EX-99 2 ex99-earningsq22019.htm EXHIBIT 99 Exhibit


afcnewsreleaselogorgba08.jpg
250 Glen Street
Glens Falls, NY 12801
NASDAQ® Symbol: "AROW"
Website: arrowfinancial.com

Media Contact: Jillian Cutrone
Tel: (518) 415-4306
Fax: (518) 745-1976

Arrow Reports Year-Over-Year Loan Growth of 10.8% and $8.9 million in Q2 Net Income

Total loans grew by $45.1 million in the second quarter of 2019.
Second quarter net income was $8.9 million.
Second quarter diluted earnings per share (EPS) of $0.62.
Second quarter net interest income increased 3.6% over the prior-year comparable quarter.
Continued strong profitability, asset quality and capital ratios.

GLENS FALLS, N.Y. (July 22, 2019) – Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three-month period ended June 30, 2019. Net income for the second quarter of 2019 was $8.9 million, compared to $9.7 million in the second quarter of 2018. Steady loan growth continued in the second quarter of 2019, as total loans grew by $45.1 million from March 31, 2019 to $2.3 billion. Driven primarily by this growth, net interest income increased to $21.7 million in the second quarter of 2019, compared to $21.0 million for the comparable quarter of 2018.

Annualized key profitability ratios remained strong, as measured by a return on average equity of 12.79% and a return on average assets of 1.20% for the second quarter, compared to 15.22% and 1.38%, respectively, a year earlier.

"Thanks to the efforts of our team, Arrow continued its solid performance with steady loan growth and strong asset quality through the second quarter of the year," said President and CEO Thomas J. Murphy. “Our Company is well-positioned to adapt to the continuing changes in a complex rate environment. Additionally, we are making strategic lending decisions within our communities that will help our region thrive, and we are making important investments that will help us provide an enhanced customer experience.”

The Company continued its forward momentum and expansion in the Capital Region with the opening of a new Saratoga National Bank and Trust Company office in Rotterdam, New York in the second quarter. Additionally, the company announced plans for the opening of its 12th Saratoga National Bank office, in Latham, New York, anticipated in early 2020.

The following expands on our second-quarter results:

Cash Dividend: On June 14, 2019, the Company distributed a cash dividend of $0.26 per share. The June 14, 2019 cash dividend was 7.1% higher than the $0.25 cash dividend paid by the Company in the second quarter of 2018, when adjusted for the 3% stock dividend distributed on September 27, 2018. The 2018 increase from $0.25 per share to $0.26 per share was the first increase in per share dividend amount since 2008.

Loan Growth: Total loans reached $2.3 billion as of June 30, 2019, which represents an increase of $222.4 million, or 10.8% as compared to June 30, 2018. The consumer loan portfolio grew by $117.1 million, or 17.7%, as compared to June 30, 2018, primarily within the indirect automobile lending program. The total residential real estate loan portfolio increased $60.0 million, or 7.4%, as compared to June 30, 2018. Total outstanding commercial loans increased $45.3 million, or 7.8%, as compared to June 30, 2018.

1



Deposit Growth: At June 30, 2019, deposit balances reached $2.5 billion, up $199.0 million, or 8.6%, from the prior-year level. Noninterest-bearing deposits represented 18.7% of total deposits at June 30, 2019. At June 30, 2019, other time deposits were $289.3 million, an increase of $119.7 million compared to the prior year. Time deposits include brokered deposits acquired to diversify source of funds to more favorable rates as compared to other borrowings.

Net Interest Income: Driven by strong loan growth, second quarter 2019 net interest income increased to $21.7 million, up 3.6% from $21.0 million in the comparable quarter of 2018. The net interest margin was 3.04% for the quarter, compared to 3.11% for the second quarter of 2018. The decrease in net interest margin from the prior year was the result of the migration to higher yielding deposit accounts due to rise in short-term market rates.

Noninterest Income: Noninterest income for the three months ended June 30, 2019, was $6.9 million, compared to $7.9 million in the comparable 2018 quarter. Despite the decline from the prior year, total noninterest income represented 24.1% of total revenues in the second quarter of 2019.

Noninterest Expense: Noninterest expense for the second quarter of 2019 increased 4.4% to $16.9 million, from $16.2 million for the second quarter of 2018. Technology and equipment expense increased $394 thousand, and other operating expense increased $409 thousand from the comparable quarter in 2018.

Provision for Income Taxes: The provision for income taxes was $2.3 million for the second quarter of both 2019 and 2018. The effective income tax rates for the three-month periods ended June 30, 2019 and 2018 were 20.5% and 19.3%, respectively.

Asset Quality: Asset quality remained strong at June 30, 2019, with continued low levels of nonperforming loans and net charge-offs. Nonperforming loans at June 30, 2019, were $5.5 million, up $26.0 thousand from the level at December 31, 2018. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.02% for the three-month period ended June 30, 2019, up from the prior-year comparable quarter of 0.01%. The allowance for loan losses was $20.7 million at June 30, 2019, which represented 0.91% of loans outstanding, as compared to 0.95% at June 30, 2018. The loss provision expense for the second quarter of 2019 was $455 thousand, down $174 thousand from the provision for the comparable 2018 quarter.

Capital: Total stockholders’ equity was a record $284.6 million at June 30, 2019, up $25.2 million, or 9.7%, 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 12.99% and the total risk-based capital ratio estimated to be 14.91% at June 30, 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 49 and 41 quarters, respectively. In May, Seifried & Brew named Glens Falls National and Saratoga National to the top 15th percentile of Community Banks based on their performance in 2018.

_________


2



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.


3



ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
INTEREST AND DIVIDEND INCOME
 
 
 
 
 
 
 
 
Interest and Fees on Loans
 
$
23,520

 
$
19,909

 
$
45,923

 
$
38,767

Interest on Deposits at Banks
 
195

 
158

 
390

 
292

Interest and Dividends on Investment Securities:
 
 
 
 
 
 
 
 
Fully Taxable
 
2,284

 
2,048

 
4,653

 
3,941

Exempt from Federal Taxes
 
1,228

 
1,475

 
2,474

 
3,008

Total Interest and Dividend Income
 
27,227

 
23,590

 
53,440

 
46,008

INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest-Bearing Checking Accounts
 
453

 
388

 
935

 
775

Savings Deposits
 
2,008

 
711

 
3,609

 
1,233

Time Deposits over $250,000
 
515

 
328

 
911

 
532

Other Time Deposits
 
1,131

 
282

 
1,844

 
541

Federal Funds Purchased and
Securities Sold Under Agreements to Repurchase
 
25

 
16

 
47

 
32

Federal Home Loan Bank Advances
 
1,099

 
656

 
2,693

 
1,070

Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts
 
261

 
247

 
530

 
461

Interest on Financing Leases
 
28

 

 
43

 

Total Interest Expense
 
5,520

 
2,628

 
10,612

 
4,644

NET INTEREST INCOME
 
21,707

 
20,962

 
42,828

 
41,364

Provision for Loan Losses
 
455

 
629

 
927

 
1,375

NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES
 
21,252

 
20,333

 
41,901

 
39,989

NONINTEREST INCOME
 
 
 
 
 
 
 
 
Income From Fiduciary Activities
 
2,252

 
2,647

 
4,359

 
4,844

Fees for Other Services to Customers
 
2,545

 
2,570

 
4,947

 
4,950

Insurance Commissions
 
1,935

 
2,192

 
3,654

 
4,095

Net Gain on Securities Transactions
 

 
223

 
76

 
241

Net Gain on Sales of Loans
 
140

 
23

 
244

 
61

Other Operating Income
 
24

 
256

 
503

 
609

Total Noninterest Income
 
6,896

 
7,911

 
13,783

 
14,800

NONINTEREST EXPENSE
 
 
 
 
 
 
 
 
Salaries and Employee Benefits
 
9,727

 
9,812

 
19,046

 
19,181

Occupancy Expenses, Net
 
1,279

 
1,270

 
2,699

 
2,610

Technology and Equipment Expense
 
3,243

 
2,849

 
6,384

 
5,547

FDIC Assessments
 
212

 
223

 
424

 
440

Other Operating Expense
 
2,447

 
2,038

 
5,007

 
4,370

Total Noninterest Expense
 
16,908

 
16,192

 
33,560

 
32,148

INCOME BEFORE PROVISION FOR INCOME TAXES
 
11,240

 
12,052

 
22,124

 
22,641

Provision for Income Taxes
 
2,306

 
2,322

 
4,456

 
4,380

NET INCOME
 
$
8,934

 
$
9,730

 
$
17,668

 
$
18,261

Average Shares Outstanding 1:
 
 
 
 
 
 
 
 
Basic
 
14,487

 
14,394

 
14,478

 
14,374

Diluted
 
14,527

 
14,480

 
14,523

 
14,459

Per Common Share:
 
 
 
 
 
 
 
 
Basic Earnings
 
$
0.62

 
$
0.68

 
$
1.22

 
$
1.27

Diluted Earnings
 
0.62

 
0.67

 
1.22

 
1.26

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


4



ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
 
June 30, 2019
 
December 31, 2018
 
June 30, 2018
ASSETS
 
 
 
 
 
Cash and Due From Banks
$
34,650

 
$
56,529

 
$
38,552

Interest-Bearing Deposits at Banks
28,045

 
27,710

 
22,189

Investment Securities:
 
 
 
 
 
Available-for-Sale
285,878

 
317,535

 
325,387

Held-to-Maturity (Approximate Fair Value of $266,068 at June 30, 2019; $280,338 at December 31, 2018; and $292,605 at June 30, 2018)
262,541

 
283,476

 
297,885

Equity Securities
1,850

 
1,774

 
1,802

Other Investments
8,202

 
15,506

 
11,089

Loans
2,280,308

 
2,196,215

 
2,057,862

Allowance for Loan Losses
(20,695
)
 
(20,196
)
 
(19,640
)
Net Loans
2,259,613

 
2,176,019

 
2,038,222

Premises and Equipment, Net
38,836

 
30,446

 
28,104

Goodwill
21,873

 
21,873

 
21,873

Other Intangible Assets, Net
1,730

 
1,852

 
2,060

Other Assets
62,532

 
55,614

 
58,008

Total Assets
$
3,005,750

 
$
2,988,334

 
$
2,845,171

LIABILITIES
 
 
 
 
 
Noninterest-Bearing Deposits
$
467,179

 
$
472,768

 
$
467,048

Interest-Bearing Checking Accounts
741,395

 
790,781

 
861,959

Savings Deposits
908,642

 
818,048

 
735,217

Time Deposits over $250,000
97,220

 
73,583

 
70,950

Other Time Deposits
289,317

 
190,404

 
169,607

Total Deposits
2,503,753

 
2,345,584

 
2,304,781

Federal Funds Purchased and
  Securities Sold Under Agreements to Repurchase
51,149

 
54,659

 
60,248

Federal Home Loan Bank Overnight Advances
83,000

 
234,000

 
136,000

Federal Home Loan Bank Term Advances
30,000

 
45,000

 
45,000

Junior Subordinated Obligations Issued to Unconsolidated
Subsidiary Trusts
20,000

 
20,000

 
20,000

Finance Leases
5,270





Other Liabilities
27,929

 
19,507

 
19,654

Total Liabilities
2,721,101

 
2,718,750

 
2,585,683

STOCKHOLDERS’ EQUITY
 
 
 
 
 
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at June 30, 2019; $5 Par Value and 1,000,000 Shares Authorized at December 31, 2018 and June 30, 2018

 

 

Common Stock, $1 Par Value; 30,000,000 Shares Authorized at June 30, 2019 and 20,000,000 Shares Authorized at December 31, 2018 and June 30, 2018 (19,035,565 Shares Issued at June 30, 2019 and December 31, 2018 and 18,481,301 at June 30, 2018)
19,035

 
19,035

 
18,481

Additional Paid-in Capital
316,229

 
314,533

 
292,020

Retained Earnings
39,397

 
29,257

 
40,326

Unallocated ESOP Shares (5,001 Shares at June 30, 2019; 5,001 Shares at December 31, 2018 and 9,643 Shares at June 30, 2018)
(100
)
 
(100
)
 
(200
)
Accumulated Other Comprehensive Loss
(9,647
)
 
(13,810
)
 
(11,804
)
Treasury Stock, at Cost (4,517,412 Shares at June 30, 2019; 4,558,207 Shares at December 31, 2018 and 4,467,909 Shares at June 30, 2018)
(80,265
)
 
(79,331
)
 
(79,335
)
Total Stockholders’ Equity
284,649

 
269,584

 
259,488

Total Liabilities and Stockholders’ Equity
$
3,005,750

 
$
2,988,334

 
$
2,845,171


5



Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended
6/30/2019

 
3/31/2019

 
12/31/2018

 
9/30/2018

 
6/30/2018

Net Income
$
8,934

 
$
8,734

 
$
8,758

 
$
9,260

 
$
9,730

Transactions in Net Income (Net of Tax):
 
 
 
 
 
 
 
 
 
Net Changes in Fair Value of Equity Investments

 
57

 
(106
)
 
85

 
166

 
 
 
 
 
 
 
 
 
 
Share and Per Share Data:1
 
 
 
 
 
 
 
 
 
Period End Shares Outstanding
14,513

 
14,474

 
14,472

 
14,441

 
14,424

Basic Average Shares Outstanding
14,487

 
14,469

 
14,451

 
14,431

 
14,394

Diluted Average Shares Outstanding
14,527

 
14,520

 
14,514

 
14,520

 
14,480

Basic Earnings Per Share
$
0.62

 
$
0.60

 
$
0.61

 
$
0.64

 
$
0.68

Diluted Earnings Per Share
0.62

 
0.60

 
0.60

 
0.64

 
0.67

Cash Dividend Per Share
0.260

 
0.260

 
0.260

 
0.252

 
0.243

 
 
 
 
 
 
 
 
 
 
Selected Quarterly Average Balances:
 
 
 
 
 
 
 
 
 
  Interest-Bearing Deposits at Banks
$
25,107

 
$
26,163

 
$
34,782

 
$
30,522

 
$
28,543

  Investment Securities
584,679

 
611,161

 
637,341

 
636,847

 
647,913

  Loans
2,255,299

 
2,210,642

 
2,160,435

 
2,089,651

 
2,026,598

  Deposits
2,436,290

 
2,347,985

 
2,347,231

 
2,279,709

 
2,325,202

  Other Borrowed Funds
250,283

 
327,138

 
315,172

 
314,304

 
219,737

  Shareholders' Equity
280,247

 
272,864

 
268,503

 
263,139

 
256,358

  Total Assets
2,997,458

 
2,977,056

 
2,954,029

 
2,879,854

 
2,823,061

Return on Average Assets, annualized
1.20
%
 
1.19
%
 
1.18
%
 
1.28
%
 
1.38
%
Return on Average Equity, annualized
12.79
%
 
12.98
%
 
12.94
%
 
13.96
%
 
15.22
%
Return on Average Tangible Equity, annualized 2
13.96
%
 
14.22
%
 
14.20
%
 
15.36
%
 
16.80
%
Average Earning Assets
$
2,865,085

 
$
2,847,966

 
$
2,832,558

 
$
2,757,020

 
$
2,703,054

Average Paying Liabilities
2,235,462

 
2,224,403

 
2,189,233

 
2,110,924

 
2,100,085

Interest Income
27,227

 
26,213

 
26,000

 
24,495

 
23,590

Tax-Equivalent Adjustment 3
376

 
373

 
376

 
376

 
468

Interest Income, Tax-Equivalent 3
27,603

 
26,586

 
26,376

 
24,871

 
24,058

Interest Expense
5,520

 
5,092

 
4,343

 
3,498

 
2,628

Net Interest Income
21,707

 
21,121

 
21,657

 
20,997

 
20,962

Net Interest Income, Tax-Equivalent 3
22,083

 
21,494

 
22,033

 
21,373

 
21,430

Net Interest Margin, annualized
3.04
%
 
3.01
%
 
3.03
%
 
3.02
%
 
3.11
%
Net Interest Margin, Tax-Equivalent, annualized 3
3.09
%
 
3.06
%
 
3.09
%
 
3.08
%
 
3.18
%
 
 
 
 
 
 
 
 
 
 
Efficiency Ratio Calculation: 4
 
 
 
 
 
 
 
 
 
Noninterest Expense
$
16,908

 
$
16,652

 
$
16,881

 
$
16,026

 
$
16,192

Less: Intangible Asset Amortization
44

 
79

 
65

 
65

 
66

Net Noninterest Expense
$
16,864

 
$
16,573

 
$
16,816

 
$
15,961

 
$
16,126

Net Interest Income, Tax-Equivalent
$
22,083

 
$
21,494

 
$
22,033

 
$
21,373

 
$
21,430

Noninterest Income
6,896

 
6,887

 
6,799

 
7,350

 
7,911

Less: Net Changes in Fair Value of Equity Invest.

 
76

 
(142
)
 
114

 
223

Net Gross Income
$
28,979

 
$
28,305

 
$
28,974

 
$
28,609

 
$
29,118

Efficiency Ratio
58.19
%
 
58.55
%
 
58.04
%
 
55.79
%
 
55.38
%
 
 
 
 
 
 
 
 
 
 
Period-End Capital Information:
 
 
 
 
 
 
 
 
 
Total Stockholders' Equity (i.e. Book Value)
$
284,649

 
$
276,609

 
$
269,584

 
$
264,810

 
$
259,488

Book Value per Share 1
19.61

 
19.11

 
18.63

 
18.34

 
17.99

Goodwill and Other Intangible Assets, net
23,603

 
23,650

 
23,725

 
23,827

 
23,933

Tangible Book Value per Share 1,2
17.99

 
17.48

 
16.99

 
16.69

 
16.33

 
 
 
 
 
 
 
 
 
 
Capital Ratios:5
 
 
 
 
 
Tier 1 Leverage Ratio
9.88
%
 
9.73
%
 
9.61
%
 
9.67
%
 
9.65
%
Common Equity Tier 1 Capital Ratio 
12.99
%
 
12.98
%
 
12.89
%
 
12.89
%
 
13.01
%
Tier 1 Risk-Based Capital Ratio
13.93
%
 
13.95
%
 
13.87
%
 
13.90
%
 
14.04
%
Total Risk-Based Capital Ratio
14.91
%
 
14.93
%
 
14.86
%
 
14.90
%
 
15.06
%
 
 
 
 
 
 
 
 
 
 
Assets Under Trust Admin. & Investment Mgmt.
$
1,496,966

 
$
1,483,259

 
$
1,385,752

 
$
1,551,289

 
$
1,479,753




6




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.
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
Total Stockholders' Equity (GAAP)
$
284,649

 
$
276,609

 
$
269,584

 
$
264,810

 
$
259,488

 
Less: Goodwill and Other Intangible assets, net
23,603

 
23,650

 
23,725

 
23,827

 
23,933

 
Tangible Equity (Non-GAAP)
$
261,046

 
$
252,959

 
$
245,859

 
$
240,983

 
$
235,555

 
 
 
 
 
 
 
 
 
 
 
 
Period End Shares Outstanding
14,513

 
14,474

 
14,472

 
14,441

 
14,424

 
Tangible Book Value per Share (Non-GAAP)
$
17.99

 
$
17.48

 
$
16.99

 
$
16.69

 
$
16.33

 
Net Income
8,934

 
8,734

 
8,758

 
9,260

 
9,730

 
Return on Tangible Equity (Net Income/Tangible Equity - Annualized)
13.96
%
 
14.22
%
 
14.20
%
 
15.36
%
 
16.80
%
 
 
 
 
 
 
 
 
 
 
 
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.

 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
Interest Income (GAAP)
$
27,227

 
$
26,213

 
$
26,000

 
$
24,495

 
$
23,590

 
Add: Tax-Equivalent adjustment
(Non-GAAP)
376

 
373

 
376

 
376

 
468

 
Interest Income - Tax Equivalent
(Non-GAAP)
$
27,603

 
$
26,586

 
$
26,376

 
$
24,871

 
$
24,058

 
Net Interest Income (GAAP)
$
21,707

 
$
21,121

 
$
21,657

 
$
20,997

 
$
20,962

 
Add: Tax-Equivalent adjustment
(Non-GAAP)
376

 
373

 
376

 
376

 
468

 
Net Interest Income - Tax Equivalent
(Non-GAAP)
$
22,083

 
$
21,494

 
$
22,033

 
$
21,373

 
$
21,430

 
Average Earning Assets
$
2,865,085

 
$
2,847,966

 
$
2,832,558

 
$
2,757,020

 
$
2,703,054

 
Net Interest Margin (Non-GAAP)*
3.09
%
 
3.06
%
 
3.09
%
 
3.08
%
 
3.18
%
 
 
 
 
 
 
 
 
 
 
 
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 June 30, 2019 listed in the tables (i.e., 12.99%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
Total Risk Weighted Assets
$
2,121,541

 
$
2,075,115

 
$
2,046,495

 
$
1,999,849

 
$
1,934,890

 
Common Equity Tier 1 Capital
275,528

 
269,363

 
263,863

 
257,852

 
251,666

 
Common Equity Tier 1 Ratio
12.99
%
 
12.98
%
 
12.89
%
 
12.89
%
 
13.01
%
            
                   
* Quarterly ratios have been annualized

7



Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)

Quarter Ended:
6/30/2019
 
12/31/2018
 
6/30/2018
Loan Portfolio
 
 
 
 
 
Commercial Loans
$
138,331

 
$
136,890

 
$
118,881

Commercial Real Estate Loans
490,274

 
484,562

 
464,393

  Subtotal Commercial Loan Portfolio
628,605

 
621,452

 
583,274

Consumer Loans
779,024

 
719,510

 
661,908

Residential Real Estate Loans
872,679

 
855,253

 
812,680

Total Loans
$
2,280,308

 
$
2,196,215

 
$
2,057,862

Allowance for Loan Losses
 
 
 
 
 
Allowance for Loan Losses, Beginning of Quarter
$
20,373

 
$
20,003

 
$
19,057

Loans Charged-off
(368
)
 
(573
)
 
(264
)
Less Recoveries of Loans Previously Charged-off
235

 
120

 
218

Net Loans Charged-off
(133
)
 
(453
)
 
(46
)
Provision for Loan Losses
455

 
646

 
629

Allowance for Loan Losses, End of Quarter
$
20,695

 
$
20,196

 
$
19,640

Nonperforming Assets
 
 
 
 
 
Nonaccrual Loans
$
4,949

 
$
4,159

 
$
3,880

Loans Past Due 90 or More Days and Accruing
457

 
1,225

 
170

Loans Restructured and in Compliance with Modified Terms
142

 
138

 
106

Total Nonperforming Loans
5,548

 
5,522

 
4,156

Repossessed Assets
115

 
130

 
76

Other Real Estate Owned
1,258

 
1,130

 
1,412

Total Nonperforming Assets
$
6,921

 
$
6,782

 
$
5,644

Key Asset Quality Ratios
 
 
 
 
 
Net Loans Charged-off to Average Loans,
   Quarter-to-date Annualized
0.02
%
 
0.08
%
 
0.01
%
Provision for Loan Losses to Average Loans,
  Quarter-to-date Annualized
0.08
%
 
0.12
%
 
0.12
%
Allowance for Loan Losses to Period-End Loans
0.91
%
 
0.92
%
 
0.95
%
Allowance for Loan Losses to Period-End Nonperforming Loans
373.02
%
 
365.74
%
 
472.57
%
Nonperforming Loans to Period-End Loans
0.24
%
 
0.25
%
 
0.20
%
Nonperforming Assets to Period-End Assets
0.23
%
 
0.23
%
 
0.20
%
Six-Month Period Ended:
 
 
 
 
 
Allowance for Loan Losses
 
 
 
 
 
Allowance for Loan Losses, Beginning of Year
$
20,196

 
 
 
$
18,586

Loans Charged-off
(830
)
 
 
 
(634
)
Less Recoveries of Loans Previously Charged-off
402

 
 
 
313

Net Loans Charged-off
(428
)
 
 
 
(321
)
Provision for Loan Losses
927

 
 
 
1,375

Allowance for Loan Losses, End of Period
$
20,695

 
 
 
$
19,640

Key Asset Quality Ratios
 
 
 
 
 
Net Loans Charged-off to Average Loans, Annualized
0.04
%
 
 
 
0.03
%
Provision for Loan Losses to Average Loans, Annualized
0.08
%
 
 
 
0.14
%

8