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Arrow Reports $6.0 million in Q2 2023 Net Income, Loans Reach Record High of $3.1 Billion

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Arrow Financial Corporation announced financial results for Q2 2023, with net income of $6.0 million and fully diluted earnings per share of $0.36. Nonperforming assets decreased $4.2 million in the quarter. Total loans reached a record high of $3.1 billion, growing at an annualized rate of 8.6%. Strong liquidity of $376 million and additional $1.3 billion of immediately available liquidity. Non-interest income was $6.9 million. Non-interest expense was $24.1 million. Total assets were $4.1 billion.
Positive
  • Record high total loans at $3.1 billion, growing at an annualized rate of 8.6%
  • Strong liquidity of $376 million and additional $1.3 billion of immediately available liquidity
  • Non-interest income of $6.9 million
  • Total assets at $4.1 billion
Negative
  • Net income decreased from $8.6 million in Q1 2023 to $6.0 million in Q2 2023
  • Non-interest expense increased to $24.1 million
  • Total investments decreased by $51.1 million
  • Unrealized losses of $5.2 million within the available-for-sale portfolio

GLENS FALLS, N.Y., Aug. 8, 2023 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) ("Arrow") announced financial results for the three-month period ended June 30, 2023. Net income for the second quarter of 2023 was $6.0 million and fully diluted earnings per share was $0.36. Nonperforming assets decreased $4.2 million in the second quarter, with the allowance for credit losses reaching 477% of nonperforming loans.

Arrow President and CEO David S. DeMarco: 

"I am pleased to announce that we are back in full compliance with our NASDAQ®  filing requirements. While this is an important step, it did not distract us from growing the business to a new record high for loans while maintaining sound credit quality. As always, our team is dedicated to serving our communities and our customers throughout our eight-county footprint. We remain focused on further enhancing the customer experience and optimizing our operations." 

"Now that the Arrow team has returned to our fully renovated headquarters in downtown Glens Falls, New York, we are opening our Main Office branch and lending areas to customers. The renovated campus offers a collaborative and modern space for both customers and our team. This investment is a key part of the revitalization of downtown Glens Falls and represents Arrow's approach to community banking, based on long-lasting and meaningful relationships with our shareholders, customers, communities and employees."

This Earnings Release and related commentary should be read in conjunction with our August 8, 2023 Form 8-K and related Second Quarter 2023 Investor Presentation, which can be found on our website: arrowfinancial.com/investor-presentations. 

Second-Quarter Highlights and Key Metrics

  • Total loans reached a record high of $3.1 billion as of June 30, 2023, growing at an annualized rate of 8.6%, or $64.5 million, for the quarter.
  • Strong on-balance sheet liquidity of $376 million, or 9% of total assets; 4% cash and 5% unencumbered readily marketable securities.
  • Additional $1.3 billion of immediately available liquidity with FHLB, FRB and other bank lines.
  • Replaced FHLB  advances with $150 million of flexible term and lower cost advances from the FRB of NY Bank Term Funding Program (BTFP).
  • Immediately available liquidity provides in excess of 200% coverage of uninsured deposits which are less than 30% of total deposits.
  • Loan-to-deposit ratio was 88%.
  • Nonperforming assets decreased to $7.1 million at June 30, 2023, representing 0.17% of period-end assets.
  • Net charge-offs to average loans for the second quarter of 2023 were 0.07% as compared to 0.10% for the previous quarter.
  • Allowance for Credit Losses to Nonperforming Loans coverage was 477%.
  • Total assets and deposits remained relatively unchanged at $4.1 billion and $3.5 billion respectively.
  • Non-interest expenses included $2.0 million in incremental expenses related to the delay in filing the 2022 Form 10-K and the First Quarter Form 10-Q.
  • Net interest margin was 2.61%.
  • Return on average assets (ROA) was 0.59%; excluding incremental expenses related to the delayed filings it was 0.75%.
  • Return on average equity (ROE) was 6.64%; excluding incremental expense related to the delayed filings it was 8.41%.

Income Statement

  • Net Income:  Net income for the second quarter of 2023 was $6.0 million, decreasing from $8.6 million and $12.0 million in the first quarter of 2023 and the second quarter of 2022, respectively. The decline from the first quarter of 2023 was primarily due to an increase of $6.2 million in interest expense and an increase in non-interest expense of $1.8 million, partially offset by an increase in interest and dividend income of $3.9 million. The decline from the the same period in the prior year was due to an increase of $12.7 million in interest expense, an increase in non-interest expense of $3.7 million and a decrease in non-interest income of $838 thousand. The decrease was partially offset by an increase in interest and dividend income of $9.4 million.
  • Net Interest Income: Net interest income for the second quarter was $25.8 million, decreasing 8.3% from $28.1 million in the first quarter of 2023 and 11.2% from $29.0 million in the comparable quarter of 2022. Interest and fees on loans were $34.6 million for the second quarter of 2023, an increase from $31.9 million in the first quarter of 2023  and from $26.9 million for the quarter ended June 30, 2022. These increases are driven by loan growth and higher loan rates. Interest expense for the second quarter of 2023 was $14.2 million, an increase of $6.2 million versus first quarter of 2023 and $12.7 million from the comparable quarter ended June 30, 2022.  The increases for both comparison periods were driven by higher deposit rates and changes in deposit composition.
  • Net Interest Margin: Net interest margin was 2.61% for the quarter, compared to 2.96% for the first quarter of 2023 and 3.02% for the second quarter of 2022.  The decrease in net interest margin compared to the first quarter in 2023 was the result of the cost of interest-bearing liabilities increasing at a faster pace than the yield on average earning assets.The year-over-year decrease in net interest margin was also impacted by lower cash balances as a result of deposit outflows in the fourth quarter of 2022 that temporarily reduced average earning asset balances year-over- year. 

Three Months Ended


(Dollars in Thousands)


June 30, 2023


March 31, 2023


June 30, 2022

Interest and Dividend Income

$               40,013


$               36,110


$               30,593

Interest Expense

14,241


8,016


1,555

Net Interest Income

25,772


28,094


29,038

Average Earning Assets(1)

3,953,642


3,845,825


3,858,837

Average Interest-Bearing Liabilities

2,924,743


2,782,299


2,808,287







Yield on Earning Assets(1)

4.06 %


3.81 %


3.18 %

Cost of Interest-Bearing Liabilities

1.95


1.17


0.22

Net Interest Spread

2.11


2.88


2.96

Net Interest Margin

2.61


2.96


3.02







Income Earned on PPP Loans included in Net Interest Income

$                      —


$                      —


$                    438

Net Interest Income excluding PPP loans

25,772


28,094


28,600

Net Interest Margin excluding PPP loans

2.61 %


2.96 %


2.98 %







(1) Includes Nonaccrual Loans.












  • Provision for Credit Losses: For the second quarter of 2023, the provision for credit losses was $948 thousand compared to $1.6 million in the first quarter of 2023 and $905 thousand in the prior-year quarter. The key drivers for the provision for credit losses in the second quarter of 2023 were loan growth and, to a lesser extent, charge-offs.  The second quarter 2023 provision for credit losses was not impacted by changes to the economic forecast factors embedded in the allowance model.  The provision for the first quarter of 2023 was driven by charge-offs and by changes made to the economic forecast within the model.
  • Non-Interest Income: Non-interest income for the three months ended June 30, 2023, was $6.9 million, compared to $6.7 million in the first quarter of 2023 and  $7.7 million in the comparable quarter of 2022. Income from fiduciary activities, which includes Wealth Management services, rebounded in the second quarter of 2023 after a downturn in 2022 caused by declining market performance.  Fees and other services to customers declined versus the linked quarter and year-over-year driven by lower interchange fees. Other income was consistent with both the first quarter of 2023 and the comparable quarter of 2022. 
  • Non-Interest Expense: Non-interest expense for the second quarter of 2023 was $24.1 million,   an increase from  $22.3 million in the first quarter of 2023 and $20.3 million for the second quarter of 2022.  The increase was related to $3.0 million of additional legal and professional fees incurred in the first half of 2023 associated with the delay in the filing of the 2022 Form 10-K and the First Quarter Form 10-Q. Salaries and benefits increased $0.5 million year-over-year as a result of pension and other benefit expenses. 
  • Provision for Income Taxes: The provision for income taxes was $1.6 million for the second quarter of 2023,  $2.4 million for the first quarter of 2023 and $3.6 million for the second quarter of 2022.  The reduction in the provision for income taxes was the result of lower pre-tax income. The effective tax rate as of June 30, 2023 was 20.9%.

Balance Sheet

  • Total Assets: Total assets were $4.1 billion at June 30, 2023, comparable to March 31, 2023 and an increase of $134.1 million, or 3.4%, compared to December 31, 2022.  Growth in the balance sheet is in line with growth in the loan portfolio and higher cash balances. 
  • Investments: Total investments were $694.0 million as of June 30, 2023, a decrease of $51.1 million, or 6.9%, compared to March 31, 2023 and a decrease of $57.0 million compared to December 31, 2022. The decrease for both periods was driven primarily by paydowns and maturities (net of purchases) of $56.7 million and $45.3 million respectively. The proceeds were primarily used to fund loan growth and for general corporate purposes. The rising rate environment led to unrealized losses of $5.2 million within the available-for-sale portfolio in the second quarter of 2023
  • Loans: Total loans reached a record high of $3.1 billion as of June 30, 2023. Loan growth for the second quarter of 2023 was $64.5 million, or 2.1%, and $86.7 million, or 2.9%, from December 31, 2022. Loan growth was spread across all segments.  Please see the loan detail included in the consolidated financial information table on page 11.
  • Allowance for Credit Losses: The allowance for credit losses was $31.2 million on June 30, 2023, which represented 1.02% of loans outstanding, as compared to $30.8 million or 1.02% at March 31, 2023 and $30.0 million  or 1.00% at December 31, 2022. Asset quality improved at June 30, 2023. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.07% for the three-month period ended June 30, 2023, as compared to 0.10% for the three-month period ended March 31, 2023 and 0.09% for the three-month period ended December 31, 2022. Nonperforming assets of $7.1 million at June 30, 2023, represented 0.17% of period-end assets, compared to $11.3 million or 0.27% at March 31, 2023 and $12.6 million or 0.32% at December 31, 2022.
  • Deposits: At June 30, 2023, deposit balances were $3.5 billion, relatively unchanged from March 31, 2023 and December 31, 2022. While overall deposit balances have remained stable, the deposit mix has continued to shift from non-interest bearing accounts to higher cost money market and time deposit accounts.  Please refer to page 6 for further details related to deposits. 
  • Capital: Total stockholders' equity was $361.4 million at June 30, 2023, a decrease of $1.9 million, or 0.5%, from the March 31, 2023 level of $363.4 million, and an increase of $7.9 million, or 2.2%, from December 31, 2022.  Arrow's regulatory capital ratios remained strong in the second quarter of 2023. As of June 30, 2023, Arrow's Common Equity Tier 1 Capital Ratio was 13.27% and Total Risk-Based Capital Ratio was 15.08%. 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 June 15, 2023, Arrow distributed a cash dividend of $0.27 per share. On July 28, 2023, Arrow declared a cash dividend of $.27 per share, payable on September 15, 2023, to shareholders of record as of September 1, 2023. This marks the 41st consecutive quarterly cash dividend.

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, the efficiency ratio and net interest margin. 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, 2022 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 June 30,


Six Months Ended June 30,



2023


2022


2023


2022

INTEREST AND DIVIDEND INCOME









Interest and Fees on Loans


$            34,618


$            26,906


$         66,504


$         52,645

Interest on Deposits at Banks


1,674


427


2,153


625

Interest and Dividends on Investment Securities:









Fully Taxable


2,951


2,444


5,899


4,633

Exempt from Federal Taxes


770


816


1,567


1,637

Total Interest and Dividend Income


40,013


30,593


76,123


59,540

INTEREST EXPENSE









Interest-Bearing Checking Accounts


820


199


1,190


362

Savings Deposits


8,514


892


14,101


1,309

Time Deposits over $250,000


1,119


26


1,693


54

Other Time Deposits


1,196


111


1,670


220

Borrowings


2,373


108


3,166


295

Junior Subordinated Obligations Issued to

  Unconsolidated Subsidiary Trusts


171


171


340


340

Interest on Financing Leases


48


48


97


97

Total Interest Expense


14,241


1,555


22,257


2,677

NET INTEREST INCOME


25,772


29,038


53,866


56,863

Provision for Credit Losses


948


905


2,502


1,674

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES


24,824


28,133


51,364


55,189

NON-INTEREST INCOME









Income From Fiduciary Activities


2,428


2,517


4,703


5,113

Fees for Other Services to Customers


2,717


3,050


5,312


5,845

Insurance Commissions


1,560


1,622


3,080


3,133

Net (Loss) Gain on Securities


(181)


154


(285)


284

Net Gain on Sales of Loans



10


4


62

Other Operating Income


382


391


769


1,469

Total Non-Interest Income


6,906


7,744


13,583


15,906

NON-INTEREST EXPENSE









Salaries and Employee Benefits


12,039


11,687


23,986


22,973

Occupancy Expenses, Net


1,583


1,602


3,211


3,200

Technology and Equipment Expense


4,362


3,974


8,779


7,753

FDIC Assessments


484


291


963


598

Other Operating Expense


5,615


2,791


9,440


4,766

Total Non-Interest Expense


24,083


20,345


46,379


39,290

INCOME BEFORE PROVISION FOR INCOME TAXES


7,647


15,532


18,568


31,805

Provision for Income Taxes


1,600


3,558


3,959


7,256

NET INCOME


$              6,047


$            11,974


$         14,609


$         24,549

Average Shares Outstanding 1:









Basic


16,553


16,494


16,552


16,503

Diluted


16,553


16,535


16,552


16,551

Per Common Share:









Basic Earnings


$                0.36


$                0.72


$              0.88


$              1.48

Diluted Earnings


0.36


0.72


0.88


1.48


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)



June 30,
2023


December 31,
2022


June 30,
2022

ASSETS






Cash and Due From Banks

$                33,803


$                31,886


$                51,549

Interest-Bearing Deposits at Banks

139,798


32,774


165,705

Investment Securities:






Available-for-Sale at Fair Value

543,708


573,495


582,741

Held-to-Maturity (Fair Value of $139,143 at June 30, 2023; $171,623 at December 31, 2022; and $180,511 at June 30, 2022)

143,460


175,364


182,096

Equity Securities

1,889


2,174


2,031

FHLB and Federal Reserve Bank Stock

4,932


6,064


4,718

Loans

3,069,897


2,983,207


2,844,802

Allowance for Credit Losses

(31,170)


(29,952)


(28,090)

Net Loans

3,038,727


2,953,255


2,816,712

Premises and Equipment, Net

59,773


56,491


50,141

Goodwill

21,873


21,873


21,873

Other Intangible Assets, Net

1,302


1,500


1,710

Other Assets

114,388


114,633


111,929

Total Assets

$          4,103,653


$          3,969,509


$          3,991,205

LIABILITIES






Noninterest-Bearing Deposits

759,495


836,871


824,842

Interest-Bearing Checking Accounts

856,016


997,694


1,046,570

Savings Deposits

1,517,937


1,454,364


1,504,791

Time Deposits over $250,000

140,694


76,224


40,021

Other Time Deposits

228,082


133,211


129,436

Total Deposits

3,502,224


3,498,364


3,545,660

Borrowings

171,800


54,800


25,000

Junior Subordinated Obligations Issued to Unconsolidated

  Subsidiary Trusts

20,000


20,000


20,000

Finance Leases

5,093


5,119


5,144

Other Liabilities

43,093


37,688


38,903

Total Liabilities

3,742,210


3,615,971


3,634,707

STOCKHOLDERS' EQUITY






Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at June 30, 2023, December 31, 2022 and June 30, 2022



Common Stock, $1 Par Value; 30,000,000 Shares Authorized  (21,423,992 Shares Issued at June 30, 2023 and December 31, 2022 and 20,800,144 Shares Issued at   June 30, 2022)

21,424


21,424


20,800

Additional Paid-in Capital

401,069


400,270


379,423

Retained Earnings

71,076


65,401


69,980

Accumulated Other Comprehensive Loss

(47,613)


(49,655)


(29,564)

Treasury Stock, at Cost (4,870,934 Shares at June 30, 2023; 4,872,355 Shares at December 31, 2022 and 4,777,605 Shares at June 30, 2022)

(84,513)


(83,902)


(84,141)

Total Stockholders' Equity

361,443


353,538


356,498

Total Liabilities and Stockholders' Equity

$          4,103,653


$          3,969,509


$          3,991,205

 

Arrow Financial Corporation

Selected Quarterly Information

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


Quarter Ended

6/30/2023


3/31/2023


12/31/2022


9/30/2022


6/30/2022

Net Income

$        6,047


$        8,562


$      12,087


$      12,163


$      11,974

Transactions in Net Income (Net of Tax):










Net Changes in Fair Value of Equity Investments

(133)


(76)


35


70


114











Share and Per Share Data:1










Period End Shares Outstanding

16,553


16,553


16,552


16,523


16,503

Basic Average Shares Outstanding

16,553


16,552


16,535


16,512


16,494

Diluted Average Shares Outstanding

16,553


16,564


16,589


16,558


16,535

Basic Earnings Per Share

$           0.36


$           0.52


$           0.73


$           0.74


$           0.72

Diluted Earnings Per Share

0.36


0.52


0.73


0.74


0.72

Cash Dividend Per Share

0.270


0.270


0.270


0.262


0.262











Selected Quarterly Average Balances:










  Interest-Bearing Deposits at Banks

$    130,057


$      40,436


$    143,499


$    209,001


$    232,545

  Investment Securities

787,175


813,461


845,859


821,052


822,112

  Loans

3,036,410


2,991,928


2,951,547


2,872,066


2,804,180

  Deposits

3,460,711


3,480,279


3,614,945


3,598,519


3,569,754

  Other Borrowed Funds

220,616


100,596


63,304


50,125


50,140

  Shareholders' Equity

365,070


359,556


351,402


361,675


357,228

  Total Assets

4,087,653


3,978,851


4,074,028


4,047,738


4,012,999

Return on Average Assets, annualized

0.59 %


0.87 %


1.18 %


1.19 %


1.20 %

Return on Average Equity, annualized

6.64 %


9.66 %


13.65 %


13.34 %


13.44 %

Return on Average Tangible Equity, annualized 2

7.10 %


10.33 %


14.62 %


14.27 %


14.40 %

Average Earning Assets

$ 3,953,642


$ 3,845,825


$ 3,940,905


$ 3,902,119


$ 3,858,837

Average Paying Liabilities

2,924,743


2,782,299


2,891,092


2,781,985


2,808,287

Interest Income

40,013


36,110


35,904


34,207


30,593

Tax-Equivalent Adjustment 3

196


202


279


268


269

Interest Income, Tax-Equivalent 3

40,209


36,312


36,183


34,475


30,862

Interest Expense

14,241


8,016


5,325


3,306


1,555

Net Interest Income

25,772


28,094


30,579


30,901


29,038

Net Interest Income, Tax-Equivalent 3

25,968


28,296


30,858


31,169


29,307

Net Interest Margin, annualized

2.61 %


2.96 %


3.08 %


3.14 %


3.02 %

Net Interest Margin, Tax-Equivalent, annualized 3

2.63 %


2.98 %


3.11 %


3.17 %


3.05 %











Efficiency Ratio Calculation: 4










Non-Interest Expense

$      24,083


$      22,296


$      20,792


$      21,448


$      20,345

Less: Intangible Asset Amortization

44


45


47


48


48

Net Non-Interest Expense

$      24,039


$      22,251


$      20,745


$      21,400


$      20,297

Net Interest Income, Tax-Equivalent

$      25,968


$      28,296


$      30,858


$      31,169


$      29,307

Non-Interest Income

6,906


6,677


7,165


7,827


7,744

Less: Net (Loss) Gain on Securities

(181)


(104)


48


95


154

Net Gross Income

$      33,055


$      35,077


$      37,975


$      38,901


$      36,897

Efficiency Ratio

72.72 %


63.43 %


54.63 %


55.01 %


55.01 %











Period-End Capital Information:










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

$    361,443


$    363,371


$    353,538


$    345,550


$    356,498

Book Value per Share 1

21.84


21.95


21.36


20.91


21.60

Goodwill and Other Intangible Assets, net

23,175


23,273


23,373


23,477


23,583

Tangible Book Value per Share 1,2

20.44


20.55


19.95


19.49


20.17











Capital Ratios:5










Tier 1 Leverage Ratio

9.92 %


10.13 %


9.80 %


9.71 %


9.60 %

Common Equity Tier 1 Capital Ratio 

13.27 %


13.34 %


13.32 %


13.14 %


13.14 %

Tier 1 Risk-Based Capital Ratio

13.96 %


14.03 %


14.01 %


13.85 %


13.86 %

Total Risk-Based Capital Ratio

15.08 %


15.15 %


15.11 %


14.93 %


14.93 %











Assets Under Trust Admin. & Investment Mgmt.

$ 1,711,460


$ 1,672,117


$ 1,606,132


$ 1,515,994


$ 1,589,178

 

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 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.





6/30/2023


3/31/2023


12/31/2022


9/30/2022


6/30/2022


Total Stockholders' Equity (GAAP)

$   361,443


$   363,371


$   353,538


$   345,550


$   356,498


Less:  Goodwill and Other Intangible assets, net

23,175


23,273


23,373


23,477


23,583


Tangible Equity (Non-GAAP)

$   338,268


$   340,098


$   330,165


$   322,073


$   332,915













Period End Shares Outstanding

16,553


16,553


16,552


16,523


16,503


Tangible Book Value per Share (Non-GAAP)

$        20.44


$        20.55


$        19.95


$        19.49


$        20.17


Net Income

6,047


8,562


12,087


12,163


11,974


Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)

7.10 %


10.33 %


14.62 %


14.27 %


14.40 %












3.

Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of 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.





6/30/2023


3/31/2023


12/31/2022


9/30/2022


6/30/2022


Interest Income (GAAP)

$     40,013


$     36,110


$     35,904


$     34,207


$     30,593


Add:  Tax-Equivalent adjustment

     (Non-GAAP)

196


202


279


268


269


Interest Income - Tax Equivalent

     (Non-GAAP)

$     40,209


$     36,312


$     36,183


$     34,475


$     30,862


Net Interest Income (GAAP)

$     25,772


$     28,094


$     30,579


$     30,901


$     29,038


Add:  Tax-Equivalent adjustment

     (Non-GAAP)

196


202


279


268


269


Net Interest Income - Tax Equivalent

     (Non-GAAP)

$     25,968


$     28,296


$     30,858


$     31,169


$     29,307


Average Earning Assets

$  3,953,642


$  3,845,825


$  3,940,905


$  3,902,119


$  3,858,837


Net Interest Margin (Non-GAAP)*

2.63 %


2.98 %


3.11 %


3.17 %


3.05 %












4.

Non-GAAP Financial Measure Reconciliation: 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 non-interest expense to net gross income (which equals tax-equivalent net interest income plus non-interest income, as adjusted).












5.

For the current quarter, all of the regulatory capital ratios as well as the Total Risk-Weighted Assets are calculated in accordance with bank regulatory capital rules.  The June 30, 2023 CET1 ratio listed in the tables (i.e., 13.27%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).





6/30/2023


3/31/2023


12/31/2022


9/30/2022


6/30/2022


Total Risk Weighted Assets

$  2,937,837


$  2,909,610


$  2,883,902


$  2,856,224


$  2,790,520


Common Equity Tier 1 Capital

389,966


388,228


384,003


375,394


366,798


Common Equity Tier 1 Ratio

13.27 %


13.34 %


13.32 %


13.14 %


13.14 %












* Quarterly ratios have been annualized.





 

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)


Quarter Ended:

June 30, 2023


June 30, 2022




Interest


Rate




Interest


Rate


Average


Income/


Earned/


Average


Income/


Earned/


Balance


Expense


Paid


Balance


Expense


Paid

Interest-Bearing Deposits at Banks

$   130,057


$       1,674


5.16 %


$  232,545


$           427


0.74 %

Investment Securities:












Fully Taxable

637,018


2,951


1.86


644,443


2,444


1.52

Exempt from Federal Taxes

150,157


770


2.06


177,669


816


1.84

Loans

3,036,410


34,618


4.57


2,804,180


26,906


3.85

Total Earning Assets

3,953,642


40,013


4.06


3,858,837


30,593


3.18

Allowance for Credit Losses

(30,577)






(27,558)





Cash and Due From Banks

28,742






40,105





Other Assets

135,846






141,615





Total Assets

$  4,087,653






$  4,012,999





Deposits:












Interest-Bearing Checking Accounts

$   863,892


820


0.38


$  1,048,752


199


0.08

Savings Deposits

1,504,412


8,514


2.27


1,541,616


892


0.23

Time Deposits of $250,000 or More

133,897


1,119


3.35


37,418


26


0.28

Other Time Deposits

201,926


1,196


2.38


130,361


111


0.34

Total Interest-Bearing Deposits

2,704,127


11,649


1.73


2,758,147


1,228


0.18

Borrowings

195,527


2,373


4.87


25,000


108


1.73

Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts

20,000


171


3.43


20,000


171


3.43

Finance Leases

5,089


48


3.78


5,140


48


3.75

Total Interest-Bearing Liabilities

2,924,743


14,241


1.95


2,808,287


1,555


0.22

Noninterest-Bearing Deposits

756,584






811,607





Other Liabilities

41,256






35,877





Total Liabilities

3,722,583






3,655,771





Stockholders' Equity

365,070






357,228





Total Liabilities and Stockholders' Equity

$  4,087,653






$  4,012,999





Net Interest Income



$     25,772






$     29,038



Net Interest Spread





2.11 %






2.96 %

Net Interest Margin





2.61 %






3.02 %

 

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)


Quarter Ended:

June 30, 2023


March 31, 2023




Interest


Rate




Interest


Rate


Average


Income/


Earned/


Average


Income/


Earned/


Balance


Expense


Paid


Balance


Expense


Paid

Interest-Bearing Deposits at Banks

$   130,057


$       1,674


5.16 %


$     40,436


$           479


4.80 %

Investment Securities:












Fully Taxable

637,018


2,951


1.86


652,743


2,948


1.83

Exempt from Federal Taxes

150,157


770


2.06


160,718


797


2.01

Loans

3,036,410


34,618


4.57


2,991,928


31,886


4.32

Total Earning Assets

3,953,642


40,013


4.06


3,845,825


36,110


3.81

Allowance for Credit Losses

(30,577)






(29,792)





Cash and Due From Banks

28,742






30,518





Other Assets

135,846






132,300





Total Assets

$  4,087,653






$  3,978,851





Deposits:












Interest-Bearing Checking Accounts

$   863,892


820


0.38


$  964,735


370


0.16

Savings Deposits

1,504,412


8,514


2.27


1,474,251


5,587


1.54

Time Deposits of $250,000 or More

133,897


1,119


3.35


94,415


574


2.47

Other Time Deposits

201,926


1,196


2.38


148,302


474


1.30

Total Interest-Bearing Deposits

2,704,127


11,649


1.73


2,681,703


7,005


1.06

Borrowings

195,527


2,373


4.87


75,494


793


4.26

Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts

20,000


171


3.43


20,000


169


3.43

Finance Leases

5,089


48


3.78


5,102


49


3.89

Total Interest-Bearing Liabilities

2,924,743


14,241


1.95


2,782,299


8,016


1.17

Noninterest-bearing deposits

756,584






798,576





Other Liabilities

41,256






38,420





Total Liabilities

3,722,583






3,619,295





Stockholders' Equity

365,070






359,556





Total Liabilities and Stockholders' Equity

$  4,087,653






$  3,978,851





Net Interest Income



$     25,772






$     28,094



Net Interest Spread





2.11 %






2.64 %

Net Interest Margin





2.61 %






2.96 %

 

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)


Quarter Ended:

6/30/2023


12/31/2022


6/30/2022

Loan Portfolio






Commercial Loans

$       147,518


$       140,293


$       138,675

Commercial Real Estate Loans

723,948


707,022


663,234

  Subtotal Commercial Loan Portfolio

871,466


847,315


801,909

Consumer Loans

1,087,765


1,065,135


1,031,111

Residential Real Estate Loans

1,110,666


1,070,757


1,011,782

Total Loans

$   3,069,897


$   2,983,207


$   2,844,802

Allowance for Credit Losses






Allowance for Credit Losses, Beginning of Quarter

$         30,784


$         29,232


$         27,661

Loans Charged-off

(1,280)


(1,261)


(907)

Less Recoveries of Loans Previously Charged-off

718


572


431

Net Loans Charged-off

(562)


(689)


(476)

Provision for Credit Losses

948


1,409


905

Allowance for Credit Losses, End of Quarter

$         31,170


$         29,952


$         28,090

Nonperforming Assets






Nonaccrual Loans

$           5,997


$         10,757


$           7,999

Loans Past Due 90 or More Days and Accruing

467


1,157


1,641

Loans Restructured and in Compliance with Modified Terms

67


69


77

Total Nonperforming Loans

6,531


11,983


9,717

Repossessed Assets

342


593


297

Other Real Estate Owned

182



Total Nonperforming Assets

$           7,055


$         12,576


$         10,014







Key Asset Quality Ratios






Net Loans Charged-off to Average Loans,

   Quarter-to-date Annualized

0.07 %


0.09 %


0.07 %

Provision for Credit Losses to Average Loans,

  Quarter-to-date Annualized

0.13 %


0.19 %


0.13 %

Allowance for Credit Losses to Period-End Loans

1.02 %


1.00 %


0.99 %

Allowance for Credit Losses to Period-End Nonperforming Loans

477.26 %


249.95 %


289.08 %

Nonperforming Loans to Period-End Loans

0.21 %


0.40 %


0.34 %

Nonperforming Assets to Period-End Assets

0.17 %


0.32 %


0.25 %







Year-to-Date Period Ended:

6/30/2023


12/31/2022


6/30/2022

Allowance for Credit Losses






Allowance for Credit Losses, Beginning of Year

$         29,952


$         27,281


$         27,281

Loans Charged-off

(2,608)


(4,143)


(1,736)

Less Recoveries of Loans Previously Charged-off

1,324


2,016


871

Net Loans Charged-off

(1,284)


(2,127)


(865)

Provision for Credit Losses

2,502


4,798


1,674

Allowance for Credit Losses, End of Period

$         31,170


$         29,952


$         28,090







Key Asset Quality Ratios






Net Loans Charged-off to Average Loans, Annualized

0.09 %


0.08 %


0.06 %

Provision for Loan Losses to Average Loans, Annualized

0.17 %


0.17 %


0.12 %

 

Cision View original content:https://www.prnewswire.com/news-releases/arrow-reports-6-0-million-in-q2-2023-net-income-loans-reach-record-high-of-3-1-billion-301895613.html

SOURCE Arrow Financial Corporation

FAQ

What were the financial results for Q2 2023?

Net income for Q2 2023 was $6.0 million with fully diluted earnings per share of $0.36.

What was the growth rate of total loans?

Total loans reached a record high of $3.1 billion, growing at an annualized rate of 8.6%.

What was the liquidity position of Arrow Financial Corporation?

Arrow Financial Corporation had strong liquidity of $376 million and additional $1.3 billion of immediately available liquidity.

What was the non-interest income for the quarter?

Non-interest income for Q2 2023 was $6.9 million.

What were the total assets of Arrow Financial Corporation?

Total assets were $4.1 billion at the end of Q2 2023.

Arrow Financial Corp

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