Arrow Financial (US:AROW)2020-08-06 14:59Company Overview - Arrow Financial Corporation is a two-bank holding company with subsidiaries including Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company[112]. - The Company’s performance is compared with a peer group of 146 domestic bank holding companies with total consolidated assets between $3 billion and $10 billion[111]. Financial Performance - Net income for the quarter ended June 30, 2020, was $9,159,000, an increase from $8,127,000 in the previous quarter[122]. - Basic and diluted earnings per share for the quarter were both $0.61, compared to $0.54 in the previous quarter[122]. - Total assets increased to $3,437,155,000 from $3,180,857,000 in the previous quarter, reflecting a growth of approximately 8.06%[122]. - Loans increased to $2,518,198,000 from $2,394,346,000, representing a growth of about 5.19%[122]. - Deposits rose to $2,952,432,000 from $2,670,009,000, marking an increase of approximately 10.53%[122]. - Return on average assets (annualized) improved to 1.07% from 1.03% in the previous quarter[122]. - Return on average equity (annualized) increased to 11.64% from 10.66% in the previous quarter[122]. - Net income for Q2 2020 was $9.2 million, up from $8.9 million in Q2 2019, representing a year-over-year increase of 3.4%[142]. - Total loans grew by $147.7 million to $2.6 billion in Q2 2020, including $140.0 million from the Paycheck Protection Program, marking a 12.3% increase compared to June 30, 2019[142]. - Net interest income increased to $24.8 million, a 14.4% rise from $21.7 million in Q2 2019, with a net interest margin of 3.05%[143]. Asset and Loan Growth - Total assets increased to $3,437,155,000 as of June 30, 2020, compared to $2,997,458,000 in 2019, reflecting a growth of approximately 14.7%[136]. - Total loans reached $2,518,198,000 in Q2 2020, up from $2,255,299,000 in Q2 2019, marking an increase of 11.7%[161]. - Loans reached $2.6 billion, an increase of $175.8 million or 7.4% from December 31, 2019, driven by a 22.5% increase in commercial and commercial real estate loans[152]. - The loan portfolio's commercial and commercial real estate loans increased by $148.5 million or 22.5% during the first half of 2020[152]. - Consumer loans originated in the first six months of 2020 totaled $179,000,000, down from $210,400,000 in the same period of 2019, reflecting a decrease of 14.9%[166]. Deposits and Liquidity - Total deposits reached $3.1 billion, an increase of $565.0 million or 22.6% from the prior year, with noninterest-bearing deposits at 21.8% of total deposits[142]. - Noninterest-bearing deposits increased to $624,125,000 in Q2 2020 from $454,130,000 in Q2 2019, a growth of 37.4%[169]. - The company has not experienced liquidity issues, with interest-bearing cash balances at $215.0 million compared to $28.0 million a year earlier[149]. - The company's liquidity position included $378.8 million in available-for-sale securities as of June 30, 2020, an increase of $21.4 million from year-end 2019[196]. Efficiency and Cost Management - The efficiency ratio improved to 53.06% from 56.42% in the previous quarter, indicating better cost management[126]. - Noninterest expense for the second quarter of 2020 was $17.2 million, an increase of $0.3 million, or 2.0%, from the second quarter of 2019[204]. - Salaries and employee benefits expense rose by 8.1% to $20.6 million, primarily driven by increased benefit costs[214]. Allowance for Loan Losses - The allowance for loan losses was $26.3 million, representing 1.03% of total loans, an increase from 0.91% at June 30, 2019[146]. - The company has increased its allowance for loan losses due to uncertainties surrounding borrowers' ability to meet obligations, indicating a cautious outlook amid the pandemic[141]. - The total amount of potential problem loans was $35.9 million as of June 30, 2020, up from $32.4 million at December 31, 2019[180]. Impact of COVID-19 - Forward-looking statements indicate potential risks including economic impacts from the COVID-19 pandemic and changes in interest rates[114]. - The company expects continued adverse impacts on operations and financial results due to the COVID-19 pandemic, particularly affecting loan production and borrower obligations[141]. - The economic impact of the COVID-19 pandemic is expected to adversely affect loan growth for the remainder of the year[148]. Stockholder Information - Stockholders' equity increased to $317.7 million at June 30, 2020, reflecting a $16.0 million, or 5.3%, increase from December 31, 2019[189]. - A cash dividend of $0.26 per share was declared for the third quarter of 2020, compared to $0.252 in the same quarter of 2019[193]. - Arrow's stock repurchase program resulted in $1.5 million of common stock repurchases during the period[190].