Arrow Financial Corp. on Thursday kicked off the local banking industry’s third quarter financial reporting period, providing a glimpse of how area banks are faring amid the global financial crisis.
The initial view shows community banks are still able to turn a profit, even if they get clipped by Wall Street’s problems. Arrow, the parent of Saratoga National Bank & Trust Co. and Glens Falls National Bank, posted a third-quarter net income of $5 million, up 11 percent from the same period of 2007.
In announcing the quarterly results, Arrow Chairman, President and Chief Executive Officer Thomas Hoy stressed his bank holding company’s “conservative posture,” which kept it from issuing subprime mortgages or taking on securities backed by those loans for borrowers with poor credit.
But Arrow also revealed its balance sheet will take a hit because of a $2 million unsecured bond issued by Lehman Brothers Holdings Co. Lehman is the New York investment bank whose heavy dealings in the subprime market drove it to file for bankruptcy Sept. 15.
“Our concentration on fundamentals has allowed the company to achieve new record totals for assets, deposits and loans outstanding in spite of historic trauma in the financial markets,” Hoy said.
Arrow’s Lehman connection did not frighten away investors, who sent the bank holding company’s stock price up 12.1 percent to $27.94 per share by the close of trading Thursday.
During the quarter, deposits at Arrow rose by 4.5 percent to $1.27 billion from a year earlier. Loans increased 7 percent to $1.11 billion during the same period. Total assets were up 6.1 percent at $1.67 billion.
Arrow said Lehman’s bankruptcy declaration resulted in a “significant decline n the market value of the investment bank’s bond, prompting the Glens Falls company to record a $731,000 other-than-temporary impairment charge for the quarter.
The remaining estimated value of the bond is $800,000, which Arrow noted as a nonperforming asset, which totaled $4 million by Sept. 30. A year earlier, Arrow had $2.1 million in nonperforming assets.
Among the bank holding companies slated to post their third quarter results next week are TrustCo Bank Corp in Glenville, KeyCorp in Cleveland, First Niagara Financial Group in Lockport and Berkshire Hills Bancorp in Pittsfield, Mass.