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
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 • 1Q 2025 Results and Performance Metrics • Non-Interest Income/Expense • Loans • Deposits/Funding Sources • Credit Quality • Investments • Capital Actions & Strategy • Overview and History
Slide 4: 1Q 2025 Results
1Q 2025 Results - =\RROW Financial Corporation
Slide 5: Highlights
5 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 $31.4 million FTE NIM of 3.08% vs. 2.85% for the 4th quarter of 2024 • Cost of interest-bearing deposits decreased by 23 bps in the quart
Slide 6: 1Q 2025 – Discrete Items
6 1Q 2025 – Discrete Items ($ 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% Core In
Slide 7: Investment Rationale
7 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 Div
Slide 8: 1Q 2025 Consolidated Financial Statements
8 1Q 2025 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 Quart
Slide 9: Net Interest Margin
9 Net Interest Margin 1 1Yield includes the impact of deferred fees and amortization of loan origination costs 2.98% 2.63% 2.55% 2.55% 2.62% 2.69% 2.79% 2.85% 3.08% 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 All NIM for 2024 and beyond presented as FTE 2.67% 2.62% 2.69% 2.79% 2.85% 3.08% 4.62% 5.0
Slide 10: 2025 Reported Results & Key Metrics
10 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% wholesale funding ratio 1.11% Al
Slide 11: Performance Trends
11 Performance Trends $2.41 $2.92 $2.86 $1.77 $2.05 $0.38 2020 2021 2022 2023 2024 1Q25 Reported EPS $1.77 $18.32 $20.42 $19.37 $21.06 $22.40 $22.72 2020 2021 2022 2023 2024 1Q25 Fully Diluted Tangible Book Value 12.77% 14.09% 13.55% 8.29% 8.93% 6.33% 2020 2021 2022 2023 2024 1Q25 ROE (Annualized) 1
Slide 12: Non-Interest Income/Expense
Non-Interest Income/Expense
Slide 13: 1Q 2025 Non-Interest Income
13 1Q 2025 Non-Interest Income • Non-core items impacting “Other Operating Income” in 4Q24 versus 1Q25: $3.0M loss on securities sale repositioning and $0.7M write-off related to legacy branding items • Wealth Management assets under management (AUM) decreased by ~$71M in 1Q25 Net account activi
Slide 14: 1Q 2025 Non-Interest Expense
14 1Q 2025 Non-Interest Expense • 1Q 2025 included unification expenses of ~$600k • Unification expenses were primarily comprised of project management (legal & professional) and information technology costs related to the planned July 2025 system conversion • Legal and professional expenses also im
Slide 15: Operating Expenses — Efficiency Trends
15 Operating Expenses — Efficiency Trends 52.8% 54.2% 54.3% 68.8% 67.7% 66.5% 2020 2021 2022 2023 2024 1Q 2025 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 th
Slide 16: Loans
Loans - =\RROW Financial Corporation
Slide 17: Loan Portfolio Composition
17 Loan Portfolio Composition Commercial (C&I)1 10.3% Commercial Real Estate (CRE) 17.7% Consumer 32.8% Residential Real Estate (RRE) 39.2% • No single relationship represents more than ~1.75% of total loans as of March 31, 2025 • CRE concentration ratio of ~135% of risk-based capital • CRE loans no
Slide 18: Loan Balances
18 Loan Balances $316 $350 $357 $359 $353 $442 $497 $544 $596 $606 $921 $1,065 $1,112 $1,119 $1,119 $946 $1,071 $1,194 $1,318 $1,336 2021 2022 2023 2024 1Q 2025 Residential Real Estate (RRE) Consumer Commercial Real Estate (CRE) Commercial (C&I) $2,624 $2,983 $3,207 $3,392 $3,414 Dollars in millions
Slide 19: Loan Exit Rate Trends
19 • Indirect loan rates continue positive trajectory – current average origination rate(s) still above exit rate • C&I and CRE rates are affected by the variability of volume and repricing • RRE rates trending higher despite increased loan sales from current originations Loan Exit Rate Trends 1 Loa
Slide 20: Loan Yields
20 Loan Yields $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 $3.41 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% 5.30% 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 Loan Balance Average Loan Portfolio Yield for t
Slide 21: Consumer Loan Portfolio
21 Consumer Loan Portfolio $921 $977 $1,031 $1,056 $1,065 $1,073 $1,088 $1,108 $1,112 $1,126 $1,139 $1,120 $1,119 $1,119 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% 6.06% 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 Period-End Loan Balance A
Slide 22: Commercial Real Estate Portfolio
22 Commercial Real Estate Portfolio $442 $441 $455 $468 $497 $507 $519 $529 $543 $555 $561 $562 $596 $606 4.90% 5.08% 5.19% 4.88% 5.07% 5.18% 5.25% 5.18% 5.15% 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 Period-End Loan Balance Average Loan Portfolio Yield for the Period Sh
Slide 23: C&I Portfolio
23 C&I Portfolio $316 $334 $346 $350 $350 $344 $352 $354 $359 $358 $360 $365 $359 $353 4.35% 4.57% 4.89% 5.38% 5.53% 5.66% 5.81% 5.88% 5.71% 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in mill
Slide 24: Residential Real Estate Loans
24 Residential Real Estate Loans $946 $967 $1,012 $1,051 $1,071 $1,081 $1,111 $1,148 $1,194 $1,218 $1,255 $1,287 $1,318 $1,336 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% 4.71% 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 Period-End Loan Bal
Slide 25: Deposits/Funding Sources
Deposits/Funding Sources - =\RROW Financial Corporation
Slide 26: Deposit Balances – Excl. Brokered CDs
26 Deposit Balances – Excl. Brokered CDs 27.0% 27.2% 28.0% 26.4% 24.3% 23.3% 22.7% 25.2% 48.7% 49.5% 49.3% 48.4% 2022 2023 2024 1Q 2025 Non-Municipal Municipal Business Dollars in billions $3.50 $3.51 $3.56 $3.67 1Q 2025 deposit balances reflect seasonal surge of municipal deposits
Slide 27: Deposit Balances – Excl. Brokered CDs
27 Deposit Balances – Excl. Brokered CDs 23.9% 21.5% 19.8% 19.0% 28.5% 22.8% 22.8% 25.2% 41.6% 41.8% 42.7% 41.8% 6.0% 13.9% 14.7% 14.0% 2022 2023 2024 1Q 2025 Deposit Balances Time Deposits Savings Deposits Interest-Bearing Checking Noninterest-Bearing Dollars in billions $3.50 $3.51 $3.56 $3.67 Int
Slide 28: Funding Sources and 1Q 2025 Exit Rates
28 Funding Sources and 1Q 2025 Exit Rates • In mid-February, executed a new $125M brokered CD tied to a 2-year swap with an all-in cost of ~3.3% • Retail CD pricing (6, 14 and 23-month offerings) lower than the average maturing CD specials • Approximately $150M of CDs maturing/repricing by end of 2Q
Slide 29: Core Deposit Analysis
29 Core Deposit Analysis 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 $514 3.44% $524 3.60% -
Slide 30: Credit Quality
Credit Quality - =\RROW Financial Corporation
Slide 31: Credit Quality
31 Credit Quality 0.66% 0.64% 0.66% 0.62% 0.56% 1Q24 2Q24 3Q24 4Q24 1Q25 Non-Performing Loans (NPL) / Gross Loans Dollars in millions Specific reserve of $3.75 recorded in 1Q25 related to $15M commercial loan participation New appraisal resulted in significantly reduced valuation (-42% compared
Slide 32: Delinquent Loan Trends
32 Delinquent Loan Trends 0.43% 0.45% 0.51% 0.68% 0.57% 0.58% 0.62% 0.76% 0.56% 0.61% 0.60% 0.60% 0.53% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 Delinquent Loans to Total Loans – Excl. $15M CRE Loan Participation Delinquency trends remain benign
Slide 33: Allowance for Credit Losses
33 Allowance for Credit Losses $33,598 ($846) $846 $282 $141 $3,750 $37,771 4Q 2024 Net Charge-Offs Net Charge-Offs Loan Growth Result of Model Calculation (e.g. Mix/Aging) Specific Reserve 1Q 2025 YTD 2025 Allowance for Credit Loss Walk Provision for Credit Losses $5.0M
Slide 34: Investments
Investments - =\RROW Financial Corporation
Slide 35: Investment Portfolio – AFS and HTM
35 • During 1Q25 book yield increased 5bps to 2.96% while duration decreased from 3.16 to 3.08 years • AFS additions of ~$34.6MM in April at avg. yield of ~4.90% • $70M of investment run-off expected in 2Q25 Investment Portfolio – AFS and HTM 1 1 Unrealized Gain/(Loss) on HTM for informational purpo
Slide 36: Capital Actions and Strategy
Capital Actions and Strategy
Slide 37: Equity and Ownership; Dividends and Return of Capital
37 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 bu
Slide 38: 2025 TBV / Share Walk
38 $22.40 $0.38 ($0.28) ($0.08) $0.30 $22.72 4Q 2024 Net Income Dividends AOCI Stock Repurchases 1Q 2025 2025 TBV / Share Walk Fully Diluted Tangible Book Value (TBV)
Slide 39: Capital Position
39 Capital Position 9.61% 12.59% 13.23% 14.48% 8.56% 9.60% 12.71% 13.35% 14.47% 8.78% 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 40: Overview and History
Overview and History - =\RROW Financial Corporation
Slide 41: Financial Snapshot
41 Financial Snapshot 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 91.2% 80.2% 75.1% 85.3% 87.1% 88.7% 86.1% ROA
Slide 42: Our Profile
42 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 Insurance Offices Bank Branches 938
Slide 43: Our History
43 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
Slide 44: Our History
44 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 bra
Slide 45: President and Chief Executive Officer
45 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 46: Experienced Leadership Team
46 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 47: Experienced Leadership Team
47 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 48: Thank you!
Thank you! - =\RROW Financial Corporation