Arrow Reports $12.2 million in Q3 Net Income, Loan Growth of $80 Million in the Quarter
GLENS FALLS, N.Y., Oct. 27, 2022 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) announced financial results for the three-month period ended September 30, 2022. Net income for the third quarter of 2022 was $12.2 million and diluted earnings per share was $0.74. Loan growth and deposit growth were both strong in the quarter, increasing by $80 million and $249 million, respectively.
Third-Quarter Highlights
Earnings:
- Net income was $12.2 million.
- Net interest margin was 3.14%.
- Return on average assets (ROA) was 1.19%.
- Return on average equity (ROE) was 13.34%.
- Diluted earnings per share (EPS) was $0.74 for the third quarter.
- Net charge-offs for the third quarter of 2022 were $573 thousand as compared to $153 thousand for the comparable 2021 quarter.
- Revenue for third quarter of 2022 was $38.7 million as compared to $36.3 million for the prior-year quarter.
Balance Sheet:
- Total assets were $4.2 billion as of September 30, 2022, a record high.
- Total loans were $2.9 billion as of September 30, 2022, a record high.
- Total deposits were $3.8 billion as of September 30, 2022.
- Loans to deposits ratio as of September 30, 2022 was 77.1%
Additional Items:
- Book value per share was $20.91, down by 4.2% over the prior-year level, primarily as a result of unrealized losses within the available for sale investment portfolio as a result of increasing interest rates.
- Nonperforming assets of $10.0 million at September 30, 2022 represented 0.24% of period-end assets, down from 0.29% at September 30, 2021.
Net income for the third quarter of 2022 was $12.2 million, down slightly from $13.0 million for the prior-year period. The year-over-year decline in third-quarter net income was primarily due to a decrease of $2.4 million in income earned on loans made under the Paycheck Protection Program (PPP) in the third quarter of 2022, compared to the third quarter of 2021, offset by an increase in the provision expense for credit losses to $1.7 million for the third quarter of 2022, as compared to $99 thousand in the third quarter of 2021.
"Arrow had a very strong third quarter, including $80 million of loan growth in the third quarter to reach a record high," said Arrow President and CEO Thomas J. Murphy. "We also completed a conversion of our core banking system in the quarter, which represents a significant investment in technology, operational efficiency and the future of our digital experience. I am proud of our team for continuing to deliver value to our shareholders while advancing our long-term strategic initiatives."
In recognition of the team's tremendous dedication and efforts, Arrow awarded a special bonus in the third quarter, similar to special pandemic bonuses awarded in 2021 and 2020 for outstanding performance.
Additionally, subsidiary Glens Falls National Bank and Trust Company announced the consolidation of a smaller Queensbury branch (Aviation Road) into its largest Queensbury branch (Upper Glen Street) as part of our ongoing branch network optimization. The consolidation is expected to become effective in December, and is paired with significant renovations to enhance the Upper Glen Street branch customer experience.
Specific details include:
Income Statement
- Net Interest Income: Net interest income for the third quarter was $30.9 million, up 7.9% from $28.6 million in the comparable quarter of 2021. Interest and fees on loans were $29.6 million for the third quarter of 2022, an increase of 9.1% from $27.2 million for the quarter ending September 30, 2021 due to loan growth and higher market rates. Interest and fees related to PPP loans, included in the $29.6 million total, were $70 thousand in the third quarter of 2022, a decrease of $2.4 million from the third quarter of 2021 resulting from the wind-down of the PPP loan program. In addition, there was an inclusion of $536 thousand to interest income related to an amortization adjustment of indirect loans during the quarter ended September 30, 2022. Interest expense for the third quarter of 2022 was $3.3 million, an increase of $2.1 million, or 182.8%, from $1.2 million in expense for the comparable quarter ending September 30, 2021 due to year-over-year deposit growth and higher deposit rates.
- Net Interest Margin: Net interest margin was 3.14% for the quarter, compared to 3.04% for the third quarter of 2021. The increase in net interest margin was due to a variety of factors including higher market rates impacting asset yields, a reduction in cash balances and a one-time adjustment related to indirect loan fees. Net interest margin, excluding PPP income, increased to 3.14% from 2.84% in the comparable prior-year quarter. The cost of interest-bearing liabilities increased primarily due to the repricing of municipal deposits.
Three Months Ended | |||||||||||||||||||||||
September 30, 2022 | September 30, 2021 | ||||||||||||||||||||||
Interest and Dividend Income | $ | 34,207 | $ | 29,807 | |||||||||||||||||||
Interest Expense | 3,306 | 1,169 | |||||||||||||||||||||
Net Interest Income | 30,901 | 28,638 | |||||||||||||||||||||
Average Earning Assets(1) | 3,902,119 | 3,734,206 | |||||||||||||||||||||
Average Interest-Bearing Liabilities | 2,781,985 | 2,705,283 | |||||||||||||||||||||
Yield on Earning Assets(1) | 3.48 | % | 3.17 | % | |||||||||||||||||||
Cost of Interest-Bearing Liabilities | 0.47 | 0.17 | |||||||||||||||||||||
Net Interest Spread | 3.01 | 3.00 | |||||||||||||||||||||
Net Interest Margin | 3.14 | 3.04 | |||||||||||||||||||||
Income Earned on PPP Loans included in Net Interest Income | $ | 70 | $ | 2,530 | |||||||||||||||||||
Net Interest Income excluding PPP loans | 30,831 | 26,108 | |||||||||||||||||||||
Net Interest Margin excluding PPP loans | 3.14 | % | 2.84 | % | |||||||||||||||||||
(1) Includes Nonaccrual Loans. | |||||||||||||||||||||||
- Provision for Credit Losses: For the third quarter of 2022, the provision for credit losses was $1.7 million, compared to $99 thousand in provision expense in the prior-year quarter. The key drivers for the increase were strong loan growth and a deterioration in forecasted economic conditions.
- Noninterest Income: Noninterest income for the three months ended September 30, 2022, was $7.8 million, compared to $7.7 million in the comparable 2021 quarter. Income from fiduciary activities for the three months ended September 30, 2022, decreased by $230 thousand over the comparable quarter of 2021, driven by market conditions. Fees and other services to customers increased $105 thousand over the comparable quarter of 2021. Gain on sales of loans decreased $193 thousand from the third quarter of 2021. Other operating income increased $176 thousand from the comparable quarter of 2021 due to a variety of factors, including bank-owned life insurance proceeds.
- Noninterest Expense: Noninterest expense for the third quarter of 2022 was $21.4 million, an increase from $19.4 million for the third quarter of 2021. The largest component of noninterest expense was salaries and benefits paid to our employees, which totaled $12.4 million for the third quarter of 2022. In the third quarter of 2022, $550 thousand relating to additional actuarial pension expense was recognized as a result of exceeding the threshold amount of lump sum distributions during the year. The expense for estimated credit losses on off-balance sheet credit exposures included in other expenses was $30 thousand.
- Provision for Income Taxes: The provision for income taxes was $3.4 million for the third quarter of 2022, compared to $3.8 million for the same quarter of 2021.
Balance Sheet
- Total Assets: Total assets were $4.2 billion at September 30, 2022, an increase of $161.7 million, or 4.0%, compared to September 30, 2021, and an increase of $241.6 million, or 6.1%, compared to June 30, 2022.
- Investments: Total investments were $759.4 million as of September 30, 2022, an increase of $72.2 million, or 10.5%, compared to September 30, 2021, and a decrease of $7.5 million, or 1.0%, compared to June 30, 2022. In 2022, the rising interest rate environment resulted in an increase of unrealized losses versus the comparable prior period.
- Loans: Total loans were $2.9 billion as of September 30, 2022 reaching a record high for Arrow. Loan growth for the third quarter of 2022 was $80.0 million and increased $270.0 million, or 10.2%, from September 30, 2021. In the third quarter, total outstanding commercial loans increased $16.3 million, or 2.0%, driven mostly by commercial real estate loan growth. The consumer loan portfolio grew by $24.5 million, or 2.4%, in the third quarter, primarily within the indirect automobile lending program. Total outstanding residential real estate loans increased $39.2 million, or 3.9%, for the third quarter of 2022.
- Allowance for Credit Losses: The allowance for credit losses was $29.2 million on September 30, 2022, which represented 1.00% of loans outstanding, as compared to 1.02% at September 30, 2021. Asset quality remained solid at September 30, 2022. Net loan losses, expressed as an annualized percentage of average loans outstanding, were 0.08% for the three-month period ended September 30, 2022, as compared to 0.07% for the three-month period ended June 30, 2022 and 0.02% for the three-month period ended September 30, 2021. Nonperforming assets of $10.0 million at September 30, 2022, represented 0.24% of period-end assets, compared to 0.29% at September 30, 2021.
- Deposits: At September 30, 2022, deposit balances were $3.8 billion. Deposits in the third quarter of 2022 increased by $249.4 million from the prior quarter and increased by $189.5 million, or 5.3%, from the prior-year level. Municipal deposits increased $127.3 million in the third quarter and $13.8 million, or 1.4%, from September 30, 2021. Non-municipal deposits increased $122.1 million for the quarter and $175.7 million, or 6.7%, from September 30, 2021. Noninterest-bearing deposits represented 24.0% of total deposits at September 30, 2022, compared to 23.4% of total deposits at September 30, 2021. At September 30, 2022, total time deposits were $186.7 million.
- Capital: Total stockholders' equity was $345.6 million on September 30, 2022, down $14.6 million, or 4.1%, from September 30, 2021. Accumulated other comprehensive loss was $49.1 million as of September 30, 2022, primarily as a result of unrealized losses within the available-for-sale investment portfolio. Arrow's regulatory capital ratios remained strong in the third quarter of 2022. As of September 30, 2022, Arrow's Common Equity Tier 1 Capital Ratio was 13.14% and Total Risk-Based Capital Ratio was 14.93%. The capital ratios of Arrow and both its subsidiary banks, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, continued to exceed the "well capitalized" regulatory standards.
Additional Commentary
- Cash and Stock Dividends: On September 15, 2022, Arrow distributed a cash dividend of $0.27 per share. Additionally, a 3% stock dividend was distributed on September 23, 2022. This is the 14th consecutive year Arrow has declared a stock dividend.
- Industry Recognition: In the third quarter of 2022, both of Arrow's banking subsidiaries once again earned BauerFinancial, Inc. 5-Star Exceptional Performance Bank ratings.
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. Arrow 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). Some 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. These 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 Arrow are useful in evaluating Arrow'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 in this document may contain statements based on management's beliefs, assumptions, expectations, estimates and projections about the future. Such "forward-looking statements," as defined in Section 21E of the Securities Exchange Act of 1934, as amended, involve a degree of uncertainty and attendant risk. Actual outcomes and results may differ, explicitly or by implication. We are not obliged to revise or update these statements to reflect unanticipated events. This document should be read in conjunction with Arrow's Annual Report on Form 10-K for the year ended December 31, 2021 and other filings with the SEC.
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||||||
(In Thousands, Except Per Share Amounts - Unaudited) | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
INTEREST AND DIVIDEND INCOME | ||||||||||||||||||||||||||
Interest and Fees on Loans | $ | 29,618 | $ | 27,157 | $ | 82,263 | $ | 79,354 | ||||||||||||||||||
Interest on Deposits at Banks | 1,201 | 163 | 1,826 | 351 | ||||||||||||||||||||||
Interest and Dividends on Investment Securities: | ||||||||||||||||||||||||||
Fully Taxable | 2,603 | 1,632 | 7,236 | 4,809 | ||||||||||||||||||||||
Exempt from Federal Taxes | 785 | 855 | 2,422 | 2,682 | ||||||||||||||||||||||
Total Interest and Dividend Income | 34,207 | 29,807 | 93,747 | 87,196 | ||||||||||||||||||||||
INTEREST EXPENSE | ||||||||||||||||||||||||||
Interest-Bearing Checking Accounts | 267 | 155 | 629 | 566 | ||||||||||||||||||||||
Savings Deposits | 2,469 | 424 | 3,778 | 1,490 | ||||||||||||||||||||||
Time Deposits over $250,000 | 89 | 39 | 143 | 228 | ||||||||||||||||||||||
Other Time Deposits | 150 | 133 | 370 | 511 | ||||||||||||||||||||||
Federal Funds Purchased and | — | — | — | 3 | ||||||||||||||||||||||
Federal Home Loan Bank Advances | 110 | 197 | 405 | 586 | ||||||||||||||||||||||
Junior Subordinated Obligations Issued to | 173 | 173 | 513 | 513 | ||||||||||||||||||||||
Interest on Financing Leases | 48 | 48 | 145 | 146 | ||||||||||||||||||||||
Total Interest Expense | 3,306 | 1,169 | 5,983 | 4,043 | ||||||||||||||||||||||
NET INTEREST INCOME | 30,901 | 28,638 | 87,764 | 83,153 | ||||||||||||||||||||||
Provision for Credit Losses | 1,715 | 99 | 3,389 | (286) | ||||||||||||||||||||||
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 29,186 | 28,539 | 84,375 | 83,439 | ||||||||||||||||||||||
NONINTEREST INCOME | ||||||||||||||||||||||||||
Income From Fiduciary Activities | 2,341 | 2,571 | 7,454 | 7,538 | ||||||||||||||||||||||
Fees for Other Services to Customers | 3,071 | 2,966 | 8,916 | 8,494 | ||||||||||||||||||||||
Insurance Commissions | 1,650 | 1,576 | 4,783 | 4,842 | ||||||||||||||||||||||
Net Gain (Loss) on Securities | 95 | (106) | 379 | 250 | ||||||||||||||||||||||
Net Gain on Sales of Loans | 18 | 211 | 80 | 2,251 | ||||||||||||||||||||||
Other Operating Income | 652 | 476 | 2,121 | 1,405 | ||||||||||||||||||||||
Total Noninterest Income | 7,827 | 7,694 | 23,733 | 24,780 | ||||||||||||||||||||||
NONINTEREST EXPENSE | ||||||||||||||||||||||||||
Salaries and Employee Benefits | 12,427 | 11,377 | 35,400 | 33,360 | ||||||||||||||||||||||
Occupancy Expenses, Net | 1,521 | 1,403 | 4,721 | 4,480 | ||||||||||||||||||||||
Technology and Equipment Expense | 4,049 | 3,833 | 11,802 | 11,002 | ||||||||||||||||||||||
FDIC Assessments | 295 | 249 | 893 | 764 | ||||||||||||||||||||||
Other Operating Expense | 3,156 | 2,561 | 7,922 | 7,582 | ||||||||||||||||||||||
Total Noninterest Expense | 21,448 | 19,423 | 60,738 | 57,188 | ||||||||||||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 15,565 | 16,810 | 47,370 | 51,031 | ||||||||||||||||||||||
Provision for Income Taxes | 3,402 | 3,821 | 10,658 | 11,483 | ||||||||||||||||||||||
NET INCOME | $ | 12,163 | $ | 12,989 | $ | 36,712 | $ | 39,548 | ||||||||||||||||||
Average Shares Outstanding 1: | ||||||||||||||||||||||||||
Basic | 16,512 | 16,508 | 16,506 | 16,495 | ||||||||||||||||||||||
Diluted | 16,558 | 16,568 | 16,553 | 16,554 | ||||||||||||||||||||||
Per Common Share: | ||||||||||||||||||||||||||
Basic Earnings | $ | 0.74 | $ | 0.79 | $ | 2.22 | $ | 2.40 | ||||||||||||||||||
Diluted Earnings | 0.74 | 0.78 | 2.22 | 2.39 | ||||||||||||||||||||||
1 2021 Share and Per Share Amounts have been restated for the September 23, 2022, 3% stock dividend. | ||||||||||||||||||||||||||
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||||||||||
(In Thousands, Except Share and Per Share Amounts - Unaudited) | |||||||||||||||||
September 30, | December 31, 2021 | September 30, | |||||||||||||||
ASSETS | |||||||||||||||||
Cash and Due From Banks | $ | 44,872 | $ | 26,978 | $ | 49,430 | |||||||||||
Interest-Bearing Deposits at Banks | 328,557 | 430,718 | 548,936 | ||||||||||||||
Investment Securities: | |||||||||||||||||
Available-for-Sale at Fair Value | 575,054 | 559,316 | 486,900 | ||||||||||||||
Held-to-Maturity (Fair Value of $175,800 at September 30, 2022; $201,292 at December 31, 2021; and $203,936 at September 30, 2021) | 182,178 | 196,566 | 198,337 | ||||||||||||||
Equity Securities | 2,126 | 1,747 | 1,886 | ||||||||||||||
FHLB and Federal Reserve Bank Stock | 4,720 | 5,380 | 5,380 | ||||||||||||||
Loans | 2,924,794 | 2,667,941 | 2,654,751 | ||||||||||||||
Allowance for Credit Losses | (29,232) | (27,281) | (26,956) | ||||||||||||||
Net Loans | 2,895,562 | 2,640,660 | 2,627,795 | ||||||||||||||
Premises and Equipment, Net | 54,015 | 46,217 | 44,003 | ||||||||||||||
Goodwill | 21,873 | 21,873 | 21,873 | ||||||||||||||
Other Intangible Assets, Net | 1,604 | 1,918 | 2,006 | ||||||||||||||
Other Assets | 122,217 | 96,579 | 84,558 | ||||||||||||||
Total Assets | $ | 4,232,778 | $ | 4,027,952 | $ | 4,071,104 | |||||||||||
LIABILITIES | |||||||||||||||||
Noninterest-Bearing Deposits | 910,221 | 810,274 | 841,910 | ||||||||||||||
Interest-Bearing Checking Accounts | 1,113,850 | 994,391 | 1,035,358 | ||||||||||||||
Savings Deposits | 1,584,373 | 1,531,287 | 1,515,692 | ||||||||||||||
Time Deposits over $250,000 | 59,059 | 82,811 | 73,889 | ||||||||||||||
Other Time Deposits | 127,602 | 131,734 | 138,714 | ||||||||||||||
Total Deposits | 3,795,105 | 3,550,497 | 3,605,563 | ||||||||||||||
Federal Funds Purchased and | — | — | 2,426 | ||||||||||||||
Federal Home Loan Bank Term Advances | 25,000 | 45,000 | 45,000 | ||||||||||||||
Junior Subordinated Obligations Issued to Unconsolidated | 20,000 | 20,000 | 20,000 | ||||||||||||||
Finance Leases | 5,131 | 5,169 | 5,181 | ||||||||||||||
Other Liabilities | 41,992 | 36,100 | 32,763 | ||||||||||||||
Total Liabilities | 3,887,228 | 3,656,766 | 3,710,933 | ||||||||||||||
STOCKHOLDERS' EQUITY | |||||||||||||||||
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at September 30, 2022, December 31, 2021 and September 30, 2021 | — | — | — | ||||||||||||||
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (21,423,992 Shares Issued at September 30, 2022 and 20,800,144 Shares Issued at December 31, 2021 and September 30, 2021) | 21,424 | 20,800 | 20,800 | ||||||||||||||
Additional Paid-in Capital | 399,461 | 377,996 | 377,349 | ||||||||||||||
Retained Earnings | 57,778 | 54,078 | 47,936 | ||||||||||||||
Accumulated Other Comprehensive (Loss) Income | (49,070) | 347 | (3,719) | ||||||||||||||
Treasury Stock, at Cost (4,900,975 Shares at September 30, 2022; 4,759,414 Shares at December 31, 2021 and 4,780,496 Shares at September 30, 2021) | (84,043) | (82,035) | (82,195) | ||||||||||||||
Total Stockholders' Equity | 345,550 | 371,186 | 360,171 | ||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 4,232,778 | $ | 4,027,952 | $ | 4,071,104 | |||||||||||
Arrow Financial Corporation | |||||||||||||||||||||||||||||
Selected Quarterly Information | |||||||||||||||||||||||||||||
(Dollars In Thousands, Except Per Share Amounts - Unaudited) | |||||||||||||||||||||||||||||
Quarter Ended | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||||||||||
Net Income | $ | 12,163 | $ | 11,974 | $ | 12,575 | $ | 10,309 | $ | 12,989 | |||||||||||||||||||
Transactions in Net Income (Net of Tax): | |||||||||||||||||||||||||||||
Net Changes in Fair Value of Equity Investments | 70 | 114 | 96 | (104) | (79) | ||||||||||||||||||||||||
Share and Per Share Data:1 | |||||||||||||||||||||||||||||
Period End Shares Outstanding | 16,523 | 16,503 | 16,493 | 16,522 | 16,500 | ||||||||||||||||||||||||
Basic Average Shares Outstanding | 16,512 | 16,494 | 16,511 | 16,509 | 16,508 | ||||||||||||||||||||||||
Diluted Average Shares Outstanding | 16,558 | 16,535 | 16,566 | 16,574 | 16,568 | ||||||||||||||||||||||||
Basic Earnings Per Share | $ | 0.74 | $ | 0.72 | $ | 0.76 | $ | 0.62 | $ | 0.79 | |||||||||||||||||||
Diluted Earnings Per Share | 0.74 | 0.72 | 0.76 | 0.61 | 0.78 | ||||||||||||||||||||||||
Cash Dividend Per Share | 0.262 | 0.262 | 0.262 | 0.252 | 0.245 | ||||||||||||||||||||||||
Selected Quarterly Average Balances: | |||||||||||||||||||||||||||||
Interest-Bearing Deposits at Banks | $ | 209,001 | $ | 232,545 | $ | 410,644 | $ | 551,890 | $ | 416,500 | |||||||||||||||||||
Investment Securities | 821,052 | 822,112 | 797,347 | 681,732 | 675,980 | ||||||||||||||||||||||||
Loans | 2,872,066 | 2,804,180 | 2,678,796 | 2,660,665 | 2,641,726 | ||||||||||||||||||||||||
Deposits | 3,598,519 | 3,569,754 | 3,582,256 | 3,590,766 | 3,435,933 | ||||||||||||||||||||||||
Other Borrowed Funds | 50,125 | 50,140 | 68,596 | 70,162 | 72,187 | ||||||||||||||||||||||||
Shareholders' Equity | 361,675 | 357,228 | 370,264 | 364,409 | 359,384 | ||||||||||||||||||||||||
Total Assets | 4,047,738 | 4,012,999 | 4,054,943 | 4,060,540 | 3,902,041 | ||||||||||||||||||||||||
Return on Average Assets, annualized | 1.19 | % | 1.20 | % | 1.26 | % | 1.01 | % | 1.32 | % | |||||||||||||||||||
Return on Average Equity, annualized | 13.34 | % | 13.44 | % | 13.77 | % | 11.22 | % | 14.34 | % | |||||||||||||||||||
Return on Average Tangible Equity, annualized 2 | 14.27 | % | 14.40 | % | 14.72 | % | 12.01 | % | 15.36 | % | |||||||||||||||||||
Average Earning Assets | $ | 3,902,119 | $ | 3,858,837 | $ | 3,886,787 | $ | 3,894,287 | $ | 3,734,206 | |||||||||||||||||||
Average Paying Liabilities | 2,781,985 | 2,808,287 | 2,855,884 | 2,841,304 | 2,705,283 | ||||||||||||||||||||||||
Interest Income | 34,207 | 30,593 | 28,947 | 28,354 | 29,807 | ||||||||||||||||||||||||
Tax-Equivalent Adjustment 3 | 268 | 269 | 270 | 285 | 292 | ||||||||||||||||||||||||
Interest Income, Tax-Equivalent 3 | 34,475 | 30,862 | 29,217 | 28,639 | 30,099 | ||||||||||||||||||||||||
Interest Expense | 3,306 | 1,555 | 1,122 | 1,152 | 1,169 | ||||||||||||||||||||||||
Net Interest Income | 30,901 | 29,038 | 27,825 | 27,202 | 28,638 | ||||||||||||||||||||||||
Net Interest Income, Tax-Equivalent 3 | 31,169 | 29,307 | 28,095 | 27,487 | 28,930 | ||||||||||||||||||||||||
Net Interest Margin, annualized | 3.14 | % | 3.02 | % | 2.90 | % | 2.77 | % | 3.04 | % | |||||||||||||||||||
Net Interest Margin, Tax-Equivalent, annualized 3 | 3.17 | % | 3.05 | % | 2.93 | % | 2.80 | % | 3.07 | % | |||||||||||||||||||
Efficiency Ratio Calculation: 4 | |||||||||||||||||||||||||||||
Noninterest Expense | $ | 21,448 | $ | 20,345 | $ | 18,945 | $ | 20,860 | $ | 19,423 | |||||||||||||||||||
Less: Intangible Asset Amortization | 48 | 48 | 49 | 52 | 51 | ||||||||||||||||||||||||
Net Noninterest Expense | $ | 21,400 | $ | 20,297 | $ | 18,896 | $ | 20,808 | $ | 19,372 | |||||||||||||||||||
Net Interest Income, Tax-Equivalent | $ | 31,169 | $ | 29,307 | $ | 28,095 | $ | 27,487 | $ | 28,930 | |||||||||||||||||||
Noninterest Income | 7,827 | 7,744 | 8,162 | 7,589 | 7,694 | ||||||||||||||||||||||||
Less: Net (Loss) Gain on Securities | 95 | 154 | 130 | (139) | (106) | ||||||||||||||||||||||||
Net Gross Income | $ | 38,901 | $ | 36,897 | $ | 36,127 | $ | 35,215 | $ | 36,730 | |||||||||||||||||||
Efficiency Ratio | 55.01 | % | 55.01 | % | 52.30 | % | 59.09 | % | 52.74 | % | |||||||||||||||||||
Period-End Capital Information: | |||||||||||||||||||||||||||||
Total Stockholders' Equity (i.e. Book Value) | $ | 345,550 | $ | 356,498 | $ | 357,243 | $ | 371,186 | $ | 360,171 | |||||||||||||||||||
Book Value per Share 1 | 20.91 | 21.60 | 21.66 | 22.47 | 21.83 | ||||||||||||||||||||||||
Goodwill and Other Intangible Assets, net | 23,477 | 23,583 | 23,691 | 23,791 | 23,879 | ||||||||||||||||||||||||
Tangible Book Value per Share 1,2 | 19.49 | 20.17 | 20.22 | 21.03 | 20.38 | ||||||||||||||||||||||||
Capital Ratios:5 | |||||||||||||||||||||||||||||
Tier 1 Leverage Ratio | 9.71 | % | 9.60 | % | 9.37 | % | 9.20 | % | 9.39 | % | |||||||||||||||||||
Common Equity Tier 1 Capital Ratio | 13.14 | % | 13.14 | % | 13.48 | % | 13.77 | % | 13.71 | % | |||||||||||||||||||
Tier 1 Risk-Based Capital Ratio | 13.85 | % | 13.86 | % | 14.23 | % | 14.55 | % | 14.51 | % | |||||||||||||||||||
Total Risk-Based Capital Ratio | 14.93 | % | 14.93 | % | 15.33 | % | 15.69 | % | 15.66 | % | |||||||||||||||||||
Assets Under Trust Admin. & Investment Mgmt. | $ | 1,515,994 | $ | 1,589,178 | $ | 1,793,747 | $ | 1,851,101 | $ | 1,778,659 | |||||||||||||||||||
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 23, 2022, 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. | |||||||||||||||||||||||||||||||
9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||||||||||||||
Total Stockholders' Equity (GAAP) | $ | 345,550 | $ | 356,498 | $ | 357,243 | $ | 371,186 | $ | 360,171 | ||||||||||||||||||||||
Less: Goodwill and Other Intangible assets, net | 23,477 | 23,583 | 23,691 | 23,791 | 23,879 | |||||||||||||||||||||||||||
Tangible Equity (Non-GAAP) | $ | 322,073 | $ | 332,915 | $ | 333,552 | $ | 347,395 | $ | 336,292 | ||||||||||||||||||||||
Period End Shares Outstanding | 16,523 | 16,503 | 16,493 | 16,522 | 16,500 | |||||||||||||||||||||||||||
Tangible Book Value per Share (Non-GAAP) | $ | 19.49 | $ | 20.17 | $ | 20.22 | $ | 21.03 | $ | 20.38 | ||||||||||||||||||||||
Net Income | 12,163 | 11,974 | 12,575 | 10,309 | 12,989 | |||||||||||||||||||||||||||
Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized) | 14.27 | % | 14.40 | % | 14.72 | % | 12.01 | % | 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 Arrow believes provides investors with information that is useful in understanding its financial performance. | |||||||||||||||||||||||||||||||
9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||||||||||||||
Interest Income (GAAP) | $ | 34,207 | $ | 30,593 | $ | 28,947 | $ | 28,354 | $ | 29,807 | ||||||||||||||||||||||
Add: Tax-Equivalent adjustment | 268 | 269 | 270 | 285 | 292 | |||||||||||||||||||||||||||
Interest Income - Tax Equivalent | $ | 34,475 | $ | 30,862 | $ | 29,217 | $ | 28,639 | $ | 30,099 | ||||||||||||||||||||||
Net Interest Income (GAAP) | $ | 30,901 | $ | 29,038 | $ | 27,825 | $ | 27,202 | $ | 28,638 | ||||||||||||||||||||||
Add: Tax-Equivalent adjustment | 268 | 269 | 270 | 285 | 292 | |||||||||||||||||||||||||||
Net Interest Income - Tax Equivalent | $ | 31,169 | $ | 29,307 | $ | 28,095 | $ | 27,487 | $ | 28,930 | ||||||||||||||||||||||
Average Earning Assets | $ | 3,902,119 | $ | 3,858,837 | $ | 3,886,787 | $ | 3,894,287 | $ | 3,734,206 | ||||||||||||||||||||||
Net Interest Margin (Non-GAAP)* | 3.17 | % | 3.05 | % | 2.93 | % | 2.80 | % | 3.07 | % | ||||||||||||||||||||||
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, 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, 2022 listed in the tables (i.e., 13.14%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%). | |||||||||||||||||||||||||||||||
9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||||||||||||||
Total Risk Weighted Assets | $ | 2,856,224 | $ | 2,790,520 | $ | 2,661,952 | $ | 2,552,812 | $ | 2,511,910 | ||||||||||||||||||||||
Common Equity Tier 1 Capital | 375,394 | 366,798 | 358,738 | 351,497 | 344,507 | |||||||||||||||||||||||||||
Common Equity Tier 1 Ratio | 13.14 | % | 13.14 | % | 13.48 | % | 13.77 | % | 13.71 | % | ||||||||||||||||||||||
* Quarterly ratios have been annualized. | ||||||||||||||||||||||||||||||||
Arrow Financial Corporation | |||||||||||||||||||||||||||||||||||
Average Consolidated Balance Sheets and Net Interest Income Analysis | |||||||||||||||||||||||||||||||||||
(Dollars in Thousands - Unaudited) | |||||||||||||||||||||||||||||||||||
Quarter Ended September 30: | 2022 | 2021 | |||||||||||||||||||||||||||||||||
Interest | Rate | Interest | Rate | ||||||||||||||||||||||||||||||||
Average | Income/ | Earned/ | Average | Income/ | Earned/ | ||||||||||||||||||||||||||||||
Balance | Expense | Paid | Balance | Expense | Paid | ||||||||||||||||||||||||||||||
Interest-Bearing Deposits at Banks | $ | 209,001 | $ | 1,201 | 2.28 | % | $ | 416,500 | $ | 163 | 0.16 | % | |||||||||||||||||||||||
Investment Securities: | |||||||||||||||||||||||||||||||||||
Fully Taxable | 651,899 | 2,603 | 1.58 | 494,869 | 1,632 | 1.31 | |||||||||||||||||||||||||||||
Exempt from Federal Taxes | 169,153 | 785 | 1.84 | 181,111 | 855 | 1.87 | |||||||||||||||||||||||||||||
Loans | 2,872,066 | 29,618 | 4.09 | 2,641,726 | 27,157 | 4.08 | |||||||||||||||||||||||||||||
Total Earning Assets | 3,902,119 | 34,207 | 3.48 | 3,734,206 | 29,807 | 3.17 | |||||||||||||||||||||||||||||
Allowance for Credit Losses | (28,006) | (27,040) | |||||||||||||||||||||||||||||||||
Cash and Due From Banks | 32,475 | 38,036 | |||||||||||||||||||||||||||||||||
Other Assets | 141,150 | 156,839 | |||||||||||||||||||||||||||||||||
Total Assets | $ | 4,047,738 | $ | 3,902,041 | |||||||||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||||||||||||
Interest-Bearing Checking Accounts | $ | 996,116 | 267 | 0.11 | $ | 923,002 | 155 | 0.07 | |||||||||||||||||||||||||||
Savings Deposits | 1,549,451 | 2,469 | 0.63 | 1,496,938 | 424 | 0.11 | |||||||||||||||||||||||||||||
Time Deposits of $250,000 or More | 49,459 | 89 | 0.71 | 71,435 | 39 | 0.22 | |||||||||||||||||||||||||||||
Other Time Deposits | 136,834 | 150 | 0.43 | 141,721 | 133 | 0.37 | |||||||||||||||||||||||||||||
Total Interest-Bearing Deposits | 2,731,860 | 2,975 | 0.43 | 2,633,096 | 751 | 0.11 | |||||||||||||||||||||||||||||
Short-Term Borrowings | — | — | 2,012 | — | — | ||||||||||||||||||||||||||||||
FHLBNY Term Advances & Other Long-Term Debt | 45,000 | 283 | 2.50 | 65,000 | 370 | 2.26 | |||||||||||||||||||||||||||||
Finance Leases | 5,125 | 48 | 3.72 | 5,175 | 48 | 3.68 | |||||||||||||||||||||||||||||
Total Interest-Bearing Liabilities | 2,781,985 | 3,306 | 0.47 | 2,705,283 | 1,169 | 0.17 | |||||||||||||||||||||||||||||
Noninterest-bearing deposits | 866,659 | 802,837 | |||||||||||||||||||||||||||||||||
Other Liabilities | 37,419 | 34,537 | |||||||||||||||||||||||||||||||||
Total Liabilities | 3,686,063 | 3,542,657 | |||||||||||||||||||||||||||||||||
Stockholders' Equity | 361,675 | 359,384 | |||||||||||||||||||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 4,047,738 | $ | 3,902,041 | |||||||||||||||||||||||||||||||
Net Interest Income | $ | 30,901 | $ | 28,638 | |||||||||||||||||||||||||||||||
Net Interest Spread | 3.01 | % | 3.00 | % | |||||||||||||||||||||||||||||||
Net Interest Margin | 3.14 | % | 3.04 | % | |||||||||||||||||||||||||||||||
Arrow Financial Corporation | |||||||||||||||||
Consolidated Financial Information | |||||||||||||||||
(Dollars in Thousands - Unaudited) | |||||||||||||||||
Quarter Ended: | 9/30/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||
Loan Portfolio | |||||||||||||||||
Commercial Loans | $ | 138,973 | $ | 172,518 | $ | 188,191 | |||||||||||
Commercial Real Estate Loans | 679,217 | 628,929 | 615,080 | ||||||||||||||
Subtotal Commercial Loan Portfolio | 818,190 | 801,447 | 803,271 | ||||||||||||||
Consumer Loans | 1,055,585 | 920,556 | 921,189 | ||||||||||||||
Residential Real Estate Loans | 1,051,019 | 945,938 | 930,291 | ||||||||||||||
Total Loans | $ | 2,924,794 | $ | 2,667,941 | $ | 2,654,751 | |||||||||||
Allowance for Credit Losses | |||||||||||||||||
Allowance for Credit Losses, Beginning of Quarter | $ | 28,090 | $ | 26,956 | $ | 27,010 | |||||||||||
Loans Charged-off | (1,147) | (719) | (444) | ||||||||||||||
Less Recoveries of Loans Previously Charged-off | 574 | 486 | 291 | ||||||||||||||
Net Loans Charged-off | (573) | (233) | (153) | ||||||||||||||
Provision for Credit Losses | 1,715 | 558 | 99 | ||||||||||||||
Allowance for Credit Losses, End of Quarter | $ | 29,232 | $ | 27,281 | $ | 26,956 | |||||||||||
Nonperforming Assets | |||||||||||||||||
Nonaccrual Loans | $ | 8,812 | $ | 10,764 | $ | 10,723 | |||||||||||
Loans Past Due 90 or More Days and Accruing | 514 | 823 | 555 | ||||||||||||||
Loans Restructured and in Compliance with Modified Terms | 82 | 77 | 67 | ||||||||||||||
Total Nonperforming Loans | 9,408 | 11,664 | 11,345 | ||||||||||||||
Repossessed Assets | 604 | 126 | 272 | ||||||||||||||
Other Real Estate Owned | — | — | 79 | ||||||||||||||
Total Nonperforming Assets | $ | 10,012 | $ | 11,790 | $ | 11,696 | |||||||||||
Key Asset Quality Ratios | |||||||||||||||||
Net Loans Charged-off to Average Loans, | 0.08 | % | 0.03 | % | 0.02 | % | |||||||||||
Provision for Credit Losses to Average Loans, | 0.24 | % | 0.08 | % | 0.01 | % | |||||||||||
Allowance for Credit Losses to Period-End Loans | 1.00 | % | 1.02 | % | 1.02 | % | |||||||||||
Allowance for Credit Losses to Period-End Nonperforming Loans | 310.71 | % | 233.89 | % | 237.60 | % | |||||||||||
Nonperforming Loans to Period-End Loans | 0.32 | % | 0.44 | % | 0.43 | % | |||||||||||
Nonperforming Assets to Period-End Assets | 0.24 | % | 0.29 | % | 0.29 | % | |||||||||||
Nine Month Period Ended: | |||||||||||||||||
Allowance for Loan Losses | |||||||||||||||||
Allowance for Loan Losses, Beginning of Year | $ | 27,281 | $ | 29,232 | |||||||||||||
Impact of the Adoption of ASU 2016-13 | — | (1,300) | |||||||||||||||
Loans Charged-off | (2,883) | (1,520) | |||||||||||||||
Less Recoveries of Loans Previously Charged-off | 1,445 | 830 | |||||||||||||||
Net Loans Charged-off | (1,438) | (690) | |||||||||||||||
Provision for Loan Losses | 3,389 | (286) | |||||||||||||||
Allowance for Loan Losses, End of Period | $ | 29,232 | $ | 26,956 | |||||||||||||
Key Asset Quality Ratios | |||||||||||||||||
Net Loans Charged-off to Average Loans, Annualized | 0.07 | % | 0.03 | % | |||||||||||||
Provision for Loan Losses to Average Loans, Annualized | 0.16 | % | (0.01) | % | |||||||||||||
SOURCE Arrow Financial Corporation
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