0000717538-19-000210.txt : 20191022 0000717538-19-000210.hdr.sgml : 20191022 20191022094012 ACCESSION NUMBER: 0000717538-19-000210 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20191022 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20191022 DATE AS OF CHANGE: 20191022 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARROW FINANCIAL CORP CENTRAL INDEX KEY: 0000717538 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 222448962 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12507 FILM NUMBER: 191160720 BUSINESS ADDRESS: STREET 1: 250 GLEN ST CITY: GLENS FALLS STATE: NY ZIP: 12801 BUSINESS PHONE: 5184154299 MAIL ADDRESS: STREET 1: 250 GLEN STREET CITY: GLENS FALLS STATE: NY ZIP: 12801 FORMER COMPANY: FORMER CONFORMED NAME: ARROW BANK CORP DATE OF NAME CHANGE: 19900710 8-K 1 form8kseptember2019earnings.htm 8-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
 
 
 
Date of Report (Date of earliest event reported):
October 22, 2019
 
 
ARROW FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 
New York
0-12507
22-2448962
(State or other jurisdiction of incorporation)
Commission File Number
(IRS Employer Identification Number)
 
250 GLEN STREET, GLENS FALLS, NEW YORK 12801
(Address of principal executive offices)   (Zip Code)
 
Registrant’s telephone number, including area code:   (518) 745-1000
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ___
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ___
 
 
 
 
 








Item 2.02.     Results of Operations and Financial Condition.

On October 22, 2019, Arrow Financial Corporation issued a press release containing unaudited financial information and accompanying discussion for the year-to-date period ended September 30, 2019.  A copy of this press release is furnished as Exhibit 99 to this report on Form 8-K.

Item 9.01.    Financial Statements and Exhibits.

Exhibits:

Exhibit No. Description





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.





 
 
ARROW FINANCIAL CORPORATION
 
 
                       Registrant
 
 
 
Date:
October 22, 2019
/s/ Edward J. Campanella
 
 
Edward J. Campanella, Senior Vice President,
Treasurer and Chief Financial Officer



EX-99 2 ex99-earningsq32019.htm EXHIBIT 99 Exhibit


afcnewsreleaselogorgba11.jpg
250 Glen Street
Glens Falls, NY 12801
NASDAQ® Symbol: "AROW"
Website: arrowfinancial.com

Media Contact: Blake Jones
Tel: (518) 415-4274

Arrow Reports $10.1 million in Q3 Net Income and Year-Over-Year Loan Growth of 9.9%

Total loans grew by $55.3 million in the third quarter of 2019 to a record high.
Third quarter net income was $10.1 million.
Third quarter diluted earnings per share (EPS) of $0.67.
Third quarter net interest income increased 6.2% over the prior-year comparable quarter.
Continued strong profitability, asset quality and capital ratios.

GLENS FALLS, N.Y. (October 22, 2019) – Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three-month period ended September 30, 2019. Net income for the third quarter of 2019 was $10.1 million, compared to $9.3 million in the third quarter of 2018. Steady loan growth continued in the third quarter of 2019, as total loans grew by $55.3 million from June 30, 2019 to $2.3 billion. Driven primarily by this growth, net interest income increased to $22.3 million in the third 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 13.82% and a return on average assets of 1.32% for the third quarter, compared to 13.96% and 1.28%, respectively, a year earlier.

"Arrow delivered another strong quarter, demonstrated by $55.3 million of loan growth in the quarter, total assets above $3.0 billion and continued stable asset quality," said President and CEO Thomas J. Murphy. “Alongside organic growth, we remain focused on the customer experience through strategic investments in technology as well as our branch network. I am proud of our team and these results."

In the third quarter, Glens Falls National Bank completed a yearlong optimization of its three-branch Plattsburgh presence, which included relocations, renovations and the debut of a newly built facility at Smithfield Boulevard in September. In addition, Glens Falls National Bank reopened its fully renovated Exit 18 Office in Queensbury, and Saratoga National Bank is targeting to open its 12th branch in Latham in early 2020.
The following expands on our third-quarter results:

Cash and Stock Dividends: On September 13, 2019, the Company distributed a cash dividend of $0.26 per share. The cash dividend was 3% higher than the cash dividend paid by the Company in the third quarter of 2018 when adjusted for the 3% stock dividend distributed on September 27, 2018. Additionally, a 3% stock dividend was distributed on September 27, 2019. This is the 11th consecutive year the Company declared a stock dividend.

Loan Growth: Total loans reached $2.3 billion as of September 30, 2019, which represents an increase of $209.5 million, or 9.9% as compared to September 30, 2018. The consumer loan portfolio grew by $111.6 million, or 16.1%, as compared to September 30, 2018, primarily within the indirect automobile lending program. Total outstanding residential real estate loans increased $54.9 million, or 6.6%, as compared to September 30, 2018. Total outstanding commercial loans increased $43.0 million, or 7.2%, as compared to September 30, 2018.

1



Deposit Growth: At September 30, 2019, deposit balances reached $2.6 billion, up $206.7 million, or 8.6%, from the prior-year level. Noninterest-bearing deposits represented 19.8% of total deposits at September 30, 2019, a decrease from 20.4% of total deposits a year prior. At September 30, 2019, other time deposits were $269.8 million, an increase of $86.9 million compared to the prior year. Time deposits include brokered deposits acquired to diversify funding with more favorable rates as compared to wholesale borrowings. Total combined Federal Home Loan Bank Overnight and Term Advances declined $98.0 million from September 30, 2018.

Net Interest Income: Third quarter 2019 net interest income increased to $22.3 million, up 6.2% from $21.0 million in the comparable quarter of 2018. The net interest margin was 3.07% for the quarter, compared to 3.02% for the third quarter of 2018. The increase in net interest margin from the prior year was primarily the result of an improved balance sheet mix, with loans and deposits increasing and investments and borrowings decreasing.

Noninterest Income: Noninterest income for the three months ended September 30, 2019 was $7.7 million, compared to $7.4 million in the comparable 2018 quarter. For the third quarter of 2019, income from fiduciary activities and insurance combined to generate 13.8% of total revenue. For the third quarter of 2018, income from fiduciary activities and insurance combined to generate 15.1% of total revenue.

Noninterest Expense: Noninterest expense for the third quarter of 2019 increased 4.8% to $16.8 million, from $16.0 million for the third quarter of 2018. Technology and equipment expense increased $546 thousand, and other operating expense increased $481 thousand from the comparable quarter in 2018. The FDIC provided Small Bank Assessment Credits of $687 thousand, which were fully recorded in the third quarter of 2019.

Provision for Income Taxes: The provision for income taxes was $2.6 million for the third quarter of 2019 compared to $2.5 million for the same quarter of 2018. The effective income tax rates for the three-month periods ended September 30, 2019 and 2018 were 20.6% and 21.1%, respectively.

Asset Quality: Asset quality remained strong at September 30, 2019, with continued low levels of nonperforming loans and net charge-offs. Nonperforming loans at September 30, 2019, were $4.7 million, down $1.1 million from the level at September 30, 2018. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.05% for the three-month period ended September 30, 2019, up from the prior-year comparable quarter of 0.04%. The allowance for loan losses was $20.9 million at September 30, 2019, which represented 0.90% of loans outstanding, as compared to 0.94% at September 30, 2018. The loss provision expense for the third quarter of 2019 was $518 thousand, down $68 thousand from the provision for the comparable 2018 quarter.

Capital: Total stockholders’ equity was a record $292.2 million at September 30, 2019, up $27.4 million, or 10.4%, 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 12.93% and the total risk-based capital ratio estimated to be 14.81% at September 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 50 and 42 quarters, respectively.
_________

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 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). 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 September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
INTEREST AND DIVIDEND INCOME
 
 
 
 
 
 
 
 
Interest and Fees on Loans
 
$
24,620

 
$
20,839

 
$
70,543

 
$
59,606

Interest on Deposits at Banks
 
182

 
182

 
572

 
474

Interest and Dividends on Investment Securities:
 
 
 
 
 
 
 
 
Fully Taxable
 
2,018

 
2,187

 
6,671

 
6,128

Exempt from Federal Taxes
 
1,132

 
1,287

 
3,606

 
4,295

Total Interest and Dividend Income
 
27,952

 
24,495

 
81,392

 
70,503

INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest-Bearing Checking Accounts
 
500

 
390

 
1,435

 
1,165

Savings Deposits
 
2,317

 
901

 
5,926

 
2,134

Time Deposits over $250,000
 
451

 
301

 
1,362

 
833

Other Time Deposits
 
1,255

 
370

 
3,099

 
911

Federal Funds Purchased and
Securities Sold Under Agreements to Repurchase
 
28

 
15

 
75

 
47

Federal Home Loan Bank Advances
 
820

 
1,270

 
3,513

 
2,340

Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts
 
250

 
251

 
780

 
712

Interest on Financing Leases
 
28

 

 
71

 

Total Interest Expense
 
5,649

 
3,498

 
16,261

 
8,142

NET INTEREST INCOME
 
22,303

 
20,997

 
65,131

 
62,361

Provision for Loan Losses
 
518

 
586

 
1,445

 
1,961

NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES
 
21,785

 
20,411

 
63,686

 
60,400

NONINTEREST INCOME
 
 
 
 
 
 
 
 
Income From Fiduciary Activities
 
2,212

 
2,262

 
6,571

 
7,106

Fees for Other Services to Customers
 
2,623

 
2,605

 
7,570

 
7,555

Insurance Commissions
 
1,936

 
2,024

 
5,590

 
6,119

Net Gain on Securities Transactions
 
146

 
114

 
222

 
355

Net Gain on Sales of Loans
 
257

 
54

 
501

 
115

Other Operating Income
 
517

 
291

 
1,020

 
900

Total Noninterest Income
 
7,691

 
7,350

 
21,474

 
22,150

NONINTEREST EXPENSE
 
 
 
 
 
 
 
 
Salaries and Employee Benefits
 
10,015

 
9,771

 
29,061

 
28,952

Occupancy Expenses, Net
 
1,324

 
1,132

 
4,023

 
3,742

Technology and Equipment Expense
 
3,305

 
2,759

 
9,689

 
8,306

FDIC Assessments
 
(480
)
 
218

 
(56
)
 
658

Other Operating Expense
 
2,627

 
2,146

 
7,634

 
6,516

Total Noninterest Expense
 
16,791

 
16,026

 
50,351

 
48,174

INCOME BEFORE PROVISION FOR INCOME TAXES
 
12,685

 
11,735

 
34,809

 
34,376

Provision for Income Taxes
 
2,618

 
2,475

 
7,074

 
6,855

NET INCOME
 
$
10,067

 
$
9,260

 
$
27,735

 
$
27,521

Average Shares Outstanding 1:
 
 
 
 
 
 
 
 
Basic
 
14,955

 
14,864

 
14,927

 
14,825

Diluted
 
14,991

 
14,956

 
14,968

 
14,914

Per Common Share:
 
 
 
 
 
 
 
 
Basic Earnings
 
$
0.67

 
$
0.62

 
$
1.86

 
$
1.85

Diluted Earnings
 
0.67

 
0.62

 
1.85

 
1.84

1 Share and Per Share Amounts have been restated for the September 27, 2019, 3% stock dividend.
 
 
 
 


4



ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
 
September 30, 2019
 
December 31, 2018
 
September 30, 2018
ASSETS
 
 
 
 
 
Cash and Due From Banks
$
65,882

 
$
56,529

 
$
57,385

Interest-Bearing Deposits at Banks
26,416

 
27,710

 
34,910

Investment Securities:
 
 
 
 
 
Available-for-Sale
314,182

 
317,535

 
340,411

Held-to-Maturity (Approximate Fair Value of $259,128 at September 30, 2019; $280,338 at December 31, 2018; and $282,719 at September 30, 2018)
255,095

 
283,476

 
289,952

Equity Securities
1,996

 
1,774

 
1,916

Other Investments
6,627

 
15,506

 
10,866

Loans
2,335,591

 
2,196,215

 
2,126,100

Allowance for Loan Losses
(20,931
)
 
(20,196
)
 
(20,003
)
Net Loans
2,314,660

 
2,176,019

 
2,106,097

Premises and Equipment, Net
40,228

 
30,446

 
28,601

Goodwill
21,873

 
21,873

 
21,873

Other Intangible Assets, Net
1,713

 
1,852

 
1,954

Other Assets
64,150

 
55,614

 
59,255

Total Assets
$
3,112,822

 
$
2,988,334

 
$
2,953,220

LIABILITIES
 
 
 
 
 
Noninterest-Bearing Deposits
$
516,876

 
$
472,768

 
$
490,469

Interest-Bearing Checking Accounts
801,446

 
790,781

 
899,547

Savings Deposits
929,691

 
818,048

 
758,727

Time Deposits over $250,000
96,770

 
73,583

 
76,226

Other Time Deposits
269,764

 
190,404

 
182,886

Total Deposits
2,614,547

 
2,345,584

 
2,407,855

Federal Funds Purchased and
  Securities Sold Under Agreements to Repurchase
72,869

 
54,659

 
62,503

Federal Home Loan Bank Overnight Advances
48,000

 
234,000

 
131,000

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
5,263





Other Liabilities
29,915

 
19,507

 
22,052

Total Liabilities
2,820,594

 
2,718,750

 
2,688,410

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

 

 

Common Stock, $1 Par Value; 30,000,000 Shares Authorized at September 30, 2019 and 20,000,000 Shares Authorized at December 31, 2018 and September 30, 2018 (19,606,449 Shares Issued at September 30, 2019 and 19,035,565 at December 31, 2018 and September 30, 2018)
19,606

 
19,035

 
19,035

Additional Paid-in Capital
334,597

 
314,533

 
313,763

Retained Earnings
27,375

 
29,257

 
24,258

Unallocated ESOP Shares (5,151 Shares at September 30, 2019; 5,001 Shares at December 31, 2018 and 9,932 Shares at September 30, 2018)
(100
)
 
(100
)
 
(200
)
Accumulated Other Comprehensive Loss
(8,979
)
 
(13,810
)
 
(12,621
)
Treasury Stock, at Cost (4,632,657 Shares at September 30, 2019; 4,558,207 Shares at December 31, 2018 and 4,584,147 Shares at September 30, 2018)
(80,271
)
 
(79,331
)
 
(79,425
)
Total Stockholders’ Equity
292,228

 
269,584

 
264,810

Total Liabilities and Stockholders’ Equity
$
3,112,822

 
$
2,988,334

 
$
2,953,220


5



Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
Net Income
$
10,067

 
$
8,934

 
$
8,734

 
$
8,758

 
$
9,260

Transactions in Net Income (Net of Tax):
 
 
 
 
 
 
 
 
 
Net Changes in Fair Value of Equity Investments
109

 

 
57

 
(106
)
 
85

 
 
 
 
 
 
 
 
 
 
Share and Per Share Data:1
 
 
 
 
 
 
 
 
 
Period End Shares Outstanding
14,969

 
14,949

 
14,909

 
14,907

 
14,875

Basic Average Shares Outstanding
14,955

 
14,922

 
14,903

 
14,885

 
14,864

Diluted Average Shares Outstanding
14,991

 
14,963

 
14,956

 
14,949

 
14,956

Basic Earnings Per Share
$
0.67

 
$
0.60

 
$
0.59

 
$
0.59

 
$
0.62

Diluted Earnings Per Share
0.67

 
0.60

 
0.58

 
0.59

 
0.62

Cash Dividend Per Share
0.252

 
0.252

 
0.252

 
0.252

 
0.245

 
 
 
 
 
 
 
 
 
 
Selected Quarterly Average Balances:
 
 
 
 
 
 
 
 
 
  Interest-Bearing Deposits at Banks
$
27,083

 
$
25,107

 
$
26,163

 
$
34,782

 
$
30,522

  Investment Securities
545,073

 
584,679

 
611,161

 
637,341

 
636,847

  Loans
2,308,879

 
2,255,299

 
2,210,642

 
2,160,435

 
2,089,651

  Deposits
2,472,528

 
2,436,290

 
2,347,985

 
2,347,231

 
2,279,709

  Other Borrowed Funds
231,291

 
253,302

 
330,086

 
315,172

 
314,304

  Shareholders' Equity
289,016

 
280,247

 
272,864

 
268,503

 
263,139

  Total Assets
3,023,043

 
2,997,458

 
2,977,056

 
2,954,029

 
2,879,854

Return on Average Assets, annualized
1.32
%
 
1.20
%
 
1.19
%
 
1.18
%
 
1.28
%
Return on Average Equity, annualized
13.82
%
 
12.79
%
 
12.98
%
 
12.94
%
 
13.96
%
Return on Average Tangible Equity, annualized 2
15.05
%
 
13.96
%
 
14.22
%
 
14.20
%
 
15.36
%
Average Earning Assets
$
2,881,035

 
$
2,865,085

 
$
2,847,966

 
$
2,832,558

 
$
2,757,020

Average Paying Liabilities
2,213,642

 
2,235,462

 
2,224,403

 
2,189,233

 
2,110,924

Interest Income
27,952

 
27,227

 
26,213

 
26,000

 
24,495

Tax-Equivalent Adjustment 3
344

 
376

 
373

 
376

 
376

Interest Income, Tax-Equivalent 3
28,296

 
27,603

 
26,586

 
26,376

 
24,871

Interest Expense
5,649

 
5,520

 
5,092

 
4,343

 
3,498

Net Interest Income
22,303

 
21,707

 
21,121

 
21,657

 
20,997

Net Interest Income, Tax-Equivalent 3
22,647

 
22,083

 
21,494

 
22,033

 
21,373

Net Interest Margin, annualized
3.07
%
 
3.04
%
 
3.01
%
 
3.03
%
 
3.02
%
Net Interest Margin, Tax-Equivalent, annualized 3
3.12
%
 
3.09
%
 
3.06
%
 
3.09
%
 
3.08
%
 
 
 
 
 
 
 
 
 
 
Efficiency Ratio Calculation: 4
 
 
 
 
 
 
 
 
 
Noninterest Expense
$
16,791

 
$
16,908

 
$
16,652

 
$
16,881

 
$
16,026

Less: Intangible Asset Amortization
61

 
44

 
79

 
65

 
65

Net Noninterest Expense
$
16,730

 
$
16,864

 
$
16,573

 
$
16,816

 
$
15,961

Net Interest Income, Tax-Equivalent
$
22,647

 
$
22,083

 
$
21,494

 
$
22,033

 
$
21,373

Noninterest Income
7,691

 
6,896

 
6,887

 
6,799

 
7,350

Less: Net Changes in Fair Value of Equity Invest.
146

 

 
76

 
(142
)
 
114

Net Gross Income
$
30,192

 
$
28,979

 
$
28,305

 
$
28,974

 
$
28,609

Efficiency Ratio
55.41
%
 
58.19
%
 
58.55
%
 
58.04
%
 
55.79
%
 
 
 
 
 
 
 
 
 
 
Period-End Capital Information:
 
 
 
 
 
 
 
 
 
Total Stockholders' Equity (i.e. Book Value)
$
292,228

 
$
284,649

 
$
276,609

 
$
269,584

 
$
264,810

Book Value per Share 1
19.52

 
19.04

 
18.55

 
18.08

 
17.80

Goodwill and Other Intangible Assets, net
23,586

 
23,603

 
23,650

 
23,725

 
23,827

Tangible Book Value per Share 1,2
17.95

 
17.46

 
16.97

 
16.49

 
16.20

 
 
 
 
 
 
 
 
 
 
Capital Ratios:5
 
 
 
 
 
Tier 1 Leverage Ratio
10.04
%
 
9.88
%
 
9.73
%
 
9.61
%
 
9.67
%
Common Equity Tier 1 Capital Ratio 
12.93
%
 
12.99
%
 
12.98
%
 
12.89
%
 
12.89
%
Tier 1 Risk-Based Capital Ratio
13.85
%
 
13.93
%
 
13.95
%
 
13.87
%
 
13.90
%
Total Risk-Based Capital Ratio
14.81
%
 
14.91
%
 
14.93
%
 
14.86
%
 
14.90
%
 
 
 
 
 
 
 
 
 
 
Assets Under Trust Admin. & Investment Mgmt.
$
1,485,116

 
$
1,496,966

 
$
1,483,259

 
$
1,385,752

 
$
1,551,289




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, 2019, 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.
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
Total Stockholders' Equity (GAAP)
$
292,228

 
$
284,649

 
$
276,609

 
$
269,584

 
$
264,810

 
Less: Goodwill and Other Intangible assets, net
23,586

 
23,603

 
23,650

 
23,725

 
23,827

 
Tangible Equity (Non-GAAP)
$
268,642

 
$
261,046

 
$
252,959

 
$
245,859

 
$
240,983

 
 
 
 
 
 
 
 
 
 
 
 
Period End Shares Outstanding
14,969

 
14,949

 
14,909

 
14,907

 
14,875

 
Tangible Book Value per Share (Non-GAAP)
$
17.95

 
$
17.46

 
$
16.97

 
$
16.49

 
$
16.20

 
Net Income
10,067

 
8,934

 
8,734

 
8,758

 
9,260

 
Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)
15.05
%
 
13.96
%
 
14.22
%
 
14.20
%
 
15.36
%
 
 
 
 
 
 
 
 
 
 
 
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.

 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
Interest Income (GAAP)
$
27,952

 
$
27,227

 
$
26,213

 
$
26,000

 
$
24,495

 
Add: Tax-Equivalent adjustment
(Non-GAAP)
344

 
376

 
373

 
376

 
376

 
Interest Income - Tax Equivalent
(Non-GAAP)
$
28,296

 
$
27,603

 
$
26,586

 
$
26,376

 
$
24,871

 
Net Interest Income (GAAP)
$
22,303

 
$
21,707

 
$
21,121

 
$
21,657

 
$
20,997

 
Add: Tax-Equivalent adjustment
(Non-GAAP)
344

 
376

 
373

 
376

 
376

 
Net Interest Income - Tax Equivalent
(Non-GAAP)
$
22,647

 
$
22,083

 
$
21,494

 
$
22,033

 
$
21,373

 
Average Earning Assets
$
2,881,035

 
$
2,865,085

 
$
2,847,966

 
$
2,832,558

 
$
2,757,020

 
Net Interest Margin (Non-GAAP)*
3.12
%
 
3.09
%
 
3.06
%
 
3.09
%
 
3.08
%
 
 
 
 
 
 
 
 
 
 
 
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 September 30, 2019 listed in the tables (i.e., 12.93%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
Total Risk Weighted Assets
$
2,184,214

 
$
2,121,541

 
$
2,075,115

 
$
2,046,495

 
$
1,999,849

 
Common Equity Tier 1 Capital
282,485

 
275,528

 
269,363

 
263,863

 
257,852

 
Common Equity Tier 1 Ratio
12.93
%
 
12.99
%
 
12.98
%
 
12.89
%
 
12.89
%
            
                   
* Quarterly ratios have been annualized

7



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

Quarter Ended:
9/30/2019
 
12/31/2018
 
9/30/2018
Loan Portfolio
 
 
 
 
 
Commercial Loans
$
142,135

 
$
136,890

 
$
127,112

Commercial Real Estate Loans
498,083

 
484,562

 
470,122

  Subtotal Commercial Loan Portfolio
640,218

 
621,452

 
597,234

Consumer Loans
805,798

 
719,510

 
694,188

Residential Real Estate Loans
889,575

 
855,253

 
834,679

Total Loans
$
2,335,591

 
$
2,196,215

 
$
2,126,101

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

 
$
20,003

 
$
19,640

Loans Charged-off
(402
)
 
(573
)
 
(325
)
Less Recoveries of Loans Previously Charged-off
120

 
120

 
102

Net Loans Charged-off
(282
)
 
(453
)
 
(223
)
Provision for Loan Losses
518

 
646

 
586

Allowance for Loan Losses, End of Quarter
$
20,931

 
$
20,196

 
$
20,003

Nonperforming Assets
 
 
 
 
 
Nonaccrual Loans
$
3,465

 
$
4,159

 
$
4,468

Loans Past Due 90 or More Days and Accruing
1,066

 
1,225

 
1,172

Loans Restructured and in Compliance with Modified Terms
150

 
138

 
115

Total Nonperforming Loans
4,681

 
5,522

 
5,755

Repossessed Assets
76

 
130

 
47

Other Real Estate Owned
1,198

 
1,130

 
1,173

Total Nonperforming Assets
$
5,955

 
$
6,782

 
$
6,975

Key Asset Quality Ratios
 
 
 
 
 
Net Loans Charged-off to Average Loans,
   Quarter-to-date Annualized
0.05
%
 
0.08
%
 
0.04
%
Provision for Loan Losses to Average Loans,
  Quarter-to-date Annualized
0.09
%
 
0.12
%
 
0.11
%
Allowance for Loan Losses to Period-End Loans
0.90
%
 
0.92
%
 
0.94
%
Allowance for Loan Losses to Period-End Nonperforming Loans
447.15
%
 
365.74
%
 
347.58
%
Nonperforming Loans to Period-End Loans
0.20
%
 
0.25
%
 
0.27
%
Nonperforming Assets to Period-End Assets
0.19
%
 
0.23
%
 
0.24
%
Nine-Month Period Ended:
 
 
 
 
 
Allowance for Loan Losses
 
 
 
 
 
Allowance for Loan Losses, Beginning of Year
$
20,196

 
 
 
$
18,586

Loans Charged-off
(1,232
)
 
 
 
(960
)
Less Recoveries of Loans Previously Charged-off
522

 
 
 
416

Net Loans Charged-off
(710
)
 
 
 
(544
)
Provision for Loan Losses
1,445

 
 
 
1,961

Allowance for Loan Losses, End of Period
$
20,931

 
 
 
$
20,003

Key Asset Quality Ratios
 
 
 
 
 
Net Loans Charged-off to Average Loans, Annualized
0.04
%
 
 
 
0.03
%
Provision for Loan Losses to Average Loans, Annualized
0.09
%
 
 
 
0.14
%

8
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