Arrow Financial Corporation · NASDAQ:AROW
Arrow Financial — Q1 2025 Earnings Presentation
48 slides from Arrow Financial's earnings presentation, May 1, 2025
Slide 1: 1Q 2025 Investor Presentation
1Q 2025 Investor Presentation May 1, 2025
Slide 2: Safe Harbor
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
Slide 3: Table of Contents
Table of Contents • 1Q 2025 Results and Performance Metrics • Non-Interest Income/Expense • Loans • Deposits/Funding Sources • Credit Quality • Investments • Capital Actions & Strategy • Overview and History 3
Slide 4: 1Q 2025 Results
1Q 2025 Results ~ =\RROW Financial Corporation
Slide 5: Highlights
Highlights Net Income of $6.3 million (EPS of $0.38) • Includes non-core unification related expenses of $0.6M ($0.03/share) Record Net Interest Income of $31.4 million FTE NIM of 3.08% vs. 2.85% for the 4th quarter of 2024 • Cost of interest-bearing deposits decreased by 23 bps in the quarter
Slide 6: 1Q 2025 – Discrete Items
1Q 2025 – Discrete Items 1Q25 ($ in Millions, except EPS) Pre-Tax $ After-Tax $ EPS ROA Reported Income 8.13 6.31 $ 0.38 0.59% Non-Core Items Unification Expenses 0.63 0.49 $ 0.03 0.05% Core Income 8.76 6.80 $ 0.41 0.64% 1Q 2025 Discrete Items Commercial Loan Specific Reserve 3.75 2.91 $ 0.17 0.27%
Slide 7: Investment Rationale
Investment Rationale • Continued expansion of Net Interest Margin • ROA on path to return to/exceed 1% • Looking for M&A Opportunities • Absent M&A, committed to Return of Capital to Investors Share repurchases (subject to Price/TBV target) Potential dividend increase in 2H 2025 • Focus on Diver
Slide 8: 1Q 2025 Consolidated Financial Statements
1Q 2025 Consolidated Financial Statements Linked Quarter UNAUDITED Dollars in millions, except per share data Fav/(Unfav) 1Q25 vs Income Statement 1Q25 4Q24 Balance Sheet 1Q25 4Q24 Var1 4Q24 Total Interest Income $ 50.4 $ 50.9 (0.5) Cash & Cash Equivalents $ 301.4 $ 154.5 146.9 Total Interest Expens
Slide 9: Net Interest Margin
Net Interest Margin 2.85% 3.08% 3.08% 2.67% 2.62% 2.69% 2.79% 2.98% 5.01% 5.17% 5.27% 5.30% 5.30% 4.62% 2.85% 2.79% 2.15% 2.69% 2.06% 2.12% 2.12% 1.96% 2.63% 2.62% 1.43% 2.55% 2.55% 2023 1Q24 2Q24 3Q24 4Q24 1Q25 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 NIM 1 Average Loan Yield for the Period Sho
Slide 10: 2025 Reported Results & Key Metrics
2025 Reported Results & Key Metrics YTD 2025 EPS $ 0.38 FTE Net Interest Margin 3.08% Profitability Net Revenue $39.2 million Return on Average Assets (ROA) 0.59% Return on Average Equity (ROE) 6.33% $3.4 billion of gross loans 86.1% loan-to-deposit ratio Balance Sheet $4.0 billion of deposits 6.94%
Slide 11: Performance Trends
Performance Trends History of strong earnings and performance metrics Reported EPS Fully Diluted Tangible Book Value $22.40 $22.72 $20.42 $19.37 $21.06 $2.92 $2.86 $18.32 $2.41 $2.05 $1.77 $1.77 $0.38 1 1 2020 2021 2022 2023 2024 1Q25 2020 2021 2022 2023 2024 1Q25 ROE (Annualized) ROA (Annualized) 1
Slide 12: Non-Interest Income/Expense
Non-Interest Income/Expense
Slide 13: 1Q 2025 Non-Interest Income
1Q 2025 Non-Interest Income Dollars in thousands Three Months Ended March 31, 2025 December 31, 2024 March 31, 2024 Fees for Other Services to Customers $ 2,600 $ 2,762 $ 2,543 Fiduciary Activities/Wealth Management 2,535 2,615 2,457 Insurance Commissions 1,826 1,848 1,682 Other Operating Income 878
Slide 14: 1Q 2025 Non-Interest Expense
1Q 2025 Non-Interest Expense Dollars in thousands Three Months Ended March 31, 2025 December 31, 2024 March 31, 2024 Compensation & Benefits $ 13,555 $ 13,332 $ 12,893 Occupancy & Equipment 2,022 1,870 1,771 Data Processing & Technology 5,087 5,119 4,820 Advertising & Contributions 376 578 205 Legal
Slide 15: Operating Expenses — Efficiency Trends
Operating Expenses — Efficiency Trends 2020 2021 2022 2023 2024 1Q 2025 68.8% 67.7% 66.5% 52.8% 54.2% 54.3% 2020 2021 2022 2023 2024 1Q 2025 • 2023 impacted by margin compression and elevated expenses (audit, professional, legal) due to the prior SEC filing delays • 2024 negatively impacted by the n
Slide 16: Loans
Loans ~ =\rRow Financial Corporation
Slide 17: Loan Portfolio Composition
Loan Portfolio Composition Total Loan Portfolio ~ $3.4 billion Commercial (C&I)1 10.3% • No single relationship represents more than ~1.75% of Residential Commercial total loans as of March 31, 2025 Real Estate Real Estate (RRE) (CRE) 39.2% 17.7% • CRE concentration ratio of ~135% of risk-based capi
Slide 18: Loan Balances
Loan Balances Dollars in millions Loan Growth Across All Portfolios Residential Real Estate (RRE) Consumer Commercial Real Estate (CRE) Commercial (C&I) ~8.9% CAGR $3,392 $3,414 $3,207 $2,983 $2,624 $1,318 $1,336 $1,194 $1,071 $946 $1,112 $1,119 $1,119 $1,065 $921 $497 $544 $596 $606 $442 $316 $350
Slide 19: Loan Exit Rate Trends
Loan Exit Rate Trends 1 1Q24 2Q24 3Q24 4Q24 1Q25 Consumer 5.70% 5.99% 6.19% 6.32% 6.44% Commercial Real Estate 5.34% 5.38% 5.36% 5.31% 5.32% C&I 5.14% 5.27% 5.36% 5.36% 5.37% Residential Real Estate 4.41% 4.51% 4.61% 4.66% 4.70% Total Loans 5.14% 5.25% 5.35% 5.40% 5.45% • Indirect loan rates continu
Slide 20: Loan Yields
Loan Yields Dollars in billions 5.17% 5.27% 5.30% 5.30% 5.02% 4.86% 4.70% 4.57% $3.39 $3.41 4.09% 4.13% 4.32% $3.26 $3.32 $3.33 Rate by Vintage 3.82% 3.90% 3.85% $3.21 2025 $3.14 7.02% $3.07 $3.01 $2.98 $2.93 $2.85 2024 Pre 2021 7.13% 4.66% $2.74 $2.67 2023 2021 6.66% 3.80% 2022 4.61% 1 ~43% of bala
Slide 21: Consumer Loan Portfolio
Consumer Loan Portfolio • ~99.6% of the portfolio are collateralized auto Dollars in millions loans; only $4 million in unsecured personal 6.08% 6.06% loans 5.79% 5.61% 5.36% 5.11% • Auto loans sourced through a network of 4.83% 4.26% 4.61% >490 dealers in New York and Vermont with 3.87% 3.84% 3.83%
Slide 22: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio Dollars in millions 5.25% 5.18% 5.15% • CRE excludes owner-occupied real estate loans 5.08% 5.19% 5.07% 5.18% 4.90% 4.88% $596 $606 • CRE loans extended to businesses / borrowers $561 $562 primarily located in our regional market area $555 $543 $529 $507 $519 • No CR
Slide 23: C&I Portfolio
C&I Portfolio Dollars in millions 5.81% 5.88% 5.71% 5.53% 5.66% 5.38% 4.89% 4.35% 4.57% • C&I includes owner-occupied real estate loans $365 $350 $350 $352 $354 $359 $358 $360 $359 $353 • C&I loans extended to businesses/ borrowers $346 $344 $334 primarily located in our regional market area $316 •
Slide 24: Residential Real Estate Loans
Residential Real Estate Loans Dollars in millions • RRE loan balances exclude FV hedge mark 4.67% 4.77% 4.66% 4.71% • One-to-four family RRE secured by first or 4.52% 4.57% 4.10% 4.17% 4.25% $1,318 $1,336 second mortgages on residences and home 3.73% 3.71% 3.70% 3.78% 3.80% $1,287 equity lines locat
Slide 25: Deposits/Funding Sources
Deposits/Funding Sources ~ =\RROW Financial Corporation
Slide 26: Deposit Balances – Excl. Brokered CDs
Deposit Balances – Excl. Brokered CDs Dollars in billions Non-Municipal Municipal Business $3.50 $3.51 $3.56 $3.67 48.7% 49.5% 49.3% 48.4% 24.3% 23.3% 22.7% 25.2% 27.0% 27.2% 28.0% 26.4% 2022 2023 2024 1Q 2025 1Q 2025 deposit balances reflect seasonal surge of municipal deposits 26
Slide 27: Deposit Balances – Excl. Brokered CDs
Deposit Balances – Excl. Brokered CDs Dollars in billions Time Deposits Savings Deposits Interest-Bearing Checking Deposit Balances Noninterest-Bearing $3.50 $3.51 $3.56 $3.67 6.0% 13.9% 14.7% 14.0% 41.6% 41.8% 42.7% 41.8% 28.5% 22.8% 22.8% 25.2% 23.9% 21.5% 19.8% 19.0% 2022 2023 2024 1Q 2025 Intere
Slide 28: Funding Sources and 1Q 2025 Exit Rates
Funding Sources and 1Q 2025 Exit Rates Dollars in millions Consumer Business Municipal Total Balance Rate Balance Rate Balance Rate Balance Rate Demand (Non-Interest Bearing) $ 295 0.00% $ 396 0.00% $ 7 0.00% $ 697 0.00% Interest Bearing Checking 325 0.08% 259 2.95% 340 0.44% 924 1.02% Savings and M
Slide 29: Core Deposit Analysis
Core Deposit Analysis 1Q 2025 4Q 2024 Variance Balance Exit Rate Balance Exit Rate Balance Exit Rate Demand (Non-Interest Bearing) $697 0.00% $703 0.00% -$6 0.00% Interest Bearing Checking $924 1.02% $811 1.12% $113 -0.10% Savings and Money Market $1,532 2.53% $1,520 2.65% $12 -0.12% Time Deposits $
Slide 30: Credit Quality
Credit Quality ~ =\RROW Financial Corporation
Slide 31: Credit Quality
Credit Quality Dollars in millions Non-Performing Loans (NPL) / Gross Loans 0.66% 0.66% 0.64% 0.62% 0.56% 0.44% - $15M CRE Relationship 0.12% - All Other 1Q24 2Q24 3Q24 4Q24 1Q25 $21.4 $21.1 $21.9 $21.0 $19.0 Specific reserve of $3.75 recorded in 1Q25 related to $15M commercial loan participation
Slide 32: Delinquent Loan Trends
Delinquent Loan Trends Delinquent Loans to Total Loans – Excl. $15M CRE Loan Participation 0.76% 0.68% 0.62% 0.61% 0.58% 0.60% 0.60% 0.57% 0.56% 0.53% 0.51% 0.45% 0.43% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 Delinquency trends remain benign 32
Slide 33: Allowance for Credit Losses
Allowance for Credit Losses YTD 2025 Allowance for Credit Loss Walk $3,750 $37,771 $282 $141 $33,598 $846 ($846) Provision for Credit Losses $5.0M 4Q 2024 Net Charge-Offs Net Charge-Offs Loan Growth Result of Specific Reserve 1Q 2025 Model Calculation (e.g. Mix/Aging) 33
Slide 34: Investments
Investments ~ =\RROW Financial Corporation
Slide 35: Investment Portfolio – AFS and HTM
Investment Portfolio – AFS and HTM Dollars in thousands March 31, 2025 Wtd Avg Expected Current Book Unrealized Category Market Value Book Yield Remaining Life Duration Run-Off by Value Gain / (Loss)1 1 EOY US Treasuries $ 98,080 $ 99,499 $ 1,419 4.48% 3.76 3.38 $ 25,000 US Agencies 55,000 54,492 (5
Slide 36: Capital Actions and Strategy
Capital Actions and Strategy
Slide 37: Equity and Ownership
Equity and Ownership Dividends and Return of Capital • Declared 2Q25 dividend of $0.28 per share • 47th consecutive quarter of dividends • 2025 Share Repurchase Activity ~$3.4M of stock repurchases in 1Q25 128K shares at an average price of $26.48 Capital Strategy – M&A Dependent • New $5M buyba
Slide 38: Fully Diluted Tangible Book Value (TBV)
Fully Diluted Tangible Book Value (TBV) 2025 TBV / Share Walk $0.38 $0.30 $22.72 ($0.08) $22.40 ($0.28) 4Q 2024 Net Income Dividends AOCI Stock Repurchases 1Q 2025 38
Slide 39: Capital Position
Capital Position Capital Ratios – Arrow Tangible Common Equity 8.78% 8.56% 8.00% Total Risk-Based Capital 14.47% 14.48% 6.00% Tier 1 Risk-Based Capital 13.35% 13.23% 4.50% Common Equity Tier 1 Capital 12.71% 12.59% 4.00% Tier 1 Leverage Ratio 9.60% 9.61% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13%
Slide 40: Overview and History
y “al Overview and History ~ =\RROW Financial Corporation
Slide 41: Financial Snapshot
Financial Snapshot Dollars in thousands, except per share amounts 2019 2020 2021 2022 2023 2024 1Q 2025 Total assets $3,184,275 $3,688,636 $4,027,952 $3,969,509 $4,169,868 $4,306,348 $4,448,885 Loans $2,386,120 $2,595,030 $2,667,941 $2,983,207 $3,212,908 $3,394,541 $3,416,868 Loan-to-deposit ratio 9
Slide 42: Our Profile
Our Profile • Bank holding company • Arrow Bank National Association • Upstate Agency, LLC • Wealth Management Services • $4.5 billion in assets • 580 plus employees • Primary service area population of more than 1.1 million 38 Bank Branches 9 Insurance Offices 42
Slide 43: Our History
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 For
Slide 44: Our History
Our History 1988 Formed Saratoga National Bank and Trust Company and expanded footprint 1999 Surpassed $1 billion in assets 2001 Added to the Russell 2000 Index 2004 Bought first insurance agency 2012 Reached $2 billion in assets 2018 Consolidated our insurance business into the Upstate Agency brand
Slide 45: President and Chief Executive Officer
President and Chief Executive Officer David S. DeMarco, President and CEO 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,
Slide 46: Experienced Leadership Team
Experienced Leadership Team Penko Ivanov, David D. Kaiser, Andrew J. Wise, Senior Executive Vice President, CFO, Senior Executive Vice President and CCO Senior Executive Vice President and CRO Treasurer and CAO Mr. Ivanov joined the Company in 2023 with Mr. Kaiser joined the Company in 2001 Mr. Wise
Slide 47: Experienced Leadership Team
Experienced Leadership Team Marc Yrsha, Michael Jacobs, Brooke Pancoe, Senior Executive Vice President, Executive Vice President, Executive Vice President, Chief Chief Banking Officer Chief Information Officer Human Resources Officer Mr. Yrsha joined the Company in 2015. Mr. Jacobs joined the Compan
Slide 48: Thank you!
Thank you! ~ =\RROW Financial Corporation