ABVA Alliance Bankshares Corp. (MM)

Alliance Bankshares Corporation (NASDAQ – ABVA) today reported a net loss of $170 thousand for the quarter ended September 30, 2012. Results during the quarter were primarily impacted by reduced interest income, merger-related expenses, OREO expenses and valuation write-downs, and a negative adjustment to the $25 million FHLB advance carried at fair value, the total of which offset gains on the sale of investment securities and favorable reductions in non-interest expenses, interest expense and the provision for loan losses. Due to improvement in the overall risk profile of the loan portfolio and a lower level of total loans, the Company released a portion of its allowance for loan losses into income and also did not recognize a provision expense during the quarter. On a year-to-date basis, the Company has experienced a loss of $1.52 million. The quarterly results represent a loss of $.03 per share versus a loss of $.10 per share for the same period in 2011, while the year-to-date results represent a loss of $.30 per share versus income of $.05 per share for the same period in 2011. Alliance’s regulatory capital ratios at September 30, 2012 remain above the levels necessary to be considered a “well capitalized” institution.

At September 30, 2012, total assets amounted to $521.9 million, an increase of 3% as compared to the level at December 31, 2011. Total loans were $288 million at September 30, 2012, reflecting a decline of 6.2% 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 $79.4 million as of September 30, 2012, a decline of $44.1 million from the December 31, 2011 level of $123.5 million. Total deposits at September 30, 2012, were $414.2, reflecting an 8.9% increase from the level at December 31, 2011. Strong growth in title agency-related deposits, coupled with a strategic shift of funding from repurchase agreements into deposits, contributed to the increase in overall deposits.

Non-performing assets (NPAs) of $15.9 million at September 30, 2012 were 11.6% lower when compared to $18.0 million at December 31, 2011. The overall decrease resulted largely from a reduction of 18.2% in non-accrual loans during the quarter as compared to year end 2011. NPAs-to-total assets declined from 3.51% at December 31, 2011, to 2.94% at September 30, 2012. At September 30, 2011, the allowance for loan losses stood at $4.9 million, or 1.69% of loans.

The Company’s net interest margin for the nine months was 3.10%, a decrease from 3.74% 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, a change in the mix of investments and lower reinvestment rates available in the market.

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, and in the SEC DEFM14A filed by the Company on November 9, 2012. The merger is expected to close during the fourth quarter 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   September 30, December 31, 2012*   2011 ASSETS (Dollars in thousands)   Cash and due from banks $ 115,515 $ 45,837 Federal funds sold 26,594 16,567 Trading securities, at fair value 293 596 Investment securities available-for-sale, at fair value 79,411 123,463 Restricted stock, at cost 3,972 4,772 Loans, net of unearned discount and fees 287,981 306,876 Less: allowance for loan losses   (4,866 )     (5,393 ) Loans, net 283,115 301,483   Premises and equipment, net 1,103 1,415 Other real estate owned (OREO) 3,575 3,748

Deferred tax asset, net of allowance ($5,291 and $5,291)

1,601 1,553 Other assets   6,751       7,049     TOTAL ASSETS $ 521,930     $ 506,483     LIABILITIES AND STOCKHOLDERS' EQUITY   Non-interest bearing deposits $ 145,295 $ 112,450 Savings and NOW deposits 84,058 51,475 Money market deposits 18,123 23,370 Time deposits   166,733       193,148   Total deposits 414,209 380,443   Repurchase agreements, federal funds purchased and other borrowings 22,558 40,420 Federal Home Loan Bank advances ($30,018 and $29,350 at fair value) 45,018 44,350 Trust Preferred Capital Notes 10,310 10,310 Other liabilities   2,766       2,838     TOTAL LIABILITIES   494,861       478,361  

 

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

20,440 20,440 Capital surplus 25,942 25,915 Retained (deficit) (19,791 ) (18,269 ) Accumulated other comprehensive income , net   478       36     TOTAL STOCKHOLDERS' EQUITY   27,069       28,122     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 521,930     $ 506,483               * Unaudited financial results             ALLIANCE BANKSHARES CORPORATION Consolidated Income Statements   Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2012*   2011*   2012*   2011* (Dollars in thousands, except per share)   INTEREST INCOME: Loans $ 3,973 $ 4,574 $ 12,245 $ 13,674 Trading securities 9 12 27 57 Investment securities 155 802 810 3,290 Federal funds sold   33       10       72     32     Total interest income   4,170       5,398       13,154     17,053     INTEREST EXPENSE: Savings and NOW deposits 30 26 89 88 Time deposits 629 877 2,070 2,845 Money market deposits 34 45 95 139 Repurchase agreements, federal funds purchased and other borrowings 11 54 117 194 FHLB advances 267 261 803 776 Trust preferred capital notes   128       93       359     278     Total interest expense   1,099       1,356       3,533       4,320     Net interest income 3,071 4,042 9,621 12,733 Provision (recovery of) for loan losses   (222 )     130       228     1,205     Net interest income after provision for loan losses   3,293       3,912       9,393       11,528     OTHER INCOME: Deposit account service charges 39 39 113 115

Net gain (loss) on sale of available-for-sale securities

168 2,120 171 3,034 Gain (loss) on fair value adjustments on trading securities 58 (43 ) (113 ) (76 ) Fair value adjustments of FHLB advance (459 ) (2,801 ) (668 ) (2,874 ) Other operating income   41       34       119     153     Total other income (loss) (153 ) (651 ) (378 ) 352   OTHER EXPENSES: Salaries and employee benefits 956 1,197 3,277 3,993 Professional fees 465 398 1,558 1,239 Occupancy expense 581 578 1,704 1,703 Equipment expense 121 163 391 486 Other real estate owned expense 245 26 340 77 FDIC assessments 202 220 633 860 Merger Expense 248 619 666 619 Operating expenses   648       866       2,195     2,577     Total other expenses   3,466       4,067       10,764     11,554     Income before income taxes (326 ) (806 ) (1,749 ) 326 Income tax expense (benefit)   (156 )     (303 )     (227 )   70   NET INCOME (LOSS) $ (170 )   $ (503 )   $ (1,522 )   $ 256   Net income (loss) per common share, basic $ (0.03 )   $ (0.10 )   $ (0.30 )   $ 0.05   Net income (loss) per common share, diluted $ (0.03 )   $ (0.10 )   $ (0.30 )   $ 0.05   Weighted average number of shares, basic   5,109,969       5,108,821       5,109,969     5,108,616   Weighted average number of shares, diluted   5,109,969       5,108,969       5,109,969     5,129,311                   * Unaudited financial results         ALLIANCE BANKSHARES CORPORATION Consolidated Statistical Information Performance Information   September 30, September 30, 2012*   2011* (Dollars in thousands, except per share) Performance Information:   For The Three Months Ended: Average loans $ 288,421 $ 320,004 Average earning assets 407,523 446,088 Average assets 476,907 485,386 Average non-interest bearing deposits 113,770 89,101 Average total deposits 365,115 354,348 Average interest-bearing liabilities 333,119 357,429 Average stockholder equity 27,243 36,285 Net interest margin (1) 3.02 % 3.61 % Net income (loss) per share, basic $ (0.03 ) $ (0.10 ) Net income (loss) per share, diluted $ (0.03 ) $ (0.10 )   For The Nine Months Ended: Average loans $ 294,498 $ 321,981 Average earning assets 417,270 457,547 Average assets 470,394 495,897 Average non-interest bearing deposits 98,038 89,369 Average total deposits 348,725 358,021 Average interest-bearing liabilities 340,270 369,136 Average stockholder equity 29,546 34,839 Net interest margin (1) 3.10 % 3.74 % Net income (loss) per share, basic $ (0.30 ) $ 0.05 Net income (loss) per share, diluted (0.30 ) 0.05             * 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)   September 30, December 31, September 30, 2012*   2011 2011* (Dollars in thousands) Credit Quality Information: Non-performing assets: Non-accrual loans 10,853 13,264 10,657 OREO 3,575 3,748 4,102 Other impaired loans $ 560 $ - $ - Troubled debt restructured   897       956       501   Total non-performing assets $ 15,885     $ 17,968     $ 15,260     Specific reserves associated with impaired loans $ 1,711   $ 2,271   $ 1,370     Non-performing assets to assets   3.04 %   3.55 %   2.85 %     Largest components of the nonperforming assets listed above:   September 30, 2012 non-accrual loans (92% of the total) $2.5 million secured by commercial land in Dulles, VA.

$2.2 million secured by residential land in Loudoun VA.

$2.2 million secured by a 17 unit condominium project in Washington, DC. $983 thousand secured by commercial land in Sterling VA. $892 thousand secured by commercial equipment and receivables. $559 thousand secured by a residential property and lot in Warrenton VA. $336 thousand secured by a residential building lot in Warrenton VA.       September 30, 2012 OREO (82% of the total) $951 thousand which are residential lots in Stephens City, VA. $851 thousand which is a residential property in Annandale, VA. $790 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 Nine Months Ended: September 30, September 30, 2012*   2011* (Dollars in thousands)   Balance, beginning of period $ 5,393 $ 5,281   Provision for loan losses 228 1,205   Loans charged off (894 ) (1,556 )   Recoveries of loans charged off   139     248     Net charge-offs   (755 )     (1,308 )   Balance, end of period $ 4,866     $ 5,178                               September 30, June 30, March 31, December 31, September 30, 2012*   2012*   2012* 2011 2011* Ratios: Allowance for loan losses to total loans 1.69% 1.72% 1.71% 1.76% 1.62%   Allowance for loan losses to non-accrual loans 0.45X 0.48X 0.45X 0.41X 0.49X   Allowance for loan losses to nonperforming assets 0.31X 0.33X 0.30X 0.30X 0.34X   Nonperforming assets to total assets 3.04% 3.05% 3.37% 3.51% 2.85%   Net charge-offs to average loans 0.26% 0.28% 0.26% 0.45% 0.54%                         * 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  

September 30, 2012*

December 31, 2011

Fair Fair Trading Security         Value   Yield   Value   Yield (Dollars in thousands)   PCMO 1 $ 293 5.43 % $ 596 5.44 %   Total $ 293 5.43 % $ 596 5.44 %                          

1 As of September 30, 2012 trading security 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.

 

           

September 30, 2012*

December 31, 2011

Fair Fair Fair Value Asset and Liabilities           Value     Value   (Dollars in thousands)   Trading security

$ 293

$ 596

  FHLB advances

$ 30,018

$ 29,350

    * Unaudited financial results       ALLIANCE BANKSHARES CORPORATION Consolidated Statistical Information Capital Information     September 30, December 31, 2012*   2011 (Dollars in thousands, except per share)   Capital Information: Book value per share $ 5.30 $ 5.50 Tier I risk-based capital ratio 12.1 % 12.3 % Total risk-based capital ratio 13.7 % 13.8 % Leverage capital ratio 7.4 % 7.4 % Total equity to total assets ratio 5.2 % 5.6 %             * Unaudited financial results       ALLIANCE BANKSHARES CORPORATION Components of Stockholder Equity on a Book Value per Share Basis       Nine Months Twelve Months Nine Months Ended September 30, Ended December 31, Ended September 30, 2012*   2011   2011* Book Value Per Share, beginning of the period $ 5.50 $ 6.60 $ 6.60   Net income (loss) per common share (0.30 ) (1.17 ) 0.05   Effects of Changes in Other Comprehensive Income 1   0.10       0.07       0.10   Book Value Per Share, end of the period $ 5.30     $ 5.50     $ 6.75               * Unaudited financial results

 

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