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Arrow Reports 12.2% Year-Over-Year Loan Growth and $8.7 million in Net Income

-- Net loans grew by $38.8 million in the first quarter of 2019.

-- First quarter net income increased 2.4% year-over-year to $8.7 million.

-- First quarter diluted earnings per share (EPS) of $0.60.

-- First quarter net interest income increased 3.5% over the prior-year comparable quarter.

-- Continued strong profitability, asset quality and capital ratios.

GLENS FALLS, N.Y., April 23, 2019 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three-month period ended March 31, 2019. Net income for the first quarter of 2019 was $8.7 million compared to $8.5 million in the first quarter of 2018. Steady loan growth continued in 2019, as net loans grew by $38.8 million to $2.21 billion. Driven primarily by this growth, net interest income increased to $21.1 million in the first quarter of 2019, compared to $20.4 million for the comparable quarter of 2018. Noninterest income, which includes revenues generated from insurance commissions and wealth management, contributed $6.9 million to total first quarter revenue of $28.0 million, a 2.6% increase over $27.3 million for the first quarter of 2018.

Annualized key profitability ratios remained strong, as measured by a return on average equity (ROE) of 12.98% and a return on average assets (ROA) of 1.19% for the first quarter, compared to 13.78% and 1.25%, respectively, a year earlier.

"Arrow continued its strong performance through the first quarter of the year," said President and CEO Thomas J. Murphy. "Steady loan growth was again a highlight, while our profitability, asset and capital ratios all reflect our solid foundation. Our team is committed to advancing community banking in the markets we serve, and I am very proud of their achievements."

Cash Dividend: On March 15, 2019, the Company distributed a cash dividend of $0.26 per share. The March 15, 2019 cash dividend was 7.1% higher than the $0.25 cash dividend paid by the Company in the first quarter of 2018, when adjusted for the 3% stock dividend distributed on September 27, 2018.

The following expands on our first-quarter results:

Loan Growth: Over the twelve months ended March 31, 2019, total loans increased $242.2 million, or 12.2%, to $2.2 billion. The consumer loan portfolio grew by $120.2 million, or 19.2%, over the balance at March 31, 2018, primarily within the indirect automobile lending program. The total residential real estate loan portfolio increased $78.1 million, or 10.0%, over the balance at March 31, 2018. Total outstanding commercial loans increased $43.9 million, or 7.5% over the balance at March 31, 2018.

Deposit Growth: At March 31, 2019, deposit balances reached $2.5 billion, up $78.8 million, or 3.3%, from the prior-year level with growth in both personal and business balances. Noninterest-bearing deposits represented 18.2% of total deposits at March 31, 2019, compared to 18.8% at March 31, 2018. At March 31, 2019, other time deposits were $263.0 million, an increase of $95.9 million compared to the prior year.

Net Interest Income: Driven by strong loan growth, first quarter 2019 net interest income increased to $21.1 million, up 3.5% from $20.4 million in the comparable quarter of 2018. The net interest margin was 3.01% for the quarter, compared to 3.13% for the first quarter of 2018. The decrease in net interest margin was primarily due to increased rates on money market savings, time deposits and other borrowings as a result of higher short-term interest rates.

Noninterest Income: Noninterest income for the three-month period ended March 31, 2019, was $6.9 million, compared to $6.9 million in the comparable 2018 quarter. Revenue generated from the wealth management and insurance segments, remained consistent, and total noninterest income represented 24.6% of total revenues in the first quarter of 2019 compared to 25.2% for the same period of 2018.

Noninterest Expense: Noninterest expense for the first quarter of 2019 increased 4.4% to $16.7 million, from $16.0 million for the first quarter of 2018. Technology and equipment expense increased $443 thousand, and other operating expense increased $228 thousand from the comparable quarter in 2018.

Provision for Income Taxes: The provision for income taxes was $2.2 million in the first quarter of 2019 versus $2.1 million in the same quarter of 2018. The effective income tax rates for the three-month periods ended March 31, 2019 and 2018 were 19.8% and 19.4%, respectively.

Asset Quality: Asset quality remained strong at March 31, 2019, helped by continuing low levels of nonperforming loans and net charge-offs. Nonperforming loans at March 31, 2019, were $5.3 million, down $174.0 thousand from the level at December 31, 2018. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.05% for the three-month period ended March 31, 2019, down from the prior-year comparable quarter of 0.06%. The allowance for loan losses was $20.4 million at March 31, 2019, which represented 0.91% of loans outstanding, as compared to 0.96% at March 31, 2018. The loss provision expense for the first quarter of 2019 was $472 thousand, down $274 thousand from the provision for the comparable 2018 quarter.

Capital: Total stockholders' equity was a record $276.6 million at March 31, 2019, up $23.9 million, or 9.4%, from the comparable quarter of 2018. Overall regulatory capital ratios also remained strong in 2019, with the Company's common equity tier 1 ratio estimated to be 12.98% and the total risk-based capital ratio estimated to be 14.93% at March 31, 2019. These capital levels at the Company and both its subsidiary banks continue to significantly exceed the "well capitalized" regulatory standard.

Industry Recognition: Both of the Company's banking subsidiaries maintained their BauerFinancial, Inc. 5-Star Superior Bank rating. Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company have continued to earn this designation for the last 48 and 40 quarters, respectively.

About Arrow: Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. The Company is the parent of Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company. Other subsidiaries include North Country Investment Advisers, Inc. and Upstate Agency, LLC.

Non-GAAP Financial Measures Reconciliation: In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). The following measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission ("SEC") and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules. Certain non-GAAP financial measures include: tangible equity, return on tangible equity, tax-equivalent adjustment and related net interest income, tax-equivalent, and the efficiency ratio. Management believes that the non-GAAP financial measures disclosed by the Company from time to time are useful in evaluating the Company's performance and that such information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Non-GAAP financial measures may differ from similar measures presented by other companies. See the reconciliation of GAAP to non-GAAP measures in the section "Selected Quarterly Information."

Safe Harbor Statement: 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 may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, involving 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, explicitly or by implication. 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, 2018, and other filings with the Securities and Exchange Commission.

 

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts - Unaudited)












Three Months Ended March 31,



2019


2018

INTEREST AND DIVIDEND INCOME





Interest and Fees on Loans


$

22,403



$

18,858


Interest on Deposits at Banks


195



134


Interest and Dividends on Investment Securities:





Fully Taxable


2,369



1,893


Exempt from Federal Taxes


1,246



1,533


Total Interest and Dividend Income


26,213



22,418


INTEREST EXPENSE





Interest-Bearing Checking Accounts


482



387


Savings Deposits


1,601



522


Time Deposits over $250,000


396



204


Other Time Deposits


713



259


Federal Funds Purchased and

  Securities Sold Under Agreements to Repurchase


22



16


Federal Home Loan Bank Advances


1,594



414


Junior Subordinated Obligations Issued to

  Unconsolidated Subsidiary Trusts


269



214


Interest on Financing Leases


15




 Total Interest Expense


5,092



2,016


NET INTEREST INCOME


21,121



20,402


Provision for Loan Losses


472



746


NET INTEREST INCOME AFTER PROVISION FOR
  LOAN LOSSES


20,649



19,656


NONINTEREST INCOME





Income From Fiduciary Activities


2,107



2,197


Fees for Other Services to Customers


2,402



2,380


Insurance Commissions


1,719



1,903


Net Gain on Securities Transactions


76



18


Net Gain on Sales of Loans


104



38


Other Operating Income


479



353


 Total Noninterest Income


6,887



6,889


NONINTEREST EXPENSE





Salaries and Employee Benefits


9,319



9,369


Occupancy Expenses, Net


1,420



1,340


Technology and Equipment Expense


3,141



2,698


FDIC Assessments


212



217


Other Operating Expense


2,560



2,332


 Total Noninterest Expense


16,652



15,956


INCOME BEFORE PROVISION FOR INCOME TAXES


10,884



10,589


Provision for Income Taxes


2,150



2,058


NET INCOME


$

8,734



$

8,531


Average Shares Outstanding 1:





Basic


14,469



14,354


Diluted


14,520



14,436


Per Common Share:





Basic Earnings


$

0.60



$

0.59


Diluted Earnings


0.60



0.59


1 2018 Share and Per Share Amounts have been restated for the September 27, 2018, 3% stock dividend.




 

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Amounts - Unaudited)
















March 31,
2019


December 31,
2018


March 31,
2018

ASSETS






Cash and Due From Banks

$

36,198



$

56,529



$

29,525


Interest-Bearing Deposits at Banks

25,031



27,710



70,747


Investment Securities:






Available-for-Sale

298,812



317,535



305,589


Held-to-Maturity (Approximate Fair Value of $280,414 at March 31, 2019; $280,338 at December 31, 2018; and $324,937 at March 31, 2018)

279,400



283,476



330,124


Equity Securities

1,850



1,774



1,579


Other Investments

7,878



15,506



4,780


Loans

2,235,208



2,196,215



1,993,037


Allowance for Loan Losses

(20,373)



(20,196)



(19,057)


Net Loans

2,214,835



2,176,019



1,973,980


Premises and Equipment, Net

34,949



30,446



27,815


Goodwill

21,873



21,873



21,873


Other Intangible Assets, Net

1,777



1,852



2,172


Other Assets

62,280



55,614



58,503


 Total Assets

$

2,984,883



$

2,988,334



$

2,826,687


LIABILITIES






Noninterest-Bearing Deposits

$

453,089



$

472,768



$

452,347


Interest-Bearing Checking Accounts

823,301



790,781



944,161


Savings Deposits

866,861



818,048



762,220


Time Deposits over $250,000

83,834



73,583



85,403


Other Time Deposits

263,012



190,404



167,142


 Total Deposits

2,490,097



2,345,584



2,411,273


Federal Funds Purchased and

  Securities Sold Under Agreements to Repurchase

58,407



54,659



74,957


Federal Home Loan Bank Overnight Advances

74,500



234,000




Federal Home Loan Bank Term Advances

35,000



45,000



45,000


Junior Subordinated Obligations Issued to Unconsolidated
  Subsidiary Trusts

20,000



20,000



20,000


Finance Leases

2,946






Other Liabilities

27,324



19,507



22,723


 Total Liabilities

2,708,274



2,718,750



2,573,953


STOCKHOLDERS' EQUITY






Preferred Stock, $5 Par Value; 1,000,000 Shares Authorized






Common Stock, $1 Par Value; 20,000,000 Shares Authorized (19,035,565 Shares Issued at March 31, 2019; 19,035,565 at December 31, 2018 and 18,481,301 at March 31, 2018)

19,035



19,035



18,481


Additional Paid-in Capital

315,262



314,533



290,980


Retained Earnings

34,231



29,257



34,093


Unallocated ESOP Shares (5,001 Shares at March 31, 2019; 5,001 Shares at December 31, 2018 and 9,643 Shares at March 31, 2018)

(100)



(100)



(200)


Accumulated Other Comprehensive Loss

(11,567)



(13,810)



(11,285)


Treasury Stock, at Cost (4,556,083 Shares at March 31, 2019; 4,558,207 Shares at December 31, 2018 and 4,516,444 Shares at March 31, 2018)

(80,252)



(79,331)



(79,335)


 Total Stockholders' Equity

276,609



269,584



252,734


 Total Liabilities and Stockholders' Equity

$

2,984,883



$

2,988,334



$

2,826,687


 

 

Arrow Financial Corporation

Selected Quarterly Information

(Dollars In Thousands, Except Per Share Amounts - Unaudited)





















Quarter Ended

3/31/2019



12/31/2018



9/30/2018



6/30/2018



3/31/2018


Net Income

$

8,734



$

8,758



$

9,260



$

9,730



$

8,531


Transactions Recorded in Net Income (Net of Tax):










Net Changes in Fair Value of Equity Investments

57



(106)



85



166



13












Share and Per Share Data:1










Period End Shares Outstanding

14,474



14,472



14,441



14,424



14,368


Basic Average Shares Outstanding

14,469



14,451



14,431



14,394



14,354


Diluted Average Shares Outstanding

14,520



14,514



14,520



14,480



14,436


Basic Earnings Per Share

$

0.60



$

0.61



$

0.64



$

0.68



$

0.59


Diluted Earnings Per Share

0.60



0.60



0.64



0.67



0.59


Cash Dividend Per Share

0.260



0.260



0.252



0.243



0.243












Selected Quarterly Average Balances:










  Interest-Bearing Deposits at Banks

$

26,163



$

34,782



$

30,522



$

28,543



$

27,978


  Investment Securities

611,161



637,341



636,847



647,913



642,442


  Loans

2,210,642



2,160,435



2,089,651



2,026,598



1,971,240


  Deposits

2,347,985



2,347,231



2,279,709



2,325,202



2,305,736


  Other Borrowed Funds

327,138



315,172



314,304



219,737



184,613


  Shareholders' Equity

272,864



268,503



263,139



256,358



251,109


  Total Assets

2,977,056



2,954,031



2,879,854



2,823,061



2,763,706


Return on Average Assets, annualized

1.19

%


1.18

%


1.28

%


1.38

%


1.25

%

Return on Average Equity, annualized

12.98

%


12.94

%


13.96

%


15.22

%


13.78

%

Return on Average Tangible Equity, annualized 2

14.22

%


14.20

%


15.36

%


16.80

%


15.24

%

Average Earning Assets

$

2,847,966



$

2,832,558



$

2,757,020



$

2,703,054



$

2,641,660


Average Paying Liabilities

2,224,403



2,189,233



2,110,924



2,100,085



2,050,661


Interest Income

26,213



26,000



24,495



23,590



22,418


Tax-Equivalent Adjustment 3

373



376



376



468



491


Interest Income, Tax-Equivalent 3

26,586



26,376



24,871



24,058



22,909


Interest Expense

5,092



4,343



3,498



2,628



2,016


Net Interest Income

21,121



21,657



20,997



20,962



20,402


Net Interest Income, Tax-Equivalent 3

21,494



22,033



21,373



21,430



20,893


Net Interest Margin, annualized

3.01

%


3.03

%


3.02

%


3.11

%


3.13

%

Net Interest Margin, Tax-Equivalent, annualized 3

3.06

%


3.09

%


3.08

%


3.18

%


3.21

%











Efficiency Ratio Calculation: 4










Noninterest Expense

$

16,652



$

16,881



$

16,026



$

16,192



$

15,956


Less: Intangible Asset Amortization

79



65



65



66



67


Net Noninterest Expense

$

16,573



$

16,816



$

15,961



$

16,126



$

15,889


Net Interest Income, Tax-Equivalent

$

21,494



$

22,033



$

21,373



$

21,430



$

20,893


Noninterest Income

6,887



6,799



7,350



7,911



6,888


Less: Net Changes in Fair Value of Equity Invest.

76



(142)



114



223



18


Net Gross Income

$

28,305



$

28,974



$

28,611



$

29,118



$

27,763


Efficiency Ratio

58.55

%


58.04

%


55.79

%


55.38

%


57.23

%











Period-End Capital Information:










Total Stockholders' Equity (i.e. Book Value)

$

276,609



$

269,584



$

264,810



$

259,488



$

252,734


Book Value per Share 1

19.11



18.63



18.34



17.99



17.59


Goodwill and Other Intangible Assets, net

23,650



23,725



23,827



23,933



24,045


Tangible Book Value per Share 1,2

17.48



16.99



16.69



16.33



15.92












Capital Ratios:5






Tier 1 Leverage Ratio

9.73

%


9.61

%


9.67

%


9.65

%


9.62

%

Common Equity Tier 1 Capital Ratio 

12.98

%


12.89

%


12.89

%


13.01

%


12.97

%

Tier 1 Risk-Based Capital Ratio

13.95

%


13.87

%


13.90

%


14.04

%


14.03

%

Total Risk-Based Capital Ratio

14.93

%


14.86

%


14.90

%


15.06

%


15.04

%











Assets Under Trust Admin. & Investment Mgmt.

$

1,483,259



$

1,385,752



$

1,551,289



$

1,479,753



$

1,470,191


 

 

Arrow Financial Corporation

Selected Quarterly Information - Continued

(Dollars In Thousands, Except Per Share Amounts - Unaudited)























Footnotes:




















1.

Share and Per Share Data have been restated for the September 27, 2018, 3% stock dividend.



2.

Non-GAAP Financial Measures Reconciliation: Tangible Book Value and Tangible Equity exclude goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures which we believe provide investors with information that is useful in understanding our financial performance.



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018


Total Stockholders' Equity (GAAP)

$

276,609



$

269,584



$

264,810



$

259,488



$

252,734



Less: Goodwill and Other Intangible assets, net

23,650



23,725



23,827



23,933



24,045



Tangible Equity (Non-GAAP)

$

252,959



$

245,859



$

240,983



$

235,555



$

228,689














Period End Shares Outstanding

14,474



14,472



14,441



14,424



14,368



Tangible Book Value per Share (Non-GAAP)

$

17.48



$

16.99



$

16.69



$

16.33



$

15.92



Net Income

8,734



8,758



9,260



9,730



8,531



Return on Tangible Equity (Net Income/Tangible Equity - Annualized)

14.22

%


14.20

%


15.36

%


16.80

%


15.24

%












3.

Non-GAAP Financial Measures Reconciliation: Net Interest Margin, Tax-Equivalent is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which we believe provides investors with information that is useful in understanding our financial performance.



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018


Interest Income (GAAP)

$

26,213



$

26,000



$

24,495



$

23,590



$

22,418



Add: Tax-Equivalent adjustment
(Non-GAAP)

373



376



376



468



491



Interest Income - Tax Equivalent
(Non-GAAP)

$

26,586



$

26,376



$

24,871



$

24,058



$

22,909



Net Interest Income (GAAP)

$

21,121



$

21,657



$

20,997



$

20,962



$

20,402



Add: Tax-Equivalent adjustment
(Non-GAAP)

373



376



376



468



491



Net Interest Income - Tax Equivalent
(Non-GAAP)

$

21,494



$

22,033



$

21,373



$

21,430



$

20,893



Average Earning Assets

$

2,847,966



$

2,832,558



$

2,757,020



$

2,703,054



$

2,641,660



Net Interest Margin (Non-GAAP)*

3.06

%


3.09

%


3.08

%


3.18

%


3.21

%












4.

Non-GAAP Financial Measures: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. We believe the efficiency ratio provides investors with information that is useful in understanding our financial performance. We define our efficiency ratio as the ratio of our noninterest expense to our net gross income (which equals our tax-equivalent net interest income plus noninterest income, as adjusted).












5.

For the current quarter, all of the regulatory capital ratios in the table above, as well as the Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below, are estimates based on, and calculated in accordance with, bank regulatory capital rules. All prior quarters reflect actual results. The CET1 ratio at March 31, 2019 listed in the tables (i.e., 12.98%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018


Total Risk Weighted Assets

$

2,075,115



$

2,046,495



$

1,999,849



$

1,934,890



$

1,889,719



Common Equity Tier 1 Capital

269,363



263,863



257,852



251,666



245,015



Common Equity Tier 1 Ratio

12.98

%


12.89

%


12.89

%


13.01

%


12.97

%


















* Quarterly ratios have been annualized














 

 

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)













Quarter Ended:

3/31/2019


12/31/2018


3/31/2018

Loan Portfolio






Commercial Loans

$

133,276



$

136,890



$

127,674


Commercial Real Estate Loans

493,387



484,562



455,059


  Subtotal Commercial Loan Portfolio

626,663



621,452



582,733


Consumer Loans

746,799



719,510



626,639


Residential Real Estate Loans

861,746



855,253



783,665


Total Loans

$

2,235,208



$

2,196,215



$

1,993,037


Allowance for Loan Losses






Allowance for Loan Losses, Beginning of Quarter

$

20,196



$

20,003



$

18,586


Loans Charged-off

(462)



(573)



(370)


Less Recoveries of Loans Previously Charged-off

167



120



95


Net Loans Charged-off

(295)



(453)



(275)


Provision for Loan Losses

472



646



746


Allowance for Loan Losses, End of Quarter

$

20,373



$

20,196



$

19,057


Nonperforming Assets






Nonaccrual Loans

$

5,143



$

4,159



$

4,470


Loans Past Due 90 or More Days and Accruing

64



1,225




Loans Restructured and in Compliance with Modified Terms

141



138



100


Total Nonperforming Loans

5,348



5,522



4,570


Repossessed Assets

123



130



120


Other Real Estate Owned

1,322



1,130



1,525


Total Nonperforming Assets

$

6,793



$

6,782



$

6,215


Key Asset Quality Ratios






Net Loans Charged-off to Average Loans,

   Quarter-to-date Annualized

0.05

%


0.08

%


0.06

%

Provision for Loan Losses to Average Loans,

  Quarter-to-date Annualized

0.09

%


0.12

%


0.15

%

Allowance for Loan Losses to Period-End Loans

0.91

%


0.92

%


0.96

%

Allowance for Loan Losses to Period-End Nonperforming Loans

380.95

%


365.74

%


417.00

%

Nonperforming Loans to Period-End Loans

0.24

%


0.25

%


0.23

%

Nonperforming Assets to Period-End Assets

0.23

%


0.23

%


0.22

%

 

 

Cision

View original content:http://www.prnewswire.com/news-releases/arrow-reports-12-2-year-over-year-loan-growth-and-8-7-million-in-net-income-300836354.html