To: | All Media |
Date: | January 23, 2007 |
Arrow Reports Results of Operations for 2006
Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the quarter and year ended December 31, 2006. Net income for the quarter ended December 31, 2006 was $4.3 million, representing diluted earnings per share of $.40, or 7.0% below the diluted per share amount of $.43 earned in the fourth quarter of 2005, when net income was $4.7 million. Net income for the year 2006 was $16.9 million, representing diluted earnings per share of $1.57, or 8.2% below the diluted per share amount of $1.71 earned in 2005, when net income was $18.6 million. Cash dividends paid to shareholders in 2006 totaled $.94, or 5.6% higher than the $.89 paid in 2005.
Thomas L. Hoy, Chairman, President and CEO stated, "Our fourth quarter and twelve month operating results for 2006 again reflected the impact of a lower net interest margin. Although the Federal Reserve Bank has not changed the targeted federal funds rate since the June 2006 meeting of the Federal Open Market Committee, the Fed’s actions to raise the short-term rate 425 basis points between June 2004 and June 2006 resulted in significant increases in our funding costs. However, intermediate and longer term rates, which are more likely to influence our earning asset yields, have not risen commensurately leading to margin shrinkage. Although earning asset yields increased steadily throughout 2006, our cost of funds rose at an even faster rate. Net interest margin was 3.24% for the fourth quarter of 2006 compared with 3.32% for the preceding quarter and 3.46% for the same quarter last year. & nbsp;Net interest margin for the year ending December 31, 2006 was 3.32% which compared with 3.64% for 2005.
Increases in other non-interest income partially offset the impact of margin compression. An increase in assets under trust administration and investment management of $92.8 million, or 11.4%, from year-end 2005 to year-end 2006, led to a $406 thousand increase in income from fiduciary activities. We also experienced a $583 thousand increase in fees for other services to customers and an $85 thousand increase in commission income from group health and life insurance sales.
Arrow's key profitability ratios, return on average assets and return on average equity, remained strong in 2006, but were down from 2005 levels, again principally due to margin compression. Return on average assets for the year of 2006 was 1.11%, compared with 1.28% for the prior year, while return on average equity for 2006 was 14.38% versus 15.94% for 2005. For the quarter ended December 31, 2006, the return on average assets was 1.11% compared with 1.23% for the same quarter in 2005, whereas return on average equity was 14.19% for the 2006 quarter as compared with 16.04% for 2005.”
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Mr. Hoy further added, "Deposit balances at December 31, 2006 were $1.186 billion, representing an increase of $20.6 million, or 1.8%, from the prior year-end balance of $1.166 billion. For the first time, loan balances outstanding exceeded one billion dollars at year-end, reaching $1.009 billion at December 31, 2006. Loan growth totaled $12.5 million in the 12-month period, representing a 1.2% increase. The relatively strong demand for commercial and commercial real estate credit that we experienced in 2004 and 2005 continued throughout 2006. Commercial loans totaled $272 million at December 31, 2006, up $24 million, or 9.7%, from $248 million one year earlier. Residential mortgage loan balances rose $12 million, or 3.2%, to $399 million from $387 million at December 31, 2005. The volume of new residential mortgage loan originations increased over the 2005 total as attractive financing rates during 2006 continued to spur demand. The consumer installment loan portfolio was the only loan category to decrease during 2006. This category, primarily loans to finance motor vehicles, decreased $25 million, or 6.8%, to $337 million at year-end 2006 from $362 million at December 31, 2005. For most of 2006 we elected not to compete aggressively in the indirect loan sector in the face of a resurgence of extremely low rates being offered by automobile manufacturers, their finance affiliates and other lenders in the marketplace.”
Mr. Hoy said, "Asset quality remained high at year-end, with nonperforming loans of $2.8 million at December 31, 2006, representing only .28% of year-end loans, but up from the ratio of .23% one year earlier. This compared favorably with the ratio for our peer group at September 30, 2006 which was .54%. Nonperforming assets were $3.2 million at December 31, 2006, equaling .21% of assets, up from .16% one year earlier. Net loan losses for 2006, expressed as a percentage of average loans outstanding, were a very low .08% compared to .09% for 2005. Arrow's allowance for loan losses amounted to $12.3 million at December 31, 2006, which represented 1.22% of loans outstanding.
Other highlights for 2006 included the distribution of a 3% stock dividend in September which effectively resulted in a fourth quarter increase in the quarterly cash dividend. We expect to open two new branches in early 2007 situated in the northern and southern regions of our market area. The economy of the greater Plattsburgh, New York area remains vibrant and has been a source of significant new business for us. We have strategically located a new Glens Falls National Bank branch in South Plattsburgh on property purchased from the Plattsburgh Airbase Redevelopment Corporation on the corner of U.S. Avenue and New York Road. A new branch for Saratoga National Bank will be located on Ballard Road in Wilton, New York, an area experiencing significant residential growth and business expansion. The North Country Funds, which are advised exclusively by our subsidiary, North Country Investmen t Advisors, Inc., continued to grow, reaching a record combined balance of $176 million at year-end.”
Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, NY, serving the financial needs of Northeastern New York. Arrow is the parent of Glens Falls National Bank and Trust Company, its subsidiary, Capital Financial Group, Inc. and Saratoga National Bank and Trust Company.
The information contained in this News Release may contain statements that are not historical in nature but rather are based on management's beliefs, assumptions, expectations, estimates and projections about the future. Examples are management’s statements about future economic conditions and anticipated business developments. These statements are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and involve a degree of uncertainty and attendant risk. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast. The Company undertakes no obligation to revise or update any forward-looking statements to reflect the occurrence of unanticipated events. This News Release should be read in conjunction with the Company's Annual Report on For m 10-K and Form 10-K/A for the year ended December 31, 2005.
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Arrow Financial Corporation |
Consolidated Financial Information |
($ in thousands, except per share amounts) |
Unaudited |
| | Three Months | Twelve Months |
| | Ended December 31, | Ended December 31, |
| | 2006 | 2005 | 2006 | 2005 |
Income Statement | | | | |
Interest and Dividend Income | $20,831 | $19,190 | $80,611 | $72,127 |
Interest Expense | 9,488 | 7,272 | 34,743 | 24,114 |
Net Interest Income | 11,343 | 11,918 | 45,868 | 48,013 |
Provision for Loan Losses | 266 | 404 | 826 | 1,030 |
Net Interest Income After Provision for Loan Losses | 11,077 | 11,514 | 45,042 | 46,983 |
| | | | | |
Net Gain (Loss) on Securities Transactions | 16 | 24 | (102) | 364 |
Net Gain on Sales of Loans | 11 | 14 | 74 | 122 |
Net Gain on the Sale of Other Real Estate Owned | --- | 29 | --- | 57 |
Net Gains on Sale of Premises | --- | --- | 227 | --- |
Income From Fiduciary Activities | 1,276 | 1,241 | 5,082 | 4,676 |
Fees for Other Services to Customers | 1,978 | 1,811 | 7,954 | 7,371 |
Insurance Commissions | 406 | 351 | 1,768 | 1,683 |
Other Operating Income | 286 | 220 | 778 | 675 |
Total Other Income | 3,973 | 3,690 | 15,781 | 14,948 |
| | | | | |
Salaries and Employee Benefits | 5,599 | 5,155 | 22,096 | 20,693 |
Occupancy Expenses of Premises, Net | 726 | 689 | 3,058 | 2,914 |
Furniture and Equipment Expense | 625 | 604 | 2,971 | 2,875 |
Amortization of Intangible Assets | 107 | 127 | 436 | 385 |
Foreclosed Property Expense | 45 | --- | 119 | --- |
Other Operating Expense | 2,018 | 1,953 | 8,127 | 8,322 |
Total Other Expense | 9,120 | 8,528 | 36,807 | 35,189 |
| | | | | |
Income Before Taxes | 5,930 | 6,676 | 24,016 | 26,742 |
Provision for Income Taxes | 1,635 | 1,986 | 7,124 | 8,103 |
Net Income | $ 4,295 | $ 4,690 | $16,892 | $18,639 |
| | | | | |
Share and Per Share Data1 | | | | |
Period Ending Shares Outstanding | 10,587 | 10,677 | 10,587 | 10,677 |
Basic Average Shares Outstanding | 10,578 | 10,672 | 10,604 | 10,732 |
Diluted Average Shares Outstanding | 10,700 | 10,834 | 10,745 | 10,914 |
| | | | | |
Basic Earnings Per Share | $ 0.41 | $ 0.44 | $ 1.59 | $ 1.74 |
Diluted Earnings Per Share | 0.40 | 0.43 | 1.57 | 1.71 |
| | | | | |
Cash Dividends | 0.24 | 0.23 | 0.94 | 0.89 |
| | | | | |
Book Value | 11.16 | 11.00 | 11.16 | 11.00 |
Tangible Book Value2 | 9.56 | 9.37 | 9.56 | 9.37 |
| | | | | |
Key Earnings Ratios | | | | |
Return on Average Assets | 1.11% | 1.23% | 1.11% | 1.28% |
Return on Average Equity | 14.19 | 16.04 | 14.38 | 15.94 |
Net Interest Margin3 | 3.24 | 3.46 | 3.32 | 3.64 |
| | | | | |
1Share and Per Shareamounts have been restated for the September 2006 3% stock dividend. |
2Tangible Book Valueexcludes from total equity intangible assets, primarily goodwill. |
3Net Interest Marginincludes a tax equivalent upward adjustment for the fourth quarter of 15 basis points in 2006 and 18 basis points in 2005 and |
an upward adjustment for the twelve-month period of 16 basis points in 2006 and 18 basis points in 2005. |
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Arrow Financial Corporation |
Consolidated Financial Information |
($ in thousands) |
Unaudited |
| | | | |
| | December 31, 2006 | | December 31, 2005 |
| | | Fourth | Year-to- | | | Fourth | Year-to- |
| | Period | Quarter | Date | | Period | Quarter | Date |
| | End | Average | Average | | End | Average | Average |
Balance Sheet | | | | | | | |
Cash and Due From Banks | $ 34,995 | $ 34,018 | $ 33,853 | | $ 35,558 | $ 36,075 | $ 36,312 |
Federal Funds Sold | 9,000 | 17,951 | 8,875 | | --- | 4,842 | 3,060 |
Securities Available-for-Sale | 315,886 | 340,686 | 341,789 | | 326,363 | 331,251 | 328,404 |
Securities Held-to-Maturity | 108,498 | 99,898 | 104,380 | | 118,123 | 118,814 | 112,735 |
| | | | | | | | |
Loans | 1,008,999 | 999,676 | 996,611 | | 996,545 | 988,567 | 942,286 |
Allowance for Loan Losses | (12,278) | (12,282) | (12,263) | | (12,241) | (12,216) | (12,136) |
Net Loans | 996,721 | 987,394 | 984,348 | | 984,304 | 976,351 | 930,150 |
| | | | | | | | |
Premises and Equipment, Net | 15,608 | 15,854 | 15,943 | | 15,884 | 15,491 | 15,225 |
Goodwill and Intangible Assets, Net | 16,925 | 16,993 | 17,149 | | 17,337 | 17,361 | 15,907 |
Other Assets | 22,584 | 17,772 | 15,990 | | 22,034 | 15,844 | 16,923 |
Total Assets | $1,520,217 | $1,530,566 | $1,522,327 | | $1,519,603 | $1,516,029 | $1,458,716 |
| | | | | | | | |
Demand Deposits | $ 183,492 | $ 184,267 | $ 182,706 | | $ 179,441 | $ 179,555 | $ 174,762 |
Nonmaturity Interest-Bearing Deposits | 559,132 | 570,705 | 574,113 | | 610,524 | 622,108 | 610,995 |
Time Deposits of $100,000 or More | 187,777 | 170,388 | 161,729 | | 154,626 | 136,703 | 126,919 |
Other Time Deposits | 255,996 | 259,346 | 248,706 | | 221,172 | 214,330 | 198,130 |
Total Deposits | 1,186,397 | 1,184,706 | 1,167,254 | | 1,165,763 | 1,152,696 | 1,110,806 |
| | | | | | | | |
Short-Term Borrowings | 48,324 | 51,788 | 46,044 | | 43,054 | 57,817 | 49,493 |
Federal Home Loan Bank Advances | 125,000 | 131,217 | 151,020 | | 157,000 | 149,120 | 143,889 |
Other Long-Term Debt | 20,000 | 20,000 | 20,000 | | 20,000 | 20,000 | 20,000 |
Other Liabilities | 22,366 | 22,758 | 20,543 | | 16,365 | 20,389 | 17,572 |
Total Liabilities | 1,402,087 | 1,410,469 | 1,404,861 | | 1,402,182 | 1,400,022 | 1,341,760 |
| | | | | | | | |
Common Stock | 14,300 | 14,300 | 14,033 | | 13,883 | 13,883 | 13,623 |
Surplus | 150,919 | 150,660 | 143,680 | | 139,442 | 139,233 | 131,974 |
Undivided Profits | 17,619 | 16,323 | 20,751 | | 21,402 | 20,007 | 23,845 |
Unallocated ESOP Shares | (862) | (862) | (864) | | (1,163) | (1,181) | (1,183) |
Accumulated Other Comprehensive Loss | (7,965) | (4,645) | (5,713) | | (4,563) | (4,415) | (2,281) |
Treasury Stock | (55,881) | (55,679) | (54,421) | | (51,580) | (51,520) | (49,022) |
Total Shareholders’ Equity | 118,130 | 120,097 | 117,466 | | 117,421 | 116,007 | 116,956 |
Total Liabilities and Shareholders’ Equity | $1,520,217 | $1,530,566 | $1,522,327 | | $1,519,603 | $1,516,029 | $1,458,716 |
| | | | | | | | |
Assets Under Trust Administration And Investment Management | $906,451 | | | | $813,693 | | |
| | | | | | | | |
Capital Ratios | | | | | | | |
Leverage Ratio | 8.63% | | | | 8.33% | | |
Tier 1 Risk-Based Capital Ratio | 13.09 | | | | 12.56 | | |
Total Risk-Based Capital Ratio | 14.32 | | | | 13.79 | | |
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Arrow Financial Corporation |
Consolidated Financial Information |
($ in thousands) |
Unaudited |
| | December 31, |
| | 2006 | 2005 |
Loan Portfolio | | |
Commercial, Financial and Agricultural | $ 79,581 | $ 79,917 |
Real Estate – Commercial | 192,762 | 168,101 |
Real Estate – Residential | 399,446 | 386,902 |
Indirect and Other Consumer Loans | 337,210 | 361,625 |
Total Loans | $1,008,999 | $996,545 |
| | | |
Allowance for Loan Losses, Fourth Quarter | | |
Allowance for Loan Losses, Beginning of Period | $12,274 | $12,211 |
| | | |
Loans Charged-off | (353) | (437) |
Recoveries of Loans Previously Charged-off | 91 | 63 |
Net Loans Charged-off | (262) | (374) |
| | | |
Provision for Loan Losses | 266 | 404 |
Allowance for Loan Losses, End of Period | $12,278 | $12,241 |
| | | |
Allowance for Loan Losses, Twelve Months | | |
Allowance for Loan Losses, Beginning of Period | $12,241 | $12,046 |
| | | |
Loans Charged-off | (1,137) | (1,128) |
Recoveries of Loans Previously Charged-off | 348 | 293 |
Net Loans Charged-off | (789) | (835) |
| | | |
Provision for Loan Losses | 826 | 1,030 |
Allowance for Loan Losses, End of Period | $12,278 | $12,241 |
| | | |
Nonperforming Assets | | |
Nonaccrual Loans | $2,038 | $1,875 |
Loans Past Due 90 or More Days and Accruing | 739 | 373 |
Total Nonperforming Loans | 2,777 | 2,248 |
Repossessed Assets | 144 | 124 |
Other Real Estate Owned | 248 | --- |
Total Nonperforming Assets | $3,169 | $2,372 |
| | | |
Key Asset Quality Ratios | | |
Net Loans Charged-off to Average Loans, Fourth Quarter Annualized | 0.10% | 0.15% |
Net Loans Charged-off to Average Loans, Twelve Months | 0.08 | 0.09 |
| | | |
Provision for Loan Losses to Average Loans, Fourth Quarter Annualized | 0.11 | 0.16 |
Provision for Loan Losses to Average Loans, Twelve Months | 0.08 | 0.11 |
| | | |
Allowance for Loan Losses to Period-End Loans | 1.22 | 1.23 |
Allowance for Loan Losses to Nonperforming Loans | 442.12 | 544.55 |
Nonperforming Loans to Period-End Loans | 0.28 | 0.23 |
Nonperforming Assets to Period-End Assets | 0.21 | 0.16 |
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