GLENS
FALLS, N.Y., Aug. 8, 2023
/PRNewswire/ -- Arrow Financial Corporation
(NasdaqGS® – AROW) ("Arrow") announced financial results
for the three-month period ended June 30, 2023. Net income for
the second quarter of 2023 was $6.0
million and fully diluted earnings per share was
$0.36. Nonperforming assets decreased
$4.2 million in the second quarter,
with the allowance for credit losses reaching 477% of nonperforming
loans.
Arrow President and CEO David S.
DeMarco:
"I am pleased to announce that we are back in full compliance
with our NASDAQ® filing requirements. While this is an
important step, it did not distract us from growing the business to
a new record high for loans while maintaining sound credit quality.
As always, our team is dedicated to serving our communities and our
customers throughout our eight-county footprint. We remain focused
on further enhancing the customer experience and optimizing our
operations."
"Now that the Arrow team has returned to our fully renovated
headquarters in downtown Glens Falls, New
York, we are opening our Main Office branch and lending
areas to customers. The renovated campus offers a collaborative and
modern space for both customers and our team. This investment is a
key part of the revitalization of downtown Glens Falls and represents Arrow's approach to
community banking, based on long-lasting and meaningful
relationships with our shareholders, customers, communities and
employees."
This Earnings Release and related commentary should be read in
conjunction with our August 8, 2023
Form 8-K and related Second Quarter 2023 Investor Presentation,
which can be found on our website:
arrowfinancial.com/investor-presentations.
Second-Quarter Highlights and Key Metrics
- Total loans reached a record high of $3.1 billion as of June 30,
2023, growing at an annualized rate of 8.6%, or $64.5 million, for the quarter.
- Strong on-balance sheet liquidity of $376 million, or 9% of total assets; 4% cash and
5% unencumbered readily marketable securities.
- Additional $1.3 billion of
immediately available liquidity with FHLB, FRB and other bank
lines.
- Replaced FHLB advances with $150
million of flexible term and lower cost advances from the
FRB of NY Bank Term Funding Program (BTFP).
- Immediately available liquidity provides in excess of 200%
coverage of uninsured deposits which are less than 30% of total
deposits.
- Loan-to-deposit ratio was 88%.
- Nonperforming assets decreased to $7.1
million at June 30, 2023, representing 0.17% of
period-end assets.
- Net charge-offs to average loans for the second quarter of 2023
were 0.07% as compared to 0.10% for the previous quarter.
- Allowance for Credit Losses to Nonperforming Loans coverage was
477%.
- Total assets and deposits remained relatively unchanged at
$4.1 billion and $3.5 billion respectively.
- Non-interest expenses included $2.0
million in incremental expenses related to the delay in
filing the 2022 Form 10-K and the First Quarter Form 10-Q.
- Net interest margin was 2.61%.
- Return on average assets (ROA) was 0.59%; excluding incremental
expenses related to the delayed filings it was 0.75%.
- Return on average equity (ROE) was 6.64%; excluding incremental
expense related to the delayed filings it was 8.41%.
Income Statement
- Net Income: Net income for the second quarter of
2023 was $6.0 million, decreasing
from $8.6 million and $12.0 million in the first quarter of 2023 and
the second quarter of 2022, respectively. The decline from the
first quarter of 2023 was primarily due to an increase of
$6.2 million in interest expense and
an increase in non-interest expense of $1.8
million, partially offset by an increase in interest and
dividend income of $3.9 million. The
decline from the the same period in the prior year was due to an
increase of $12.7 million in interest
expense, an increase in non-interest expense of $3.7 million and a decrease in non-interest
income of $838 thousand. The decrease
was partially offset by an increase in interest and dividend income
of $9.4 million.
- Net Interest Income: Net interest income for the second
quarter was $25.8 million, decreasing
8.3% from $28.1 million in the first
quarter of 2023 and 11.2% from $29.0
million in the comparable quarter of 2022. Interest and fees
on loans were $34.6 million for the
second quarter of 2023, an increase from $31.9 million in the first quarter of 2023
and from $26.9 million for the
quarter ended June 30, 2022. These increases are driven by
loan growth and higher loan rates. Interest expense for the second
quarter of 2023 was $14.2 million, an
increase of $6.2 million versus first
quarter of 2023 and $12.7 million
from the comparable quarter ended June 30, 2022. The
increases for both comparison periods were driven by higher deposit
rates and changes in deposit composition.
- Net Interest Margin: Net interest margin was 2.61% for
the quarter, compared to 2.96% for the first quarter of 2023 and
3.02% for the second quarter of 2022. The decrease in net
interest margin compared to the first quarter in 2023 was the
result of the cost of interest-bearing liabilities increasing at a
faster pace than the yield on average earning assets.The
year-over-year decrease in net interest margin was also impacted by
lower cash balances as a result of deposit outflows in the fourth
quarter of 2022 that temporarily reduced average earning asset
balances year-over- year.
|
Three Months
Ended
|
|
(Dollars in
Thousands)
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
|
Interest and Dividend
Income
|
$
40,013
|
|
$
36,110
|
|
$
30,593
|
|
Interest
Expense
|
14,241
|
|
8,016
|
|
1,555
|
|
Net Interest
Income
|
25,772
|
|
28,094
|
|
29,038
|
|
Average Earning
Assets(1)
|
3,953,642
|
|
3,845,825
|
|
3,858,837
|
|
Average
Interest-Bearing Liabilities
|
2,924,743
|
|
2,782,299
|
|
2,808,287
|
|
|
|
|
|
|
|
Yield on Earning
Assets(1)
|
4.06 %
|
|
3.81 %
|
|
3.18 %
|
|
Cost of
Interest-Bearing Liabilities
|
1.95
|
|
1.17
|
|
0.22
|
|
Net Interest
Spread
|
2.11
|
|
2.88
|
|
2.96
|
|
Net Interest
Margin
|
2.61
|
|
2.96
|
|
3.02
|
|
|
|
|
|
|
|
Income Earned on PPP
Loans included in Net Interest Income
|
$
—
|
|
$
—
|
|
$
438
|
|
Net Interest Income
excluding PPP loans
|
25,772
|
|
28,094
|
|
28,600
|
|
Net Interest Margin
excluding PPP loans
|
2.61 %
|
|
2.96 %
|
|
2.98 %
|
|
|
|
|
|
|
|
(1) Includes
Nonaccrual Loans.
|
|
|
|
|
|
|
|
|
|
|
|
- Provision for Credit Losses: For the second quarter of
2023, the provision for credit losses was $948 thousand compared to $1.6 million in the first quarter of 2023 and
$905 thousand in the prior-year
quarter. The key drivers for the provision for credit losses in the
second quarter of 2023 were loan growth and, to a lesser extent,
charge-offs. The second quarter 2023 provision for credit
losses was not impacted by changes to the economic forecast factors
embedded in the allowance model. The provision for the first
quarter of 2023 was driven by charge-offs and by changes made to
the economic forecast within the model.
- Non-Interest Income: Non-interest income for the three
months ended June 30, 2023, was $6.9
million, compared to $6.7
million in the first quarter of 2023 and $7.7 million in the comparable quarter of 2022.
Income from fiduciary activities, which includes Wealth Management
services, rebounded in the second quarter of 2023 after a downturn
in 2022 caused by declining market performance. Fees and
other services to customers declined versus the linked quarter and
year-over-year driven by lower interchange fees. Other income was
consistent with both the first quarter of 2023 and the comparable
quarter of 2022.
- Non-Interest Expense: Non-interest expense for the
second quarter of 2023 was $24.1
million, an increase from $22.3 million in the first quarter of 2023 and
$20.3 million for the second quarter
of 2022. The increase was related to $3.0 million of additional legal and professional
fees incurred in the first half of 2023 associated with the delay
in the filing of the 2022 Form 10-K and the First Quarter Form
10-Q. Salaries and benefits increased $0.5
million year-over-year as a result of pension and other
benefit expenses.
- Provision for Income Taxes: The provision for
income taxes was $1.6 million for the
second quarter of 2023, $2.4
million for the first quarter of 2023 and $3.6 million for the second quarter of
2022. The reduction in the provision for income taxes was the
result of lower pre-tax income. The effective tax rate as of
June 30, 2023 was 20.9%.
Balance Sheet
- Total Assets: Total assets were $4.1 billion at June 30, 2023, comparable to
March 31, 2023 and an increase of $134.1 million, or 3.4%, compared to
December 31, 2022. Growth in the balance sheet is in
line with growth in the loan portfolio and higher cash
balances.
- Investments: Total investments were $694.0 million as of June 30, 2023, a
decrease of $51.1 million, or 6.9%,
compared to March 31, 2023 and a decrease of $57.0 million compared to December 31, 2022.
The decrease for both periods was driven primarily by paydowns and
maturities (net of purchases) of $56.7
million and $45.3 million
respectively. The proceeds were primarily used to fund loan growth
and for general corporate purposes. The rising rate environment led
to unrealized losses of $5.2 million
within the available-for-sale portfolio in the second quarter of
2023
- Loans: Total loans reached a record high of $3.1 billion as of June 30, 2023. Loan
growth for the second quarter of 2023 was $64.5 million, or 2.1%, and $86.7 million, or 2.9%, from December 31,
2022. Loan growth was spread across all segments. Please see
the loan detail included in the consolidated financial information
table on page 11.
- Allowance for Credit Losses: The allowance for credit
losses was $31.2 million on
June 30, 2023, which represented 1.02% of loans outstanding,
as compared to $30.8 million or 1.02%
at March 31, 2023 and $30.0
million or 1.00% at December 31, 2022. Asset quality
improved at June 30, 2023. Net charge-offs, expressed as an
annualized percentage of average loans outstanding, were 0.07% for
the three-month period ended June 30, 2023, as compared to
0.10% for the three-month period ended March 31, 2023 and
0.09% for the three-month period ended December 31, 2022.
Nonperforming assets of $7.1 million
at June 30, 2023, represented 0.17% of period-end assets,
compared to $11.3 million or 0.27% at
March 31, 2023 and $12.6 million
or 0.32% at December 31, 2022.
- Deposits: At June 30, 2023, deposit balances
were $3.5 billion, relatively
unchanged from March 31, 2023 and December 31, 2022.
While overall deposit balances have remained stable, the deposit
mix has continued to shift from non-interest bearing accounts to
higher cost money market and time deposit accounts. Please
refer to page 6 for further details related to deposits.
- Capital: Total stockholders' equity was $361.4 million at June 30, 2023, a decrease
of $1.9 million, or 0.5%, from the
March 31, 2023 level of $363.4
million, and an increase of $7.9
million, or 2.2%, from December 31, 2022. Arrow's
regulatory capital ratios remained strong in the second quarter of
2023. As of June 30, 2023, Arrow's Common Equity Tier 1
Capital Ratio was 13.27% and Total Risk-Based Capital Ratio was
15.08%. The capital ratios of Arrow and both its subsidiary banks,
Glens Falls National Bank and Trust Company and Saratoga National
Bank and Trust Company, continued to exceed the "well capitalized"
regulatory standards.
Additional Commentary
- Cash and Stock Dividends: On June 15, 2023, Arrow distributed a cash dividend
of $0.27 per share. On July 28, 2023, Arrow declared a cash dividend of
$.27 per share, payable on
September 15, 2023, to shareholders
of record as of September 1, 2023.
This marks the 41st consecutive quarterly cash dividend.
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. Arrow is the parent of
Glens Falls National Bank and Trust Company and Saratoga National
Bank and Trust Company. Other subsidiaries include Upstate Agency,
LLC and North Country Investment Advisers, Inc.
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). Some 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. These non-GAAP financial measures
include: tangible equity, return on tangible equity, tax-equivalent
adjustment and related net interest income, tax-equivalent, the
efficiency ratio and net interest margin. Management believes that
the non-GAAP financial measures disclosed by Arrow are useful in
evaluating Arrow'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 in this document may contain statements based on
management's beliefs, assumptions, expectations, estimates and
projections about the future. Such "forward-looking statements," as
defined in Section 21E of the Securities Exchange Act of 1934, as
amended, involve a degree of uncertainty and attendant risk. Actual
outcomes and results may differ, explicitly or by implication. We
are not obliged to revise or update these statements to reflect
unanticipated events. This document should be read in conjunction
with Arrow's Annual Report on Form 10-K for the year ended
December 31, 2022 and other filings
with the SEC.
|
ARROW FINANCIAL
CORPORATION AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|
(In Thousands, Except
Per Share Amounts - Unaudited)
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
INTEREST AND
DIVIDEND INCOME
|
|
|
|
|
|
|
|
|
|
Interest and Fees on
Loans
|
|
$
34,618
|
|
$
26,906
|
|
$
66,504
|
|
$
52,645
|
|
Interest on Deposits at
Banks
|
|
1,674
|
|
427
|
|
2,153
|
|
625
|
|
Interest and Dividends
on Investment Securities:
|
|
|
|
|
|
|
|
|
|
Fully
Taxable
|
|
2,951
|
|
2,444
|
|
5,899
|
|
4,633
|
|
Exempt from Federal
Taxes
|
|
770
|
|
816
|
|
1,567
|
|
1,637
|
|
Total Interest and
Dividend Income
|
|
40,013
|
|
30,593
|
|
76,123
|
|
59,540
|
|
INTEREST
EXPENSE
|
|
|
|
|
|
|
|
|
|
Interest-Bearing
Checking Accounts
|
|
820
|
|
199
|
|
1,190
|
|
362
|
|
Savings
Deposits
|
|
8,514
|
|
892
|
|
14,101
|
|
1,309
|
|
Time Deposits over
$250,000
|
|
1,119
|
|
26
|
|
1,693
|
|
54
|
|
Other Time
Deposits
|
|
1,196
|
|
111
|
|
1,670
|
|
220
|
|
Borrowings
|
|
2,373
|
|
108
|
|
3,166
|
|
295
|
|
Junior Subordinated
Obligations Issued to
Unconsolidated
Subsidiary Trusts
|
|
171
|
|
171
|
|
340
|
|
340
|
|
Interest on Financing
Leases
|
|
48
|
|
48
|
|
97
|
|
97
|
|
Total Interest
Expense
|
|
14,241
|
|
1,555
|
|
22,257
|
|
2,677
|
|
NET INTEREST
INCOME
|
|
25,772
|
|
29,038
|
|
53,866
|
|
56,863
|
|
Provision for Credit
Losses
|
|
948
|
|
905
|
|
2,502
|
|
1,674
|
|
NET INTEREST INCOME
AFTER PROVISION FOR CREDIT LOSSES
|
|
24,824
|
|
28,133
|
|
51,364
|
|
55,189
|
|
NON-INTEREST
INCOME
|
|
|
|
|
|
|
|
|
|
Income From Fiduciary
Activities
|
|
2,428
|
|
2,517
|
|
4,703
|
|
5,113
|
|
Fees for Other Services
to Customers
|
|
2,717
|
|
3,050
|
|
5,312
|
|
5,845
|
|
Insurance
Commissions
|
|
1,560
|
|
1,622
|
|
3,080
|
|
3,133
|
|
Net (Loss) Gain on
Securities
|
|
(181)
|
|
154
|
|
(285)
|
|
284
|
|
Net Gain on Sales of
Loans
|
|
—
|
|
10
|
|
4
|
|
62
|
|
Other Operating
Income
|
|
382
|
|
391
|
|
769
|
|
1,469
|
|
Total Non-Interest
Income
|
|
6,906
|
|
7,744
|
|
13,583
|
|
15,906
|
|
NON-INTEREST
EXPENSE
|
|
|
|
|
|
|
|
|
|
Salaries and Employee
Benefits
|
|
12,039
|
|
11,687
|
|
23,986
|
|
22,973
|
|
Occupancy Expenses,
Net
|
|
1,583
|
|
1,602
|
|
3,211
|
|
3,200
|
|
Technology and
Equipment Expense
|
|
4,362
|
|
3,974
|
|
8,779
|
|
7,753
|
|
FDIC
Assessments
|
|
484
|
|
291
|
|
963
|
|
598
|
|
Other Operating
Expense
|
|
5,615
|
|
2,791
|
|
9,440
|
|
4,766
|
|
Total Non-Interest
Expense
|
|
24,083
|
|
20,345
|
|
46,379
|
|
39,290
|
|
INCOME BEFORE
PROVISION FOR INCOME TAXES
|
|
7,647
|
|
15,532
|
|
18,568
|
|
31,805
|
|
Provision for Income
Taxes
|
|
1,600
|
|
3,558
|
|
3,959
|
|
7,256
|
|
NET
INCOME
|
|
$
6,047
|
|
$
11,974
|
|
$
14,609
|
|
$
24,549
|
|
Average Shares
Outstanding 1:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
16,553
|
|
16,494
|
|
16,552
|
|
16,503
|
|
Diluted
|
|
16,553
|
|
16,535
|
|
16,552
|
|
16,551
|
|
Per Common
Share:
|
|
|
|
|
|
|
|
|
|
Basic
Earnings
|
|
$
0.36
|
|
$
0.72
|
|
$
0.88
|
|
$
1.48
|
|
Diluted
Earnings
|
|
0.36
|
|
0.72
|
|
0.88
|
|
1.48
|
|
|
1 2022 Share
and Per Share Amounts have been restated for the September 23,
2022, 3% stock dividend.
|
|
ARROW FINANCIAL
CORPORATION AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
(In Thousands, Except
Share and Per Share Amounts - Unaudited)
|
|
|
June
30,
2023
|
|
December 31,
2022
|
|
June
30,
2022
|
|
ASSETS
|
|
|
|
|
|
|
Cash and Due From
Banks
|
$
33,803
|
|
$
31,886
|
|
$
51,549
|
|
Interest-Bearing
Deposits at Banks
|
139,798
|
|
32,774
|
|
165,705
|
|
Investment
Securities:
|
|
|
|
|
|
|
Available-for-Sale at
Fair Value
|
543,708
|
|
573,495
|
|
582,741
|
|
Held-to-Maturity (Fair
Value of $139,143 at June 30, 2023; $171,623 at
December 31, 2022; and $180,511 at June 30,
2022)
|
143,460
|
|
175,364
|
|
182,096
|
|
Equity
Securities
|
1,889
|
|
2,174
|
|
2,031
|
|
FHLB and Federal
Reserve Bank Stock
|
4,932
|
|
6,064
|
|
4,718
|
|
Loans
|
3,069,897
|
|
2,983,207
|
|
2,844,802
|
|
Allowance for Credit
Losses
|
(31,170)
|
|
(29,952)
|
|
(28,090)
|
|
Net Loans
|
3,038,727
|
|
2,953,255
|
|
2,816,712
|
|
Premises and Equipment,
Net
|
59,773
|
|
56,491
|
|
50,141
|
|
Goodwill
|
21,873
|
|
21,873
|
|
21,873
|
|
Other Intangible
Assets, Net
|
1,302
|
|
1,500
|
|
1,710
|
|
Other Assets
|
114,388
|
|
114,633
|
|
111,929
|
|
Total
Assets
|
$
4,103,653
|
|
$
3,969,509
|
|
$
3,991,205
|
|
LIABILITIES
|
|
|
|
|
|
|
Noninterest-Bearing
Deposits
|
759,495
|
|
836,871
|
|
824,842
|
|
Interest-Bearing
Checking Accounts
|
856,016
|
|
997,694
|
|
1,046,570
|
|
Savings
Deposits
|
1,517,937
|
|
1,454,364
|
|
1,504,791
|
|
Time Deposits over
$250,000
|
140,694
|
|
76,224
|
|
40,021
|
|
Other Time
Deposits
|
228,082
|
|
133,211
|
|
129,436
|
|
Total
Deposits
|
3,502,224
|
|
3,498,364
|
|
3,545,660
|
|
Borrowings
|
171,800
|
|
54,800
|
|
25,000
|
|
Junior Subordinated
Obligations Issued to Unconsolidated
Subsidiary
Trusts
|
20,000
|
|
20,000
|
|
20,000
|
|
Finance
Leases
|
5,093
|
|
5,119
|
|
5,144
|
|
Other
Liabilities
|
43,093
|
|
37,688
|
|
38,903
|
|
Total
Liabilities
|
3,742,210
|
|
3,615,971
|
|
3,634,707
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
Preferred Stock, $1 Par
Value and 1,000,000 Shares Authorized at June 30, 2023,
December 31, 2022 and June 30, 2022
|
—
|
|
—
|
|
—
|
|
Common Stock, $1 Par
Value; 30,000,000 Shares Authorized (21,423,992 Shares Issued
at June 30, 2023 and December 31, 2022 and 20,800,144
Shares Issued at June 30, 2022)
|
21,424
|
|
21,424
|
|
20,800
|
|
Additional Paid-in
Capital
|
401,069
|
|
400,270
|
|
379,423
|
|
Retained
Earnings
|
71,076
|
|
65,401
|
|
69,980
|
|
Accumulated Other
Comprehensive Loss
|
(47,613)
|
|
(49,655)
|
|
(29,564)
|
|
Treasury Stock, at Cost
(4,870,934 Shares at June 30, 2023; 4,872,355 Shares at
December 31, 2022 and 4,777,605 Shares at June 30,
2022)
|
(84,513)
|
|
(83,902)
|
|
(84,141)
|
|
Total Stockholders'
Equity
|
361,443
|
|
353,538
|
|
356,498
|
|
Total Liabilities and
Stockholders' Equity
|
$
4,103,653
|
|
$
3,969,509
|
|
$
3,991,205
|
|
Arrow Financial
Corporation
|
|
Selected Quarterly
Information
|
|
(Dollars In
Thousands, Except Per Share Amounts -
Unaudited)
|
|
|
Quarter
Ended
|
6/30/2023
|
|
3/31/2023
|
|
12/31/2022
|
|
9/30/2022
|
|
6/30/2022
|
|
Net Income
|
$
6,047
|
|
$
8,562
|
|
$ 12,087
|
|
$ 12,163
|
|
$ 11,974
|
|
Transactions in Net
Income (Net of Tax):
|
|
|
|
|
|
|
|
|
|
|
Net Changes in Fair
Value of Equity Investments
|
(133)
|
|
(76)
|
|
35
|
|
70
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
Share and Per Share
Data:1
|
|
|
|
|
|
|
|
|
|
|
Period End Shares
Outstanding
|
16,553
|
|
16,553
|
|
16,552
|
|
16,523
|
|
16,503
|
|
Basic Average Shares
Outstanding
|
16,553
|
|
16,552
|
|
16,535
|
|
16,512
|
|
16,494
|
|
Diluted Average Shares
Outstanding
|
16,553
|
|
16,564
|
|
16,589
|
|
16,558
|
|
16,535
|
|
Basic Earnings Per
Share
|
$
0.36
|
|
$
0.52
|
|
$
0.73
|
|
$
0.74
|
|
$
0.72
|
|
Diluted Earnings Per
Share
|
0.36
|
|
0.52
|
|
0.73
|
|
0.74
|
|
0.72
|
|
Cash Dividend Per
Share
|
0.270
|
|
0.270
|
|
0.270
|
|
0.262
|
|
0.262
|
|
|
|
|
|
|
|
|
|
|
|
Selected Quarterly
Average Balances:
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing
Deposits at Banks
|
$
130,057
|
|
$ 40,436
|
|
$
143,499
|
|
$
209,001
|
|
$
232,545
|
|
Investment
Securities
|
787,175
|
|
813,461
|
|
845,859
|
|
821,052
|
|
822,112
|
|
Loans
|
3,036,410
|
|
2,991,928
|
|
2,951,547
|
|
2,872,066
|
|
2,804,180
|
|
Deposits
|
3,460,711
|
|
3,480,279
|
|
3,614,945
|
|
3,598,519
|
|
3,569,754
|
|
Other Borrowed
Funds
|
220,616
|
|
100,596
|
|
63,304
|
|
50,125
|
|
50,140
|
|
Shareholders'
Equity
|
365,070
|
|
359,556
|
|
351,402
|
|
361,675
|
|
357,228
|
|
Total
Assets
|
4,087,653
|
|
3,978,851
|
|
4,074,028
|
|
4,047,738
|
|
4,012,999
|
|
Return on Average
Assets, annualized
|
0.59 %
|
|
0.87 %
|
|
1.18 %
|
|
1.19 %
|
|
1.20 %
|
|
Return on Average
Equity, annualized
|
6.64 %
|
|
9.66 %
|
|
13.65 %
|
|
13.34 %
|
|
13.44 %
|
|
Return on Average
Tangible Equity, annualized 2
|
7.10 %
|
|
10.33 %
|
|
14.62 %
|
|
14.27 %
|
|
14.40 %
|
|
Average Earning
Assets
|
$ 3,953,642
|
|
$ 3,845,825
|
|
$ 3,940,905
|
|
$ 3,902,119
|
|
$ 3,858,837
|
|
Average Paying
Liabilities
|
2,924,743
|
|
2,782,299
|
|
2,891,092
|
|
2,781,985
|
|
2,808,287
|
|
Interest
Income
|
40,013
|
|
36,110
|
|
35,904
|
|
34,207
|
|
30,593
|
|
Tax-Equivalent
Adjustment 3
|
196
|
|
202
|
|
279
|
|
268
|
|
269
|
|
Interest Income,
Tax-Equivalent 3
|
40,209
|
|
36,312
|
|
36,183
|
|
34,475
|
|
30,862
|
|
Interest
Expense
|
14,241
|
|
8,016
|
|
5,325
|
|
3,306
|
|
1,555
|
|
Net Interest
Income
|
25,772
|
|
28,094
|
|
30,579
|
|
30,901
|
|
29,038
|
|
Net Interest Income,
Tax-Equivalent 3
|
25,968
|
|
28,296
|
|
30,858
|
|
31,169
|
|
29,307
|
|
Net Interest Margin,
annualized
|
2.61 %
|
|
2.96 %
|
|
3.08 %
|
|
3.14 %
|
|
3.02 %
|
|
Net Interest Margin,
Tax-Equivalent, annualized 3
|
2.63 %
|
|
2.98 %
|
|
3.11 %
|
|
3.17 %
|
|
3.05 %
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency Ratio
Calculation: 4
|
|
|
|
|
|
|
|
|
|
|
Non-Interest
Expense
|
$ 24,083
|
|
$ 22,296
|
|
$ 20,792
|
|
$ 21,448
|
|
$ 20,345
|
|
Less: Intangible Asset
Amortization
|
44
|
|
45
|
|
47
|
|
48
|
|
48
|
|
Net Non-Interest
Expense
|
$ 24,039
|
|
$ 22,251
|
|
$ 20,745
|
|
$ 21,400
|
|
$ 20,297
|
|
Net Interest Income,
Tax-Equivalent
|
$ 25,968
|
|
$ 28,296
|
|
$ 30,858
|
|
$ 31,169
|
|
$ 29,307
|
|
Non-Interest
Income
|
6,906
|
|
6,677
|
|
7,165
|
|
7,827
|
|
7,744
|
|
Less: Net (Loss) Gain
on Securities
|
(181)
|
|
(104)
|
|
48
|
|
95
|
|
154
|
|
Net Gross
Income
|
$ 33,055
|
|
$ 35,077
|
|
$ 37,975
|
|
$ 38,901
|
|
$ 36,897
|
|
Efficiency
Ratio
|
72.72 %
|
|
63.43 %
|
|
54.63 %
|
|
55.01 %
|
|
55.01 %
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Capital
Information:
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders'
Equity (i.e. Book Value)
|
$
361,443
|
|
$
363,371
|
|
$
353,538
|
|
$
345,550
|
|
$
356,498
|
|
Book Value per Share
1
|
21.84
|
|
21.95
|
|
21.36
|
|
20.91
|
|
21.60
|
|
Goodwill and Other
Intangible Assets, net
|
23,175
|
|
23,273
|
|
23,373
|
|
23,477
|
|
23,583
|
|
Tangible Book Value per
Share 1,2
|
20.44
|
|
20.55
|
|
19.95
|
|
19.49
|
|
20.17
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Ratios:5
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Leverage
Ratio
|
9.92 %
|
|
10.13 %
|
|
9.80 %
|
|
9.71 %
|
|
9.60 %
|
|
Common Equity Tier 1
Capital Ratio
|
13.27 %
|
|
13.34 %
|
|
13.32 %
|
|
13.14 %
|
|
13.14 %
|
|
Tier 1 Risk-Based
Capital Ratio
|
13.96 %
|
|
14.03 %
|
|
14.01 %
|
|
13.85 %
|
|
13.86 %
|
|
Total Risk-Based
Capital Ratio
|
15.08 %
|
|
15.15 %
|
|
15.11 %
|
|
14.93 %
|
|
14.93 %
|
|
|
|
|
|
|
|
|
|
|
|
Assets Under Trust
Admin. & Investment Mgmt.
|
$ 1,711,460
|
|
$ 1,672,117
|
|
$ 1,606,132
|
|
$ 1,515,994
|
|
$ 1,589,178
|
|
Arrow Financial
Corporation
|
|
Selected Quarterly
Information - Continued
|
|
(Dollars In
Thousands, Except Per Share Amounts -
Unaudited)
|
|
|
Footnotes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
Share and Per Share
Data have been restated for the September 23, 2022, 3% stock
dividend.
|
|
|
|
2.
|
Non-GAAP Financial
Measure Reconciliation: Tangible Book Value, Tangible Equity, and
Return on 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.
|
|
|
|
|
6/30/2023
|
|
3/31/2023
|
|
12/31/2022
|
|
9/30/2022
|
|
6/30/2022
|
|
Total Stockholders'
Equity (GAAP)
|
$
361,443
|
|
$
363,371
|
|
$
353,538
|
|
$
345,550
|
|
$
356,498
|
|
Less: Goodwill
and Other Intangible assets, net
|
23,175
|
|
23,273
|
|
23,373
|
|
23,477
|
|
23,583
|
|
Tangible Equity
(Non-GAAP)
|
$
338,268
|
|
$
340,098
|
|
$
330,165
|
|
$
322,073
|
|
$
332,915
|
|
|
|
|
|
|
|
|
|
|
|
|
Period End Shares
Outstanding
|
16,553
|
|
16,553
|
|
16,552
|
|
16,523
|
|
16,503
|
|
Tangible Book Value per
Share (Non-GAAP)
|
$
20.44
|
|
$
20.55
|
|
$
19.95
|
|
$
19.49
|
|
$
20.17
|
|
Net Income
|
6,047
|
|
8,562
|
|
12,087
|
|
12,163
|
|
11,974
|
|
Return on Average
Tangible Equity (Net Income/Tangible Equity -
Annualized)
|
7.10 %
|
|
10.33 %
|
|
14.62 %
|
|
14.27 %
|
|
14.40 %
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
Non-GAAP Financial
Measure Reconciliation: Net Interest Margin is the ratio of
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.
|
|
|
|
|
6/30/2023
|
|
3/31/2023
|
|
12/31/2022
|
|
9/30/2022
|
|
6/30/2022
|
|
Interest Income
(GAAP)
|
$ 40,013
|
|
$ 36,110
|
|
$ 35,904
|
|
$ 34,207
|
|
$ 30,593
|
|
Add:
Tax-Equivalent adjustment
(Non-GAAP)
|
196
|
|
202
|
|
279
|
|
268
|
|
269
|
|
Interest Income - Tax
Equivalent
(Non-GAAP)
|
$ 40,209
|
|
$ 36,312
|
|
$ 36,183
|
|
$ 34,475
|
|
$ 30,862
|
|
Net Interest Income
(GAAP)
|
$ 25,772
|
|
$ 28,094
|
|
$ 30,579
|
|
$ 30,901
|
|
$ 29,038
|
|
Add:
Tax-Equivalent adjustment
(Non-GAAP)
|
196
|
|
202
|
|
279
|
|
268
|
|
269
|
|
Net Interest Income -
Tax Equivalent
(Non-GAAP)
|
$ 25,968
|
|
$ 28,296
|
|
$ 30,858
|
|
$ 31,169
|
|
$ 29,307
|
|
Average Earning
Assets
|
$
3,953,642
|
|
$
3,845,825
|
|
$
3,940,905
|
|
$
3,902,119
|
|
$
3,858,837
|
|
Net Interest Margin
(Non-GAAP)*
|
2.63 %
|
|
2.98 %
|
|
3.11 %
|
|
3.17 %
|
|
3.05 %
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Non-GAAP Financial
Measure Reconciliation: 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 non-interest expense to net gross income (which equals
tax-equivalent net interest income plus non-interest income, as
adjusted).
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
For the current
quarter, all of the regulatory capital ratios as well as the Total
Risk-Weighted Assets are calculated in accordance with bank
regulatory capital rules. The June 30, 2023 CET1 ratio
listed in the tables (i.e., 13.27%) exceeds the sum of the required
minimum CET1 ratio plus the fully phased-in Capital Conservation
Buffer (i.e., 7.00%).
|
|
|
|
|
6/30/2023
|
|
3/31/2023
|
|
12/31/2022
|
|
9/30/2022
|
|
6/30/2022
|
|
Total Risk Weighted
Assets
|
$
2,937,837
|
|
$
2,909,610
|
|
$
2,883,902
|
|
$
2,856,224
|
|
$
2,790,520
|
|
Common Equity Tier 1
Capital
|
389,966
|
|
388,228
|
|
384,003
|
|
375,394
|
|
366,798
|
|
Common Equity Tier 1
Ratio
|
13.27 %
|
|
13.34 %
|
|
13.32 %
|
|
13.14 %
|
|
13.14 %
|
|
|
|
|
|
|
|
|
|
|
|
|
* Quarterly ratios have
been annualized.
|
|
|
|
|
|
Arrow Financial
Corporation
|
|
Average Consolidated
Balance Sheets and Net Interest Income Analysis
|
|
(Dollars in Thousands -
Unaudited)
|
|
|
Quarter
Ended:
|
June 30,
2023
|
|
June 30,
2022
|
|
|
|
Interest
|
|
Rate
|
|
|
|
Interest
|
|
Rate
|
|
Average
|
|
Income/
|
|
Earned/
|
|
Average
|
|
Income/
|
|
Earned/
|
|
Balance
|
|
Expense
|
|
Paid
|
|
Balance
|
|
Expense
|
|
Paid
|
|
Interest-Bearing
Deposits at Banks
|
$
130,057
|
|
$
1,674
|
|
5.16 %
|
|
$
232,545
|
|
$
427
|
|
0.74 %
|
|
Investment
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully
Taxable
|
637,018
|
|
2,951
|
|
1.86
|
|
644,443
|
|
2,444
|
|
1.52
|
|
Exempt from Federal
Taxes
|
150,157
|
|
770
|
|
2.06
|
|
177,669
|
|
816
|
|
1.84
|
|
Loans
|
3,036,410
|
|
34,618
|
|
4.57
|
|
2,804,180
|
|
26,906
|
|
3.85
|
|
Total Earning
Assets
|
3,953,642
|
|
40,013
|
|
4.06
|
|
3,858,837
|
|
30,593
|
|
3.18
|
|
Allowance for Credit
Losses
|
(30,577)
|
|
|
|
|
|
(27,558)
|
|
|
|
|
|
Cash and Due From
Banks
|
28,742
|
|
|
|
|
|
40,105
|
|
|
|
|
|
Other Assets
|
135,846
|
|
|
|
|
|
141,615
|
|
|
|
|
|
Total
Assets
|
$
4,087,653
|
|
|
|
|
|
$
4,012,999
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing
Checking Accounts
|
$
863,892
|
|
820
|
|
0.38
|
|
$
1,048,752
|
|
199
|
|
0.08
|
|
Savings
Deposits
|
1,504,412
|
|
8,514
|
|
2.27
|
|
1,541,616
|
|
892
|
|
0.23
|
|
Time Deposits of
$250,000 or More
|
133,897
|
|
1,119
|
|
3.35
|
|
37,418
|
|
26
|
|
0.28
|
|
Other Time
Deposits
|
201,926
|
|
1,196
|
|
2.38
|
|
130,361
|
|
111
|
|
0.34
|
|
Total Interest-Bearing
Deposits
|
2,704,127
|
|
11,649
|
|
1.73
|
|
2,758,147
|
|
1,228
|
|
0.18
|
|
Borrowings
|
195,527
|
|
2,373
|
|
4.87
|
|
25,000
|
|
108
|
|
1.73
|
|
Junior Subordinated
Obligations Issued to Unconsolidated Subsidiary Trusts
|
20,000
|
|
171
|
|
3.43
|
|
20,000
|
|
171
|
|
3.43
|
|
Finance
Leases
|
5,089
|
|
48
|
|
3.78
|
|
5,140
|
|
48
|
|
3.75
|
|
Total Interest-Bearing
Liabilities
|
2,924,743
|
|
14,241
|
|
1.95
|
|
2,808,287
|
|
1,555
|
|
0.22
|
|
Noninterest-Bearing
Deposits
|
756,584
|
|
|
|
|
|
811,607
|
|
|
|
|
|
Other
Liabilities
|
41,256
|
|
|
|
|
|
35,877
|
|
|
|
|
|
Total
Liabilities
|
3,722,583
|
|
|
|
|
|
3,655,771
|
|
|
|
|
|
Stockholders'
Equity
|
365,070
|
|
|
|
|
|
357,228
|
|
|
|
|
|
Total Liabilities
and Stockholders' Equity
|
$
4,087,653
|
|
|
|
|
|
$
4,012,999
|
|
|
|
|
|
Net Interest
Income
|
|
|
$ 25,772
|
|
|
|
|
|
$ 29,038
|
|
|
|
Net Interest
Spread
|
|
|
|
|
2.11 %
|
|
|
|
|
|
2.96 %
|
|
Net Interest
Margin
|
|
|
|
|
2.61 %
|
|
|
|
|
|
3.02 %
|
|
Arrow Financial
Corporation
|
|
Average Consolidated
Balance Sheets and Net Interest Income Analysis
|
|
(Dollars in Thousands -
Unaudited)
|
|
|
Quarter
Ended:
|
June 30,
2023
|
|
March 31,
2023
|
|
|
|
Interest
|
|
Rate
|
|
|
|
Interest
|
|
Rate
|
|
Average
|
|
Income/
|
|
Earned/
|
|
Average
|
|
Income/
|
|
Earned/
|
|
Balance
|
|
Expense
|
|
Paid
|
|
Balance
|
|
Expense
|
|
Paid
|
|
Interest-Bearing
Deposits at Banks
|
$
130,057
|
|
$
1,674
|
|
5.16 %
|
|
$ 40,436
|
|
$
479
|
|
4.80 %
|
|
Investment
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully
Taxable
|
637,018
|
|
2,951
|
|
1.86
|
|
652,743
|
|
2,948
|
|
1.83
|
|
Exempt from Federal
Taxes
|
150,157
|
|
770
|
|
2.06
|
|
160,718
|
|
797
|
|
2.01
|
|
Loans
|
3,036,410
|
|
34,618
|
|
4.57
|
|
2,991,928
|
|
31,886
|
|
4.32
|
|
Total Earning
Assets
|
3,953,642
|
|
40,013
|
|
4.06
|
|
3,845,825
|
|
36,110
|
|
3.81
|
|
Allowance for Credit
Losses
|
(30,577)
|
|
|
|
|
|
(29,792)
|
|
|
|
|
|
Cash and Due From
Banks
|
28,742
|
|
|
|
|
|
30,518
|
|
|
|
|
|
Other Assets
|
135,846
|
|
|
|
|
|
132,300
|
|
|
|
|
|
Total
Assets
|
$
4,087,653
|
|
|
|
|
|
$
3,978,851
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing
Checking Accounts
|
$
863,892
|
|
820
|
|
0.38
|
|
$
964,735
|
|
370
|
|
0.16
|
|
Savings
Deposits
|
1,504,412
|
|
8,514
|
|
2.27
|
|
1,474,251
|
|
5,587
|
|
1.54
|
|
Time Deposits of
$250,000 or More
|
133,897
|
|
1,119
|
|
3.35
|
|
94,415
|
|
574
|
|
2.47
|
|
Other Time
Deposits
|
201,926
|
|
1,196
|
|
2.38
|
|
148,302
|
|
474
|
|
1.30
|
|
Total Interest-Bearing
Deposits
|
2,704,127
|
|
11,649
|
|
1.73
|
|
2,681,703
|
|
7,005
|
|
1.06
|
|
Borrowings
|
195,527
|
|
2,373
|
|
4.87
|
|
75,494
|
|
793
|
|
4.26
|
|
Junior Subordinated
Obligations Issued to Unconsolidated Subsidiary Trusts
|
20,000
|
|
171
|
|
3.43
|
|
20,000
|
|
169
|
|
3.43
|
|
Finance
Leases
|
5,089
|
|
48
|
|
3.78
|
|
5,102
|
|
49
|
|
3.89
|
|
Total Interest-Bearing
Liabilities
|
2,924,743
|
|
14,241
|
|
1.95
|
|
2,782,299
|
|
8,016
|
|
1.17
|
|
Noninterest-bearing
deposits
|
756,584
|
|
|
|
|
|
798,576
|
|
|
|
|
|
Other
Liabilities
|
41,256
|
|
|
|
|
|
38,420
|
|
|
|
|
|
Total
Liabilities
|
3,722,583
|
|
|
|
|
|
3,619,295
|
|
|
|
|
|
Stockholders'
Equity
|
365,070
|
|
|
|
|
|
359,556
|
|
|
|
|
|
Total Liabilities
and Stockholders' Equity
|
$
4,087,653
|
|
|
|
|
|
$
3,978,851
|
|
|
|
|
|
Net Interest
Income
|
|
|
$ 25,772
|
|
|
|
|
|
$ 28,094
|
|
|
|
Net Interest
Spread
|
|
|
|
|
2.11 %
|
|
|
|
|
|
2.64 %
|
|
Net Interest
Margin
|
|
|
|
|
2.61 %
|
|
|
|
|
|
2.96 %
|
|
Arrow Financial
Corporation
|
|
Consolidated
Financial Information
|
|
(Dollars in
Thousands - Unaudited)
|
|
|
Quarter
Ended:
|
6/30/2023
|
|
12/31/2022
|
|
6/30/2022
|
|
Loan
Portfolio
|
|
|
|
|
|
|
Commercial
Loans
|
$
147,518
|
|
$
140,293
|
|
$
138,675
|
|
Commercial Real Estate
Loans
|
723,948
|
|
707,022
|
|
663,234
|
|
Subtotal
Commercial Loan Portfolio
|
871,466
|
|
847,315
|
|
801,909
|
|
Consumer
Loans
|
1,087,765
|
|
1,065,135
|
|
1,031,111
|
|
Residential Real Estate
Loans
|
1,110,666
|
|
1,070,757
|
|
1,011,782
|
|
Total Loans
|
$
3,069,897
|
|
$
2,983,207
|
|
$
2,844,802
|
|
Allowance for Credit
Losses
|
|
|
|
|
|
|
Allowance for Credit
Losses, Beginning of Quarter
|
$
30,784
|
|
$
29,232
|
|
$
27,661
|
|
Loans
Charged-off
|
(1,280)
|
|
(1,261)
|
|
(907)
|
|
Less Recoveries of
Loans Previously Charged-off
|
718
|
|
572
|
|
431
|
|
Net Loans
Charged-off
|
(562)
|
|
(689)
|
|
(476)
|
|
Provision for Credit
Losses
|
948
|
|
1,409
|
|
905
|
|
Allowance for Credit
Losses, End of Quarter
|
$
31,170
|
|
$
29,952
|
|
$
28,090
|
|
Nonperforming
Assets
|
|
|
|
|
|
|
Nonaccrual
Loans
|
$
5,997
|
|
$
10,757
|
|
$
7,999
|
|
Loans Past Due 90 or
More Days and Accruing
|
467
|
|
1,157
|
|
1,641
|
|
Loans Restructured and
in Compliance with Modified Terms
|
67
|
|
69
|
|
77
|
|
Total Nonperforming
Loans
|
6,531
|
|
11,983
|
|
9,717
|
|
Repossessed
Assets
|
342
|
|
593
|
|
297
|
|
Other Real Estate
Owned
|
182
|
|
—
|
|
—
|
|
Total Nonperforming
Assets
|
$
7,055
|
|
$
12,576
|
|
$
10,014
|
|
|
|
|
|
|
|
Key Asset Quality
Ratios
|
|
|
|
|
|
|
Net Loans Charged-off
to Average Loans,
Quarter-to-date Annualized
|
0.07 %
|
|
0.09 %
|
|
0.07 %
|
|
Provision for Credit
Losses to Average Loans,
Quarter-to-date Annualized
|
0.13 %
|
|
0.19 %
|
|
0.13 %
|
|
Allowance for Credit
Losses to Period-End Loans
|
1.02 %
|
|
1.00 %
|
|
0.99 %
|
|
Allowance for Credit
Losses to Period-End Nonperforming Loans
|
477.26 %
|
|
249.95 %
|
|
289.08 %
|
|
Nonperforming Loans to
Period-End Loans
|
0.21 %
|
|
0.40 %
|
|
0.34 %
|
|
Nonperforming Assets to
Period-End Assets
|
0.17 %
|
|
0.32 %
|
|
0.25 %
|
|
|
|
|
|
|
|
Year-to-Date Period
Ended:
|
6/30/2023
|
|
12/31/2022
|
|
6/30/2022
|
|
Allowance for Credit
Losses
|
|
|
|
|
|
|
Allowance for Credit
Losses, Beginning of Year
|
$
29,952
|
|
$
27,281
|
|
$
27,281
|
|
Loans
Charged-off
|
(2,608)
|
|
(4,143)
|
|
(1,736)
|
|
Less Recoveries of
Loans Previously Charged-off
|
1,324
|
|
2,016
|
|
871
|
|
Net Loans
Charged-off
|
(1,284)
|
|
(2,127)
|
|
(865)
|
|
Provision for Credit
Losses
|
2,502
|
|
4,798
|
|
1,674
|
|
Allowance for Credit
Losses, End of Period
|
$
31,170
|
|
$
29,952
|
|
$
28,090
|
|
|
|
|
|
|
|
Key Asset Quality
Ratios
|
|
|
|
|
|
|
Net Loans Charged-off
to Average Loans, Annualized
|
0.09 %
|
|
0.08 %
|
|
0.06 %
|
|
Provision for Loan
Losses to Average Loans, Annualized
|
0.17 %
|
|
0.17 %
|
|
0.12 %
|
View original
content:https://www.prnewswire.com/news-releases/arrow-reports-6-0-million-in-q2-2023-net-income-loans-reach-record-high-of-3-1-billion-301895613.html
SOURCE Arrow Financial Corporation