0000717538FALSE00007175382025-01-292025-01-29
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report: January 29, 2025
(Date of earliest event reported)
ARROW FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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| New York | 0-12507 | 22-2448962 |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
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| 250 Glen Street | Glens Falls | New York | 12801 |
| (Address of principal executive offices) | (Zip Code) |
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| Registrant’s telephone number, including area code: | 518 | | 745-1000 |
(Former name or former address, if changed since last report)
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| 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)) |
Securities registered pursuant to Section 12(b) of the Act:
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| 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 |
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| 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 | ☐ |
Item 2.02. Results of Operations and Financial Condition.
On January 30, 2025, Arrow Financial Corporation (the "Company") issued a press release containing unaudited financial information and accompanying discussion for the year-to-date period ended December 31, 2024. A copy of this press release is furnished as Exhibit 99.1 to this report on Form 8-K.
Item 7.01. Regulation FD Disclosure.
On January 30, 2025, the Company made available certain presentation material (the "Fourth Quarter 2024 Investor Presentation"), which includes among other things, a review of financial results and trends through the period ended December 31, 2024. The furnished Fourth Quarter 2024 Investor Presentation should be read in conjunction with our Earnings Release for the quarter ended December 31, 2024.
A copy of the presentation material is included as Exhibit 99.2 to this current report on Form 8-K and is incorporated herein by reference.
The information furnished under this Report, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that section. The information shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission made by the Company, regardless of any general incorporation language in such filing.
Item 8.01. Other Events.
On January 29, 2025, the Board of Directors (the “Board”) of Arrow Financial Corporation (the “Company”) declared a quarterly cash dividend of $0.28 per share payable February 24, 2025 to shareholders of record on February 10, 2025.
A copy of the press release announcing the quarterly cash dividend is furnished as Exhibit 99.1 to this report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | ARROW FINANCIAL CORPORATION |
| | Registrant |
| | |
| Date: | January 30, 2025 | /s/ Penko Ivanov |
| | Penko Ivanov
Chief Financial Officer |
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| 250 Glen Street |
| Glens Falls, NY 12801 |
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| NASDAQ® Symbol: “AROW“ |
| Website: arrowfinancial.com |
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| Media Contact: Rachael Murray |
| P: (518) 742-6505 |
| E: rachael.murray@arrowbank.com |
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| FOR IMMEDIATE RELEASE |
Arrow Reports 4th Quarter Net Income of $4.5 Million or $0.27 per Share and $29.7 Million or $1.77 per Share for 2024. Declares first quarter dividend of $0.28 per share.
GLENS FALLS, N.Y. (January 30, 2025) — Arrow Financial Corporation (NasdaqGS® – AROW) ("Arrow") reported net income of $4.5 million, and fully diluted earnings per share ("EPS") of $0.27 for the fourth quarter of 2024, versus $7.7 million and EPS of $0.46, for the same period in 2023. For the year ended 2024, net income totaled $29.7 million, with EPS of $1.77, versus $30.1 million, and EPS of $1.77, for the same period in 2023.
The Board of Directors of Arrow declared a quarterly cash dividend of $0.28 per share payable February 24, 2025 to shareholders of record as of February 10, 2025.
The reported results included several non-core items that impacted the fourth quarter and the 2024 full year results. As previously disclosed in our Form 8-K filed December 26, 2024, the fourth quarter included the following pre-tax non-core items:
•$3.0 million, or $0.15 per share, loss on sale of repositioning of the securities portfolio
•$0.7 million, or $0.03 per share, write-off related to legacy branding items
•$0.5 million, or $0.02 per share, in expenses (legal, consulting, compliance) related to the unification of our two bank subsidiaries into Arrow Bank National Association ("Arrow Bank")
Prior to the fourth quarter, Arrow recognized the following pre-tax non-core/non-recurring items:
•$0.4 million, or $0.02 per share, in expenses related to the acquisition of the Whitehall branch and the assets of A&B Agency, Inc. completed during the third quarter
•$1.2 million, or $0.06 per share, in residual expenses related to the 2022 Form 10-K filing delay
This Earnings Release and related commentary should be read in conjunction with our Form 8-K filed January 30, 2025 and related Fourth Quarter 2024 Investor Presentation, which can also be found on our website: arrowfinancial.com/documents/investor-presentations.
Arrow President and CEO David S. DeMarco:
“Arrow just completed a transformational year. We completed the unification of our two subsidiary banks under one brand, Arrow Bank. Our exceptional team continues to serve our customers and communities in the same way they have come to expect from us. In addition, we also acquired a bank branch in Whitehall, New York as well the assets of a local insurance agency. We made significant contributions to the communities we serve, both financially and through volunteer efforts, continuing our commitment to giving back. In 2024, we delivered for our shareholders, growing loans by mid-single digits, expanding our net interest margin and actively managing our balance sheet, positioning the Bank for increased profitability in 2025."
Fourth-Quarter Highlights and Key Metrics
•Reported Net Income of $4.5 million or $0.27 EPS
•Core Net Income of $7.8 million or $0.47 EPS
•Results included approximately $4.2 million of non-core charges and expenses related to the repositioning of the securities portfolio and efforts related to bank unification
•Net Interest Margin improved to 2.83% (2.85% FTE1) versus 2.78% (2.79% FTE) in the prior quarter
•Loan growth of $59 million2 (7.0% annualized) for the quarter
•Record loan balances — reaching $3.4 billion
•Provision for Credit Losses was $2.9 million on strong loan growth and changes in portfolio composition
•Net Charge-Offs remained low at 0.06% (annualized) for the quarter
•Tangible Book Value improved to $22.40, an increase from $21.06 from the prior year
•Return on Average Assets 0.41% impacted by 31bps from non-core items as well as 21bps from the provision for credit losses
•Other Comprehensive Income improved $5.3 million, or 20%, from the prior-quarter, excluding realized loss on the repositioning of the investment portfolio
•Legal bank unification of our bank subsidiaries completed
•Increased quarterly dividend by 3.7% to $0.28 per share
Select 2024 Highlights and Key Metrics
•Reported Net Income of $29.7 million or $1.77 EPS
•Core Net Income of $34.4 million or $2.05 EPS
•Results included approximately $5.8 million of pre-tax non-core charges and expenses related to the repositioning of the securities portfolio, bank unification, acquisition of the Whitehall branch and A&B Agency, Inc. as well as residual costs related to 2022 Form 10-K filing delay
•Loan growth of $185 million3, or 5.8%.
•Net Interest Margin improved to 2.72% (2.74% FTE4), up from 2.65% (2.67% FTE) in the prior year
•Return on Average Assets of 0.70% reduced by 11bps from non-core items and the provision for credit losses
•Net Charge-Offs were 0.09% for the year
•Whitehall branch and A&B Agency, Inc. acquisitions in 3Q24
•Enhanced shareholder value via share repurchases and increased cash dividend
•Named to the prestigious Piper Sandler Sm-All Stars: Class of 2024 list
Income Statement
•Net Income: Net income for the fourth quarter of 2024 was $4.5 million, decreasing from $9.0 million in the third quarter of 2024. Net income for 2024 was $29.7 million, down from $30.1 million for 2023.
•Compared to the prior quarter, net income benefited from an increase of $1.2 million in net
1 FTE (fully taxable equivalent basis) net interest margin is a non-GAAP measure. See reconciliation on Note 3 to the Selected Quarterly Information.
2 Excludes both $2.2 million fair value hedge adjustment at December 31, 2024 and $6.5 million fair value hedge adjustment at September 30, 2024.
3 Excludes both $2.2 million fair value hedge adjustment at December 31, 2024 and $5.8 million fair value hedge adjustment at December 31, 2023.
4 FTE Net interest margin is a non-GAAP measure. See reconciliation on Note 3 to the Selected Quarterly Information.
interest income, offset by an increase in non-interest expense of $1.7 million, a decrease in non-interest income of $3.9 million and an increase in the provision for credit losses of $1.9 million. The remaining change was related to the tax impact.
•Compared to the prior year, the decrease in net income was primarily the result of an increase in net interest income of $6.9 million offset by an increase of non-interest expense of $4.2 million and a $1.8 million increase in the provision for credit losses. The remaining change was related to the tax impact.
•Net Interest Income: Net interest income for the fourth quarter of 2024 was $29.7 million, an increase of $1.2 million compared to the third quarter of 2024. Net interest income for the year ended December 31, 2024 was $111.7 million, an increase of $6.9 million, or 6.6%, from the prior year.
•Compared to the prior quarter, interest income increased $1.5 million while interest expense increased by only $0.2 million as a result of reduced deposits and continued pricing discipline.
•Compared to the prior year, the increase was primarily due to interest income outpacing growth in interest expense. Interest and fees on loans were $171.3 million for the year ended December 31, 2024, an increase of 20.6% from the $142.0 million for the year ended December 31, 2023. The increase was primarily driven by loan growth and higher loan rates. Interest expense for the year ended December 31, 2024 was $83.3 million. This represents an increase of $25.5 million, or 44.2%, from the $57.7 million in interest expense for the prior-year period. The increase in the interest expense was driven primarily by higher deposit rates and changes in deposit composition.
•Net Interest Margin: Net interest margin was 2.72% (2.74% FTE5) for the year ended December 31, 2024, as compared to 2.65% (2.67% FTE) for the year ended December 31, 2023. In the fourth quarter of 2024, the net interest margin was 2.83% (2.85% FTE), as compared to 2.53% (2.55% FTE) for the fourth quarter of 2023. The increase in net interest margin compared to the third quarter of 2024 was primarily the result of continued yield expansion on earning assets combined with the moderating cost of interest-bearing liabilities. The increase in net interest margin from the previous year was primarily the result of yield on average earning assets increasing at a faster pace than costs of interest-bearing liabilities. Net interest margin was affected by deposits migrating to higher costing products, such as money market savings and time deposits.
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| Twelve Months Ended
(dollars in thousands) | | | | |
| December 31, 2024 | | December 31, 2023 | | | | |
| Interest and Dividend Income | $ | 194,993 | | | $ | 162,564 | | | | | |
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| Interest Expense | 83,261 | | | 57,732 | | | | | |
| Net Interest Income | 111,732 | | | 104,832 | | | | | |
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Average Earning Assets(1) | 4,102,954 | | | 3,948,708 | | | | | |
| Average Interest-Bearing Liabilities | 3,126,495 | | | 2,903,925 | | | | | |
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Yield on Earning Assets(1) | 4.75 | % | | 4.12 | % | | | | |
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| Cost of Interest-Bearing Liabilities | 2.66 | | | 1.99 | | | | | |
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| Net Interest Spread | 2.09 | | | 2.13 | | | | | |
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| Net Interest Margin | 2.72 | | | 2.65 | | | | | |
| FTE Net Interest Margin | 2.74 | | | 2.67 | | | | | |
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(1) Includes Nonaccrual Loans. | | | | | | | |
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•Provision for Credit Losses: For the year ended December 31, 2024, the provision for credit losses related to the loan portfolio was $5.2 million, compared to $3.4 million in the prior year. The
5 FTE net interest margin is a non-GAAP measure. See reconciliation on Note 3 to the Selected Quarterly Information.
key drivers for the provision for credit losses in 2024 were loan growth, charge-offs, and changes to the portfolio mix/age, due to fourth-quarter commercial loan growth, partially offset by changes to the economic forecast factors embedded in the credit loss allowance model, as well as qualitative factors relating to local and Arrow-specific conditions.
•Non-Interest Income: Non-interest income was $4.2 million for the fourth quarter of 2024, a decrease from $8.1 million for the previous quarter. Non-interest income was $28.1 million for the year ended December 31, 2024, a decrease of 3.6%, as compared to $29.1 million for the year ended December 31, 2023. The decreases were primarily attributable to the $3.0 million pre-tax loss related to the investment portfolio repositioning as well as the $0.7 million pre-tax charge related to legacy branding, both recognized in the fourth quarter of 2024. Revenue from fee businesses, including wealth management and insurance, both increased compared to the prior year.
•Non-Interest Expense: Non-interest expense for the year ended December 31, 2024 increased by $4.2 million, or 4.5%, to $97.3 million, as compared to $93.0 million in 2023. The largest component of non-interest expense is salaries and benefits paid to our employees, which totaled $52.7 million in 2024 and increased $5.0 million, or 10.6%, from the prior year. The increase was related to headcount increases to support additional control and compliance initiatives and our growing organization. Salaries and benefits were also impacted by inflation-driven wage increases and rising benefit costs.
•Provision for Income Taxes: The provision for income taxes for 2024 was $7.6 million, compared to $7.4 million for 2023. The effective income tax rates for 2024 and 2023 were 20.5% and 19.8%, respectively. The increase in the effective tax rate was primarily the result of reduced tax exempt income in 2024.
Balance Sheet
•Total Assets: Total assets were $4.3 billion at December 31, 2024, an increase of $136.5 million, or 3.3%, compared to December 31, 2023 and a decrease of $105.1 million, or 2.4%, from September 30, 2024. The increase over the prior year was primarily driven by loan growth. The decrease in the fourth quarter was primary driven by decreases in municipal cash balances due to seasonality.
•Investments: Total investments were $570.8 million at December 31, 2024, a decrease of $65.4 million, or 10.3%, compared to December 31, 2023. The decrease was driven primarily by paydowns and maturities, the proceeds of which were used to fund loan growth in 2024. The repositioning of the investment portfolio in the fourth quarter did not materially impact the overall investment balance. There were no credit quality issues related to the investment portfolio.
•Loans6: At December 31, 2024, total loan balances reached $3.4 billion. Loan growth for the fourth quarter was $59 million. Loan growth for the year was $185 million or 5.8%. Loan growth was spread across all loan products. Please see the loan detail included in the Consolidated Financial Information table on page 14.
•Allowance for Credit Losses: The allowance for credit losses was $33.6 million at December 31, 2024, an increase of $2.3 million from December 31, 2023. The allowance for credit losses at year-end 2024 represented 0.99% of loans outstanding, an increase from 0.97% at year-end 2023. Asset quality remained solid at December 31, 2024. Net loan charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.09% for the year ended December 31, 2024, as
6 Excludes both $2.2 million fair value hedge adjustment at December 31, 2024, $6.5 million fair value hedge adjustment at September 30, 2024 and $5.8 million fair value hedge adjustment at December 31, 2023.
compared to 0.07% for the prior year. Nonperforming assets of $21.5 million at December 31, 2024, represented 0.50% of period-end assets, compared to $21.5 million or 0.51% at December 31, 2023.
•Deposits: At December 31, 2024, total deposit balances were $3.8 billion, an increase of $140.4 million, or 3.8%, from the prior-year level. Deposits decreased in the fourth quarter by $9.5 million. In the fourth quarter, $95 million of borrowings were replaced with callable brokered CDs with a lower cost of funds. The increase was offset in part by the seasonal behavior of municipal deposits. Non-municipal deposits, excluding brokered CDs, decreased by $57.6 million and municipal deposits decreased by $12.2 million, each as compared to December 31, 2023. Non-interest bearing deposits decreased by $55.4 million, or 7.3%, during 2024, and represented 18.4% of total deposits at year-end, as compared to the prior-year level of 20.6%. At December 31, 2024, total time deposits, excluding brokered CDs, increased $36.0 million from the prior-year level. The change in composition of deposits was primarily due to pressure from competitive rate pricing and the migration from low to higher costing products.
•Capital: Total shareholders’ equity was $400.9 million at December 31, 2024, an increase of $21.1 million, or 5.6%, from December 31, 2023 and an increase of $7.6 million in the fourth quarter. The increase from the third quarter was primarily attributable to net income of $4.5 million, other comprehensive income of $7.5 million and various capital items of $0.3 million, partially offset by dividends of $4.7 million. The increase in stockholders' equity from December 31, 2023 was primarily attributable to net income of $29.7 million, other comprehensive income of $15.0 million and various capital items of $1.5 million partially offset by dividends of $18.3 million and stock repurchases of $6.8 million. The changes to other comprehensive income stem primarily from fair value adjustments relating to the Company's cash flow hedges as well as its available for sale investment portfolio. Arrow's regulatory capital ratios remained strong in 2024. At December 31, 2024, Arrow's Common Equity Tier 1 Capital Ratio was 12.71% and Total Risk-Based Capital Ratio was 14.47%. The capital ratios of Arrow and its subsidiary bank, Arrow Bank, continued to significantly exceed the “well capitalized” regulatory standards.
Additional Commentary
•Piper Sandler Sm-All Stars: In 2024, Arrow was named to the prestigious Piper Sandler Sm-All Stars: Class of 2024, a list of 30 top-performing small-cap banks and thrifts in the country. Arrow is one of just three New York financial institutions on the list and the only bank in Upstate New York. Piper Sandler, an independent investment bank and research firm, evaluated more than 300 institutions that trade on a major exchange, narrowing the field to the top 30.
•Bauer Financial Ratings: Prior to unification, Arrow's subsidiary banks, continued to maintain their 5-Star Exceptional Performance ratings from Bauer Financial for the 70th and 62nd quarters.
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About Arrow: Arrow Financial Corporation is a holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. The Company is the parent of Arrow Bank National Association, a full-service commercial bank, and Upstate Agency, LLC, a comprehensive insurance agency. Other subsidiaries include 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). The following 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. Certain non-GAAP financial
measures include: tangible book value, tangible equity, return on tangible equity, tax-equivalent adjustment and related net interest income, tax-equivalent net interest margin and the efficiency ratio. Management believes that the non-GAAP financial measures disclosed by Arrow from time to time 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 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. Arrow 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 Arrow’s Annual Report on Form 10-K for the year ended December 31, 2023, and other filings with the SEC.
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)
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| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| INTEREST AND DIVIDEND INCOME | | | | | | | |
| Interest and Fees on Loans | $ | 44,703 | | | $ | 38,813 | | | $ | 171,342 | | | $ | 142,016 | |
| Interest on Deposits at Banks | 2,880 | | | 1,873 | | | 9,615 | | | 5,831 | |
| Interest and Dividends on Investment Securities: | | | | | | | |
| Fully Taxable | 2,728 | | | 2,941 | | | 11,579 | | | 11,764 | |
| Exempt from Federal Taxes | 590 | | | 697 | | | 2,457 | | | 2,953 | |
| Total Interest and Dividend Income | 50,901 | | | 44,324 | | | 194,993 | | | 162,564 | |
| INTEREST EXPENSE | | | | | | | |
| Interest-Bearing Checking Accounts | 1,932 | | | 1,317 | | | 7,442 | | | 3,663 | |
| Savings Deposits | 11,144 | | | 10,513 | | | 42,850 | | | 34,343 | |
| Time Deposits over $250,000 | 1,815 | | | 1,807 | | | 7,460 | | | 4,966 | |
| Other Time Deposits | 5,906 | | | 3,406 | | | 20,997 | | | 7,127 | |
| | | | | | | |
| Borrowings | 198 | | | 1,447 | | | 3,637 | | | 6,756 | |
Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts | 172 | | | 173 | | | 686 | | | 686 | |
| Interest on Financing Leases | 47 | | | 48 | | | 189 | | | 191 | |
| Total Interest Expense | 21,214 | | | 18,711 | | | 83,261 | | | 57,732 | |
| NET INTEREST INCOME | 29,687 | | | 25,613 | | | 111,732 | | | 104,832 | |
| Provision for Credit Losses | 2,854 | | | 525 | | | 5,180 | | | 3,381 | |
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES | 26,833 | | | 25,088 | | | 106,552 | | | 101,451 | |
| NONINTEREST INCOME | | | | | | | |
| Income From Fiduciary Activities | 2,615 | | | 2,363 | | | 9,952 | | | 9,444 | |
| Fees for Other Services to Customers | 2,762 | | | 2,725 | | | 10,892 | | | 10,798 | |
| Insurance Commissions | 1,848 | | | 1,723 | | | 7,147 | | | 6,498 | |
| Net (Loss) Gain on Securities | (3,072) | | | 122 | | | (2,907) | | | (92) | |
| Net Gain on Sales of Loans | 74 | | | 7 | | | 209 | | | 32 | |
| Other Operating Income | — | | | 544 | | | 2,781 | | | 2,437 | |
| Total Noninterest Income | 4,227 | | | 7,484 | | | 28,074 | | | 29,117 | |
| NONINTEREST EXPENSE | | | | | | | |
| Salaries and Employee Benefits | 13,332 | | | 11,693 | | | 52,707 | | | 47,667 | |
| Occupancy Expenses, Net | 1,870 | | | 1,826 | | | 7,169 | | | 6,554 | |
| Technology and Equipment Expense | 5,119 | | | 4,458 | | | 19,365 | | | 17,608 | |
| FDIC Assessments | 664 | | | 572 | | | 2,775 | | | 2,050 | |
| Other Operating Expense | 4,853 | | | 4,641 | | | 15,252 | | | 19,169 | |
| Total Noninterest Expense | 25,838 | | | 23,190 | | | 97,268 | | | 93,048 | |
| INCOME BEFORE PROVISION FOR INCOME TAXES | 5,222 | | | 9,382 | | | 37,358 | | | 37,520 | |
| Provision for Income Taxes | 752 | | | 1,659 | | | 7,649 | | | 7,445 | |
| NET INCOME | $ | 4,470 | | | $ | 7,723 | | | $ | 29,709 | | | $ | 30,075 | |
| Average Shares Outstanding: | | | | | | | |
| Basic | 16,718 | | | 17,002 | | | 16,739 | | | 17,037 | |
| Diluted | 16,739 | | | 17,004 | | | 16,745 | | | 17,037 | |
| Per Common Share: | | | | | | | |
| Basic Earnings | $ | 0.27 | | | $ | 0.46 | | | $ | 1.78 | | | $ | 1.77 | |
| Diluted Earnings | 0.27 | | | 0.46 | | | 1.77 | | | 1.77 | |
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ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
| | | | | | | | | | | |
| | December 31, 2024 | | December 31, 2023 |
| ASSETS | | | |
| Cash and Due From Banks | $ | 27,422 | | | $ | 36,755 | |
| Interest-Bearing Deposits at Banks | 127,124 | | | 105,781 | |
| Investment Securities: | | | |
| Available-for-Sale | 463,111 | | | 497,769 | |
Held-to-Maturity (Approximate Fair Value of $96,586 at December 31, 2024, and $128,837 at December 31, 2023) | 98,261 | | | 131,395 | |
| Equity Securities | 5,055 | | | 1,925 | |
| Other Investments | 4,353 | | | 5,049 | |
| Loans | 3,394,541 | | | 3,212,908 | |
| Allowance for Credit Losses | (33,598) | | | (31,265) | |
| Net Loans | 3,360,943 | | | 3,181,643 | |
| Premises and Equipment, Net | 59,717 | | | 59,642 | |
| Goodwill | 23,789 | | | 21,873 | |
| Other Intangible Assets, Net | 2,058 | | | 1,110 | |
| Other Assets | 134,515 | | | 126,926 | |
| Total Assets | $ | 4,306,348 | | | $ | 4,169,868 | |
| LIABILITIES | | | |
| Noninterest-Bearing Deposits | $ | 702,978 | | | $ | 758,425 | |
| Interest-Bearing Checking Accounts | 810,834 | | | 799,785 | |
| Savings Deposits | 1,520,024 | | | 1,466,280 | |
| Time Deposits over $250,000 | 191,962 | | | 179,301 | |
| Other Time Deposits | 602,132 | | | 483,775 | |
| Total Deposits | 3,827,930 | | | 3,687,566 | |
| | | |
| | | |
| Borrowings | 8,600 | | | 26,500 | |
| Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 20,000 | | | 20,000 | |
| Finance Leases | 5,005 | | | 5,066 | |
| Other Liabilities | 43,912 | | | 50,964 | |
| Total Liabilities | 3,905,447 | | | 3,790,096 | |
| STOCKHOLDERS’ EQUITY | | | |
Preferred Stock, $1 Par Value, 1,000,000 Shares Authorized | — | | | — | |
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (22,066,559 Shares Issued at December 31, 2024 and December 31, 2023) | 22,067 | | | 22,067 | |
| Additional Paid-in Capital | 413,476 | | | 412,551 | |
| Retained Earnings | 77,215 | | | 65,792 | |
| | | |
| Accumulated Other Comprehensive (Loss) Income | (18,453) | | | (33,416) | |
Treasury Stock, at Cost (5,323,638 Shares at December 31, 2024, and 5,124,073 Shares at December 31, 2023) | (93,404) | | | (87,222) | |
| Total Stockholders’ Equity | 400,901 | | | 379,772 | |
| Total Liabilities and Stockholders’ Equity | $ | 4,306,348 | | | $ | 4,169,868 | |
Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | 12/31/2024 | | 9/30/2024 | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 |
| Net Income | $ | 4,470 | | | $ | 8,975 | | | $ | 8,604 | | | $ | 7,660 | | | $ | 7,723 | |
| Transactions in Net Income (Net of Tax): | | | | | | | | | |
| | | | | | | | | |
| Net Changes in Fair Value of Equity Investments | (26) | | | 69 | | | 39 | | | 13 | | | 90 | |
| | | | | | | | | |
| | | | | | | | | |
| Share and Per Share Data: | | | | | | | | | |
| Period End Shares Outstanding | 16,743 | | | 16,734 | | | 16,723 | | | 16,710 | | | 16,942 | |
| Basic Average Shares Outstanding | 16,718 | | | 16,710 | | | 16,685 | | | 16,865 | | | 17,002 | |
| Diluted Average Shares Outstanding | 16,739 | | | 16,742 | | | 16,709 | | | 16,867 | | | 17,004 | |
| Basic Earnings Per Share | $ | 0.27 | | | $ | 0.54 | | | $ | 0.52 | | | $ | 0.45 | | | $ | 0.46 | |
| Diluted Earnings Per Share | 0.27 | | | 0.53 | | | 0.52 | | | 0.45 | | | 0.46 | |
| Cash Dividend Per Share | 0.280 | | | 0.270 | | | 0.270 | | | 0.270 | | | 0.270 | |
| | | | | | | | | |
| Selected Quarterly Average Balances: | | | | | | | | | |
| Interest-Bearing Deposits at Banks | $ | 233,469 | | | $ | 154,937 | | | $ | 159,336 | | | $ | 178,452 | | | $ | 136,026 | |
| Investment Securities | 579,107 | | | 590,352 | | | 644,192 | | | 671,105 | | | 713,144 | |
| Loans | 3,354,463 | | | 3,329,873 | | | 3,280,285 | | | 3,235,841 | | | 3,170,262 | |
| Deposits | 3,847,691 | | | 3,672,128 | | | 3,678,957 | | | 3,693,325 | | | 3,593,949 | |
| Other Borrowed Funds | 49,090 | | | 134,249 | | | 131,537 | | | 122,033 | | | 149,507 | |
| Shareholders’ Equity | 393,696 | | | 387,904 | | | 378,256 | | | 379,446 | | | 363,753 | |
| Total Assets | 4,339,833 | | | 4,245,597 | | | 4,237,359 | | | 4,245,484 | | | 4,159,313 | |
| Return on Average Assets, annualized | 0.41 | % | | 0.84 | % | | 0.82 | % | | 0.73 | % | | 0.74 | % |
| Return on Average Equity, annualized | 4.52 | % | | 9.20 | % | | 9.15 | % | | 8.12 | % | | 8.42 | % |
Return on Average Tangible Equity, annualized 1 | 4.84 | % | | 9.79 | % | | 9.74 | % | | 8.64 | % | | 8.99 | % |
| Average Earning Assets | 4,167,039 | | | 4,075,162 | | | 4,083,813 | | | 4,085,398 | | | 4,019,432 | |
| Average Paying Liabilities | 3,185,215 | | | 3,085,066 | | | 3,127,417 | | | 3,108,093 | | | 2,985,717 | |
| Interest Income | 50,901 | | | 49,443 | | | 47,972 | | | 46,677 | | | 44,324 | |
Tax-Equivalent Adjustment 2 | 157 | | | 149 | | | 163 | | | 176 | | | 184 | |
Interest Income, Tax-Equivalent 2 | 51,058 | | | 49,592 | | | 48,135 | | | 46,853 | | | 44,508 | |
| Interest Expense | 21,214 | | | 21,005 | | | 20,820 | | | 20,222 | | | 18,711 | |
| Net Interest Income | 29,687 | | | 28,438 | | | 27,152 | | | 26,455 | | | 25,613 | |
Net Interest Income, Tax-Equivalent 2 | 29,844 | | | 28,587 | | | 27,315 | | | 26,631 | | | 25,797 | |
| Net Interest Margin, annualized | 2.83 | % | | 2.78 | % | | 2.67 | % | | 2.60 | % | | 2.53 | % |
Net Interest Margin, Tax-Equivalent, annualized 2 | 2.85 | % | | 2.79 | % | | 2.69 | % | | 2.62 | % | | 2.55 | % |
| | | | | | | | | |
Efficiency Ratio Calculation: 3 | | | | | | | | | |
| Noninterest Expense | $ | 25,838 | | | $ | 24,100 | | | $ | 23,318 | | | $ | 24,012 | | | $ | 23,190 | |
| Less: Intangible Asset Amortization | 89 | | | 78 | | | 40 | | 41 | | | 43 | |
| Net Noninterest Expense | $ | 25,749 | | | $ | 24,022 | | | $ | 23,278 | | | $ | 23,971 | | | $ | 23,147 | |
| Net Interest Income, Tax-Equivalent | $ | 29,844 | | | $ | 28,587 | | | $ | 27,315 | | | $ | 26,631 | | | $ | 25,797 | |
| Noninterest Income | 4,227 | | | 8,133 | | | 7,856 | | | 7,858 | | | 7,484 | |
| | | | | | | | | |
| Less: Net Gain (Loss) on Securities | (3,038) | | | 94 | | | 54 | | | 17 | | | 122 | |
| Net Gross Income | $ | 37,109 | | | $ | 36,626 | | | $ | 35,117 | | | $ | 34,472 | | | $ | 33,159 | |
| Efficiency Ratio | 69.39 | % | | 65.59 | % | | 66.29 | % | | 69.54 | % | | 69.81 | % |
| | | | | | | | | |
| Period-End Capital Information: | | | | | | | | | |
| Total Stockholders’ Equity (i.e. Book Value) | $ | 400,901 | | | $ | 393,311 | | | $ | 383,018 | | | $ | 377,986 | | | $ | 379,772 | |
Book Value per Share | 23.94 | | | 23.50 | | | 22.90 | | | 22.62 | | | 22.42 | |
| Goodwill and Other Intangible Assets, net | 25,847 | | | 25,979 | | | 22,800 | | | 22,891 | | | 22,983 | |
Tangible Book Value per Share 1 | 22.40 | | | 21.95 | | | 21.54 | | | 21.25 | | | 21.06 | |
| | | | | | | | | |
Capital Ratios:4 | | | | | | | | | |
| Tier 1 Leverage Ratio | 9.60 | % | | 9.78 | % | | 9.74 | % | | 9.63 | % | | 9.84 | % |
Common Equity Tier 1 Capital Ratio | 12.71 | % | | 12.77 | % | | 12.88 | % | | 12.84 | % | | 13.00 | % |
| Tier 1 Risk-Based Capital Ratio | 13.35 | % | | 13.41 | % | | 13.53 | % | | 13.50 | % | | 13.66 | % |
| Total Risk-Based Capital Ratio | 14.47 | % | | 14.46 | % | | 14.57 | % | | 14.57 | % | | 14.74 | % |
| | | | | | | | | |
| Assets Under Trust Admin. & Investment Mgmt. | $ | 2,036,393 | | | $ | 1,944,239 | | | $ | 1,848,349 | | | $ | 1,829,266 | | | $ | 1,763,194 | |
Arrow Financial Corporation
Selected Quarterly Information - Continued
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Footnotes: | | | | | | | | |
| | | | | | | | | | |
| |
| |
| 1. | Non-GAAP Financial Measure Reconciliation: Tangible Book Value, Tangible Equity, and Return on Average Tangible Equity exclude goodwill and other intangible assets, net from total equity. These are non-GAAP financial measures which we believe provide investors with information that is useful in understanding our financial performance. |
| | 12/31/2024 | | 9/30/2024 | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 |
| Total Stockholders' Equity (GAAP) | $ | 400,901 | | | $ | 393,311 | | | $ | 383,018 | | | $ | 377,986 | | | $ | 379,772 | |
| Less: Goodwill and Other Intangible assets, net | 25,847 | | | 25,979 | | | 22,800 | | | 22,891 | | | 22,983 | |
| Tangible Equity (Non-GAAP) | $ | 375,054 | | | $ | 367,332 | | | $ | 360,218 | | | $ | 355,095 | | | $ | 356,789 | |
| | | | | | | | | | |
| Period End Shares Outstanding | 16,743 | | | 16,734 | | | 16,723 | | | 16,710 | | | 16,942 | |
| Tangible Book Value per Share (Non-GAAP) | $ | 22.40 | | | $ | 21.95 | | | $ | 21.54 | | | $ | 21.25 | | | $ | 21.06 | |
| Net Income | 4,470 | | | 8,975 | | | 8,604 | | | 7,660 | | | 7,723 | |
| Return on Average Tangible Equity (Net Income/Average Tangible Equity - Annualized) | 4.84 | % | | 9.79 | % | | 9.74 | % | | 8.64 | % | | 8.99 | % |
| | | | | | | | | | |
| 2. | Non-GAAP Financial Measure Reconciliation: 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. |
| | 12/31/2024 | | 9/30/2024 | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 |
| Interest Income (GAAP) | $ | 50,901 | | | $ | 49,443 | | | $ | 47,972 | | | $ | 46,677 | | | $ | 44,324 | |
| Add: Tax Equivalent Adjustment (Non-GAAP) | 157 | | | 149 | | | 163 | | | 176 | | | 184 | |
| Interest Income - Tax Equivalent (Non-GAAP) | $ | 51,058 | | | $ | 49,592 | | | $ | 48,135 | | | $ | 46,853 | | | $ | 44,508 | |
| | | | | | | | | | |
| Net Interest Income (GAAP) | $ | 29,687 | | | $ | 28,438 | | | $ | 27,152 | | | $ | 26,455 | | | $ | 25,613 | |
| Add: Tax-Equivalent adjustment (Non-GAAP) | 157 | | | 149 | | | 163 | | | 176 | | | 184 | |
| Net Interest Income - Tax Equivalent (Non-GAAP) | $ | 29,844 | | | $ | 28,587 | | | $ | 27,315 | | | $ | 26,631 | | | $ | 25,797 | |
| Average Earning Assets | 4,167,039 | | | 4,075,162 | | | 4,083,813 | | | 4,085,398 | | | 4,019,432 | |
| Net Interest Margin (Non-GAAP)* | 2.85 | % | | 2.79 | % | | 2.69 | % | | 2.62 | % | | 2.55 | % |
| | | | | | | | | | |
| 3. | Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. We believe the efficiency ratio provides investors with information that is useful in understanding our financial performance. We define our efficiency ratio as the ratio of our noninterest expense to our net gross income (which equals our tax-equivalent net interest income plus noninterest income, as adjusted). |
| | | | | | | | | | |
| 4. | 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 December 31, 2024 CET1 ratio listed in the tables (i.e., 12.71%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%). |
| | 12/31/2024 | | 9/30/2024 | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 |
| Total Risk Weighted Assets | 3,126,362 | | | 3,110,178 | | | 3,072,922 | | | 3,049,525 | | | 3,032,188 | |
| Common Equity Tier 1 Capital | 397,285 | | | 397,122 | | | 395,691 | | | 391,706 | | | 394,166 | |
| Common Equity Tier 1 Ratio | 12.71 | % | | 12.77 | % | | 12.88 | % | | 12.84 | % | | 13.00 | % |
| | | | | | | | | | |
| * Quarterly ratios have been annualized | | | | | | | | | |
Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended: | December 31, 2024 | | December 31, 2023 |
| | | Interest | | Rate | | | | Interest | | Rate |
| Average | | Income/ | | Earned/ | | Average | | Income/ | | Earned/ |
| Balance | | Expense | | Paid | | Balance | | Expense | | Paid |
| Interest-Bearing Deposits at Banks | $ | 233,469 | | | $ | 2,880 | | | 4.91 | % | | $ | 136,026 | | | 1,873 | | | 5.46 | % |
| Investment Securities: | | | | | | | | | | | |
| Fully Taxable | 484,860 | | | 2,728 | | | 2.24 | % | | 586,227 | | | 2,941 | | | 1.99 | % |
| Exempt from Federal Taxes | 94,247 | | | 590 | | | 2.49 | % | | 126,917 | | | 697 | | | 2.18 | % |
Loans (1) | 3,354,463 | | | 44,703 | | | 5.30 | % | | 3,170,262 | | | 38,813 | | | 4.86 | % |
Total Earning Assets (1) | 4,167,039 | | | 50,901 | | | 4.86 | % | | 4,019,432 | | | 44,324 | | | 4.38 | % |
| Allowance for Credit Losses | (31,529) | | | | | | | (31,417) | | | | | |
| Cash and Due From Banks | 30,706 | | | | | | | 30,402 | | | | | |
| Other Assets | 173,617 | | | | | | | 140,896 | | | | | |
| Total Assets | $ | 4,339,833 | | | | | | | $ | 4,159,313 | | | | | |
| Deposits: | | | | | | | | | | | |
| Interest-Bearing Checking Accounts | $ | 802,808 | | | 1,932 | | | 0.96 | % | | $ | 801,923 | | | 1,317 | | | 0.65 | % |
| Savings Deposits | 1,567,455 | | | 11,144 | | | 2.83 | % | | 1,509,946 | | | 10,513 | | | 2.76 | % |
| Time Deposits of $250,000 or More | 183,325 | | | 1,815 | | | 3.94 | % | | 169,854 | | | 1,807 | | | 4.22 | % |
| Other Time Deposits | 582,537 | | | 5,906 | | | 4.03 | % | | 354,487 | | | 3,406 | | | 3.81 | % |
| Total Interest-Bearing Deposits | 3,136,125 | | | 20,797 | | | 2.64 | % | | 2,836,210 | | | 17,043 | | | 2.38 | % |
| Borrowings | 24,089 | | | 198 | | | 3.27 | % | | 124,445 | | | 1,447 | | | 4.61 | % |
| Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 20,000 | | | 172 | | | 3.42 | % | | 20,000 | | | 173 | | | 3.43 | % |
| Finance Leases | 5,001 | | | 47 | | | 3.74 | % | | 5,062 | | | 48 | | | 3.76 | % |
| Total Interest-Bearing Liabilities | 3,185,215 | | | 21,214 | | | 2.65 | % | | 2,985,717 | | | 18,711 | | | 2.49 | % |
| Noninterest-Bearing Deposits | 711,566 | | | | | | | 757,739 | | | | | |
| Other Liabilities | 49,356 | | | | | | | 52,104 | | | | | |
| Total Liabilities | 3,946,137 | | | | | | | 3,795,560 | | | | | |
| Stockholders’ Equity | 393,696 | | | | | | | 363,753 | | | | | |
| Total Liabilities and Stockholders’ Equity | $ | 4,339,833 | | | | | | | $ | 4,159,313 | | | | | |
| Net Interest Income | | | $ | 29,687 | | | | | | | $ | 25,613 | | | |
| Net Interest Spread | | | | | 2.21 | % | | | | | | 1.89 | % |
| Net Interest Margin | | | | | 2.83 | % | | | | | | 2.53 | % |
(1) Includes Nonaccrual Loans
Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended: | December 31, 2024 | | September 30, 2024 |
| | | Interest | | Rate | | | | Interest | | Rate |
| Average | | Income/ | | Earned/ | | Average | | Income/ | | Earned/ |
| Balance | | Expense | | Paid | | Balance | | Expense | | Paid |
| Interest-Bearing Deposits at Banks | $ | 233,469 | | | $ | 2,880 | | | 4.91 | % | | $ | 154,937 | | | 2,103 | | | 5.40 | % |
| Investment Securities: | | | | | | | | | | | |
| Fully Taxable | 484,860 | | | 2,728 | | | 2.24 | % | | 497,450 | | | 2,656 | | | 2.12 | % |
| Exempt from Federal Taxes | 94,247 | | | 590 | | | 2.49 | % | | 92,902 | | | 562 | | | 2.41 | % |
Loans (1) | 3,354,463 | | | 44,703 | | | 5.30 | % | | 3,329,873 | | | 44,122 | | | 5.27 | % |
Total Earning Assets (1) | 4,167,039 | | | 50,901 | | | 4.86 | % | | 4,075,162 | | | 49,443 | | | 4.83 | % |
| Allowance for Credit Losses | (31,529) | | | | | | | (31,147) | | | | | |
| Cash and Due From Banks | 30,706 | | | | | | | 33,159 | | | | | |
| Other Assets | 173,617 | | | | | | | 168,423 | | | | | |
| Total Assets | $ | 4,339,833 | | | | | | | $ | 4,245,597 | | | | | |
| Deposits: | | | | | | | | | | | |
| Interest-Bearing Checking Accounts | $ | 802,808 | | | 1,932 | | | 0.96 | % | | $ | 785,134 | | | 1,966 | | | 1.00 | % |
| Savings Deposits | 1,567,455 | | | 11,144 | | | 2.83 | % | | 1,492,888 | | | 10,905 | | | 2.91 | % |
| Time Deposits of $250,000 or More | 183,325 | | | 1,815 | | | 3.94 | % | | 174,028 | | | 1,803 | | | 4.12 | % |
| Other Time Deposits | 582,537 | | | 5,906 | | | 4.03 | % | | 498,767 | | | 4,934 | | | 3.94 | % |
| Total Interest-Bearing Deposits | 3,136,125 | | | 20,797 | | | 2.64 | % | | 2,950,817 | | | 19,608 | | | 2.64 | % |
| Borrowings | 24,089 | | | 198 | | | 3.27 | % | | 109,230 | | | 1,177 | | | 4.29 | % |
| Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 20,000 | | | 172 | | | 3.42 | % | | 20,000 | | | 173 | | | 3.44 | % |
| Finance Leases | 5,001 | | | 47 | | | 3.74 | % | | 5,019 | | | 47 | | | 3.73 | % |
| Total Interest-Bearing Liabilities | 3,185,215 | | | 21,214 | | | 2.65 | % | | 3,085,066 | | | 21,005 | | | 2.71 | % |
| Noninterest-Bearing Deposits | 711,566 | | | | | | | 721,311 | | | | | |
| Other Liabilities | 49,356 | | | | | | | 51,316 | | | | | |
| Total Liabilities | 3,946,137 | | | | | | | 3,857,693 | | | | | |
| Stockholders’ Equity | 393,696 | | | | | | | 387,904 | | | | | |
| Total Liabilities and Stockholders’ Equity | $ | 4,339,833 | | | | | | | $ | 4,245,597 | | | | | |
| Net Interest Income | | | $ | 29,687 | | | | | | | $ | 28,438 | | | |
| Net Interest Spread | | | | | 2.21 | % | | | | | | 2.12 | % |
| Net Interest Margin | | | | | 2.83 | % | | | | | | 2.78 | % |
Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31: | 2024 | | 2023 | | |
| | | Interest | | Rate | | | | Interest | | Rate | | | | | | |
| Average | | Income/ | | Earned/ | | Average | | Income/ | | Earned/ | | | | | | |
| Balance | | Expense | | Paid | | Balance | | Expense | | Paid | | | | | | |
| Interest-Bearing Deposits at Banks | $ | 181,618 | | | $ | 9,615 | | | 5.29 | % | | $ | 109,906 | | | 5,831 | | | 5.31 | % | | | | | | |
| Investment Securities: | | | | | | | | | | | | | | | | | |
| Fully Taxable | 515,794 | | | 11,579 | | | 2.24 | % | | 622,575 | | | 11,764 | | | 1.89 | % | | | | | | |
| Exempt from Federal Taxes | 105,196 | | | 2,457 | | | 2.34 | % | | 141,966 | | | 2,953 | | | 2.08 | % | | | | | | |
| Loans | 3,300,346 | | | 171,342 | | | 5.19 | % | | 3,074,261 | | | 142,016 | | | 4.62 | % | | | | | | |
| Total Earning Assets | 4,102,954 | | | 194,993 | | | 4.75 | % | | 3,948,708 | | | 162,564 | | | 4.12 | % | | | | | | |
| Allowance for Credit Losses | (31,387) | | | | | | | (30,799) | | | | | | | | | | | |
| Cash and Due From Banks | 30,577 | | | | | | | 30,640 | | | | | | | | | | | |
| Other Assets | 164,577 | | | | | | | 135,970 | | | | | | | | | | | |
| Total Assets | $ | 4,266,721 | | | | | | | $ | 4,084,519 | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | |
| Interest-Bearing Checking Accounts | $ | 812,634 | | | 7,442 | | | 0.92 | % | | $ | 855,931 | | | 3,663 | | | 0.43 | % | | | | | | |
| Savings Deposits | 1,507,227 | | | 42,850 | | | 2.84 | % | | 1,498,749 | | | 34,343 | | | 2.29 | % | | | | | | |
| Time Deposits of $250,000 or More | 176,844 | | | 7,460 | | | 4.22 | % | | 137,974 | | | 4,966 | | | 3.60 | % | | | | | | |
| Other Time Deposits | 520,658 | | | 20,997 | | | 4.03 | % | | 241,218 | | | 7,127 | | | 2.95 | % | | | | | | |
| Total Interest-Bearing Deposits | 3,017,363 | | | 78,749 | | | 2.61 | % | | 2,733,872 | | | 50,099 | | | 1.83 | % | | | | | | |
| Borrowings | 84,106 | | | 3,637 | | | 4.32 | % | | 144,971 | | | 6,756 | | | 4.66 | % | | | | | | |
| Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 20,000 | | | 686 | | | 3.43 | % | | 20,000 | | | 686 | | | 3.43 | % | | | | | | |
| Finance Leases | 5,026 | | | 189 | | | 3.76 | % | | 5,082 | | | 191 | | | 3.76 | % | | | | | | |
| Total Interest-Bearing Liabilities | 3,126,495 | | | 83,261 | | | 2.66 | % | | 2,903,925 | | | 57,732 | | | 1.99 | % | | | | | | |
| Demand Deposits | 705,863 | | | | | | | 772,889 | | | | | | | | | | | |
| Other Liabilities | 49,505 | | | | | | | 44,924 | | | | | | | | | | | |
| Total Liabilities | 3,881,863 | | | | | | | 3,721,738 | | | | | | | | | | | |
| Stockholders’ Equity | 384,858 | | | | | | | 362,781 | | | | | | | | | | | |
| Total Liabilities and Stockholders’ Equity | $ | 4,266,721 | | | | | | | $ | 4,084,519 | | | | | | | | | | | |
| Net Interest Income | | | $ | 111,732 | | | | | | | $ | 104,832 | | | | | | | | | |
| Net Interest Spread | | | | | 2.09 | % | | | | | | 2.13 | % | | | | | | |
| Net Interest Margin | | | | | 2.72 | % | | | | | | 2.65 | % | | | | | | |
Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
| | | | | | | | | | | |
| Quarter Ended: | 12/31/2024 | | 12/31/2023 |
| Loan Portfolio | | | |
| Commercial Loans | $ | 158,991 | | | $ | 156,224 | |
| Commercial Real Estate Loans | 796,365 | | | 745,487 | |
| Subtotal Commercial Loan Portfolio | 955,356 | | | 901,711 | |
| Consumer Loans | 1,118,981 | | | 1,111,667 | |
| Residential Real Estate Loans | 1,320,204 | | | 1,199,530 | |
| Total Loans | $ | 3,394,541 | | | $ | 3,212,908 | |
| Allowance for Credit Losses | | | |
| Allowance for Credit Losses, Beginning of Quarter | $ | 31,262 | | | $ | 31,112 | |
| Loans Charged-off | (1,333) | | | (1,366) | |
| Recoveries of Loans Previously Charged-off | 815 | | | 994 | |
| Net Loans Charged-off | (518) | | | (372) | |
| Provision for Credit Losses | 2,854 | | | 525 | |
| Allowance for Credit Losses, End of Quarter | $ | 33,598 | | | $ | 31,265 | |
| Nonperforming Assets | | | |
| Nonaccrual Loans | $ | 20,621 | | | $ | 20,645 | |
| Loans Past Due 90 or More Days and Accruing | 398 | | | 452 |
| Loans Restructured and in Compliance with Modified Terms | 20 | | | 54 | |
| Total Nonperforming Loans | 21,039 | | | 21,151 | |
| Repossessed Assets | 382 | | | 312 | |
| Other Real Estate Owned | 76 | | | — | |
| Total Nonperforming Assets | $ | 21,497 | | | $ | 21,463 | |
| Key Asset Quality Ratios | | | |
Net Loans Charged-off to Average Loans, Quarter-to-date
Annualized | 0.06 | % | | 0.05 | % |
Provision for Credit Losses to Average Loans, Quarter-to-date
Annualized | 0.34 | % | | 0.07 | % |
| Allowance for Credit Losses to Period-End Loans | 0.99 | % | | 0.97 | % |
| Allowance for Credit Losses to Period-End Nonperforming Loans | 159.69 | % | | 147.82 | % |
| Nonperforming Loans to Period-End Loans | 0.62 | % | | 0.66 | % |
| Nonperforming Assets to Period-End Assets | 0.50 | % | | 0.51 | % |
| Twelve-Month Period Ended: | | | |
| Allowance for Credit Losses | | | |
| Allowance for Credit Losses, Beginning of Year | 31,265 | | | 29,952 | |
| | | |
| Loans Charged-off | (5,895) | | | (5,177) | |
| Recoveries of Loans Previously Charged-off | 3,048 | | | 3,109 | |
| Net Loans Charged-off | (2,847) | | | (2,068) | |
| Provision for Credit Losses | 5,180 | | | 3,381 | |
| Allowance for Credit Losses, End of Year | $ | 33,598 | | | $ | 31,265 | |
| Key Asset Quality Ratios | | | |
| Net Loans Charged-off to Average Loans | 0.09 | % | | 0.07 | % |
| Provision for Credit Losses to Average Loans | 0.16 | % | | 0.11 | % |
4Q 2024 Investor Presentation January 30, 2025
2 Safe Harbor This presentation may contain certain forward-looking statements about Arrow Financial Corporation (“Arrow” or the “Company”). Forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934, as amended, include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “would,” “should,” “could,” or “may.” Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the banking industry or securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged. We are not obligated to revise or update these statements to reflect unanticipated events. This document should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”), other filings with the SEC, and the fourth quarter 2024 earnings release issued January 30, 2025 (the “4Q Earnings Release”).
3 Table of Contents • 4Q & YTD 2024 Results and Performance Metrics • Non-Interest Income/Expense • Loans • Deposits/Funding Sources • Credit Quality • Capital Actions & Strategy • Investments • Overview and History
4Q 2024 Results
5 4Q24 Highlights • Reported Net Income of $4.5 million or $0.27 EPS • Core Net Income of $7.8 million or $0.47 EPS (see page 6) • 4Q NIM FTE of 2.85% vs. 2.79% in prior quarter • Strong loan growth of $59 million, or 7.0% annualized • Record loan balances – reaching $3.4B • Provision for credit losses of $2.9 million on loan growth and changes in portfolio composition, specifically commercial loans • Low Net Charge-Offs of 0.06% (annualized) • Tangible Book Value increased to $22.40 • 4Q ROA (0.41%) impacted by 31bps from non-core items as well as 21 bps from the provision for credit losses • Other Comprehensive Income improved $5.3 million, or 20%, from 3Q24, excluding realized loss on the repositioning of the investment portfolio • Legal bank unification of our bank subsidiaries completed • Increased quarterly dividend by 3.7% to $0.28 per share Financial information provided in this document is unaudited. Please refer to the 4Q24 Earnings Release for a reconciliation of any non-GAAP measures.
6 4Q24 Non-Core Items Non-Core items previously disclosed on our Form 8-K filed on December 26, 2024 • Repositioning of securities portfolio $3.0 million pre-tax loss, $2.4 million after- tax loss or $0.15 EPS 22 bps impact on 4Q ROA Approximately 1.1 year earn-back Accretive to NIM and EPS in 2025 • Bank unification write-off related to legacy branding items $0.7 million pre-tax charge off, $0.5 million after-tax, or $ 0.03 EPS 5 bps impact on 4Q ROA • Bank unification related expenses (legal, consulting, compliance) $0.5 million pre-tax charges, $0.4 million after-tax, or $0.02 EPS 4 bps impact on 4Q ROA
YTD 2024 Results
8 Select YTD 2024 Highlights • Reported Net Income of $29.7 million or $1.77 EPS • Core Net Income of $34.4 million or $2.05 EPS (see page 9) • Loan growth of $185 million or 5.8% • Full year FTE NIM of 2.74% vs. previous year of 2.67% Cost of funds down 4bps from 3Q2024 Loan portfolio rate at end of 4Q24 reached 5.40%, up 5 bps from 3Q24 • YTD ROA (0.70%) reduced 11 bps from non-core items as well as by the provision for credit losses • Net Charge-Offs of 0.09% • Whitehall branch and A&B Agency, Inc. acquisitions in 3Q24 • Enhanced shareholder value via share repurchases and increased cash dividend • Named to the prestigious Piper Sandler Sm-All Stars: Class of 2024 list Financial information provided in this document is unaudited. Please refer to the 4Q24 Earnings Release for a reconciliation of any non-GAAP measures.
9 YTD 2024 Non-Core Items 4Q24 non-core items previously disclosed on our Form 8-K filed on December 26, 2024 • Repositioning of securities portfolio $3.0 million pre-tax loss, $2.4 million after- tax or $0.15 EPS 6 bps impact on ROA Approximately 1.1 year earn-back Accretive to NIM and EPS in 2025 • Bank unification write-off related to legacy branding items $0.7 million pre-tax charge off, $0.5 million after-tax, or $0.03 EPS 1 bp impact on ROA • Bank unification related expenses (legal, consulting, compliance) $0.5 million pre-tax charges, $0.4 million after-tax, or $0.02 EPS 1 bp impact on ROA Pre 4Q24 non-core/non-recurring items • Acquisition related expenses for Whitehall branch, A&B Agency, Inc. $0.4 million pre-tax, $0.3 million after-tax, or $0.02 EPS 1 bp impact on ROA • Residual expenses related 2022 Form 10-K filing delay $1.2 million pre-tax, $1.0 million after-tax, or $0.06 EPS 2 bps impact on ROA
10 4Q and 2024 Consolidated Financial Statements 1 Variances are rounded based on actual whole dollar amounts 2 Pre-tax, pre-provision net revenue per share is a non-GAAP metric and excludes provision for loan losses and income tax expense UNAUDITED Dollars in millions, except per share data Linked Quarter and Comparative Year Income Statement 4Q24 3Q24 Fav/(Unfav) Var1 Total Interest Income $ 50.9 $ 49.4 1.5 Total Interest Expense 21.2 21.0 (0.2) Net Interest Income 29.7 28.4 1.3 Non-Interest Income 4.2 8.1 (3.9) Non-Interest Expense 25.8 24.1 (1.7) Pre-Tax, Pre-Provision Net Revenue2 $ 8.1 $ 12.4 (4.3) Provision for Credit Losses $ 2.9 $ 0.9 (2.0) Pre-Tax Income $ 5.2 $ 11.5 (6.3) Income Tax Expense $ 0.7 $ 2.5 1.8 Net Income $ 4.5 $ 9.0 (4.5) EPS $ 0.27 $ 0.53 (0.26) Income Statement 2024 2023 Fav/(Unfav) Var1 Total Interest Income $ 195.0 $ 162.5 32.5 Total Interest Expense 83.3 57.7 (25.6) Net Interest Income 111.7 104.8 6.9 Non-Interest Income 28.1 29.1 (1.0) Non-Interest Expense 97.3 93.0 (4.3) Pre-Tax, Pre-Provision Net Revenue2 $ 42.5 $ 40.9 1.6 Provision for Credit Losses $ 5.2 $ 3.4 (1.8) Pre-Tax Income $ 37.3 $ 37.5 (0.2) Income Tax Expense $ 7.6 $ 7.4 (0.2) Net Income $ 29.7 $ 30.1 (0.4) EPS $ 1.77 $ 1.77 0.00
11 4Q 2024 Consolidated Financial Statements 1 Variances rounded based on actual whole dollar amounts UNAUDITED Dollars in millions, except per share data Linked Quarter Balance Sheet 4Q24 3Q24 4Q23 4Q24 vs 3Q241 4Q24 vs 4Q231 Cash & Cash Equivalents $ 154.5 $ 340.1 $ 142.5 (185.6) 12.0 Investment Securities 570.8 549.8 636.1 21.0 (65.3) Loans Receivable, net 3,360.9 3,308.7 3,181.6 52.2 179.3 All Other Assets 220.1 212.8 209.6 7.3 10.5 Total Assets $ 4,306.3 $ 4,411.4 $ 4,169.9 (105.1) 136.4 Total Deposits $ 3,827.9 $ 3,837.5 $ 3,687.6 (9.6) 140.3 Total Borrowings 33.6 128.6 51.6 (95.0) (18.0) Other Liabilities 43.9 52.0 51.0 (8.1) (7.1) Total Liabilities $ 3,905.4 $ 4,018.1 $ 3,790.1 (112.7) 115.3 Equity $ 400.9 $ 393.3 $ 379.8 7.6 21.1 Total Liabilities & Equity $ 4,306.3 $ 4,411.4 $ 4,169.9 (105.1) 136.4
12 4Q24 YTD 2024 EPS $0.27 $1.77 FTE Net Interest Margin 2.85% 2.74% Profitability Net Revenue $33.9 million $139.8 million Return on Average Assets (ROA) 0.41% 0.70% Return on Average Equity (ROE) 4.52% 7.72% $3.4 billion of gross loans 88.7% loan-to-deposit ratio Balance Sheet $3.8 billion of deposits 6.47% wholesale funding ratio 0.99% Allowance for Credit Losses (ACL) 0% digital deposits $22.40 Fully Diluted Tangible Book Value per Share Capital 8.78% Tangible Common Equity Ratio 2024 Reported Results & Key Metrics AFC Arrow Bank, NA Tier 1 Leverage Ratio 9.60% 9.22% CET 1 Capital Ratio 12.71% 12.62% Tier 1 Risk-Based Capital Ratio 13.35% 12.62%
13 Performance Trends $2.41 $2.92 $2.86 $1.77 $1.77 $2.05 2020 2021 2022 2023 2024 Core 2024 Reported EPS $18.32 $20.42 $19.37 $21.06 $22.40 2020 2021 2022 2023 2024 Fully Diluted Tangible Book Value 12.77% 14.09% 13.55% 8.29% 7.72% 8.93% 2020 2021 2022 2023 2024 Core 2024 Return on Average Equity 1.17% 1.28% 1.21% 0.74% 0.70% 0.81% 2020 2021 2022 2023 2024 Core 2024 Return on Average Assets Core 2024 exclude bank unification charges, loss on sale of AFS securities repositioning, acquisition-related expenses and carryover expenses related to 2022 Form 10-K filing delays History of strong earnings and performance metrics
14 Net Interest Margin 1 1Yield includes the impact of deferred fees and amortization of loan origination costs 2Bank Term Funding Program 2.90% 3.02% 3.14% 3.08% 2.98% 2.63% 2.55%2.55% 2.62% 2.69% 2.79% 2.85% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 NIM Expansion Accelerating All NIM in 2023 and beyond presented as FTE 2.99% 2.97% 3.03% 2.67% 2.74% 3.98% 3.97% 4.00% 4.62% 5.19% 0.36% 0.10% 0.27% 1.43% 2.12% 2020 2021 2022 2023 2024 NIM Average Loan Yield for the Period Shown Cost of Deposits Increase in deposit exit rate due to replacement of BTFP2 (borrowing) with Brokered CDs (deposit); total cost of funds down 4bps from 3Q2024 4Q2024 3Q2024 Loan Origination Avg. Rate 6.73% 7.35% Loan Portfolio Exit Rate at Period End 5.40% 5.35% Deposit Exit Rate at Period End 2.10% 2.08%
15 Takeaways & Themes for 2025 • Continued Expansion of Net Interest Margin • ROA returning to 1% • Looking for M&A Opportunities • Absent M&A, evaluating add’l Return of Capital to Investors Share repurchases (subject to Price/TBV limits) Potential dividend increase • Focus on Diversified Revenue Sources Core Banking (including expansion of loan sale activity resumed in 2H24) Wealth Management Insurance • Other Tailwinds Liability Sensitive Balance Sheet (one rate cut expected) Positive Core Operating Leverage
Non-Interest Income/Expense
17 4Q24 Non-Interest Income • Solid 4Q non-interest income across all categories • Non-core items impacting “Other Operating Income”: $3.0 million loss on sale of securities repositioning $0.7 million write-off related to legacy branding items Dollars in thousands December 31, 2024 September 30, 2024 December 31, 2023 Fees for Other Services to Customers $ 2,764 $ 2,881 $ 2,725 Fiduciary Activities/Wealth Management 2,616 2,429 2,363 Insurance Commissions 1,848 1,955 1,723 Other Operating Income (2,998) 868 673 Total Non-Interest Income $ 4,230 $ 8,133 $ 7,484 Three Months Ended
18 YTD Non-Interest Income • Wealth Management and Insurance delivering strong results AUM growth driven primarily by market performance and recent account wins Insurance business benefitting from recent acquisition and increased commissions • Fees from services and card usage reverse prior year trend • 4Q non-core items impacted “Other Operating Income” by $(3.7) million Dollars in thousands December 31, 2024 December 31, 2023 Fees for Other Services to Customers $ 10,892 $ 10,798 Fiduciary Activities/Wealth Management 9,952 9,444 Insurance Commissions 7,147 6,498 Other Operating Income 83 2,377 Total Non-Interest Income $ 28,074 $ 29,117 Year Ended
19 4Q24 Non-Interest Expense • Increase in Data Processing & Technology related to new Wealth Management processing system (~$200K) as well a continued investment in innovation and infrastructure to meet our growing organization’s needs • Advertising & Contributions included ~$200K of contributions to local causes as part of our recurring fourth-quarter annual campaign as well as some unification charges • Elevated Legal & Professional expenses related to $~250K of charges for bank unification efforts • All Other Expenses include increased reserves of ~$125K for unfunded commitments as well as unification charges of ~$225K Dollars in thousands December 31, 2024 September 30, 2024 December 31, 2023 Compensation & Benefits $ 13,331 $ 13,446 $ 11,693 Occupancy & Equipment 1,870 1,754 1,826 Data Processing & Technology 5,119 4,692 4,458 Advertising & Contributions 578 305 274 Legal & Professional 1,526 1,155 1,776 FDIC Assessment 664 698 572 Fraud Expenses 130 9 664 All Other Expenses 2,620 2,041 1,927 Total Non-Interest Expense $ 25,838 $ 24,100 $ 23,190 Three Months Ended
20 YTD Non-Interest Expense • Increase in Salaries and Employee Benefits reflects: Headcount increases to support additional control and compliance initiatives Headcount to support growing organization and inflation-driven wage increases as well as rising benefit costs • Remaining expense categories driven by previously outlined non-core items discussed on page 9 as well as the specifically mentioned items driving the 4Q24 variance Dollars in thousands December 31, 2024 December 31, 2023 Salaries and Employee Benefits $ 52,707 $ 47,667 Occupancy Expenses 7,169 6,554 Technology and Equipment 19,365 17,608 Advertising & Contributions 1,365 1,225 Legal & Professional 5,816 8,989 FDIC Assessment 2,775 2,050 Fraud Expenses (173) 993 All Other Expenses 8,244 7,962 Total Non-Interest Expense $ 97,268 $ 93,048 Twelve Months Ended
21 Operating Expenses - Efficiency Trends 52.8% 54.2% 54.3% 68.8% 67.7% 2.02% 2.00% 2.01% 2.28% 2.27% 2020 2021 2022 2023 2024 Efficiency Ratio Net Non-interest Expense / Average Assets • 2023 impacted by margin compression and elevated expenses (audit, professional, legal) due to the 2022 10-K Filing Delay • 2024 negatively impacted by the non-core items discussed on page 9 and overall higher costs due to investments in people and infrastructure to support growth, control and compliance initiatives; Starting to benefit from margin expansion • Excluding the non-core items discussed on page 9, 2024 Efficiency Ratio would be ~65.9%
Loans
23 Loan Portfolio Composition Commercial (C&I)1 10.6% Commercial Real Estate (CRE) 17.6% Consumer 33.0% Residential Real Estate (RRE) 38.8% • No single relationship represents more than ~1.75% of total loans as of December 31, 2024 • CRE concentration ratio of ~137% of risk-based capital • CRE loans not in major metropolitan areas • C&I portfolio can be a source of deposit growth Total Loan Portfolio ~ $3.4 billion 1Commercial (C&I) includes owner-occupied real estate loans. RRE and total loans do not include fair value (“FV”) hedge mark of $2.2M in 4Q24.
24 Loan Balances $316 $350 $357 $359 $442 $497 $544 $596 $921 $1,065 $1,112 $1,119 $946 $1,071 $1,194 $1,318 2021 2022 2023 2024 Residential Real Estate (RRE) Consumer Commercial Real Estate (CRE) Commercial (C&I) $2,624 $2,983 $3,207 $3,392 Dollars in millions Loan Growth Across All Portfolios Balances exclude all Paycheck Protection Plan loans. CRE excludes owner-occupied real estate loans. Owner-occupied real estate loans shown as part of the C&I portfolio. RRE and total loans do not include FV hedge mark of $5.8M and $2.2M in 2023 and 2024, respectively. 4Q24 loan growth of 7.0% (annualized); FY24 loan growth of 5.8% ~8.9% CAGR
25 Loan Yields Steadily Increasing $2.64 $2.64 $2.66 $2.67 $2.74 $2.85 $2.93 $2.98 $3.01 $3.07 $3.14 $3.21 $3.26 $3.32 $3.33 $3.39 3.90% 4.04% 4.08% 3.82% 3.90% 3.85% 4.09% 4.13% 4.32% 4.57% 4.70% 4.86% 5.02% 5.17% 5.27% 5.30% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 Loan Portfolio Yields experiencing meaningful increase during 2024, continuing trend from 2023 Loan Balance Average Loan Portfolio Yield for the Periods Shown Dollars in billions Pre 2020 4.90% 2020 4.22% 2021 3.81% 2022 4.63% 2023 6.60% 2024 7.05% Rate by Vintage • ~59% of balances are 2022-2024 vintages • Portfolio exit rate was 5.40% as of Dec. 31, 2024 1Yield includes the impact of deferred fees and loan origination costs amortization 1
26 Consumer Loan Portfolio $861 $893 $921 $921 $977 $1,031 $1,056 $1,065 $1,073 $1,088 $1,108 $1,112 $1,126 $1,139 $1,120 $1,119 3.94% 3.92% 3.93% 3.87% 3.84% 3.83% 4.10% 4.02% 4.26% 4.61% 4.83% 5.11% 5.36% 5.61% 5.79% 6.08% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • 99.6% of the portfolio are collateralized auto loans; only $4 million in unsecured personal loans • Auto loans sourced through a network of >485 dealers in New York and Vermont with customers extending beyond those states • Loans are underwritten/credit scored by Arrow • Essentially 100% of auto loans are fully amortizing, fixed-rate loans • >73% of auto loan balances have customers with FICO scores >700 • Average portfolio FICO score is 740; Average debt to income ratio ~31%; average LTV is 88% • Less than 5% of indirect loans have FICO scores <620 • Annual losses over last 5 years were 9-20 bps • ~26% new, ~74% used vehicles exposure 2 1Yield includes the impact of deferred fees and loan origination costs amortization 2 Based on MSRP or used National Automobile Dealers Association (NADA) retail value at time of origination 1 Portfolio rates at December 31, 2024 - 6.32% Average origination rate for 2024 - 7.68% Rate excludes the impact of deferred fees/loan origination costs
27 Commercial Real Estate Portfolio $407 $412 $431 $442 $441 $455 $468 $497 $507 $519 $529 $543 $555 $561 $562 $596 4.90%5.08%5.19% 4.88% 5.07%5.18%5.25%5.18% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • CRE excludes owner-occupied real estate loans • CRE loans extended to businesses / borrowers primarily located in our regional market area • No CRE exposure to large metropolitan areas – e.g., no NYC exposure • As of December 31, 2024: – ~$166 million, or ~28%, of CRE loans are variable- rate loans or are fixed-rate loans that reprice within 12 months – Non-owner occupied Office exposure accounted for ~10% of CRE and <2% of total loans – Non-owner occupied Retail exposure accounted for ~14% of CRE and <3% of total loans outstanding – Total Hotels and Motels exposure accounted for ~24% of CRE and ~4% of total loans outstanding – The majority of the remaining CRE exposure is comprised of multi-family and other residential investment properties 1 Yield includes the impact of deferred fees and loan origination costs amortization 1 Portfolio rates at December 31, 2024 - 5.31% Rate excludes the impact of deferred fees/loan origination costs
28 Commercial (C&I) Portfolio $301 $312 $312 $316 $334 $346 $350 $350 $344 $352 $354 $359 $358 $360 $365 $359 4.35% 4.57% 4.89% 5.38% 5.53% 5.66% 5.81% 5.88% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • Commercial (C&I) includes owner-occupied real estate loans • C&I loans extended to businesses/ borrowers primarily located in our regional market area • C&I portfolio a potential source for deposit acquisition • As of December 31, 2024: – ~$54 million, or ~15%, of C&I loans are either variable-rate loans or fixed-rate loans that reprice within 12 months .1Yield includes the impact of deferred fees and loan origination costs amortization 1 Portfolio rates trending up YoY 4Q24 exit rates at 5.36% vs 4Q23 at 5.10% Rate excludes the impact of deferred fees/loan origination costs
29 Residential Real Estate Loans $908 $911 $930 $946 $967 $1,012 $1,051 $1,071 $1,081 $1,111 $1,148 $1,194 $1,218 $1,255 $1,287 $1,318 3.79%3.77%3.76%3.73%3.71%3.70%3.78%3.80% 4.10%4.17%4.25% 4.52%4.57%4.67%4.77%4.66% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • RRE loan balances exclude FV hedge mark • 4Q24 yields include ~3bps related to FV balance sheet hedge, down from ~19bps in 3Q24 • One-to-four family RRE secured by first or second mortgages on residences and home equity lines located in our market area • LTV generally does not exceed 80% at time of origination (lower of purchase price or appraised value) • Loans exceeding 80% LTV at origination require private mortgage insurance or other guarantees • ~ $37MM, or 3%, of RRE loan portfolio is for construction purposes • ~9% of the portfolio are home equity loans • As of December 31, 2024: • ~$115 million, or ~9%, of RRE loans are either variable-rate loans or fixed-rate loans that reprice within 12 months 1Yield includes the impact of deferred fees and loan origination costs amortization. 1 As of December 31, 2024, the average rate in the Residential Mortgage portfolio was ~4.41% and the Home Equity Line portfolio rate was ~7.14%, resulting in overall portfolio rate of ~4.66% Rates exclude the impact of deferred fees/loan origination costs
Deposits/Funding Sources
31 Deposit Balances – Excl. Brokered CDs 27.0% 27.2% 28.0% 24.3% 23.3% 22.7% 48.7% 49.5% 49.3% 2022 2023 2024 Non-Municipal Municipal Business Dollars in billions $3.50 $3.51 $3.56 • Increase from prior year primarily related to branch acquisition and success in growing business relationships • Municipal deposits are from county and local governments, including school, water, fire, sewer districts and housing authorities
32 Deposit Balances – Excl. Brokered CDs 23.9% 21.5% 19.8% 28.5% 22.8% 22.8% 41.6% 41.8% 42.7% 6.0% 13.9% 14.7% 2022 2023 2024 Deposit Balances Time Deposits Savings Deposits Interest-Bearing Checking Noninterest-Bearing Dollars in billions $3.50 $3.51 $3.56 • Shifting deposit mix contributing to elevated interest expense/cost of deposits • Non-interest bearing deposit trend represents major business challenge • Strong discipline on deposit pricing, but mix (partially) offsets pricing efforts
33 Funding Sources and 4Q24 Exit Rates • Recent FRB activity created opportunity to actively reduce cost of funds • During 4Q24 BTFP borrowings of $95 million were replaced with a callable brokered CD at a lower cost • Subsequent to year-end, the brokered CD was called and temporarily replaced with cheaper FHLB borrowings; These borrowings will be replaced in mid-February by a new brokered CD tied to a two- year swap agreement with an all-in cost of ~3.3% • Retail CD pricing (6, 14, and 23-month offerings) lower than the average maturing CD specials Dollars in millions Balance Rate Balance Rate Balance Rate Balance Rate Demand (Non-Interest Bearing) $ 293 0.00% $ 412 0.00% $ (3) 0.00% $ 703 0.00% Interest Bearing Checking 318 0.08% 259 3.20% 234 0.22% 811 1.12% Savings and Money Market 713 1.27% 279 3.32% 528 4.15% 1,520 2.65% Time Deposits 431 3.64% 45 3.64% 48 3.21% 524 3.60% Core Deposits $ 1,755 1.42% $ 995 1.93% $ 807 2.97% $ 3,558 1.92% Brokered CDs - Net of Swap Effect 270 4.56% Total Deposits $ 1,755 1.42% $ 995 1.93% $ 807 2.97% $ 3,828 2.10% Other Borrowings 14 1.36% Junior Subordinated Obligations - TRUPS 20 3.43% Total Deposits and Borrowings $ 1,755 1.42% $ 995 1.93% $ 807 2.97% $ 3,862 2.11% Consumer Business Municipal Total
34 Core Deposit Rate Analysis Balance Exit Rate1 Balance Exit Rate1 Balance Exit Rate1 Demand (Non-Interest Bearing) $703 0.00% $740 0.00% -$37 0.00% Interest Bearing Checking $811 1.12% $875 1.08% -$64 0.04% Savings and Money Market $1,520 2.65% $1,545 2.90% -$25 -0.25% Time Deposits $524 3.60% $502 3.58% $22 0.02% Total $3,558 1.92% $3,662 1.97% -$104 -0.04% 4Q 2024 3Q 2024 Variance 1Exit Rate is the rate as of the end of the quarter • Lower Exit Rate in 4Q24 driven primarily by disciplined pricing and recent Fed action • Potential reduction of cost of funds due to future Fed rate action
Credit Quality
36 Credit Quality 0.40% 0.37% 0.21% 0.20% 0.66% 0.66% 0.64% 0.66% 0.62% 2022 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 Non-Performing Loans (NPL) / Gross Loans Dollars in millions $12.0 $11.2 $6.5 $6.3 $21.2 $21.4 $21.1 $21.9 $21.0 • Increase in 4Q23 related to one ~$15.3M commercial loan relationship going on non-accrual Strong collateral position; account closely monitored and in active work-out discussions • Annualized charge-offs were 9bps in 2024 • Allowance for credit losses to loans is 0.99% • Coverage ratio of 160%; 585% excluding the ~$15.3M commercial loan • One NPL relationship • Well collateralized • No specific reserve required 0.44% 0.18%
37 Allowance for Credit Losses $31,262 ($517) $517 $725 $1,611 $33,598 3Q24 Net Charge-Offs Net Charge-Offs Loan Growth Result of Model Calculation (e.g. Mix/Aging) 4Q24 4Q24 Allowance for Credit Loss Walk Provision for Credit Losses $2.9M
Capital Actions and Strategy
39 Equity and Ownership Dividends and Return of Capital • Fourth-quarter dividend of $0.28 per share paid on October 29, 2024 Represents a 3.7% increase to our quarterly dividend • 46th consecutive quarter of dividends • YTD 2024 ~$6.4 million of stock repurchases (263K shares) No repurchase activity in 2H24 Capital Strategy – M&A dependent • $5M stock buyback authorization for opportunistic use subject to P/TBV limits • Evaluating additional return of capital via potential dividend increase Ownership • Directors, Management and Employees (through equity incentives and/or employee ownership plans) currently own ~6% of Arrow
40 $21.95 $0.27 ($0.28) $0.46 $22.40 3Q24 Net Income Dividends AOCI 2024 4Q24 TBV / Share Walk Fully Diluted Tangible Book Value (TBV) AOCI benefitting from cash flow hedges related to longer–term funding arrangements
41 $21.06 $1.77 ($1.09) ($0.16) $0.82 $22.40 2023 Net Income Dividends AOCI Change in Intangibles (3Q Acquisitions) and Other 2024 2024 TBV / Share Walk Fully Diluted Tangible Book Value (TBV)
42 Capital Position 9.60% 12.71% 13.35% 14.47% 8.78% 9.84% 13.00% 13.66% 14.74% 8.60% 4.00% 4.50% 6.00% 8.00% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% Tier 1 Leverage Ratio Common Equity Tier 1 Capital Tier 1 Risk-Based Capital Total Risk-Based Capital Tangible Common Equity Capital Ratios – Arrow Minimum Regulatory Capital Ratios 2023 2024
Investments
44 Duration Wtd Avg Remaining LifeCurrent Book Value Market Value Unrealized Gain / (Loss) Book Yield • Repositioned securities portfolio late in 4Q24 • Increase of $5.9M in unrealized losses from September 30, 2024 – as FV marks on newer investments offset positive trending FV marks on older investments • Compared to 3Q24 book yield increased from 2.25% to near 3% and duration increased from 2.39 to over 3 years Investment Portfolio – AFS and HTM 1 1 Unrealized Gain/(Loss) on HTM for informational purposes only – not reflected in OCI Dollars in thousands December 31, 2024 1.69 597,934$ 559,697$ 2.59% 4.92% 3.09% 2.91% (1,456) 0 (1,675)$ Duration 0.92 4.15 3.63 3.72 Wtd Avg Remaining Life 0.96 5.01 4.14 1.16 0.70 1.08 2.64 4.75 4.24 1.47 1.84 1.21 0.70 1.13 2.64 3.84 3.57 1.382.40% 2.59% 96,586$ Agency MBS Agency CMO Municipal Municipal - Local Total HTM 69,049 98,261$ (132)$ (87) Category 3.16 6,712 6,464 (248) 3.66% 323,736 288,144 (35,592) 2.29% Unrealized Gain / (Loss)1 Book Yield 3.15% Current Book Val e 70,000 Total Investments US Agencies 240 1,000 499,673$ 4,123$ Agency MBS (38,237)$ Market Value 69,214 70,505 21,324 2,309 2,222 21,324 240 979 463,111$ 3,991$ 97,985$ 98,070$ 85$ 4.48% 4.01 3.55 (786) Agency CMO Municipal - Local Other Total AFS US Treasuries 7.02% 7.47% 2.87% 0 (21) (36,562)$
Overview and History
46 Financial Snapshot 2019 2020 2021 2022 2023 2024 Total assets $3,184,275 $3,688,636 $4,027,952 $3,969,509 $4,169,868 $4,305,142 Loans $2,386,120 $2,595,030 $2,667,941 $2,983,207 $3,212,908 $3,394,541 Loan-to-deposit ratio 91.2% 80.2% 75.1% 85.3% 87.1% 88.7% Return on average assets 1.24% 1.17% 1.28% 1.21% 0.74% 0.70% Efficiency ratio 57.08% 52.80% 54.16% 54.26% 68.81% 67.68% Net interest margin 3.05% 2.99% 2.97% 3.03% 2.65% 2.72% Tier 1 Leverage Ratio 9.98% 9.07% 9.20% 9.80% 9.84% 9.60% Return on average equity 13.17% 12.77% 14.09% 13.55% 8.29% 7.72% Tangible book value per share $16.48 $18.32 $20.41 $19.37 $21.06 $22.40 Net interest income $88,049 $99,202 $110,355 $118,343 $104,832 $111,732 Net income $37,475 $40,827 $49,857 $48,799 $30,075 $29,711 EPS (fully diluted) $2.23 $2.41 $2.92 $2.86 $1.77 $1.77 Dollars in thousands, except per share amounts
47 Our Profile • Bank holding company • Arrow Bank National Association • Upstate Agency, LLC • Wealth Management Services • $4.3 billion in assets • 560 plus employees • Primary service area population of more than 1.1 million Insurance Offices Bank Branches 938
48 Our History 1851 Glens Falls Bank opened for business in a newly constructed building on Ridge Street. 1932 Changed name to Glens Falls National Bank and Trust Company. 1949 Broke ground at 250 Glen Street — our current headquarters. 1981 Glens Falls National Bank went public on NASDAQ as GFAL. 1983 Formed Arrow Bank Corporation (now Arrow Financial Corporation) and trading began on NASDAQ as AROW.
49 Our History 1988 Formed Saratoga National Bank and Trust Company and expanded footprint 1999 Surpassed $1 billion in assets 2004 Bought first insurance agency 2001 Added to the Russell 2000 Index 2021 Topped $4 billion in assets. 2018 Consolidated our insurance business into the Upstate Agency brand. 2012 Reached $2 billion in assets. 2024 Unified banking subsidiaries to form Arrow Bank National Association.
50 President and Chief Executive Officer Mr. DeMarco joined the Company in 1987 as a commercial lender and since that time has served in positions of increasing responsibility within the organization. In 2012, he was named President and CEO of Saratoga National Bank, now named Arrow Bank. In May 2023, he was named President and CEO of Arrow Financial Corporation and Glens Falls National Bank, now named Arrow Bank. He holds a bachelor’s degree in finance from the University of Texas at Austin. Mr. DeMarco is a graduate of the Adirondack Regional Chamber of Commerce’s Leadership Program and the Stonier Graduate School of Banking. He serves as a Director of the Company and its subsidiary bank and sits on the boards of various non-profits dedicated to healthcare and economic development. David S. DeMarco, President and CEO
51 Experienced Leadership Team Mr. Kaiser joined the Company in 2001 as Vice President and Commercial Loan Officer. He served as Corporate Banking Manager and was later promoted to Senior Vice President, before being named Chief Credit Officer in 2011, followed by promotions to Executive Vice President and Senior Executive Vice President. Prior to joining the Company, he spent 15 years in the Capital Region as a Commercial Loan Officer. Mr. Kaiser has a bachelor’s degree in business administration from Siena College. Mr. Kaiser actively serves on boards of numerous community organizations. David D. Kaiser, Senior Executive Vice President and CCO Mr. Ivanov joined the Company in 2023 with more than 30 years of experience in Financial Planning & Analysis, Controllership, SOX, Financial Reporting and Treasury. Mr. Ivanov previously served as CFO for Bankwell Financial Group, helping it almost double in size over six-plus years to $3.3 billion. He has held CFO positions at Darien Rowayton Bank and for Doral Bank’s U.S. Operations. He began his career with Ernst & Young and held accounting/ finance positions at PepsiCo, GE Capital and Bridgewater Associates. Mr. Ivanov holds an MBA and bachelor’s degree in accounting and finance from the University of South Florida. He is also Six Sigma Black Belt certified. Penko Ivanov, Senior Executive Vice President, CFO, Treasurer and CAO Mr. Wise joined the Company in 2016 as Senior Vice President of Administration for Glens Falls National Bank, now named Arrow Bank. He has since been promoted to Senior Executive Vice President and Chief Risk Officer of the Company. He has more than 30 years of experience building and leading both community banks and bank-owned insurance agencies. Mr. Wise previously served as Vice President and CISO for The Adirondack Trust Company and acted as Executive Vice President, COO for Wise Insurance Brokers, Inc. He has extensive experience in designing, implementing and managing workflows and delivering operational efficiency. He holds a bachelor’s degree from Boston University’s School of Management. Andrew J. Wise, Senior Executive Vice President and CRO
52 Experienced Leadership Team Ms. Pancoe joined the Company in 2018 as Director of Human Resources. In her current role as Chief Human Resources Officer, she has executive oversight of the Company’s human resource strategies, which includes organizational design and succession planning, talent acquisition and retention, performance management, professional development and compensation and benefits. Prior to joining the Company, Ms. Pancoe held various human resource management roles within the power generation and engineering services industry. Ms. Pancoe holds a bachelor’s degree in psychology from Clark University in Worcester, MA, and an MBA from the University at Albany. In addition, she maintains a certified professional human resources designation. Brooke Pancoe, Executive Vice President, Chief Human Resources Officer Mr. Yrsha joined the Company in 2015. He currently is the Chief Banking Officer and oversees the strategic direction of the Retail Banking unit, which includes retail deposits and lending, business development, consumer payments, business services, municipal banking, as well as small business and retail lending. In addition, Marc oversees the Wealth Management division and Marketing. Prior to joining our Company, Mr. Yrsha spent time in retail leadership, retail and commercial lending at large regional and community banks within the Arrow footprint. Mr. Yrsha is active in the community serving in leadership roles on a variety of boards. He is a graduate of Castleton University in Vermont and the Adirondack Regional Chamber of Commerce’s Leadership Adirondack Program. Marc Yrsha, Senior Executive Vice President, Chief Banking Officer Mr. Jacobs joined Glens Falls National Bank, now named Arrow Bank, in 2003 as Information Systems Manager. He was later promoted to Senior Vice President and then Executive Vice President. As Chief Information Officer, Mr. Jacobs guides the Company’s strategic technology plans. He has more than 30 years of experience in the community banking industry, having previously served as Operations Manager at Cohoes Savings Bank and Item Processing Manager at Hudson River Bank and Trust. Mr. Jacobs earned a bachelor’s degree in finance from Siena College and an associate degree in business administration from Hudson Valley Community College. Michael Jacobs, Executive Vice President, Chief Information Officer
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Arrow Financial (NASDAQ:AROW)
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