ABVA Alliance Bankshares Corp. (MM)

Alliance Bankshares Corporation (NASDAQ – ABVA) today reported a net loss of $919 thousand for the quarter ended June 30, 2012. Results during the quarter were primarily impacted by reduced interest income, merger-related expenses, OREO expenses, and a negative adjustment to the fair value of the of the $25 million FHLB advance, the total of which offset favorable reductions in non-interest expenses and interest expense. Due to full collection of a large, substantially impaired loan, improvement in the overall risk profile of the loan portfolio and a lower level of total loans, the Company also did not recognize a provision expense during the quarter. On a year-to-date basis, the Company has experienced a loss of $1.35 million. The quarterly results represent a loss of $.18 per share versus income of $.08 per share for the same period in 2011, while the year-to-date results represent a loss of $.26 per share versus income of $.15 per share for the same period in 2011. Alliance’s regulatory capital ratios at June 30, 2012 remain above the levels necessary to be considered a “well capitalized” institution.

At June 30, 2012, total assets amounted to $507.8 million, essentially flat as compared to the level at December 31, 2011. Total loans were $293.5 million at June 30, 2012, reflecting a decline of 4.4% since December 31, 2011. The decline in the loan portfolio results from a combination of strategic repositioning of lending activities, normal amortization and payoffs, the total of which offset new loan production during the period. Investment securities amounted to $103.4 million as of June 30, 2012, a decline of $20.1 million from the December 31, 2011 level of $123.5 million. Total deposits at June 30, 2012, were $382.2, reflecting a slight increase from the level at December 31, 2011.

Non-performing assets (NPAs) of $15.5 million at June 30, 2012 were 13.9% lower when compared to $18.0 million at December 31, 2011. The overall decrease resulted largely from a significant reduction of 31.7% in non-accrual loans during the quarter as compared to year end 2011. NPAs-to-total assets declined slightly from 3.55% at December 31, 2011, to 3.05% at June 30, 2012. At June 30, 2011, the allowance for loan losses stood at $5.1 million, or 1.72% of loans.

The Company’s net interest margin for the quarter was 3.08%, a decrease from 3.82% when compared to the same period in 2011. The margin decline resulted largely from the reduced yield in the investment portfolio due to pre-payments of CMOs and a change in the mix of investments, the latter related to our restructuring the portfolio in anticipation of the planned merger with Eagle Bancorp, Inc. that was subsequently terminated.

On May 3, 2012, the Company and WashingtonFirst Bankshares entered into an agreement to merge. Details regarding the terms of the merger are disclosed in the SEC 8-K filed by the Company on May 8, 2012.

Cautionary Statement Regarding Forward-Looking Statements. Certain statements contained in this report that are not historical facts may constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These statements can generally be identified by the use of words such as “may,” “will,” “should,” “could,” “would,” “plan,” “believe,” “expect,” “anticipate,” “intend” or words of similar meaning. These statements are inherently uncertain; there can be no assurance that the underlying assumptions will prove to be accurate. These forward-looking statements include statements relating to the Company’s anticipated future performance, mix of assets and liabilities and effects of efforts to reposition its business. Readers should not place undue reliance on such statements, which speak only as of the date of this release. The Company does not undertake to update any forward-looking statement that may be made from time to time by it or on its behalf.

Forward-looking statements are subject to risks, assumptions and uncertainties, and could be affected by many factors. Some factors that could cause the Company’s actual results to differ materially from those anticipated in these forward-looking statements include: interest rates, general business conditions, as well as conditions within the financial markets, general economic conditions, unemployment levels, the legislative/regulatory climate, including the effect of the Dodd-Frank Wall Street Reform Act and Consumer Protection Act of 2010 and related regulations, regulatory compliance costs, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve, the quality/composition of the loan portfolios and the value of related collateral, the value of securities the Company holds, charge-offs on loans and the adequacy of the allowance for loan losses, loan demand, deposit flows, counterparty strength, competition, reliance on third parties for key services, the health of the real estate markets, the outcome of the Company’s repositioning initiatives, and changes in accounting principles.

More information on Alliance Bankshares Corporation can be found online at www.alliancebankva.com, or by phoning an Alliance office.

  ALLIANCE BANKSHARES CORPORATION Consolidated Balance Sheets           June 30, December 31, 2012*     2011 ASSETS (Dollars in thousands)

 

Cash and due from banks $ 74,777 $ 45,837 Federal funds sold 22,880 16,567 Trading securities, at fair value 300 596 Investment securities available-for-sale, at fair value 103,353 123,463 Restricted stock, at cost 4,150 4,772 Loans, net of unearned discount and fees 293,471 306,876 Less: allowance for loan losses   (5,055 )       (5,393 ) Loans, net 288,416 301,483   Premises and equipment, net 1,211 1,415 Other real estate owned (OREO) 4,031 3,748 Deferred tax asset, net of allowance ($5,291, $5,291, and $0) 1,442 1,553 Other assets   7,258         7,049     TOTAL ASSETS $ 507,818       $ 506,483     LIABILITIES AND STOCKHOLDERS' EQUITY   Non-interest bearing deposits $ 119,553 $ 112,450 Savings and NOW deposits 66,643 51,475 Money market deposits 18,087 23,370 Time deposits   177,916         193,148   Total deposits 382,199 380,443   Repurchase agreements, federal funds purchased and other borrowings 40,388 40,420 Federal Home Loan Bank advances ($29,559, $29,350 and $26,057 at fair value) 44,559 44,350 Trust Preferred Capital Notes 10,310 10,310 Other liabilities   3,223         2,838     TOTAL LIABILITIES   480,679         478,361    

Common stock, $4 par value; 15,000,000 shares authorized; 5,109,969 issued and outstanding at June 30, 2012 and December 31, 2011 and 5,108,969 shares issued and outstanding at June 30, 2011

20,440 20,440 Capital surplus 25,933 25,915 Retained (deficit) (19,621 ) (18,269 )

Accumulated other comprehensive income, net

  387         36     TOTAL STOCKHOLDERS' EQUITY   27,139         28,122     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 507,818       $ 506,483                           * Unaudited financial results     ALLIANCE BANKSHARES CORPORATION Consolidated Income Statements                   Three Months Ended Three Months Ended Six Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2012*     2011*     2012* 2011* (Dollars in thousands, except per share)   INTEREST INCOME: Loans $ 4,089 $ 4,555 $ 8,272 $ 9,100 Trading securities 9 12 18 45 Investment securities 331 1,167 655 2,488 Federal funds sold   24         12         39     22     Total interest income   4,453         5,746         8,984     11,655     INTEREST EXPENSE: Savings and NOW deposits 30 30 59 62 Time deposits 694 971 1,441 1,968 Money market deposits 32 45 61 94 Repurchase agreements, federal funds purchased and other borrowings 49 52 94 140 FHLB advances 268 256 536 515 Trust preferred capital notes   129         93         243     185     Total interest expense   1,202         1,447         2,434     2,964     Net interest income 3,251 4,299 6,550 8,691 Provision for loan losses   -         769         450     1,075     Net interest income after provision for loan losses   3,251         3,530         6,100     7,616     OTHER INCOME: Deposit account service charges 41 39 74 76 Net gain on sale of available-for-sale securities - 835 3 914 Gain (loss) on fair value adjustments on trading securities (100 ) 94 (171 ) (33 ) Fair value adjustments of FHLB advance (672 ) (224 ) (209 ) (73 ) Other operating income   39         75         78     119     Total other income (loss) (692 ) 819 (225 ) 1,003   OTHER EXPENSES: Salaries and employee benefits 1,148 1,404 2,321 2,796 Occupancy expense 532 564 1,123 1,125 Equipment expense 136 155 270 323 Other real estate owned expense 54 16 95 51 FDIC assessments 210 290 431 640 Merger Expense 410 - 418 - Operating expenses   1,217         1,335         2,640     2,552     Total other expenses   3,707         3,764         7,298     7,487     Income before income taxes (1,148 ) 585 (1,423 ) 1,132 Income tax expense (benefit)   (229 )       191         (71 )   373   NET INCOME (LOSS) $ (919 )     $ 394       $ (1,352 ) $ 759   Net income (loss) per common share, basic $ (0.18 )     $ 0.08       $ (0.26 ) $ 0.15   Net income (loss) per common share, diluted $ (0.18 )     $ 0.08       $ (0.26 ) $ 0.15   Weighted average number of shares, basic   5,109,969         5,108,821         5,109,969     5,108,436   Weighted average number of shares, diluted   5,109,969         5,134,153         5,109,969     5,125,151                                       * Unaudited financial results   ALLIANCE BANKSHARES CORPORATION Consolidated Statistical Information Performance Information           June 30, June 30, 2012*     2011* (Dollars in thousands, except per share) Performance Information:   For The Three Months Ended: Average loans $ 293,553 $ 320,845 Average earning assets 417,195 449,770 Average assets 466,062 489,814 Average non-interest bearing deposits 93,548 91,033 Average total deposits 343,741 362,512 Average interest-bearing liabilities 342,085 361,398 Average stockholder equity 27,911 34,581 Net interest margin (1) 3.13 % 3.86 % Net income (loss) per share, basic $ (0.18 ) $ 0.08 Net income (loss) per share, diluted $ (0.18 ) $ 0.08   For The Six Months Ended: Average loans $ 297,570 $ 322,986 Average earning assets 426,607 461,962 Average assets 467,100 501,238 Average non-interest bearing deposits 90,085 89,505 Average total deposits 340,439 359,888 Average interest-bearing liabilities 343,885 375,087 Average stockholder equity 30,710 34,102 Net interest margin (1) 3.08 % 3.82 % Net income (loss) per share, basic $ (0.26 ) $ 0.15 Net income (loss) per share, diluted (0.26 ) 0.15                 * Unaudited financial results

(1) On a fully-tax equivalent basis assuming a 34% federal tax rate.

    ALLIANCE BANKSHARES CORPORATION Consolidated Statistical Information Credit Quality Information (1)               June 30, December 31, June 30, 2012*     2011 2011* (Dollars in thousands) Credit Quality Information: Nonperforming assets: Impaired loans (performing loans with a specific allowance) $ 4,369 $ 4,233 $ 1,249 Non-accrual loans 6,166 9,031 9,272 Loans past due 90 days and still accruing - - 408 Troubled debt restructured 900 957 749 OREO   4,031   3,748   4,312 Total nonperforming assets $ 15,466 $ 17,969 $ 15,990     Specific reserves associated with impaired & non-accrual loans $ 2,121 $ 2,271 $ 1,533     Largest components of the nonperforming assets listed above:   June 30, 2012 non-accrual loans (93% of the total) $2.5 million secured by commercial real estate. $2.2 million secured by residential land. $2.2 million secured by a 17 unit condominium project. $998 thousand secured by commercial land. $923 thousand secured by commercial equipment and receivables. $559 thousand secured by a residential property and lot. $336 thousand secured by a residential building lot.       June 30, 2012 OREO (91% of the total) $1.1 million which are residential lots in Stephens City, VA. $963 thousand which is a residential property in Annandale, VA. $879 thousand which is acreage in Woodstock, VA $720 thousand which is acreage near Charles Town, WV.                      

(1) The allowance for loan losses includes a specific allocation for all impaired loans. Nonperforming assets are defined as impaired loans, non-accrual loans, OREO, troubled debt restructured, and loans past due 90 days or more and still accruing interest.

 

* Unaudited financial results

    ALLIANCE BANKSHARES CORPORATION Consolidated Statistical Information Credit Quality Information (1)            

 

          For The Six Months Ended: June 30, June 30, 2012*     2011* (Dollars in thousands)   Balance, beginning of period $ 5,393 $ 5,281   Provision for loan losses 450 1,075   Loans charged off (821 ) (986 )   Recoveries of loans charged off   33     240     Net charge-offs   (788 )   (746 )   Balance, end of period $ 5,055   $ 5,610           June 30, March 31, December 31, September 30, June 30, 2012*     2012 2011* 2011*     2011* Ratios: Allowance for loan losses to total loans 1.7 % 1.71 % 1.76 % 1.62 % 1.75 %   Allowance for loan losses to non-accrual loans

 

0.48

X

 

0.45

X

0.41

X

0.49

X

0.53

X

  Allowance for loan losses to nonperforming assets 27.2 % 29.6 % 30.0 % 33.9 % 35.1 %   Nonperforming assets to total assets 3.05 % 3.37 % 3.55 % 2.85 % 2.98 %   Net charge-offs to average loans 0.27 % 0.26 % 0.45 % 0.40 % 0.23 %                                                 * Unaudited financial results  

(1) The allowance for loan losses includes a specific allocation for all impaired loans. Nonperforming assets are defined as impaired loans, non-accrual loans, OREO, troubled debt restructured, and loans past due 90 days or more and still accruing interest.

    ALLIANCE BANKSHARES CORPORATION Consolidated Statistical Information Trading Asset & Liability Summary                                

June 30, 2012

December 31, 2011

Fair Fair Trading Security                   Value     Yield     Value     Yield (Dollars in thousands)   PCMO 1 $ 300 5.43 % $ 596 5.44 %   Total $ 300 5.40 % $ 596 5.44 %                                                  

1 As of June 30, 2012 trading securities consisted of one PCMO instrument. This PCMO was rated AAA by at least one ratings agency on the purchase date. Currently the security has a rating below investment grade. The instrument is currently performing as expected.

                   

June 30, 2012

December 31, 2011

Fair Fair Fair Value Asset and Liabilities       Value           Value       (Dollars in thousands)   Trading security $ 300 $ 596   FHLB advances $ 29,559 $ 29,350     * Unaudited financial results     ALLIANCE BANKSHARES CORPORATION Consolidated Statistical Information Capital Information           June 30, December 31, 2012*     2011 (Dollars in thousands, except per share)   Capital Information: Book value per share $ 5.31 $ 5.50 Tier I risk-based capital ratio 11.8 % 12.3 % Total risk-based capital ratio 13.4 % 13.8 % Leverage capital ratio 7.7 % 7.4 % Total equity to total assets ratio 5.3 % 5.6 %     * Unaudited financial results     ALLIANCE BANKSHARES CORPORATION Components of Stockholder Equity on a Book Value per Share Basis               Six Months Twelve Months Six Months Ended June 30, Ended December 31, Ended June 30, 2012*     2011     2011* Book Value Per Share, beginning of the period $ 5.50 $ 6.60 $ 6.60   Net income (loss) per common share (0.26 ) (1.17 ) 0.15  

Effects of Changes in Other Comprehensive Income1

  0.07         0.07         0.25   Book Value Per Share, end of the period $ 5.31       $ 5.50       $ 7.00   * Unaudited financial results

1 Other Comprehensive Income represents the unrealized gains or losses associated with available-for-sale securities and the related reclassification adjustments.