Profit slips 16 percent at Alliance Financial in Q2

SYRACUSE — Ongoing low interest rates pushed profit lower at Alliance Financial Corp. (NASDAQ: ALNC) in the second quarter, despite growth in the banking company’s loan portfolio.

Syracuse–based Alliance Financial, the holding company for Alliance Bank, earned $2.9 million, or 61 cents a share, in the quarter, down 16 percent from $3.5 million, or 73 cents, in the second quarter of 2011. Low interest rates put pressure on the bank’s net interest margin, which drove profit lower, Alliance said.

Loan growth helped offset some of the decrease.

“Our loan portfolio grew at an annualized rate of 13 percent 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,” Alliance Financial President and CEO Jack Webb said in the earnings news release issued Tuesday July 17 after the close of trading. “Loan originations across all our business lines totaled more than $106 million in the second quarter, which was an increase of 98 percent from the second quarter of 2011, and was up 47 percent from the first quarter of this year.”

Alliance shares opened up 12 cents, or 0.33 percent, in trading the morning after the earnings report. Through July 17, the stock was up more than 16 percent year to date. That exceeds the nearly 13 percent gain for the NASDAQ Bank Index in the same time period.

Net interest income in the latest quarter was $10 million, down from $11.3 million in the second quarter of 2011, but up from $9.8 million in the first quarter this year.

Alliance grew commercial loans and mortgages by $9.3 million in the second quarter to a total of $283.1 million as of June 30. Residential mortgages outstanding increased $7.1 million to $320.9 million and indirect auto balances rose by 

$16.9 million to $188.8 million

Loans and leases at the end of the second quarter totaled $898.5 million, up by $28.6 million from the previous quarter. Alliance had total assets of more than $1.42 billion as of June 30, up by $7.2 million from March 31. Deposits 

totaled $1.1 billion as of June 30, up by $5.6 million three months earlier.

Net charge-offs in the second quarter totaled $166,000, compared to $155,000 in the second quarter of 2011. Nonperforming assets totaled $6.7 million, or 0.47 percent of total assets, as of June 30. That’s compared with $9.2 million, or 0.65 percent of total assets, as of March 31 and $11.7 million, or 0.83 percent of total assets, as of Dec. 31, 2011.

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

A negative provision expense during the second quarter resulted in $300,000 of income, compared with a provision expense of $160,000 a year earlier, according to Alliance.

Noninterest income was $4.5 million for the second quarter, up from $4.4 million a year earlier. Gains on the sale of loans rose $259,000 in the period from the second quarter of 2011 thanks to higher volumes of mortgages originated and sold in 2012, according to Alliance.

Noninterest expenses totaled $11 million in the second quarter, up from $10.8 million a year earlier.

Alliance Financial has 29 Alliance Bank branches in Cortland, Madison, Oneida, Onondaga, and Oswego counties. The company also runs an investment management administration center in Buffalo and an equipment-lease financing company.

Alliance Bank is the number four bank in the Syracuse metro area deposit market with $827.8 million in deposits and a market share of 7.9 percent, according to the latest statistics from the Federal Deposit Insurance Corp.