Arrow Reports Increased Quarterly Earnings, Continued Strong Asset Quality Ratios -- Second-quarter diluted earnings per share increased 7.1% over the 2013 quarter.

-- Second-quarter net interest income on a tax-equivalent basis rose $1.5 million or 10.3%.

-- Continued growth in insurance commission income and income from fiduciary activities.

-- Record high at quarter-end for total loans; rose $139.4 million or 11.6% from June 30, 2013.

GLENS FALLS, N.Y., July 21, 2014 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS:  AROW) announced operating results for the three- and six-month periods ended June 30, 2014. Net income for the second quarter of 2014 was $5.52 million, an increase of $317 thousand, or 6.1%, from net income of $5.21 million for the second quarter of 2013. Diluted earnings per share (EPS) for the quarter was $0.45, a 7.1% increase from the comparable 2013 quarter, when diluted EPS was $0.42. Return on average assets for the 2014 second quarter was 1.01%, and return on average equity for the 2014 second quarter was 11.28%. Net income for the first six months of 2014 was $10.8 million, an increase of $456 thousand, or 4.4%, from net income of $10.4 million for the first six months of 2013. Diluted EPS for the six-month period was $0.88, a 3.5% increase from the comparable 2013 period, when diluted EPS was $0.85.

Our regional footprint continued to expand in the second-quarter with the opening of a new full-service Saratoga National Bank and Trust Company banking branch in Colonie, New York -- the Bank's first location in Albany County. Also in the second quarter, both Arrow banking subsidiaries expanded their mobile banking services with the addition of mobile check deposit, which has been well-received by customers.

Arrow President and CEO Thomas J. Murphy stated, "Arrow ended the quarter with strong results, including increased earnings per share, net income and net interest margin. In addition, we delivered solid ratios for return on average assets and return on average equity, record highs in several key balance sheet categories, and continued excellent asset quality and strong capital."

The following list expands on the highlights of our second-quarter results:

Net Interest Income and Margin: In the second quarter of 2014, on a tax-equivalent basis, our net interest income increased $1.5 million, or 10.3%, compared to the second quarter of 2013, while our tax-equivalent net interest margin increased by 18 basis points from 2.99% in the second quarter of 2013 to 3.17% for the second quarter of 2014. This principally reflected the impact of an increased level of average loans outstanding between the periods.

Insurance Agency Operations: Insurance commission income rose from $2.2 million for the second quarter of 2013 to $2.3 million for the second quarter of 2014, an increase of $117 thousand, or 5.4%. This improvement was primarily attributable to an increase in the annual contingent commission income received from certain insurance carriers.

Trust Assets and Related Noninterest Income: Assets under trust administration and investment management at June 30, 2014 were a record $1.215 billion, an increase of $141.3 million, or 13.2%, from the June 30, 2013 balance of $1.074 billion. The growth in balances was generally attributable to a significant rise in the equity markets between the periods and the addition of new accounts. Income from fiduciary activities increased by $447 thousand, or 13.4%, from $3.3 million for the first six months of 2013, to $3.8 million for the six months of 2014.

Balance Sheet Changes: Total assets at June 30, 2014 reached $2.153 billion, an increase of $69.9 million, or 3.4%, from the $2.083 billion balance at June 30, 2013, although a slight decline of 0.5% from total assets of $2.164 billion at December 31, 2013. Our loan portfolio also rose to a record high of $1.3 billion, up $139.4 million, or 11.6%, from the June 30, 2013 level, and an increase of $77.7 million, or 6.1%, from the level at December 31, 2013. All major categories within our loan portfolio grew during the second quarter of 2014.

During the first six months of 2014, we originated approximately $55 million of residential real estate loans, a decrease of 11.6% from approximately $62 million of residential real estate loans originated in the comparable period for 2013. Over the preceding 12 months, our management strategy shifted from selling most of our originations into the secondary market to retaining most of them. As a result, the outstanding balance of our residential real estate loan portfolio at June 30, 2014 was higher than the outstanding balance at both June 30, 2013 and December 31, 2013. Since we elected to retain most mortgage originations, our gain on the sale of residential real estate loan originations in the second quarter of 2014 was significantly less than our gain on the sale of such originations in the comparable 2013 quarter.

Asset Quality: Asset quality remained strong at June 30, 2014, as measured by our low level of nonperforming assets and the low level of net charge-offs. Nonperforming assets of $8.3 million at June 30, 2014, represented only 0.38% of period-end assets, an increase of one basis point from our 0.37% ratio as of December 31, 2013. Net loan losses for the second quarter of 2014, expressed as an annualized percentage of average loans outstanding, were just 0.03% and only .06% for the six month period ended June 30, 2014. All of our asset quality ratios continue to be significantly better than recently reported industry-wide averages.

Our allowance for loan losses was $15.0 million at June 30, 2014, which represented 1.12% of loans outstanding, ten basis points below our ratio one year earlier and two basis points below our ratio at December 31, 2013.

Capital: Total stockholders' equity was a record $197.6 million at period-end, an increase of $20.0 million, or 11.3%, above the June 30, 2013, amount. Arrow's capital ratios remain strong, as reflected by a Tier 1 leverage ratio of 9.39% at second quarter-end, up from 9.19% a year ago. Arrow's total risk-based capital ratio was 15.57%, down from 15.96% a year ago. The capital ratios of the Company and its subsidiary banks continue to significantly exceed the "well capitalized" regulatory standard, which is the highest current regulatory category.

Peer Group: Many of our key operating ratios have consistently compared very favorably to our peer group, which we define as all U.S. bank holding companies having $1.0 billion to $3.0 billion in total assets, as identified in the Federal Reserve Bank's "Bank Holding Company Performance Report" (FRB Report). The most current peer data available in the FRB Report is for the three-month period ended March 31, 2014, in which our return on average equity (ROE) was 10.96%, as compared to 7.85% for our peer group. Our ratio of loans 90 days past due and accruing plus nonaccrual loans to total loans was 0.51% as of March 31, 2014, as compared to 1.40% for our peer group. Our annualized ratio of net loan losses for the quarter ending March 31, 2014 was 0.08%, well below the peer result of 0.14%.

Cash and Stock Dividends: We distributed a cash dividend of $.25 per share to stockholders in the second quarter of 2014. The cash dividend was 2% higher than the cash dividend paid in the second quarter of 2013, adjusted for our 2% stock dividend in September 2013. This quarter's cash dividend, based on our $25.94 closing stock price at June 30, 2014, represented an annualized yield of 3.86%.

Industry Recognition: Arrow was recently included on the ABA Banking Journal's annual list of "top-performing midsize banks," ranking 33rd out of the top 100 public banks and thrifts with $1 billion to $10 billion in assets based on 2013 return on average equity. In addition, Arrow's banking subsidiaries were again recognized as a 5-Star Superior bank by BauerFinancial, Inc., a national bank rating and research firm, based on March 31, 2014 financial data. Glens Falls National Bank and Trust Company has earned this designation for the past 29 consecutive quarters; Saratoga National Bank has earned it the past 21 quarters.

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.; three property and casualty insurance agencies: Loomis & LaPann, Inc., Upstate Agency, LLC, and McPhillips Insurance Agency, a division of Glens Falls National Insurance Agencies, LLC; and Capital Financial Group, Inc., an insurance agency specializing in the sale and servicing of group health plans.

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, 2013, and our other filings with the Securities and Exchange Commission.

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts - Unaudited)

 




















Three Months Ended June 30,


Six Months Ended June 30,



2014


2013


2014


2013

INTEREST AND DIVIDEND INCOME









Interest and Fees on Loans


$

13,202



$

12,650



$

25,976



$

25,433


Interest on Deposits at Banks


16



19



29



46


Interest and Dividends on Investment Securities:









Fully Taxable


2,041



1,639



4,049



3,435


Exempt from Federal Taxes


1,436



1,501



2,907



2,891


Total Interest and Dividend Income


16,695



15,809



32,961



31,805


INTEREST EXPENSE









NOW Accounts


495



786



959



1,564


Savings Deposits


226



277



445



545


Time Deposits of $100,000 or More


201



305



431



624


Other Time Deposits


359



505



750



1,059


Federal Funds Purchased and

Securities Sold Under Agreements to Repurchase


5



6



9



9


Federal Home Loan Bank Advances


127



199



272



372


Junior Subordinated Obligations Issued to

Unconsolidated Subsidiary Trusts


142



145



283



289


Total Interest Expense


1,555



2,223



3,149



4,462


NET INTEREST INCOME


15,140



13,586



29,812



27,343


Provision for Loan Losses


505



100



963



200


NET INTEREST INCOME AFTER PROVISION FOR

LOAN LOSSES


14,635



13,486



28,849



27,143


NONINTEREST INCOME









Income From Fiduciary Activities


1,906



1,758



3,779



3,332


Fees for Other Services to Customers


2,377



2,371



4,571



4,653


Insurance Commissions


2,293



2,176



4,737



4,204


Net (Loss) Gain on Securities Transactions


(27)



13



(27)



540


Net Gain on Sales of Loans


166



498



289



1,105


Other Operating Income


304



255



556



411


Total Noninterest Income


7,019



7,071



13,905



14,245


NONINTEREST EXPENSE









Salaries and Employee Benefits


7,880



7,637



15,522



15,258


Occupancy Expenses, Net


2,316



2,119



4,657



4,395


FDIC Assessments


282



267



555



531


Other Operating Expense


3,259



3,251



6,469



6,501


Total Noninterest Expense


13,737



13,274



27,203



26,685


INCOME BEFORE PROVISION FOR INCOME TAXES


7,917



7,283



15,551



14,703


Provision for Income Taxes


2,393



2,076



4,707



4,315


NET INCOME


$

5,524



$

5,207



$

10,844



$

10,388


Average Shares Outstanding 1:









Basic


12,348



12,261



12,351



12,267


Diluted


12,369



12,279



12,373



12,285


Per Common Share:









Basic Earnings


$

0.45



$

0.42



$

0.88



$

0.85


Diluted Earnings


0.45



0.42



0.88



0.85






1 Share and per share data have been restated for the September 27, 2013, 2% stock dividend.




 

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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














June 30,
2014


December 31,
2013


June 30,
2013

ASSETS






Cash and Due From Banks

$

35,351



$

37,275



$

32,706


Interest-Bearing Deposits at Banks

16,459



12,705



11,894


Investment Securities:






Available-for-Sale

366,848



457,606



501,574


Held-to-Maturity (Approximate Fair Value of $304,259 at June 30, 2014; $302,305 at December 31, 2013; and $252,691 at June 30, 2013)

297,437



299,261



248,914


Other Investments

4,583



6,281



6,136


Loans

1,344,124



1,266,472



1,204,734


Allowance for Loan Losses

(15,036)



(14,434)



(14,678)


Net Loans

1,329,088



1,252,038



1,190,056


Premises and Equipment, Net

28,465



29,154



29,301


Goodwill

22,003



22,003



22,003


Other Intangible Assets, Net

3,865



4,140



4,384


Other Assets

48,952



43,235



36,201


Total Assets

$

2,153,051



$

2,163,698



$

2,083,169


LIABILITIES






Noninterest-Bearing Deposits

$

286,735



$

278,958



$

261,910


NOW Accounts

820,589



817,366



754,371


Savings Deposits

523,626



498,779



494,586


Time Deposits of $100,000 or More

70,600



78,928



87,369


Other Time Deposits

159,116



168,299



181,669


Total Deposits

1,860,666



1,842,330



1,779,905


Federal Funds Purchased and

Securities Sold Under Agreements to Repurchase

16,896



11,777



14,738


Federal Home Loan Bank Overnight Advances

24,000



53,000



40,000


Federal Home Loan Bank Term Advances

10,000



20,000



30,000


Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts

20,000



20,000



20,000


Other Liabilities

23,873



24,437



20,919


Total Liabilities

1,955,435



1,971,544



1,905,562


STOCKHOLDERS' EQUITY






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






Common Stock, $1 Par Value; 20,000,000 Shares Authorized (16,744,486 Shares Issued at June 30, 2014, and December 31, 2013; and 16,416,163 Shares Issued at March 31, 2013)

16,744



16,744



16,416


Additional Paid-in Capital

230,131



229,290



219,772


Retained Earnings

32,132



27,457



30,625


Unallocated ESOP Shares (74,845 Shares at June 30, 2014; 87,641 Shares at December 31, 2013; and 95,172 Shares at June 30, 2013)

(1,550)



(1,800)



(1,900)


Accumulated Other Comprehensive Loss

(3,489)



(4,373)



(11,739)


Treasury Stock, at Cost (4,319,587 Shares at June 30, 2014; 4,296,723 Shares at December 31, 2013; and 4,277,680 Shares at June 30, 2013)

(76,352)



(75,164)



(75,567)


Total Stockholders' Equity

197,616



192,154



177,607


Total Liabilities and Stockholders' Equity

$

2,153,051



$

2,163,698



$

2,083,169


 

 

Arrow Financial Corporation

Selected Quarterly Information

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





















Quarter Ended

6/30/2014



3/31/2014



12/31/2013



9/30/2013



6/30/2013


Net Income

$

5,524



$

5,320



$

5,784



$

5,623



$

5,207


Transactions Recorded in Net Income (Net of Tax):










Net (Loss) Gain on Securities Transactions

(16)









8


Net Gain on Sales of Loans

100



74



114



100



301


Share and Per Share Data:1










Period End Shares Outstanding

12,350



12,350



12,360



12,329



12,284


Basic Average Shares Outstanding

12,348



12,354



12,339



12,308



12,261


Diluted Average Shares Outstanding

12,369



12,378



12,387



12,344



12,279


Basic Earnings Per Share

$

0.45



$

0.43



$

0.47



$

0.46



$

0.42


Diluted Earnings Per Share

0.45



0.43



0.47



0.46



0.42


Cash Dividend Per Share

0.25



0.25



0.25



0.25



0.25


Selected Quarterly Average Balances:










  Interest-Bearing Deposits at Banks

22,486



17,184



46,853



14,096



26,632


  Investment Securities

712,088



755,008



762,768



744,928



771,018


  Loans

1,328,639



1,284,649



1,254,957



1,224,840



1,185,041


  Deposits

1,900,399



1,887,589



1,904,922



1,800,181



1,801,346


  Other Borrowed Funds

60,900



68,375



62,038



92,073



94,596


  Shareholders' Equity

196,478



194,127



184,506



179,634



178,867


  Total Assets

2,183,611



2,176,038



2,176,264



2,095,017



2,099,138


Return on Average Assets

1.01

%


0.99

%


1.05

%


1.06

%


0.99

%

Return on Average Equity

11.28

%


11.11

%


12.44

%


12.42

%


11.68

%

Return on Tangible Equity2

12.99

%


12.84

%


14.50

%


14.55

%


13.70

%

Average Earning Assets

$

2,063,213



$

2,056,841



$

2,064,578



$

1,983,864



$

1,982,691


Average Paying Liabilities

1,680,149



1,678,080



1,686,993



1,614,873



1,641,300


Interest Income, Tax-Equivalent

17,837



17,439



17,633



17,032



16,989


Interest Expense

1,555



1,594



1,713



1,747



2,223


Net Interest Income, Tax-Equivalent

16,282



15,845



15,920



15,285



14,766


Tax-Equivalent Adjustment

1,142



1,173



1,174



1,158



1,180


Net Interest Margin 3

3.17

%


3.12

%


3.06

%


3.06

%


2.99

%

Efficiency Ratio Calculation:










Noninterest Expense

$

13,737



$

13,466



$

13,385



$

13,133



$

13,274


Less: Intangible Asset Amortization

(94)



(106)



(108)



(108)



(112)


Net Noninterest Expense

$

13,643



$

13,360



$

13,277



$

13,025



$

13,162


Net Interest Income, Tax-Equivalent

$

16,282



$

15,845



$

15,920



$

15,285



$

14,766


Noninterest Income

7,019



6,886



6,877



6,939



7,071


Less: Net Securities (Gain) Loss

27









(13)


Net Gross Income

$

23,328



$

22,731



$

22,797



$

22,224



$

21,824


Efficiency Ratio

58.48

%


58.77

%


58.24

%


58.61

%


60.31

%

Period-End Capital Information:










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

$

197,616



$

194,491



$

192,154



$

182,683



$

177,607


Book Value per Share

16.00



15.75



15.55



14.82



14.46


Intangible Assets

25,868



25,999



26,143



26,273



26,387


Tangible Book Value per Share 2

13.91



13.64



13.43



12.69



12.31


Capital Ratios:










Tier 1 Leverage Ratio

9.39

%


9.30

%


9.19

%


9.37

%


9.19

%

Tier 1 Risk-Based Capital Ratio

14.49

%


14.55

%


14.70

%


14.59

%


14.82

%

Total Risk-Based Capital Ratio

15.57

%


15.62

%


15.77

%


15.69

%


15.96

%

Assets Under Trust Administration

and Investment Management

$

1,214,841



$

1,182,661



$

1,174,891



$

1,111,085



$

1,073,523


 

1Share and Per Share Data have been restated for the September 27, 2013, 2% stock dividend.

2Tangible Book Value and Tangible Equity exclude intangible assets from total equity. These are non-GAAP financial measures which we believe provide investors with information that is useful in understanding our financial performance.

3Net Interest Margin 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.

 

 

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)













Quarter Ended:

6/30/2014


12/31/2013


6/30/2013

Loan Portfolio






Commercial Loans

$

93,890



$

87,893



$

87,549


Commercial Construction Loans

29,702



27,815



30,980


Commercial Real Estate Loans

309,646



288,119



259,799


Other Consumer Loans

7,863



7,649



7,456


Consumer Automobile Loans

409,301



394,204



375,060


Residential Real Estate Loans

493,722



460,792



443,890


Total Loans

$

1,344,124



$

1,266,472



$

1,204,734


Allowance for Loan Losses






Allowance for Loan Losses, Beginning of Quarter

$

14,636



$

14,584



$

14,603


Loans Charged-off

168



246



92


Less Recoveries of Loans Previously Charged-off

63



96



67


Net Loans Charged-off

105



150



25


Provision for Loan Losses

505





100


Allowance for Loan Losses, End of Quarter

$

15,036



$

14,434



$

14,678


Nonperforming Assets






Nonaccrual Loans

$

6,185



$

6,479



$

5,591


Loans Past Due 90 or More Days and Accruing

1,325



652



760


Loans Restructured and in Compliance with Modified Terms

398



641



461


Total Nonperforming Loans

7,908



7,772



6,812


Repossessed Assets

40



63



34


Other Real Estate Owned

326



81



1,141


Total Nonperforming Assets

$

8,274



$

7,916



$

7,987


Key Asset Quality Ratios






Net Loans Charged-off to Average Loans,

Quarter-to-date Annualized

0.03

%


0.05

%


0.01

%

Provision for Loan Losses to Average Loans,

Quarter-to-date Annualized

0.15

%


%


0.03

%

Allowance for Loan Losses to Period-End Loans

1.12

%


1.14

%


1.22

%

Allowance for Loan Losses to Period-End Nonperforming Loans

190.14

%


185.71

%


215.47

%

Nonperforming Loans to Period-End Loans

0.59

%


0.61

%


0.57

%

Nonperforming Assets to Period-End Assets

0.38

%


0.37

%


0.38

%

Six Month Period Ended






Allowance for Loan Losses






Allowance for Loan Losses, Beginning of Year

$

14,434





$

15,298


Loans Charged-off

504





982


Less Recoveries of Loans Previously Charged-off

143





162


Net Loans Charged-off

361





820


Provision for Loan Losses

963





200


Allowance for Loan Losses, End of Period

$

15,036





$

14,678


Key Asset Quality Ratios






Net Loans Charged-off to Average Loans, Annualized

0.06

%




0.14

%

Provision for Loan Losses to Average Loans, Annualized

0.15

%




0.03

%

 

SOURCE Arrow Financial Corporation



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