Arrow Reports $12.2 million in Q3 Net Income, Loan Growth of $80 Million in the Quarter

Rhea-AI Summary

Arrow Financial Corporation (NasdaqGS® – AROW) reported third-quarter 2022 net income of $12.2 million, a slight decrease from $13 million in the same quarter of 2021. Diluted earnings per share were $0.74, with a net interest margin of 3.14%. Total assets reached a record $4.2 billion, supported by strong loan growth of $80 million and deposit growth of $249 million. However, net charge-offs increased to $573 thousand from $153 thousand year-over-year. The company also recognized a special bonus for employees and announced consolidation efforts to optimize branch operations.

Positive

• Net income of $12.2 million indicates strong financial performance despite a slight year-over-year decline.
• Record total assets of $4.2 billion demonstrate significant growth.
• Strong loan growth of $80 million and deposit growth of $249 million enhance financial stability.
• Net interest margin improved to 3.14%, driven by higher market rates and effective cost management.
• Regulatory capital ratios remain strong, exceeding 'well capitalized' standards.

Negative

• Net income decreased by $0.8 million from the prior-year period, primarily due to lower income earned on PPP loans.
• Increased net charge-offs of $573 thousand compared to $153 thousand in the prior-year quarter.
• Book value per share declined by 4.2% primarily due to unrealized losses in the investment portfolio.

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 September 30,												Nine Months Ended September 30,
						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   Securities Sold Under Agreements to Repurchase						—						—						—						3
Federal Home Loan Bank Advances						110						197						405						586
Junior Subordinated Obligations Issued to   Unconsolidated Subsidiary Trusts						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, 2022						December 31, 2021						September 30, 2021
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   Securities Sold Under Agreements to Repurchase			—						—						2,426
Federal Home Loan Bank Term Advances			25,000						45,000						45,000
Junior Subordinated Obligations Issued to Unconsolidated   Subsidiary Trusts			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      (Non-GAAP)			268						269						270						285						292
			Interest Income - Tax Equivalent      (Non-GAAP)			$	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      (Non-GAAP)			268						269						270						285						292
			Net Interest Income - Tax Equivalent      (Non-GAAP)			$	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,    Quarter-to-date Annualized			0.08		%				0.03		%				0.02		%
Provision for Credit Losses to Average Loans,   Quarter-to-date Annualized			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)		%

 

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SOURCE Arrow Financial Corporation

FAQ

What were Arrow Financial Corporation's earnings for the third quarter of 2022?

Arrow Financial Corporation reported net income of $12.2 million for the third quarter of 2022.

How did Arrow Financial's loan growth perform in Q3 2022?

Arrow Financial experienced strong loan growth of $80 million in the third quarter of 2022.

What was the diluted earnings per share for AROW in Q3 2022?

The diluted earnings per share for Arrow Financial Corporation (AROW) in Q3 2022 was $0.74.

Did Arrow Financial announce any special bonuses in Q3 2022?

Yes, Arrow Financial awarded a special bonus to its employees in the third quarter of 2022.

What is the current status of Arrow Financial's total assets?

As of September 30, 2022, Arrow Financial's total assets were at a record high of $4.2 billion.