SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-12507
ARROW FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
New York 22-2448962
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
250 GLEN STREET, GLENS FALLS, NEW YORK 12801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 745-1000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of April 30, 1996
Common Stock, par value $1.00 per share 5,302,950
PAGE 1
<PAGE>
ARROW FINANCIAL CORPORATION
FORM 10-Q
MARCH 31, 1996
INDEX
PART I FINANCIAL INFORMATION Page
No.
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 3
Consolidated Statements of Income for the
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II OTHER INFORMATION 16
SIGNATURES 17
PAGE 2
<PAGE>
<TABLE>
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)(Unaudited)
<CAPTION>
3/31/96 12/31/95
ASSETS
<S> <C> <C>
Cash and Due from Banks $ 20,421 $ 23,406
Federal Funds Sold and Securities Purchased Under
Agreements to Resell 9,400 35,100
Securities Available-for-Sale 171,766 178,645
Securities Held-to-Maturity: (Approximate Fair Value of
$14,554 in 1996 and $14,508 in 1995) 14,120 13,921
Loans and Leases 479,848 517,787
Less: Allowance for Loan Losses (11,469) (12,106)
Net Loans and Leases 468,379 505,681
Premises and Equipment 12,555 13,888
Other Real Estate Owned 2,215 2,410
Other Assets 15,556 16,739
Total Assets $714,412 $789,790
LIABILITIES
Deposits:
Demand $ 78,123 $ 94,713
Regular Savings, N.O.W. & Money Market
Deposit Accounts 299,950 352,302
Time Certificates of $100,000 or More 73,468 57,557
Other Time Deposits 159,711 189,881
Total Deposits 611,252 694,453
Short-Term Borrowings:
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase 12,666 14,045
Other Short-Term Borrowings 4,648 1,252
Other Liabilities 15,708 12,536
Total Liabilities 644,274 722,286
SHAREHOLDERS' EQUITY
Preferred Stock, $5 Par Value; 1,000,000 Shares Authorized --- ---
Common Stock, $1 Par Value; 20,000,000 Shares Authorized
(5,979,124 Shares Issued in 1996 and 1995) 5,979 5,979
Surplus 41,074 40,938
Undivided Profits 30,816 24,296
Valuation Allowance for Securities Available-for-Sale 85 1,152
Unallocated ESOP Shares (33,888 in 1996 and 43,130 in 1995) (550) (700)
Treasury Stock (456,259 Shares in 1996 and
309,833 in 1995, at Cost) (7,266) (4,161)
Total Shareholders' Equity 70,138 67,504
Total Liabilities and Shareholders' Equity $714,412 $789,790
</TABLE>
PAGE 3
<PAGE>
<TABLE>
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)(Unaudited)
<CAPTION>
Three Months
Ended March 31,
1996 1995
INTEREST INCOME
<S> <C> <C>
Interest and Fees on Loans and Leases $11,574 $11,644
Interest and Dividends on Securities Held-to-Maturity:
U.S. Government, Agencies and Corporations --- 1,619
State and Municipal Obligations 194 165
Other Securities --- 114
Interest on Federal Funds Sold and Securities
Purchased Under Agreements to Resell 138 69
Interest and Dividends on Securities Available-for-Sale 2,643 785
Total Interest Income 14,549 14,396
INTEREST EXPENSE
Interest on Deposits:
Time Certificates of $100,000 or More 944 726
Other Deposits 4,423 4,453
Interest on Short-Term Borrowings:
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase 179 161
Other Short-Term Borrowings 30 53
Interest on Long-Term Debt --- 105
Total Interest Expense 5,576 5,498
NET INTEREST INCOME 8,973 8,898
Provision for Loans Losses 224 130
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,749 8,768
OTHER INCOME
Income from Fiduciary Activities 970 977
Fees for Other Services to Customers 1,014 1,139
Net Gains on Securities Transactions 112 ---
Gain on the Disposition of Branches 7,091 ---
Other Operating Income 281 283
Total Other Income 9,468 2,399
OTHER EXPENSE
Salaries and Employee Benefits 3,900 3,925
Occupancy Expense of Premises, Net 525 545
Furniture and Equipment Expense 457 502
Other Operating Expense 1,899 2,450
Total Other Expense 6,781 7,422
INCOME BEFORE PROVISION FOR INCOME TAXES 11,436 3,745
Provision for Income Taxes 3,963 1,361
NET INCOME $ 7,473 $ 2,384
Average Primary Shares Outstanding 5,648 5,749
Average Fully Diluted Shares Outstanding 5,660 6,057
Per Common Share:
Primary Earnings $ 1.32 $ .41
Fully Diluted Earnings 1.32 .40
Dividends Declared .17 .13
Book Value 12.78 10.56
Per share amounts have been adjusted for the November 1995 four percent stock dividend.
</TABLE>
PAGE 4
<PAGE>
<TABLE>
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)(Unaudited)
<CAPTION>
Three Months
Ended March 31,
1996 1995
Operating Activities:
<S> <C> <C>
Net Income $ 7,473 $ 2,384
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Loan Losses 224 130
Provision for Other Real Estate Owned Losses 215 ---
Depreciation and Amortization 318 408
Compensation Expense for Allocated ESOP Shares 23 ---
Gains on the Sale of Securities Available-for-Sale (112) ---
Proceeds from the Sale of Loans 41,516 5,164
Net Gains on the Sale of Loans, Fixed Assets and
Other Real Estate Owned (39) (81)
Decrease (Increase) in Deferred Tax Assets 269 232
Decrease (Increase) in Interest Receivable 442 (166)
Increase (Decrease) in Interest Payable (646) 453
Decrease (Increase) in Other Assets 1,157 (184)
Increase (Decrease) in Other Liabilities 3,613 856
Net Cash Provided By Operating Activities 54,453 9,196
Investing Activities:
Proceeds from the Sale of Securities Available-for-Sale 18,285 ---
Proceeds from the Maturities of
Securities Available-for-Sale 13,924 9,500
Purchases of Securities Available-for-Sale (27,051) (17,673)
Proceeds from the Maturities of
Securities Held-to-Maturity 20 1,509
Purchases of Securities Held-to-Maturity (221) (4,550)
Net Decrease (Increase) in Loans and Leases (4,475) (6,819)
Proceeds from the Sales of Fixed Assets and
Other Real Estate Owned 1,871 287
Purchase of Fixed Assets (568) (154)
Net Cash Provided By (Used In) Investing Activities 1,785 (17,900)
Financing Activities:
Net Increase (Decrease) in Deposits (83,201) 31,304
Net Decrease in Short-Term Borrowings 2,017 (13,715)
Purchase of Treasury Stock (2,979) (420)
Exercise of Stock Options 160 ---
Disqualifying Disposition of ISO Shares 32 ---
Cash Dividends Paid (952) (716)
Net Cash Provided By (Used In) Financing Activities (84,923) 16,453
Net Increase (Decrease) in Cash and Cash Equivalents (28,685) 7,749
Cash and Cash Equivalents at Beginning of Period 58,506 34,624
Total Cash and Cash Equivalents $29,821 $42,373
Cash and Cash Equivalents:
Cash and Due from Banks $20,421 $24,873
Federal Funds Sold and Securities Purchased Under
Agreements to Resell 9,400 17,500
Total Cash and Cash Equivalents $29,821 $42,373
Supplemental Cash Flow Information:
Interest Paid $ 6,211 $ 5,044
Income Taxes Paid 290 103
Transfer of Loans to Other Real Estate Owned 216 386
Accrued Compensation from Stock
Appreciation Rights Transferred
to Shareholders' Equity upon Exercise
of Tandem Stock Options --- 50
Cancellation of Debentures by Exercise of Cancellable
Mandatory Stock Purchase Contracts --- 108
</TABLE>
PAGE 5
<PAGE>
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q
MARCH 31, 1996
1. Financial Statement Presentation
In the opinion of the management of Arrow Financial Corporation (the
"Company"), the accompanying consolidated financial statements contain all
of the adjustments necessary to present fairly the financial position as of
March 31, 1996 and December 31, 1995; the results of operations for the
three month periods ended March 31, 1996 and March 31, 1995; and the
statements of cash flows for the three month periods ended March 31, 1996
and March 31, 1995. All such adjustments are of a normal recurring nature.
Certain items have been reclassified to conform to the 1996 presentation.
Per share amounts have been restated to reflect the November 1995 four
percent stock dividend.
2. Derivative Financial Instruments
In October 1994, the FASB released SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments."
SFAS No. 119 requires disclosures about amounts, nature, and terms of
derivative financial instruments that are not subject to SFAS No. 105,
"Disclosure of Information about Financial Instruments with Off-Balance-Sheet
Risk and Financial Instruments with Concentrations of Credit Risk",
because they do not result in off-balance-sheet risk of accounting loss.
SFAS No. 119 also requires disclosures in addition to the requirements of
SFAS No. 105 and No. 107, "Disclosures about Fair Value of Financial
Instruments." For the Company, SFAS No.119 is effective for financial
statements issued after 1995. The Company does not trade in derivative
financial instruments and as of March 31, 1996 did not use derivative
financial instruments to hedge its interest rate risk position. Consequently,
as of March 31, 1996 and December 31, 1995, SFAS No. 119 would not
have required the Company to provide disclosures in addition to those
already required by SFAS No. 105 and 107.
3. Accounting for Long-Lived Assets
In March 1995, the FASB released SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell. SFAS
No. 121 is effective for years beginning after December 15, 1995, with earlier
adoption allowed. The Company adopted SFAS No. 121 in the first quarter
of 1996, but did not experience any impact on net income or shareholders'
equity.
4. Accounting for Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 requires Companies not using a fair
value based method of accounting for employee stock options or similar
plans, to provide pro forma disclosure of net income and earnings per share
as if that method of accounting had been applied. The Statement is effective
for fiscal years beginning after December 15, 1995. The Company has
elected to continue to account for its stock option plans under APB No. 25,
and to provide the pro forma disclosures required by SFAS No. 123.
PAGE 6
<PAGE>
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1996
OVERVIEW
Arrow Financial Corporation (the "Company") is a three bank holding
company headquartered in Glens Falls, New York. The banking subsidiaries
are: Glens Falls National Bank and Trust Company whose main office is
located in Glens Falls, New York; Saratoga National Bank and Trust
Company whose main office is located in Saratoga Springs, New York; and
Green Mountain Bank, whose main office is located in Rutland, Vermont.
Disposition of Vermont Operations
On January 15, 1996, the Company completed the sale of eight branches of
Green Mountain Bank to Mascoma Savings Bank, Lebanon, New Hampshire.
On February 27, 1996, the Company announced definitive agreements for
the sale of Green Mountain Bank's remaining branches and related deposits
and loans to ALBANK FSB, Albany, New York, and the sale of Green
Mountain Bank's trust business to Vermont National Bank, Brattleboro,
Vermont. These sales, subject to regulatory approval, are expected to close
in the third quarter of 1996. If completed in accordance with the terms of the
definitive agreements, the sale to ALBANK may generate for the Company
a gain equal to 7.5% of deposits transferred (at signing, deposits subject to
transfer equaled approximately $110 million), and the sale to Vermont
National may generate a gain in excess of $3.0 million, in each case subject
to adjustments as provided in the agreements. After the completion of these
sales, the Company effectively will have no remaining operations in Vermont.
The terms and effects of these sales are discussed in more detail in the
following analysis.
Concurrent with the announcement of the sale agreements for Green
Mountain Bank, the Company announced that the Board of Directors had
authorized a stock repurchase program, under which up to $10 million of
common stock may be repurchased from time to time on the market or in
private transactions. During the first quarter of 1996, the Company
repurchased an aggregate of 159,500 shares of its common stock for a total
price of $3.2 million. Pending completion of the sale agreements for the
remainder of Green Mountain Bank's operations, the Board of Directors
continues to review strategic alternatives for the redeployment of the sale
proceeds.
The Company reported earnings of $7.5 million for the first quarter of 1996,
compared to earnings of $2.4 million for the first quarter of 1995. Primary
earnings per share were $1.32 and $.41 for the two respective periods.
Earnings in the 1996 period included the gain on the sale of the eight
Vermont branches to Mascoma Savings Bank and substantial unanticipated
repayments on certain restructured loans. On a basis comparable to the first
quarter of 1995, earnings for the first quarter of 1996 amounted to $2.5
million reflecting core earnings per share of $.44, an increase of three cents
per share or 7.3% over the 1995 period.
The return on average assets was 4.15% and 1.29% for the first quarter of
1996 and 1995, respectively. The return on average equity was 41.54% and
16.23% for the first quarter of 1996 and 1995, respectively. Excluding the
nonrecurring items, the return on average assets and the return on average
equity were 1.39% and 14.73%, respectively, for the 1996 quarter.
Total assets were $714.4 million at March 31, 1996, a decrease of $75.4
million or 9.5% from December 31, 1995, reflecting among other changes,
the effects of the branch sale to Mascoma Savings Bank on January 15,
1996.
Shareholders' equity increased $2.6 million to $70.1 million during the first
three months of 1996. This increase resulted from net earnings during the
period, reduced by cash dividends, changes to the available-for-sale
investment securities valuation allowance, and the stock repurchase program
cited above. The Company's risk-based capital ratios and Tier 1 leverage
ratio exceeded regulatory minimums at period end and all Company banks
qualified as "well-capitalized" under federal bank guidelines.
PAGE 7
<PAGE>
<TABLE>
CHANGE IN FINANCIAL CONDITION
<CAPTION>
Summary of Consolidated Balance Sheets
(Dollars in Thousands)
% Change % Change
Mar 1996 Dec 1995 Mar 1995 From Dec From Mar
<S> <C> <C> <C> <C> <C>
Securities Held to Maturity $ 14,120 $ 13,921 $132,722 1.4% (89.4)%
Securities Available for Sale 171,766 178,645 62,957 (3.9) 172.8
Federal Funds Sold 9,400 35,100 17,500 (73.2) (46.3)
Loans, Net of Unearned Income (1) 479,848 517,787 508,626 (7.3) (5.7)
Allowance for Loan Losses 11,469 12,106 12,210 (5.3) (6.1)
Earning Assets (1) 675,134 745,453 721,805 (9.4) (6.5)
Total Assets 714,412 789,790 767,095 (9.5) (6.9)
Demand Deposits 78,123 94,713 84,449 (17.5) (7.5)
Savings, NOW and MMDA Accounts 299,950 352,302 341,896 (14.9) (12.3)
Time Deposits of $100,000 or More 73,468 57,557 73,347 27.6 0.2
Other Time Deposits 159,711 189,881 182,097 (15.9) (12.3)
Total Deposits 611,252 694,453 681,789 (12.0) (10.3)
Other Borrowed Funds 17,314 15,297 16,051 13.2 7.9
Shareholders' Equity 70,138 67,504 60,327 3.9 16.3
(1) Includes Nonaccrual Loans
</TABLE>
Total resources at March 31, 1996 amounted to $714.4 million, a decrease
of $75.4 million or 9.5% from year-end 1995, and a decrease of $52.7 million
or 6.9% from March 31, 1995. The branch sale to Mascoma Savings Bank
reduced total assets by approximately $82.6 million. This decrease was
offset, in part, by growth in the loan portfolios of the Company's two New York
based banks, primarily in the area of consumer loans.
Total deposits of $611.3 million at March 31, 1996 decreased $83.2 million
from the December 31, 1995 level. Approximately $101.0 million of deposit
liabilities were assumed by Mascoma Savings Bank on January 15, 1996.
Offsetting this decrease, in part, were deposit increases at Company banks
attributable to a seasonal influx of municipal deposits, largely in time
deposits of $100,000 and over. Total deposits for Green Mountain Bank were
$108.7 million at March 31, 1996. Substantially all of Green Mountain Bank's
deposits will be assumed by ALBANK under the branch sale agreement
discussed above.
While management of the Company and Green Mountain Bank has focused
in recent periods on disposing of the Vermont business, the two subsidiary
banks in New York have continued to develop plans for growth in their
market areas. The following table, presenting average loan balances for the
most recent five quarters, indicates a pattern of steady growth.
<TABLE>
Quarterly Average Loan Balances in New York
(In Thousands)
<CAPTION>
Glens
Falls Saratoga
National National
Bank Bank
<S> <C> <C>
First Quarter of 1995 $295,164 $47,771
Second Quarter of 1995 297,706 48,104
Third Quarter of 1995 300,395 49,544
Fourth Quarter of 1995 304,333 49,832
First Quarter of 1996 308,943 50,676
</TABLE>
Shareholders' equity increased $2.6 million to $70.1 million during the first
three months of 1996, reflecting net earnings less cash dividends, changes
to the available-for-sale investment securities valuation allowance, and the
amounts spent on stock repurchases. The Company paid a $.17 cash
dividend for the first quarter of 1996, which followed dividends of $.16 and
$.144 for the two previous quarters.
PAGE 8
<PAGE>
Deposit and Loan Trends
The following analysis on trends in the deposit and loan portfolios focuses
exclusively on the two New York banking subsidiaries;
Vermont operations, which are the subject of definitive sale agreements, have
been excluded.
The following table presents the quarterly average balance by deposit type and
the relative proportion of each deposit type for
each of the most recent five quarters for Glens Falls National Bank & Trust
Company and Saratoga National Bank and Trust
Company.
<TABLE>
<CAPTION>
Quarterly Average Deposit Balances
(Excludes Vermont Deposits)
(Dollars in Thousands)
Mar 1996 Dec 1995 Sep 1995 Jun 1995 Mar 1995
Amount % Amount % Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand Deposits $ 63,156 13 $ 66,437 13 $ 67,648 14 $ 61,137 13 $ 60,694 13
N.O.W. and Super N.O.W. 99,004 20 103,881 21 88,384 18 86,808 18 85,835 18
Savings and M.M.D.A 145,094 29 142,582 29 150,654 31 155,102 32 167,768 36
Time Deposits of
$100,000 or More 66,755 14 67,141 13 67,475 14 62,577 13 51,208 11
Other Time Deposits 117,682 24 116,702 24 116,468 23 113,164 24 101,881 22
Total Deposits $491,692 100 $496,744 100 $490,628 100 $478,788 100 $467,387 100
</TABLE>
<TABLE>
<CAPTION>
Quarterly Cost of Deposits
(Excludes Vermont Deposits)
Mar 1996 Dec 1995 Sep 1995 Jun 1995 Mar 1995
<S> <C> <C> <C> <C> <C>
Demand Deposits --- % --- % --- % --- % --- %
N.O.W. and Super N.O.W. 2.58 2.87 2.62 2.71 2.35
Savings and M.M.D.A 3.00 3.08 3.08 3.09 3.09
Time Deposits of
$100,000 or More 5.37 5.59 5.66 5.71 5.50
Other Time Deposits 5.49 5.64 5.60 5.46 4.86
Total Deposits 3.45 3.57 3.53 3.53 3.20
</TABLE>
<TABLE>
<CAPTION>
Federal Reserve Bank's Discount Rate Changes 1992 - 1996
Date New Rate Old Rate
<S> <C> <C>
January 31, 1996 5.00% 5.25%
February 1, 1995 5.25 4.75
November 15, 1994 4.75 4.00
August 16, 1994 4.00 3.50
May 17, 1994 3.50 3.00
July 2, 1992 3.00 3.50
</TABLE>
Average deposits for the Company's New York banks increased $24.3
million, or 5.2%, from the first quarter of 1995 to the first quarter of 1996.
Average deposits decreased by 1.0% from the last quarter of 1995 to the first
quarter of 1996, representing the normal seasonal trend of the Company.
Over the five quarters charted in the table above, the Company experienced
a shift in the mix of deposits, with savings and money market accounts
decreasing as a percentage of total deposits and N.O.W. accounts and time
deposits increasing in proportion to total deposits. The ratio of other time
deposits to total deposits remained constant over the most recent four
quarters.
The Federal Reserve Board attempts to influence the federal funds and
prime interest rates by changing the Federal Reserve Bank discount rate.
Over the past two years, changes in the discount rate have directly influenced
federal funds and prime rates, which in turn have had an impact upon the
Company's cost of funds. The "Quarterly Cost of Deposits" analysis and the
Federal Reserve Bank Discount Rate Chart above, demonstrate the positive
correlation between changes in the federal discount rate and changes in the
Company's cost of funds. The increase in the discount rate on February 1,
1995 marked the last in a series of interest rate increases by the Federal
Reserve Board which had begun in May of 1994. Rates then held steady for
twelve months until the Reserve Board lowered rates by twenty five basis
points on January 31, 1996. The Company's cost of funds rose throughout
1994 and into 1995 as a result of these changes. Correspondingly, the cost
of deposits reached a plateau for the last three quarters of 1995, and
decreased twelve basis points in the first quarter of 1996 as a result of the
January 31, 1996 decrease in the federal discount rate.
PAGE 9
PAGE
<PAGE>
The following table presents the quarterly average balance by loan type
and the relative proportion of each loan type for each of the most recent five
quarters for Glens Falls National Bank & Trust Company and Saratoga
National Bank and Trust Company.
<TABLE>
<CAPTION>
Quarterly Average Loan Balances
(Excludes Vermont Loans)
(Dollars in Thousands)
Mar 1996 Dec 1995 Sep 1995 Jun 1995 Mar 1995
Amount % Amount % Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
Commercial Real Estate $ 87,073 24 $ 87,388 25 $ 89,361 25 $ 90,130 26 $ 86,549 25
Residential Real Estate 120,010 33 119,157 34 118,519 34 118,308 34 117,948 34
Home Equity 29,226 8 29,364 8 29,333 8 29,306 8 29,281 9
Indirect Consumer Loans 82,446 23 78,823 22 75,560 22 72,539 21 69,851 20
Direct Consumer Loans 31,555 9 30,022 8 27,831 8 26,720 8 30,439 9
Credit Card Loans 9,310 3 9,413 3 9,334 3 8,804 3 8,867 3
Total Loans $359,620 100 $354,166 100 $349,939 100 $345,807 100 $342,935 100
</TABLE>
<TABLE>
<CAPTION>
Quarterly Taxable Equivalent Yield on Loans
(Excludes Vermont Loans)
Mar 1996 Dec 1995 Sep 1995 Jun 1995 Mar 1995
<S> <C> <C> <C> <C> <C>
Commercial and
Commercial Real Estate 9.98% 10.07% 10.21% 10.26% 10.50%
Residential Real Estate 8.55 8.47 8.42 8.67 8.25
Home Equity 9.40 9.76 9.91 10.03 9.57
Indirect Consumer Loans 8.62 8.56 8.50 8.36 8.20
Direct Consumer Loans 9.43 9.90 9.83 10.26 9.48
Credit Card Loans 16.45 15.64 16.45 16.72 16.46
Total Loans 9.26 9.30 9.35 9.46 9.24
</TABLE>
Average loans of the Company's New York banks increased at a steady pace
over the five most recent quarters. Average loans for the first quarter of 1996
had increased by $16.7 million, or 4.9%, over the first quarter of 1995. While
all categories of loans either increased or maintained a constant level,
indirect consumer loans demonstrated the most significant change. Indirect
consumer loans are primarily auto loans financed through local dealerships,
where the Company acquires the dealer paper. As a percentage of overall
loan portfolio of the New York banks, these loans increased from 20% to
23% during the period from the first quarter of 1995 to the first quarter of
1996. Otherwise, there was no significant change in the mix of loan
categories within the loan portfolio.
Yields on the Company's loan portfolio for its New York banks continued to
increase during the first part of 1995, reflecting the general increase in
interest rates. The yield on the loan portfolio peaked in the second quarter
of 1995 and decreased in each of the three subsequent quarters.
PAGE 10
<PAGE>
The following table presents information related to the Company's allowance
and provision for loan losses for each of the past six quarters. The provision
for loan losses and net charge-offs are reported on a year-to-date basis, and
are annualized when expressed as numerators in ratios.
<TABLE>
<CAPTION>
Summary of the Allowance and Provision for Loan Losses
(Dollars in Thousands)(Loans Stated Net of Unearned Income)
Mar 1996 Dec 1995 Sep 1995 Jun 1995 Mar 1995 Dec 1994
Loan Balances:
<S> <C> <C> <C> <C> <C> <C>
Period End Loans $479,848 $517,787 $515,935 $517,165 $508,626 $507,553
Average Loans, Year-to-Date 482,640 513,266 512,515 511,909 509,886 502,224
Allowance for Loan Losses:
Allowance for Loan Losses,
Begin of Period $12,106 $12,338 $12,338 $ 12,338 $12,338 $16,078
Transfer Pursuant to Branch Sale (596) --- --- --- --- ---
Provision for Loans Losses, YTD 224 1,170 640 360 130 (950)
Net Charge-offs, YTD (265) (1,402) (599) (515) (258) (2,790)
Allowance for Loan Losses,
End of Period $11,469 $12,106 $12,379 $12,183 $12,210 $12,338
Nonperforming Assets:
Nonaccrual Loans $3,247 $ 4,244 $ 4,927 $ 5,060 $2,780 $3,618
Loans Past Due 90 or More Days
and Still Accruing Interest 957 111 371 327 526 231
Loans Restructured and in
Compliance with Modified Terms --- --- --- --- 62 580
Total Nonperforming Loans 4,204 4,355 5,298 5,387 3,368 4,429
Other Real Estate Owned 2,215 2,410 2,703 2,785 3,545 3,396
Total Nonperforming Assets $6,419 $ 6,765 $ 8,001 $ 8,172 $6,913 $7,825
Performance Ratios:
Allowance to Nonperforming Loans 272.81% 277.98% 233.65% 226.17% 362.53% 278.57%
Allowance to Period End Loans 2.39 2.34 2.40 2.36 2.40 2.43
Provision to Average Loans (1) 0.19 0.23 0.17 0.14 0.10 (0.19)
Net Charge-offs to Average Loans (1) 0.22 0.27 0.16 0.20 0.21 0.56
Nonperforming Assets to Loans & OREO 1.33 1.30 1.54 1.57 1.35 1.53
(1) Annualized
</TABLE>
The Company's nonperforming assets (including both New York and
Vermont operations) at March 31, 1996 amounted to $6.4 million, a decrease
of $346 thousand or 5.1% from December 31, 1995 and a decrease of $494
thousand or 7.1% from March 31, 1995. The decrease from year-end was
primarily attributable to sales of other real estate owned and a 3.5%
decrease in nonperforming loans.
The provision for loan losses was $224 thousand for the first quarter of 1996,
compared to a provision of $130 thousand for the first quarter of 1995. On
an annualized basis, the ratio of the first quarter provision to average loans
was .19%, only slightly below the annualized ratio of the quarter's net
charge-offs to average loans of .22%. The first quarter provision was
deemed adequate, in light of the Company's high coverage ratio compared
to industry norms. The coverage ratio, defined as the ratio of the allowance
for loan losses to nonperforming loans, was 272.81% at March 31, 1996.
The ratio of the provision for loan losses to average loans was negative for
1994 as a result of the Company's decision to reduce the level of the
allowance for loan losses during 1994, effected as a $1.5 million credit to the
provision for loan losses.
CAPITAL RESOURCES
Shareholders' equity was $70.1 million at March 31, 1996, an increase of
$2.6 million or 3.9% from December 31, 1995. The increase in
shareholders' equity was primarily attributable to retained current year
earnings. Increases were offset in part by a $1.1 million decrease in the
valuation allowance for securities available-for-sale, cash dividends of $952
thousand and the repurchase by the Company as part of its newly-adopted
stock repurchase program of 159,500 shares of common stock at a cost of
$3.2 million. The valuation allowance was established upon the December
31, 1993 adoption of SFAS No. 115 which requires that securities available-for-
sale be carried at fair value through a valuation reserve in shareholders'
equity.
The Company and its subsidiaries are currently subject to two capital
guidelines, a leverage ratio test and a risk-based capital measure. The
risk-based capital guidelines assign weightings to all assets and certain off-
balance sheet items and establish an 8% minimum ratio of qualified total
capital to risk-weighted assets. At least half of total capital must consist of
"Tier 1" capital, which comprises common equity, retained earnings and a
limited amount of permanent preferred stock, less goodwill. Up to half of
total capital may consist of so-called "Tier 2" capital, comprising a limited
amount of subordinated debt, other preferred
PAGE 11
<PAGE>
stock, certain other instruments
and a limited amount of loan loss reserves. The leverage ratio guideline
establishes minimum limits on the ratio of Tier 1 capital to total tangible
assets. For top-rated companies, the minimum leverage ratio is 3%, but
lower-rated or rapidly expanding companies may be required to meet
substantially greater minimum ratios. The FDIC Improvement Act ("FDICIA")
of 1991 mandated actions to be taken by banking regulators for various
levels of undercapitalization of financial institutions as measured by these
capital ratios. FDICIA established five levels of capitalization ranging from
"critically undercapitalized" to "well-capitalized." As of March 31, 1996, the
Tier 1 leverage and risk-based capital ratios for the Company and its
subsidiaries were as follows:
<TABLE>
<CAPTION>
Summary of Capital Ratios
Tier 1 Total
Risk-Based Risk-Based
Leverage Capital Capital
Ratio Ratio Ratio
<S> <C> <C> <C>
Arrow Financial Corporation 9.46% 15.39% 16.65%
Glens Falls National Bank & Trust Co. 7.73 13.50 14.75
Saratoga National Bank & Trust Co. 8.13 10.76 12.01
Green Mountain Bank 13.77 20.98 22.29
Regulatory Minimum 3.00 4.00 8.00
FDICIA's "Well-Capitalized" Standard 5.00 6.00 10.00
</TABLE>
All capital ratios for the Company and its subsidiary banks at March 31, 1996
were above minimum capital standards for financial institutions. Additionally,
all Company and subsidiary bank capital ratios at that date were above
FDICIA's "well-capitalized" standard.
The following table presents the cash dividends paid in 1996 and 1995,
restated for the November 1995 four percent stock dividend. On April 25,
1996, the Company announced the 1996 second quarter dividend of $.17
payable on June 15, 1996.
Quarterly Dividends
1996 1995
First Quarter $.170 $.125
Second Quarter .170 .135
Third Quarter N/A .144
Fourth Quarter N/A .160
First Quarter Core Earnings Per Share $.44 $.41
Dividend Payout Ratio: (Second quarter
dividends as a percent of first quarter
core earnings per share) 38.6% 32.9%
LIQUIDITY
The objective of liquidity management is to satisfy cash flow requirements,
principally the needs of depositors and borrowers to access funds. Liquidity
is provided through assumption or "purchase" of liabilities, the maturity of
asset balances and the sale of assets. Liability liquidity arises primarily
from the significant base of "core" and other deposits gathered through a
branch network operating over a dispersed geographical area. These "core"
balances consist of demand deposits, savings, N.O.W. and money market
account balances and small denomination time deposits. Core deposits are
considered to be less volatile in their movement into and out of financial
institutions, as compared to large denomination time deposits, brokered time
deposits and repurchase agreements, which are perceived as more sensitive
to changes in interest rates than core deposits. Core deposits represented
a substantial proportion of the Company's total assets. At March 31, 1996,
core deposits represented more than 75% of the Company's total assets and
stockholders' equity contributed 9.8% as a source of funds. Large
denomination time deposits, repurchase agreements and other borrowed
funds represented 11.1% of total assets at March 31, 1996.
Federal funds sold are overnight sales of the Company's surplus funds to
correspondent banks, while federal funds purchased represent overnight
borrowings. The Company's practice is to be a net seller of federal funds on
average, and to avoid extended periods of purchasing federal funds. During
the first quarter of 1996, average federal funds sold amounted to $10.3
million and average federal funds purchased were $1.5 million. At March
31, 1996, federal funds sold amounted to $9.4 million.
PAGE 12
<PAGE>
Apart from federal funds, securities available-for-sale represent the
Company's primary source of liquidity. This liquidity arises both from an
ability to sell the securities quickly without significant impact on Company
earnings, as well as from the ability to use the securities as collateral for
borrowing. At March 31, 1996, securities available-for-sale amounted to $171.8
million and averaged $173.0 million for the quarter.
Other sources of funds include term federal funds arrangements with
correspondent banks and a borrowing arrangement with the Federal Home
Loan Bank.
The Company is not aware of any known trends, events or uncertainties that
will have or that are reasonably likely to have a material effect or make
material demands on the Company's liquidity, capital resources or results of
operations.
INTEREST RATE RISK
While managing liquidity, the Company must monitor and control interest rate
risk. Interest rate risk is the exposure of the Company's net interest income
to changes in interest rates. Interest rate risk is directly related to the
different maturities and repricing characteristics of interest-bearing assets
and liabilities, as well as to prepayment risks for mortgage-backed assets,
possible early withdrawal of time deposits, and the fact that the speed and
magnitude of responses to interest rate changes varies by product. While
many of the Company's loan products are indexed to independent rates,
such as prime or treasury notes, the rates on most deposit products are set
by management pricing committees.
The Company's primary short-term measure of interest rate risk projects net
interest income for the ensuing twelve-month period based on the maturity,
prepayment assumption and repricing characteristic of each individual
interest-bearing asset and liability under a variety of interest rate projec-
tions. The Company obtains interest rate projections from a third party
provider of economic data. These projections are applied to existing interest
sensitive assets and liabilities and to expected new and rollover amounts.
As a base, the Company projects net interest income for the ensuing twelve
months for the most likely projection and for a no-change scenario. Exposure
to rising or falling rates are calculated to cover a wide distribution of the
perceived probable interest rate scenarios.
For a long-term measure of interest rate risk, the Company measures the
economic value of equity for immediate and sustained changes in interest
rates. At March 31, 1996, the Company was operating within established
internal policy limits for both the short-term and long-term measures of
interest rate risk.
The Company is able to reduce interest rate risk by adjusting the mix of loan
products as well as the balance of fixed and variable rate products within the
various loan categories. To a lesser extent, the Company manages interest
rate risk through selection of investments for the securities portfolios. The
Company does not, and in the foreseeable future will not, use derivative
financial instruments to manage interest rate risk.
RESULTS OF OPERATIONS: Three Months Ended March 31, 1996 Compared With
Three Months Ended March 31, 1995
<TABLE>
<CAPTION>
Summary of Earnings Performance
(Dollars in Thousands)
Mar 1996 Mar 1995 Change % Change
<S> <C> <C> <C> <C>
Net Income $7,473 $2,384 $5,089 213.5%
Net Income, recurring 2,480 2,375 105 4.4
Primary Earnings Per Share 1.32 .41 .91 222.0
Primary Earnings Per Share, recurring .44 .41 .03 7.3
Return on Assets 4.15% 1.29% 2.86% 221.8
Return on Assets, recurring 1.39% 1.28% .11% 8.6
Return on Equity 41.54% 16.23% 25.31% 156.0
Return on Equity, recurring 14.73% 16.16% (1.43)% (8.8)
</TABLE>
The Company reported earnings of $7.5 million for the first quarter of 1996,
which included the gain associated with the sale of eight branches of Green
Mountain Bank to Mascoma Savings Bank on January 15, 1996. Recurring
net income was $2.5 million for the first quarter of 1996, which compared
to earnings of $2.4 million for the first quarter of 1995, representing an
PAGE 13
<PAGE>
increase of $105 thousand, or 4.4%. Primary earnings per share were
$1.32 and $.41 for the two respective periods. However, adjusted to reflect
recurring earnings only, earnings per share for the 1996 period were $.44.
The $7.1 million pre-tax gain on the sale of eight branches to Mascoma
Savings Bank was reported as other income in the 1996 period. The $105
thousand increase in recurring net income for the first quarter of 1996 as
compared to the first quarter of 1995 was primarily attributable to decreased
operating expenses offset in part by a decrease in net interest income.
These and other changes are reviewed in the following sections on net
interest income, other income, other expense and income taxes.
<TABLE>
<CAPTION>
Net Interest Income
Summary of Net Interest Income
(Taxable Equivalent Basis)
(Dollars in Thousands)
Mar 1996 Mar 1995 Change % Change
<S> <C> <C> <C> <C>
Interest Income $ 14,702 $ 14,579 $ 123 0.8%
Interest Expense 5,576 5,498 78 1.4
Net Interest Income $ 9,126 $ 9,081 $ 45 0.5
Average Earning Assets (1) $680,079 $701,618 $(21,539) (3.1)%
Average Paying Liabilities 556,615 594,865 (38,250) (6.4)
Taxable Equivalent Adjustment 153 183 (30) (16.4)
Yield on Earning Assets (1) 8.69% 8.43% 0.26% 3.1%
Cost of Paying Liabilities 4.03 3.75 0.28 7.5
Net Interest Spread 4.67 4.68 (0.01) (0.2)
Net Interest Margin 5.40 5.25 0.15 2.9
(1) Includes Nonaccrual Loans
</TABLE>
During the first quarter of 1996, the obligations of two significant borrowers,
which had been restructured in earlier periods and were performing under
the restructured terms, were satisfied in accordance with settlement
agreements involving repayments of amounts in excess of the amounts
recorded on the Company's books. Under the effective accounting
guidelines, payments in excess of the recorded amounts were reported as
interest income. Otherwise, net interest income for the first quarter of 1996
would have been $497 thousand less than the amount shown in the table
above, and the net interest margin for the period would have been 5.10%,
which compared to a margin of 5.25% for the 1995 period.
As adjusted, net interest income decreased $452 thousand in the first quarter
of 1996 as compared to the first quarter of 1995. The decrease is primarily
attributable to a $21.5 million decrease in average earning assets and from
the effects of the change in interest rates during the 1996 period. The
decrease in average earning assets was attributable to the sale of eight
branches in Vermont to Mascoma Savings Bank, which was offset, in part,
by increased loan portfolios in New York.
In January 1996, the Federal Reserve Board effected a decrease in interest
rates by reducing the discount rate by twenty five basis points, ending a
twelve month period of stable interest rates. The Company's earning assets
responded more quickly to the decrease in interest rates than paying
liabilities, which had a negative effect on net interest income for the first
quarter of 1996.
The provision for loan losses was $224 thousand and $130 thousand for the
quarters ended March 31, 1996 and 1995, respectively. The provision for
loan losses was discussed previously under the "Summary of the Allowance
and Provision for Loan Losses" on page 11 of this report.
PAGE 14
<PAGE>
<TABLE>
<CAPTION>
Other Income
Summary of Other Income
(Dollars in Thousands)
Mar 1996 Mar 1995 $ Change % Change
<S> <C> <C> <C> <C>
Income From Fiduciary Activities $ 970 $ 977 $ (7) (0.7)%
Fees for Other Services to Customers 1,014 1,139 (125) (11.0)
Net Gains on Securities Transactions 112 --- 112 ---
Gain on the Sale of Branches 7,091 --- 7,091 ---
Other Operating Income 281 283 (2) (0.7)
Total Other Income $9,468 $2,399 $7,069 294.7
Total Other Income, Without Branch Sales
and Securities Transactions $2,265 $2,399 $ (134) (5.6)
</TABLE>
Disregarding the sale of eight Vermont branches to Mascoma Savings Bank
and securities transactions, other income for the first quarter of 1996
decreased by $134 thousand, or 5.6%, from the first quarter of 1995.
Income from fiduciary services and other operating income, which were
largely unaffected by the branch sale, remain virtually unchanged from the
prior year. Fees for other services to customers (primarily service charges
on deposit accounts, credit card fee income and servicing income on sold
loans) decreased $125 thousand or 11.0%, principally due decreased service
charge income on deposit accounts resulting from the Mascoma transaction.
During the first quarter of 1996, the Company sold $18.2 million of securities
classified as available-for-sale, recognizing net gains of $112 thousand. The
sales were primarily effected to meet funding needs incident to completion
of the Mascoma transaction.
Other operating income (primarily third party credit card servicing income
and gains on the sale of other real estate owned, loans and other assets) for
the first quarter of 1996 remained virtually unchanged from the first quarter
of 1995. The Company services the credit card portfolios for 11 small
financial institutions in the Northeast with approximately $13 million in
outstanding balances from a base of 22,000 cardholders.
<TABLE>
<CAPTION>
Other Expense
Summary of Other Expense
(Dollars in Thousands)
Mar 1996 Mar 1995 $ Change % Change
<S> <C> <C> <C> <C>
Salaries and Employee Benefits $3,900 $3,925 $ (25) (0.6)%
Occupancy Expense of Premises, Net 525 545 (20) (3.7)
Furniture and Equipment Expense 457 502 (45) (9.0)
Other Operating Expense 1,899 2,450 (551) (22.5)
Total Other Expense $6,781 $7,422 $(641) (8.6)
</TABLE>
Other (i.e. noninterest) expense decreased $641 thousand, or 8.6%, for the
first three months of 1996 compared with the first three months of 1995. A
substantial portion of the decrease was attributable to the costs to operate
the eight branches sold to Mascoma Savings Bank on January 15, 1996.
Salaries and employee benefits decreased $25 thousand or .6% in the
comparative period, reflecting the decrease in salaries resulting from the sale
of branches to Mascoma Savings Bank offset in part by an increase in
employee benefits. Salaries in the 1996 period decreased 6.7% from the
1996 period, as the effect of fewer employees more than offset general
salary increases. Employee benefits, however, rose 13.8%, reflecting the
rising costs of providing various benefit programs. No termination benefits
were paid in connection with the branch sale to Mascoma; virtually all of the
affected employees continued as employees of Mascoma following the sale.
Occupancy expense of premises, net of rental income, and furniture and
equipment expense in the first quarter of 1996 both decreased from the 1995
comparative period. The decrease in both areas was primarily attributable
to the disposition of the branches in Vermont. Other operating expense in
the first quarter of 1996 decreased by $551 thousand or 22.5% from the
same period in 1995. In addition to the effects of the branch sale, FDIC
insurance premiums were substantially reduced in the third quarter of 1995.
As a result, FDIC and other insurance expense for the first quarter of 1996
had decreased $406 thousand from the first quarter of 1995.
PAGE 15
<PAGE>
<TABLE>
<CAPTION>
Income Taxes
Summary of Income Taxes
(Dollars in Thousands)
Mar 1996 Mar 1995 Change
<S> <C> <C> <C>
Provision for Income Taxes $3,963 $1,361 $2,602
Effective Federal Rate 34.65% 36.34% 1.69%
</TABLE>
The provision for federal and state income taxes amounted to $4.0 million
and $1.4 million for the first quarter of 1996 and 1995, respectively. The
effective tax rate decreased by 169 basis points between the 1995 and 1996
periods. The decrease was experienced, primarily, because much of the
gain in the 1996 period (i.e., that attributable to the Vermont branch sale) was
not directly subject to state income tax.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any material
pending legal proceedings, other than ordinary
routine litigation occurring in the normal course of
its business.
The Company's subsidiary banks are parties to
various legal claims which arise in the normal
course of their business. For example, the banks,
especially Green Mountain Bank, have in the past
few years encountered claims against them
grounded in lender liability of the sort which
financial institutions routinely face. These lender
liability claims normally take the form of
counterclaims to lawsuits filed by the banks for
collection of past due loans. The various pending
legal claims against the subsidiary banks will not, in
the current opinion of management, likely result in
any material liability to the subsidiary banks or the
Company.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4 .Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders
held April 24, 1996, shareholders elected the
following directors to serve terms expiring in 1999:
<TABLE>
<CAPTION>
Withhold Broker
Director For Authority Non-Votes
<S> <C> <C> <C>
Michael B. Clarke 3,575,201 37,561 ---
Kenneth C. Hopper, MD. 3,575,306 37,436 ---
Michael F. Massiano 3,575,328 37,434 ---
Doris E. Ornstein 3,567,683 45,079 ---
</TABLE>
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
Form 8-K, dated January 15, 1996 - Reporting the
sale of eight branches of Green Mountain Bank to
Mascoma Savings Bank.
Form 8-K, dated February 27, 1996 - Reporting
execution of the definitive purchase and sale
agreements with ALBANK FSB and Vermont
National Bank, for, respectively, sale to ALBANK of
the remaining Vermont branches and certain
related deposits and asset and sale to Vermont
National of the Vermont trust operations.
PAGE 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARROW FINANCIAL CORPORATION
Registrant
Date: May 14, 1996
s/Michael F. Massiano
Michael F. Massiano, Chairman and
President (Chief Executive Officer)
Date: May 14, 1996 s/John J. Murphy
John J. Murphy, Executive Vice
President and Treasurer/CFO
(Principal Financial Officer and
Principal Accounting Officer)
PAGE 17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 20,421
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 171,766
<INVESTMENTS-CARRYING> 14,120
<INVESTMENTS-MARKET> 14,554
<LOANS> 479,848
<ALLOWANCE> 11,469
<TOTAL-ASSETS> 714,412
<DEPOSITS> 611,252
<SHORT-TERM> 17,314
<LIABILITIES-OTHER> 15,708
<LONG-TERM> 0
<COMMON> 5,979
0
0
<OTHER-SE> 64,159
<TOTAL-LIABILITIES-AND-EQUITY> 714,412
<INTEREST-LOAN> 11,574
<INTEREST-INVEST> 2,837
<INTEREST-OTHER> 138
<INTEREST-TOTAL> 14,549
<INTEREST-DEPOSIT> 5,367
<INTEREST-EXPENSE> 5,576
<INTEREST-INCOME-NET> 8,973
<LOAN-LOSSES> 224
<SECURITIES-GAINS> 112
<EXPENSE-OTHER> 6,781
<INCOME-PRETAX> 11,436
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,473
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
<YIELD-ACTUAL> 8.69
<LOANS-NON> 3,247
<LOANS-PAST> 957
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,106
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 11,469
<ALLOWANCE-DOMESTIC> 11,469
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
