ARROW FINANCIAL CORPORATION GLENS FALLS, N.Y., Jan. 21, 2015 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® - AROW) announced operating results for the three- and twelve-month periods ended December 31, 2014. Net income for the fourth quarter of 2014 was $6.4 million, an increase of $585,000, or 10.1%, from net income of $5.8 million for the fourth quarter of 2013. Diluted earnings per share (EPS) for the quarter was $0.50, an increase of 8.7% from the comparable 2013 quarter, when diluted EPS was $0.46. For the year ended December 31, 2014, net income was a record $23.4 million, up 7.2% over net income of $21.8 million for 2013, while diluted EPS was a record $1.85, up 6.9% over $1.73 in 2013. Return on average equity and return on average assets were 11.79% and 1.07%, respectively, for the year ended December 31, 2014, as compared to 12.11% and 1.04%, respectively, for 2013.
Arrow President and CEO Tom Murphy stated, "Arrow's 2014 performance was very strong, thanks to the combined efforts of our team. A major highlight for the year was the double-digit growth of our loan portfolio to a record high at year-end, while maintaining our commitment to strong asset quality. Record highs were also reached for net income, assets under trust administration and total equity at year-end, and our profitability measurements remained strong. I am very proud of our entire staff for achieving these results."
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 $1.1 million, or 6.7%, in the fourth quarter of 2014, as compared to the fourth quarter of 2013, 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 3.17% for the fourth quarter of 2014, up from 3.06% in the fourth quarter of 2013, although down slightly from 3.21% in the third quarter of 2014. While the yield on earning assets held steady compared to the prior-year period, the cost of our interest-bearing liabilities decreased significantly as these liabilities have continued to reprice downward in this low interest rate environment. Our average cost of funds in the fourth quarter of 2014, as compared to the prior-year period, fell 12 basis points from 0.40% to 0.28%; our average yield on earning assets increased by one basis point.
Loan Growth: At December 31, 2014, our loan portfolio reached a record high of $1.413 billion, up $146.8 million, or 11.6%, from the prior-year level, due to growth in all three of our major segments: residential real estate, commercial and commercial real estate, and automobile.
The outstanding balance of our residential real estate loan portfolio at December 31, 2014, was 16.5% higher than at year-end 2013. During 2014, we originated over $131.2 million of residential real estate loans, up 10.3% from approximately $118.9 million in 2013. We retained more residential real estate loan originations in 2014 than we sold as yields began to rise. Our gain on the sale of residential real estate loan originations in 2014 was significantly less than our gain on the sale of originations in 2013 due both to a decrease in the amount of loans sold and to a narrowing of the premium received on these sales.
Trust Assets and Related Noninterest Income: Assets under trust administration and investment management at December 31, 2014, rose to a record high of $1.227 billion, an increase of $52 million, or 4.5%, from the December 31, 2013, balance of $1.175 billion. The growth in balances was generally attributable to an increase in the market value of accounts, principally reflecting improvements in the equity markets during the year, and the addition of new accounts. For the 2014 fourth quarter, income from fiduciary activities of $1.8 million was up 6.6% from the same period in 2013.
Insurance Agency Operations: Insurance income for 2014 rose $560,000, or 6.3%, to $9.5 million from $8.9 million in 2013. This increase was attributable to organic growth of insurance commissions within our agency operations.
Asset Quality: Asset quality remained strong, as measured by our low level of nonperforming assets and charge-offs. Nonperforming assets of $8.2 million at December 31, 2014, represented only 0.37% of period-end assets, a ratio that is below industry averages and unchanged from the prior year-end. Our net loan losses for the full year were 0.05% for 2014 and 0.09% for 2013. Net loan losses for the fourth quarter of 2014, expressed as an annualized percentage of average loans outstanding, were 0.05%, also lower than our peer group and industry averages.
Our allowance for loan losses was $15.6 million at December 31, 2014, which represented 1.10% of loans outstanding, a decrease of four basis points from our ratio of 1.14% at year-end 2013.
Cash and Stock Dividends: A cash dividend of $0.25 per share was paid to our shareholders in the fourth quarter of 2014, 2% higher than the cash dividend paid in the 2013 quarter. This represents the 21st consecutive year of an increased cash dividend. In September 2014, 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 $200.9 million at period-end, an increase of $8.8 million, or 4.6%, above the year-end 2013 balance. Arrow's capital ratios remained strong in 2014. At December 31, 2014, the Tier 1 leverage ratio at the holding company level was 9.44%, up from 9.19% at year-end 2013, and total risk-based capital ratio was 15.54%, as compared to 15.77% for the prior year. The capital ratios of the Company and both of 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 very 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, 2014, in which our return on average equity (ROE) was 11.52%, as compared to 8.44% for our peer group.
Our ratio of loans 90 days past due and accruing, plus nonaccrual loans to total loans was 0.55% as of September 30, 2014, as compared to 1.14% for our peer group, while our annualized net loan losses of 0.06% for the year-to-date period ending September 30, 2014, were well below the peer result of 0.15%.
Overall, our operating results and asset quality ratios have withstood the economic stress of recent years much better than most banks in our national peer group.
Industry Recognition: In the fourth quarter, Arrow was named to the Sandler O'Neill "Sm-All Stars Class of 2014," a list of 35 top-performing small-cap banks and thrifts in the country. To create the list, Sandler O'Neill + Partners, L.P. evaluated all 443 publicly traded banks and thrifts with a market cap between $25 million and $2.5 billion based on growth, profitability, credit quality and capital strength metrics. Arrow was one of a dozen newcomers named to the Class of 2014, and the only bank based in Upstate New York.
In addition, Arrow's banking subsidiaries were each recognized as a 5-Star Superior bank by BauerFinancial, Inc., a national bank rating and research firm, based on September 30, 2014, financial data. Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company have each earned this designation for the past 31 and 23 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.; three property and casualty insurance agencies: Loomis & LaPann, Inc., 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, 2013, and our other filings with the Securities and Exchange Commission.
Website: arrowfinancial.com
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,
2014 2013 2014 2013
---- ---- ---- ----
INTEREST AND DIVIDEND INCOME
Interest and Fees on
Loans $13,758 $13,040 $53,194 $51,319
Interest on Deposits at
Banks 39 32 80 89
Interest and Dividends on Investment
Securities:
Fully Taxable 1,986 1,912 7,954 6,903
Exempt from Federal
Taxes 1,357 1,475 5,633 5,827
----- ----- ----- -----
Total Interest and
Dividend Income 17,140 16,459 66,861 64,138
------ ------ ------ ------
INTEREST EXPENSE
NOW Accounts 377 474 1,722 2,461
Savings Deposits 176 239 839 1,024
Time Deposits of
$100,000 or More 144 277 770 1,198
Other Time Deposits 269 433 1,354 1,962
Federal Funds Purchased
and 7 4 22 18
Securities Sold Under Agreements to
Repurchase
Federal Home Loan Bank
Advances 103 141 490 680
Junior Subordinated
Obligations Issued to 143 145 570 579
Unconsolidated Subsidiary Trusts
Total Interest Expense 1,219 1,713 5,767 7,922
----- ----- ----- -----
NET INTEREST INCOME 15,921 14,746 61,094 56,216
Provision for Loan
Losses 441 - 1,848 200
--- --- ----- ---
NET INTEREST INCOME
AFTER PROVISION FOR 15,480 14,746 59,246 56,016
LOAN LOSSES
NONINTEREST INCOME
Income From Fiduciary
Activities 1,828 1,715 7,468 6,735
Fees for Other Services
to Customers 2,337 2,351 9,261 9,407
Insurance Commissions 2,267 2,287 9,455 8,895
Net Gain on Securities
Transactions - - 110 540
Net Gain on Sales of
Loans 282 189 784 1,460
Other Operating Income 346 335 1,238 1,024
--- --- ----- -----
Total Noninterest Income 7,060 6,877 28,316 28,061
----- ----- ------ ------
NONINTEREST EXPENSE
Salaries and Employee
Benefits 7,638 8,068 30,941 31,182
Occupancy Expenses, Net 2,067 2,008 8,990 8,285
FDIC Assessments 289 280 1,117 1,080
Other Operating Expense 3,305 3,029 12,980 12,656
----- ----- ------ ------
Total Noninterest
Expense 13,299 13,385 54,028 53,203
------ ------ ------ ------
INCOME BEFORE PROVISION
FOR INCOME TAXES 9,241 8,238 33,534 30,874
Provision for Income
Taxes 2,872 2,454 10,174 9,079
NET INCOME $6,369 $5,784 $23,360 $21,795
====== ====== ======= =======
Average Shares Outstanding(1):
Basic 12,614 12,586 12,604 12,542
Diluted 12,655 12,634 12,633 12,573
Per Common Share:
Basic Earnings $0.50 $0.46 $1.85 $1.74
Diluted Earnings 0.50 0.46 1.85 1.73
(1) Share and per share data have been restated for the September 29, 2014, 2% stock dividend.
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
December 31, 2014 December 31, 2013
----------------- -----------------
ASSETS
Cash and Due From Banks $35,081 $37,275
Interest-Bearing Deposits
at Banks 11,214 12,705
Investment Securities:
Available-for-Sale 366,139 457,606
Held-to-Maturity
(Approximate Fair Value of
$308,566 at 302,024 299,261
December 31, 2014, and $302,305 at December
31, 2013)
Other Investments 4,851 6,281
Loans 1,413,268 1,266,472
Allowance for Loan Losses (15,570) (14,434)
Net Loans 1,397,698 1,252,038
--------- ---------
Premises and Equipment, Net 28,488 29,154
Goodwill 22,003 22,003
Other Intangible Assets, Net 3,625 4,140
Other Assets 46,297 43,235
Total Assets $2,217,420 $2,163,698
========== ==========
LIABILITIES
Noninterest-Bearing Deposits $300,786 $278,958
NOW Accounts 871,671 817,366
Savings Deposits 524,648 498,779
Time Deposits of $100,000 or
More 61,797 78,928
Other Time Deposits 144,046 168,299
------- -------
Total Deposits 1,902,948 1,842,330
--------- ---------
Federal Funds Purchased and 19,421 11,777
Securities Sold Under Agreements to
Repurchase
Federal Home Loan Bank
Overnight Advances 41,000 53,000
Federal Home Loan Bank Term
Advances 10,000 20,000
Junior Subordinated
Obligations Issued to
Unconsolidated Subsidiary
Trusts 20,000 20,000
Other Liabilities 23,125 24,437
------ ------
Total Liabilities 2,016,494 1,971,544
--------- ---------
STOCKHOLDERS' EQUITY
Preferred Stock, $5 Par
Value; 1,000,000 Shares
Authorized - -
Common Stock, $1 Par Value;
20,000,000 Shares
Authorized 17,079 16,744
(17,079,376 Shares Issued at December 31,
2014, and
16,744,486 Shares Issued at December 31,
2013)
Additional Paid-in Capital 239,721 229,290
Retained Earnings 29,458 27,457
Unallocated ESOP Shares
(71,748 Shares at December
31, 2014, and (1,450) (1,800)
87,641 Shares at December 31, 2013)
Accumulated Other
Comprehensive Loss (7,166) (4,373)
Treasury Stock, at Cost
(4,386,001 Shares at
December 31, 2014, and (76,716) (75,164)
4,296,723 Shares at December 31, 2013)
Total Stockholders' Equity 200,926 192,154
Total Liabilities and
Stockholders' Equity $2,217,420 $2,163,698
========== ==========
Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
------------- ---------- --------- --------- --------- ----------
Net Income $6,369 $6,147 $5,524 $5,320 $5,784
Transactions Recorded in Net Income (Net of
Tax):
-------------------------------------------
Net Gain (Loss) on
Securities
Transactions - 83 (16) - -
Net Gain on Sales of
Loans 171 129 100 74 114
Share and Per Share Data:(1)
---------------------------
Period End Shares
Outstanding 12,622 12,605 12,597 12,597 12,607
Basic Average Shares
Outstanding 12,614 12,606 12,595 12,602 12,586
Diluted Average Shares
Outstanding 12,655 12,621 12,616 12,613 12,634
Basic Earnings Per
Share $0.50 $0.49 $0.44 $0.42 $0.46
Diluted Earnings Per
Share 0.50 0.49 0.44 0.42 0.46
Cash Dividend Per
Share 0.25 0.25 0.25 0.25 0.25
Selected Quarterly Average Balances:
------------------------------------
Interest-Bearing
Deposits at Banks $58,048 $15,041 $22,486 $17,184 $46,853
Investment Securities 664,334 653,702 712,088 755,008 762,768
Loans 1,401,601 1,361,347 1,328,639 1,284,649 1,254,957
Deposits 1,962,698 1,861,115 1,900,399 1,887,589 1,904,922
Other Borrowed Funds 56,185 67,291 60,900 68,375 62,038
Shareholders' Equity 202,603 199,518 196,478 194,127 184,506
Total Assets 2,247,576 2,154,307 2,183,611 2,176,038 2,176,264
Return on Average
Assets 1.12% 1.13% 1.01% 0.99% 1.05%
Return on Average
Equity 12.47% 12.22% 11.28% 11.11% 12.44%
Return on Tangible
Equity(2) 14.28% 14.04% 12.99% 12.84% 14.50%
Average Earning Assets $2,123,983 $2,030,090 $2,063,213 $2,056,841 $2,064,578
Average Paying
Liabilities 1,716,699 1,626,327 1,680,149 1,678,080 1,686,993
Interest Income, Tax-
Equivalent 18,213 17,834 17,837 17,439 17,633
Interest Expense 1,219 1,399 1,555 1,594 1,713
Net Interest Income,
Tax-Equivalent 16,994 16,435 16,282 15,845 15,920
Tax-Equivalent
Adjustment 1,073 1,074 1,142 1,173 1,174
Net Interest Margin 3 3.17% 3.21% 3.17% 3.12% 3.06%
Efficiency Ratio Calculation:
-----------------------------
Noninterest Expense $13,299 $13,526 $13,737 $13,466 $13,385
Less: Intangible Asset
Amortization (94) (94) (94) (106) (108)
Net Noninterest
Expense $13,205 $13,432 $13,643 $13,360 $13,277
------- ------- ------- ------- -------
Net Interest Income,
Tax-Equivalent $16,994 $16,435 $16,282 $15,845 $15,920
Noninterest Income 7,060 7,351 7,019 6,886 6,877
Less: Net Securities
Gains - (137) 27 - -
--- ---- --- --- ---
Net Gross Income $24,054 $23,649 $23,328 $22,731 $22,797
------- ------- ------- ------- -------
Efficiency Ratio 54.90% 56.80% 58.48% 58.77% 58.24%
Period-End Capital Information:
-------------------------------
Total Stockholders'
Equity (i.e. Book
Value) $200,926 $200,089 $197,616 $194,491 $192,154
Book Value per Share 15.92 15.87 15.69 15.44 15.24
Intangible Assets 25,628 25,747 25,868 25,999 26,143
Tangible Book Value
per Share (2) 13.89 13.83 13.63 13.38 13.17
Capital Ratios:
---------------
Tier 1 Leverage Ratio 9.44% 9.68% 9.39% 9.30% 9.19%
Tier 1 Risk-Based
Capital Ratio 14.47% 14.41% 14.49% 14.55% 14.70%
Total Risk-Based
Capital Ratio 15.54% 15.48% 15.57% 15.62% 15.77%
Assets Under Trust
Administration $1,227,179 $1,199,930 $1,214,841 $1,182,661 $1,174,891
and Investment Management
-------------------------
(1)Share and Per Share Data have been restated for the September 29, 2014, 2% stock dividend.
(2)Tangible 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.
(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.
Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
Quarter
Ended: 12/31/2014 12/31/2013
------- ---------- ----------
Loan Portfolio
Commercial
Loans $99,511 $87,893
Commercial
Construction
Loans 18,815 27,815
Commercial
Real
Estate
Loans 321,297 288,119
Other
Consumer
Loans 7,665 7,649
Consumer
Automobile
Loans 429,376 394,204
Residential
Real Estate
Loans 536,604 460,792
Total Loans $1,413,268 $1,266,472
========== ==========
Allowance for Loan Losses
Allowance
for Loan
Losses,
Beginning
of Quarter $15,293 $14,584
Loans
Charged-
off (251) (246)
Recoveries
of Loans
Previously
Charged-
off 87 96
--- ---
Net Loans
Charged-
off (164) (150)
Provision
for Loan
Losses 441 -
Allowance
for Loan
Losses,
End of
Quarter $15,570 $14,434
======= =======
Nonperforming Assets
Nonaccrual
Loans $6,899 $6,479
Loans Past
Due 90 or
More Days
and
Accruing 537 652
Loans
Restructured
and in
Compliance
with
Modified
Terms 333 641
--- ---
Total
Nonperforming
Loans 7,769 7,772
Repossessed
Assets 81 63
Other Real
Estate
Owned 312 81
Total
Nonperforming
Assets $8,162 $7,916
====== ======
Key Asset Quality Ratios
Net Loans
Charged-
off to
Average
Loans,
Quarter-
to-date 0.05% 0.05%
Annualized
Provision
for Loan
Losses to
Average
Loans,
Quarter-
to-date 0.12 - %
Annualized
Allowance
for Loan
Losses to
Period-
End Loans 1.10% 1.14%
Allowance
for Loan
Losses to
Period-
End
Nonperforming
Loans 200.41% 185.71%
Nonperforming
Loans to
Period-
End Loans 0.55% 0.61%
Nonperforming
Assets to
Period-
End Assets 0.37% 0.37%
Twelve-Month Period Ended:
--------------------------
Allowance for Loan Losses
Allowance
for Loan
Losses,
Beginning
of Year $14,434 $15,298
Loans
Charged-
off (1,021) (1,411)
Recoveries
of Loans
Previously
Charged-
off 309 347
--- ---
Net Loans
Charged-
off (712) (1,064)
Provision
for Loan
Losses 1,848 200
Allowance
for Loan
Losses,
End of
Year $15,570 $14,434
======= =======
Key Asset Quality Ratios
Net Loans
Charged-
off to
Average
Loans 0.05% 0.09%
Provision
for Loan
Losses to
Average
Loans 0.14% 0.02%
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/arrow-reports-record-earnings-for-2014-over-11-loan-growth-300023682.html
SOURCE Arrow Financial Corporation
