ARROW FINANCIAL CORPORATION 
By GLENS FALLS, N.Y., April 21, 2014 /PRNewswire/ --
-- First-quarter diluted earnings per share increased 2.4%.
-- Net interest income on a tax-equivalent basis rose $1.0 million or 6.9%.
-- Continued growth in insurance commission income and income from
fiduciary activities.
-- Record highs at quarter-end for total loans, assets, deposits and
stockholders' equity, as well as assets under trust administration and
investment management.
-- An increase of 2% in the cash dividends paid.
Arrow Financial Corporation (NasdaqGS: AROW) announced operating results for the three-month period ended March 31, 2014. Net income for the first quarter of 2014 was $5.32 million, an increase of $139 thousand, or 2.7%, from net income of $5.18 million for the first quarter of 2013. Diluted earnings per share (EPS) for the quarter was $0.43, a 2.4% increase from the comparable 2013 quarter, when diluted EPS was $0.42. Return on average assets for the first quarter of 2014 was 0.99%, and return on average equity for the 2014 first quarter was 11.11%.
Expansion continues with the announcement of a new Saratoga National Bank and Trust Company banking branch in Colonie, New York; it will be the Bank's first office in Albany County.
Arrow President and CEO Thomas J. Murphy stated, "Arrow ended the first quarter with solid returns on average assets and average equity, record highs in several key balance sheet categories, excellent asset quality and strong capital. We are pleased with these results."
The following list expands on the highlights of our first-quarter results:
Net Interest Income and Margin: In the first quarter of 2014, on a tax-equivalent basis, our net interest income increased $1.0 million, or 6.9%, compared to the first quarter of 2013, while our tax-equivalent net interest margin remained relatively unchanged, falling one basis point to 3.12% from 3.13% in the first quarter of 2013. Although our loan yields remain under pressure, net interest margin increased 6 basis points to 3.12% from our fourth quarter 2013 margin of 3.06%.
Insurance Agency Operations: Insurance commission income rose from $2.0 million for the first quarter of 2013 to $2.4 million for the first quarter of 2014, an increase of $416 thousand, or 20.5%. This increase was primarily attributable to annual contingent commission income received from certain insurance carriers.
Trust Assets and Related Noninterest Income: Assets under trust administration and investment management at March 31, 2014, were a record $1.183 billion, an increase of $88.0 million, or 8.0%, from the March 31, 2013, balance of $1.095 billion. The growth in balances was generally attributable to a significant rise in the equity markets between the reporting dates as well as to the addition of new accounts. Income from fiduciary activities increased by $299 thousand, or 19.0%, for the first three months of 2014, as compared to the 2013 period.
Balance Sheet Changes: Total assets at March 31, 2014, reached a record high of $2.222 billion, an increase of $105.6 million, or 5.0%, from the $2.116 billion balance at March 31, 2013, and 2.7% above total assets of $2.164 billion at December 31, 2013. Our loan portfolio also rose to a record high of $1.3 billion, up $145.7 million, or 12.5%, from the March 31, 2013, level, and an increase of $44.0 million, or 3.5%, from the level at December 31, 2013. While all three major categories of our loan portfolio grew during the first quarter of 2014, the largest increase was in our commercial real estate loan portfolio, followed by increases in our residential real estate loan and automobile loan categories.
During the first three months of 2014, we originated approximately $27 million of residential real estate loans, a decrease of 12.1% from approximately $30 million of residential real estate loans originated in the comparable period for 2013. However, during the 2014 first quarter, our management strategy was to retain most of our originations, as opposed to our 2013 strategy of selling most into the secondary market. As a result, the outstanding balance of our residential real estate loan portfolio at March 31, 2014, was higher than the outstanding balance at both March 31, 2013 and December 31, 2013. Since we elected to retain most mortgage originations, our gain on the sale of residential real estate loan originations in the first quarter of 2014 was significantly less than our gain on the sale of such originations in the comparable 2013 quarter.
Asset Quality: Asset quality remained strong at March 31, 2014, as measured by our low level of nonperforming assets and low level of net charge-offs. Nonperforming assets of $7.3 million at March 31, 2014 represented only 0.33% of period-end assets, down four basis points from our 0.37% ratio as of December 31, 2013. Net loan losses for the first quarter of 2014, expressed as an annualized percentage of average loans outstanding, were only 0.08%. These asset quality ratios continue to be significantly better than recently reported industry-wide averages and our overall loan delinquency rates remain low.
Our allowance for loan losses was $14.6 million at March 31, 2014, which represented 1.12% of loans outstanding, thirteen basis points below our ratio one year earlier and two basis points below our ratio at December 31, 2013.
Capital: Total stockholders' equity was a record $194.5 million at period-end, an increase of $16.7 million, or 9.4%, above the March 31, 2013 amount. Arrow's capital ratios continued to remain strong, as reflected by a Tier 1 leverage ratio of 9.30% at quarter-end, unchanged from March 31, 2013. Arrow's total risk-based capital ratio was 15.62%, down from 16.34% a year ago. The capital ratios of the Company and its subsidiary banks continue to significantly exceed the "well capitalized" regulatory standard, which is the highest current regulatory category.
Peer Group: Many of our key operating ratios have consistently compared very favorably to our peer group, which we define as all U.S. bank holding companies having $1.0 billion to $3.0 billion in total assets, as identified in the Federal Reserve Bank's "Bank Holding Company Performance Report" (FRB Report). The most current peer data available in the FRB Report is for the twelve-month period ended December 31, 2013, in which our return on average equity (ROE) was 12.11%, as compared to 8.56% for our peer group. Our ratio of loans 90 days past due and accruing plus nonaccrual loans to total loans was 0.56% as of December 31, 2013, as compared to 1.46% for our peer group. Our ratio of net loan losses for the year ending December 31, 2013, was 0.09%, well below the peer result of 0.25%.
Cash and Stock Dividends: We distributed a cash dividend of $.25 per share to stockholders in the first quarter of 2014. The cash dividend was 2% higher than the cash dividend paid in the first quarter of 2013, adjusted for our 2% stock dividend in September 2013. This quarter's dividend, based on our $26.44 closing stock price at March 31, 2014, represented an annualized yield of 3.78%.
Securities Transactions: There were no securities transactions in the first quarter of 2014. However, included in our comparable 2013 first quarter results were securities transactions of $318 thousand, net of tax, which represented nearly $.03 per share for the quarter.
Industry Recognition: Arrow was recently recognized by Forbes as one of "America's 50 Most Trustworthy Financial Companies" for its accounting and governance practices. The list includes publicly traded banks and insurance companies. This is the third consecutive year Arrow has received a "Most Trustworthy" designation from Forbes.
Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. The Company is the parent of Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company. Other subsidiaries include North Country Investment Advisers, Inc.; three property and casualty insurance agencies: Loomis & LaPann, Inc., Upstate Agency, LLC, and McPhillips Insurance Agency, a division of Glens Falls National Insurance Agencies, LLC; and Capital Financial Group, Inc., an insurance agency specializing in the sale and servicing of group health plans.
The information contained in this News Release may contain statements that are not historical in nature but rather are based on management's beliefs, assumptions, expectations, estimates and projections about the future. These statements may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, involving a degree of uncertainty and attendant risk. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast, explicitly or by implication. The Company undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. This News Release should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2013, and our other filings with the Securities and Exchange Commission.
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)
Three Months
Ended March
31,
2014 2013
---- ----
INTEREST AND
DIVIDEND INCOME
Interest and Fees
on Loans $12,774 $12,783
Interest on
Deposits at Banks 13 27
Interest and
Dividends on
Investment
Securities:
Fully Taxable 2,008 1,796
Exempt from Federal
Taxes 1,471 1,390
Total Interest and
Dividend Income 16,266 15,996
------ ------
INTEREST EXPENSE
NOW Accounts 464 778
Savings Deposits 219 268
Time Deposits of
$100,000 or More 230 319
Other Time Deposits 391 554
Federal Funds
Purchased and 4 3
Securities Sold
Under Agreements
to Repurchase
Federal Home Loan
Bank Advances 145 173
Junior Subordinated
Obligations Issued
to 141 144
Unconsolidated
Subsidiary Trusts
Total Interest
Expense 1,594 2,239
----- -----
NET INTEREST INCOME 14,672 13,757
Provision for Loan
Losses 458 100
--- ---
NET INTEREST INCOME
AFTER PROVISION
FOR 14,214 13,657
LOAN LOSSES
NONINTEREST INCOME
Income From
Fiduciary
Activities 1,873 1,574
Fees for Other
Services to
Customers 2,194 2,282
Insurance
Commissions 2,444 2,028
Net Gain on
Securities
Transactions - 527
Net Gain on Sales
of Loans 123 607
Other Operating
Income 252 156
Total Noninterest
Income 6,886 7,174
----- -----
NONINTEREST EXPENSE
Salaries and
Employee Benefits 7,642 7,621
Occupancy Expenses,
Net 2,341 2,276
FDIC Assessments 273 264
Other Operating
Expense 3,210 3,250
Total Noninterest
Expense 13,466 13,411
------ ------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 7,634 7,420
Provision for
Income Taxes 2,314 2,239
NET INCOME $5,320 $5,181
====== ======
Average Shares
Outstanding (1):
Basic 12,354 12,272
Diluted 12,378 12,290
Per Common Share:
Basic Earnings $0.43 $0.42
Diluted Earnings 0.43 0.42
(1) Share and per share data have been restated for
the September 27, 2013, 2% stock dividend.
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
March 31, December
31, March 31,
2014 2013 2013
---- ---- ----
ASSETS
Cash
and
Due
From
Banks $40,056 $37,275 $23,943
Interest-
Bearing
Deposits
at
Banks 35,994 12,705 113,231
Investment
Securities:
Available-
for-
Sale 429,230 457,606 478,775
Held-
to-
Maturity
(Approximate
Fair
Value
of
$322,335
at
March
31, 317,632 299,261 251,456
2014;
$302,305 at
December
31, 2013;
and
$259,562 at
March 31,
2013)
Other
Investments 3,896 6,281 4,493
Loans 1,310,423 1,266,472 1,164,759
Allowance
for
Loan
Losses (14,636) (14,434) (14,603)
Net
Loans 1,295,787 1,252,038 1,150,156
--------- --------- ---------
Premises
and
Equipment,
Net 28,717 29,154 29,363
Goodwill 22,003 22,003 22,003
Other
Intangible
Assets,
Net 3,996 4,140 4,457
Other
Assets 44,270 43,235 38,085
Total
Assets $2,221,581 $2,163,698 $2,115,962
======== ======== ========
LIABILITIES
Noninterest-
Bearing
Deposits $277,086 $278,958 $254,308
NOW
Accounts 908,028 817,366 845,531
Savings
Deposits 524,670 498,779 476,115
Time
Deposits
of
$100,000
or
More 74,127 78,928 89,797
Other
Time
Deposits 164,108 168,299 185,455
Total
Deposits 1,948,019 1,842,330 1,851,206
--------- --------- ---------
Federal
Funds
Purchased
and 13,787 11,777 12,166
Securities
Sold Under
Agreements
to
Repurchase
Federal
Home
Loan
Bank
Overnight
Advances - 53,000 -
Federal
Home
Loan
Bank
Term
Advances 20,000 20,000 30,000
Junior
Subordinated
Obligations
Issued
to
Unconsolidated
Subsidiary
Trusts 20,000 20,000 20,000
Other
Liabilities 25,284 24,437 24,787
Total
Liabilities 2,027,090 1,971,544 1,938,159
--------- --------- ---------
STOCKHOLDERS'
EQUITY
Preferred
Stock,
$5
Par
Value;
1,000,000
Shares
Authorized - - -
Common
Stock,
$1
Par
Value;
20,000,000
Shares
Authorized 16,744 16,744 16,416
(16,744,486
Shares
Issued at
March 31,
2014, and
December
31,
2013; and
16,416,163
Shares
Issued at
March 31,
2013)
Additional
Paid-
in
Capital 229,842 229,290 219,178
Retained
Earnings 29,692 27,457 28,423
Unallocated
ESOP
Shares
(79,763
Shares
at
March
31,
2014; (1,650) (1,800) (2,000)
87,641
Shares at
December
31, 2013;
and 95,172
Shares at
March 31,
2013)
Accumulated
Other
Comprehensive
Loss (4,075) (4,373) (8,324)
Treasury
Stock, Shares
at at
Cost
(4,315,156
Shares
at
March
31,
2014;
4,296,723 (76,062) (75,164) (75,890)
December 31,
2013; and
4,310,578
Shares at
March 31,
2013)
Total
Stockholders'
Equity 194,491 192,154 177,803
------- ------- -------
Total
Liabilities
and
Stockholders'
Equity $2,221,581 $2,163,698 $2,115,962
======== ======== ========
Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended 3/31/2014 12/31/2013 9/30/2013 6/30/2013 3/31/2013
------------- --------- ---------- --------- --------- ---------
Net Income $5,320 $5,784 $5,623 $5,207 $5,181
Transactions Recorded in Net Income (Net of Tax):
-------------------------------------------------
Net Gain on Securities Transactions - - - 8 318
Net Gain on Sales of Loans 74 114 100 301 367
Share and Per Share Data:(1)
---------------------------
Period End Shares Outstanding 12,350 12,360 12,329 12,284 12,251
Basic Average Shares Outstanding 12,354 12,339 12,308 12,261 12,272
Diluted Average Shares Outstanding 12,378 12,387 12,344 12,279 12,290
Basic Earnings Per Share $0.43 $0.47 $0.46 $0.42 $0.42
Diluted Earnings Per Share 0.43 0.47 0.46 0.42 0.42
Cash Dividend Per Share 0.25 0.25 0.25 0.25 0.25
Selected Quarterly Average Balances:
------------------------------------
Interest-Bearing Deposits at Banks 17,184 46,853 14,096 26,632 41,145
Investment Securities 755,008 762,768 744,928 771,018 711,848
Loans 1,284,649 1,254,957 1,224,840 1,185,041 1,169,870
Deposits 1,887,589 1,904,922 1,800,181 1,801,346 1,773,126
Other Borrowed Funds 68,375 62,038 92,073 94,596 64,622
Shareholders' Equity 194,127 184,506 179,634 178,867 176,874
Total Assets 2,176,038 2,176,264 2,095,017 2,099,138 2,039,314
Return on Average Assets 0.99% 1.05% 1.06% 0.99% 1.03%
Return on Average Equity 11.11% 12.44% 12.42% 11.68% 11.88%
Return on Tangible Equity(2) 12.84% 14.50% 14.55% 13.70% 13.97%
Average Earning Assets $2,056,841 $2,064,578 $1,983,864 $1,982,691 $1,922,863
Average Paying Liabilities 1,678,080 1,686,993 1,614,873 1,641,300 1,590,401
Interest Income, Tax-Equivalent 17,439 17,633 17,032 16,989 17,059
Interest Expense 1,594 1,713 1,747 2,223 2,239
Net Interest Income, Tax-Equivalent 15,845 15,920 15,285 14,766 14,820
Tax-Equivalent Adjustment 1,173 1,174 1,158 1,180 1,063
Net Interest Margin 3 3.12% 3.06% 3.06% 2.99% 3.13%
Efficiency Ratio Calculation:
-----------------------------
Noninterest Expense $13,466 $13,385 $13,133 $13,274 $13,411
Less: Intangible Asset Amortization (106) (108) (108) (112) (124)
Net Noninterest Expense $13,360 $13,277 $13,025 $13,162 $13,287
------- ------- ------- ------- -------
Net Interest Income, Tax-Equivalent $15,845 $15,920 $15,285 $14,766 $14,820
Noninterest Income 6,886 6,877 6,939 7,071 7,174
Less: Net Securities Gains - - - (13) (527)
---
Net Gross Income $22,731 $22,797 $22,224 $21,824 $21,467
------- ------- ------- ------- -------
Efficiency Ratio 58.77% 58.24% 58.61% 60.31% 61.90%
Period-End Capital Information:
-------------------------------
Total Stockholders' Equity (i.e. Book Value) $194,491 $192,154 $182,683 $177,607 $177,803
Book Value per Share 15.75 15.55 14.82 14.46 14.51
Intangible Assets 25,999 26,143 26,273 26,387 26,460
Tangible Book Value per Share (2) 13.64 13.43 12.69 12.31 12.35
Capital Ratios:
---------------
Tier 1 Leverage Ratio 9.30% 9.19% 9.37% 9.19% 9.30%
Tier 1 Risk-Based Capital Ratio 14.55% 14.70% 14.59% 14.82% 15.15%
Total Risk-Based Capital Ratio 15.62% 15.77% 15.69% 15.96% 16.34%
Assets Under Trust Administration $1,182,661 $1,174,891 $1,111,085 $1,073,523 $1,094,708
and Investment Management
-------------------------
(1)Share and Per Share Data have been restated for the September 27, 2013, 2% stock dividend.
(2)Tangible 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.
(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.
Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
Quarter
Ended: 3/31/2014 12/31/2013 3/31/2013
------- --------- ---------- ---------
Loan Portfolio
Commercial
Loans $89,876 $87,893 $89,167
Commercial
Construction
Loans 28,026 27,815 27,380
Commercial
Real
Estate
Loans 308,841 288,119 255,242
Other
Consumer
Loans 7,783 7,649 7,031
Consumer
Automobile
Loans 400,621 394,204 354,001
Residential
Real
Estate
Loans 475,276 460,792 431,938
Total
Loans $1,310,423 $1,266,472 $1,164,759
======== ======== ========
Allowance for
Loan Losses
Allowance
for
Loan
Losses,
Beginning
of
Quarter $14,434 $14,584 $15,298
Loans
Charged-
off 336 246 890
Less
Recoveries
of
Loans
Previously
Charged-
off 80 96 95
--- --- ---
Net
Loans
Charged-
off 256 150 795
Provision
for
Loan
Losses 458 - 100
Allowance
for
Loan
Losses,
End
of
Quarter $14,636 $14,434 $14,603
======= ======= =======
Nonperforming
Assets
Nonaccrual
Loans $6,284 $6,479 $5,218
Loans
Past
Due
90 or
More
Days
and
Accruing 347 652 259
Loans
Restructured
and
in
Compliance
with
Modified
Terms 380 641 473
--- --- ---
Total
Nonperforming
Loans 7,011 7,772 5,950
Repossessed
Assets 138 63 45
Other
Real
Estate
Owned 198 81 1,149
Total
Nonperforming
Assets $7,347 $7,916 $7,144
====== ====== ======
Key Asset
Quality Ratios
Net
Loans
Charged-
off
to
Average
Loans,
Quarter-
to-
date
Annualized 0.08% 0.05% 0.28%
Provision
for
Loan
Losses
to
Average
Loans,
Quarter-
to-
date
Annualized 0.14% - % 0.03%
Allowance
for
Loan
Losses
to
Period-
End
Loans 1.12% 1.14% 1.25%
Allowance
for
Loan
Losses
to
Period-
End
Nonperforming
Loans 208.76% 185.71% 245.43%
Nonperforming
Loans
to
Period-
End
Loans 0.53% 0.61% 0.51%
Nonperforming
Assets
to
Period-
End
Assets 0.33% 0.37% 0.34%
SOURCE Arrow Financial Corporation
