Arrow Reports Record High Net Income of $24.7 Million for 2015

Arrow Reports Record High Net Income of $24.7 Million for 2015

- Net income for 2015 reached a record high of $24.7 million.

- Diluted EPS was a record $1.91 for the full year and increased to $0.51 in the fourth quarter.

- Fourth-quarter net interest income rose 8.2% year over year on a tax-equivalent basis.

- Period-end loan portfolio balances hit a record high; increased 11.4% since prior year-end.

- Total deposit balances increased 6.7% to $2.03 billion at year-end.

PR Newswire

GLENS FALLS, N.Y., Jan. 21, 2016

GLENS FALLS, N.Y., Jan. 21, 2016 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three- and twelve-month periods ended December 31, 2015. Net income for the fourth quarter of 2015 was $6.6 million, an increase of $200 thousand, or 3.1%, from net income of $6.4 million for the fourth quarter of 2014. Diluted earnings per share (EPS) for the quarter was $0.51, an increase of 4.1% from the comparable 2014 quarter, when diluted EPS was $0.49. For the year ended December 31, 2015, net income was a record $24.7 million, up 5.6% over net income of $23.4 million for 2014, while diluted EPS was a record $1.91, up 5.4% over $1.81 in 2014. Return on average equity (ROE) and return on average assets (ROA) were 11.86% and 1.05%, respectively, for the year, as compared to 11.79% and 1.07%, respectively, for 2014.

Arrow President and CEO Tom Murphy stated, "Arrow delivered excellent results in 2015, thanks to the combined efforts of our dedicated team. A major highlight for the year was the double-digit growth of our loan portfolio, which reached a new record high at year-end, while maintaining our commitment to strong asset quality. We also set new records for net income and total equity at year-end, and our profitability measurements remained strong."

The following list expands on our fourth-quarter and year-to-date results:

Net Interest Income:  Our net interest income, on a tax-equivalent basis, increased $1.4 million, or 8.2%, in the fourth quarter of 2015, as compared to the fourth quarter of 2014, due primarily to an increase in the average level of interest-earning assets between the periods and a decrease in our cost of funds. Our tax-equivalent net interest margin was 3.15% for the fourth quarter of 2015, down from 3.17% in the fourth quarter of 2014, and up slightly from 3.14% in the third quarter of 2015. While the yield on earning assets decreased slightly compared to the prior-year period, the cost of our interest-bearing liabilities decreased even more as these liabilities have continued to reprice downward in this historically low interest rate environment. Our average cost of funds in the fourth quarter of 2015, as compared to the prior-year period, fell six basis points from 0.32% to 0.26%; while our average yield on earning assets decreased by three basis points.

Loan Growth:  At December 31, 2015, our loan portfolio reached a record high of $1.574 billion, up $160.7 million, or 11.4%, from the prior-year level, due to growth in all three of our major segments: commercial, consumer and residential real estate.

The outstanding balance of our residential real estate loan portfolio at December 31, 2015, was 15.9% higher than at year-end 2014. During 2015, we originated $144.2 million of residential real estate loans, up 9.9% from approximately $131.2 million in 2014. We retained a higher percentage of our residential real estate loan originations in 2015 than in 2014 as yields began to rise. Our gain on the sale of residential real estate loan originations in 2015 was less than our gain on the sale of originations in 2014 due both to a decrease in the amount of loans sold and a narrowing of the premium received on these sales.

Deposit Growth:  At December 31, 2015, our deposit balances reached $2.03 billion, up $127.5 million, or 6.7%, from the prior-year level. Noninterest-bearing deposits grew $58.0 million or 19.3% from the prior-year level, which has positively impacted net interest margin. Noninterest-bearing demand deposits represent 17.7% of total deposits at year-end, up from 15.8% as of the prior-year level.

Assets Under Management and Related Noninterest Income:  Assets under trust administration and investment management at December 31, 2015, rose to $1.233 billion, a slight increase of $6 million, or 0.5%, from the December 31, 2014, balance of $1.227 billion. The growth in balances was generally attributable to a net gain in market value of accounts, which has since declined in 2016, as well as the addition of new accounts. For the 2015 fourth quarter, income from fiduciary activities of $1.9 million was up 1.5% from the same period in 2014.

Insurance Agency Operations:  Insurance income for the fourth quarter of 2015 declined $149 thousand, or 6.6%, to $2.12 million from $2.27 million in 2014. This decrease was primarily attributable to the October 2015 sale of our wholly-owned subsidiary specializing in offering insurance services to out-of-market amateur sports management associations.

Asset Quality:  Asset quality remained strong, as measured by our low level of nonperforming assets and charge-offs. Nonperforming assets of $8.9 million at December 31, 2015, represented only 0.36% of period-end assets, a ratio that is below industry averages and below 0.37% from the prior year-end. Our net loan losses for the full year were 0.06% of average loans outstanding for 2015 and 0.05% for 2014. Net loan losses for the fourth quarter of 2015, expressed as an annualized percentage of average loans outstanding, were 0.05%. These asset quality ratios continue to be significantly lower than our peer group and industry averages.

Our allowance for loan losses was $16.0 million at December 31, 2015, which represented 1.02% of loans outstanding, a decrease of eight basis points from our ratio of 1.10% at year-end 2014.

Cash and Stock Dividends:  A cash dividend of $0.25 per share was paid to our shareholders in the fourth quarter of 2015, 2% higher than the cash dividend paid in the 2014 quarter. This represents the 22nd consecutive year of an increased cash dividend. In September 2015, we distributed a 2% stock dividend. All prior-period and per share data have been adjusted accordingly.

Capital:  Total shareholders' equity grew to a record $214.0 million at period-end, an increase of $13.0 million, or 6.5%, above the year-end 2014 balance. Arrow's capital ratios remained strong in 2015. At December 31, 2015, the Company's CET1 ratio was 9.59%  and total risk-based capital ratio was 15.54%. The capital ratios of the Company and both its subsidiary banks continue to significantly exceed the "well capitalized" regulatory standards, which places us in the highest current regulatory category.

Peer Group:  Many of our key operating ratios have consistently compared favorably to our peer group, which we define as all U.S. bank holding companies having $1.0 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 nine-month period ended September 30, 2015, in which our return on average equity (ROE) was 11.70%, as compared to 8.61% for our peer group.

As of September 30, 2015, our ratio of loans 90 days past due and accruing, plus nonaccrual loans to total loans was 0.57%, as compared to 0.87% for our peer group, while our annualized net loan losses of 0.06% for the year-to-date period ending September 30, 2015, were below the peer result of 0.08%.

Industry Recognition: In the fourth quarter, Arrow was named to Bank Director Magazine's annual "Bank Performance Scorecard" list of the top-performing banks in the country. This follows other recognitions in 2015, including being named one of "America's 50 Most Trustworthy Companies" by Forbes; appearing on the American Banker Magazine top-performer list; and receiving the Raymond James Community Bankers Cup for our 2014 financial performance.

In addition, the Company's two banking subsidiaries were each recognized as a 5-Star Superior Bank by BauerFinancial, Inc., a nationwide bank rating and research firm, based on September 30, 2015, financial data. Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company have each earned this designation for the past 35 and 27 quarters, respectively.

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.; two property and casualty insurance agencies: 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, 2014, 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

Twelve Months Ended

December 31,

December 31,

2015

2014

2015

2014

INTEREST AND DIVIDEND INCOME






Interest and Fees on Loans

$

14,903

$

13,758

$

56,856

$

53,194

Interest on Deposits at Banks

34

39

94

80

Interest and Dividends on Investment Securities:






Fully Taxable

2,107

1,986

8,043

7,954

Exempt from Federal Taxes

1,466

1,357

5,745

5,633

Total Interest and Dividend Income

18,510

17,140

70,738

66,861

INTEREST EXPENSE






NOW Accounts

316

377

1,276

1,722

Savings Deposits

203

176

741

839

Time Deposits of $100,000 or More

89

144

356

770

Other Time Deposits

176

269

742

1,354

Federal Funds Purchased and

  Securities Sold Under Agreements to Repurchase

5

7

20

22

Federal Home Loan Bank Advances

293

103

1,097

490

Junior Subordinated Obligations Issued to

  Unconsolidated Subsidiary Trusts

149

143

581

570

Total Interest Expense

1,231

1,219

4,813

5,767

NET INTEREST INCOME

17,279

15,921

65,925

61,094

Provision for Loan Losses

465

441

1,347

1,848

NET INTEREST INCOME AFTER PROVISION FOR

   LOAN LOSSES

16,814

15,480

64,578

59,246

NONINTEREST INCOME






Income From Fiduciary Activities

1,855

1,828

7,762

7,468

Fees for Other Services to Customers

2,316

2,337

9,220

9,261

Insurance Commissions

2,118

2,267

8,967

9,455

Net Gain on Securities Transactions

23

—

129

110

Net Gain on Sales of Loans

204

282

692

784

Other Operating Income

171

346

1,354

1,238

Total Noninterest Income

6,687

7,060

28,124

28,316

NONINTEREST EXPENSE






Salaries and Employee Benefits

8,487

7,638

33,064

30,941

Occupancy Expenses, Net

2,161

2,067

9,267

8,990

FDIC Assessments

313

289

1,186

1,117

Other Operating Expense

3,281

3,305

13,913

12,980

Total Noninterest Expense

14,242

13,299

57,430

54,028

INCOME BEFORE PROVISION FOR INCOME TAXES

9,259

9,241

35,272

33,534

Provision for Income Taxes

2,690

2,872

10,610

10,174

NET INCOME

$

6,569

$

6,369

$

24,662

$

23,360

Average Shares Outstanding1:






Basic

12,918

12,867

12,894

12,856

Diluted

12,979

12,908

12,942

12,886

Per Common Share:






Basic Earnings

$

0.51

$

0.49

$

1.91

$

1.82

Diluted Earnings

0.51

0.49

1.91

1.81

1 Share and per share data have been restated for the September 28, 2015, 2% stock dividend.

 

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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







December 31,
2015

December 31,
2014

ASSETS


Cash and Due From Banks

$

34,816

$

35,081

Interest-Bearing Deposits at Banks

16,252

11,214

Investment Securities:


Available-for-Sale

402,309

366,139

Held-to-Maturity (Approximate Fair Value of $325,930 at

  December 31, 2015, and $308,566 at December 31, 2014)

320,611

302,024

Other Investments

8,839

4,851

Loans

1,573,952

1,413,268

Allowance for Loan Losses

(16,038)

(15,570)

Net Loans

1,557,914

1,397,698

Premises and Equipment, Net

27,440

28,488

Goodwill

21,873

22,003

Other Intangible Assets, Net

3,107

3,625

Other Assets

53,027

46,297

Total Assets

$

2,446,188

$

2,217,420

LIABILITIES


Noninterest-Bearing Deposits

$

358,751

$

300,786

NOW Accounts

887,317

871,671

Savings Deposits

594,538

524,648

Time Deposits of $100,000 or More

59,792

61,797

Other Time Deposits

130,025

144,046

Total Deposits

2,030,423

1,902,948

Federal Funds Purchased and

  Securities Sold Under Agreements to Repurchase

23,173

19,421

Federal Home Loan Bank Overnight Advances

82,000

41,000

Federal Home Loan Bank Term Advances

55,000

10,000

Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts

20,000

20,000

Other Liabilities

21,621

23,125

Total Liabilities

2,232,217

2,016,494

STOCKHOLDERS' EQUITY


Preferred Stock, $5 Par Value; 1,000,000 Shares Authorized


—

Common Stock, $1 Par Value; 20,000,000 Shares Authorized

   (17,420,776 Shares Issued at December 31, 2015, and

   17,079,376 Shares Issued at December 31, 2014)

17,421

17,079

Additional Paid-in Capital

250,680

239,721

Retained Earnings

32,139

29,458

Unallocated ESOP Shares (55,275 Shares at December 31, 2015, and

  71,748 Shares at December 31, 2014)

(1,100)

(1,450)

Accumulated Other Comprehensive Loss

(7,972)

(7,166)

Treasury Stock, at Cost (4,426,072 Shares at December 31, 2015, and

  4,386,001 Shares at December 31, 2014)

(77,197)

(76,716)

Total Stockholders' Equity

213,971

200,926

Total Liabilities and Stockholders' Equity

$

2,446,188

$

2,217,420

 

 

Arrow Financial Corporation

Selected Quarterly Information

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


















Quarter Ended

12/31/2015

9/30/2015

6/30/2015

3/31/2015

12/31/2014

Net Income

$

6,569

$

5,933

$

6,305

$

5,855

$

6,369

Transactions Recorded in Net Income (Net of Tax):








Net Gain on Securities Transactions

14

—

10

54

—

Share and Per Share Data:1








Period End Shares Outstanding

12,939

12,905

12,875

12,880

12,874

Basic Average Shares Outstanding

12,918

12,888

12,886

12,886

12,867

Diluted Average Shares Outstanding

12,979

12,929

12,922

12,924

12,908

Basic Earnings Per Share

$

0.51

$

0.46

$

0.49

$

0.45

$

0.49

Diluted Earnings Per Share

0.51

0.46

0.49

0.45

0.49

Cash Dividend Per Share

0.250

0.245

0.245

0.245

0.245

Selected Quarterly Average Balances:








Interest-Bearing Deposits at Banks

$

44,603

$

17,788

$

37,303

$

30,562

$

58,048

Investment Securities

716,947

711,830

701,329

673,753

664,334

Loans

1,556,234

1,502,620

1,456,534

1,422,005

1,401,601

Deposits

2,075,825

1,970,738

1,983,647

1,949,776

1,962,698

Other Borrowed Funds

127,471

148,887

99,994

69,034

56,185

Shareholders' Equity

213,219

209,334

206,831

202,552

202,603

Total Assets

2,442,964

2,356,121

2,316,427

2,248,054

2,247,576

Return on Average Assets

1.07

%

1.00

%

1.09

%

1.06

%

1.12

%

Return on Average Equity

12.22

%

11.24

%

12.23

%

11.72

%

12.47

%

Return on Tangible Equity2

13.86

%

12.79

%

13.94

%

13.42

%

14.28

%

Average Earning Assets

$

2,317,784

$

2,232,238

$

2,195,166

$

2,126,320

$

2,123,983

Average Paying Liabilities

1,854,548

1,772,156

1,770,023

1,713,253

1,716,699

Interest Income, Tax-Equivalent

19,619

18,924

18,501

18,073

18,213

Interest Expense

1,231

1,253

1,243

1,086

1,219

Net Interest Income, Tax-Equivalent

18,388

17,671

17,258

16,987

16,994

Tax-Equivalent Adjustment

1,109

1,093

1,094

1,083

1,073

Net Interest Margin 3

3.15

%

3.14

%

3.15

%

3.24

%

3.17

%

Efficiency Ratio Calculation:










Noninterest Expense

$

14,242

$

14,850

$

14,383

$

13,955

$

13,299

Less: Intangible Asset Amortization

(78)

(79)

(80)

(91)

(94)

Net Noninterest Expense

$

14,164

$

14,771

$

14,303

$

13,864

$

13,205

Net Interest Income, Tax-Equivalent

$

18,388

$

17,671

$

17,258

$

16,987

$

16,994

Noninterest Income

6,687

7,137

7,444

6,856

7,060

Less: Net Securities Gains

(23)

—

(16)

(90)

—

Net Gross Income

$

25,052

$

24,808

$

24,686

$

23,753

$

24,054

Efficiency Ratio

56.54

%

59.54

%

57.94

%

58.37

%

54.90

%

Period-End Capital Information:








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

$

213,971

$

211,142

$

206,947

$

204,965

$

200,926

Book Value per Share

16.54

16.36

16.07

15.91

15.61

Intangible Assets

24,980

25,266

25,372

25,492

25,628

Tangible Book Value per Share 2

14.61

14.40

14.10

13.93

13.62

Capital Ratios:








Tier 1 Leverage Ratio

9.59

%

9.40

%

9.41

%

9.57

%

9.44

%

Common Equity Tier 1 Capital Ratio

12.82

%

12.66

%

12.92

%

13.27

%

N/A

Tier 1 Risk-Based Capital Ratio

14.08

%

13.93

%

14.24

%

14.65

%

14.47

%

Total Risk-Based Capital Ratio

15.09

%

14.94

%

15.28

%

15.73

%

15.54

%

Assets Under Trust Administration

  and Investment Management

$

1,232,890

$

1,195,629

$

1,246,849

$

1,254,823

$

1,227,179

 

1Share and Per Share Data have been restated for the September 28, 2015, 2% stock dividend.
2Tangible 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.
3Net 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
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 28, 2015, 2% stock dividend.

2.

Tangible Book Value and Tangible Equity exclude goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures which we believe provide investors with information that is useful in understanding our financial performance.

12/31/2015

9/30/2015

6/30/2015

3/31/2015

12/31/2014

Total Stockholders' Equity (GAAP)

$

213,971

$

211,142

$

206,947

$

204,965

$

200,926

Less: Goodwill and Other Intangible assets, net

24,980

25,266

25,372

25,492

25,628

Tangible Equity (Non-GAAP)

$

188,991

$

185,876

$

181,575

$

179,473

$

175,298












Period End Shares Outstanding

12,939

12,905

12,875

12,880

12,874

Tangible Book Value per Share (Non-GAAP)

$

14.61

$

14.40

$

14.10

$

13.93

$

13.62











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.

12/31/2015

9/30/2015

6/30/2015

3/31/2015

12/31/2014

Net Interest Income (GAAP)

$

17,279

$

16,578

$

16,164

$

15,904

$

15,921

Add: Tax-Equivalent adjustment (Non-GAAP)

1,109

1,093

1,094

1,083

1,073

Net Interest Income - Tax Equivalent (Non-GAAP)

$

18,388

$

17,671

$

17,258

$

16,987

$

16,994

Average Earning Assets

2,317,784

2,232,238

2,195,166

2,126,320

2,123,983

Net Interest Margin (Non-GAAP)*

3.15

%

3.14

%

3.15

%

3.24

%

3.17

%









4.

Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. We believe the efficiency ratio provides investors with information that is useful in understanding our financial performance. We define our efficiency ratio as the ratio of our noninterest expense to our net gross income (which equals our tax-equivalent net interest income plus noninterest income, as adjusted).









5.

Common Equity Tier 1 Capital Ratio (CET1) is a new regulatory capital measure applicable to financial institutions, effective January 1, 2015. 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, these new bank regulatory capital rules. All prior quarters reflect actual results. The December 31, 2015 CET1 ratio listed in the tables (i.e., 12.82%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).

12/31/2015

9/30/2015

6/30/2015

3/31/2015

12/31/2014

Total Risk Weighted Assets

1,590,129

1,574,704

$

1,515,416

$

1,452,975

N/A

Common Equity Tier 1 Capital

213,970

199,377

$

195,800

$

192,865

N/A

Common Equity Tier 1 Ratio

12.82

%

12.66

%

12.92

%

13.27

%

N/A

 

   * Quarterly ratios have been annualized

 

 

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)






Quarter Ended:

12/31/2015

12/31/2014

Loan Portfolio


Commercial Loans

$

102,587

$

99,511

Commercial Real Estate Loans

384,939

340,112

  Subtotal Commercial Loan Portfolio

487,526

439,623

Consumer Loans

464,523

437,041

Residential Real Estate Loans

621,903

536,604

Total Loans

$

1,573,952

$

1,413,268

Allowance for Loan Losses


Allowance for Loan Losses, Beginning of Quarter

$

15,774

$

15,293

Loans Charged-off

(271)

(251)

Recoveries of Loans Previously Charged-off

70

87

Net Loans Charged-off

(201)

(164)

Provision for Loan Losses

465

441

Allowance for Loan Losses, End of Quarter

$

16,038

$

15,570

Nonperforming Assets


Nonaccrual Loans

$

6,433

$

6,899

Loans Past Due 90 or More Days and Accruing

187

537

Loans Restructured and in Compliance with Modified Terms

286

333

Total Nonperforming Loans

6,906

7,769

Repossessed Assets

140

81

Other Real Estate Owned

1,878

312

Total Nonperforming Assets

$

8,924

$

8,162

Key Asset Quality Ratios


Net Loans Charged-off to Average Loans, Quarter-to-date

  Annualized

0.05

%

0.05

%

Provision for Loan Losses to Average Loans, Quarter-to-date

  Annualized

0.12

%

0.12

%

Allowance for Loan Losses to Period-End Loans

1.02

%

1.10

%

Allowance for Loan Losses to Period-End Nonperforming Loans

232.24

%

200.41

%

Nonperforming Loans to Period-End Loans

0.44

%

0.55

%

Nonperforming Assets to Period-End Assets

0.36

%

0.37

%

Twelve-Month Period Ended:


Allowance for Loan Losses


Allowance for Loan Losses, Beginning of Year

$

15,570

$

14,434

Loans Charged-off

(1,106)

(1,021)

Recoveries of Loans Previously Charged-off

227

309

Net Loans Charged-off

(879)

(712)

Provision for Loan Losses

1,347

1,848

Allowance for Loan Losses, End of Year

$

16,038

$

15,570

Key Asset Quality Ratios


Net Loans Charged-off to Average Loans

0.06

%

0.05

%

Provision for Loan Losses to Average Loans

0.09

%

0.14

%

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/arrow-reports-record-high-net-income-of-247-million-for-2015-300207894.html

SOURCE Arrow Financial Corporation

Copyright CNW Group 2016