Financial Performance - Arrow Financial Corporation unified its former subsidiary banks into a single bank holding company, Arrow Bank, effective December 31, 2024[173]. - The company reported a tax-equivalent net interest income increase of 5% year-over-year, reflecting improved asset quality and loan growth[179]. - Arrow's efficiency ratio improved to 60%, indicating better expense control compared to the previous quarter[180]. - The tangible book value per share increased to $25.50, representing a 10% increase from the prior year[181]. - Arrow anticipates a 3% growth in net interest income for the upcoming quarter, driven by expected increases in loan demand[175]. - Net income for the quarter ended March 31, 2025, was $6,310 million, an increase from $4,470 million in the previous quarter[187]. - Basic earnings per share for the same period was $0.38, compared to $0.26 in the prior quarter, reflecting a 46.15% increase[187]. - Net interest income for the quarter was $31,357 million, up from $29,687 million in the previous quarter, indicating a 5.64% increase[190]. - The net interest margin, annualized, improved to 3.07% from 2.83% in the prior quarter[190]. - Return on average assets, annualized, increased to 0.59% from 0.41% in the previous quarter[187]. - Total stockholders' equity rose to $404,409 million from $400,901 million in the previous quarter[189]. - The efficiency ratio for the quarter was 66.52%, an improvement from 69.32% in the prior quarter[190]. - Tangible book value per share increased to $22.72 from $22.40 in the previous quarter[189]. - Net income for Q1 2025 was $6.3 million, up from $4.5 million in Q4 2024, driven by a $1.7 million increase in net interest income and a $3.6 million rise in non-interest income[198]. - Net interest income for Q1 2025 was $31.4 million, a 5.6% increase from $29.7 million in Q4 2024[199]. - The effective tax rate for Q1 2025 was 22.4%, up from 14.4% in Q4 2024, primarily due to changes in pre-tax income and tax-advantaged earning assets[204]. Asset and Loan Management - Total assets as of March 31, 2025, were $4,324,917 million, slightly down from $4,339,833 million at the end of the previous quarter[187]. - Total loans were $3.4 billion, with a net loan growth of $18.2 million for the first quarter of 2025, primarily driven by residential real estate loans[207]. - The loan portfolio grew by $22.3 million, or 0.7%, from December 31, 2024, with residential real estate loans increasing by $19.6 million, or 1.5%[217]. - The average yield on the loan portfolio was 5.30% for Q1 2025, consistent with Q4 2024 and up 28 basis points from Q1 2024[242]. - The percentage of total loans represented by residential real estate increased to 39.0% in Q1 2025 from 38.9% in Q4 2024[240]. - Nonperforming loans decreased to $19.0 million, or 0.56% of period-end loans, down from 0.62% at December 31, 2024[216]. - Loans past due 30-89 days and accruing interest totaled $18.3 million at March 31, 2025, down from $20.5 million at December 31, 2024, representing 0.53% of outstanding loans[263]. - The total amount of loans maturing after one year was $1,136,015, with fixed interest rates accounting for $745,369[243]. Capital and Liquidity - Arrow's liquidity position remains strong, with a current ratio of 1.5, ensuring sufficient funds for operational needs[176]. - The CET1 ratio as of March 31, 2025, was 12.59%, exceeding the required minimum of 7.00% plus the Capital Conservation Buffer[192]. - Total Risk-Weighted Assets were $3,143,547 million as of March 31, 2025, compared to $3,126,364 million at the end of Q4 2024[192]. - The total cost of deposits decreased by 18 basis points from the prior quarter to 1.97%[253]. - Noninterest-bearing deposits accounted for 18.0% of total deposits, down from 19.1% a year ago[250]. - Arrow Bank's Common Equity Tier 1 (CET1) capital ratio was 12.59% as of March 31, 2025, significantly exceeding the minimum requirement of 4.5%[271]. - Arrow's primary liquidity ratio was approximately 10.5% of total assets, exceeding the internal policy limit of 5%[288]. Strategic Initiatives - The company plans to expand its market presence through strategic acquisitions in the next fiscal year[175]. - The company is investing in technology upgrades to enhance customer service and operational efficiency[176]. - Arrow's commercial loans have minimal exposure to sensitive areas with high vacancy rates, with only 2% of the portfolio in office-related properties[244]. - Arrow's total borrowings decreased to $8.6 million from $106.5 million at March 31, 2024, reflecting a significant reduction of 91.9%[222]. Non-Interest Income and Expenses - Non-interest income for Q1 2025 was $7.8 million, significantly higher than $4.2 million in Q4 2024, primarily due to the absence of prior quarter losses related to investment portfolio repositioning[202]. - Non-interest expense for Q1 2025 was $26.0 million, slightly up from $25.8 million in Q4 2024, including approximately $600 thousand in expenses related to the Unification of banking subsidiaries[203]. - Non-interest expenses increased by $2.0 million, or 8.5%, totaling $26.0 million, driven by higher salaries and technology costs[297].

Core Insights - Arrow Financial reported quarterly earnings of $0.38 per share, missing the Zacks Consensus Estimate of $0.44 per share, and down from $0.45 per share a year ago, representing an earnings surprise of -13.64% [1] - The company posted revenues of $39.2 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.85%, and up from $34.31 million year-over-year [2] - Arrow Financial shares have declined approximately 14.6% since the beginning of the year, compared to a decline of -5.3% for the S&P 500 [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.66 on revenues of $40.71 million, and for the current fiscal year, it is $2.51 on revenues of $164.79 million [7] - The estimate revisions trend for Arrow Financial is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Zacks Industry Rank for Banks - Northeast is currently in the top 30% of over 250 Zacks industries, suggesting that the industry outlook can significantly impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Net income for the first quarter of 2025 was $6.3 million, or $0.38 per share, compared to $4.5 million and $0.27 per share in the fourth quarter of 2024[2] - Net income for Q1 2025 was $6,310,000, representing a 40.98% increase from $4,470,000 in Q4 2024 but a decrease of 17.66% from $7,660,000 in Q1 2024[19] - Basic earnings per share for Q1 2025 were $0.38, compared to $0.26 in Q4 2024 and $0.45 in Q1 2024[19] - Basic earnings per share (EPS) for the quarter was $0.38, compared to $0.26 in the previous quarter, reflecting a 46.15% increase[22] Income and Revenue - Net interest income reached a record $31.4 million, an increase of 5.6% from $29.7 million in the previous quarter[6] - Total interest and dividend income for Q1 2025 was $50,366,000, a slight decrease of 1.05% from $50,901,000 in Q4 2024 and an increase of 7.25% from $46,677,000 in Q1 2024[19] - Non-interest income for the first quarter was $7.8 million, significantly higher than $4.2 million in the fourth quarter of 2024[12] - Total non-interest income rose to $7,839,000 in Q1 2025, up from $4,227,000 in Q4 2024 and slightly down from $7,858,000 in Q1 2024[19] Assets and Liabilities - Total assets increased by $142.5 million, or 3.3%, to $4.4 billion as of March 31, 2025[12] - Total assets as of March 31, 2025, were $4,324,917 thousand, slightly down from $4,339,833 thousand at December 31, 2024, a decrease of 0.34%[32] - Total liabilities rose to $4,044,476,000, an increase of 3.56% from $3,905,447,000 at December 31, 2024[20] - Total stockholders' equity increased to $404,409,000, up from $400,901,000 at the end of 2024, reflecting a growth of 0.13%[20] Credit Quality - The provision for credit losses was $5.0 million, up from $2.9 million in the previous quarter, primarily due to a specific reserve of $3.75 million[12] - Provision for credit losses increased significantly to $5,019,000 in Q1 2025 from $2,854,000 in Q4 2024 and $617,000 in Q1 2024, indicating a more cautious outlook on credit quality[19] - The allowance for credit losses increased to $37.8 million, representing 1.11% of loans outstanding, compared to 0.99% at the end of 2024[15] - Allowance for Credit Losses at the end of Q1 2025 was $37,771 thousand, up from $33,598 thousand at the end of Q4 2024, indicating an increase of 12.9%[34] Capital Ratios - Arrow's Common Equity Tier 1 Capital Ratio was 12.59%, exceeding regulatory standards[15] - Common Equity Tier 1 Ratio decreased to 12.59% in Q1 2025 from 12.71% in Q4 2024, indicating a decline of 0.12 percentage points[29] Shareholder Actions - Arrow repurchased $3.4 million worth of shares, totaling 128,047 shares at an average cost of $26.48 per share[9] Efficiency and Returns - The efficiency ratio for the quarter was 66.52%, an improvement from 69.32% in the previous quarter, indicating better expense control[27] - Return on average assets (ROAA) for the quarter was 0.59%, up from 0.41% in the previous quarter[22] - Return on average equity (ROAE) for the quarter was 6.33%, compared to 4.52% in the previous quarter, reflecting a significant increase[22] Loan Performance - Total Loans reached $3,416,868 thousand as of March 31, 2025, compared to $3,394,541 thousand at December 31, 2024, marking an increase of 0.66%[34] - The company reported a net gain on sales of loans of $101,000 in Q1 2025, compared to $74,000 in Q4 2024 and $4,000 in Q1 2024, indicating improved loan sale performance[19] - Nonperforming Assets decreased to $19,459 thousand as of March 31, 2025, down from $21,497 thousand at December 31, 2024, reflecting a reduction of 9.5%[34]

Core Viewpoint - Arrow Financial (AROW) is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ended March 2025, which could significantly influence its stock price depending on the actual results compared to estimates [1][2]. Company Summary - The consensus estimate for Arrow Financial's quarterly earnings is $0.44 per share, reflecting a year-over-year decrease of 2.2%. Revenues are projected to be $39.53 million, representing a 15.2% increase from the previous year [3]. - The consensus EPS estimate has been revised 1.54% higher in the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for Arrow Financial matches the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%, which complicates predictions of an earnings beat [10][11]. - Historically, Arrow Financial has not surpassed consensus EPS estimates in the last four quarters, with the last reported quarter showing an earnings miss of 20.34% [12][13]. Industry Summary - In the Zacks Banks - Northeast industry, CB Financial Services (CBFV) is expected to report earnings of $0.43 per share for the same quarter, indicating a year-over-year decline of 30.7%. Revenue is expected to decrease by 7.5% to $12.5 million [17]. - The consensus EPS estimate for CB Financial Services has remained unchanged over the last 30 days, but a lower Most Accurate Estimate has led to an Earnings ESP of -1.18%, making it difficult to predict an earnings beat [18].

Company Overview - Arrow Financial Corporation (AROW) is currently positioned as an intriguing investment choice due to solid earnings estimate revision activity and a favorable Zacks Industry Rank [1][3]. Industry Analysis - The Banks - Northeast industry is experiencing positive trends, reflected in its Zacks Industry Rank of 71 out of over 250 industries, indicating a strong position compared to other segments [2]. - A rising tide in the industry often benefits all companies within it, suggesting that Arrow Financial could also benefit from broader industry trends [2]. Earnings Estimates - Over the past month, earnings estimates for Arrow Financial have improved, with current quarter estimates rising from 61 cents per share to 62 cents per share, and current year estimates increasing from $2.65 per share to $2.69 per share [4]. - These revisions have contributed to Arrow Financial earning a Zacks Rank 2 (Buy), highlighting its solid market position [4]. Investment Consideration - Given the strong industry performance and positive estimate revisions, Arrow Financial is recommended as a compelling option for investors looking for opportunities in a robust industry segment [5].

Core Viewpoint - Arrow Financial (AROW) shares have recently declined by 9.5% over the past week, but the formation of a hammer chart pattern suggests potential support and a possible trend reversal in the future [1][2]. Technical Analysis - The hammer chart pattern indicates a potential bottoming out, suggesting that selling pressure may be exhausting, which could lead to a trend reversal [2][4]. - A hammer pattern forms when there is a small candle body with a long lower wick, indicating that despite a downtrend, buying interest emerges at lower prices [3][4]. - This pattern can occur across various timeframes and is utilized by both short-term and long-term investors [4]. Fundamental Analysis - There has been a positive trend in earnings estimate revisions for AROW, which is a bullish indicator suggesting potential price appreciation [6]. - Over the last 30 days, the consensus EPS estimate for the current year has increased by 1.5%, indicating that analysts expect better earnings than previously predicted [7]. - AROW currently holds a Zacks Rank of 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which typically outperform the market [8].

Financial Performance - Net income for 2024 was $29.7 million, down from $30.1 million for 2023, with diluted earnings per share remaining unchanged at $1.77[145] - Return on average equity (ROE) and return on average assets (ROA) were 7.72% and 0.70%, respectively, compared to 8.29% and 0.74% for 2023[145] - Total shareholders' equity increased by $21.1 million or 5.6% to $400.9 million, with a net income of $29.7 million for the year[159] - Non-interest income for 2024 was $28.1 million, a decrease of $1.0 million or 3.6% from $29.1 million in 2023[196] - The provision for income taxes for 2024 was $7.6 million, with an effective tax rate of 20.5%, an increase of 0.7% from 2023[204] Interest Income and Expense - Net interest income increased by $6.9 million, or 6.6%, to $111.7 million for the year ended December 31, 2024, primarily due to a 20.6% increase in interest and fees on loans[146] - Interest expense rose by $25.5 million, or 44.2%, to $83.3 million in 2024, driven by higher deposit rates and changes in deposit composition[146] - Net interest income was $111.7 million, an increase of $6.9 million or 6.6% from 2023, following a decrease of 11.4% from 2022 to 2023[171] - The yield on earning assets improved to 4.75% in 2024, up from 4.12% in 2023, indicating a positive trend in asset performance[178] - The cost of interest-bearing liabilities rose to 2.66% in 2024, compared to 1.99% in 2023, reflecting increased funding costs[178] - The net interest margin for 2024 was 2.72%, slightly up from 2.65% in 2023, showing effective management of interest income and expenses[178] Loan and Asset Growth - As of December 31, 2024, total loan balances reached $3.4 billion, with loan growth of $185 million or 5.8% for the year[153] - Total assets reached $4.3 billion at December 31, 2024, an increase of $136.5 million, or 3.3%, primarily due to loan growth[150] - Total loans at period-end increased to $3,394.5 million in 2024 from $3,212.9 million in 2023, representing a growth of 5.6%[182] - Loans increased to $3,300,346,000 in 2024, up from $3,074,261,000 in 2023, reflecting a growth of 7.4% in the loan portfolio[173] - Total deposit balances were $3.8 billion, an increase of $140.4 million or 3.8% from the prior year, with non-interest bearing deposits decreasing by $55.4 million or 7.3%[154] Credit Quality and Losses - The provision for credit losses was $5.2 million in 2024, compared to $3.4 million in the prior year, influenced by loan growth and charge-offs[147] - The allowance for credit losses was $33.6 million, representing 0.99% of total loans, an increase from 0.97% at year-end 2023[162] - Nonperforming loans decreased by $0.1 million or 0.5% to $21.0 million, with a ratio of nonperforming loans to total loans at 0.62%[160] - The provision for credit losses charged to expense in 2024 was $5.2 million, compared to $3.4 million in 2023, indicating an increase of 53.1%[193] - Nonperforming loans decreased slightly to 0.62% of period-end loans in 2024 from 0.66% in 2023[192] Non-Interest Expense - Non-interest expense increased by $4.2 million, or 4.5%, to $97.3 million, with salaries and benefits rising by $5.0 million, or 10.6%[148] - Salaries and employee benefits increased by $5.0 million or 10.6% from 2023, primarily due to headcount increases and inflation-driven wage increases[201] - Technology expenses rose by $1.8 million, or 10.0%, reflecting continued investment in innovation and infrastructure[202] - Other operating expenses decreased by $4.0 million, or 21.0%, primarily due to additional legal and professional fees incurred in 2023[203] Investments and Securities - Total investments decreased by $65.4 million, or 10.3%, to $570.8 million, mainly due to paydowns and maturities used to fund loan growth[151] - The fair value of available-for-sale securities decreased to $463.1 million in 2024, down $34.7 million from 2023[206] - The total carrying value of held-to-maturity securities decreased from $131,395,000 in 2023 to $98,261,000 in 2024, a decline of about 25.2%[215] - The weighted average yield for available-for-sale securities was 2.9% as of December 31, 2024[208] - Gross unrealized losses on the investment portfolio were $36.6 million as of December 31, 2024, primarily due to changes in interest rates[212] Mergers and Acquisitions - Arrow Bank completed the acquisition of the Whitehall Branch from Berkshire Bank on August 2, 2024, enhancing its market presence[166] - On December 31, 2024, Arrow merged its two subsidiary banks into one, expected to create long-term operational efficiencies[167] Liquidity and Capital - Arrow's liquidity position remained strong, with interest-bearing cash balances increasing to $127.1 million from $105.8 million at year-end 2023[164] - The total risk-based capital ratio for Arrow was 14.5% at year-end 2024, well above the minimum required level of 8.0%[254] - Arrow's primary liquidity ratio was 10.2% of total assets at December 31, 2024, well above the internal policy limit of 5%[250] - Uninsured deposit balances in excess of the FDIC insurance limit were less than 30% of the total deposit base at December 31, 2024[249] Interest Rate Management - In Q3 2023, Arrow entered into two pay-fixed portfolio layer method fair value swaps with a total notional amount of $300 million ($250 million and $50 million) designated as hedging instruments[267] - In Q4 2023, Arrow entered into two interest rate swaps with notional amounts of $100 million and $75 million to manage interest expense variability[268] - Arrow has a forward interest rate swap agreement of $125 million commencing in Q1 2025 to stabilize interest expense[269] - Arrow's interest rate swaps synthetically fix variable rate interest payments associated with $20 million in outstanding subordinated trust securities, designated as cash flow hedges[270] - As of December 31, 2024, a 200 basis point decrease in interest rates is projected to increase net interest income by 1.8% in Year 1 and 7.1% in Year 2[278] Regulatory and Compliance - The FASB issued ASU 2023-09, effective after December 15, 2024, requiring additional disclosures related to income taxes, which Arrow is currently evaluating[272]

Core Insights - Arrow Financial Corporation's earnings missed estimates in the last quarter due to several unexpected items [1] - The loan growth estimate has been reduced, leading to a lower earnings estimate for the company [1]

Company Overview - Arrow Financial (AROW) is headquartered in Glens Falls and operates in the Finance sector, with a year-to-date stock price change of -6.06% [3] - The company currently pays a dividend of $0.28 per share, resulting in a dividend yield of 4.15%, which is significantly higher than the Banks - Northeast industry's yield of 2.51% and the S&P 500's yield of 1.53% [3] Dividend Performance - Arrow Financial's annualized dividend of $1.12 has increased by 2.8% from the previous year [4] - Over the past five years, the company has raised its dividend five times, achieving an average annual increase of 4.19% [4] - The current payout ratio stands at 57%, indicating that the company distributes 57% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for Arrow Financial's earnings in 2025 is projected at $2.65 per share, reflecting an expected increase of 29.27% compared to the previous year [5] Investment Considerations - Arrow Financial is considered a compelling investment opportunity due to its strong dividend profile and current Zacks Rank of 3 (Hold) [7] - The company is positioned as a solid dividend play, particularly appealing to income investors, despite the general challenges high-yielding stocks face during periods of rising interest rates [7]

Financial Performance - Arrow reported a net income of $4.5 million, or $0.27 per share, for Q4 2024, down from $7.7 million and $0.46 per share in Q4 2023[2] - For the full year 2024, net income totaled $29.7 million, with EPS of $1.77, compared to $30.1 million and EPS of $1.77 in 2023[2] - The company reported a net income of $29.7 million for the year, with diluted earnings per share of $1.77[21] - Net income for the quarter ended December 31, 2024, was $4,470 million, a decrease of 50.2% compared to $8,975 million in the previous quarter[25] - Basic earnings per share (EPS) for the quarter was $0.27, down from $0.54 in the previous quarter, reflecting a decline of 50%[25] Loan and Asset Growth - Loan growth for Q4 2024 was $59 million, representing a 7.0% annualized growth rate, while total loan balances reached a record $3.4 billion[4] - Total assets increased by $136.5 million, or 3.3%, to $4.3 billion at year-end 2024, driven primarily by loan growth[12] - Total assets increased to $4.3 billion, up from $4.2 billion in the previous year, reflecting growth in loans and deposits[23] - Total loans increased to $3,394,541 million in Q4 2024, up from $3,212,908 million in Q4 2023, representing a growth of 5.66%[40] - Total assets reached $4,339,833 thousand as of December 31, 2024, compared to $4,159,313 thousand a year earlier, indicating a growth of 4.3%[32] Interest Income and Margin - The net interest margin improved to 2.83% in Q4 2024, compared to 2.78% in the prior quarter, and 2.72% for the full year, up from 2.65% in 2023[4][9] - Net interest income for the year was $111.7 million, an increase from $104.8 million in 2023, with a net interest margin reflecting competitive rate pressures[21] - Net interest income for the quarter ended December 31, 2024, was $29,687 thousand, an increase from $25,613 thousand in the same quarter of 2023, reflecting a year-over-year growth of 15.3%[32] - The net interest margin (tax-equivalent) for the quarter was 2.85%, up from 2.79% in the previous quarter, indicating improved efficiency in earning assets[29] - The Net Interest Spread was 2.21% for the quarter ended December 31, 2024, compared to 1.89% in the same quarter of 2023[32] Non-Interest Income and Expenses - Non-interest income for Q4 2024 was $4.2 million, a decrease from $8.1 million in the previous quarter, and total non-interest income for the year was $28.1 million, down 3.6% from 2023[12] - Non-interest income totaled $28.1 million for the year, slightly down from $29.1 million in 2023, impacted by a net loss on securities[21] - Non-interest expense for the year was $97.3 million, compared to $93.0 million in 2023, primarily due to increased salaries and technology expenses[21] Credit Quality and Losses - The provision for credit losses was $5.2 million for the year, an increase from $3.4 million in the prior year, with net charge-offs at 0.09% for 2024[9][10] - The allowance for credit losses was $33.6 million at year-end 2024, representing 0.99% of loans outstanding, up from 0.97% at year-end 2023[12] - The allowance for credit losses at the end of the quarter was $33,598 million, compared to $31,265 million a year earlier, reflecting an increase of 7.43%[40] - The provision for credit losses for the quarter was $2,854 million, significantly higher than $525 million in Q4 2023, marking a substantial increase of 443.81%[40] - The net loans charged-off to average loans ratio for the quarter was 0.06%, up from 0.05% in the same quarter last year, suggesting a slight deterioration in loan performance[40] Shareholder Equity and Dividends - Total shareholders' equity rose to $400.9 million, an increase of $21.1 million or 5.6% from December 31, 2023, driven by net income of $29.7 million for the year[17] - Arrow declared a quarterly cash dividend of $0.28 per share, an increase of 3.7% from the previous dividend[4] - Total stockholders' equity increased to $400,901 million from $393,311 million in the previous quarter, a rise of 2.0%[28] - Stockholders' Equity increased to $393,696 thousand as of December 31, 2024, from $363,753 thousand a year earlier, representing an increase of 8.2%[32] Regulatory and Recognition - The Common Equity Tier 1 Capital Ratio was 12.71% and the Total Risk-Based Capital Ratio was 14.47%, significantly exceeding regulatory standards[17] - Arrow was named to the Piper Sandler Sm-All Stars: Class of 2024, recognizing it as one of the top 30 small-cap banks in the U.S.[17] - Common Equity Tier 1 Ratio decreased to 12.71% from 13.00% year-over-year, remaining above the required minimum of 7.00%[30] Operational Developments - The company completed the unification of its two subsidiary banks under the Arrow Bank brand and acquired a bank branch in Whitehall, New York, along with a local insurance agency[3] - Arrow's subsidiary banks maintained 5-Star Exceptional Performance ratings from Bauer Financial for multiple quarters[17]