Alliance Financial Corp. (ALNC, Financial) filed Quarterly Report for the period ended 2012-06-30.
Alliance Financial Corporation has a market cap of $168.6 million; its shares were traded at around $35.09 with a P/E ratio of 13.9 and P/S ratio of 2.2. The dividend yield of Alliance Financial Corporation stocks is 3.5%. Alliance Financial Corporation had an annual average earning growth of 3.3% over the past 10 years.
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 over the same period.
Since December 2008 the Federal Reserve has maintained its target fed funds rate between zero and 0.25%, and has carried out a number of policy actions designed to lower long-term interest rates. These monetary policy actions, along with volatility in equity markets, economic recession and federal government economic stimulus efforts, among other factors, have caused yields on U.S. Treasury securities to drop to exceptionally low levels throughout much of the past four years. This persistently low interest rate environment has caused an ongoing decline over the past four years in the returns on our interest-earning assets, consistent with much of the financial industry. The tax-equivalent yield on our securities portfolio decreased 50 basis points in the second quarter of 2012 compared to the year-ago quarter. The yield on our commercial loans, residential loans and consumer (including indirect) loans decreased 10 basis points, 33 basis points and 73 basis points, respectively, in the second quarter of 2012 compared to the second quarter of 2011.
Net charge-offs were $166,000 and $1.6 million in the three months and six months ended June 30, 2012, respectively, compared with $155,000 and $360,000 in the year-ago periods, respectively. Approximately $1.5 million or 81% of the gross charge-offs recognized in the first quarter of 2012 were on loans that were considered impaired in the fourth quarter of 2011 and for which impairment reserves were largely established due to the identification of probable loss events in the fourth quarter. Charge-offs on these impaired credits were recognized in the first quarter upon the occurrence of events confirming the existence of the losses, including further deterioration in the respective borrowers financial condition and negotiated settlements. A substantial portion of the allowance allocated to these impaired credits in 2011 came from the release of a portion of the general allowance for our lease portfolio. During 2011, approximately $1.2 million of the allowance that had been allocated from our lease portfolio prior to 2011 was released due to a substantial decline in charge-offs in our lease portfolio in 2011 compared with 2010 and 2009 (the years in which provisions for possible lease losses were charged to earnings) and to a $16.8 million decrease in the balance of that portfolio during 2011.
Our principal sources of funds for operations are cash flows generated from earnings, deposit inflows, loan and lease repayments, investment amortization and maturities, borrowings from the Federal Home Loan Bank of New York (FHLB), and securities sold under repurchase agreements. During the six months ended June 30, 2012, cash and cash equivalents increased by $18.1 million. Net cash provided by investing activities primarily resulted from $30.7 million in maturities, sales and principal repayments partly reduced a net increase in loans of $27.4 million. Net cash provided by financing activities in the first half of 2012 principally reflects a $23.5 million net increase in deposits, partly reduced by a net decrease in borrowings of $11.0 million and cash dividends of $3.0 million. Net cash from operating activities was primarily provided by net income in the amount of $5.6 million and proceeds from sale of loans and leases held-for-sale of $30.7 million, partly reduced by originations of loans held-for-sale of $30.2 million.
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Alliance Financial Corporation has a market cap of $168.6 million; its shares were traded at around $35.09 with a P/E ratio of 13.9 and P/S ratio of 2.2. The dividend yield of Alliance Financial Corporation stocks is 3.5%. Alliance Financial Corporation had an annual average earning growth of 3.3% over the past 10 years.
Highlight of Business Operations:
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 and 3.22% in the first quarter of 2012. The net interest margin in the second quarter adjusted for the recovery 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.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 over the same period.
Since December 2008 the Federal Reserve has maintained its target fed funds rate between zero and 0.25%, and has carried out a number of policy actions designed to lower long-term interest rates. These monetary policy actions, along with volatility in equity markets, economic recession and federal government economic stimulus efforts, among other factors, have caused yields on U.S. Treasury securities to drop to exceptionally low levels throughout much of the past four years. This persistently low interest rate environment has caused an ongoing decline over the past four years in the returns on our interest-earning assets, consistent with much of the financial industry. The tax-equivalent yield on our securities portfolio decreased 50 basis points in the second quarter of 2012 compared to the year-ago quarter. The yield on our commercial loans, residential loans and consumer (including indirect) loans decreased 10 basis points, 33 basis points and 73 basis points, respectively, in the second quarter of 2012 compared to the second quarter of 2011.
Net charge-offs were $166,000 and $1.6 million in the three months and six months ended June 30, 2012, respectively, compared with $155,000 and $360,000 in the year-ago periods, respectively. Approximately $1.5 million or 81% of the gross charge-offs recognized in the first quarter of 2012 were on loans that were considered impaired in the fourth quarter of 2011 and for which impairment reserves were largely established due to the identification of probable loss events in the fourth quarter. Charge-offs on these impaired credits were recognized in the first quarter upon the occurrence of events confirming the existence of the losses, including further deterioration in the respective borrowers financial condition and negotiated settlements. A substantial portion of the allowance allocated to these impaired credits in 2011 came from the release of a portion of the general allowance for our lease portfolio. During 2011, approximately $1.2 million of the allowance that had been allocated from our lease portfolio prior to 2011 was released due to a substantial decline in charge-offs in our lease portfolio in 2011 compared with 2010 and 2009 (the years in which provisions for possible lease losses were charged to earnings) and to a $16.8 million decrease in the balance of that portfolio during 2011.
Our principal sources of funds for operations are cash flows generated from earnings, deposit inflows, loan and lease repayments, investment amortization and maturities, borrowings from the Federal Home Loan Bank of New York (FHLB), and securities sold under repurchase agreements. During the six months ended June 30, 2012, cash and cash equivalents increased by $18.1 million. Net cash provided by investing activities primarily resulted from $30.7 million in maturities, sales and principal repayments partly reduced a net increase in loans of $27.4 million. Net cash provided by financing activities in the first half of 2012 principally reflects a $23.5 million net increase in deposits, partly reduced by a net decrease in borrowings of $11.0 million and cash dividends of $3.0 million. Net cash from operating activities was primarily provided by net income in the amount of $5.6 million and proceeds from sale of loans and leases held-for-sale of $30.7 million, partly reduced by originations of loans held-for-sale of $30.2 million.
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