Arrow Reports Increase in First-Quarter Net Income; Double Digit Loan Growth Continues

Author: Shannon MacCue Kavanaugh/Monday, April 23, 2018/Categories: News Release

  • First-quarter net income increased 28.7% year over year to $8.5 million.
  • First-quarter diluted earnings per share (EPS) rose 29.8% to $0.61.
  • Period-end total loans reached a record high of $2.0 billion, up 10.1% year over year.
  • First-quarter net interest income increased 10.5% over the prior year comparable quarter.
  • New record highs for total assets, total deposits, total equity and assets under management and trust administration.
  • Continued strong ratios for profitability, asset quality and capital.

GLENS FALLS, N.Y. (April 23, 2018) – Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three -month period ended March 31, 2018. Net income for the first quarter of 2018 was $8.5 million, an increase of $1.9 million, or 28.7%, from net income of $6.6 million a year earlier. Diluted earnings per share (EPS) for the first quarter was $0.61, an increase of 29.8% from diluted EPS of $0.47 during the comparable 2017 quarter.

Income before taxes for the first quarter of 2018 increased $1.3 million to $10.6 million, up 13.6% from $9.3 million in the same quarter of 2017. Additionally, first quarter 2018 results were further positively impacted by reduced tax rates pursuant to the Tax Cuts and Jobs Act of 2017 ("Tax Act").

Annualized key profitability ratios continue to remain strong, as measured by a return on average equity (ROE) of 13.78% and a return on average assets (ROA) of 1.25% for the first quarter, compared to 11.43% and 1.02% a year earlier.

Arrow President and CEO Thomas J. Murphy stated, "Our first-quarter results demonstrate the forward momentum and strength of our Company. We continue to experience significant loan growth and strong asset quality, and again have set new records for total assets, total deposits, total equity and assets under management and administration. We are continuing to evaluate how we can best deliver the value created by the tax reform, based on our strategic plan and our commitment to our customers, our employees, our shareholders and the communities in which we do business."

The following expands upon first-quarter results:

Net Interest Income: In the first quarter of 2018, net interest income on a GAAP basis increased to $20.4 million, up 10.5% over the $18.5 million total in the comparable quarter of 2017. Net interest margin for the first quarter of 2018 was 3.13%, up from 2.99% for the first quarter of 2017. On a tax equivalent (non-GAAP) basis, net interest income increased by 7.6% compared to the first quarter of 2017. Net interest margin, measured on a tax equivalent (non-GAAP) basis, increased to 3.21% from 3.15% in the prior year comparable quarter. Continued strong loan growth, in addition to higher market rates, were the primary drivers of the increase in interest income. Meanwhile, non-interest bearing deposit growth and low deposit rate sensitivities allowed us to maintain a relatively low cost of funds.

Loan Growth: Over the 12 months ended March 31, 2018, total loans increased to a record high of $2.0 billion, up $182.2 million, or 10.1%, from the March 31, 2017 level. During the first quarter of 2018, total loans grew by $42.3 million, or 2.2%, as compared to the fourth quarter of 2017. There was growth in all three major loan segments: commercial, consumer, and residential real estate.

During the first quarter of 2018, the consumer loan portfolio grew $23.8 million, or 4.0%, to $627 million at period-end. This balance exceeded the prior year's balance by $74.7 million, or 13.5%. The increase was primarily a result of growth in the indirect automobile lending program. Total outstanding commercial loans increased 1.6% during the first quarter to $582.7 million, and were up $28.6 million, or 5.2%, from March 31, 2017. The residential real estate loan portfolio increased $9.2 million, or 1.2%, during the first quarter of 2018 to $783.7 million, up $79.0 million, or 11.2%, over the balance at March 31, 2017.

Deposit Growth: At March 31, 2018, deposit balances reached $2.4 billion, up $154.7 million, or 6.9%, from the prior-year level with growth in both personal and business accounts. Noninterest-bearing demand deposits increased $49.8 million, or 12.4%, from the prior-year level, which had a positive impact on the net interest margin. Noninterest-bearing demand deposits represented 18.8% of total deposits at March 31, 2018, compared to 17.8% at March 31, 2017. The first quarter increase in deposit balances also included seasonal municipal deposit growth and the use of brokered deposits to diversify balance sheet funding.

Noninterest Income: Noninterest income for the three-month period ended March 31, 2018, increased 2.9% from the comparable 2017 quarter. Income from fiduciary activities increased during the quarter by $179 thousand, or 8.9%, over the amount for the first quarter of 2017.

Assets Under Management: Assets under trust administration and investment management reached a record high of $1.5 billion at March 31, 2018, increasing by $136.5 million, or 10.2%, from the balance at March 31, 2017, primarily due to the performance of the equity markets.

Noninterest Expenses: Noninterest expense for the first quarter of 2018 increased to $16.0 million, an increase of $480 thousand, or 3.1%, from $15.5 million for the first quarter of 2017. Salaries and employee benefits increased in the first quarter of 2018 by $222 thousand, or 2.4%, over the same 2017 quarter.

Provision for Income Taxes: The provision for income taxes was $2.1 million in the first quarter of 2018 versus $2.7 million in the same quarter of 2017. The effective income tax rates for the three-month periods ended March 31, 2018 and 2017 were 19.4% and 28.9%, respectively. The decrease in the effective income tax rate in the 2018 period reflects the impact of the Tax Act.

Asset Quality: Asset quality remained strong at March 31, 2018, as measured by continuing low levels of nonperforming assets and net charge-offs. Nonperforming assets at March 31, 2018, were $6.2 million, up $107 thousand, or 1.8%, from the prior-year level. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.06% for the three-month period ended March 31, 2018, up slightly from the prior year comparable quarter of 0.03%.

Allowance for loan losses was $19.1 million at March 31, 2018, which represented 0.96% of loans outstanding. The provision for loan losses for the first quarter of 2018 was $746 thousand, up $388 thousand from the provision for the comparable 2017 quarter.

Capital: Total stockholders’ equity was a record $252.7 million at period-end, up $16.6 million, or 7.0%, from the prior-year. This increase exceeded the 6.4% increase in total assets over the same period. Overall regulatory capital ratios also remain strong in 2018. At March 31, 2018, the Company's Common Equity Tier 1 Ratio was estimated to be 12.97% and the Total Risk-Based Capital Ratio was estimated to be 15.04%. These capital levels at the Company and both its subsidiary banks continue to significantly exceed the "well capitalized" regulatory standard.

Cash and Stock Dividends: The Company distributed a cash dividend of $0.25 per share to shareholders in the first quarter of 2018. The cash dividend was 3% higher than the cash dividend paid in the first quarter of 2017 when adjusted for our 3.0% stock dividend distributed on September 28, 2017.

Industry Recognition: Both of the Company's two banking subsidiaries maintained their BauerFinancial, Inc. 5-Star Superior Bank rating. Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company have continued to earn this designation for the last 44 and 36 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.; Upstate Agency, LLC, specializing in property and casualty insurance; and Capital Financial Group, Inc., specializing in the sale and servicing of group health plans.

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). The following 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. Certain 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 the Company from time to time are useful in evaluating the Company'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."

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, 2017, and other filings with the Securities and Exchange Commission.

To view the full tables for this earnings release, please Click Here »


Number of views (26812)/Comments (0)