To: | All Media |
Date: | October 19, 2007 |
Arrow Announces Third Quarter Operating Results
Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the quarter and nine-month periods ended September 30, 2007. Net income for the quarter ended September 30, 2007 was $4.510 million, representing diluted earnings per share of $.42. This was 7.7% above the diluted earnings per share amount of $.39 earned in the third quarter of 2006, when net income was $4.261 million. For the nine-month period, net income was $12.851 million in 2007, and diluted earnings per share was $1.19, 4.4% above the $1.14 amount earned in 2006 when net income was $12.597 million. Cash dividends paid to shareholders during 2007 totaled $.70 per share, or 2.9% higher than the $.68 per share paid in the first nine months of 2006. All per share amounts have been adjusted for the 3% stock dividend distributed on September 28, 2007.
Thomas L. Hoy, Chairman, President and CEO stated, "We are pleased to report that our strong earnings performance was accompanied by record levels for total assets, total deposits and total loans outstanding. Our key profitability ratios confirm the excellent operating results, highlighted by a return on average equity which exceeded 15% for the third quarter of 2007. In addition, the continuing low levels of nonperforming assets and net loan losses indicates that our asset quality remains high.
Total assets at September 30, 2007 reached a new record high of $1.577 billion, up $54.0 million, or 3.5%, over the September 30, 2006 balance of $1.523 billion. Deposit balances at September 30, 2007 were $1.218 billion, representing an increase of $55.0 million, or 4.7%, from the September 30, 2006 level of $1.163 billion. Loan balances outstanding reached $1.035 billion at September 30, 2007, representing an increase of $42.0 million, or 4.2%, from the balance at September 30, 2006. We experienced increases in all of our major loan categories during the past 12 months, including an $8.1 million increase in commercial loans, a $12.6 million increase in indirect loans (primarily automobile loans) and a $21.2 million increase in residential real estate loans.
Asset quality remained high at quarter-end, with nonperforming loans of $2.0 million at September 30, 2007, representing only .20% of period-end loans. Nonperforming assets were $2.1 million at September 30, 2007, representing only .13% of assets. Annualized net loan losses for the third quarter of 2007 as a percentage of average loans outstanding were a very low .04% compared to .07% for the third quarter of 2006. Arrow's allowance for loan losses amounted to $12.3 million at September 30, 2007, which represented 1.19% of loans outstanding. Throughout the third quarter of 2007, subprime consumer real estate lending continued to have a negative impact on the national and world economy. We have not engaged in subprime lending as a business line nor do we hold mortgage-backed securities backed by subprime mortgages in our investment portfolio.
Our increase in net interest income was primarily the result of a significant increase in average earning assets, an increase of $50.0 million from the third quarter of 2006 to the third quarter of 2007. This more than offset a decrease in our net interest margin, which for the third quarter of 2007 was 3.29%, down three basis points from the third quarter of 2006 and also down three basis points from the second quarter of 2007.
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The Federal Reserve Bank reduced the federal funds target rate on September 18, 2007. Short-term interest rates have declined greater than longer-term interest rates, resulting in a positively sloped yield curve. Throughout this volatile interest rate environment, we have continued to follow our core banking strategy and the disciplined course we believe best serves our shareholders over time.
Many of our operating ratios in recent periods have compared favorably to our peer group, consisting of all U.S. Bank Holding Companies having $1.0 to $3.0 billion in assets as identified in the Federal Reserve Bank’s June 30, 2007 ‘Bank Holding Company Performance Report.’ Most notably, our return on average equity for the quarter ended September 30, 2007 was 15.38%, as compared to 14.49% for the 2006 period. The return on average equity for our peer group was 11.05% for the June 2007 six-month period and 11.07% for the March 2007 three-month period. Our loan quality ratios also compare favorably to our peer group. Our nonperforming loans to period-end loans was .20%, compared to a ratio of .72% for our peer group at June 30, 2007. We continue to maintain a higher total risk-based capital ratio than our peer group.
As of September 30, 2007, assets under trust administration and investment management were $987.4 million, an increase of $113.9 million, or 13.0%, from September 30, 2006. This increase in asset levels, partially attributable to rising prices in the equity markets, led to a $138 thousand increase in fee income from fiduciary activities for the third quarter of 2007. Included in assets under trust administration and investment management are our proprietary mutual funds, the North Country Funds, advised exclusively by our subsidiary, North Country Investment Advisors, Inc., which recently reached a record balance of over $211 million.”
Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, NY serving the financial needs of northeastern New York. Arrow is the parent of Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company. Other subsidiaries include North Country Investment Advisers, Inc. and Capital Financial Group, Inc., an insurance agency specializing in the sale and servicing of group health plans.
The information contained in this News Release may contain statements that are not historical in nature but rather are based on management's beliefs, assumptions, expectations, estimates and projections about the future. These statements may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, involving a degree of uncertainty and attendant risk. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast, explicitly or by implication. The company undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. This News Release should be read in conjunction with the company's Annual Report on Form 10-K for the year ended December 31, 2006.
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Arrow Financial Corporation |
Consolidated Financial Information |
($ in thousands, except per share amounts) |
Unaudited |
| | Three Months | Nine Months |
| | Ended September 30, | Ended September 30, |
| | 2007 | 2006 | 2007 | 2006 |
Income Statement | | | | |
Interest and Dividend Income | $21,921 | $20,440 | $64,146 | $59,780 |
Interest Expense | 10,272 | 8,893 | 29,870 | 25,255 |
Net Interest Income | 11,649 | 11,547 | 34,276 | 34,525 |
Provision for Loan Losses | 136 | 186 | 322 | 560 |
Net Interest Income After Provision for Loan Losses | 11,513 | 11,361 | 33,954 | 33,965 |
Net (Losses) Gains on Securities Transactions | --- | --- | --- | (118) |
Net Gain on Sales of Loans | 4 | 8 | 32 | 63 |
Gain on Sale of Premises | --- | --- | --- | 227 |
Income From Fiduciary Activities | 1,334 | 1,196 | 4,206 | 3,806 |
Fees for Other Services to Customers | 2,097 | 2,163 | 6,041 | 5,976 |
Insurance Commissions | 472 | 458 | 1,435 | 1,362 |
Other Operating Income | 182 | 205 | 558 | 492 |
Total Noninterest Income | 4,089 | 4,030 | 12,272 | 11,808 |
Salaries and Employee Benefits | 5,442 | 5,546 | 16,198 | 16,497 |
Occupancy Expenses of Premises, Net | 750 | 712 | 2,393 | 2,332 |
Furniture and Equipment Expense | 720 | 776 | 2,261 | 2,346 |
Amortization of Intangible Assets | 96 | 106 | 298 | 329 |
Other Operating Expense | 2,215 | 2,062 | 7,007 | 6,183 |
Total Noninterest Expense | 9,223 | 9,202 | 28,157 | 27,687 |
Income Before Taxes | 6,379 | 6,189 | 18,069 | 18,086 |
Provision for Income Taxes | 1,869 | 1,928 | 5,218 | 5,489 |
Net Income | $ 4,510 | $ 4,261 | $12,851 | $12,597 |
| | | | | |
Share and Per Share Data1 | | | | |
Period End Shares Outstanding | 10,612 | 10,879 | 10,612 | 10,879 |
Basic Average Shares Outstanding | 10,628 | 10,878 | 10,746 | 10,931 |
Diluted Average Shares Outstanding | 10,697 | 11,031 | 10,821 | 11,085 |
Basic Earnings Per Share | $ 0.42 | $ 0.39 | $ 1.20 | $ 1.15 |
Diluted Earnings Per Share | 0.42 | 0.39 | 1.19 | 1.14 |
Cash Dividends | 0.23 | 0.23 | 0.70 | 0.68 |
Book Value | 11.20 | 10.97 | 11.20 | 10.97 |
Tangible Book Value2 | 9.63 | 9.41 | 9.63 | 9.41 |
| | | | | |
Key Earnings Ratios | | | | |
Return on Average Assets | 1.14% | 1.12% | 1.11% | 1.11% |
Return on Average Equity | 15.38 | 14.49 | 14.65 | 14.45 |
Return on Tangible Equity2 | 17.96 | 16.98 | 17.11 | 16.95 |
Net Interest Margin3 | 3.29 | 3.32 | 3.31 | 3.35 |
| | | | | |
1Share and Per Shareamounts have been restated for the September 2007 3% stock dividend. |
2Tangible Book Valueper share is the ratio of Total Equity less Intangible Assets to Period End Shares Outstanding. |
3Net Interest Marginincludes a tax equivalent upward adjustment of 20 and 15 basis points for the respective 2007 and 2006 quarterly periods and 20 and 17 basis points for the respective 2007 and 2006 nine-month periods. |
| |
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Arrow Financial Corporation |
Consolidated Financial Information |
($ in thousands) |
Unaudited |
| | September 30, 2007 | | September 30, 2006 |
| |
Period End | Third Quarter Average | Year-to- Date Average | |
Period End | Third Quarter Average | Year-to- Date Average |
Balance Sheet | | | | | | | |
Cash and Due From Banks | $ 42,219 | $ 33,854 | $ 32,746 | | $ 41,710 | $ 34,076 | $ 33,797 |
Federal Funds Sold | 4,000 | 16,013 | 17,900 | | 12,000 | 7,587 | 5,817 |
Securities Available-for-Sale | 336,055 | 342,959 | 329,523 | | 339,812 | 349,829 | 342,160 |
Securities Held-to-Maturity | 115,702 | 114,373 | 110,463 | | 91,607 | 95,687 | 105,891 |
Loans | 1,034,548 | 1,021,399 | 1,015,529 | | 992,675 | 991,669 | 995,578 |
Allowance for Loan Losses | (12,341) | (12,325) | (12,313) | | (12,274) | (12,273) | (12,257) |
Net Loans | 1,022,207 | 1,009,074 | 1,003,216 | | 980,401 | 979,396 | 983,321 |
Premises and Equipment, Net | 16,385 | 16,235 | 16,034 | | 15,935 | 15,887 | 15,973 |
Goodwill and Intangible Assets, Net | 16,699 | 16,762 | 16,861 | | 17,044 | 17,112 | 17,201 |
Other Assets | 23,782 | 17,059 | 17,083 | | 24,867 | 16,148 | 15,391 |
Total Assets | $1,577,049 | $1,566,329 | $1,543,826 | | $1,523,376 | $1,515,722 | $1,519,551 |
Demand Deposits | $ 191,125 | $ 194,628 | $ 185,285 | | $ 184,773 | $ 187,764 | $ 182,180 |
Nonmaturity Interest-Bearing Deposits | 607,180 | 573,839 | 569,550 | | 566,578 | 551,061 | 575,260 |
Time Deposits of $100,000 or More | 166,916 | 189,685 | 182,524 | | 147,409 | 154,929 | 158,811 |
Other Time Deposits | 252,281 | 257,056 | 260,665 | | 264,324 | 255,491 | 245,121 |
Total Deposits | 1,217,502 | 1,215,208 | 1,198,024 | | 1,163,084 | 1,149,245 | 1,161,372 |
Short-Term Borrowings | 48,791 | 49,976 | 48,515 | | 55,296 | 50,062 | 44,107 |
Federal Home Loan Bank Advances | 150,000 | 141,256 | 136,535 | | 145,000 | 158,595 | 157,693 |
Other Long-Term Debt | 20,000 | 20,000 | 20,000 | | 20,000 | 20,000 | 20,000 |
Other Liabilities | 21,882 | 23,527 | 23,463 | | 20,623 | 21,137 | 19,799 |
Total Liabilities | 1,458,175 | 1,449,967 | 1,426,537 | | 1,404,003 | 1,399,039 | 1,402,971 |
Common Stock | 14,729 | 14,486 | 14,362 | | 14,300 | 14,060 | 13,943 |
Surplus | 160,912 | 155,697 | 152,766 | | 150,356 | 144,357 | 141,328 |
Undivided Profits | 13,410 | 17,594 | 18,550 | | 15,878 | 21,046 | 22,243 |
Unallocated ESOP Shares | (2,042) | (2,042) | (1,673) | | (862) | (862) | (864) |
Accumulated Other Comprehensive Loss | (6,157) | (7,772) | (7,643) | | (4,870) | (6,496) | (6,073) |
Treasury Stock | (61,978) | (61,601) | (59,073) | | (55,429) | (55,422) | (53,997) |
Total Shareholders’ Equity | 118,874 | 116,362 | 117,289 | | 119,373 | 116,683 | 116,580 |
Total Liabilities and Shareholders’ Equity | $1,577,049 | $1,566,329 | $1,543,826 | | $1,523,376 | $1,515,722 | $1,519,551 |
| | | | | | | | |
Assets Under Trust Administration and Investment Management | $987,415 | | | | $873,565 | | |
| | | | | | | | |
Capital Ratios | | | | | | | |
Leverage Ratio | 8.39% | | | | 8.51% | | |
Tier 1 Risk-Based Capital Ratio | 12.63 | | | | 12.87 | | |
Total Risk-Based Capital Ratio | 13.82 | | | | 14.10 | | |
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Arrow Financial Corporation |
Consolidated Financial Information |
($ in thousands) |
Unaudited |
| | September 30, |
| | 2007 | 2006 |
Loan Portfolio | | |
Commercial, Financial and Agricultural | $ 79,109 | $ 79,016 |
Real Estate – Commercial | 189,350 | 181,295 |
Real Estate – Residential | 419,054 | 397,879 |
Indirect and Other Consumer Loans | 347,035 | 334,485 |
Total Loans | $1,034,548 | $992,675 |
| | | |
Allowance for Loan Losses, Third Quarter | | |
Allowance for Loan Losses, Beginning of Period | $12,315 | $12,265 |
| | | |
Loans Charged-off | (185) | (240) |
Recoveries of Loans Previously Charged-off | 75 | 63 |
Net Loans Charged-off | (110) | (177) |
| | | |
Provision for Loan Losses | 136 | 186 |
Allowance for Loan Losses, End of Period | $12,341 | $12,274 |
| | | |
Allowance for Loan Losses, First Nine Months | | |
Allowance for Loan Losses, Beginning of Period | $12,278 | $12,241 |
| | | |
Loans Charged-off | (610) | (784) |
Recoveries of Loans Previously Charged-off | 351 | 257 |
Net Loans Charged-off | (259) | (527) |
| | | |
Provision for Loan Losses | 322 | 560 |
Allowance for Loan Losses, End of Period | $12,341 | $12,274 |
| | | |
Nonperforming Assets | | |
Nonaccrual Loans | $1,900 | $1,263 |
Loans Past Due 90 or More Days and Accruing | 121 | 59 |
Total Nonperforming Loans | 2,021 | 1,322 |
Repossessed Assets | 63 | 82 |
Other Real Estate Owned | 26 | 200 |
Total Nonperforming Assets | $2,110 | $1,604 |
| | | |
Key Asset Quality Ratios | | |
Net Loans Charged-off to Average Loans, Third Quarter Annualized | 0.04% | 0.07% |
Net Loans Charged-off to Average Loans, First Nine Months Annualized | 0.03 | 0.07 |
Provision for Loan Losses to Average Loans, Third Quarter Annualized | 0.05 | 0.07 |
Provision for Loan Losses to Average Loans, First Nine Months Annualized | 0.04 | 0.08 |
Allowance for Loan Losses to Period-End Loans | 1.19 | 1.24 |
Allowance for Loan Losses to Nonperforming Loans | 610.64 | 928.41 |
Nonperforming Loans to Period-End Loans | 0.20 | 0.13 |
Nonperforming Assets to Period-End Assets | 0.13 | 0.11 |
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