Arrow Reports $8.6 million in Q1 2023 Net Income and Grew Deposits by $48.0 Million
GLENS FALLS, N.Y., July 24, 2023 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) announced financial results for the three-month period ended March 31, 2023. Net income for the first quarter of 2023 was $8.6 million and diluted earnings per share was $0.52.
First-Quarter Highlights and Key Metrics
- Total assets were $4.1 billion.
- Total deposits were $3.5 billion.
- Total loans reached a record high of $3.0 billion as of March 31, 2023, an increase of $22.1 million from December 31, 2022.
- Loan-to-deposit ratio was 85%.
- Tangible book value per share was $20.55, an increase of $0.60, or 3.01% compared to December 31, 2022.
- On-balance sheet liquidity of $409 million, or 10%, of total assets; 5% cash and 5% unencumbered readily marketable securities.
- Additional $1.3 billion of immediately available liquidity with FHLB, FRB and other bank lines.
- Immediately available liquidity provides in excess of 150% coverage of uninsured deposits.
- Nonperforming assets decreased to $11.3 million at March 31, 2023, represented 0.27% of period-end assets.
- Net charge-offs to average loans for the first quarter of 2023 were 0.10% as compared to 0.09% for the previous quarter.
- Revenue was $34.8 million.
- Net income was $8.6 million.
- Non-interest expenses of $22.3 million included $1.0 million in incremental expenses related to the delayed filing of the Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K").
- Net interest margin was 2.96%.
- Return on average assets (ROA) was 0.87%.
- Return on average equity (ROE) was 9.66%.
"In the face of a challenging banking environment, Arrow continued to add to its deposit base and maintained a strong liquidity position while meeting the credit needs of our customers and communities," said Arrow President and CEO David S. DeMarco. "We remain committed to our long-term strategic initiatives of investing in our technology and our team so we can continue to enhance the customer experience and optimize operations. We look forward to continuing to focus on our customers and communities."
Arrow remains dedicated to developing its team and recently celebrated graduates from Arrow Leadership Academy and Upskill University, internal courses designed to support our culture of collaboration and continuous improvement. Our banks are working toward realizing operational efficiencies and customer-facing enhancements made possible by the completion of our core conversion in September 2022. Our team has returned to our completely renovated downtown Glens Falls, New York headquarters and we look forward to welcoming our customers back to our newly renovated campus. The renovated Glens Falls campus now offers an energy-efficient, flexible and collaborative environment for our team and customers. This investment is important to our team culture, is a key part of the revitalization of downtown Glens Falls, and is a centerpiece of what community banking means to us -- accessible, long-lasting and friendly.
Net income for the first quarter of 2023 was $8.6 million, down from $12.6 million for the same period in the prior year. The year-over-year decline was primarily due to an increase in non-interest expense of $3.4 million, a decrease in non-interest income of $1.5 million and an increase in the provision for credit loss of $785 thousand.
Please see below for further detail.
Income Statement
- Net Interest Income: Net interest income for the first quarter was $28.1 million, up 1.0% from $27.8 million in the comparable quarter of 2022. Interest and fees on loans were $31.9 million for the first quarter of 2023, an increase of 23.9% from $25.7 million (29.23% excluding Paycheck Protection Program ("PPP") revenue) for the first quarter of 2022 primarily due to loan growth and higher market rates. PPP loans contributed $1.1 million in the first quarter of 2022. The PPP program ended in 2022. Interest expense for the first quarter of 2023 was $8.0 million, an increase of $6.9 million versus the comparable quarter ending March 31, 2022, primarily due to higher deposit rates and changes in deposit composition.
- Net Interest Margin: Net interest margin was 2.96% for the quarter, compared to 2.90% for the first quarter of 2022 and 3.08% for the fourth quarter of 2022. The year-over-year increase in net interest margin was primarily due to growth in loan balances with higher yields partially offset with higher costs of interest bearing liabilities. The decrease in net interest margin compared to the fourth quarter of 2022 was primarily the result of the cost of interest bearing liabilities increasing at a faster pace than the yield on average earning assets.
Three Months Ended | |||||
March 31, 2023 | December 31, 2022 | March 31, 2022 | |||
Interest and Dividend Income | $ 36,110 | $ 35,904 | $ 28,947 | ||
Interest Expense | 8,016 | 5,325 | 1,122 | ||
Net Interest Income | 28,094 | 30,579 | 27,825 | ||
Average Earning Assets(1) | 3,845,825 | 3,940,904 | 3,886,787 | ||
Average Interest Bearing Liabilities | 2,782,299 | 2,891,092 | 2,855,884 | ||
Yield on Earning Assets(1) | 3.81 % | 3.61 % | 3.02 % | ||
Cost of Interest Bearing Liabilities | 1.17 | 0.73 | 0.16 | ||
Net Interest Spread | 2.64 | 2.88 | 2.86 | ||
Net Interest Margin | 2.96 | 3.08 | 2.90 | ||
Income Earned on PPP Loans included in Net Interest Income | $ — | $ — | $ 1,066 | ||
Net Interest Income excluding PPP loans | 28,094 | 30,579 | 26,759 | ||
Net Interest Margin excluding PPP loans | 2.96 % | 3.08 % | 2.81 % | ||
(1) Includes Nonaccrual Loans. | |||||
- Provision for Credit Losses: For the first quarter of 2023, the provision for credit losses was $1.6 million, compared to $769 thousand in the prior-year quarter. The key drivers for the increase were higher loan charge-offs and a more challenging economic forecast.
- Non-Interest Income: Non-interest income for the three months ended March 31, 2023, was $6.7 million, compared to $8.2 million in the comparable 2022 quarter. Income from fiduciary activities decreased by $321 thousand over the comparable quarter of 2022, driven primarily by market conditions. Fees and other services to customers decreased $200 thousand over the comparable quarter of 2022 driven primarily by lower volume of interchange transactions. Other operating income decreased $691 thousand from the comparable quarter of 2022, primarily due to a decline in the gain on other assets of $463 thousand and a decrease in income earned on bank-owned life insurance of $181 thousand.
- Non-Interest Expense: Non-interest expense for the first quarter of 2023 was $22.3 million, an increase of 17.7% from $18.9 million for the first quarter of 2022. The increase was primarily due to $1.0 million of additional legal and professional fees associated with the delay in the filing of the 2022 Form 10-K. In addition, other operating expenses included a credit for estimated credit losses on off-balance sheet exposures of $68 thousand for the first quarter of 2023 versus a larger credit of $316 thousand recognized in the first quarter of 2022. Technology and equipment spending increased $638 thousand from the first quarter of 2022, driven primarily by management's commitment to invest in new technology to enhance the customer experience and optimize operations. Salaries and benefits have increased compared to the first quarter of 2022 as a result of pension and other benefit expenses. In the first quarter of 2023, non-interest expenses increased $1.5 million from the fourth quarter of 2022. In addition to the factors described above, there was a charge for estimated credit losses on off-balance sheet exposures of $197 thousand for the fourth quarter.
- Provision for Income Taxes: The provision for income taxes was $2.4 million for the first quarter of 2023, compared to $3.7 million for the same quarter of 2022, primarily the result of lower pre-tax income.
Balance Sheet
- Total Assets: Total assets were $4.1 billion at March 31, 2023, a decrease of $41.8 million, or 1.0%, compared to March 31, 2022. This decrease was primarily driven by lower cash balances as pandemic era excess deposits decreased. Assets increased $145.1 million, or 3.7%, compared to December 31, 2022 driven by an increase in on-balance sheet liquidity as evidenced by our higher cash balances.
- Investments: Total investments were $745.1 million as of March 31, 2023, a decrease of $40.3 million, or 5.1%, compared to March 31, 2022, and a decrease of $5.9 million, or 0.8%, compared to December 31, 2022. While the rising rate environment led to an increase in unrealized losses within the available-for-sale portfolio versus the same period last year, unrealized losses within the available-for-sale portfolio decreased by $8.2 million versus December 31, 2022, as interest rates declined in the first quarter of 2023. The decrease in investments in the first quarter, as compared to the same period last year, was primarily driven by Arrow's decision to fund loan growth from cash flows from amortizing and maturing investments.
- Loans: Total loans reached a record high of $3.0 billion as of March 31, 2023. Loan growth for the first quarter of 2023 was $22.1 million, as compared to December 31, 2022, and $268.1 million, or 9.8%, from March 31, 2022. Residential real estate loan growth for the first quarter of 2023 was $10.0 million, or 0.9%, as compared to December 31, 2022 and $114.0 million, or 11.8%, as compared to March 31, 2022. The consumer loan portfolio grew by $8.2 million, or 0.8%, in the first quarter, primarily within the indirect automobile lending program. Total outstanding commercial loans increased $4.0 million, or 0.5%, in the first quarter of 2023, driven primarily by commercial real estate loans.
- Allowance for Credit Losses: The allowance for credit losses was $30.8 million on March 31, 2023, which represented 1.02% of loans outstanding, as compared to 1.01% at March 31, 2022. Asset quality remained stable at March 31, 2023. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.10% for the quarter ended March 31, 2023, as compared to 0.09% for the quarter ended December 31, 2022 and 0.06% for the three-month period ended March 31, 2022. Nonperforming assets of $11.3 million at March 31, 2023, represented 0.27% of period-end assets, compared to 0.32% at December 31, 2022.
- Deposits: At March 31, 2023, deposit balances were $3.5 billion. Deposits in the first quarter of 2023 increased by $48.0 million from the prior quarter and decreased by $169.0 million, or 4.5%, from the prior-year level as pandemic era excess deposits exited the system and due to competitive pressures from the rising rate environment. Municipal deposits increased $110.5 million in the first quarter, as compared to December 31, 2022, and decreased $22.1 million from March 31, 2022. Non-municipal deposits decreased $62.5 million for the quarter and $147.0 million from March 31, 2022. Non-interest bearing deposits represented 22.2% of total deposits at March 31, 2023, compared to 23.9% at December 31 ,2022, and 21.9% at March 31, 2022. At March 31, 2023, total time deposits were $301.8 million compared to $209.4 million at December 31, 2022 and $177.0 million at March 31, 2022, as a result of successful campaigns to grow certificate of deposit balances.
- Capital: Total stockholders' equity was $363.4 million at March 31, 2023, an increase of $9.8 million, or 2.8%, from the December 31, 2022 level of $353.5 million, and an increase of $6.1 million, or 1.7%, from the prior-year level. The increase in stockholders' equity over the first three months of 2023 principally reflected the following factors: the addition of $8.6 million of net income for the period, gains in other comprehensive income of $5.7 million from favorable mark-to-market activity within the available for sale securities portfolio and issuance of $0.9 million of common stock through employee benefit and dividend reinvestment plans reduced by cash dividends of $4.5 million and repurchases of common stock of $0.8 million. Arrow's regulatory capital ratios remained strong in the first quarter of 2023. As of March 31, 2023, Arrow's Common Equity Tier 1 Capital Ratio was 13.34% and Total Risk-Based Capital Ratio was 15.15%. The capital ratios of Arrow and both its subsidiary banks, Glens Falls National Bank and Trust Company ("GFNB") and Saratoga National Bank and Trust Company ("SNB"), continued to significantly exceed the "well capitalized" regulatory standards.
Additional Commentary
- Leadership Change: Effective May 13, 2023, Arrow's board of directors appointed David S. DeMarco to serve as President and CEO.
- Cash and Stock Dividends: On March 15, 2023 and June 15, 2023, Arrow distributed quarterly cash dividends of $0.27 per share.
- Industry Recognition: In the first quarter of 2023, both of Arrow's banking subsidiaries earned BauerFinancial, Inc. 5-Star Exceptional Performance Bank rating for the 57th consecutive quarter.
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 GFNB and SNB. 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 2022 Form 10-K 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: | ||||||
March 31, | December 31, | March 31, | ||||
INTEREST AND DIVIDEND INCOME | ||||||
Interest and Fees on Loans | $ 31,886 | $ 30,719 | $ 25,739 | |||
Interest on Deposits at Banks | 479 | 1,274 | 198 | |||
Interest and Dividends on Investment Securities: | ||||||
Fully Taxable | 2,948 | 3,121 | 2,189 | |||
Exempt from Federal Taxes | 797 | 790 | 821 | |||
Total Interest and Dividend Income | 36,110 | 35,904 | 28,947 | |||
INTEREST EXPENSE | ||||||
Interest Bearing Checking Accounts | 370 | 344 | 163 | |||
Savings Deposits | 5,587 | 4,101 | 417 | |||
Time Deposits over $250,000 | 574 | 226 | 28 | |||
Other Time Deposits | 474 | 234 | 109 | |||
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase | — | — | — | |||
Federal Home Loan Bank Advances | 793 | 200 | 187 | |||
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 169 | 172 | 169 | |||
Interest on Financing Leases | 49 | 48 | 49 | |||
Total Interest Expense | 8,016 | 5,325 | 1,122 | |||
NET INTEREST INCOME | 28,094 | 30,579 | 27,825 | |||
Provision for Credit Losses | 1,554 | 1,409 | 769 | |||
NET INTEREST INCOME AFTER PROVISION FOR CREDIT | 26,540 | 29,170 | 27,056 | |||
NON-INTEREST INCOME | ||||||
Income From Fiduciary Activities | 2,275 | 2,257 | 2,596 | |||
Fees for Other Services to Customers | 2,595 | 2,710 | 2,795 | |||
Insurance Commissions | 1,520 | 1,680 | 1,511 | |||
Net (Loss) Gain on Securities | (104) | 48 | 130 | |||
Net Gain on Sales of Loans | 4 | 3 | 52 | |||
Other Operating Income | 387 | 467 | 1,078 | |||
Total Non-interest Income | 6,677 | 7,165 | 8,162 | |||
NON-INTEREST EXPENSE | ||||||
Salaries and Employee Benefits | 11,947 | 11,603 | 11,286 | |||
Occupancy Expenses, Net | 1,628 | 1,481 | 1,598 | |||
Technology and Equipment Expense | 4,417 | 4,316 | 3,779 | |||
FDIC Assessments | 479 | 283 | 307 | |||
Other Operating Expense | 3,825 | 3,109 | 1,975 | |||
Total Non-interest Expense | 22,296 | 20,792 | 18,945 | |||
INCOME BEFORE PROVISION FOR INCOME TAXES | 10,921 | 15,543 | 16,273 | |||
Provision for Income Taxes | 2,359 | 3,456 | 3,698 | |||
NET INCOME | $ 8,562 | $ 12,087 | $ 12,575 | |||
Average Shares Outstanding 1: | ||||||
Basic | 16,552 | 16,535 | 16,511 | |||
Diluted | 16,564 | 16,589 | 16,566 | |||
Per Common Share: | ||||||
Basic Earnings | $ 0.52 | $ 0.73 | $ 0.76 | |||
Diluted Earnings | 0.52 | 0.73 | 0.76 | |||
1 2022 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) | |||||
March 31, | December 31, 2022 | March 31, | |||
ASSETS | |||||
Cash and Due From Banks | $ 25,107 | $ 31,886 | $ 38,964 | ||
Interest Bearing Deposits at Banks | 178,365 | 32,774 | 448,614 | ||
Investment Securities: | |||||
Available-for-Sale at Fair Value | 565,693 | 573,495 | 582,428 | ||
Held-to-Maturity (Fair Value of $164,439 at March 31, 2023; | 167,347 | 175,364 | 196,661 | ||
Equity Securities | 2,070 | 2,174 | 1,877 | ||
FHLB and Federal Reserve Bank Stock | 10,027 | 6,064 | 4,491 | ||
Loans | 3,005,352 | 2,983,207 | 2,737,267 | ||
Allowance for Credit Losses | (30,784) | (29,952) | (27,661) | ||
Net Loans | 2,974,568 | 2,953,255 | 2,709,606 | ||
Premises and Equipment, Net | 58,233 | 56,491 | 48,481 | ||
Goodwill | 21,873 | 21,873 | 21,873 | ||
Other Intangible Assets, Net | 1,400 | 1,500 | 1,818 | ||
Other Assets | 109,947 | 114,633 | 101,589 | ||
Total Assets | $ 4,114,630 | $ 3,969,509 | $ 4,156,402 | ||
LIABILITIES | |||||
Non-interest Bearing Deposits | 788,690 | 836,871 | 813,066 | ||
Interest Bearing Checking Accounts | 958,490 | 997,694 | 1,154,068 | ||
Savings Deposits | 1,497,326 | 1,454,364 | 1,571,274 | ||
Time Deposits over $250,000 | 122,827 | 76,224 | 48,288 | ||
Other Time Deposits | 179,016 | 133,211 | 128,677 | ||
Total Deposits | 3,546,349 | 3,498,364 | 3,715,373 | ||
Federal Home Loan Bank Overnight Advances | 35,000 | 27,000 | — | ||
Federal Home Loan Bank Term Advances | 107,800 | 27,800 | 25,000 | ||
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 20,000 | 20,000 | 20,000 | ||
Finance Leases | 5,106 | 5,119 | 5,156 | ||
Other Liabilities | 37,004 | 37,688 | 33,630 | ||
Total Liabilities | 3,751,259 | 3,615,971 | 3,799,159 | ||
STOCKHOLDERS' EQUITY | |||||
Preferred Stock, $1 Par Value and 1,000,000 Shares | — | — | — | ||
Common Stock, $1 Par Value; 30,000,000 Shares | 21,424 | 21,424 | 20,800 | ||
Additional Paid-in Capital | 400,944 | 400,270 | 378,758 | ||
Retained Earnings | 69,499 | 65,401 | 62,328 | ||
Accumulated Other Comprehensive Loss | (43,983) | (49,655) | (20,797) | ||
Treasury Stock, at Cost (4,870,935 Shares at March 31, 2023; | (84,513) | (83,902) | (83,846) | ||
Total Stockholders' Equity | 363,371 | 353,538 | 357,243 | ||
Total Liabilities and Stockholders' Equity | $ 4,114,630 | $ 3,969,509 | $ 4,156,402 | ||
Arrow Financial Corporation Selected Quarterly Information (Dollars In Thousands, Except Per Share Amounts - Unaudited) | |||||||||
Quarter Ended | 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||
Net Income | $ 8,562 | $ 12,087 | $ 12,163 | $ 11,974 | $ 12,575 | ||||
Transactions in Net Income (Net of Tax): | |||||||||
Net Changes in Fair Value of Equity Investments | (76) | 35 | 70 | 114 | 96 | ||||
Share and Per Share Data:1 | |||||||||
Period End Shares Outstanding | 16,553 | 16,552 | 16,523 | 16,503 | 16,493 | ||||
Basic Average Shares Outstanding | 16,552 | 16,535 | 16,512 | 16,494 | 16,511 | ||||
Diluted Average Shares Outstanding | 16,564 | 16,589 | 16,558 | 16,535 | 16,566 | ||||
Basic Earnings Per Share | $ 0.52 | $ 0.73 | $ 0.74 | $ 0.72 | $ 0.76 | ||||
Diluted Earnings Per Share | 0.52 | 0.73 | 0.74 | 0.72 | 0.76 | ||||
Cash Dividend Per Share | 0.270 | 0.270 | 0.262 | 0.262 | 0.262 | ||||
Selected Quarterly Average Balances: | |||||||||
Interest Bearing Deposits at Banks | $ 40,436 | $ 143,499 | $ 209,001 | $ 232,545 | $ 410,644 | ||||
Investment Securities | 813,461 | 845,859 | 821,052 | 822,112 | 797,347 | ||||
Loans | 2,991,928 | 2,951,547 | 2,872,066 | 2,804,180 | 2,678,796 | ||||
Deposits | 3,480,279 | 3,614,945 | 3,598,519 | 3,569,754 | 3,582,256 | ||||
Other Borrowed Funds | 100,596 | 63,304 | 50,125 | 50,140 | 68,596 | ||||
Shareholders' Equity | 359,556 | 351,402 | 361,675 | 357,228 | 370,264 | ||||
Total Assets | 3,978,851 | 4,074,028 | 4,047,738 | 4,012,999 | 4,054,943 | ||||
Return on Average Assets, annualized | 0.87 % | 1.18 % | 1.19 % | 1.20 % | 1.26 % | ||||
Return on Average Equity, annualized | 9.66 % | 13.65 % | 13.34 % | 13.44 % | 13.77 % | ||||
Return on Average Tangible Equity, annualized 2 | 10.33 % | 14.62 % | 14.27 % | 14.40 % | 14.72 % | ||||
Average Earning Assets | $ 3,845,825 | $ 3,940,905 | $ 3,902,119 | $ 3,858,837 | $ 3,886,787 | ||||
Average Paying Liabilities | 2,782,299 | 2,891,092 | 2,781,985 | 2,808,287 | 2,855,884 | ||||
Interest Income | 36,110 | 35,904 | 34,207 | 30,593 | 28,947 | ||||
Tax-Equivalent Adjustment 3 | 202 | 279 | 268 | 269 | 270 | ||||
Interest Income, Tax-Equivalent 3 | 36,312 | 36,183 | 34,475 | 30,862 | 29,217 | ||||
Interest Expense | 8,016 | 5,325 | 3,306 | 1,555 | 1,122 | ||||
Net Interest Income | 28,094 | 30,579 | 30,901 | 29,038 | 27,825 | ||||
Net Interest Income, Tax-Equivalent 3 | 28,296 | 30,858 | 31,169 | 29,307 | 28,095 | ||||
Net Interest Margin, annualized | 2.96 % | 3.08 % | 3.14 % | 3.02 % | 2.90 % | ||||
Net Interest Margin, Tax-Equivalent, annualized 3 | 2.98 % | 3.11 % | 3.17 % | 3.05 % | 2.93 % | ||||
Efficiency Ratio Calculation: 4 | |||||||||
Non-interest Expense | $ 22,296 | $ 20,792 | $ 21,448 | $ 20,345 | $ 18,945 | ||||
Less: Intangible Asset Amortization | 45 | 47 | 48 | 48 | 49 | ||||
Net Non-interest Expense | $ 22,251 | $ 20,745 | $ 21,400 | $ 20,297 | $ 18,896 | ||||
Net Interest Income, Tax-Equivalent | $ 28,296 | $ 30,858 | $ 31,169 | $ 29,307 | $ 28,095 | ||||
Non-interest Income | 6,677 | 7,165 | 7,827 | 7,744 | 8,162 | ||||
Less: Net (Loss) Gain on Securities | (104) | 48 | 95 | 154 | 130 | ||||
Net Gross Income | $ 35,077 | $ 37,975 | $ 38,901 | $ 36,897 | $ 36,127 | ||||
Efficiency Ratio | 63.43 % | 54.63 % | 55.01 % | 55.01 % | 52.30 % | ||||
Period-End Capital Information: | |||||||||
Total Stockholders' Equity (i.e. Book Value) | $ 363,371 | $ 353,538 | $ 345,550 | $ 356,498 | $ 357,243 | ||||
Book Value per Share 1 | 21.95 | 21.36 | 20.91 | 21.60 | 21.66 | ||||
Goodwill and Other Intangible Assets, net | 23,273 | 23,373 | 23,477 | 23,583 | 23,691 | ||||
Tangible Book Value per Share 1,2 | 20.55 | 19.95 | 19.49 | 20.17 | 20.22 | ||||
Capital Ratios:5 | |||||||||
Tier 1 Leverage Ratio | 10.13 % | 9.80 % | 9.71 % | 9.60 % | 9.37 % | ||||
Common Equity Tier 1 Capital Ratio | 13.34 % | 13.32 % | 13.14 % | 13.14 % | 13.48 % | ||||
Tier 1 Risk-Based Capital Ratio | 14.03 % | 14.01 % | 13.85 % | 13.86 % | 14.23 % | ||||
Total Risk-Based Capital Ratio | 15.15 % | 15.11 % | 14.93 % | 14.93 % | 15.33 % | ||||
Assets Under Trust Admin. & Investment Mgmt. | $ 1,672,117 | $ 1,606,132 | $ 1,515,994 | $ 1,589,178 | $ 1,793,747 | ||||
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 Measure Reconciliation: Tangible Book Value, Tangible Equity, and Return on Tangible Equity | |||||||||
3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||
Total Stockholders' Equity (GAAP) | $ 363,371 | $ 353,538 | $ 345,550 | $ 356,498 | $ 357,243 | |||||
Less: Goodwill and Other Intangible | 23,273 | 23,373 | 23,477 | 23,583 | 23,691 | |||||
Tangible Equity (Non-GAAP) | $ 340,098 | $ 330,165 | $ 322,073 | $ 332,915 | $ 333,552 | |||||
Period End Shares Outstanding | 16,553 | 16,552 | 16,523 | 16,503 | 16,493 | |||||
Tangible Book Value per Share (Non-GAAP) | $ 20.55 | $ 19.95 | $ 19.49 | $ 20.17 | $ 20.22 | |||||
Net Income | 8,562 | 12,087 | 12,163 | 11,974 | 12,575 | |||||
Return on Average Tangible Equity | 10.33 % | 14.62 % | 14.27 % | 14.40 % | 14.72 % | |||||
3. | Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of annualized tax-equivalent net | |||||||||
3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||
Interest Income (GAAP) | $ 36,110 | $ 35,904 | $ 34,207 | $ 30,593 | $ 28,947 | |||||
Add: Tax-Equivalent adjustment (Non-GAAP) | 202 | 279 | 268 | 269 | 270 | |||||
Interest Income - Tax Equivalent (Non-GAAP) | $ 36,312 | $ 36,183 | $ 34,475 | $ 30,862 | $ 29,217 | |||||
Net Interest Income (GAAP) | $ 28,094 | $ 30,579 | $ 30,901 | $ 29,038 | $ 27,825 | |||||
Add: Tax-Equivalent adjustment (Non-GAAP) | 202 | 279 | 268 | 269 | 270 | |||||
Net Interest Income - Tax Equivalent (Non-GAAP) | $ 28,296 | $ 30,858 | $ 31,169 | $ 29,307 | $ 28,095 | |||||
Average Earning Assets | $ 3,845,825 | $ 3,940,905 | $ 3,902,119 | $ 3,858,837 | $ 3,886,787 | |||||
Net Interest Margin (Non-GAAP)* | 2.98 % | 3.11 % | 3.17 % | 3.05 % | 2.93 % | |||||
4. | Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP | |||||||||
5. | For the current quarter, all of the regulatory capital ratios as well as the Total Risk-Weighted Assets are calculated | |||||||||
3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||
Total Risk Weighted Assets | $ 2,909,610 | $ 2,883,902 | $ 2,856,224 | $ 2,790,520 | $ 2,661,952 | |||||
Common Equity Tier 1 Capital | 388,228 | 384,003 | 375,394 | 366,798 | 358,738 | |||||
Common Equity Tier 1 Ratio | 13.34 % | 13.32 % | 13.14 % | 13.14 % | 13.48 % | |||||
* Quarterly ratios have been annualized. | ||||||||||
Arrow Financial Corporation Average Consolidated Balance Sheets and Net Interest Income Analysis (Dollars in Thousands - Unaudited) | |||||||||||
Quarter Ended: | March 31, 2023 | March 31, 2022 | |||||||||
Interest | Rate | Interest | Rate | ||||||||
Average | Income/ | Earned/ | Average | Income/ | Earned/ | ||||||
Balance | Expense | Paid | Balance | Expense | Paid | ||||||
Interest Bearing Deposits at Banks | $ 40,436 | $ 479 | 4.80 % | $ 410,644 | $ 198 | 0.20 % | |||||
Investment Securities: | |||||||||||
Fully Taxable | 652,743 | 2,948 | 1.83 | 618,806 | 2,189 | 1.43 | |||||
Exempt from Federal Taxes | 160,718 | 797 | 2.01 | 178,541 | 821 | 1.86 | |||||
Loans | 2,991,928 | 31,886 | 4.32 | 2,678,796 | 25,739 | 3.90 | |||||
Total Earning Assets | 3,845,825 | 36,110 | 3.81 | 3,886,787 | 28,947 | 3.02 | |||||
Allowance for Credit Losses | (29,792) | (27,165) | |||||||||
Cash and Due From Banks | 30,518 | 37,654 | |||||||||
Other Assets | 132,300 | 157,667 | |||||||||
Total Assets | $ 3,978,851 | $ 4,054,943 | |||||||||
Deposits: | |||||||||||
Interest Bearing Checking Accounts | $ 964,735 | 370 | 0.16 | $ 1,027,740 | 163 | 0.06 | |||||
Savings Deposits | 1,474,251 | 5,587 | 1.54 | 1,557,855 | 417 | 0.11 | |||||
Time Deposits of $250,000 or More | 94,415 | 574 | 2.47 | 70,101 | 28 | 0.16 | |||||
Other Time Deposits | 148,302 | 474 | 1.30 | 131,592 | 109 | 0.34 | |||||
Total Interest Bearing Deposits | 2,681,703 | 7,005 | 1.06 | 2,787,288 | 717 | 0.10 | |||||
Short-Term Borrowings | 40,138 | 490 | 4.95 | — | — | ||||||
FHLBNY Term Advances & Other Long-Term Debt | 55,356 | 472 | 3.46 | 63,444 | 356 | 2.28 | |||||
Finance Leases | 5,102 | 49 | 3.89 | 5,152 | 49 | 3.86 | |||||
Total Interest Bearing Liabilities | 2,782,299 | 8,016 | 1.17 | 2,855,884 | 1,122 | 0.16 | |||||
Non-interest bearing deposits | 798,576 | 794,968 | |||||||||
Other Liabilities | 38,420 | 33,827 | |||||||||
Total Liabilities | 3,619,295 | 3,684,679 | |||||||||
Stockholders' Equity | 359,556 | 370,264 | |||||||||
Total Liabilities and Stockholders' Equity | $ 3,978,851 | $ 4,054,943 | |||||||||
Net Interest Income | $ 28,094 | $ 27,825 | |||||||||
Net Interest Spread | 2.64 % | 2.86 % | |||||||||
Net Interest Margin | 2.96 % | 2.90 % | |||||||||
Arrow Financial Corporation Average Consolidated Balance Sheets and Net Interest Income Analysis (Dollars in Thousands - Unaudited) | |||||||||||
Quarter Ended: | March 31, 2023 | December 31, 2022 | |||||||||
Interest | Rate | Interest | Rate | ||||||||
Average | Income/ | Earned/ | Average | Income/ | Earned/ | ||||||
Balance | Expense | Paid | Balance | Expense | Paid | ||||||
Interest Bearing Deposits at Banks | $ 40,436 | $ 479 | 4.80 % | $ 143,499 | $ 1,274 | 3.52 % | |||||
Investment Securities: | |||||||||||
Fully Taxable | 652,743 | 2,948 | 1.83 | 679,390 | 3,121 | 1.82 | |||||
Exempt from Federal Taxes | 160,718 | 797 | 2.01 | 166,468 | 790 | 1.88 | |||||
Loans | 2,991,928 | 31,886 | 4.32 | 2,951,547 | 30,719 | 4.13 | |||||
Total Earning Assets | 3,845,825 | 36,110 | 3.81 | 3,940,904 | 35,904 | 3.61 | |||||
Allowance for Credit Losses | (29,792) | (29,069) | |||||||||
Cash and Due From Banks | 30,518 | 30,736 | |||||||||
Other Assets | 132,300 | 131,457 | |||||||||
Total Assets | $ 3,978,851 | $ 4,074,028 | |||||||||
Deposits: | |||||||||||
Interest Bearing Checking Accounts | $ 964,735 | 370 | 0.16 | $ 1,082,267 | 344 | 0.13 | |||||
Savings Deposits | 1,474,251 | 5,587 | 1.54 | 1,548,293 | 4,101 | 1.05 | |||||
Time Deposits of $250,000 or More | 94,415 | 574 | 2.47 | 65,897 | 226 | 1.36 | |||||
Other Time Deposits | 148,302 | 474 | 1.30 | 131,331 | 234 | 0.71 | |||||
Total Interest Bearing Deposits | 2,681,703 | 7,005 | 1.06 | 2,827,788 | 4,905 | 0.69 | |||||
Short-Term Borrowings | 40,138 | 490 | 4.95 | 8,424 | 92 | 4.33 | |||||
FHLBNY Term Advances & Other Long-Term Debt | 55,356 | 472 | 3.46 | 49,767 | 280 | 2.23 | |||||
Finance Leases | 5,102 | 49 | 3.89 | 5,113 | 48 | 3.72 | |||||
Total Interest Bearing Liabilities | 2,782,299 | 8,016 | 1.17 | 2,891,092 | 5,325 | 0.73 | |||||
Non-interest bearing deposits | 798,576 | 787,157 | |||||||||
Other Liabilities | 38,420 | 44,377 | |||||||||
Total Liabilities | 3,619,295 | 3,722,626 | |||||||||
Stockholders' Equity | 359,556 | 351,402 | |||||||||
Total Liabilities and Stockholders' Equity | $ 3,978,851 | $ 4,074,028 | |||||||||
Net Interest Income | $ 28,094 | $ 30,579 | |||||||||
Net Interest Spread | 2.64 % | 2.88 % | |||||||||
Net Interest Margin | 2.96 % | 3.08 % | |||||||||
Arrow Financial Corporation Consolidated Financial Information (Dollars in Thousands - Unaudited) | |||||
Quarter Ended: | 3/31/2023 | 12/31/2022 | 3/31/2022 | ||
Loan Portfolio | |||||
Commercial Loans | $ 135,917 | $ 140,293 | $ 155,467 | ||
Commercial Real Estate Loans | 715,357 | 707,022 | 638,437 | ||
Subtotal Commercial Loan Portfolio | 851,274 | 847,315 | 793,904 | ||
Consumer Loans | 1,073,369 | 1,065,135 | 976,648 | ||
Residential Real Estate Loans | 1,080,709 | 1,070,757 | 966,715 | ||
Total Loans | $ 3,005,352 | $ 2,983,207 | $ 2,737,267 | ||
Allowance for Credit Losses | |||||
Allowance for Credit Losses, Beginning of Quarter | $ 29,952 | $ 29,232 | $ 27,281 | ||
Loans Charged-off | (1,328) | (1,261) | (829) | ||
Less Recoveries of Loans Previously Charged-off | 606 | 572 | 440 | ||
Net Loans Charged-off | (722) | (689) | (389) | ||
Provision for Credit Losses | 1,554 | 1,409 | 769 | ||
Allowance for Credit Losses, End of Quarter | $ 30,784 | $ 29,952 | $ 27,661 | ||
Nonperforming Assets | |||||
Nonaccrual Loans | $ 10,852 | $ 10,757 | $ 9,750 | ||
Loans Past Due 90 or More Days and Accruing | 241 | 1,157 | 55 | ||
Loans Restructured and in Compliance with Modified Terms | 62 | 69 | 74 | ||
Total Nonperforming Loans | 11,155 | 11,983 | 9,879 | ||
Repossessed Assets | 144 | 593 | 180 | ||
Other Real Estate Owned | — | — | — | ||
Total Nonperforming Assets | $ 11,299 | $ 12,576 | $ 10,059 | ||
Key Asset Quality Ratios | |||||
Net Loans Charged-off to Average Loans, Quarter-to-date Annualized | 0.10 % | 0.09 % | 0.06 % | ||
Provision for Credit Losses to Average Loans, Quarter-to-date Annualized | 0.21 % | 0.19 % | 0.12 % | ||
Allowance for Credit Losses to Period-End Loans | 1.02 % | 1.00 % | 1.01 % | ||
Allowance for Credit Losses to Period-End Nonperforming Loans | 275.97 % | 249.95 % | 280.00 % | ||
Nonperforming Loans to Period-End Loans | 0.37 % | 0.40 % | 0.36 % | ||
Nonperforming Assets to Period-End Assets | 0.27 % | 0.32 % | 0.24 % | ||
SOURCE Arrow Financial Corporation
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