasing, Inc. Alliance also operates a wholly-owned multi-line insurance subsidiary, Ladd's Agency, Inc.
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 reduce margins; changes in the regulatory environment; general economic conditions, both nationally and 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; the possibility that our investment management business will fail to perform as currently anticipated; and other factors detailed from time to time in our SEC filings.
Contact: Alliance Financial Corporation J. Daniel Mohr, Treasurer and CFO (315) 475-4478 Alliance Financial Corporation Consolidated Balance Sheets (Unaudited) December 31, December 31, 2007 2006 (Dollars in thousands, except Assets share and per share data) Cash and due from banks $30,704 $27,398 Securities available-for-sale 272,713 254,002 Federal Home Loan Bank of NY ("FHLB") Stock and Federal Reserve Bank ("FRB") Stock 9,507 7,985 Loans held for sale 3,163 1,155 Total loans and leases, net of unearned income 895,533 881,411 Less allowance for credit losses 8,426 7,029 Net loans and leases 887,107 874,382 Premises and equipment, net 19,495 20,125 Accrued interest receivable 4,501 4,605 Bank-owned life insurance 17,084 16,449 Assets held-for-sale 2,866 2,367 Goodwill 32,187 33,456 Intangible assets, net 13,183 14,912 Other assets 14,891 16,131 Total assets $1,307,401 $1,272,967 Liabilities and shareholders' equity Liabilities: Deposits: Non-interest bearing 138,846 129,575 Interest bearing 805,367 806,021 Total deposits 944,213 935,596 Borrowings (1) 201,929 179,650 Accrued interest payable 3,903 2,651 Other liabilities 16,163 19,790 Junior subordinated obligations issued to unconsolidated subsidiary trusts 25,774 25,774 Total liabilities 1,191,982 1,163,461 Shareholders' equity: Common stock 4,889 4,895 Surplus 38,847 38,986 Undivided profits 75,844 70,658 Accumulated other comprehensive income (loss) 1,064 (2,122) Treasury stock (5,225) (2,911) Total shareholders' equity 115,419 109,506 Total liabilities and shareholders' equity $1,307,401 $1,272,967 Common shares outstanding 4,710,885 4,800,512 Book value per share $24.50 $22.81 Tangible book value per share $14.87 $12.74 (1) Includes mortgagors' escrow funds Alliance Financial Corporation Consolidated Average Balances (Unaudited) Three months ended Twelve months ended December 31, December 31, 2007 2006 2007 2006 Earning assets: (Dollars in thousands) Federal funds sold and interest bearing deposits $896 $906 $362 $2,450 Securities(1) 280,307 268,634 268,447 258,644 Loans and leases receivable: Residential real estate loans(2) 273,192 250,711 263,180 204,946 Commercial loans 217,147 222,355 220,491 177,917 Leases, net of unearned income 128,669 121,069 130,441 90,504 Indirect loans 179,306 182,945 180,688 179,552 Other consumer loans 94,454 89,317 91,502 72,450 Loans and leases receivable, net of unearned income 892,768 866,397 886,302 725,369 Total earning assets 1,173,971 1,135,937 1,155,111 986,463 Non-earning assets 123,401 105,386 123,063 68,410 Total assets $1,297,372 $1,241,323 $1,278,174 $1,054,873 Interest bearing liabilities: Interest bearing checking accounts $99,947 $93,973 $97,740 $87,221 Savings accounts 81,631 84,522 83,953 62,432 Money market accounts 200,442 194,743 197,079 176,811 Time deposits 430,883 438,184 432,652 378,382 Borrowings(3) 195,877 163,438 182,862 145,140 Junior subordinated obligations issued to unconsolidated trusts 25,774 25,774 25,774 14,606 Total interest bearing liabilities 1,034,554 1,000,634 1,020,060 864,592 Non-interest bearing deposits 127,878 124,753 126,698 101,266 Other non-interest bearing liabilities 19,908 15,844 19,688 11,239 Total liabilities 1,182,340 1,141,231 1,166,446 977,097 Shareholders' equity 115,032 100,092 111,728 77,776 Total liabilities and shareholders' equity $1,297,372 $1,241,323 $1,278,174 $1,054,873 (1) The amounts shown are amortized cost and include FHLB and FRB stock. (2) Includes loans held for sale. (3) Includes mortgagors' escrow funds. Alliance Financial Corporation Loan and Deposit Composition (Unaudited) December 31, 2007 September 30, 2007 December 31, 2006 Amount Percent Amount Percent Amount Percent Loan portfolio composition (Dollars in thousands) Residential real estate loans $273,465 30.6% $268,249 30.2% $252,134 28.7% Commercial loans 217,136 24.4% 214,217 24.1% 223,600 25.4% Leases, net of unearned income 131,300 14.7% 130,224 14.7% 131,048 14.9% Indirect loans 176,115 19.7% 182,104 20.5% 181,929 20.7% Other consumer loans 94,246 10.6% 92,997 10.5% 90,438 10.3% Total loans and leases $892,262 100.0% $887,791 100.0% $879,149 100.0% Net deferred loan costs 3,271 3,052 2,262 Allowance for credit losses (8,426) (7,863) (7,029) Net loans and leases $887,107 $882,980 $874,382 Deposit composition Non-interest bearing checking $138,846 14.7% $128,835 13.7% $129,575 13.9% Interest bearing checking 101,793 10.8% 103,370 10.9% 93,819 10.0% Total checking 240,639 25.5% 232,205 24.6% 223,394 23.9% Savings 81,154 8.6% 82,176 8.7% 86,025 9.2% Money market 203,075 21.5% 192,359 20.4% 189,142 20.2% Time deposits 419,345 44.4% 437,328 46.3% 437,035 46.7% Total deposits $944,213 100.0% $944,068 100.0% $935,596 100.0% Alliance Financial Corporation Consolidated Statements of Income (Unaudited Three months ended Twelve months ended December 31, December 31, 2007 2006 2007 2006 (In thousands, except share and per share data) Interest income: Loans, including fees $14,712 $14,523 $58,992 $46,790 Federal funds sold and interest bearing deposits 12 27 28 148 Securities 3,253 2,883 12,012 10,735 Total interest income 17,977 17,433 71,032 57,673 Interest expense: Deposits: Savings accounts 113 114 452 339 Money market accounts 1,649 1,517 6,322 5,141 Time accounts 5,205 5,031 20,547 16,161 NOW accounts 246 183 911 519 Total 7,213 6,845 28,232 22,160 Borrowings: Repurchase agreements 675 711 2,790 2,596 FHLB advances 1,438 1,188 5,546 4,052 Mortgagors' escrow funds 12 4 22 4 2,125 1,903 8,358 6,652 Junior subordinated obligations 494 500 1,960 1,139 Total interest expense 9,832 9,248 38,550 29,951 Net interest income 8,145 8,185 32,482 27,722 Provision for credit losses 1,200 510 3,790 2,477 Net interest income after provision for credit losses 6,945 7,675 28,692 25,245 Non-interest income: Investment management income 2,348 2,258 9,180 8,895 Service charges on deposit accounts 1,372 1,378 5,296 4,316 Card-related fees 521 440 1,942 1,291 Insurance agency income 520 615 1,855 615 Income from bank-owned life insurance 162 155 635 455 Gain on the sale of loans 63 56 192 126 Loss on sale of securities available for sale (12) (2) (12) (2) Rental income from leases 38 196 162 797 Other non-interest income 769 380 2,338 1,325 Total non-interest income 5,781 5,476 21,588 17,818 Non-interest expense: Salaries and employee benefits 4,650 4,885 18,281 16,607 Occupancy and equipment expense 1,677 1,932 6,765 6,460 Communication expense 245 337 827 744 Stationery and supplies expense 160 309 611 645 Marketing expense 225 327 1,237 1,128 Amortization of intangible assets 410 392 1,729 797 Professional fees 716 1,156 2,785 3,239 Other operating expense 1,488 1,418 5,699 4,370 Total non-interest expense 9,571 10,756 37,934 33,990 Income before income tax expense 3,155 2,395 12,346 9,073 Income tax expense 714 315 2,869 1,762 Net income $ 2,441 $2,080 $9,477 $7,311 Share and Per Share Data Basic average shares outstanding 4,699,106 4,720,384 4,710,530 3,804,711 Diluted average shares outstanding 4,752,112 4,801,544 4,775,883 3,874,484 Basic earnings per share $0.52 $0.44 $2.01 $1.92 Diluted earnings per share $0.51 $0.43 $1.98 $1.88 Cash dividends declared $0.24 $0.22 $0.90 $0.88 Alliance Financial Corporation Consolidated Financial Information (Unaudited) ($ in thousands) December 31, September 30, December 31, 2007 2007 2006 Asset quality Non-accruing loans and leases: Residential real estate loans $1,118 $294 $298 Commercial loans 4,988 2,562 1,248 Leases 320 347 99 Indirect loans 83 43 63 Other consumer loans 158 138 141 Total non-accruing loans and leases 6,667 3,384 1,849 Accruing loans and leases delinquent 90 days or more 39 1,080 790 Total non-performing loans and leases 6,706 4,464 2,639 Other real estate and repossessed assets 229 326 - Total non-performing assets $6,935 $4,790 $2,639 Allowance for credit losses Three months ended Twelve months ended December 31, December 31, 2007 2006 2007 2006 Allowance for credit losses, beginning of period $7,863 $5,402 $7,029 $4,960 Loans and leases charged-off (850) (360) (3,227) (2,390) Recoveries of loans and leases previously charged-off 213 180 834 685 Net loans and leases charged- off (637) (180) (2,393) (1,705) Provision for credit losses 1,200 510 3,790 2,477 Allowance acquired from Bridge Street Financial - 1,297 - 1,297 Allowance for credit losses, end of period $8,426 $7,029 $8,426 $7,029 Alliance Financial Corporation Consolidated Financial Information (Unaudited) Key Ratios At or for the three months At or for the twelve months ended December 31, ended December 31, 2007 2006 2007 2006 Return on average assets 0.75% 0.67% 0.74% 0.69% Return on average equity 8.49% 8.31% 8.48% 9.40% Yield on earning assets 6.33% 6.34% 6.36% 6.06% Cost of funds 3.80% 3.70% 3.78% 3.46% Net interest margin (tax equivalent) (1) 2.98% 3.09% 3.02% 3.02% Non-interest income to total income (2) 40.35% 40.08% 39.62% 39.13% Efficiency ratio (3) 70.09% 78.74% 70.51% 74.64% Dividend payout ratio (4) 47.06% 51.16% 45.45% 46.81% Net loans and leases charged-off to average loans and leases, annualized 0.29% 0.08% 0.27% 0.23% Provision for credit losses to average loans and leases, annualized 0.54% 0.24% 0.43% 0.34% Allowance for credit losses to total loans and leases 0.94% 0.80% 0.94% 0.80% Allowance for credit losses to nonperforming loans and leases 125.7% 266.4% 125.7% 266.4% Nonperforming loans and leases to total loans and leases 0.75% 0.30% 0.75% 0.30% Nonperforming assets to total assets 0.53% 0.21% 0.53% 0.21% (1) Tax equivalent net interest income divided by average earning assets (2) Non-interest income (net of realized gains and losses on securities and gain on lease prepayment) divided by the sum of net interest income and non-interest income (net of realized gains and losses on securities and gain on lease prepayment) (3) Non-interest expense divided by the sum of net interest income and non-interest income (net of realized gains and losses on securities) (4) Cash dividends declared per share divided by diluted earnings per share Alliance Financial Corporation Selected Quarterly Financial Data (Unaudited) 2007 2006 Fourth Third Second First Fourth (Dollars in thousands, except share and per share data) Interest income $17,977 $18,028 $17,649 $17,377 $17,433 Interest expense 9,832 9,822 9,600 9,296 9,248 Net interest income 8,145 8,206 8,049 8,081 8,185 Provision for credit losses 1,200 1,140 700 750 510 Net interest income after provision for credit losses 6,945 7,066 7,349 7,331 7,675 Other non-interest income 5,781 5,507 5,212 5,089 5,476 Other non-interest expense 9,571 9,425 9,617 9,321 10,756 Income before income tax expense 3,155 3,148 2,944 3,099 2,395 Income tax expense 714 738 671 745 315 Net income $2,441 $2,410 $2,273 $2,354 $2,080 Stock and related per share data Basic earnings per share $0.52 $0.51 $0.48 $0.50 $ 0.44 Diluted earnings per share $0.51 $0.51 $0.48 $0.49 $ 0.43 Basic weighted average shares outstanding 4,699,106 4,709,334 4,709,334 4,724,638 4,720,384 Diluted weighted average shares outstanding 4,752,112 4,756,088 4,771,091 4,799,638 4,801,544 Cash dividends paid per share $0.24 $0.22 $0.22 $0.22 $0.22 Dividend payout ratio (1) 47.06% 43.14% 45.83% 44.90% 51.16% Book value $24.50 $23.71 $23.06 $23.07 $22.81 Tangible book value (2) $14.87 $13.87 $13.10 $13.01 $12.74 Capital Tier 1 leverage ratio 7.53% 7.53% 7.41% 7.34% 7.34% Tier 1 risk based capital 10.64% 10.62% 10.41% 10.15% 10.14% Total risk based capital 11.59% 11.53% 11.29% 11.01% 10.97% Selected ratios Return on average assets 0.75% 0.75% 0.71% 0.75% 0.67% Return on average equity 8.49% 8.64% 8.22% 8.58% 8.31% Yield on earning assets 6.33% 6.43% 6.35% 6.30% 6.34% Cost of funds 3.80% 3.86% 3.78% 3.67% 3.70% Net interest margin (tax equivalent) (3) 2.98% 3.04% 3.01% 3.04% 3.09% Non-interest income to total income (4) 40.35% 40.15% 39.31% 38.64% 40.08% Efficiency ratio (5) 70.09% 68.74% 72.52% 70.77% 78.74% Asset quality ratios Net loans and leases charged off to average loans and leases, annualized 0.29% 0.37% 0.22% 0.20% 0.08% Provision for credit losses to average loans and leases, annualized 0.54% 0.51% 0.32% 0.34% 0.24% Allowance for credit losses to total loans and leases 0.94% 0.88% 0.85% 0.83% 0.80% Allowance for credit losses to non- performing loans and leases 125.7% 176.1% 139.3% 132.7% 266.4% Non-performing loans and leases to total loans and leases 0.75% 0.50% 0.61% 0.62% 0.30% Non-performing assets to total assets 0.53% 0.37% 0.43% 0.44% 0.21% (1) Cash dividends declared per share divided by diluted earnings per share (2) Shareholders' equity less goodwill and intangible assets divided by common shares outstanding (3) Tax equivalent net interest income divided by average earning assets (4) Non-interest income (net of realized gains and losses on securities) divided by the sum of net interest income and non-interest income (net of realized gains and losses on securities and gain on lease prepayment) (5) Non-interest expense divided by the sum of net interest income and non-interest income (net of realized gains and losses on securities)
