- Net loans grew by $38.8 million in the first quarter of 2019.
- First quarter net income increased 2.4% year-over-year to $8.7 million.
- First quarter diluted earnings per share (EPS) of $0.60.
- First quarter net interest income increased 3.5% over the prior-year comparable quarter.
- Continued strong profitability, asset quality and capital ratios.
GLENS FALLS, N.Y. (April 23, 2019) – Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three-month period ended March 31, 2019. Net income for the first quarter of 2019 was $8.7 million compared to $8.5 million in the first quarter of 2018. Steady loan growth continued in 2019, as net loans grew by $38.8 million to $2.21 billion. Driven primarily by this growth, net interest income increased to $21.1 million in the first quarter of 2019, compared to $20.4 million for the comparable quarter of 2018. Noninterest income, which includes revenues generated from insurance commissions and wealth management, contributed $6.9 million to total first quarter revenue of $28.0 million, a 2.6% increase over $27.3 million for the first quarter of 2018.
Annualized key profitability ratios remained strong, as measured by a return on average equity (ROE) of 12.98% and a return on average assets (ROA) of 1.19% for the first quarter, compared to 13.78% and 1.25%, respectively, a year earlier.
"Arrow continued its strong performance through the first quarter of the year," said President and CEO Thomas J. Murphy. "Steady loan growth was again a highlight, while our profitability, asset and capital ratios all reflect our solid foundation. Our team is committed to advancing community banking in the markets we serve, and I am very proud of their achievements.”
Cash Dividend: On March 15, 2019, the Company distributed a cash dividend of $0.26 per share. The March 15, 2019 cash dividend was 7.1% higher than the $0.25 cash dividend paid by the Company in the first quarter of 2018, when adjusted for the 3% stock dividend distributed on September 27, 2018.
The following expands on our first-quarter results:
Loan Growth: Over the twelve months ended March 31, 2019, total loans increased $242.2 million, or 12.2%, to $2.2 billion. The consumer loan portfolio grew by $120.2 million, or 19.2%, over the balance at March 31, 2018, primarily within the indirect automobile lending program. The total residential real estate loan portfolio increased $78.1 million, or 10.0%, over the balance at March 31, 2018. Total outstanding commercial loans increased $43.9 million, or 7.5% over the balance at March 31, 2018.
Deposit Growth: At March 31, 2019, deposit balances reached $2.5 billion, up $78.8 million, or 3.3%, from the prior-year level with growth in both personal and business balances. Noninterest-bearing deposits represented 18.2% of total deposits at March 31, 2019, compared to 18.8% at March 31, 2018. At March 31, 2019, other time deposits were $263.0 million, an increase of $95.9 million compared to the prior year.
Net Interest Income: Driven by strong loan growth, first quarter 2019 net interest income increased to $21.1 million, up 3.5% from $20.4 million in the comparable quarter of 2018. The net interest margin was 3.01% for the quarter, compared to 3.13% for the first quarter of 2018. The decrease in net interest margin was primarily due to increased rates on money market savings, time deposits and other borrowings as a result of higher short-term interest rates.
Noninterest Income: Noninterest income for the three-month period ended March 31, 2019, was $6.9 million, compared to $6.9 million in the comparable 2018 quarter. Revenue generated from the wealth management and insurance segments, remained consistent, and total noninterest income represented 24.6% of total revenues in the first quarter of 2019 compared to 25.2% for the same period of 2018.
Noninterest Expense: Noninterest expense for the first quarter of 2019 increased 4.4% to $16.7 million, from $16.0 million for the first quarter of 2018. Technology and equipment expense increased $443 thousand, and other operating expense increased $228 thousand from the comparable quarter in 2018.
Provision for Income Taxes: The provision for income taxes was $2.2 million in the first quarter of 2019 versus $2.1 million in the same quarter of 2018. The effective income tax rates for the three-month periods ended March 31, 2019 and 2018 were 19.8% and 19.4%, respectively.
Asset Quality: Asset quality remained strong at March 31, 2019, helped by continuing low levels of nonperforming loans and net charge-offs. Nonperforming loans at March 31, 2019, were $5.3 million, down $174.0 thousand from the level at December 31, 2018. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.05% for the three-month period ended March 31, 2019, down from the prior-year comparable quarter of 0.06%. The allowance for loan losses was $20.4 million at March 31, 2019, which represented 0.91% of loans outstanding, as compared to 0.96% at March 31, 2018. The loss provision expense for the first quarter of 2019 was $472 thousand, down $274 thousand from the provision for the comparable 2018 quarter.
Capital: Total stockholders’ equity was a record $276.6 million at March 31, 2019, up $23.9 million, or 9.4%, from the comparable quarter of 2018. Overall regulatory capital ratios also remained strong in 2019, with the Company's common equity tier 1 ratio estimated to be 12.98% and the total risk-based capital ratio estimated to be 14.93% at March 31, 2019. These capital levels at the Company and both its subsidiary banks continue to significantly exceed the "well capitalized" regulatory standard.
Industry Recognition: Both of the Company's 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 48 and 40 quarters, respectively.
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. 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. and Upstate Agency, LLC.
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). 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."
Safe Harbor Statement: 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, 2018, and other filings with the Securities and Exchange Commission.
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