Arrow Financial Corporation · NASDAQ:AROW
Arrow Financial — Q4 2024 Earnings Presentation
53 slides from Arrow Financial's earnings presentation, Jan 30, 2025
Slide 1: 4Q 2024 Investor Presentation
4Q 2024 Investor Presentation January 30, 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 • 4Q & YTD 2024 Results and Performance Metrics • Non-Interest Income/Expense • Loans • Deposits/Funding Sources • Credit Quality • Capital Actions & Strategy • Investments • Overview and History 3
Slide 4: 4Q 2024 Results
4Q 2024 Results ~ =\RROW Financial Corporation
Slide 5: 4Q24 Highlights
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 losse
Slide 6: 4Q24 Non-Core Items
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
Slide 7: YTD 2024 Results
YTD 2024 Results ~ =\RROW Financial Corporation
Slide 8: Select YTD 2024 Highlights
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
Slide 9: YTD 2024 Non-Core Items
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
Slide 10: 4Q and 2024 Consolidated Financial Statements
4Q and 2024 Consolidated Financial Statements Linked Quarter and Comparative Year UNAUDITED Dollars in millions, except per share data Fav/(Unfav) Fav/(Unfav) Income Statement 4Q24 3Q24 Income Statement 2024 2023 Var1 Var1 Total Interest Income $ 50.9 $ 49.4 1.5 Total Interest Income $ 195.0 $ 162.5
Slide 11: 4Q 2024 Consolidated Financial Statements
4Q 2024 Consolidated Financial Statements Linked Quarter UNAUDITED Dollars in millions, except per share data 4Q24 vs 4Q24 vs Balance Sheet 4Q24 3Q24 4Q23 3Q241 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, ne
Slide 12: 2024 Reported Results & Key Metrics
2024 Reported Results & Key Metrics 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 B
Slide 13: Performance Trends
Performance Trends History of strong earnings and performance metrics Reported EPS Fully Diluted Tangible Book Value $21.06 $22.40 $2.92 $20.42 $19.37 $2.86 $18.32 $2.41 $2.05 $1.77 $1.77 2020 2021 2022 2023 2024 Core 2024 2020 2021 2022 2023 2024 Return on Average Equity Return on Average Assets 14
Slide 14: Net Interest Margin
Net Interest Margin NIM Expansion Accelerating 3.14% 3.08% 2.99% 3.03% 3.02% 2.97% 2.74% 2.98% 2.67% 2.90% 5.19% 2.85% 4.62% 3.98% 3.97% 4.00% 2.79% 2.69% 2.12% 1.43% 2.63% 2.62% 0.36% 0.27% 2.55%2.55% 0.10% 2020 2021 2022 2023 2024 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 NIM 1 A
Slide 15: Takeaways & Themes for 2025
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
Slide 16: Non-Interest Income/Expense
Non-Interest Income/Expense
Slide 17: 4Q24 Non-Interest Income
4Q24 Non-Interest Income Dollars in thousands Three Months Ended 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
Slide 18: YTD Non-Interest Income
YTD Non-Interest Income Dollars in thousands Year Ended 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 $
Slide 19: 4Q24 Non-Interest Expense
4Q24 Non-Interest Expense Dollars in thousands Three Months Ended 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 L
Slide 20: YTD Non-Interest Expense
YTD Non-Interest Expense Dollars in thousands Twelve Months Ended 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 A
Slide 21: Operating Expenses - Efficiency Trends
Operating Expenses - Efficiency Trends Efficiency Ratio Net Non-interest Expense / Average Assets 68.8% 67.7% 52.8% 54.2% 54.3% 2.28% 2.27% 2.02% 2.00% 2.01% 2020 2021 2022 2023 2024 • 2023 impacted by margin compression and elevated expenses (audit, professional, legal) due to the 2022 10-K Filing
Slide 22: Loans
Loans ~ =\rRow Financial Corporation
Slide 23: Loan Portfolio Composition
Loan Portfolio Composition Total Loan Portfolio ~ $3.4 billion Commercial (C&I)1 10.6% • No single relationship represents more than ~1.75% of Residential Commercial total loans as of December 31, 2024 Real Estate Real Estate (RRE) (CRE) 38.8% 17.6% • CRE concentration ratio of ~137% of risk-based c
Slide 24: 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 $3,207 $2,983 $2,624 $1,318 $1,194 $1,071 $946 $1,112 $1,119 $1,065 $921 $497 $544 $596 $442 $316 $350 $357 $359 2021 2022 2023 2
Slide 25: Loan Yields Steadily Increasing
Loan Yields Steadily Increasing Dollars in billions Loan Portfolio Yields1 experiencing meaningful increase during 2024, continuing trend from 2023 4.86% 5.02% 5.17% 5.27% 5.30% Rate by Vintage 4.70% $3.39 4.57% 4.32% $3.32 $3.33 4.04% 4.08% 4.09% 4.13% $3.26 3.90% 3.82% 3.90% 3.85% $3.21 $3.14 $3.0
Slide 26: Consumer Loan Portfolio
Consumer Loan Portfolio Dollars in millions • 99.6% of the portfolio are collateralized auto 6.08% 5.61% 5.79% loans; only $4 million in unsecured personal 5.11% 5.36% loans 4.83% 4.61% 3.94% 3.92% 3.93% 3.87% 3.84% 3.83% 4.10% 4.02% 4.26% • Auto loans sourced through a network of $1,108 $1,112 $1,1
Slide 27: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio Dollars in millions 5.25%5.18% • CRE excludes owner-occupied real estate loans 5.08%5.19% 5.07%5.18% 4.90% 4.88% $596 • CRE loans extended to businesses / borrowers primarily located in our regional market area $555 $561 $562 $543 $529 $507 $519 • No CRE exposure to
Slide 28: Commercial (C&I) Portfolio
Commercial (C&I) Portfolio Dollars in millions 5.81% 5.88% 5.53% 5.66% 5.38% 4.89% 4.57% • Commercial (C&I) includes owner-occupied 4.35% real estate loans $365 $359 $358 $360 $359 $352 $354 $346 $350 $350 $344 $334 • C&I loans extended to businesses/ $312 $312 $316 borrowers primarily located in ou
Slide 29: Residential Real Estate Loans
Residential Real Estate Loans Dollars in millions • RRE loan balances exclude FV hedge mark 4.67% 4.77% 4.66% • 4Q24 yields include ~3bps related to FV balance 4.52% 4.57% 4.10% 4.17% 4.25% sheet hedge, down from ~19bps in 3Q24 $1,318 3.79% 3.77% 3.76% 3.73% 3.71% 3.70% 3.78% 3.80% $1,287 $1,255 • O
Slide 30: Deposits/Funding Sources
“a _Deposits/Funding Sources ~ =\RROW Financial Corporation
Slide 31: Deposit Balances – Excl. Brokered CDs
Deposit Balances – Excl. Brokered CDs Dollars in billions Non-Municipal Municipal Business $3.50 $3.51 $3.56 48.7% 49.5% 49.3% 24.3% 23.3% 22.7% 27.0% 27.2% 28.0% 2022 2023 2024 • Increase from prior year primarily related to branch acquisition and success in growing business relationships • Municip
Slide 32: 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 6.0% 13.9% 14.7% 41.6% 41.8% 42.7% 28.5% 22.8% 22.8% 23.9% 21.5% 19.8% 2022 2023 2024 • Shifting deposit mix contributing to eleva
Slide 33: Funding Sources and 4Q24 Exit Rates
Funding Sources and 4Q24 Exit Rates Dollars in millions Consumer Business Municipal Total 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 Mo
Slide 34: Core Deposit Rate Analysis
Core Deposit Rate Analysis 4Q 2024 3Q 2024 Variance Balance Exit Rate1 Balance Exit Rate1 Balance Exit Rate 1 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
Slide 35: Credit Quality
Credit Quality ~ =\RROW Financial Corporation
Slide 36: Credit Quality
Credit Quality Dollars in millions Non-Performing Loans (NPL) / Gross Loans 0.66% 0.66% 0.64% 0.66% 0.62% 0.40% 0.44% • One NPL relationship 0.37% • Well collateralized • No specific reserve required 0.21% 0.20% 0.18% 2022 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 $12.0 $11.2 $6.5 $6.3 $21.2 $21.4 $21
Slide 37: Allowance for Credit Losses
Allowance for Credit Losses 4Q24 Allowance for Credit Loss Walk $1,611 $33,598 $725 $31,262 $517 ($517) Provision for Credit Losses $2.9M 3Q24 Net Charge-Offs Net Charge-Offs Loan Growth Result of 4Q24 Model Calculation (e.g. Mix/Aging) 37
Slide 38: Capital Actions and Strategy
Capital Actions and Strategy
Slide 39: Equity and Ownership
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 activi
Slide 40: Fully Diluted Tangible Book Value (TBV)
Fully Diluted Tangible Book Value (TBV) 4Q24 TBV / Share Walk $0.46 $22.40 $0.27 $21.95 ($0.28) 3Q24 Net Income Dividends AOCI 2024 AOCI benefitting from cash flow hedges related to longer–term funding arrangements 40
Slide 41: Fully Diluted Tangible Book Value (TBV)
Fully Diluted Tangible Book Value (TBV) 2024 TBV / Share Walk $1.77 $0.82 $22.40 ($0.16) ($1.09) $21.06 2023 Net Income Dividends AOCI Change in Intangibles 2024 (3Q Acquisitions) and Other 41
Slide 42: Capital Position
Capital Position Capital Ratios – Arrow Tangible Common Equity 8.60% 8.78% 8.00% Total Risk-Based Capital 14.74% 14.47% 6.00% Tier 1 Risk-Based Capital 13.66% 13.35% 4.50% Common Equity Tier 1 Capital 13.00% 12.71% 4.00% Tier 1 Leverage Ratio 9.84% 9.60% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13%
Slide 43: Investments
Investments ~ =\RROW Financial Corporation
Slide 44: Investment Portfolio – AFS and HTM
Investment Portfolio – AFS and HTM Dollars in thousands December 31, 2024 Wtd Avg Current Book Unrealized Category Market Value 1 Remaining Book Yield Wtd Avg Life Duration Value Current Book Gain / (Loss) Unrealized Gain Market Value Book Yield Remaining Life Duration Value / (Loss) US Treasuries $
Slide 45: Overview and History
y “al Overview and History ~ =\RROW Financial Corporation
Slide 46: Financial Snapshot
Financial Snapshot Dollars in thousands, except per share amounts 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% 8
Slide 47: Our Profile
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 38 Bank Branches 9 Insurance Offices 47
Slide 48: 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
Slide 49: 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 bran
Slide 50: 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 51: 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 52: 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 Glens Fall
Slide 53: Thank you!
Thank you! ~ =\RROW Financial Corporation