Alliance Bankshares Reports 4th Quarter 2007 Results.Real Estate Recession Impacts Performance CHANTILLY, Va. -- Alliance Bankshares Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ABVA) today reported fourth quarter results and the full year 2007 results. We had a net loss of $4,252,000 for the fourth quarter 2007 and a net loss of $2,844,000 for the full year of 2007. The performance is below the 2006 fourth quarter net income of $554,000 and the full year 2006 results of $4,479,000. The results were impacted largely by three key factors: deteriorated credit quality, increased funding costs throughout the year, and the impact of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 159 and the resulting negative mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. primarily on the liability side of the balance sheet. Despite the 2007 net loss, all regulatory capital ratios remain above the levels necessary to be considered a "well capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. " institution. "Obviously, the management team and Board of Directors are very disappointed in these results," stated Thomas A. Young, Jr., President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "The well documented downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in the residential real estate markets has impacted us on both sides of our balance sheet. On the asset side, we have seen weakness with a handful of our builders and we have also experienced losses in our home equity product. On the liability side of the balance sheet a number of our real estate service providers have seen their businesses contract significantly which has impacted us in the area of non-interest bearing deposits. While somewhat apparent in earlier quarters, these factors all converged at the end of the year," Young continued. Our provision for loan losses was $4.7 million in the fourth quarter of 2007 and $5.8 million for the full year of 2007. The significant increase in the fourth quarter provision for loan losses was necessary to cover $3.4 million in chargeoffs for the quarter and to increase the allowance for loan losses to an appropriate level based upon our performing loans and the specific allocations necessary for the impaired loans. As of December 31, 2007, the allowance for loan losses was $6.4 million or 1.61% of loans. The allowance for loan losses has grown from the third quarter 2007 level of $5.1 million or 1.30% of September 30, 2007 loans and the December 31, 2006 level of $4.4 million or 1.16% of the year end 2006 loan. The chargeoffs included $.8 million to resolve a previously reported impaired loan as well as a partial write-down of $1.5 million on a land loan due to a valuation issue. The remaining $1.1 million was spread across 20 smaller credits, primarily home equity loans, where borrowers tied to the residential real estate industry were hit with losses of personal income along with the loss of value and marketability Marketability A negotiable security is said to have good marketability if there is an active secondary market in which it can easily be resold. marketability The ease with which an investment may be bought and sold in the secondary market. of the underlying property. Approximately $2.2 million of the $6.4 million allowance for loan losses represents our estimate of an appropriate impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. reserve based on a loan by loan analysis. The fourth quarter results include a loss of approximately $1.3 million on Fair Value Adjustments and trading activity. As we have repositioned the balance sheet the items accounted for under SFAS No. 159, Fair Value Option for Financial Assets Financial assets Claims on real assets. and Financial Liabilities have generated a net loss for the organization. The bulk of the loss is the mark-to-market adjustment on liabilities. As the organization has downsized the total balance sheet, approximately $85.0 million of assets are accounted for on a Fair Value basis and approximately $187.3 million of liabilities are accounted for on a Fair Value basis. The mismatch mismatch 1. in blood transfusions and transplantation immunology, an incompatibility between potential donor and recipient. 2. one or more nucleotides in one of the double strands in a nucleic acid molecule without complementary nucleotides in the same position on the other is causing more volatility in the financial results than expected. We are evaluating various options to reduce the volatility of the results. Recent swings in the interest rate markets will have an adverse effect on our results. Total loans grew approximately 5% from December 31, 2006 to December 31, 2007. Total loans were $398.2 million as of December 31, 2007. Total assets were $541.3 million as of December 31, 2007 or $103.1 million less than the December 31, 2006 position of $644.4 million. The year over year decline in total assets was part of a planned balance sheet strategy enacted in mid 2007. Our business strategy focused on shrinking the investment portfolio which was $200.8 million as of December 31, 2006 to a significantly smaller portfolio. As of December 31, 2007, our total investments were $111.1 million or a reduction of $89.7 million. Our goal further included rebalancing Rebalancing The process of realigning the weightings of one's portfolio of assets. Notes: For example, if your portfolio's proportion of stock has grown too large for your intended assets weightings and risk tolerance, you might rebalance by selling some stock and putting the portfolio away from mortgage oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. products to SBA SBA abbr. Small Business Administration Noun 1. SBA - an independent agency of the United States government that protects the interests of small businesses and ensures that they receive a fair share of government and other Government Agency products. The reduction in the investment portfolio was used to reduce reliance on borrowed funds. Our non-interest bearing deposits decreased by $92.5 million over the past year. Total non-interest bearing deposits were $66.2 million or 18.1% of total deposits as of December 31, 2007. This was a significant decline from the December 31, 2006 levels of $158.7 million or 33.7% of 2006 total deposits. This was tied directly to the reduction in deposit balances in our real estate services relationships and not erosion in the actual numbers of relationships, which continue to grow. The past year has proven to be an exceptionally challenging year in the residential real estate arena in the metropolitan Washington, D.C. "On a positive note, we have actually added new relationship managers and have entered into a strategic alliance to expand this aspect of our business. We are adding new customers daily," said Frank H. Grace, III, Executive Vice President, the member of the senior management team charged with leading this initiative. The organization's capital position remains strong. We have absorbed the 2007 net loss and still have in excess of $45.7 million of common stockholder's equity Stockholder's equity The residual claims that stockholders have against a firm's assets, calculated by subtracting all current liabilities and debt liabilities from total assets. . Our risk based capital ratios remain strong and the organization is considered "well capitalized" under regulatory capital measurements. Alliance Insurance continues to be a bright spot for the company. "Our four offices have done a great job this year in what turned out to be a very challenging environment for the insurance industry," said Thomas P. Danaher, President of Alliance Insurance. "We were pleased to add the Fredericksburg team led by Randy Thomas Men known as Randy Thomas
v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the opportunities presented by the bank's customers through a stronger working relationship with account managers, which we expect to impact results going forward." Harvey E. Johnson, Jr., Chairman of the Board stated, "We are not being complacent com·pla·cent adj. 1. Contented to a fault; self-satisfied and unconcerned: He had become complacent after years of success. 2. Eager to please; complaisant. about these results. Our officers are working aggressively to resolve non-performing assets. Relationship managers are emphasizing deposit gathering activities. Business initiatives are reviewed regularly with the board and management will be examining all business lines and expense categories to minimize costs where prudent." He further added, "As we continue to weather the real estate downturn, our core client base is expanding. The products and services we offer remain extremely competitive and the steps management is taking should position the organization for results that are more reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of our franchise's capability. The credit issues continue to be concentrated in a small group of relationships that have been significantly impacted by the residential real estate recession. As with any real estate cycle it is difficult to project when the cycle will change. Recent actions by the Federal Reserve should have a positive impact on the Metropolitan Washington, D.C. area economy in the near term." Some of the matters discussed herein may include forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . These forward-looking statements may include statements regarding profitability, balance sheet management goals and actions and financial and other goals. These statements are based on certain assumptions and analyses by the company and other factors it believes are appropriate in the circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . However, the company's expectations are subject to a number of risks and uncertainties such as changes in personnel, interest rates, accounting standards, economic conditions and other factors that could cause actual results, events and developments to differ materially from those contemplated by any forward-looking statements herein. Consequently, all forwarding-looking statements made herein are qualified by these cautionary statements and cautionary language in the company's most recent report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and other documents filed with the Securities and Exchange Commission. * All per share amounts are adjusted to reflect the three-for-twenty stock split in the form of a 15% stock dividend paid on June 30, 2006. More information on Alliance Bankshares Corporation can be found online at www.alliancebankva.com, or by phoning an Alliance office. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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