EX-99 3 q3pr.htm OCTOBER 21, 2003 THIRD QUARTER EARNINGS RELEASE To:







To:

All Media

Date:

October 21, 2003


Arrow Releases Third Quarter Operating Results


Arrow Financial Corporation announced operating results for the three and nine month periods ended September 30, 2003.  Net income for the nine month period of 2003 was $14.1 million representing diluted earnings per share of $1.40.  This was 1.4% above the diluted per share amount of $1.38 earned in the first three quarters of 2002, when net income was also $14.1 million.  For the third quarter, net income was $4.6 million in 2003, a 6.3% decrease from the prior year's result of $4.9 million.  Diluted earnings per share for the third quarter fell 6.3% to $.45 in 2003 from $.48 in 2002.  Cash dividends paid to shareholders in the nine month period totaled $.62 per share, or 10.7% higher than the $.56 per share paid in the first nine months of 2002.  All per share amounts have been adjusted to reflect the effect of the 5 for 4 stock split distributed on September 29, 2003.


Thomas L. Hoy, President and CEO stated, "Our earnings results for the third quarter, in particular, as well as for the nine month period, when compared to last year's results, reflect the near record low interest rate environment and its continued pressure on the Company's net interest margin.  However, when measured against key industry profitability ratios, our three and nine month periods reflect strong performance.  Return on average equity was 17.61% and 18.36% for the three and nine month periods ended September 30, 2003, respectively, while return on average assets was 1.35% and 1.44% for the same periods.  Operating results for the three and nine month periods ended September 30, 2002 were exceptionally strong, as demonstrated by our 1.58% return on average assets and 19.72% return on average equity for the 2002 nine month period."


Mr. Hoy added, "Net interest margin for the quarter ended September 30, 2003 was 3.90% and compares with 4.46% for the third quarter of 2002. Margin compression largely reflects lower reinvestment rate opportunities coupled with higher investment security premium amortization.  For the nine month period ended September 30, 2003, net interest margin was 4.09% or 50 basis points below the 4.59% recorded in the same 2002 period.  For each of the three and nine month periods, much of the adverse effect from shrinking margins was offset by incremental revenues from average earning asset growth.  Average earning assets were $1.279 billion for the third quarter of 2003, an increase of $111 million or 9.5%.  For the nine month period, average earning assets rose $119 million to $1.254 billion, a 10.5% increase."


Mr. Hoy also stated, "We are very pleased with the favorable growth trends impacting our key balance sheet categories.  Total assets, loans, deposits and shareholders' equity all reached new record highs at September 30, 2003." Total assets at period-end were $1.384 billion, up $121 million, or 9.6%, over the September 30, 2002 amount of $1.263 billion.  Loans outstanding increased $81 million to $867 million at September 30, 2003, up 10.4% from the prior year.  Loan outstandings have now increased for 27 consecutive quarters.  Demand for small business credit and for residential mortgage financing has remained strong, although the pace of such growth appears to be slowing. Total deposits rose $103 million to $1.050 billion, or 10.9% above the prior year's level of $947 million.  Shareholders' equity reached $104.1 million, increasing $4.1 million, or 4.1%, from $100.0 million at September 30, 2002.


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Asset quality at quarter-end remained very high.  Nonperforming assets at September 30, 2003 were $2.4 million, down $1.4 million, or 36.4%, from the same date in 2002.  Nonperforming loans were $2.2 million, down 36.3% from a balance of $3.4 million one year earlier and represented just .25% of period-end loans.  The annualized ratio of net loan losses to average loans for the three and nine month periods of 2003 were .07% and .10% respectively.


The North Country Funds, which receive investment advisory services from our subsidiary, North Country Investment Advisors, Inc., reached a milestone in the quarter when balances in the funds exceeded the $100 million level for the first time.  As part of the plan to expand our menu of products and services, our banks have recently introduced financial planning services as an adjunct to our trust and investment management services.  Under the same plan, the Company founded an insurance agency to offer various insurance products.  Now, a licensed life and health insurance sales representative is available in nearly all of our full service bank branches.  At September 30, 2003, the market value of assets under trust administration and investment management was $671 million, an increase of $74 million, or 12.4%, from $597 million one year earlier.  The rising stock market during 2003 was principally responsible for the increase, although a significant volume of new business has been developed during the year.


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.


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 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 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, 2002.


















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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,

 

2003

2002

2003

2002

Income Statement

    

Interest and Dividend Income

$17,164

$18,922

$52,970

$56,221

Interest Expense

   5,216

   6,315

  16,354

  18,836

  Net Interest Income

11,948

12,607

36,616

37,385

Provision for Loan Losses

      405

      615

    1,215

    1,845

  Net Interest Income After Provision for Loan Losses

 11,543

 11,992

  35,401

  35,540

     

Net Gain on Securities Transactions

245

---

754

173

Net Gain on Sales of Loans

117

 68

488

 80

Demutualization Benefit from an Employee Group Insurance Trust

---

---

---

 92

Net Gains on the Sales of Other Real Estate Owned

---

  3

 12

 24

Income From Fiduciary Activities

894

878

2,688

2,927

Fees for Other Services to Customers

1,747

1,660

5,072

4,507

Other Operating Income

      204

      234

      480

      585

  Total Other Income

   3,207

   2,843

   9,494

   8,388

     

Salaries and Employee Benefits

4,831

4,814

14,257

13,958

Occupancy Expenses of Premises, Net

648

581

1,915

1,777

Furniture and Equipment Expense

685

585

2,102

1,843

Amortization of Intangible Assets

9

9

28

28

Foreclosed Property Expense

2

11

4

29

Other Operating Expense

   2,025

   1,763

    5,972

    5,658

  Total Other Expense

   8,200

   7,763

  24,278

  23,293

     

Income Before Taxes

6,550

7,072

20,617

20,635

Provision for Income Taxes

   1,981

   2,198

    6,487

    6,517

  Net Income

$ 4,569

$ 4,874

$14,130

$14,118

     

Share and Per Share Data 1

    

Period Ending Shares Outstanding

9,808

9,928

9,808

9,928

Basic Average Shares Outstanding

9,841

9,958

9,866

9,987

Diluted Average Shares Outstanding

10,080

10,212

10,090

10,228

     

Basic Earnings Per Share

$  0.46

$  0.49

$  1.43

$  1.41

Diluted Earnings Per Share

0.45

0.48

1.40

1.38

     

Cash Dividends

0.21

0.19

0.62

0.56

     

Book Value

10.61

10.07

10.61

10.07

Tangible Book Value 2

9.61

9.07

9.61

9.07

     

Key Earnings Ratios

    

Return on Average Assets

1.35%

1.58%

1.44%

1.58%

Return on Average Equity

17.61

19.53

18.36

19.72

Net Interest Margin 3

3.90

4.46

4.09

4.59

     

1 Share and Per Share amounts have been restated for the September 2003 five for four stock split and the November 2002 five percent stock dividend.

2 Tangible Book Value excludes from total equity intangible assets, primarily goodwill associated with branch purchases.

3 Net Interest Margin includes a tax equivalent adjustment for the third quarter of 20 basis points in 2003 and 18 basis points in 2002 and

    an adjustment for the nine-month period of 19 basis points in 2003 and 19 basis points in 2002.


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Arrow Financial Corporation

Consolidated Financial Information

($ in thousands)

Unaudited

    
 

September 30, 2003

 

September 30, 2002

  

Third

Year-to-

  

Third

Year-to-

 

Period

Quarter

Date

 

Period

Quarter

Date

 

End

Average

Average

 

End

Average

Average

Balance Sheet

       

Cash and Due From Banks

$     38,409

$     34,167

$     32,149

 

$     32,995

$     32,282

$     31,136

Federal Funds Sold

29,400

12,477

 9,343

 

30,600

32,582

17,827

Securities Available-for-Sale

311,407

310,555

316,277

 

311,975

281,865

275,165

Securities Held-to-Maturity

106,449

101,829

 85,536

 

 74,608

 74,816

 75,039

        

Loans

867,338

854,257

843,174

 

785,941

779,042

766,826

Allowance for Loan Losses

    (11,778)

     (11,634)

     (11,467)

 

     (11,008)

     (10,796)

     (10,346)

  Net Loans

   855,560

    842,623

    831,707

 

    774,933

    768,246

    756,480

        

Premises and Equipment, Net

14,073

13,893

13,806

 

13,464

13,500

13,259

Goodwill and Intangible Assets, Net

9,799

9,730

9,714

 

9,959

9,964

9,974

Other Assets

       19,096

       18,816

       15,720

 

       14,431

       13,757

       13,538

    Total Assets

$1,384,193

$1,344,090

$1,314,252

 

$1,262,965

$1,227,012

$1,192,418

        

Demand Deposits

$  157,672

$  153,856

$  141,338

 

$  135,467

$  138,336

$  130,958

Nonmaturity Interest-Bearing Deposits

633,392

593,907

586,138

 

541,217

509,960

493,691

Time Deposits of $100,000 or More

71,772

75,771

75,428

 

64,905

71,257

87,701

Other Time Deposits

    186,808

     190,336

     195,342

 

     205,262

     206,135

     200,622

  Total Deposits

1,049,644

1,013,870

  998,246

 

  946,851

  925,688

  912,972

        

Short-Term Borrowings

49,733

46,917

41,859

 

49,704

40,468

36,621

Federal Home Loan Bank Advances

150,000

150,000

147,619

 

145,000

139,348

125,256

Other Long-Term Debt

15,000

12,500

 7,527

 

 5,000

 5,000

 5,000

Other Liabilities

       15,719

       17,892

       16,099

 

       16,401

       17,499

       16,859

  Total Liabilities

  1,280,096

  1,241,179

  1,211,350

 

  1,162,956

  1,128,003

  1,096,708

        

Common Stock

13,086

11,465

10,804

 

 9,970

 9,970

 9,970

Surplus

113,127

114,672

115,108

 

100,055

 99,979

 99,777

Undivided Profits

21,673

20,508

17,898

 

25,828

24,526

21,614

Unallocated ESOP Shares

(1,822)

(1,822)

(1,822)

 

(1,822)

(1,823)

(1,892)

Accumulated Other Comprehensive

   Income

1,067

   81

1,948

 

4,049

3,596

2,422

Treasury Stock

     (43,034)

     (41,993)

     (41,034)

 

     (38,071)

     (37,239)

     (36,181)

  Total Shareholders’ Equity

     104,097

    102,911

    102,902

 

    100,009

      99,009

      95,710

    Total Liabilities and

        Shareholders’ Equity

$1,384,193

$1,344,090

$1,314,252

 

$1,262,965

$1,227,012

$1,192,418

        

Assets Under Trust Administration

  And Investment Management

$671,160

   

$596,986

  
        

Capital Ratios

       

  Leverage Ratio

8.12%

   

7.52%

  

  Tier 1 Risk-Based Capital Ratio

12.46

   

11.54

  

  Total Risk-Based Capital Ratio

13.72

   

12.79

  










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Arrow Financial Corporation

Consolidated Financial Information

($ in thousands)

Unaudited

 

September 30,

 

2003

2002

Loan Portfolio

  

Commercial, Financial and Agricultural

$  84,330

$  74,433

Real Estate – Commercial

108,294

 96,145

Real Estate – Residential

327,250

285,041

Real Estate – Construction

9,757

9,443

Indirect Consumer Loans

323,746

305,608

Other Loans to Individuals

    13,961

    15,271

  Total Loans

$867,338

$785,941

   

Allowance for Loan Losses, Third Quarter

  

Allowance for Loan Losses, Beginning of Period

$11,518

$10,595

   

Loans Charged-off

(218)

(251)

Recoveries of Loans Previously Charged-off

        73

        49

  Net Loans Charged-off

     (145)

     (202)

   

Provision for Loan Losses

       405

       615

  Allowance for Loan Losses, End of Period

$11,778

$11,008

   

Allowance for Loan Losses, First Nine Months

  

Allowance for Loan Losses, Beginning of Period

$11,193

$ 9,720

   

Loans Charged-off

(874)

(766)

Recoveries of Loans Previously Charged-off

      244

      209

  Net Loans Charged-off

     (630)

     (557)

   

Provision for Loan Losses

    1,215

    1,845

  Allowance for Loan Losses, End of Period

$11,778

$11,008

   

Nonperforming Assets

  

Nonaccrual loans

$1,832

$3,270

Loans Past Due 90 or More Days and Accruing

332

125

Restructured Loans

       ---

       ---

  Total Nonperforming Loans

2,164

3,395

Repossessed Assets

207

258

Other Real Estate Owned

       ---

       73

  Total Nonperforming Assets

$2,371

$3,726

   

Key Asset Quality Ratios

  

Net Loans Charged-off to Average Loans, Third Quarter Annualized

0.07%

0.10%

Net Loans Charged-off to Average Loans, First Nine Months Annualized

0.10

0.10

   

Provision for Loan Losses to Average Loans, Third Quarter Annualized

0.19

0.31

Provision for Loan Losses to Average Loans, First Nine Months Annualized

0.19

0.32

   

Allowance for Loan Losses to Period-End Loans

1.36

1.40

Allowance for Loan Losses to Nonperforming Loans

544.24

324.24

Nonperforming Loans to Period-End Loans

0.25

0.43

Nonperforming Assets to Period-End Assets

0.17

0.30






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