Arrow Financial Corp 8-K, filed Oct 21, 2020

Arrow Financial Corp (AROW)

8-K 2020-10-21 For: 2020-10-21

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Added on April 06, 2026

About this 8-K

Arrow Financial Corp filed this 8-K on October 21, 2020.

Items reported

Item 2.01: Completed an acquisition or sale of assets
Item 9.01: Financial statements and exhibits

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New York	0-12507	22-2448962
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, Par Value $1.00 per share	AROW	NASDAQ Global Select Market


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company									☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act									☐


		ARROW FINANCIAL CORPORATION
		Registrant

Date:	October 21, 2020	/s/ Edward J. Campanella
		Edward J. Campanella, Senior Vice President, Treasurer and Chief Financial Officer


			250 Glen Street Glens Falls, NY 12801
						NASDAQ® Symbol: "AROW" Website: arrowfinancial.com Media Contact: Dori McDannold Tel: (518) 415-4313


	Three Months Ended September 30						Nine Months Ended September 30,
	2020		2019		2020		2019
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans	$	24,706	$	24,620	$	74,657	$	70,543
Interest on Deposits at Banks	64		182		229		572
Interest and Dividends on Investment Securities:
Fully Taxable	1,557		2,018		5,621		6,671
Exempt from Federal Taxes	969		1,132		3,017		3,606
Total Interest and Dividend Income	27,296		27,952		83,524		81,392
INTEREST EXPENSE
Interest-Bearing Checking Accounts	264		500		1,061		1,435
Savings Deposits	806		2,317		4,450		5,926
Time Deposits over $250,000	292		451		1,263		1,362
Other Time Deposits	576		1,255		2,360		3,099
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	17		28		55		75
Federal Home Loan Bank Advances	219		820		865		3,513
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	173		250		574		780
Interest on Financing Leases	49		28		148		71
Total Interest Expense	2,396		5,649		10,776		16,261
NET INTEREST INCOME	24,900		22,303		72,748		65,131
Provision for Loan Losses	2,271		518		8,083		1,445
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	22,629		21,785		64,665		63,686
NONINTEREST INCOME
Income From Fiduciary Activities	2,265		2,212		6,613		6,571
Fees for Other Services to Customers	2,619		2,623		7,348		7,570
Insurance Commissions	1,713		1,936		5,077		5,590
Net (Loss) Gain on Securities	(72)		146		(552)		222
Net Gain on Sales of Loans	1,433		257		2,193		501
Other Operating Income	739		517		2,876		1,020
Total Noninterest Income	8,697		7,691		23,555		21,474
NONINTEREST EXPENSE
Salaries and Employee Benefits	10,408		10,015		31,003		29,061
Occupancy Expenses, Net	1,427		1,324		4,221		4,023
Technology and Equipment Expense	3,228		3,305		9,807		9,689
FDIC Assessments	309		(480)		770		(56)
Other Operating Expense	2,115		2,627		6,685		7,634
Total Noninterest Expense	17,487		16,791		52,486		50,351
INCOME BEFORE PROVISION FOR INCOME TAXES	13,839		12,685		35,734		34,809
Provision for Income Taxes	2,793		2,618		7,402		7,074
NET INCOME	$	11,046	$	10,067	$	28,332	$	27,735
Average Shares Outstanding ¹:
Basic	15,472		15,404		15,453		15,375
Diluted	15,481		15,441		15,467		15,417
Per Common Share:
Basic Earnings	$	0.71	$	0.65	$	1.83	$	1.80
Diluted Earnings	0.71		0.65		1.83		1.80
¹ 2019 Share and Per Share Amounts have been restated for the September 25, 2020, 3% stock dividend.


	September 30, 2020		December 31, 2019		September 30, 2019
ASSETS
Cash and Due From Banks	$	54,286	$	47,035	$	65,882
Interest-Bearing Deposits at Banks	396,380		23,186		26,416
Investment Securities:
Available-for-Sale at Fair Value	374,928		357,334		314,182
Held-to-Maturity (Approximate Fair Value of $233,501 at September 30, 2020; $249,618 at December 31, 2019; and $259,128 at September 30, 2019)	224,799		245,065		255,095
Equity Securities	1,511		2,063		1,996
FHLB and Federal Reserve Bank Stock	5,574		10,317		6,627
Loans	2,592,455		2,386,120		2,335,591
Allowance for Loan Losses	(28,446)		(21,187)		(20,931)
Net Loans	2,564,009		2,364,933		2,314,660
Premises and Equipment, Net	42,075		40,629		40,228
Goodwill	21,873		21,873		21,873
Other Intangible Assets, Net	1,789		1,661		1,713
Other Assets	90,460		70,179		64,150
Total Assets	$	3,777,684	$	3,184,275	$	3,112,822
LIABILITIES
Noninterest-Bearing Deposits	690,232		484,944		516,876
Interest-Bearing Checking Accounts	912,980		689,221		801,446
Savings Deposits	1,354,956		1,046,568		929,691
Time Deposits over $250,000	112,555		123,968		96,770
Other Time Deposits	194,135		271,353		269,764
Total Deposits	3,264,858		2,616,054		2,614,547
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	73,949		51,099		72,869
Federal Home Loan Bank Overnight Advances	—		130,000		48,000
Federal Home Loan Bank Term Advances	50,000		30,000		30,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		20,000
Finance Leases	5,228		5,254		5,263
Other Liabilities	37,989		30,140		29,915
Total Liabilities	3,452,024		2,882,547		2,820,594
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at September 30, 2020, December 31, 2019 and September 30, 2019	—		—		—
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,194,474 Shares Issued at September 30, 2020 and 19,606,449 at December 31, 2019 and September 30, 2019)	20,194		19,606		19,606
Additional Paid-in Capital	353,062		335,355		334,597
Retained Earnings	33,434		33,218		27,375
Unallocated ESOP Shares (None at September 30, 2020 and December 31, 2019 and 5,151 Shares at September 30, 2019)	—		—		(100)
Accumulated Other Comprehensive Loss	(253)		(6,357)		(8,979)
Treasury Stock, at Cost (4,705,102 Shares at September 30, 2020; 4,608,258 Shares at December 31, 2019 and 4,632,657 Shares at September 30, 2019)	(80,777)		(80,094)		(80,271)
Total Stockholders’ Equity	325,660		301,728		292,228
Total Liabilities and Stockholders’ Equity	$	3,777,684	$	3,184,275	$	3,112,822


Quarter Ended	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Net Income	$	11,046		$	9,159		$	8,127		$	9,740		$	10,067
Transactions in Net Income (Net of Tax):

Net Changes in Fair Value of Equity Investments	(53)			(80)			(279)			50			109


Share and Per Share Data:¹
Period End Shares Outstanding	15,489			15,461			15,432			15,448			15,418
Basic Average Shares Outstanding	15,472			15,441			15,446			15,427			15,404
Diluted Average Shares Outstanding	15,481			15,448			15,476			15,476			15,441
Basic Earnings Per Share	$	0.71		$	0.59		$	0.53		$	0.63		$	0.65
Diluted Earnings Per Share	0.71			0.59			0.53			0.63			0.65
Cash Dividend Per Share	0.252			0.252			0.252			0.252			0.245

Selected Quarterly Average Balances:
Interest-Bearing Deposits at Banks	$	242,928		$	155,931		$	32,787		$	28,880		$	27,083
Investment Securities	592,457			607,094			603,748			582,982			545,073
Loans	2,582,253			2,518,198			2,394,346			2,358,110			2,308,879
Deposits	3,082,499			2,952,432			2,670,009			2,607,421			2,472,528
Other Borrowed Funds	136,117			129,383			170,987			177,877			231,291
Shareholders' Equity	324,269			316,380			306,527			296,124			289,016
Total Assets	3,583,322			3,437,155			3,180,857			3,113,114			3,023,043
Return on Average Assets, annualized	1.23		%	1.07		%	1.03		%	1.24		%	1.32		%
Return on Average Equity, annualized	13.55		%	11.64		%	10.66		%	13.05		%	13.82		%
Return on Average Tangible Equity, annualized ²	14.61		%	12.58		%	11.55		%	14.18		%	15.05		%
Average Earning Assets	$	3,417,638		$	3,281,223		$	3,030,881		$	2,969,972		$	2,881,035
Average Paying Liabilities	2,545,435			2,457,690			2,362,515			2,293,804			2,213,642
Interest Income	27,296			28,002			28,226			28,367			27,952
Tax-Equivalent Adjustment ³	284			281			288			321			344
Interest Income, Tax-Equivalent ³	27,580			28,283			28,514			28,688			28,296
Interest Expense	2,396			3,160			5,220			5,449			5,649
Net Interest Income	24,900			24,842			23,006			22,918			22,303
Net Interest Income, Tax-Equivalent ³	25,184			25,123			23,294			23,239			22,647
Net Interest Margin, annualized	2.90		%	3.05		%	3.05		%	3.06		%	3.07		%
Net Interest Margin, Tax-Equivalent, annualized³	2.93		%	3.08		%	3.09		%	3.10		%	3.12		%

Efficiency Ratio Calculation: ⁴
Noninterest Expense	$	17,487		$	17,245		$	17,754		$	17,099		$	16,791
Less: Intangible Asset Amortization	56			57			58			60			61
Net Noninterest Expense	$	17,431		$	17,188		$	17,696		$	17,039		$	16,730
Net Interest Income, Tax-Equivalent	$	25,184		$	25,123		$	23,294		$	23,238		$	22,647
Noninterest Income	8,697			7,164			7,694			7,081			7,691

Less: Net Changes in Fair Value of Equity Invest.	(72)			(106)			(374)			67			146
Net Gross Income	$	33,953		$	32,393		$	31,362		$	30,252		$	30,192
Efficiency Ratio	51.34		%	53.06		%	56.42		%	56.32		%	55.41		%

Period-End Capital Information:
Total Stockholders' Equity (i.e. Book Value)	$	325,660		$	317,687		$	309,398		$	301,728		$	292,228
Book Value per Share¹	21.03			20.55			20.05			19.53			18.95
Goodwill and Other Intangible Assets, net	23,662			23,535			23,513			23,534			23,586
Tangible Book Value per Share ^1,2	19.50			19.03			18.53			18.01			17.42

Capital Ratios:⁵

Tier 1 Leverage Ratio	9.17		%	9.32		%	9.87		%	9.98		%	10.04		%
Common Equity Tier 1 Capital Ratio	13.20		%	13.07		%	12.84		%	12.94		%	12.93		%
Tier 1 Risk-Based Capital Ratio	14.06		%	13.94		%	13.72		%	13.83		%	13.85		%
Total Risk-Based Capital Ratio	15.28		%	15.10		%	14.76		%	14.78		%	14.81		%

Assets Under Trust Admin. & Investment Mgmt.	$	1,537,128		$	1,502,866		$	1,342,531		$	1,543,653		$	1,485,116


Footnotes:

1.	Share and Per Share Data have been restated for the September 25, 2020, 3% stock dividend.

2.	Non-GAAP Financial Measures Reconciliation: Tangible Book Value and Tangible Equity exclude goodwill and other intangible assets, net from total equity. These are non-GAAP financial measures which Arrow believes provides investors with information that is useful in understanding its financial performance.
		9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
	Total Stockholders' Equity (GAAP)	$	325,660		$	317,687		$	309,398		$	301,728		$	292,228
	Less: Goodwill and Other Intangible assets, net	23,662			23,535			23,513			23,534			23,586
	Tangible Equity (Non-GAAP)	$	301,998		$	294,152		$	285,885		$	278,194		$	268,642

	Period End Shares Outstanding	15,489			15,461			15,432			15,448			15,418
	Tangible Book Value per Share (Non-GAAP)	$	19.50		$	19.03		$	18.53		$	18.01		$	17.42
	Net Income	11,046			9,159			8,127			9,740			10,067
	Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)	14.61		%	12.58		%	11.55		%	14.18		%	15.05		%

3.	Non-GAAP Financial Measures Reconciliation: Net Interest Margin, Tax-Equivalent is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which Arrow believes provides investors with information that is useful in understanding its financial performance.
		9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
	Interest Income (GAAP)	$	27,296		$	28,002		$	28,226		$	28,367		$	27,952
	Add: Tax-Equivalent adjustment (Non-GAAP)	284			281			288			321			344
	Interest Income - Tax Equivalent (Non-GAAP)	$	27,580		$	28,283		$	28,514		$	28,688		$	28,296
	Net Interest Income (GAAP)	$	24,900		$	24,842		$	23,006		$	22,918		$	22,303
	Add: Tax-Equivalent adjustment (Non-GAAP)	284			281			288			321			344
	Net Interest Income - Tax Equivalent (Non-GAAP)	$	25,184		$	25,123		$	23,294		$	23,239		$	22,647
	Average Earning Assets	$	3,417,638		$	3,281,223		$	3,030,881		$	2,969,972		$	2,881,035
	Net Interest Margin (Non-GAAP)*	2.93		%	3.08		%	3.09		%	3.10		%	3.12		%

4.	Non-GAAP Financial Measures: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. Arrow believes the efficiency ratio provides investors with information that is useful in understanding its financial performance. Arrow defines efficiency ratio as the ratio of noninterest expense to net gross income (which equals tax-equivalent net interest income plus noninterest income, as adjusted).

5.	For the current quarter, all of the regulatory capital ratios in the table above, as well as the Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below, are estimates based on, and calculated in accordance with, bank regulatory capital rules. All prior quarters reflect actual results. The CET1 ratio at September 30, 2020 listed in the tables (i.e., 13.20%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
		9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019

	Total Risk Weighted Assets	$	2,321,637		$	2,283,430		$	2,275,902		$	2,237,127		$	2,184,214
	Common Equity Tier 1 Capital	306,356			298,362			292,165			289,409			282,485
	Common Equity Tier 1 Ratio	13.20		%	13.07		%	12.84		%	12.94		%	12.93		%


Quarter Ended:	9/30/2020			12/31/2019			9/30/2019
Loan Portfolio
Commercial Loans	$	275,921		$	150,660		$	142,135
Commercial Real Estate Loans	541,233			510,541			498,083
Subtotal Commercial Loan Portfolio	817,154			661,201			640,218
Consumer Loans	849,526			811,198			805,798
Residential Real Estate Loans	925,775			913,721			889,575
Total Loans	$	2,592,455		$	2,386,120		$	2,335,591
Allowance for Loan Losses
Allowance for Loan Losses, Beginning of Quarter	$	26,300		$	20,931		$	20,695
Loans Charged-off	(392)			(503)			(402)
Less Recoveries of Loans Previously Charged-off	267			125			120
Net Loans Charged-off	(125)			(378)			(282)
Provision for Loan Losses	2,271			634			518
Allowance for Loan Losses, End of Quarter	$	28,446		$	21,187		$	20,931
Nonperforming Assets
Nonaccrual Loans	$	6,004		$	4,005		$	3,465
Loans Past Due 90 or More Days and Accruing	121			253			1,066
Loans Restructured and in Compliance with Modified Terms	157			143			150
Total Nonperforming Loans	6,282			4,401			4,681
Repossessed Assets	126			139			76
Other Real Estate Owned	—			1,122			1,198
Total Nonperforming Assets	$	6,408		$	5,662		$	5,955

Key Asset Quality Ratios
Net Loans Charged-off to Average Loans, Quarter-to-date Annualized	0.02		%	0.06		%	0.05		%
Provision for Loan Losses to Average Loans, Quarter-to-date Annualized	0.35		%	0.11		%	0.09		%
Allowance for Loan Losses to Period-End Loans	1.10		%	0.89		%	0.90		%
Allowance for Loan Losses to Period-End Nonperforming Loans	452.82		%	481.41		%	447.15		%
Nonperforming Loans to Period-End Loans	0.24		%	0.18		%	0.20		%
Nonperforming Assets to Period-End Assets	0.17		%	0.18		%	0.19		%

Nine Month Period Ended:
Allowance for Loan Losses
Allowance for Loan Losses, Beginning of Year	$	21,187					$	20,196
Loans Charged-off	(1,360)						(1,232)
Less Recoveries of Loans Previously Charged-off	536						522
Net Loans Charged-off	(824)						(710)
Provision for Loan Losses	8,083						1,445
Allowance for Loan Losses, End of Period	$	28,446					$	20,931

Key Asset Quality Ratios
Net Loans Charged-off to Average Loans, Annualized	0.04		%				0.04		%
Provision for Loan Losses to Average Loans, Annualized	0.43		%				0.09		%