Arrow Financial Corp. reported a 66 percent jump in residential mortgages in the first quarter of the year.
The parent company of Glens Falls National Bank and Trust Co. and Saratoga National Bank and Trust Co. originated $16.3 million in loans during the first three months of 2009, as compared with $10.8 million during the same period last year.
Arrow Chairman and CEO Tom Hoy, speaking to about 100 shareholders at the bank's annual meeting Wednesday at the Charles R. Wood Theater, said mortgage demand was "huge" in the first quarter. Anecdotally, he said mortgages for home purchases picked up, though refinancing still comprised the bulk of the loans.
A report released Wednesday by the Mortgage Bankers Association of Northeastern New York supports that trend. The survey of Capital Region lenders said purchase loan volume exceeded 30 percent of all new loan applications filed in April, an increase over the two previous months' activity.
The association cited the first-time homebuyer tax credit as a stimulus for new mortgages, which, combined with historically low interest rates and low home prices, has created a buyer's market. For the past four weeks, 30-year fixed loans have ranged from 5 percent to 5.25 percent. Fifteen-year fixed conforming loans remained in the 4.5 percent to 4.875 percent range in April.
With customers locking in interest rates at record lows, Hoy told shareholders that Arrow is selling more mortgages to Freddie Mac on the secondary market to avoid being "underwater" when the Federal Reserve's lending rate rises in the coming years.
"We're removing the interest rate risk from our balance sheet and transferring it to someone else," Hoy said.
But because of the turmoil in the financial industry -- especially pertaining to derivative sales of toxic assets by large investment banks -- the documentation and requirements of selling on the secondary market have become "significantly more onerous," Hoy said. Added scrutiny is just one repercussion of the financial sector meltdown that has impacted Arrow, which avoided subprime lending and has held its own throughout the turmoil.
According to the American Bankers Association, 24 percent of banks suffered losses in 2008. As of March 27, there were 21 bank failures this year costing $2.3 billion.
Another consequence of the meltdown, the FDIC has raised the premium on deposit insurance and will charge member banks a one-time fee of between 0.1 and 0.2 percent of total deposits in the second half of the year. While Arrow posted record earnings in 2008 and strong first quarter results, Hoy expressed some caution about the firm's ability to sustain last year's return on average equity, which was the highest since 2004 at 16.26 percent; the net loan losses to average loans of 0.7 percent, which was a fraction of the 0.65 percent average among banks of similar size; or the annualized rate of return on average equity, which was 21.1 percent for the first quarter.
Following the meeting, some shareholders said they would like to see the Arrow board of directors reinstate the annual stock dividend of 3 percent, which was not paid last year.
"If the bank is doing as well as it has, and the CEO is getting stock bonuses because of the bank meeting its projections, (the board) should go back to giving the dividend," said Dan Monroe, a longtime shareholder from Kattskill Bay.
On Wednesday following the meeting, the board declared a quarterly cash dividend of 25 cents per share payable June 15 to shareholders of record as of June 3. It also authorized a stock repurchase program of up to $5 million of the company's common stock over the next 12 months. Bank spokesman Tim Badger said it had not been decided whether the bank would take advantage of that program
The parent company of Glens Falls National Bank and Trust Co. and Saratoga National Bank and Trust Co. originated $16.3 million in loans during the first three months of 2009, as compared with $10.8 million during the same period last year.
Arrow Chairman and CEO Tom Hoy, speaking to about 100 shareholders at the bank's annual meeting Wednesday at the Charles R. Wood Theater, said mortgage demand was "huge" in the first quarter. Anecdotally, he said mortgages for home purchases picked up, though refinancing still comprised the bulk of the loans.
A report released Wednesday by the Mortgage Bankers Association of Northeastern New York supports that trend. The survey of Capital Region lenders said purchase loan volume exceeded 30 percent of all new loan applications filed in April, an increase over the two previous months' activity.
The association cited the first-time homebuyer tax credit as a stimulus for new mortgages, which, combined with historically low interest rates and low home prices, has created a buyer's market. For the past four weeks, 30-year fixed loans have ranged from 5 percent to 5.25 percent. Fifteen-year fixed conforming loans remained in the 4.5 percent to 4.875 percent range in April.
With customers locking in interest rates at record lows, Hoy told shareholders that Arrow is selling more mortgages to Freddie Mac on the secondary market to avoid being "underwater" when the Federal Reserve's lending rate rises in the coming years.
"We're removing the interest rate risk from our balance sheet and transferring it to someone else," Hoy said.
But because of the turmoil in the financial industry -- especially pertaining to derivative sales of toxic assets by large investment banks -- the documentation and requirements of selling on the secondary market have become "significantly more onerous," Hoy said. Added scrutiny is just one repercussion of the financial sector meltdown that has impacted Arrow, which avoided subprime lending and has held its own throughout the turmoil.
According to the American Bankers Association, 24 percent of banks suffered losses in 2008. As of March 27, there were 21 bank failures this year costing $2.3 billion.
Another consequence of the meltdown, the FDIC has raised the premium on deposit insurance and will charge member banks a one-time fee of between 0.1 and 0.2 percent of total deposits in the second half of the year. While Arrow posted record earnings in 2008 and strong first quarter results, Hoy expressed some caution about the firm's ability to sustain last year's return on average equity, which was the highest since 2004 at 16.26 percent; the net loan losses to average loans of 0.7 percent, which was a fraction of the 0.65 percent average among banks of similar size; or the annualized rate of return on average equity, which was 21.1 percent for the first quarter.
Following the meeting, some shareholders said they would like to see the Arrow board of directors reinstate the annual stock dividend of 3 percent, which was not paid last year.
"If the bank is doing as well as it has, and the CEO is getting stock bonuses because of the bank meeting its projections, (the board) should go back to giving the dividend," said Dan Monroe, a longtime shareholder from Kattskill Bay.
On Wednesday following the meeting, the board declared a quarterly cash dividend of 25 cents per share payable June 15 to shareholders of record as of June 3. It also authorized a stock repurchase program of up to $5 million of the company's common stock over the next 12 months. Bank spokesman Tim Badger said it had not been decided whether the bank would take advantage of that program
