Arrow Financial Corporation
Annual Report 2019

Plain-text annual report

2 0 1 9 ANNUAL REVIEW Performance Comparisons $2.43 $2.50 $2,605 $2,760 $2,446 $3,184 $2,988 $1.69 $1.81 $1.98 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 DILUTED EARNINGS PER SHARE ASSETS For the 12 Months Ended December 31* As of December 31 ($ in Millions) $1.02 $.97 $2,030 $2,117 $2,245 $2,346 $2,616 $.92 $.89 $.87 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 CASH DIVIDENDS PAID PER SHARE DEPOSITS For the 12 Months Ended December 31* As of December 31 ($ in Millions) $16.89 $18.08 $20.12 $233 $250 $214 $14.69 $15.81 $302 $270 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 BOOK VALUE PER SHARE SHAREHOLDERS’ EQUITY As of December 31* As of December 31 ($ in Millions) *Per share amounts have been restated for stock dividends distributed. Fellow Shareholders: 2019 FINANCIAL HIGHLIGHTS Like most financial institutions, we navigated a challenging interest rate environment and other economic pressures in 2019. Yet I am proud to share that we once again delivered record earnings, steady growth, sustained profitability and excellent credit quality. We remain committed to living our mission for our customers, employees, shareholders and the communities we serve. Our measured and thoughtful approach keeps us focused on long- term opportunities that will help us continue to grow in the future. Some highlights from 2019 include:  Surpassed $3 billion in assets for the first time  Net income reached a record high of $37.5 million  Total loan balances grew to a record $2.4 billion  Total deposits grew to a record $2.6 billion Wealth Management Division reached a record $1.5 billion in assets under management  Continued to optimize our Glens Falls National Bank branch network in Plattsburgh and Queensbury  Expanded the Saratoga National Bank Capital Region footprint by opening a Rotterdam location, and announced plans for a Latham branch  Wealth Management Division and Upstate Agency moved into new and updated headquarters Enhanced our customer experience, including upgrades for online loan payments and Business Online Banking Net Income: $37.5 million, up 3.3% Total Loans: $2.4 billion, up 8.6% Total Deposits: $2.6 billion, up 11.5% Total Assets: $3.18 billion, up 6.6% Return on Average Equity: 13.17% Return on Average Assets: 1.24% Return on Tangible Equity: 14.36% Stock Dividend: 3% distributed in Sept. Current Quarterly Cash Dividend: $0.26 Book Value Per Share: Increase of 11.2% Shareholders’ Equity: Increase of 11.9% Glens Falls National and Saratoga National maintained 5-Star “Superior” ratings from BauerFinancial  Saratoga National Bank was named “Top Small Community Lender” by the U.S. Small Business Administration in the Capital Region for the sixth consecutive year The Arrow team’s dedication is the driving force behind our accomplishments, and I want to thank our employees for everything they do. Their com- mitment to improving our customer experience, serving our communities, and delivering value for the organization keeps us competitive and strong. Additionally, our commitment to giving back helps our communities remain strong. We are proud to share that the Arrow Family of Com- panies contributed more than $4 million and countless volunteer hours over the past decade to nonprofit organizations that make our region a great place to live. Thank you for your continued investment in Arrow Financial Corporation. We value your trust, support and partnership.  Named to top-performing lists by American Banker magazine, Bank Director magazine and Seifried & Brew, LLC Tom Murphy President and Chief Executive Officer Consolidated Statements of Income (Unaudited) Years Ended December 31 (in thousands, except per-share amounts) 2015 2016 2017 2018 2019 Interest and Dividend Income Interest Expense $ 70,738 4,813 $ 76,915 5,356 $ 84,657 7,006 $ 96,503 12,485 $ 109,759 21,710 Net Interest Income Provision for Loan Losses Net Interest Income after Provision for Loan Losses Total Noninterest Income Total Noninterest Expense Income Before Taxes Provision for Income Taxes 65,925 1,347 64,578 28,124 57,430 35,272 10,610 71,559 2,033 69,526 27,832 59,609 37,749 11,215 77,651 2,736 74,915 27,645 62,705 39,855 10,529 84,018 2,607 81, 4 1 1 28,949 65,055 45,305 9,026 88,049 2,079 85,970 28,555 67,450 47,075 9,600 Net Income $ 24,662 $ 26,534 $ 29,326 $ 36,279 $ 37,475 Share and Per Share Data Diluted Average Shares Outstanding Diluted Earnings Per Share Cash Dividends Per Share Book Value Per Share Tangible Book Value Per Share Key Earnings Ratios Return on Average Assets Return on Average Equity Return on Tangible Equity Net Interest Margin Capital Ratios Tier 1 Leverage Ratio Total Risk-Based Capital Ratio Asset Quality Ratios Nonperforming Assets to Period-End Assets Allowance for Loan Losses to Period-End Loans 14,566 $ 1.69 $ .87 $ 14.69 $ 12.98 14,725 $ 1 .81 $ .89 $ 15.81 $ 14.14 14,838 $ 1.98 $ .92 $ 16.89 $ 15.26 14,922 $ 2.43 $ . 97 $ 18.08 $ 16.49 14,983 $ 2 .50 $ 1 .02 $ 20. 1 2 $ 1 8 .55 1.05% 11.86% 13.50% 2.97% 1.06% 11.79% 13.25% 3.00% 1.09% 12.14% 13.51% 3.02% 1 .27% 13.96% 15.38% 3.07% 1.24% 13.17% 14.36% 3.05% 9.25% 15.09% 9.47% 15.15% 9.49% 14.98% 9. 6 1 % 14.86% 9.98% 14.78% 0.36% 0.28% 0.28% 0.23% 0.18% 1.02% 0.97% 0.95% 0.92% 0.89% Consolidated Balance Sheets (Unaudited) As of December 31 (in thousands) 2015 2016 2017 2018 2019 Assets Cash and Due from Banks Interest-Bearing Deposits at Banks Investment Securities Loans Allowance for Loan Losses Net Loans Premises and Equipment, Net Goodwill and Intangible Assets, Net Other Assets $ 34,816 $ 43,024 $ 42,562 $ 56,529 $ 47,035 16,252 731,759 1,573,952 (16,038) 14,331 703,335 1,753,268 (17,012) 30,276 646,056 1,950,770 (18,586) 27,710 618,291 2,196,215 (20,196) 23,186 614,779 2,386,120 (21,187) 1,557,914 27,440 1,736,256 26,938 1,932,184 27,619 2,176,019 30,446 2,364,933 40,629 24,980 53,027 24,569 56,789 24,162 57,606 23,725 55,614 23,534 70,179 Total Assets $2,446,188 $2,605,242 $2,760,465 $2,988,334 $3,184,275 Liabilities and Shareholders’ Equity Noninterest-Bearing Deposits Interest-Bearing Checking and Savings Deposits Time Deposits Total Deposits Short-Term Borrowings Federal Home Loan Bank Term Advances Other Long-Term Debt Other Liabilities $ 358,751 $ 387,280 $ 441,945 $ 472,768 $ 484,944 1,481,855 1,529,953 1,601,888 1,608,829 1,735,789 189,817 199,313 201,283 263,987 395,321 2,030,423 2,116,546 2,245,116 2,345,584 2,616,054 105,173 158,836 169,966 288,659 181,099 55,000 20,000 21,621 55,000 20,000 22,008 55,000 20,000 20,780 45,000 20,000 19,507 30,000 20,000 35,394 Total Liabilities 2,232,217 2,372,390 2,510,862 2,718,750 2,882,547 Total Shareholders’ Equity 213,971 232,852 249,603 269,584 301,728 Total Liabilities and Shareholders’ Equity $2,446,188 $2,605,242 $2,760,465 $2,988,334 $3,184,275 Total Return Performance Comparison of Five-Year Cumulative Total Return • Assumes Initial Investment of $100 Arrow Financial Corporation NASDAQ Banks Index Russell 2000 Index Zacks $1B-$5B Bank Assets Index 2014 100.00 100.00 100.00 100.00 2015 104.55 108.91 95.59 108.06 2016 165.68 147.47 115.95 149.08 2017 147.29 157.10 132.94 161.73 2018 147.21 130.44 118.30 143.59 2019 184.59 163.99 148.49 170.48 Comparison of 15-Year Cumulative Total Return • Assumes Initial Investment of $100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Arrow Financial Corporation NASDAQ Banks Index Russell 2000 Index 100.00 89.88 91.25 85.41 104.52 111.57 131.92 120.93 136.71 154.26 169.05 176.74 280.07 249.00 248.87 312.06 100.00 97.68 109.68 86.80 63.28 52.66 62.62 56.01 67.00 95.90 100.77 109.75 148.60 158.31 131.45 165.25 100.00 104.51 123.71 121.77 80.62 102.53 130.06 124.62 145.00 201.28 211.13 201.81 244.82 280.69 249.78 313.54 Zacks $1B-$5B Bank Assets Index 100.00 98.79 111.96 95.27 76.13 66.49 74.17 72.08 84.55 109.61 118.73 128.30 177.00 192.02 170.48 202.41 Source: Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980–2020. Arrow Financial Corporation Board of Directors Thomas L. Hoy (Chairman) Retired President and CEO Arrow/Glens Falls National Bank David G. Kruczlnicki Retired President and CEO Glens Falls Hospital Mark L. Behan President Behan Communications, Inc. Elizabeth A. Miller President and CEO Miller Mechanical Services, Inc. Tenée R. Casaccio, AIA President JMZ Architects and Planners, P.C. Thomas J. Murphy President and CEO Arrow/Glens Falls National Bank Raymond F. O’Conor Chairman and Retired President and CEO Saratoga National Bank William L. Owens, Esq. Partner Stafford, Owens, Piller, Murnane, Kelleher & Trombley, PLLC Colin L. Read, PhD Mayor, City of Plattsburgh Professor of Economics and Finance SUNY Plattsburgh Richard J. Reisman, DMD Chairman - Section of Dentistry Glens Falls Hospital Michael B. Clarke Retired President and CEO Lone Star Industries Gary C. Dake President Stewart’s Shops Corp. Director Emeriti Herbert O. Carpenter John J. Carusone, Jr. Mary-Elizabeth T. FitzGerald Corporate Officers Thomas J. Murphy President and CEO Herbert A. Heineman, Jr. David L. Moynehan Elizabeth O’Connor Little Michael F. Massiano (Chairman Emeritus) John J. Murphy Doris E. Ornstein David S. DeMarco Senior Vice President and Chief Banking Officer Andrew J. Wise Senior Vice President and Chief Operating Officer Edward J. Campanella Senior Vice President, Treasurer and Chief Financial Officer David D. Kaiser Senior Vice President Shareholder Information Arrow Stock Arrow’s common stock trades on the NASDAQ Global Select MarketSM under the symbol “AROW.” Dividend Reinvestment Plan The Arrow Financial Corporation Dividend Reinvestment Plan offers participants a convenient and economical way to acquire common stock of Arrow Financial Corporation without payment of any brokerage commission or service charge. Participants may reinvest all cash dividends in additional shares as well as make optional cash contributions to buy shares. Since the Plan is entirely voluntary, you may join at any time and terminate whenever you wish. For more information, please contact: American Stock Transfer & Trust Company 6201 15th Avenue Brooklyn, NY 11219 Tel: (888) 444-0058 or astfinancial.com Our Family of Companies 250 Glen Street, PO Box 307 Glens Falls, NY 12801 (518) 745-1000 arrowfinancial.com Aerial view of Glens Falls, New York, home of Arrow headquarters. Aerial views of Glens Falls 

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