Slide 1: 4Q 2024 Investor Presentation
4Q 2024 Investor Presentation January 30, 2025
Slide 2: Safe Harbor
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 event
Slide 3: Table of Contents
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
Slide 4: 4Q 2024 Results
4Q 2024 Results - =\RROW Financial Corporation
Slide 5: 4Q24 Highlights
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 los
Slide 6: 4Q24 Non-Core Items
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
Slide 7: YTD 2024 Results
~ YTD 2024 Results ~ =\RROW Financial Corporation
Slide 8: Select YTD 2024 Highlights
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 e
Slide 9: YTD 2024 Non-Core Items
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
Slide 10: 4Q and 2024 Consolidated Financial Statements
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
Slide 11: 4Q 2024 Consolidated Financial Statements
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 S
Slide 12: 2024 Reported Results & Key Metrics
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 depo
Slide 13: Performance Trends
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
Slide 14: Net Interest Margin
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
Slide 15: Takeaways & Themes for 2025
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 Reven
Slide 16: Non-Interest Income/Expense
Non-Interest Income/Expense
Slide 17: 4Q24 Non-Interest Income
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,
Slide 18: YTD Non-Interest Income
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
Slide 19: 4Q24 Non-Interest Expense
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
Slide 20: YTD Non-Interest Expense
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 catego
Slide 21: Operating Expenses - Efficiency Trends
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 Fili
Slide 22: Loans
Loans - =\RROW Financial Corporation
Slide 23: Loan Portfolio Composition
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
Slide 24: Loan Balances
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 Bala
Slide 25: Loan Yields Steadily Increasing
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 3Q2
Slide 26: Consumer Loan Portfolio
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
Slide 27: Commercial Real Estate Portfolio
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
Slide 28: Commercial (C&I) Portfolio
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 P
Slide 29: Residential Real Estate Loans
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 Pe
Slide 30: Deposits/Funding Sources
Deposits/Funding Sources - =\RROW Financial Corporation
Slide 31: Deposit Balances – Excl. Brokered CDs
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 • Muni
Slide 32: Deposit Balances – Excl. Brokered CDs
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 el
Slide 33: Funding Sources and 4Q24 Exit Rates
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
Slide 34: Core Deposit Rate Analysis
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% $50
Slide 35: Credit Quality
Credit Quality - =\RROW Financial Corporation
Slide 36: 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
Slide 37: Allowance for Credit Losses
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
Slide 38: Capital Actions and Strategy
Capital Actions and Strategy
Slide 39: Equity and Ownership, Dividends and Return of Capital
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 act
Slide 40: 4Q24 TBV / Share Walk
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
Slide 41: 2024 TBV / Share Walk
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)
Slide 42: Capital Position
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
Slide 43: Investments
Investments - =\RROW Financial Corporation
Slide 44: Investment Portfolio – AFS and HTM
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 invest
Slide 45: Overview and History
Overview and History - =\RROW Financial Corporation
Slide 46: Financial Snapshot
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.
Slide 47: Our Profile
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
Slide 48: Our History
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. 1
Slide 49: Our History
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 br
Slide 50: President and Chief Executive Officer
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 202
Slide 51: Experienced Leadership Team
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 Presid
Slide 52: Experienced Leadership Team
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 acqu
Slide 53: Thank you!
Thank you! - =\RROW Financial Corporation