EX-99 2 ex99-earningsq12020.htm EXHIBIT 99 Exhibit


afcnewsreleaselogorgba12.jpg
250 Glen Street
Glens Falls, NY 12801
NASDAQ® Symbol: "AROW"
Website: arrowfinancial.com

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

Arrow Reports $8.1 million in Q1 Net Income and Year-Over-Year Loan Growth of 8.0%

Total loans grew by $28.1 million in the first quarter of 2020.
First quarter net income was $8.1 million.
First quarter provision for loan losses was $2.8 million reflecting the uncertainty of the COVID-19 pandemic.
First quarter diluted earnings per share (EPS) of $0.54.
First quarter net interest income increased 8.9% over the prior-year comparable quarter.
COVID-19 response and update.

GLENS FALLS, N.Y. (April 24, 2020) – Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three-month period ended March 31, 2020. Net income for the first quarter of 2020 was $8.1 million, compared to $8.7 million in the first quarter of 2019. Steady loan growth continued in the first quarter of 2020, as total loans grew by $28.1 million from December 31, 2019 to $2.4 billion. Net interest income increased to $23.0 million in the first quarter of 2020, compared to $21.1 million for the comparable quarter of 2019.

In February 2020, Arrow's Business Continuity Task Force deployed its pandemic plan for the impending arrival of the novel coronavirus (COVID-19) to Upstate New York. Since then, a team of more than 25 members, representing leadership from across our organization and chaired by our Chief Operating Officer, has overseen a robust and expansive effort to protect our employees, customers and communities while continuing to deliver essential banking services. Our efforts have included limiting access to our facilities, the incorporation of social distancing and remote work for a large portion of our personnel.

Arrow remains fully engaged in its COVID-19 response, with a growing focus on hardship assistance and relief programs.

“While the full impact of COVID-19 remains to be seen, we remain committed in our mission to connect meaningfully with our customers and deliver essential financial services during this pandemic,” said Thomas J. Murphy, President and CEO. “Throughout our history, in periods of planned growth and unexpected adversity, our Company has remained true to its community banking roots. In these uncertain times, we return to those core values and enter this crisis with a strong financial position from which we will manage our response.”

The following expands on our COVID-19 response:

COVID-19 Safety Measures: In mid-March, Arrow limited access at all facilities to appointment-only, encouraging customers to use no-contact alternatives such as digital banking, drive-ins and ATMs. Also in March, Arrow expanded remote work arrangements for a large portion of its employee base, discontinued employee travel, minimized in-person meetings, and implemented social distancing for essential employees who remained on-site. In addition, we have increased cleaning and sanitizing of our locations. We believe these measures have helped to keep our workforce healthy and aided in community efforts to slow the spread of the COVID-19 virus.


1



COVID-19 Customer Support: Another significant and growing aspect of Arrow’s COVID-19 response has been support for customers experiencing financial hardship due to the mandated closure of non-essential businesses in New York State and resulting rise in unemployment. As of the date of this press release, we continue to work with individuals and businesses seeking temporary financial assistance.

Demand for the Small Business Administration’s Paycheck Protection Program has been significant. Both of our subsidiary banks are proudly participating in the program as a way to deliver relief for small businesses in our markets. The effort involves the processing of a large volume of Paycheck Protection Program applications in a narrow window of time. As a result, we have reinforced our lending team with resources and support from across the Company in order to rapidly deliver funding for our customers.

COVID-19 Operational Impact: While COVID-19 did not have a material adverse effect on our first quarter 2020 financial results, we are actively monitoring the impact of the pandemic on our business and results of operations. Currently, all of our locations, including our subsidiary banks' branches, remain open and capable of meeting our customer needs. However, the Company expects with the slowing economy and deteriorating economic outlook, increased unemployment and decreased consumer and commercial spending, that there may be adverse effects on, among other things, our customer deposits, the ability of our borrowers to satisfy their obligations, a decline in the demand for loans and our other financial products and services which may negatively impact the Company. Although the Company has, and will continue to take steps to mitigate against the impact of the pandemic on its operations, it cannot provide any assurance that these actions will be successful.

The following expands upon our first-quarter results:

Cash and Stock Dividends: On March 13, 2020, 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 first quarter of 2019 when adjusted for the 3% stock dividend distributed on September 27, 2019.

Loan Growth: Total loans reached $2.4 billion as of March 31, 2020, which represents an increase of $179.0 million, or 8.0% from March 31, 2019. The consumer loan portfolio grew by $77.9 million, or 10.4%, as compared to March 31, 2019, primarily within the indirect automobile lending program. Total outstanding residential real estate loans increased $54.5 million, or 6.3%, as compared to March 31, 2019. Total outstanding commercial loans increased $46.6 million, or 7.4%, as compared to March 31, 2019.

Deposit Growth: At March 31, 2020, deposit balances reached $2.8 billion, up $320.9 million, or 12.9%, from the prior-year level. Noninterest-bearing deposits represented 17.4% of total deposits at March 31, 2020, compared to 18.2% of total deposits on March 31, 2019. At March 31, 2020, other time deposits were $245.9 million, a decrease of $17.1 million compared to the prior year. Municipal deposits increased $174.7 million, or 28.1% from March 31, 2019. Total combined Federal Home Loan Bank Overnight and Term Advances declined $110.0 million from December 31, 2019.

Net Interest Income: First quarter 2020 net interest income increased to $23.0 million, up 8.9% from $21.1 million in the comparable quarter of 2019. The net interest margin was 3.05% for the quarter, compared to 3.01% for the first quarter of 2019. The increase in net interest margin from the prior year was primarily the result of the increase in the deposit balances as described above, combined with the decrease in market rates. The yield on earning assets has been consistent between years, with increased loan yields offset by declining yields on investments.

Noninterest Income: Noninterest income for the three months ended March 31, 2020 was $7.7 million, compared to $6.9 million in the comparable 2019 quarter. For the first quarter of 2020, the fair value of equity securities at March 31, 2020 decreased $374 thousand. In addition, income of $866 thousand related to commercial loan originations was recorded in the first quarter of 2020.


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Noninterest Expense: Noninterest expense for the first quarter of 2020 increased 6.6% to $17.8 million, from $16.7 million for the first quarter of 2019. Salaries and benefits increased $1.1 million, which was primarily the result of increased cost of health insurance benefits.

Provision for Income Taxes: The provision for income taxes was $2.0 million for the first quarter of 2020, compared to $2.2 million for the same quarter of 2019. The effective income tax rates for the three-month periods ended March 31, 2020 and 2019 were 20.1% and 19.8%, respectively.

Asset Quality: Asset quality remained strong at March 31, 2020, with continued low levels of nonperforming loans and net charge-offs. Nonperforming loans at March 31, 2020, were $5.5 million, up $168 thousand from the level at March 31, 2019. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.05% for the three-month period ended March 31, 2020, consistent with March 31, 2019. The allowance for loan losses was $23.6 million at March 31, 2020, which represented 0.98% of loans outstanding, as compared to 0.91% at March 31, 2019. Loan loss provision expense for the first quarter of 2020 was $2.8 million, up $2.3 million from the provision for loan losses for the comparable 2019 quarter. Although credit quality remains very strong, the increase in loss provision for loan losses reflects the uncertainty resulting from the COVID-19 pandemic. As permitted by the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, Arrow has elected to defer the adoption of the Current Expected Credit Losses ("CECL") methodology in determining credit losses.

Liquidity: At March 31, 2020, Arrow’s liquidity position was strong, and provides flexibility to address unexpected near-term disruptions that may develop as a result of the COVID-19 pandemic, such as: reduced cash-flows from the investment and loan portfolios and aggressive funding of programs associated with response efforts, including the Small Business Administration’s Paycheck Protection Program.  Interest-bearing cash balances at March 31, 2020 were $106.0 million compared to $25.0 million at March 31, 2019.  Contingent collateralized lines of credit are established and available through the FHLBNY and FRB, totaling $1.2 billion.  Arrow also has additional liquidity options available to it including unsecured lines of credit, such as Fed Funds and brokered markets.

Capital: Total stockholders’ equity was $309.4 million at March 31, 2020, up $32.8 million, or 11.9%, from the comparable quarter of 2019. Arrow's capital reserves are well positioned to address the uncertainties related to the COVID-19 pandemic. Arrow's consistent earnings and measured dividend practices have created strong capital reserves. Since Arrow adopted the Community Bank Leverage Ratio (CBLR) framework for the first quarter of 2020 and Arrow's CBLR ratio of 9.87% exceeded the 9.0% regulatory minimum rate, Arrow is no longer required to compute or report any other capital ratios. Because the Company and both its subsidiary banks report a CBLR in excess of 9.0%, it is considered to have met the "well capitalized" regulatory standard.

Industry Recognition: Both of the Company's banking subsidiaries, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, continue to hold BauerFinancial, Inc. 5-Star Superior Bank rating.
_________


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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, including, in particular, statements regarding the uncertainty surrounding the COVID-19 pandemic. 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, 2019, and other filings with the Securities and Exchange Commission.

4



ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)
 
 
Three Months Ended March 31,
 
 
2020
 
2019
INTEREST AND DIVIDEND INCOME
 
 
 
 
Interest and Fees on Loans
 
$
24,874

 
$
22,403

Interest on Deposits at Banks
 
124

 
195

Interest and Dividends on Investment Securities:
 
 
 
 
Fully Taxable
 
2,193

 
2,369

Exempt from Federal Taxes
 
1,035

 
1,246

Total Interest and Dividend Income
 
28,226

 
26,213

INTEREST EXPENSE
 
 
 
 
Interest-Bearing Checking Accounts
 
487

 
482

Savings Deposits
 
2,471

 
1,601

Time Deposits over $250,000
 
533

 
396

Other Time Deposits
 
1,000

 
713

Federal Funds Purchased and
Securities Sold Under Agreements to Repurchase
 
22

 
22

Federal Home Loan Bank Advances
 
429

 
1,594

Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts
 
228

 
269

Interest on Financing Leases
 
50

 
15

Total Interest Expense
 
5,220

 
5,092

NET INTEREST INCOME
 
23,006

 
21,121

Provision for Loan Losses
 
2,772

 
472

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
 
20,234

 
20,649

NONINTEREST INCOME
 
 
 
 
Income From Fiduciary Activities
 
2,213

 
2,107

Fees for Other Services to Customers
 
2,451

 
2,402

Insurance Commissions
 
1,632

 
1,719

Net (Loss) Gain on Securities Transactions
 
(374
)
 
76

Net Gain on Sales of Loans
 
213

 
104

Other Operating Income
 
1,559

 
479

Total Noninterest Income
 
7,694

 
6,887

NONINTEREST EXPENSE
 
 
 
 
Salaries and Employee Benefits
 
10,383

 
9,319

Occupancy Expenses, Net
 
1,449

 
1,420

Technology and Equipment Expense
 
3,352

 
3,141

FDIC Assessments
 
219

 
212

Other Operating Expense
 
2,351

 
2,560

Total Noninterest Expense
 
17,754

 
16,652

INCOME BEFORE PROVISION FOR INCOME TAXES
 
10,174

 
10,884

Provision for Income Taxes
 
2,047

 
2,150

NET INCOME
 
$
8,127

 
$
8,734

Average Shares Outstanding 1:
 
 
 
 
Basic
 
14,996

 
14,903

Diluted
 
15,026

 
14,956

Per Common Share:
 
 
 
 
Basic Earnings
 
$
0.54

 
$
0.59

Diluted Earnings
 
0.54

 
0.58

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


5



ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
 
March 31, 2020
 
December 31, 2019
 
March 31, 2019
ASSETS
 
 
 
 
 
Cash and Due From Banks
$
32,525

 
$
47,035

 
$
36,198

Interest-Bearing Deposits at Banks
106,004

 
23,186

 
25,031

Investment Securities:
 
 
 
 
 
Available-for-Sale at Fair Value
378,186

 
357,334

 
298,812

Held-to-Maturity (Approximate Fair Value of $242,804 at March 31, 2020; $249,618 at December 31, 2019; and $280,414 at March 31, 2019)
238,520

 
245,065

 
279,400

Equity Securities
1,689

 
2,063

 
1,850

FHLB and Federal Reserve Bank Stock
5,379

 
10,317

 
7,878

Loans
2,414,193

 
2,386,120

 
2,235,208

Allowance for Loan Losses
(23,637
)
 
(21,187
)
 
(20,373
)
Net Loans
2,390,556

 
2,364,933

 
2,214,835

Premises and Equipment, Net
40,987

 
40,629

 
34,949

Goodwill
21,873

 
21,873

 
21,873

Other Intangible Assets, Net
1,640

 
1,661

 
1,777

Other Assets
73,973

 
70,179

 
62,280

Total Assets
$
3,291,332

 
$
3,184,275

 
$
2,984,883

LIABILITIES
 
 
 
 
 
Noninterest-Bearing Deposits
$
489,151

 
$
484,944

 
$
453,089

Interest-Bearing Checking Accounts
793,425

 
689,221

 
823,301

Savings Deposits
1,146,683

 
1,046,568

 
866,861

Time Deposits over $250,000
135,854

 
123,968

 
83,834

Other Time Deposits
245,892

 
271,353

 
263,012

Total Deposits
2,811,005

 
2,616,054

 
2,490,097

Federal Funds Purchased and
  Securities Sold Under Agreements to Repurchase
57,909

 
51,099

 
58,407

Federal Home Loan Bank Overnight Advances

 
130,000

 
74,500

Federal Home Loan Bank Term Advances
50,000

 
30,000

 
35,000

Junior Subordinated Obligations Issued to Unconsolidated
Subsidiary Trusts
20,000

 
20,000

 
20,000

Finance Leases
5,249


5,254


2,946

Other Liabilities
37,771

 
30,140

 
27,324

Total Liabilities
2,981,934

 
2,882,547

 
2,708,274

STOCKHOLDERS’ EQUITY
 
 
 
 
 
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at March 31, 2020 and December 31, 2019; $5 Par Value and 1,000,000 Shares Authorized at March 31, 2019

 

 

Common Stock, $1 Par Value; 30,000,000 Shares Authorized at March 31, 2020 and December 31, 2019 and 20,000,000 Shares Authorized at March 31, 2019 (19,606,449 Shares Issued at March 31, 2020 and December 31, 2019 and 19,035,565 at March 31, 2019)
19,606

 
19,606

 
19,035

Additional Paid-in Capital
336,021

 
335,355

 
315,262

Retained Earnings
37,441

 
33,218

 
34,231

Unallocated ESOP Shares (None at March 31, 2020 and December 31, 2019 and 5,501 Shares at March 31, 2019)

 

 
(100
)
Accumulated Other Comprehensive Loss
(2,412
)
 
(6,357
)
 
(11,567
)
Treasury Stock, at Cost (4,624,348 Shares at March 31, 2020; 4,608,258 Shares at December 31, 2019 and 4,556,083 Shares at March 31, 2019)
(81,258
)
 
(80,094
)
 
(80,252
)
Total Stockholders’ Equity
309,398

 
301,728

 
276,609

Total Liabilities and Stockholders’ Equity
$
3,291,332

 
$
3,184,275

 
$
2,984,883


6



Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended
3/31/2020
 
12/31/2019
 
9/30/2019
 
6/30/2019
 
3/31/2019
Net Income
$
8,127

 
$
9,740

 
$
10,067

 
$
8,934

 
$
8,734

Transactions in Net Income (Net of Tax):
 
 
 
 
 
 
 
 
 
Net Changes in Fair Value of Equity Investments
(279
)
 
50

 
109

 

 
57

 
 
 
 
 
 
 
 
 
 
Share and Per Share Data:1
 
 
 
 
 
 
 
 
 
Period End Shares Outstanding
14,982

 
14,998

 
14,969

 
14,949

 
14,909

Basic Average Shares Outstanding
14,996

 
14,978

 
14,955

 
14,922

 
14,903

Diluted Average Shares Outstanding
15,026

 
15,026

 
14,991

 
14,963

 
14,956

Basic Earnings Per Share
$
0.54

 
$
0.65

 
$
0.67

 
$
0.60

 
$
0.59

Diluted Earnings Per Share
0.54

 
0.65

 
0.67

 
0.60

 
0.58

Cash Dividend Per Share
0.260

 
0.260

 
0.252

 
0.252

 
0.252

 
 
 
 
 
 
 
 
 
 
Selected Quarterly Average Balances:
 
 
 
 
 
 
 
 
 
  Interest-Bearing Deposits at Banks
$
32,787

 
$
28,880

 
$
27,083

 
$
25,107

 
$
26,163

  Investment Securities
603,748

 
582,982

 
545,073

 
584,679

 
611,161

  Loans
2,394,346

 
2,358,110

 
2,308,879

 
2,255,299

 
2,210,642

  Deposits
2,670,009

 
2,607,421

 
2,472,528

 
2,436,290

 
2,347,985

  Other Borrowed Funds
170,987

 
177,877

 
231,291

 
250,283

 
327,138

  Shareholders' Equity
306,527

 
296,124

 
289,016

 
280,247

 
272,864

  Total Assets
3,180,857

 
3,113,114

 
3,023,043

 
2,997,458

 
2,977,056

Return on Average Assets, annualized
1.03
%
 
1.24
%
 
1.32
%
 
1.20
%
 
1.19
%
Return on Average Equity, annualized
10.66
%
 
13.05
%
 
13.82
%
 
12.79
%
 
12.98
%
Return on Average Tangible Equity, annualized 2
11.55
%
 
14.18
%
 
15.05
%
 
13.96
%
 
14.22
%
Average Earning Assets
$
3,030,881

 
$
2,969,972

 
$
2,881,035

 
$
2,865,085

 
$
2,847,966

Average Paying Liabilities
2,362,515

 
2,293,804

 
2,213,642

 
2,235,462

 
2,224,403

Interest Income
28,226

 
28,367

 
27,952

 
27,227

 
26,213

Tax-Equivalent Adjustment 3
288

 
321

 
344

 
376

 
373

Interest Income, Tax-Equivalent 3
28,514

 
28,688

 
28,296

 
27,603

 
26,586

Interest Expense
5,220

 
5,449

 
5,649

 
5,520

 
5,092

Net Interest Income
23,006

 
22,918

 
22,303

 
21,707

 
21,121

Net Interest Income, Tax-Equivalent 3
23,294

 
23,239

 
22,647

 
22,083

 
21,494

Net Interest Margin, annualized
3.05
%
 
3.06
%
 
3.07
%
 
3.04
%
 
3.01
%
Net Interest Margin, Tax-Equivalent, annualized 3
3.09
%
 
3.10
%
 
3.12
%
 
3.09
%
 
3.06
%
 
 
 
 
 
 
 
 
 
 
Efficiency Ratio Calculation: 4
 
 
 
 
 
 
 
 
 
Noninterest Expense
$
17,754

 
$
17,099

 
$
16,791

 
$
16,908

 
$
16,652

Less: Intangible Asset Amortization
58

 
60

 
61

 
44

 
79

Net Noninterest Expense
$
17,696

 
$
17,039

 
$
16,730

 
$
16,864

 
$
16,573

Net Interest Income, Tax-Equivalent
$
23,294

 
$
23,238

 
$
22,647

 
$
22,083

 
$
21,494

Noninterest Income
7,694

 
7,081

 
7,691

 
6,896

 
6,887

Less: Net Changes in Fair Value of Equity Invest.
(374
)
 
67

 
146

 

 
76

Net Gross Income
$
31,362

 
$
30,252

 
$
30,192

 
$
28,979

 
$
28,305

Efficiency Ratio
56.42
%
 
56.32
%
 
55.41
%
 
58.19
%
 
58.55
%
 
 
 
 
 
 
 
 
 
 
Period-End Capital Information:
 
 
 
 
 
 
 
 
 
Total Stockholders' Equity (i.e. Book Value)
$
309,398

 
$
301,728

 
$
292,228

 
$
284,649

 
$
276,609

Book Value per Share 1
20.65

 
20.12

 
19.52

 
19.04

 
18.55

Goodwill and Other Intangible Assets, net
23,513

 
23,534

 
23,586

 
23,603

 
23,650

Tangible Book Value per Share 1,2
19.08

 
18.55

 
17.95

 
17.46

 
16.97

 
 
 
 
 
 
 
 
 
 
Capital Ratios:5
 
 
 
 
 
 
 
 
 
Community Bank Leverage Ratio
9.87
%
 
 
 
 
 
 
 
 
Tier 1 Leverage Ratio
 
 
9.98
%
 
10.04
%
 
9.88
%
 
9.73
%
Common Equity Tier 1 Capital Ratio 
 
 
12.94
%
 
12.93
%
 
12.99
%
 
12.98
%
Tier 1 Risk-Based Capital Ratio
 
 
13.83
%
 
13.85
%
 
13.93
%
 
13.95
%
Total Risk-Based Capital Ratio
 
 
14.78
%
 
14.81
%
 
14.91
%
 
14.93
%
 
 
 
 
 
 
 
 
 
 
Assets Under Trust Admin. & Investment Mgmt.
$
1,342,531

 
$
1,543,653

 
$
1,485,116

 
$
1,496,966

 
$
1,483,259



7





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 Arrow believes provides investors with information that is useful in understanding its financial performance.
 
 
3/31/2020
 
12/31/2019
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
Total Stockholders' Equity (GAAP)
$
309,398

 
$
301,728

 
$
292,228

 
$
284,649

 
$
276,609

 
Less: Goodwill and Other Intangible assets, net
23,513

 
23,534

 
23,586

 
23,603

 
23,650

 
Tangible Equity (Non-GAAP)
$
285,885

 
$
278,194

 
$
268,642

 
$
261,046

 
$
252,959

 
 
 
 
 
 
 
 
 
 
 
 
Period End Shares Outstanding
14,982

 
14,998

 
14,969

 
14,949

 
14,909

 
Tangible Book Value per Share (Non-GAAP)
$
19.08

 
$
18.55

 
$
17.95

 
$
17.46

 
$
16.97

 
Net Income
8,127

 
9,740

 
10,067

 
8,934

 
8,734

 
Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)
11.55
%
 
14.18
%
 
15.05
%
 
13.96
%
 
14.22
%
 
 
 
 
 
 
 
 
 
 
 
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 Arrow believes provides investors with information that is useful in understanding its financial performance.

 
 
3/31/2020
 
12/31/2019
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
Interest Income (GAAP)
$
28,226

 
$
28,367

 
$
27,952

 
$
27,227

 
$
26,213

 
Add: Tax-Equivalent adjustment
(Non-GAAP)
288

 
321

 
344

 
376

 
373

 
Interest Income - Tax Equivalent
(Non-GAAP)
$
28,514

 
$
28,688

 
$
28,296

 
$
27,603

 
$
26,586

 
Net Interest Income (GAAP)
$
23,006

 
$
22,918

 
$
22,303

 
$
21,707

 
$
21,121

 
Add: Tax-Equivalent adjustment
(Non-GAAP)
288

 
321

 
344

 
376

 
373

 
Net Interest Income - Tax Equivalent
(Non-GAAP)
$
23,294

 
$
23,239

 
$
22,647

 
$
22,083

 
$
21,494

 
Average Earning Assets
$
3,030,881

 
$
2,969,972

 
$
2,881,035

 
$
2,865,085

 
$
2,847,966

 
Net Interest Margin (Non-GAAP)*
3.09
%
 
3.10
%
 
3.12
%
 
3.09
%
 
3.06
%
 
 
 
 
 
 
 
 
 
 
 
4.
Non-GAAP Financial Measures: 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 noninterest expense to net gross income (which equals tax-equivalent net interest income plus noninterest income, as adjusted).
 
 
 
 
 
 
 
 
 
 
 
5.
For the current quarter, the CBLR in the table above is an estimation. The previous Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below reflect actual results. The CBLR at March 31, 2020 listed above (i.e., 9.87%) exceeds the required minimum CBLR (i.e., 9.00%).
 
 
3/31/2020
 
12/31/2019
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
Community Bank Leverage Ratio
9.87
%
 
 
 
 
 
 
 
 
 
Total Risk Weighted Assets
 
 
$
2,237,127

 
$
2,184,214

 
$
2,121,541

 
$
2,075,115

 
Common Equity Tier 1 Capital
 
 
289,409

 
282,485

 
275,528

 
269,363

 
Common Equity Tier 1 Ratio
 
 
12.94
%
 
12.93
%
 
12.99
%
 
12.98
%

* Quarterly ratios have been annualized

8



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

Quarter Ended:
3/31/2020
 
12/31/2019
 
3/31/2019
Loan Portfolio
 
 
 
 
 
Commercial Loans
$
147,100

 
$
150,660

 
$
133,276

Commercial Real Estate Loans
526,130

 
510,541

 
493,387

  Subtotal Commercial Loan Portfolio
673,230

 
661,201

 
626,663

Consumer Loans
824,709

 
811,198

 
746,799

Residential Real Estate Loans
916,254

 
913,721

 
861,746

Total Loans
$
2,414,193

 
$
2,386,120

 
$
2,235,208

Allowance for Loan Losses
 
 
 
 
 
Allowance for Loan Losses, Beginning of Quarter
$
21,187

 
$
20,931

 
$
20,196

Loans Charged-off
(481
)
 
(503
)
 
(462
)
Less Recoveries of Loans Previously Charged-off
159

 
125

 
167

Net Loans Charged-off
(322
)
 
(378
)
 
(295
)
Provision for Loan Losses
2,772

 
634

 
472

Allowance for Loan Losses, End of Quarter
$
23,637

 
$
21,187

 
$
20,373

Nonperforming Assets
 
 
 
 
 
Nonaccrual Loans
$
4,943

 
$
4,005

 
$
5,143

Loans Past Due 90 or More Days and Accruing
437

 
253

 
64

Loans Restructured and in Compliance with Modified Terms
136

 
143

 
141

Total Nonperforming Loans
5,516

 
4,401

 
5,348

Repossessed Assets
160

 
139

 
123

Other Real Estate Owned
782

 
1,122

 
1,321

Total Nonperforming Assets
$
6,458

 
$
5,662

 
$
6,792

Key Asset Quality Ratios
 
 
 
 
 
Net Loans Charged-off to Average Loans,
   Quarter-to-date Annualized
0.05
%
 
0.06
%
 
0.05
%
Provision for Loan Losses to Average Loans,
  Quarter-to-date Annualized
0.47
%
 
0.11
%
 
0.09
%
Allowance for Loan Losses to Period-End Loans
0.98
%
 
0.89
%
 
0.91
%
Allowance for Loan Losses to Period-End Nonperforming Loans
428.52
%
 
481.41
%
 
380.95
%
Nonperforming Loans to Period-End Loans
0.23
%
 
0.18
%
 
0.24
%
Nonperforming Assets to Period-End Assets
0.20
%
 
0.18
%
 
0.23
%

9