Arrow Reports Record High Net Income of $24.7 Million for 2015

- Net income for 2015 reached a record high of $24.7 million.

- Diluted EPS was a record $1.91 for the full year and increased to $0.51 in the fourth quarter.

- Fourth-quarter net interest income rose 8.2% year over year on a tax-equivalent basis.

- Period-end loan portfolio balances hit a record high; increased 11.4% since prior year-end.

- Total deposit balances increased 6.7% to $2.03 billion at year-end.

21 Jan, 2016, 11:38 ET from Arrow Financial Corporation

GLENS FALLS, N.Y., Jan. 21, 2016 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three- and twelve-month periods ended December 31, 2015. Net income for the fourth quarter of 2015 was $6.6 million, an increase of $200 thousand, or 3.1%, from net income of $6.4 million for the fourth quarter of 2014. Diluted earnings per share (EPS) for the quarter was $0.51, an increase of 4.1% from the comparable 2014 quarter, when diluted EPS was $0.49. For the year ended December 31, 2015, net income was a record $24.7 million, up 5.6% over net income of $23.4 million for 2014, while diluted EPS was a record $1.91, up 5.4% over $1.81 in 2014. Return on average equity (ROE) and return on average assets (ROA) were 11.86% and 1.05%, respectively, for the year, as compared to 11.79% and 1.07%, respectively, for 2014.

Arrow President and CEO Tom Murphy stated, "Arrow delivered excellent results in 2015, thanks to the combined efforts of our dedicated team. A major highlight for the year was the double-digit growth of our loan portfolio, which reached a new record high at year-end, while maintaining our commitment to strong asset quality. We also set new records for net income and total equity at year-end, and our profitability measurements remained strong."

The following list expands on our fourth-quarter and year-to-date results:

Net Interest Income:  Our net interest income, on a tax-equivalent basis, increased $1.4 million, or 8.2%, in the fourth quarter of 2015, as compared to the fourth quarter of 2014, due primarily to an increase in the average level of interest-earning assets between the periods and a decrease in our cost of funds. Our tax-equivalent net interest margin was 3.15% for the fourth quarter of 2015, down from 3.17% in the fourth quarter of 2014, and up slightly from 3.14% in the third quarter of 2015. While the yield on earning assets decreased slightly compared to the prior-year period, the cost of our interest-bearing liabilities decreased even more as these liabilities have continued to reprice downward in this historically low interest rate environment. Our average cost of funds in the fourth quarter of 2015, as compared to the prior-year period, fell six basis points from 0.32% to 0.26%; while our average yield on earning assets decreased by three basis points.

Loan Growth:  At December 31, 2015, our loan portfolio reached a record high of $1.574 billion, up $160.7 million, or 11.4%, from the prior-year level, due to growth in all three of our major segments: commercial, consumer and residential real estate.

The outstanding balance of our residential real estate loan portfolio at December 31, 2015, was 15.9% higher than at year-end 2014. During 2015, we originated $144.2 million of residential real estate loans, up 9.9% from approximately $131.2 million in 2014. We retained a higher percentage of our residential real estate loan originations in 2015 than in 2014 as yields began to rise. Our gain on the sale of residential real estate loan originations in 2015 was less than our gain on the sale of originations in 2014 due both to a decrease in the amount of loans sold and a narrowing of the premium received on these sales.

Deposit Growth:  At December 31, 2015, our deposit balances reached $2.03 billion, up $127.5 million, or 6.7%, from the prior-year level. Noninterest-bearing deposits grew $58.0 million or 19.3% from the prior-year level, which has positively impacted net interest margin. Noninterest-bearing demand deposits represent 17.7% of total deposits at year-end, up from 15.8% as of the prior-year level.

Assets Under Management and Related Noninterest Income:  Assets under trust administration and investment management at December 31, 2015, rose to $1.233 billion, a slight increase of $6 million, or 0.5%, from the December 31, 2014, balance of $1.227 billion. The growth in balances was generally attributable to a net gain in market value of accounts, which has since declined in 2016, as well as the addition of new accounts. For the 2015 fourth quarter, income from fiduciary activities of $1.9 million was up 1.5% from the same period in 2014.

Insurance Agency Operations:  Insurance income for the fourth quarter of 2015 declined $149 thousand, or 6.6%, to $2.12 million from $2.27 million in 2014. This decrease was primarily attributable to the October 2015 sale of our wholly-owned subsidiary specializing in offering insurance services to out-of-market amateur sports management associations.

Asset Quality:  Asset quality remained strong, as measured by our low level of nonperforming assets and charge-offs. Nonperforming assets of $8.9 million at December 31, 2015, represented only 0.36% of period-end assets, a ratio that is below industry averages and below 0.37% from the prior year-end. Our net loan losses for the full year were 0.06% of average loans outstanding for 2015 and 0.05% for 2014. Net loan losses for the fourth quarter of 2015, expressed as an annualized percentage of average loans outstanding, were 0.05%. These asset quality ratios continue to be significantly lower than our peer group and industry averages.

Our allowance for loan losses was $16.0 million at December 31, 2015, which represented 1.02% of loans outstanding, a decrease of eight basis points from our ratio of 1.10% at year-end 2014.

Cash and Stock Dividends:  A cash dividend of $0.25 per share was paid to our shareholders in the fourth quarter of 2015, 2% higher than the cash dividend paid in the 2014 quarter. This represents the 22nd consecutive year of an increased cash dividend. In September 2015, we distributed a 2% stock dividend. All prior-period and per share data have been adjusted accordingly.

Capital:  Total shareholders' equity grew to a record $214.0 million at period-end, an increase of $13.0 million, or 6.5%, above the year-end 2014 balance. Arrow's capital ratios remained strong in 2015. At December 31, 2015, the Company's CET1 ratio was 9.59%  and total risk-based capital ratio was 15.54%. The capital ratios of the Company and both its subsidiary banks continue to significantly exceed the "well capitalized" regulatory standards, which places us in the highest current regulatory category.

Peer Group:  Many of our key operating ratios have consistently compared favorably to our peer group, which we define as all U.S. bank holding companies having $1.0 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 nine-month period ended September 30, 2015, in which our return on average equity (ROE) was 11.70%, as compared to 8.61% for our peer group.

As of September 30, 2015, our ratio of loans 90 days past due and accruing, plus nonaccrual loans to total loans was 0.57%, as compared to 0.87% for our peer group, while our annualized net loan losses of 0.06% for the year-to-date period ending September 30, 2015, were below the peer result of 0.08%.

Industry Recognition: In the fourth quarter, Arrow was named to Bank Director Magazine's annual "Bank Performance Scorecard" list of the top-performing banks in the country. This follows other recognitions in 2015, including being named one of "America's 50 Most Trustworthy Companies" by Forbes; appearing on the American Banker Magazine top-performer list; and receiving the Raymond James Community Bankers Cup for our 2014 financial performance.

In addition, the Company's two banking subsidiaries were each recognized as a 5-Star Superior Bank by BauerFinancial, Inc., a nationwide bank rating and research firm, based on September 30, 2015, financial data. Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company have each earned this designation for the past 35 and 27 quarters, respectively.

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.; two property and casualty insurance agencies: 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, 2014, 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


Twelve Months Ended


December 31,


December 31,


2015


2014


2015


2014

INTEREST AND DIVIDEND INCOME








Interest and Fees on Loans

$

14,903



$

13,758



$

56,856



$

53,194


Interest on Deposits at Banks

34



39



94



80


Interest and Dividends on Investment Securities:








Fully Taxable

2,107



1,986



8,043



7,954


Exempt from Federal Taxes

1,466



1,357



5,745



5,633


Total Interest and Dividend Income

18,510



17,140



70,738



66,861


INTEREST EXPENSE








NOW Accounts

316



377



1,276



1,722


Savings Deposits

203



176



741



839


Time Deposits of $100,000 or More

89



144



356



770


Other Time Deposits

176



269



742



1,354


Federal Funds Purchased and

  Securities Sold Under Agreements to Repurchase

5



7



20



22


Federal Home Loan Bank Advances

293



103



1,097



490


Junior Subordinated Obligations Issued to

  Unconsolidated Subsidiary Trusts

149



143



581



570


Total Interest Expense

1,231



1,219



4,813



5,767


NET INTEREST INCOME

17,279



15,921



65,925



61,094


Provision for Loan Losses

465



441



1,347



1,848


NET INTEREST INCOME AFTER PROVISION FOR

   LOAN LOSSES

16,814



15,480



64,578



59,246


NONINTEREST INCOME








Income From Fiduciary Activities

1,855



1,828



7,762



7,468


Fees for Other Services to Customers

2,316



2,337



9,220



9,261


Insurance Commissions

2,118



2,267



8,967



9,455


Net Gain on Securities Transactions

23





129



110


Net Gain on Sales of Loans

204



282



692



784


Other Operating Income

171



346



1,354



1,238


Total Noninterest Income

6,687



7,060



28,124



28,316


NONINTEREST EXPENSE








Salaries and Employee Benefits

8,487



7,638



33,064



30,941


Occupancy Expenses, Net

2,161



2,067



9,267



8,990


FDIC Assessments

313



289



1,186



1,117


Other Operating Expense

3,281



3,305



13,913



12,980


Total Noninterest Expense

14,242



13,299



57,430



54,028


INCOME BEFORE PROVISION FOR INCOME TAXES

9,259



9,241



35,272



33,534


Provision for Income Taxes

2,690



2,872



10,610



10,174


NET INCOME

$

6,569



$

6,369



$

24,662



$

23,360


Average Shares Outstanding1:








Basic

12,918



12,867



12,894



12,856


Diluted

12,979



12,908



12,942



12,886


Per Common Share:








Basic Earnings

$

0.51



$

0.49



$

1.91



$

1.82


Diluted Earnings

0.51



0.49



1.91



1.81


1 Share and per share data have been restated for the September 28, 2015, 2% stock dividend.


 

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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










December 31,
2015


December 31,
2014

ASSETS




Cash and Due From Banks

$

34,816



$

35,081


Interest-Bearing Deposits at Banks

16,252



11,214


Investment Securities:




Available-for-Sale

402,309



366,139


Held-to-Maturity (Approximate Fair Value of $325,930 at

  December 31, 2015, and $308,566 at December 31, 2014)

320,611



302,024


Other Investments

8,839



4,851


Loans

1,573,952



1,413,268


Allowance for Loan Losses

(16,038)



(15,570)


Net Loans

1,557,914



1,397,698


Premises and Equipment, Net

27,440



28,488


Goodwill

21,873



22,003


Other Intangible Assets, Net

3,107



3,625


Other Assets

53,027



46,297


Total Assets

$

2,446,188



$

2,217,420


LIABILITIES




Noninterest-Bearing Deposits

$

358,751



$

300,786


NOW Accounts

887,317



871,671


Savings Deposits

594,538



524,648


Time Deposits of $100,000 or More

59,792



61,797


Other Time Deposits

130,025



144,046


Total Deposits

2,030,423



1,902,948


Federal Funds Purchased and

  Securities Sold Under Agreements to Repurchase

23,173



19,421


Federal Home Loan Bank Overnight Advances

82,000



41,000


Federal Home Loan Bank Term Advances

55,000



10,000


Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts

20,000



20,000


Other Liabilities

21,621



23,125


Total Liabilities

2,232,217



2,016,494


STOCKHOLDERS' EQUITY




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





Common Stock, $1 Par Value; 20,000,000 Shares Authorized

   (17,420,776 Shares Issued at December 31, 2015, and

   17,079,376 Shares Issued at December 31, 2014)

17,421



17,079


Additional Paid-in Capital

250,680



239,721


Retained Earnings

32,139



29,458


Unallocated ESOP Shares (55,275 Shares at December 31, 2015, and

  71,748 Shares at December 31, 2014)

(1,100)



(1,450)


Accumulated Other Comprehensive Loss

(7,972)



(7,166)


Treasury Stock, at Cost (4,426,072 Shares at December 31, 2015, and

  4,386,001 Shares at December 31, 2014)

(77,197)



(76,716)


Total Stockholders' Equity

213,971



200,926


Total Liabilities and Stockholders' Equity

$

2,446,188



$

2,217,420


 

 

Arrow Financial Corporation

Selected Quarterly Information

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





















Quarter Ended

12/31/2015


9/30/2015


6/30/2015


3/31/2015


12/31/2014

Net Income

$

6,569



$

5,933



$

6,305



$

5,855



$

6,369


Transactions Recorded in Net Income (Net of Tax):










Net Gain on Securities Transactions

14





10



54




Share and Per Share Data:1










Period End Shares Outstanding

12,939



12,905



12,875



12,880



12,874


Basic Average Shares Outstanding

12,918



12,888



12,886



12,886



12,867


Diluted Average Shares Outstanding

12,979



12,929



12,922



12,924



12,908


Basic Earnings Per Share

$

0.51



$

0.46



$

0.49



$

0.45



$

0.49


Diluted Earnings Per Share

0.51



0.46



0.49



0.45



0.49


Cash Dividend Per Share

0.250



0.245



0.245



0.245



0.245


Selected Quarterly Average Balances:










Interest-Bearing Deposits at Banks

$

44,603



$

17,788



$

37,303



$

30,562



$

58,048


Investment Securities

716,947



711,830



701,329



673,753



664,334


Loans

1,556,234



1,502,620



1,456,534



1,422,005



1,401,601


Deposits

2,075,825



1,970,738



1,983,647



1,949,776



1,962,698


Other Borrowed Funds

127,471



148,887



99,994



69,034



56,185


Shareholders' Equity

213,219



209,334



206,831



202,552



202,603


Total Assets

2,442,964



2,356,121



2,316,427



2,248,054



2,247,576


Return on Average Assets

1.07

%


1.00

%


1.09

%


1.06

%


1.12

%

Return on Average Equity

12.22

%


11.24

%


12.23

%


11.72

%


12.47

%

Return on Tangible Equity2

13.86

%


12.79

%


13.94

%


13.42

%


14.28

%

Average Earning Assets

$

2,317,784



$

2,232,238



$

2,195,166



$

2,126,320



$

2,123,983


Average Paying Liabilities

1,854,548



1,772,156



1,770,023



1,713,253



1,716,699


Interest Income, Tax-Equivalent

19,619



18,924



18,501



18,073



18,213


Interest Expense

1,231



1,253



1,243



1,086



1,219


Net Interest Income, Tax-Equivalent

18,388



17,671



17,258



16,987



16,994


Tax-Equivalent Adjustment

1,109



1,093



1,094



1,083



1,073


Net Interest Margin 3

3.15

%


3.14

%


3.15

%


3.24

%


3.17

%

Efficiency Ratio Calculation:










Noninterest Expense

$

14,242



$

14,850



$

14,383



$

13,955



$

13,299


Less: Intangible Asset Amortization

(78)



(79)



(80)



(91)



(94)


Net Noninterest Expense

$

14,164



$

14,771



$

14,303



$

13,864



$

13,205


Net Interest Income, Tax-Equivalent

$

18,388



$

17,671



$

17,258



$

16,987



$

16,994


Noninterest Income

6,687



7,137



7,444



6,856



7,060


Less: Net Securities Gains

(23)





(16)



(90)




Net Gross Income

$

25,052



$

24,808



$

24,686



$

23,753



$

24,054


Efficiency Ratio

56.54

%


59.54

%


57.94

%


58.37

%


54.90

%

Period-End Capital Information:










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

$

213,971



$

211,142



$

206,947



$

204,965



$

200,926


Book Value per Share

16.54



16.36



16.07



15.91



15.61


Intangible Assets

24,980



25,266



25,372



25,492



25,628


Tangible Book Value per Share 2

14.61



14.40



14.10



13.93



13.62


Capital Ratios:










Tier 1 Leverage Ratio

9.59

%


9.40

%


9.41

%


9.57

%


9.44

%

Common Equity Tier 1 Capital Ratio

12.82

%


12.66

%


12.92

%


13.27

%


N/A


Tier 1 Risk-Based Capital Ratio

14.08

%


13.93

%


14.24

%


14.65

%


14.47

%

Total Risk-Based Capital Ratio

15.09

%


14.94

%


15.28

%


15.73

%


15.54

%

Assets Under Trust Administration

  and Investment Management

$

1,232,890



$

1,195,629



$

1,246,849



$

1,254,823



$

1,227,179


 

1Share and Per Share Data have been restated for the September 28, 2015, 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
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 28, 2015, 2% stock dividend.



2.

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.



12/31/2015


9/30/2015


6/30/2015


3/31/2015


12/31/2014


Total Stockholders' Equity (GAAP)

$

213,971



$

211,142



$

206,947



$

204,965



$

200,926



Less: Goodwill and Other Intangible assets, net

24,980



25,266



25,372



25,492



25,628



Tangible Equity (Non-GAAP)

$

188,991



$

185,876



$

181,575



$

179,473



$

175,298














Period End Shares Outstanding

12,939



12,905



12,875



12,880



12,874



Tangible Book Value per Share (Non-GAAP)

$

14.61



$

14.40



$

14.10



$

13.93



$

13.62













3.

Net 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.



12/31/2015


9/30/2015


6/30/2015


3/31/2015


12/31/2014


Net Interest Income (GAAP)

$

17,279



$

16,578



$

16,164



$

15,904



$

15,921



Add: Tax-Equivalent adjustment (Non-GAAP)

1,109



1,093



1,094



1,083



1,073



Net Interest Income - Tax Equivalent (Non-GAAP)

$

18,388



$

17,671



$

17,258



$

16,987



$

16,994



Average Earning Assets

2,317,784



2,232,238



2,195,166



2,126,320



2,123,983



Net Interest Margin (Non-GAAP)*

3.15

%


3.14

%


3.15

%


3.24

%


3.17

%












4.

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.

Common Equity Tier 1 Capital Ratio (CET1) is a new regulatory capital measure applicable to financial institutions, effective January 1, 2015. 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, these new bank regulatory capital rules. All prior quarters reflect actual results. The December 31, 2015 CET1 ratio listed in the tables (i.e., 12.82%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).



12/31/2015


9/30/2015


6/30/2015


3/31/2015


12/31/2014


Total Risk Weighted Assets

1,590,129



1,574,704



$

1,515,416



$

1,452,975



N/A



Common Equity Tier 1 Capital

213,970



199,377



$

195,800



$

192,865



N/A



Common Equity Tier 1 Ratio

12.82

%


12.66

%


12.92

%


13.27

%


N/A


 

   * Quarterly ratios have been annualized

 

 

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)









Quarter Ended:

12/31/2015


12/31/2014

Loan Portfolio




Commercial Loans

$

102,587



$

99,511


Commercial Real Estate Loans

384,939



340,112


  Subtotal Commercial Loan Portfolio

487,526



439,623


Consumer Loans

464,523



437,041


Residential Real Estate Loans

621,903



536,604


Total Loans

$

1,573,952



$

1,413,268


Allowance for Loan Losses




Allowance for Loan Losses, Beginning of Quarter

$

15,774



$

15,293


Loans Charged-off

(271)



(251)


Recoveries of Loans Previously Charged-off

70



87


Net Loans Charged-off

(201)



(164)


Provision for Loan Losses

465



441


Allowance for Loan Losses, End of Quarter

$

16,038



$

15,570


Nonperforming Assets




Nonaccrual Loans

$

6,433



$

6,899


Loans Past Due 90 or More Days and Accruing

187



537


Loans Restructured and in Compliance with Modified Terms

286



333


Total Nonperforming Loans

6,906



7,769


Repossessed Assets

140



81


Other Real Estate Owned

1,878



312


Total Nonperforming Assets

$

8,924



$

8,162


Key Asset Quality Ratios




Net Loans Charged-off to Average Loans, Quarter-to-date

  Annualized

0.05

%


0.05

%

Provision for Loan Losses to Average Loans, Quarter-to-date

  Annualized

0.12

%


0.12

%

Allowance for Loan Losses to Period-End Loans

1.02

%


1.10

%

Allowance for Loan Losses to Period-End Nonperforming Loans

232.24

%


200.41

%

Nonperforming Loans to Period-End Loans

0.44

%


0.55

%

Nonperforming Assets to Period-End Assets

0.36

%


0.37

%

Twelve-Month Period Ended:




Allowance for Loan Losses




Allowance for Loan Losses, Beginning of Year

$

15,570



$

14,434


Loans Charged-off

(1,106)



(1,021)


Recoveries of Loans Previously Charged-off

227



309


Net Loans Charged-off

(879)



(712)


Provision for Loan Losses

1,347



1,848


Allowance for Loan Losses, End of Year

$

16,038



$

15,570


Key Asset Quality Ratios




Net Loans Charged-off to Average Loans

0.06

%


0.05

%

Provision for Loan Losses to Average Loans

0.09

%


0.14

%

 

SOURCE Arrow Financial Corporation



RELATED LINKS

http://www.arrowfinancial.com