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Arrow Financial Corporation Reports Strong Q1 Results

In a recent announcement, Arrow Financial Corporation (NasdaqGS® – AROW) has unveiled its financial performance for the first quarter ended March 31, 2025. The company achieved a remarkable net income of $6.3 million, translating to an earnings per share (EPS) of $0.38. This shows significant improvement compared to the $4.5 million net income, or $0.27 EPS, reported in the prior quarter.

Quarterly Highlights

• - Net Income: $6.3 million
• - EPS: $0.38
• - Dividend Declaration: $0.28 per share, payable on May 23, 2025, to shareholders of record as of May 13, 2025.

Despite facing challenges, including a specific reserve of $3.75 million related to a commercial real estate loan, Arrow's overall financial metrics showcase resilience amid economic volatility. The reserve was linked to Arrow’s participation in a multi-bank lending facility involving properties in upstate New York.

Arrow's President and CEO, David S. DeMarco, expressed confidence in the strategy moving forward. He noted, “We delivered another quarter of strong margin expansion along with continued loan growth, further improving core profitability during these volatile economic times.”

Key Performance Metrics

During the first quarter, Arrow Financial's net interest income reached a record $31.4 million, with a net interest margin (NIM) improving to 3.07% from 2.83% in the previous quarter. This growth can be attributed to a successful management of earning assets alongside a decrease in the cost of interest-bearing deposits to 2.41%. Additionally, deposit balances increased to $4.0 billion, resulting in a loan-to-deposit ratio of 86.1%.

Arrow also faced non-core unification costs of approximately $0.6 million, which were associated with the planned operational merger and system conversion of its banking subsidiaries slated for July 2025. This strategic move is expected to harmonize service offerings and enhance operational performance.

Income Statement Overview

The income statement showed that net interest income increased by 5.6% from the prior quarter, largely benefiting from a $1.7 million uptick in net interest income and more than $3.6 million in non-interest income. However, there was a slight counterbalance from an increase in the provision for credit losses of $2.2 million.

• - Non-Interest Income: Rose to $7.8 million, up from $4.2 million in the previous quarter due to a repositioning of the investment portfolio.
• - Non-Interest Expense: Attributed to operational costs, increased slightly to $26 million despite efforts for expense management.

Balance Sheet Strength

As of March 31, 2025, total assets grew to $4.4 billion, an increase of 3.3% from year-end 2024, supported by seasonal municipal deposits and growth in the loan portfolio, particularly in residential real estate loans.

The allowance for credit losses increased to $37.8 million, a reflection of prudent risk management practices that weigh the credit dynamics in the current economic environment.

Moving Forward

Arrow Financial Corporation continues to position itself strategically for future growth. The bank aims to enhance its corporate banking team within New York’s Capital Region, aiming to bolster its core profitability and broaden its service capabilities across markets.

Overall, Arrow's commitment to delivering quality financial services paired with its unification strategy sets the foundation for a positive outlook in the coming quarters. As the team works to finalize the bank's unification efforts, customers can expect strengthened service delivery under an aligned brand.

This strategic approach, coupled with impressive financial results, reinforces Arrow's robust standing in the financial landscape, ensuring it remains well-positioned to navigate future market cycles.