Significant progress in reducing nonperforming assets; core banking metrics show improvement.

CHANTILLY, Va. -- (Business Wire)

Alliance Bankshares Corporation (NASDAQ: ABVA) today reported third quarter net income of $242,000. On a year-to-date basis, the Company has earned $547,000, representing a significant improvement over the first nine months of 2009, when the Company reported a loss on continuing operations of $2.2 million. Alliance’s regulatory capital ratios remain above the levels necessary to be considered a “well capitalized”financial institution.

“Our third quarter results reflect the benefits of our continuing emphasis on reducing nonperforming assets, strengthening core earnings, and repositioning the franchise,” said William E. Doyle, Jr., President and Chief Executive Officer. “While we remain cautious in our outlook for the near future due to continuing weakness in the economy, the favorable reductions in OREO and non-accruals are very positive and contribute to an overall improvement in the risk profile of our loan portfolio. Core earnings are improved through growth in low cost deposits and decreased operating costs relating to specific initiatives recently implemented. Our market and business development programs are yielding new loan opportunities with very qualified borrowers, an effort we expect to take to a higher level with the recent addition of George Cave to lead Commercial Banking. Optimizing profitability, while also investing in our future, remains the primary focus of the management team and Board of Directors,” Doyle concluded.

At September 30, 2010, total assets amounted to $607.5 million or growth of $31.2 million over the December 31, 2009 level of $576.3 million. As of September 30, 2010, total loans were down $22.3 million from December 31, 2009 level of $359.4 million. Investment securities amounted to $125.7 million as of September 30, 2010 a decline of $19.3 million from the December 31, 2009 level of $145.0 million. As part of our strategic balance sheet repositioning, Alliance is tactically reducing certain types of real estate loans and the size of the investment portfolio. Our longer-term objective is to grow small business commercial loans and owner occupied commercial real estate. We believe growth in these lending market segments will help to improve our loan portfolio diversification and risk profile while adding attractive earning assets.

Net income for the third quarter of 2010 was $242,000, or an improvement of $1.2 million over the same period last year. The quarter's results reflect the continuing impact of credit costs, OREO expenses, and fair value adjustments, as well as opportunistic gains realized from the securities portfolio. The progressive positive improvement is also reflected in net interest margin, which increased by 71 basis points to a level of 3.72% during the quarter. On a “core operating basis,” the Company's performance during the quarter indicates measurable improvement. “Core earnings,” i.e., before expenses for taxes, provision, and OREO, fair value adjustments and gains on securities sales, was a positive $451,000 compared to a positive $20,000 in the third quarter of 2009.

Net income for the first nine months of 2010 was $547,000, compared to a loss of $1.9 million for the same period in 2009. The Company's net interest margin improved to 3.76% for the nine month period in 2010. “Core earnings” for the first nine months of 2010 were a positive $1.6 million, compared to a negative $764,000 for the first nine months of 2009.

Non-GAAP Presentation.The Company prepares its financial statements under accounting principles generally accepted in the United States or “GAAP.” However, this press release refers to certain non-GAAP financial measures that we believe, when considered together with GAAP financial measures, provides investors with important information regarding our operational performance. An analysis of any non-GAAP financial measure should be used in conjunction with the results presented in accordance with GAAP.

Core earnings is a non-GAAP financial measure that reflects net income excluding taxes, loan loss provisions, OREO expenses, gains or losses on security transactions and fair value adjustments. These excluded items fluctuate and are difficult to predict and we believe core earnings provides the Company and investors a valuable tool to measure and evaluate the financial performance of the Company from period to period.

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 atwww.alliancebankva.com, or by phoning an Alliance office.

Contacts:

Alliance Bankshares Corporation
William E. Doyle, Jr., (703) 814-7200
or
Paul M. Harbolick, Jr., (703) 814-7200

Source: Alliance Bankshares Corporation