EX-99 2 pressrel.htm To:










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Date:

July 22, 2005





Arrow Announces Second Quarter Results


Arrow Financial Corporation announced operating results for the three and six-month periods ended June 30, 2005.  Net income for the second quarters of 2005 and 2004 each equaled $4.7 million representing diluted earnings per share of $.45 for both periods.  Diluted earnings per share for the first six months of 2005 were $.88 with net income totaling $9.1 million which compared with diluted earnings per share of $.92 and net income of $9.6 million in the 2004 period.  Cash dividends paid to shareholders in 2005 totaled $.46 and represented a 5.5% increase over the amount paid last year.  


Thomas L.  Hoy, President and CEO stated, "Our second quarter results reflect the very challenging interest rate environment in which shorter term rates have continued to increase while intermediate and longer term rates have not similarly responded.  Although this has led to some additional narrowing of the net interest margin, the benefit from growth in the average balance of interest earning assets offset the effect of the margin decline, resulting in a comparable level of net interest income for the respective quarters.  Average earning asset growth was concentrated in the loan portfolio, as average loan outstandings increased 7.8% to $927 million.  The period-end balance of loans reached $953 million, up $87 million, or 10.0%, from the June 30, 2004 balance of $866 million."


Mr. Hoy also stated, "Much of the earning asset growth resulted from the early April acquisition of three branch offices of HSBC Bank USA, N.A., which included approximately $62 million in deposits.  We are very pleased with the smooth transition of these offices into our branch network.  Average earning assets were $1.379 billion in the second quarter of 2005 as compared with $1.329 billion in the same quarter last year, an increase of 3.7%.  Net interest margin was 3.72% in this year's second quarter versus 3.86% for the second quarter of 2004.  For the six months ended June 30, net interest margin was 3.75% for 2005, which compares with 3.92% for the prior year.


“Other notable items impacting the six-month earnings results include a 12.8% increase in other (non-interest) income, rising from $6.4 million in 2004 to $7.2 million in 2005.  This essentially reflected insurance commission income generated by our new subsidiary, the Capital Financial Group, Inc., which we acquired in November 2004.  Income from fiduciary services also increased over the prior year's level, reaching $2.3 million in 2005 versus $2.1 million for 2004.  Assets under trust administration and investment management were $806 million at June 20, 2005, also a record total.  Included in this balance are The North Country Funds, which our subsidiary, North Country Investment Advisors, Inc. serves as exclusive investment advisor.  The North Country funds totaled a combined $150 million at June 30, 2005.




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“Also significantly influencing the earnings comparison was the change in other (non-interest) expense.  For the six-month periods ending June 30, other expense was $17.7 million in 2005 as compared with $16.3 million in 2004, or an increase of 8.4%.  Much of the increase is attributable to recurring operating expenses incurred by the newly-acquired business operations, i.e. the Capital Financial Group insurance agency and the branches acquired from HSBC, which were not included in 2004 results together with intangible asset amortization and startup costs of approximately $100,000 were associated with the branch acquisition.


“Total assets at June 30, 2005 were $1.454 billion, or 5.4% above $1.380 billion reported one year earlier.  Deposits rose 6.5% to $1.105 billion, which compares with $1.038 billion at June 30, 2004.  Both comparisons were strongly influenced by the branch acquisitions.  The record period-end loan balance of $953 million noted above included significant growth in small business loans, which totaled $232 million, up 11.1% from the June 30, 2004 level of $208 million.  The indirect consumer loan category of Arrow's loan portfolio also experienced significant growth, as the auto manufacturers began to retreat from highly subsidized financing programs.  Indirect loan originations in the three-month period ending June 30, 2005 totaled $62 million, which represented a new quarterly record.”


Mr. Hoy added, "Credit quality remains very high.  Nonperforming loans were $2.0 million at June 30, 2005, down 22.9% from the $2.5 million balance at June 30, 2004.  At June 30, 2005, nonperforming loans represented just .21% of period-end loans.  Our allowance for loan losses was $12.2 million at June 30, 2005 and equaled 1.28% of period-end loans.  Net loan losses were a very low .06% (annualized) of average loans outstanding for the six-month period ending June 30, 2005 as compared with .09% for the comparable six-month period in 2004."


Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, NY with 30 banking locations in Upstate 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, such as the statement about auto manufacturers’ subsidy financing, that are not entirely historical in nature but rather are based in the whole or in part 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, 2004.




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Arrow Financial Corporation

Consolidated Financial Information

($ in thousands, except per share amounts)

Unaudited

 

Three Months

Six Months

 

Ended June 30,

Ended June 30,

 

2005

2004

2005

2004

Income Statement

    

Interest and Dividend Income

$17,776 

$17,062 

$34,643 

$34,364 

Interest Expense

   5,621 

   4,951 

 10,684 

   9,949 

  Net Interest Income

12,155 

12,111 

23,959 

24,415 

Provision for Loan Losses

      176 

      254 

      408 

      539 

  Net Interest Income After Provision for Loan Losses

 11,979 

 11,857 

 23,551 

 23,876 

Net Gain on Securities Transactions

125 

--- 

189 

210 

Net Gain on Sales of Loans

22 

26 

27 

112 

Recovery Related to Former Vermont Operations

--- 

--- 

--- 

77 

Net Gains on the Sales of Other Real Estate Owned

8 

--- 

8 

--- 

Income From Fiduciary Activities

1,181 

1,060 

2,288 

2,116 

Fees for Other Services to Customers

1,948 

1,904 

3,548 

3,584 

Insurance Commissions

488 

  6 

883 

11 

Other Operating Income

       110 

       139 

      233 

      249 

  Total Other Income

    3,882 

    3,135 

   7,176 

   6,359 

Salaries and Employee Benefits

5,288 

4,778 

10,343 

9,583 

Occupancy Expenses of Premises, Net

757 

699 

1,464 

1,394 

Furniture and Equipment Expense

746 

695 

1,511 

1,389 

Amortization of Intangible Assets

122 

9 

142 

18 

Foreclosed Property Expense

--- 

--- 

--- 

--- 

Other Operating Expense

   2,262 

   1,992 

   4,200 

   3,915 

  Total Other Expense

   9,175 

   8,173 

 17,660 

 16,299 

Income Before Taxes

6,686 

6,819 

13,067 

13,936 

Provision for Income Taxes

   2,006 

   2,121 

   3,957 

   4,373 

  Net Income

$ 4,680 

$ 4,698 

$ 9,110 

$ 9,563 

     

Share and Per Share Data 1

    

Period End Shares Outstanding

10,123 

10,120 

10,123 

10,120 

Basic Average Shares Outstanding

10,131 

10,123 

10,160 

10,120 

Diluted Average Shares Outstanding

10,304 

10,358 

10,348 

10,358 

Basic Earnings Per Share

$  0.46 

$  0.46 

$  0.90 

$  0.94 

Diluted Earnings Per Share

0.45 

0.45 

0.88 

0.92 

Cash Dividends

0.23 

0.22 

0.46 

0.44 

Book Value

11.64 

10.70 

11.64 

10.70 

Tangible Book Value 2

9.92 

9.76 

9.92 

9.76 

     

Key Earnings Ratios

    

Return on Average Assets

1.29%

1.35%

1.29%

1.39%

Return on Average Equity

16.06

17.27

15.65

17.62

Net Interest Margin 3

3.72

3.86

3.75

3.92

     

1 Share and Per Share amounts have been restated for the September 2004 3% stock dividend.

2 Tangible Book Value is the ratio of Total Equity less Intangible Assets to Period End Shares Outstanding.

3 Net Interest Margin includes a tax equivalent upward adjustment of 18 basis points in 2005 and 20 basis points in 2004 for the three month periods

       and an upward adjustment of 18 basis points in 2005 and 20 basis points in 2004 for the six month periods.

 





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Arrow Financial Corporation

Consolidated Financial Information

($ in thousands)

Unaudited

 

June 30, 2005

 

June 30, 2004

 


Period

End

Second

Quarter

Average

Year-to-

Date

Average

 


Period

End

Second

Quarter

Average

Year-to-

Date

Average

Balance Sheet

       

Cash and Due From Banks

$    33,541 

$    35,705 

$    35,500 

 

$    28,641 

$    35,209 

$    34,642 

Federal Funds Sold

--- 

5,082 

3,340 

 

--- 

18,516 

13,634 

Securities Available-for-Sale

321,101 

334,413 

334,150 

 

343,374 

344,991 

342,160 

Securities Held-to-Maturity

106,478 

112,103 

111,039 

 

108,047 

105,736 

105,969 

Loans

952,938 

927,224 

905,075 

 

866,127 

859,902 

858,195 

Allowance for Loan Losses

    (12,168)

    (12,102)

    (12,074)

 

    (11,984)

    (11,933)

    (11,898)

  Net Loans

   940,770 

   915,122 

   893,001 

 

   854,143 

   847,969 

   846,297 

Premises and Equipment, Net

15,422 

15,301 

15,070 

 

14,561 

14,395 

14,284 

Goodwill and Intangible Assets, Net

17,461 

17,045 

14,396 

 

9,476 

9,481 

9,475 

Other Assets

      19,532 

      15,466 

      17,130 

 

      21,897 

      20,381 

      21,254 

    Total Assets

$1,454,305 

$1,450,237 

$1,423,626 

 

$1,380,139 

$1,396,678 

$1,387,715 

Demand Deposits

$   178,708 

$   173,194 

$   166,585 

 

$   167,768 

$   160,184 

$   156,373 

Nonmaturity Interest-Bearing Deposits

612,543 

623,112 

607,769 

 

634,195 

661,812 

655,802 

Time Deposits of $100,000 or More

113,062 

137,875 

123,557 

 

64,177 

65,411 

66,161 

Other Time Deposits

    200,925 

    194,692 

    184,763 

 

    171,527 

    176,405 

    178,805 

  Total Deposits

 1,105,238 

 1,128,873 

 1,082,674 

 

 1,037,667 

 1,063,812 

 1,057,141 

Short-Term Borrowings

50,919 

34,557 

41,846 

 

47,467 

42,696 

40,166 

Federal Home Loan Bank Advances

145,000 

134,341 

146,105 

 

157,500 

150,220 

150,110 

Other Long-Term Debt

20,000 

20,000 

20,000 

 

15,000 

15,000 

15,000 

Other Liabilities

      15,281 

      15,586 

      15,637 

 

      14,265 

      15,534 

      16,151 

  Total Liabilities

 1,336,438 

 1,333,357 

 1,306,262 

 

 1,271,899 

 1,287,262 

 1,278,568 

Common Stock

13,479 

13,479 

13,479 

 

13,086 

13,086 

13,086 

Surplus

128,266 

128,024 

127,889 

 

114,088 

113,939 

113,809 

Undivided Profits

27,799 

26,570 

25,437 

 

29,454 

28,212 

27,012 

Unallocated ESOP Shares

(1,182)

(1,182)

(1,184)

 

(1,502)

(1,502)

(1,503)

Accumulated Other Comprehensive Income

(1,540)

(1,767)

(1,111)

 

(2,026)

247 

1,137 

Treasury Stock

     (48,955)

     (48,244)

     (47,146)

 

     (44,860)

     (44,566)

     (44,394)

  Total Shareholders’ Equity

    117,867 

    116,880 

    117,364 

 

    108,240 

    109,416 

    109,147 

    Total Liabilities and Shareholders’ Equity

$1,454,305 

$1,450,237 

$1,423,626 

 

$1,380,139 

$1,396,678 

$1,387,715 

        

Assets Under Trust Administration

  and Investment Management

$805,964

   

 $783,248

  
        

Capital Ratios

       

  Leverage Ratio

8.54%

   

8.40%

  

  Tier 1 Risk-Based Capital Ratio

12.87

   

13.35

  

  Total Risk-Based Capital Ratio

14.13

   

14.60

  



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Arrow Financial Corporation

Consolidated Financial Information

($ in thousands)

Unaudited

 

June 30,

 

2005

2004

Loan Portfolio

  

Commercial, Financial and Agricultural

$ 87,663 

$ 81,324 

Real Estate – Commercial

144,769 

126,840 

Real Estate – Residential

363,345 

340,667 

Real Estate – Construction

7,805 

8,684 

Indirect Consumer Loans

339,766 

298,177 

Other Loans to Individuals

     9,590 

    10,435 

  Total Loans

$952,938 

$866,127 

   

Allowance for Loan Losses, Second Quarter

  

Allowance for Loan Losses, Beginning of Period

$12,091 

$11,923 

   

Loans Charged-off

(203)

(272)

Recoveries of Loans Previously Charged-off

       104 

        79 

  Net Loans Charged-off

     (99)

     (193)

   

Provision for Loan Losses

       176 

       254 

  Allowance for Loan Losses, End of Period

$12,168 

$11,984 

   

Allowance for Loan Losses, First Six Months

  

Allowance for Loan Losses, Beginning of Period

$12,046 

$11,842 

   

Loans Charged-off

(450)

(531)

Recoveries of Loans Previously Charged-off

      164 

      134 

  Net Loans Charged-off

     (286)

     (397)

   

Provision for Loan Losses

       408 

       539 

  Allowance for Loan Losses, End of Period

$12,168 

$11,984 

   

Nonperforming Assets

  

Nonaccrual Loans

$1,761 

$2,113 

Loans Past Due 90 or More Days and Accruing

199 

430 

Restructured Loans

       --- 

       --- 

  Total Nonperforming Loans

1,960 

2,543 

Repossessed Assets

10 

207 

Other Real Estate Owned

       19 

       --- 

  Total Nonperforming Assets

$1,989 

$2,750 

   

Key Asset Quality Ratios

  

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

0.04%

0.09%

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

0.06

0.09

Provision for Loan Losses to Average Loans, Second Quarter Annualized

0.08

0.12

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

0.09

0.13

Allowance for Loan Losses to Period-End Loans

1.28

1.38

Allowance for Loan Losses to Nonperforming Loans

620.79

471.22

Nonperforming Loans to Period-End Loans

0.21

0.29

Nonperforming Assets to Period-End Assets

0.14

0.20




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