Arrow Financial (US:AROW)2025-05-09 14:13Financial 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].