Jan 27, 2012

Alliance Financial Announces Fourth Quarter and Record 2011 Earnings‎

Alliance Financial Corporation (“Alliance” or the “Company”) (nasdaqgm:ALNC), the holding company for Alliance Bank, N.A., announced today net income of $2.8 million or $0.60 per diluted share for the quarter ended December 31, 2011, compared with the $2.8 million or $0.59 per diluted share in the year-ago quarter. Net income was $3.7 million or $0.77 per diluted common share in the third quarter of 2011. Net income in the third quarter of 2011 included securities gains, netted against a fixed asset write-down, of $472,000 after tax or $0.10 per diluted share.

Net income for the year ended December 31, 2011 increased 14.4% to $13.3 million or $2.80 per diluted share, compared with $11.6 million or $2.48 per diluted share in 2010.

Jack H. Webb, President and CEO of Alliance said, “We set a record for net income in 2011 for the fifth year in a row, while at the same time maintaining a strong balance sheet with very good asset quality and capital ratios. Revenues were pressured in 2011 due to a decline in assets and net interest margin; however, our disciplined expense control combined with lower loan loss provisions more than offset the impact of lower revenue in 2011. Our capital ratios increased in 2011 through earnings retention and effective capital management, and are well above regulatory minimums for well-capitalized institutions.”

Webb added, “We originated more than $250 million of credit to consumers and businesses in Central New York in 2011. In the aggregate, over the past four years we provided more than $1 billion in loans to qualified borrowers in Central New York, in what continues to be a challenging lending environment. We remain committed to meeting the credit needs of qualified borrowers in our market; however, consistent with the financial sector as a whole, loan growth and revenue growth in the current operating environment will likely remain under pressure as weak economic conditions and low interest rates are expected to continue to weigh on loan demand and our net interest margin.”

Balance Sheet Highlights

Total assets were $1.4 billion at December 30, 2011, which was a decrease of $21.7 million from the end of the third quarter. Total loans and leases (net of unearned income) were virtually unchanged in the fourth quarter, as a decrease in our residential mortgages and continuing amortization of our lease portfolio was offset by growth in commercial loans and mortgages. Securities available-for-sale decreased $34.8 million during the quarter as we did not reinvest cash flows from the portfolio.

Total assets decreased $45.5 million or 3.1% from the end of 2010 as loans and leases, net, decreased $25.8 million and securities available-for-sale decreased $40.1 million. The Company’s commercial lending business performed well in 2011, with the commercial portfolio increasing $28.4 million or 11.4% during the year. The residential mortgage and indirect auto loan portfolios declined approximately $18 million and $17 million, respectively, in 2011 due to soft market conditions and low interest rates, while our lease portfolio decreased $17 million as we continue to wind down this portfolio.

Loan originations (excluding lines of credit) totaled $91.0 million in the fourth quarter, compared with $92.5 million in the year-ago quarter and $59.5 million in the third quarter of 2011. Loan originations in 2011 totaled $255.3 million, compared with $284.1 million in 2010.

Commercial loans and mortgages increased $19.0 million in the fourth quarter and totaled $278.3 million at December 31, 2011. Originations of commercial loans and mortgages in the fourth quarter (excluding lines of credit) totaled $31.3 million, compared with $38.5 million in the year-ago quarter and $10.3 million in the third quarter of 2011. Originations in 2011 totaled $75.9 million compared with $80.4 million in 2010.