ARROW FINANCIAL CORPORATION 
By The ongoing deterioration of the real estate markets nationally and increasing levels of unemployment have continued to negatively impact many financial institutions, primarily as a result of their holdings of subprime or poor-quality mortgage loans, as well as investment securities backed by pools of such loans. Moreover, in recent periods many banks have begun to experience sudden and significant deterioration in all loan categories with sharp increases in delinquencies and charge-offs. To date, we have not been significantly affected by such trends. We have never engaged in the origination of subprime mortgage loans as a business line, nor do we hold mortgage-backed securities backed by subprime mortgages in our investment portfolio. Our commercial, residential real estate and indirect consumer loan portfolios had experienced no material deterioration at year-end, although the communities we serve, like all areas of the U.S., have undoubtedly begun to feel the effects of the recession.
Net interest income increased 26.3%, or
The economic downturn will most likely lead to a further softening in the local economies in which we operate and may result in increased credit losses which are inherent within our existing loan portfolio. Accordingly, during 2008, we prudently increased the provision for loan losses to reflect our best estimate of probable incurred loan losses.
We hold certain corporate debt instruments issued by entities whose values have been negatively impacted by the deterioration of the financial markets. We hold a
As we previously reported, Visa successfully completed an initial public offering (IPO) during the first quarter of 2008 which included a mandatory partial redemption of our holdings in Visa shares. This transaction resulted in a positive impact on our net income of
Total assets at
Despite the significant troubles affecting the U.S. economy generally, asset quality remained strong at year-end 2008. Nonperforming assets totaled
In recent periods, many of our other operating ratios have been well above those of our peer group. Most notably, our year-to-date return on average equity (ROE) through
As a result of the tumult in the financial markets, we experienced an
As of
Arrow Financial Corporation is a multi-bank holding company headquartered in
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 our most current Quarterly Report on Form 10-Q for the quarter ended
Arrow Financial Corporation
Consolidated Financial Information
($in thousands, except per share amounts)
Unaudited
Three Months Twelve Months
Ended December 31, Ended December 31,
2008 2007 2008 2007
---- ---- ---- ----
Income Statement
Interest and Dividend Income $22,719 $22,431 $89,508 $86,577
Interest Expense 7,541 10,413 32,277 40,283
----- ------ ------ ------
Net Interest Income 15,178 12,018 57,231 46,294
Provision for Loan Losses 880 191 1,671 513
--- --- ----- ---
Net Interest Income After
Provision for Loan Losses 14,298 11,827 55,560 45,781
------ ------ ------ ------
Other-Than-Temporary Impairment
Write-down on Securities (400) --- (1,610) ---
Gain on Visa Stock Redemption --- --- 749 ---
Net Gain on Securities
Transactions 412 --- 383 ---
Net Gain on Sales of Loans 51 9 106 41
Net Gain (Loss) on the Sale of
Other Real Estate Owned 30 (9) 30 (4)
Gain on Sale of Premises --- --- 115 ---
Income From Fiduciary
Activities 1,279 1,366 5,463 5,572
Fees for Other Services
to Customers 2,244 2,089 8,562 8,130
Insurance Commissions 491 434 2,066 1,869
Other Operating Income 45 127 405 680
-- --- --- ---
Total Noninterest Income 4,152 4,016 16,269 16,288
----- ----- ------ ------
Salaries and Employee Benefits 6,640 5,226 24,551 21,424
Occupancy Expenses of Premises,
Net 863 805 3,479 3,198
Furniture and Equipment Expense 826 754 3,211 3,015
Amortization of Intangible
Assets 89 96 360 394
Recognition (Reversal) of Visa
Related Litigation Exposure --- 600 (306) 600
Other Operating Expense 2,855 2,292 11,098 9,299
----- ----- ------ -----
Total Noninterest Expense 11,273 9,773 42,393 37,930
------ ----- ------ ------
Income Before Taxes 7,177 6,070 29,436 24,139
Provision for Income Taxes 2,165 1,589 8,999 6,807
----- ----- ----- -----
Net Income $5,012 $4,481 $20,437 $17,332
====== ====== ======= =======
Share and Per Share Data
Period Ending Shares
Outstanding 10,546 10,627 10,546 10,627
Basic Average Shares
Outstanding 10,524 10,619 10,565 10,714
Diluted Average Shares
Outstanding 10,588 10,682 10,622 10,786
Basic Earnings Per Share $0.48 $0.42 $1.93 $1.62
Diluted Earnings Per Share 0.47 0.42 1.92 1.61
Cash Dividends 0.25 0.24 0.98 0.94
Book Value 11.93 11.50 11.93 11.50
Tangible Book Value (1) 10.38 9.94 10.38 9.94
Key Earnings Ratios
Return on Average Assets 1.18% 1.11% 1.24% 1.11%
Return on Average Equity 15.68 14.76 16.26 14.68
Return on Tangible Equity 18.01 17.13 18.73 17.11
Net Interest Margin (2) 3.92 3.32 3.84 3.31
(1) Tangible Book Value per share is the ratio of Total Equity less
Intangible Assets to Period-End Shares Outstanding.
(2) Net Interest Margin includes a tax-equivalent upward adjustment
for the fourth quarter of 18 basis points in 2008 and 19 basis
points in 2007 and an upward adjustment for the twelve-month
period of 19 basis points in 2008 and 20 basis points in 2007.
Arrow Financial Corporation
Consolidated Financial Information
($ in thousands)
Unaudited
December 31, 2008
Fourth Year-to-
Period Quarter Date
End Average Average
--- ------- -------
Balance Sheet
Cash and Due From Banks $37,239 $28,149 $32,505
Federal Funds Sold --- 457 17,472
Bank Balances at Interest 21,099 21,859 5,997
Securities Available-for-Sale 325,090 351,938 353,616
Securities Held-to-Maturity 133,976 131,008 120,208
Loans 1,109,812 1,109,978 1,071,384
Allowance for Loan Losses (13,272) (12,921) (12,658)
------- -------- --------
Net Loans 1,096,540 1,097,057 1,058,726
--------- --------- ---------
Premises and Equipment, Net 17,602 17,440 16,819
Goodwill and Intangible Assets,
Net 16,378 16,416 16,520
Other Assets 17,162 23,042 22,347
Total Assets $1,665,086 $1,687,366 $1,644,210
Demand Deposits $182,613 $188,638 $189,999
Nonmaturity Interest-Bearing
Deposits 688,752 692,192 648,559
Time Deposits of $100,000 or More 157,187 165,725 172,055
Other Time Deposits 246,511 244,155 243,247
Total Deposits 1,275,063 1,290,710 1,253,860
Short-Term Borrowings 59,956 63,011 58,473
Federal Home Loan Bank Advances 160,000 160,261 161,406
Other Long-Term Debt 20,000 20,000 20,000
Other Liabilities 24,265 26,248 24,818
Total Liabilities 1,539,284 1,560,230 1,518,557
Common Stock 14,729 14,729 14,729
Surplus 163,215 162,665 162,124
Undivided Profits 25,454 24,540 20,604
Unallocated ESOP Shares (2,572) (2,572) (2,215)
Accumulated Other Comprehensive
Loss (9,404) (6,624) (5,299)
Treasury Stock (65,620) (65,602) (64,290)
------- ------- -------
Total Shareholders' Equity 125,802 127,136 125,653
Total Liabilities and $1,665,086 $1,687,366 $1,644,210
Shareholders' Equity
Assets Under Trust Administration $755,378
And Investment Management
Capital Ratios
Leverage Ratio 8.45%
Tier 1 Risk-Based Capital Ratio 13.05
Total Risk-Based Capital Ratio 14.27
December 31, 2007
Fourth Year-to-
Period Quarter Date
End Average Average
--- ------- -------
Balance Sheet
Cash and Due From Banks $35,289 $34,468 $33,180
Federal Funds Sold 16,000 34,255 22,022
Bank Balances at Interest --- --- ---
Securities Available-for-Sale 338,070 340,094 332,187
Securities Held-to-Maturity 114,611 115,138 111,642
Loans 1,038,844 1,036,661 1,020,856
Allowance for Loan Losses (12,401) (12,350) (12,323)
-------- -------- --------
Net Loans 1,026,443 1,024,311 1,008,533
---------- ---------- ----------
Premises and Equipment, Net 16,728 16,368 16,118
Goodwill and Intangible Assets,
Net 16,590 16,653 16,808
Other Assets 21,115 19,766 17,761
Total Assets $1,584,846 $1,601,053 $1,558,251
Demand Deposits $184,273 $190,002 $186,474
Nonmaturity Interest-Bearing
Deposits 590,383 617,439 581,621
Time Deposits of $100,000 or More 180,334 174,915 180,606
Other Time Deposits 249,210 250,260 258,042
Total Deposits 1,204,200 1,232,616 1,206,743
Short-Term Borrowings 53,719 51,847 49,355
Federal Home Loan Bank Advances 160,000 151,304 140,258
Other Long-Term Debt 20,000 20,000 20,000
Other Liabilities 24,671 24,853 23,813
Total Liabilities 1,462,590 1,480,620 1,440,169
Common Stock 14,729 14,729 14,455
Surplus 161,476 161,097 154,866
Undivided Profits 15,347 14,096 17,428
Unallocated ESOP Shares (2,042) (2,042) (1,766)
Accumulated Other Comprehensive
Loss (4,890) (5,328) (7,060)
Treasury Stock (62,364) (62,119) (59,841)
------- ------- -------
Total Shareholders' Equity 122,256 120,433 118,082
Total Liabilities and $1,584,846 $1,601,053 $1,558,251
Shareholders' Equity
Assets Under Trust Administration $961,152
And Investment Management
Capital Ratios
Leverage Ratio 8.37%
Tier 1 Risk-Based Capital Ratio 12.89
Total Risk-Based Capital Ratio 14.09
Arrow Financial Corporation
Consolidated Financial Information
($in thousands)
Unaudited
December 31,
2008 2007
---- ----
Fourth Quarter Ended December 31:
Loan Portfolio
Commercial, Financial and Agricultural $86,872 $79,128
Real Estate - Commercial 202,812 189,208
Real Estate - Residential 459,947 427,936
Indirect and Other Consumer Loans 360,181 342,572
------- -------
Total Loans $1,109,812 $1,038,844
========== ==========
Allowance for Loan Losses, Fourth Quarter
Allowance for Loan Losses, Beginning
of Period $12,785 $12,341
Loans Charged-off (466) (220)
Recoveries of Loans Previously
Charged-off 73 89
-- --
Net Loans Charged-off (393) (131)
----- -----
Provision for Loan Losses 880 191
--- ---
Allowance for Loan Losses, End of
Period $13,272 $12,401
======= =======
Nonperforming Assets
Nonaccrual Loans $3,469 $1,939
Loans Past Due 90 or More Days and Accruing 457 245
--- ---
Total Nonperforming Loans 3,926 2,184
Repossessed Assets 64 63
Other Real Estate Owned 581 89
Nonaccrual Investments 400 --
--- ---
Total Nonperforming Assets $4,971 $2,336
====== ======
Key Asset Quality Ratios
Allowance for Loan Losses to Period-End Loans 1.20% 1.19%
Allowance for Loan Losses to Period-End
Nonperforming Loans 338.05 567.81
Nonperforming Loans to Period-End Loans 0.35 0.21
Nonperforming Assets to Period-End Assets 0.30 0.15
Net Loans Charged-off to Average
Loans, Fourth Quarter Annualized 0.14 0.05
Provision for Loan Losses to Average
Loans, Fourth Quarter Annualized 0.32 0.07
December 31,
Year Ended December 31: 2008 2007
---- ----
Allowance for Loan Losses, Twelve Months
Allowance for Loan Losses, Beginning of Year $12,401 $12,278
Loans Charged-off (1,291) (830)
Recoveries of Loans Previously
Charged-off 491 440
--- ---
Net Loans Charged-off (800) (390)
----- -----
Provision for Loan Losses 1,671 513
----- ---
Allowance for Loan Losses, End of Year $13,272 $12,401
======= =======
Key Asset Quality Ratios
Net Loans Charged-off to Average
Loans, Twelve Months 0.07% 0.04%
Provision for Loan Losses to Average
Loans, Twelve Months 0.16 0.05
SOURCE Arrow Financial Corporation
