Alliance Bankshares Reports 3rd Quarter 2011 Results

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Nov 14, 2011, 05:32 ET

CHANTILLY, Va., Nov. 14, 2011 /PRNewswire/ -- Alliance Bankshares Corporation (NASDAQ: ABVA) today reported a net loss of $503 thousand for the third quarter 2011. Three primary factors influenced operating results during the period, as follows:

The unprecedented decline in the 10 year Treasury rate resulted in a significant increase in the valuation of our $25 million FHLB Advance, which is accounted for under Fair Value Option (FVO) accounting. The liability increased from $26.2 million to $29.1 million, impacting pre-tax income by $2.9 million.
On a more positive note, the decline in the 10 year Treasury rate presented opportunities to take securities gains totaling $2.1 million
Non-interest expenses relating to the previously announced merger with Eagle Bancorp totaled $619 thousand during the quarter; these expenses are largely comprised of legal and investment banking fees

This represents a loss of $.10 per share versus income of $.05 for the same period in 2010. For the nine month period ended September 30, 2011, net income was $257 thousand, or $.05 per share, versus $547 thousand, or $.11 per share, for the nine month period ended September 30, 2010. Alliance's regulatory capital ratios are strengthened since December 31, 2010, and remain above the levels necessary to be considered a "well capitalized" institution.

At September 30, 2011, total assets amounted to $536.1 million, or a decline of $2.4 million compared to the December 31, 2010 level of $538.5 million. As of September 30, 2011, total loans were $319 million, which is $13.3 million below the December 31, 2010 level of $332.3 million. Investment securities amounted to $105.2 million as of September 30, 2011, a decline of $30.6 million from the December 31, 2010 level of $135.9 million. Modest increases in low cost deposit sources offset a decline in time deposits, resulting in total deposits of $402.3 million at September 30, 2011, as compared to $406.9 million at December 31, 2010.

Non-performing assets (NPAs) at September 30, 2011 amounted to $15.3 million, compared to $9.4 million at December 31, 2010. NPAs remain above December 31, 2010 levels due to specific credit situations described in a prior quarter earnings release. At September 30, 2011, the allowance for loan losses was $5.2 million, or 1.62% of loans.

Continued efforts to manage expenses have resulted in a decline in noninterest expense of $269,000 on a quarterly comparative basis, and nearly $1.7 million when comparing the respective nine month period. Our net interest margin decreased to 3.61% for the third quarter. The margin decline resulted largely from the change in mix within the investment portfolio and was also artificially depressed due to nonaccrual interest income reversals of $150,200.

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,	September 30,
	2011*	2010	2010*
ASSETS	(Dollars in thousands)

Cash and due from banks	$ 67,497	$ 24,078	$ 102,526
Federal funds sold	23,644	17,870	14,595
Trading securities, at fair value	559	2,075	2,250
Investment securities available-for-sale, at fair value	105,210	135,852	125,685
Restricted stock, at cost	5,224	6,355	6,548

Loans, net of unearned discount and fees	318,993	332,310	337,087
Less: allowance for loan losses	(5,178)	(5,281)	(5,224)
Loans, net	313,815	327,029	331,863

Premises and equipment, net	1,547	1,584	1,652
Other real estate owned (OREO)	4,102	4,627	4,748
Other assets	14,544	19,041	17,604

TOTAL ASSETS	536,142	538,511	607,471

LIABILITIES AND STOCKHOLDERS' EQUITY

Non-interest bearing deposits	$ 125,872	$ 124,639	$ 138,831
Savings and NOW deposits	58,281	56,569	75,451
Money market deposits	23,660	25,524	24,931
Time deposits	194,518	200,211	227,030
Total deposits	402,331	406,943	466,243

Repurchase agreements, federal funds purchased and other borrowings	42,496	43,153	39,853
Federal Home Loan Bank advances ($29,081, $26,208 and $26,765 at fair value)	44,081	41,208	51,765
Trust Preferred Capital Notes	10,310	10,310	10,310
Other liabilities	2,460	3,212	2,256

TOTAL LIABILITIES	501,678	504,826	570,427

Common stock, $4 par value; 15,000,000 shares authorized;
5,108,969 shares issued and outstanding at September 30, 2011 and
5,106,819 shares at December 31, 2010 and September 30, 2010, respectively.	20,436	20,427	20,427
Capital surplus	25,864	25,857	25,857
Retained (deficit)	(12,055)	(12,311)	(12,469)
Accumulated other comprehensive income (loss), net	219	(288)	3,229

TOTAL STOCKHOLDERS' EQUITY	34,464	33,685	37,044

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 536,142	$ 538,511	$ 607,471


* 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,
	2011*	2010*	2011*	2010*
	(Dollars in thousands, except per share)

INTEREST INCOME:
Loans	$ 4,574	$ 5,046	$ 13,674	$ 15,414
Investment securities	802	1,387	3,290	4,766
Trading securities	12	40	57	177
Federal funds sold	10	18	32	40

Total interest income	5,398	6,491	17,053	20,397

INTEREST EXPENSE:
Savings and NOW deposits	26	46	88	173
Time deposits	877	1,290	2,845	4,424
Money market deposits	45	65	139	216
Repurchase agreements, federal funds purchased and other borrowings	54	82	194	288
FHLB advances	261	282	776	866
Trust preferred capital notes	93	101	278	275

Total interest expense	1,356	1,866	4,320	6,242

Net interest income	4,042	4,625	12,733	14,155
Provision for loan losses	130	378	1,205	1,328

Net interest income after provision for loan losses	3,912	4,247	11,528	12,827

OTHER INCOME:
Deposit account service charges	39	49	115	172
Net gain on sale of available-for-sale securities	2,120	656	3,034	1,715
Fair value adjustments	(2,844)	(412)	(2,950)	(1,028)
Other operating income	34	58	153	166

Total other income	(651)	351	352	1,025

OTHER EXPENSES:
Salaries and employee benefits	1,197	1,800	3,993	5,350
Occupancy expense	578	702	1,703	1,975
Equipment expense	163	186	486	565
Other real estate owned expense	26	55	77	449
FDIC assessments	220	366	860	1,031
Merger expenses	619	-	619	-
Operating expenses	1,264	1,227	3,816	3,924

Total other expenses	4,067	4,336	11,554	13,294

Income (loss) before income taxes	(806)	262	326	558
Income tax expense (benefit)	(303)	20	70	11
NET INCOME (LOSS)	$ (503)	$ 242	$ 256	$ 547
Net income (loss) per common share, basic	$ (0.10)	$ 0.05	$ 0.05	$ 0.11
Net income (loss) per common share, diluted	$ (0.10)	$ 0.05	$ 0.05	$ 0.11
Weighted average number of shares, basic	5,108,969	5,106,819	5,108,616	5,106,819
Weighted average number of shares, diluted	5,125,607	5,108,150	5,129,311	5,107,800

* Unaudited financial results

ALLIANCE BANKSHARES CORPORATION
Consolidated Statistical Information
Performance Information

	September 30,	September 30,
	2011*	2010*
	(Dollars in thousands, except per share)
Performance Information:

For The Three Months Ended:
Average loans	$ 320,004	$ 337,923
Average earning assets	446,088	498,336
Average assets	485,386	543,338
Average non-interest bearing deposits	89,101	105,065
Average total deposits	354,348	405,019
Average interest-bearing liabilities	357,429	399,742
Average stockholder equity	36,285	36,524
Net interest margin (1)	3.61%	3.72%
Net income per share, basic	$ (0.10)	$ 0.05
Net income per share, diluted	$ (0.10)	$ 0.05

For The Nine Months Ended:
Average loans	$ 321,981	$ 347,896
Average earning assets	457,547	515,467
Average assets	495,897	560,371
Average non-interest bearing deposits	89,369	96,159
Average total deposits	358,021	409,264
Average interest-bearing liabilities	369,136	426,989
Average equity	34,839	34,877
Return on average assets	0.07%	0.13%
Return on average equity	0.98%	2.10%
Net interest margin (1)	3.74%	3.76%
Net income (loss) per share, basic	$ 0.05	$ 0.11
Net income (loss) per share, diluted	0.05	0.11


* 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,
	2011*	2010	2010*
	(Dollars in thousands)
Credit Quality Information:
Nonperforming assets:
Impaired loans (performing loans with a specific allowance)	$ -	$ 2,400	$ -
Non-accrual loans	10,657	1,903	3,065
Loans past due 90 days and still accruing	-	256	-
Troubled debt restructured	501	212	-
OREO	4,102	4,627	4,748
Total nonperforming assets	$ 15,260	$ 9,398	$ 7,813


Specific reserves associated with impaired & non-accrual loans	$ 1,370	$ 873	$ 727


Largest components of the nonperforming assets listed above:

September 30, 2011 non-accrual loans (91% of the total)
$2.7 million which is secured by commercial real estate.
$2.4 million which is secured by residential land.
$1.1 million which is secured by commercial land.
$1.1 million which is secured by 11 residential properties.
$1.0 million which is secured by commercial equipment and receivables.
$540 thousand which is secured by a residential property and lot.
$495 thousand which is secured by residential building lots.
$408 thousand which is secured by commercial real estate.


September 30, 2011 OREO (100% of the total)
$1.47 million which is acreage near Winchester, Virginia. (OREO as of 9/30/07)
$879 thousand which is acreage in Woodstock, VA. (OREO as of 3/31/08)
$837 thousand which is property in Charles Town, WV. (OREO as of 6/30/10)
$477 thousand which consists of two parcels of land in Northern Virginia. (OREO as of 3/31/08)
$164 thousand which is residential lots in Virginia. (OREO as of 6/30/11)
$156 thousand which is acreage in Spotsylvania, VA. (OREO as of 12/31/10)
$117 thousand which is a commercial lot in King George, VA. (OREO as of 3/31/10)

* 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
Credit Quality Information (1)


For The Nine Months Ended:	September 30,	September 30,
	2011*	2010*
	(Dollars in thousands)

Balance, beginning of period	$ 5,281	$ 5,619

Provision for loan losses	1,205	1,328

Loans charged off	(1,556)	(1,850)

Recoveries of loans charged off	248	127

Net charge-offs	(1,308)	(1,723)

Balance, end of period	$ 5,178	$ 5,224


	September 30,	June 30,	March 31,	December 31,	September 30,
	2011	2011	2011	2010*	2010*
Ratios:
Allowance for loan losses to total loans	1.62%	1.62%	1.75%	1.59%	1.55%

Allowance for loan losses to non-accrual loans	0.49X	0.53X	0.48X	2.8X	1.7X

Allowance for loan losses to nonperforming assets	0.34X	0.35X	0.33X	0.6X	0.7X

Nonperforming assets to total assets	2.85%	2.98%	3.16%	1.75%	1.29%

Net charge-offs to average loans	0.54%	0.46%	0.03%	0.61%	0.66%


* 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, 2011		December 31, 2010
	Fair		Fair
Trading Securities	Value	Yield	Value	Yield
	(Dollars in thousands)

PCMOs (1)	$ 559	5.43%	$ 2,075	5.32%

Totals	$ 559	5.43%	$ 2,075	5.32%


(1) As of September 30, 2011 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.


	September 30, 2011		December 31, 2010
	Fair		Fair
Fair Value Assets and Liabilities	Value		Value
	(Dollars in thousands)

Trading securities	$ 559		$ 2,075

FHLB advances	29,081		26,208

ALLIANCE BANKSHARES CORPORATION
Consolidated Statistical Information
Capital Information


	September 30,	December 31,
	2011*	2010
	(Dollars in thousands, except per share)

Capital Information:
Book value per share	$ 6.75	$ 6.60
Tier I risk-based capital ratio	12.5%	11.6%
Total risk-based capital ratio	13.8%	12.9%
Leverage capital ratio	8.3%	7.5%
Total equity to total assets ratio	6.4%	6.3%


* 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,
	2011	2010	2010
Book Value Per Share, beginning of the period	$6.60	$6.49	$6.49

Net income (loss) per common share	0.05	0.14	0.11
Effects of Changes in Other Comprehensive Income (1)	0.10	(0.03)	0.65

Book Value Per Share, end of the period	$6.75	$6.60	$7.25

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