Arrow Reports $8.6 million in Q1 2023 Net Income and Grew Deposits by $48.0 Million

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GLENS FALLS, N.Y., July 24, 2023 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) announced financial results for the three-month period ended March 31, 2023. Net income for the first quarter of 2023 was $8.6 million and diluted earnings per share was $0.52.

First-Quarter Highlights and Key Metrics

  • Total assets were $4.1 billion.

  • Total deposits were $3.5 billion.

  • Total loans reached a record high of $3.0 billion as of March 31, 2023, an increase of $22.1 million from December 31, 2022.

  • Loan-to-deposit ratio was 85%.

  • Tangible book value per share was $20.55, an increase of $0.60, or 3.01% compared to December 31, 2022.

  • On-balance sheet liquidity of $409 million, or 10%, of total assets; 5% cash and 5% unencumbered readily marketable securities.

  • Additional $1.3 billion of immediately available liquidity with FHLB, FRB and other bank lines.

  • Immediately available liquidity provides in excess of 150% coverage of uninsured deposits.

  • Nonperforming assets decreased to $11.3 million at March 31, 2023, represented 0.27% of period-end assets.

  • Net charge-offs to average loans for the first quarter of 2023 were 0.10% as compared to 0.09% for the previous quarter.

  • Revenue was $34.8 million.

  • Net income was $8.6 million.

  • Non-interest expenses of $22.3 million included $1.0 million in incremental expenses related to the delayed filing of the Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K").

  • Net interest margin was 2.96%.

  • Return on average assets (ROA) was 0.87%.

  • Return on average equity (ROE) was 9.66%.

"In the face of a challenging banking environment, Arrow continued to add to its deposit base and maintained a strong liquidity position while meeting the credit needs of our customers and communities," said Arrow President and CEO David S. DeMarco. "We remain committed to our long-term strategic initiatives of investing in our technology and our team so we can continue to enhance the customer experience and optimize operations.  We look forward to continuing to focus on our customers and communities."

Arrow remains dedicated to developing its team and recently celebrated graduates from Arrow Leadership Academy and Upskill University, internal courses designed to support our culture of collaboration and continuous improvement. Our banks are working toward realizing operational efficiencies and customer-facing enhancements made possible by the completion of our core conversion in September 2022. Our team has returned to our completely renovated downtown Glens Falls, New York headquarters and we look forward to welcoming our customers back to our newly renovated campus. The renovated Glens Falls campus now offers an energy-efficient, flexible and collaborative environment for our team and customers. This investment is important to our team culture, is a key part of the revitalization of downtown Glens Falls, and is a centerpiece of what community banking means to us -- accessible, long-lasting and friendly.

Net income for the first quarter of 2023 was $8.6 million, down from $12.6 million for the same period in the prior year. The year-over-year decline was primarily due to an increase in non-interest expense of $3.4 million, a decrease in non-interest income of $1.5 million and an increase in the provision for credit loss of $785 thousand.

Please see below for further detail.

Income Statement

  • Net Interest Income: Net interest income for the first quarter was $28.1 million, up 1.0% from $27.8 million in the comparable quarter of 2022. Interest and fees on loans were $31.9 million for the first quarter of 2023, an increase of 23.9% from $25.7 million (29.23% excluding Paycheck Protection Program ("PPP") revenue) for the first quarter of 2022 primarily due to loan growth and higher market rates. PPP loans contributed $1.1 million in the first quarter of 2022. The PPP program ended in 2022. Interest expense for the first quarter of 2023 was $8.0 million, an increase of $6.9 million versus the comparable quarter ending March 31, 2022, primarily due to higher deposit rates and changes in deposit composition.

  • Net Interest Margin: Net interest margin was 2.96% for the quarter, compared to 2.90% for the first quarter of 2022 and 3.08% for the fourth quarter of 2022. The year-over-year increase in net interest margin was primarily due to growth in loan balances with higher yields partially offset with higher costs of interest bearing liabilities. The decrease in net interest margin compared to the fourth quarter of 2022 was primarily the result of the cost of interest bearing liabilities increasing at a faster pace than the yield on average earning assets.

 


Three Months Ended


March 31, 2023


December 31, 2022


March 31, 2022

Interest and Dividend Income

$               36,110


$               35,904


$               28,947

Interest Expense

8,016


5,325


1,122

Net Interest Income

28,094


30,579


27,825

Average Earning Assets(1)

3,845,825


3,940,904


3,886,787

Average Interest Bearing Liabilities

2,782,299


2,891,092


2,855,884







Yield on Earning Assets(1)

3.81 %


3.61 %


3.02 %

Cost of Interest Bearing Liabilities

1.17


0.73


0.16

Net Interest Spread

2.64


2.88


2.86

Net Interest Margin

2.96


3.08


2.90







Income Earned on PPP Loans included in Net Interest Income

$                      —


$                      —


$                 1,066

Net Interest Income excluding PPP loans

28,094


30,579


26,759

Net Interest Margin excluding PPP loans

2.96 %


3.08 %


2.81 %







(1) Includes Nonaccrual Loans.












 

  • Provision for Credit Losses: For the first quarter of 2023, the provision for credit losses was $1.6 million, compared to $769 thousand in the prior-year quarter. The key drivers for the increase were higher loan charge-offs and a more challenging economic forecast.

  • Non-Interest Income: Non-interest income for the three months ended March 31, 2023, was $6.7 million, compared to $8.2 million in the comparable 2022 quarter. Income from fiduciary activities decreased by $321 thousand over the comparable quarter of 2022, driven primarily by market conditions.  Fees and other services to customers decreased $200 thousand over the comparable quarter of 2022 driven primarily by lower volume of interchange transactions. Other operating income decreased $691 thousand from the comparable quarter of 2022, primarily due to a decline in the gain on other assets of $463 thousand and a decrease in income earned on bank-owned life insurance of $181 thousand.

  • Non-Interest Expense: Non-interest expense for the first quarter of 2023 was $22.3 million, an increase of 17.7% from $18.9 million for the first quarter of 2022. The increase was primarily due to $1.0 million of additional legal and professional fees associated with the delay in the filing of the 2022 Form 10-K. In addition, other operating expenses included a credit for estimated credit losses on off-balance sheet exposures of $68 thousand for the first quarter of 2023 versus a larger credit of $316 thousand recognized in the first quarter of 2022. Technology and equipment spending increased $638 thousand from the first quarter of 2022, driven primarily by management's commitment to invest in new technology to enhance the customer experience and optimize operations. Salaries and benefits have increased compared to the first quarter of 2022 as a result of pension and other benefit expenses. In the first quarter of 2023, non-interest expenses increased $1.5 million from the fourth quarter of 2022. In addition to the factors described above, there was a charge for estimated credit losses on off-balance sheet exposures of $197 thousand for the fourth quarter.

  • Provision for Income Taxes: The provision for income taxes was $2.4 million for the first quarter of 2023, compared to $3.7 million for the same quarter of 2022, primarily the result of lower pre-tax income.

Balance Sheet

  • Total Assets: Total assets were $4.1 billion at March 31, 2023, a decrease of $41.8 million, or 1.0%, compared to March 31, 2022. This decrease was primarily driven by lower cash balances as pandemic era excess deposits decreased.  Assets increased $145.1 million, or 3.7%, compared to December 31, 2022 driven by an increase in on-balance sheet liquidity as evidenced by our higher cash balances.

  • Investments: Total investments were $745.1 million as of March 31, 2023, a decrease of $40.3 million, or 5.1%, compared to March 31, 2022, and a decrease of $5.9 million, or 0.8%, compared to December 31, 2022. While the rising rate environment led to an increase in unrealized losses within the available-for-sale portfolio versus the same period last year, unrealized losses within the available-for-sale portfolio decreased by $8.2 million versus December 31, 2022, as interest rates declined in the first quarter of 2023. The decrease in investments in the first quarter, as compared to the same period last year, was primarily driven by Arrow's decision to fund loan growth from cash flows from amortizing and maturing investments.

  • Loans: Total loans reached a record high of $3.0 billion as of March 31, 2023. Loan growth for the first quarter of 2023 was $22.1 million, as compared to December 31, 2022, and $268.1 million, or 9.8%, from March 31, 2022. Residential real estate loan growth for the first quarter of 2023 was $10.0 million, or 0.9%, as compared to December 31, 2022 and $114.0 million, or 11.8%, as compared to March 31, 2022. The consumer loan portfolio grew by $8.2 million, or 0.8%, in the first quarter, primarily within the indirect automobile lending program. Total outstanding commercial loans increased $4.0 million, or 0.5%, in the first quarter of 2023, driven primarily by commercial real estate loans.

  • Allowance for Credit Losses: The allowance for credit losses was $30.8 million on March 31, 2023, which represented 1.02% of loans outstanding, as compared to 1.01% at March 31, 2022. Asset quality remained stable at March 31, 2023. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.10% for the quarter ended March 31, 2023, as compared to 0.09% for the quarter ended December 31, 2022 and 0.06% for the three-month period ended March 31, 2022. Nonperforming assets of $11.3 million at March 31, 2023, represented 0.27% of period-end assets, compared to 0.32% at December 31, 2022.

  • Deposits: At March 31, 2023, deposit balances were $3.5 billion. Deposits in the first quarter of 2023 increased by $48.0 million from the prior quarter and decreased by $169.0 million, or 4.5%, from the prior-year level as pandemic era excess deposits exited the system and due to competitive pressures from the rising rate environment. Municipal deposits increased $110.5 million in the first quarter, as compared to December 31, 2022, and decreased $22.1 million from March 31, 2022.  Non-municipal deposits decreased $62.5 million for the quarter and $147.0 million from March 31, 2022.  Non-interest bearing deposits represented 22.2% of total deposits at March 31, 2023, compared to 23.9% at December 31 ,2022, and 21.9% at March 31, 2022.  At March 31, 2023, total time deposits were $301.8 million compared to $209.4 million at December 31, 2022 and $177.0 million at March 31, 2022, as a result of successful campaigns to grow certificate of deposit balances.

  • Capital: Total stockholders' equity was $363.4 million at March 31, 2023, an increase of $9.8 million, or 2.8%, from the December 31, 2022 level of $353.5 million, and an increase of $6.1 million, or 1.7%, from the prior-year level. The increase in stockholders' equity over the first three months of 2023 principally reflected the following factors: the addition of $8.6 million of net income for the period, gains in other comprehensive income of $5.7 million from favorable mark-to-market activity within the available for sale securities portfolio and issuance of $0.9 million of common stock through employee benefit and dividend reinvestment plans reduced by cash dividends of $4.5 million and repurchases of common stock of $0.8 million. Arrow's regulatory capital ratios remained strong in the first quarter of 2023. As of March 31, 2023, Arrow's Common Equity Tier 1 Capital Ratio was 13.34% and Total Risk-Based Capital Ratio was 15.15%. The capital ratios of Arrow and both its subsidiary banks, Glens Falls National Bank and Trust Company ("GFNB") and Saratoga National Bank and Trust Company ("SNB"), continued to significantly exceed the "well capitalized" regulatory standards.

Additional Commentary

  • Leadership Change: Effective May 13, 2023, Arrow's board of directors appointed David S. DeMarco to serve as President and CEO.

  • Cash and Stock Dividends: On March 15, 2023 and June 15, 2023, Arrow distributed quarterly cash dividends of $0.27 per share.

  • Industry Recognition: In the first quarter of 2023, both of Arrow's banking subsidiaries earned BauerFinancial, Inc. 5-Star Exceptional Performance Bank rating for the 57th consecutive quarter.

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. Arrow is the parent of GFNB and SNB. Other subsidiaries include Upstate Agency, LLC and North Country Investment Advisers, Inc.

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"). Some 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. These 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 Arrow are useful in evaluating Arrow'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 in this document may contain statements based on management's beliefs, assumptions, expectations, estimates and projections about the future. Such "forward-looking statements," as defined in Section 21E of the Securities Exchange Act of 1934, as amended, involve a degree of uncertainty and attendant risk. Actual outcomes and results may differ, explicitly or by implication. We are not obliged to revise or update these statements to reflect unanticipated events. This document should be read in conjunction with Arrow's 2022 Form 10-K and other filings with the SEC.

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts - Unaudited)






Three Months Ended:



March 31,
2023


December 31,
2022


March 31,
2022

INTEREST AND DIVIDEND INCOME







Interest and Fees on Loans


$            31,886


$           30,719


$            25,739

Interest on Deposits at Banks


479


1,274


198

Interest and Dividends on Investment Securities:







Fully Taxable


2,948


3,121


2,189

Exempt from Federal Taxes


797


790


821

Total Interest and Dividend Income


36,110


35,904


28,947

INTEREST EXPENSE







Interest Bearing Checking Accounts


370


344


163

Savings Deposits


5,587


4,101


417

Time Deposits over $250,000


574


226


28

Other Time Deposits


474


234


109

Federal Funds Purchased and

  Securities Sold Under Agreements to Repurchase


—


—


—

Federal Home Loan Bank Advances


793


200


187

Junior Subordinated Obligations Issued to

  Unconsolidated Subsidiary Trusts


169


172


169

Interest on Financing Leases


49


48


49

Total Interest Expense


8,016


5,325


1,122

NET INTEREST INCOME


28,094


30,579


27,825

Provision for Credit Losses


1,554


1,409


769

NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES


26,540


29,170


27,056

NON-INTEREST INCOME







Income From Fiduciary Activities


2,275


2,257


2,596

Fees for Other Services to Customers


2,595


2,710


2,795

Insurance Commissions


1,520


1,680


1,511

Net (Loss) Gain on Securities


(104)


48


130

Net Gain on Sales of Loans


4


3


52

Other Operating Income


387


467


1,078

Total Non-interest Income


6,677


7,165


8,162

NON-INTEREST EXPENSE







Salaries and Employee Benefits


11,947


11,603


11,286

Occupancy Expenses, Net


1,628


1,481


1,598

Technology and Equipment Expense


4,417


4,316


3,779

FDIC Assessments


479


283


307

Other Operating Expense


3,825


3,109


1,975

Total Non-interest Expense


22,296


20,792


18,945

INCOME BEFORE PROVISION FOR INCOME TAXES


10,921


15,543


16,273

Provision for Income Taxes


2,359


3,456


3,698

NET INCOME


$              8,562


$           12,087


$            12,575

Average Shares Outstanding 1:







Basic


16,552


16,535


16,511

Diluted


16,564


16,589


16,566

Per Common Share:







Basic Earnings


$                0.52


$               0.73


$                0.76

Diluted Earnings


0.52


0.73


0.76

1 2022 Share and Per Share Amounts have been restated for the September 23, 2022, 3% stock dividend.

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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








March 31,
2023


December 31, 2022


March 31,
2022

ASSETS






Cash and Due From Banks

$                25,107


$                31,886


$                38,964

Interest Bearing Deposits at Banks

178,365


32,774


448,614

Investment Securities:






Available-for-Sale at Fair Value

565,693


573,495


582,428

Held-to-Maturity (Fair Value of $164,439 at March 31, 2023;
$171,623 at December 31, 2022; and $195,862 at March 31,
2022)

167,347


175,364


196,661

Equity Securities

2,070


2,174


1,877

FHLB and Federal Reserve Bank Stock

10,027


6,064


4,491

Loans

3,005,352


2,983,207


2,737,267

Allowance for Credit Losses

(30,784)


(29,952)


(27,661)

Net Loans

2,974,568


2,953,255


2,709,606

Premises and Equipment, Net

58,233


56,491


48,481

Goodwill

21,873


21,873


21,873

Other Intangible Assets, Net

1,400


1,500


1,818

Other Assets

109,947


114,633


101,589

Total Assets

$          4,114,630


$          3,969,509


$          4,156,402

LIABILITIES






Non-interest Bearing Deposits

788,690


836,871


813,066

Interest Bearing Checking Accounts

958,490


997,694


1,154,068

Savings Deposits

1,497,326


1,454,364


1,571,274

Time Deposits over $250,000

122,827


76,224


48,288

Other Time Deposits

179,016


133,211


128,677

Total Deposits

3,546,349


3,498,364


3,715,373

Federal Home Loan Bank Overnight Advances

35,000


27,000


—

Federal Home Loan Bank Term Advances

107,800


27,800


25,000

Junior Subordinated Obligations Issued to Unconsolidated

  Subsidiary Trusts

20,000


20,000


20,000

Finance Leases

5,106


5,119


5,156

Other Liabilities

37,004


37,688


33,630

Total Liabilities

3,751,259


3,615,971


3,799,159

STOCKHOLDERS' EQUITY






Preferred Stock, $1 Par Value and 1,000,000 Shares
Authorized at March 31, 2023, December 31, 2022 and
March 31, 2022

—


—


—

Common Stock, $1 Par Value; 30,000,000 Shares
Authorized  (21,423,992 Shares Issued at March 31,2023 and
December 31, 2022 and 20,800,144 Shares Issued at
March 31, 2022)

21,424


21,424


20,800

Additional Paid-in Capital

400,944


400,270


378,758

Retained Earnings

69,499


65,401


62,328

Accumulated Other Comprehensive Loss

(43,983)


(49,655)


(20,797)

Treasury Stock, at Cost (4,870,935 Shares at March 31, 2023;
4,872,355 Shares at December 31, 2022 and 4,787,183 Shares
at March 31, 2022)

(84,513)


(83,902)


(83,846)

Total Stockholders' Equity

363,371


353,538


357,243

Total Liabilities and Stockholders' Equity

$          4,114,630


$          3,969,509


$          4,156,402

 

Arrow Financial Corporation

Selected Quarterly Information

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











Quarter Ended

3/31/2023


12/31/2022


9/30/2022


6/30/2022


3/31/2022

Net Income

$        8,562


$      12,087


$      12,163


$      11,974


$      12,575

Transactions in Net Income (Net of Tax):










Net Changes in Fair Value of Equity Investments

(76)


35


70


114


96











Share and Per Share Data:1










Period End Shares Outstanding

16,553


16,552


16,523


16,503


16,493

Basic Average Shares Outstanding

16,552


16,535


16,512


16,494


16,511

Diluted Average Shares Outstanding

16,564


16,589


16,558


16,535


16,566

Basic Earnings Per Share

$           0.52


$           0.73


$           0.74


$           0.72


$           0.76

Diluted Earnings Per Share

0.52


0.73


0.74


0.72


0.76

Cash Dividend Per Share

0.270


0.270


0.262


0.262


0.262











Selected Quarterly Average Balances:










  Interest Bearing Deposits at Banks

$      40,436


$    143,499


$    209,001


$    232,545


$    410,644

  Investment Securities

813,461


845,859


821,052


822,112


797,347

  Loans

2,991,928


2,951,547


2,872,066


2,804,180


2,678,796

  Deposits

3,480,279


3,614,945


3,598,519


3,569,754


3,582,256

  Other Borrowed Funds

100,596


63,304


50,125


50,140


68,596

  Shareholders' Equity

359,556


351,402


361,675


357,228


370,264

  Total Assets

3,978,851


4,074,028


4,047,738


4,012,999


4,054,943

Return on Average Assets, annualized

0.87 %


1.18 %


1.19 %


1.20 %


1.26 %

Return on Average Equity, annualized

9.66 %


13.65 %


13.34 %


13.44 %


13.77 %

Return on Average Tangible Equity, annualized 2

10.33 %


14.62 %


14.27 %


14.40 %


14.72 %

Average Earning Assets

$ 3,845,825


$ 3,940,905


$ 3,902,119


$ 3,858,837


$ 3,886,787

Average Paying Liabilities

2,782,299


2,891,092


2,781,985


2,808,287


2,855,884

Interest Income

36,110


35,904


34,207


30,593


28,947

Tax-Equivalent Adjustment 3

202


279


268


269


270

Interest Income, Tax-Equivalent 3

36,312


36,183


34,475


30,862


29,217

Interest Expense

8,016


5,325


3,306


1,555


1,122

Net Interest Income

28,094


30,579


30,901


29,038


27,825

Net Interest Income, Tax-Equivalent 3

28,296


30,858


31,169


29,307


28,095

Net Interest Margin, annualized

2.96 %


3.08 %


3.14 %


3.02 %


2.90 %

Net Interest Margin, Tax-Equivalent, annualized 3

2.98 %


3.11 %


3.17 %


3.05 %


2.93 %











Efficiency Ratio Calculation: 4










Non-interest Expense

$      22,296


$      20,792


$      21,448


$      20,345


$      18,945

Less: Intangible Asset Amortization

45


47


48


48


49

Net Non-interest Expense

$      22,251


$      20,745


$      21,400


$      20,297


$      18,896

Net Interest Income, Tax-Equivalent

$      28,296


$      30,858


$      31,169


$      29,307


$      28,095

Non-interest Income

6,677


7,165


7,827


7,744


8,162

Less: Net (Loss) Gain on Securities

(104)


48


95


154


130

Net Gross Income

$      35,077


$      37,975


$      38,901


$      36,897


$      36,127

Efficiency Ratio

63.43 %


54.63 %


55.01 %


55.01 %


52.30 %











Period-End Capital Information:










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

$    363,371


$    353,538


$    345,550


$    356,498


$    357,243

Book Value per Share 1

21.95


21.36


20.91


21.60


21.66

Goodwill and Other Intangible Assets, net

23,273


23,373


23,477


23,583


23,691

Tangible Book Value per Share 1,2

20.55


19.95


19.49


20.17


20.22











Capital Ratios:5










Tier 1 Leverage Ratio

10.13 %


9.80 %


9.71 %


9.60 %


9.37 %

Common Equity Tier 1 Capital Ratio 

13.34 %


13.32 %


13.14 %


13.14 %


13.48 %

Tier 1 Risk-Based Capital Ratio

14.03 %


14.01 %


13.85 %


13.86 %


14.23 %

Total Risk-Based Capital Ratio

15.15 %


15.11 %


14.93 %


14.93 %


15.33 %











Assets Under Trust Admin. & Investment Mgmt.

$ 1,672,117


$ 1,606,132


$ 1,515,994


$ 1,589,178


$ 1,793,747

 

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 23, 2022, 3% stock dividend.



2.

Non-GAAP Financial Measure Reconciliation: Tangible Book Value, Tangible Equity, and Return on Tangible Equity
exclude goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures which
Arrow believes provides investors with information that is useful in understanding its financial performance.





3/31/2023


12/31/2022


9/30/2022


6/30/2022


3/31/2022


Total Stockholders' Equity (GAAP)

$   363,371


$   353,538


$   345,550


$   356,498


$   357,243


Less:  Goodwill and Other Intangible
assets, net

23,273


23,373


23,477


23,583


23,691


Tangible Equity (Non-GAAP)

$   340,098


$   330,165


$   322,073


$   332,915


$   333,552













Period End Shares Outstanding

16,553


16,552


16,523


16,503


16,493


Tangible Book Value per Share (Non-GAAP)

$        20.55


$        19.95


$        19.49


$        20.17


$        20.22


Net Income

8,562


12,087


12,163


11,974


12,575


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

10.33 %


14.62 %


14.27 %


14.40 %


14.72 %












3.

Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of annualized tax-equivalent net
interest income to average earning assets.  This is also a non-GAAP financial measure which Arrow believes
provides investors with information that is useful in understanding its financial performance.





3/31/2023


12/31/2022


9/30/2022


6/30/2022


3/31/2022


Interest Income (GAAP)

$     36,110


$     35,904


$     34,207


$     30,593


$     28,947


Add:  Tax-Equivalent adjustment

     (Non-GAAP)

202


279


268


269


270


Interest Income - Tax Equivalent

     (Non-GAAP)

$     36,312


$     36,183


$     34,475


$     30,862


$     29,217


Net Interest Income (GAAP)

$     28,094


$     30,579


$     30,901


$     29,038


$     27,825


Add:  Tax-Equivalent adjustment

     (Non-GAAP)

202


279


268


269


270


Net Interest Income - Tax Equivalent

     (Non-GAAP)

$     28,296


$     30,858


$     31,169


$     29,307


$     28,095


Average Earning Assets

$  3,845,825


$  3,940,905


$  3,902,119


$  3,858,837


$  3,886,787


Net Interest Margin (Non-GAAP)*

2.98 %


3.11 %


3.17 %


3.05 %


2.93 %












4.

Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP
ratio, as a measure of expense control.  Arrow believes the efficiency ratio provides investors with information
that is useful in understanding its financial performance.  Arrow defines efficiency ratio as the ratio of non-interest
expense to net gross income (which equals tax-equivalent net interest income plus non-interest income, as adjusted).












5.

For the current quarter, all of the regulatory capital ratios as well as the Total Risk-Weighted Assets are calculated
in accordance with bank regulatory capital rules.  The March 31, 2023 CET1 ratio listed in the tables (i.e., 13.34%)
exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).





3/31/2023


12/31/2022


9/30/2022


6/30/2022


3/31/2022


Total Risk Weighted Assets

$  2,909,610


$  2,883,902


$  2,856,224


$  2,790,520


$  2,661,952


Common Equity Tier 1 Capital

388,228


384,003


375,394


366,798


358,738


Common Equity Tier 1 Ratio

13.34 %


13.32 %


13.14 %


13.14 %


13.48 %












* Quarterly ratios have been annualized.










 

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)





Quarter Ended:

March 31, 2023


March 31, 2022




Interest


Rate




Interest


Rate


Average


Income/


Earned/


Average


Income/


Earned/


Balance


Expense


Paid


Balance


Expense


Paid

Interest Bearing Deposits at Banks

$     40,436


$          479


4.80 %


$  410,644


$           198


0.20 %

Investment Securities:












Fully Taxable

652,743


2,948


1.83


618,806


2,189


1.43

Exempt from Federal Taxes

160,718


797


2.01


178,541


821


1.86

Loans

2,991,928


31,886


4.32


2,678,796


25,739


3.90

Total Earning Assets

3,845,825


36,110


3.81


3,886,787


28,947


3.02

Allowance for Credit Losses

(29,792)






(27,165)





Cash and Due From Banks

30,518






37,654





Other Assets

132,300






157,667





Total Assets

$  3,978,851






$  4,054,943





Deposits:












Interest Bearing Checking Accounts

$   964,735


370


0.16


$  1,027,740


163


0.06

Savings Deposits

1,474,251


5,587


1.54


1,557,855


417


0.11

Time Deposits of $250,000 or More

94,415


574


2.47


70,101


28


0.16

Other Time Deposits

148,302


474


1.30


131,592


109


0.34

Total Interest Bearing Deposits

2,681,703


7,005


1.06


2,787,288


717


0.10

Short-Term Borrowings

40,138


490


4.95


—


—



FHLBNY Term Advances & Other Long-Term Debt

55,356


472


3.46


63,444


356


2.28

Finance Leases

5,102


49


3.89


5,152


49


3.86

Total Interest Bearing Liabilities

2,782,299


8,016


1.17


2,855,884


1,122


0.16

Non-interest bearing deposits

798,576






794,968





Other Liabilities

38,420






33,827





Total Liabilities

3,619,295






3,684,679





Stockholders' Equity

359,556






370,264





Total Liabilities and Stockholders' Equity

$  3,978,851






$  4,054,943





Net Interest Income



$     28,094






$     27,825



Net Interest Spread





2.64 %






2.86 %

Net Interest Margin





2.96 %






2.90 %

 

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)





Quarter Ended:

March 31, 2023


December 31, 2022




Interest


Rate




Interest


Rate


Average


Income/


Earned/


Average


Income/


Earned/


Balance


Expense


Paid


Balance


Expense


Paid

Interest Bearing Deposits at Banks

$     40,436


$          479


4.80 %


$  143,499


$       1,274


3.52 %

Investment Securities:












Fully Taxable

652,743


2,948


1.83


679,390


3,121


1.82

Exempt from Federal Taxes

160,718


797


2.01


166,468


790


1.88

Loans

2,991,928


31,886


4.32


2,951,547


30,719


4.13

Total Earning Assets

3,845,825


36,110


3.81


3,940,904


35,904


3.61

Allowance for Credit Losses

(29,792)






(29,069)





Cash and Due From Banks

30,518






30,736





Other Assets

132,300






131,457





Total Assets

$  3,978,851






$  4,074,028





Deposits:












Interest Bearing Checking Accounts

$   964,735


370


0.16


$  1,082,267


344


0.13

Savings Deposits

1,474,251


5,587


1.54


1,548,293


4,101


1.05

Time Deposits of $250,000 or More

94,415


574


2.47


65,897


226


1.36

Other Time Deposits

148,302


474


1.30


131,331


234


0.71

Total Interest Bearing Deposits

2,681,703


7,005


1.06


2,827,788


4,905


0.69

Short-Term Borrowings

40,138


490


4.95


8,424


92


4.33

FHLBNY Term Advances & Other Long-Term Debt

55,356


472


3.46


49,767


280


2.23

Finance Leases

5,102


49


3.89


5,113


48


3.72

Total Interest Bearing Liabilities

2,782,299


8,016


1.17


2,891,092


5,325


0.73

Non-interest bearing deposits

798,576






787,157





Other Liabilities

38,420






44,377





Total Liabilities

3,619,295






3,722,626





Stockholders' Equity

359,556






351,402





Total Liabilities and Stockholders' Equity

$  3,978,851






$  4,074,028





Net Interest Income



$     28,094






$     30,579



Net Interest Spread





2.64 %






2.88 %

Net Interest Margin





2.96 %






3.08 %

 

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)







Quarter Ended:

3/31/2023


12/31/2022


3/31/2022

Loan Portfolio






Commercial Loans

$       135,917


$       140,293


$       155,467

Commercial Real Estate Loans

715,357


707,022


638,437

  Subtotal Commercial Loan Portfolio

851,274


847,315


793,904

Consumer Loans

1,073,369


1,065,135


976,648

Residential Real Estate Loans

1,080,709


1,070,757


966,715

Total Loans

$   3,005,352


$   2,983,207


$   2,737,267

Allowance for Credit Losses






Allowance for Credit Losses, Beginning of Quarter

$         29,952


$         29,232


$         27,281

Loans Charged-off

(1,328)


(1,261)


(829)

Less Recoveries of Loans Previously Charged-off

606


572


440

Net Loans Charged-off

(722)


(689)


(389)

Provision for Credit Losses

1,554


1,409


769

Allowance for Credit Losses, End of Quarter

$         30,784


$         29,952


$         27,661

Nonperforming Assets






Nonaccrual Loans

$         10,852


$         10,757


$           9,750

Loans Past Due 90 or More Days and Accruing

241


1,157


55

Loans Restructured and in Compliance with Modified Terms

62


69


74

Total Nonperforming Loans

11,155


11,983


9,879

Repossessed Assets

144


593


180

Other Real Estate Owned

—


—


—

Total Nonperforming Assets

$         11,299


$         12,576


$         10,059







Key Asset Quality Ratios






Net Loans Charged-off to Average Loans,

   Quarter-to-date Annualized

0.10 %


0.09 %


0.06 %

Provision for Credit Losses to Average Loans,

  Quarter-to-date Annualized

0.21 %


0.19 %


0.12 %

Allowance for Credit Losses to Period-End Loans

1.02 %


1.00 %


1.01 %

Allowance for Credit Losses to Period-End Nonperforming Loans

275.97 %


249.95 %


280.00 %

Nonperforming Loans to Period-End Loans

0.37 %


0.40 %


0.36 %

Nonperforming Assets to Period-End Assets

0.27 %


0.32 %


0.24 %

 

CisionCision
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View original content:https://www.prnewswire.com/news-releases/arrow-reports-8-6-million-in-q1-2023-net-income-and-grew-deposits-by-48-0-million-301883917.html

SOURCE Arrow Financial Corporation

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