Sign in

You're signed outSign in or to get full access.

AF

ARROW FINANCIAL CORP (AROW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $0.27 (reported) and $0.47 core, with headline results depressed by ~$4.2M pre-tax non-core items (securities portfolio repositioning loss, branding write-off, and unification costs); NIM expanded sequentially to 2.83% (2.85% FTE) and loans hit a record $3.40B. Management framed 2024 as “transformational,” positioning for increased profitability in 2025.
  • Net interest income rose to $29.7M in Q4 (vs. $28.4M in Q3), while noninterest income fell to $4.2M given the $3.0M securities loss; provision increased to $2.9M on loan growth/portfolio mix. Credit quality remained solid: quarterly net charge-offs were 0.06% (annualized).
  • Balance sheet mix evolved: deposits decreased $9.5M sequentially on municipal seasonality, while $95M of borrowings were replaced with callable brokered CDs at lower funding cost; CET1 was 12.71% and TBV/share rose to $22.40. Dividend increased 3.7% to $0.28/share (payable Feb 24, 2025).
  • Street estimates: S&P Global consensus for Q4 2024 EPS and revenue was not available at the time of analysis; no formal guidance was issued. [GetEstimates errors: Daily limit exceeded]

What Went Well and What Went Wrong

  • What Went Well

    • Net interest margin expansion continued: Q4 NIM 2.83% (2.85% FTE) vs. 2.78% (2.79% FTE) in Q3 and 2.53% (2.55% FTE) in Q4’23, driven by asset yield expansion and moderating cost of interest-bearing liabilities.
    • Record loans and solid credit metrics: loans reached $3.40B; quarterly net charge-offs 0.06% (annualized); ACL/Loans 0.99%.
    • Strategic execution: bank unification completed; CEO: “Arrow just completed a transformational year… positioning the Bank for increased profitability in 2025.” Dividend raised to $0.28, TBV/share increased to $22.40.

  • What Went Wrong

    • Non-core items weighed on GAAP results: ~$3.0M pre-tax loss on securities repositioning, $0.7M legacy branding write-off, $0.5M unification expenses; reported EPS $0.27 vs core EPS $0.47.
    • Noninterest income declined to $4.2M from $8.1M in Q3 due to the securities loss and branding charge; efficiency ratio worsened to 69.39% (from 65.59%).
    • Deposit mix pressure persists: continued migration to higher-cost products and seasonal decline in municipal deposits; non-interest-bearing deposits fell to 18.4% of total.

Financial Results

Income statement and per-share trends

MetricQ2 2024Q3 2024Q4 2024Q4 2023
Net Interest Income ($USD Millions)$27.152 $28.438 $29.687 $25.613
Total Noninterest Income ($USD Millions)$7.856 $8.133 $4.227 $7.484
Provision for Credit Losses ($USD Millions)$0.775 $0.934 $2.854 $0.525
Net Income ($USD Millions)$8.604 $8.975 $4.470 $7.723
Diluted EPS ($)$0.52 $0.53 $0.27 $0.46

Margins and profitability

MetricQ2 2024Q3 2024Q4 2024Q4 2023
Net Interest Margin (GAAP, %)2.67% 2.78% 2.83% 2.53%
Net Interest Margin (FTE, %)2.69% 2.79% 2.85% 2.55%
ROA (annualized, %)0.82% 0.84% 0.41% 0.74%
ROE (annualized, %)9.15% 9.20% 4.52% 8.42%
Efficiency Ratio (%)66.29% 65.59% 69.39% 69.81%

Balance sheet

MetricQ2 2024Q3 2024Q4 2024Q4 2023
Total Assets$4.244B $4.411B $4.306B $4.170B
Total Loans$3.316B $3.340B $3.395B $3.213B
Total Deposits$3.684B $3.837B $3.828B $3.688B
CET1 Ratio (%)12.88% 12.77% 12.71% 13.00%
Tangible Book Value/Share ($)$21.54 $21.95 $22.40 $21.06

Asset quality

MetricQ2 2024Q3 2024Q4 2024Q4 2023
ACL / Loans (%)0.94% 0.94% 0.99% 0.97%
Net Charge-offs (annualized, %)0.16% 0.08% 0.06% 0.05%
NPLs / Loans (%)0.64% 0.66% 0.62% 0.66%
NPAs / Assets (%)0.50% 0.51% 0.50% 0.51%

Loan portfolio mix (period-end)

CategoryQ2 2024Q3 2024Q4 2024Q4 2023
Commercial$163.8M $169.9M $159.0M $156.2M
Commercial Real Estate$757.5M $756.4M $796.4M $745.5M
Consumer$1.1388B $1.1202B $1.1190B $1.1117B
Residential Real Estate$1.2554B $1.2934B $1.3202B $1.1995B
Total Loans$3.316B $3.340B $3.395B $3.213B

Notes

  • Core results: Core net income $7.8M and core EPS $0.47 in Q4 (vs. reported $4.5M/$0.27), reflecting exclusion of non-core items (loss on securities repositioning, branding write-off, unification costs).
  • “Net Gross Income” and FTE NIM are non-GAAP as defined by the company; see reconciliations.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ1 2025$0.27 (prior quarterly rate) $0.28 (declared payable Feb 24, 2025) Raised
Quantitative revenue/EPS guidance2025Not providedNot providedMaintained (no formal guidance)
Qualitative outlook2025Focus on NIM expansion, expense discipline (Q2/Q3 commentary) “Positioning the Bank for increased profitability in 2025” Positive tone

Earnings Call Themes & Trends

Note: A Q4 2024 earnings call transcript was not available in the document set reviewed. Themes below are synthesized from Q2–Q4 press releases.

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
Bank unificationReceived OCC approval; targeted 12/31/24; expected efficiencies and unified brand. Preparing for unification; highlighted benefits and timing. Legal unification completed; branding rollout underway. Completed; execution moving to optimization
NIM and funding costsNIM improved to 2.69% FTE; liability costs moderating. NIM 2.79% FTE; further improvement with stabilizing funding costs. NIM 2.85% FTE; yield expansion with moderating liability costs. Sequential expansion
Deposit mix and pricingContinued migration to higher-cost products; seasonal municipal declines. Growth in deposits on seasonal municipal flows; brokered CDs used to reduce borrowings. Deposits down $9.5M q/q on municipal seasonality; replaced $95M borrowings with callable brokered CDs at lower cost. Managing mix/cost; seasonal effects persist
Loan growthLoans +$57.6M; resumed mortgage loan sales. Loans +$24.2M; broad-based growth. Loans +$59M q/q; record $3.4B. Consistent mid-single-digit growth
Credit qualityACL/Loans 0.94%; NCOs 0.16% annualized. ACL/Loans 0.94%; NCOs 0.08% annualized; NPAs 0.51%. ACL/Loans 0.99%; NCOs 0.06% annualized; NPAs 0.50%. Stable to improving NCOs
Fee incomeFee businesses up YoY; wealth and insurance growth. Noninterest income stable; higher wealth mgmt fees and insurance commissions. Noninterest income down on securities loss/branding charge; underlying fee businesses up YoY. Core trajectory positive; Q4 impacted by non-core items
Capital/returnsCET1 12.88%; TBV/share $21.54. CET1 12.77%; TBV/share $21.95. CET1 12.71%; TBV/share $22.40; dividend increased. Building TBV; strong capital

Management Commentary

  • “Arrow just completed a transformational year… We completed the unification of our two subsidiary banks under one brand… We… expanded our net interest margin and actively managed our balance sheet, positioning the Bank for increased profitability in 2025.” — David S. DeMarco, President & CEO.
  • Q3 tone (prior quarter): “We delivered a solid third quarter with strong net interest margin expansion… Stabilizing funding costs, increasing asset yields, and continued expense discipline have positioned us for increased core operating leverage…”

Q&A Highlights

  • A Q4 2024 earnings call transcript was not available in the document set; no Q&A highlights or guidance clarifications could be reviewed. [ListDocuments returned none]

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at the time of analysis (API limit error). As such, we cannot quantify beats/misses vs. estimates for EPS or “revenue.” [GetEstimates errors: Daily Request Limit Exceeded]
  • Given the absence of formal guidance and unavailable consensus, near-term estimate revisions may focus on: (a) sustained NIM expansion trajectory, (b) run-rate noninterest income excluding one-time losses, and (c) credit provisioning in light of continued loan growth.

Key Takeaways for Investors

  • Core earnings power stronger than reported GAAP: excluding ~$4.2M pre-tax non-core charges, core EPS was $0.47 vs. reported $0.27; NIM expansion and record loans underscore improving core profitability.
  • Balance-sheet actions support margins: replacement of $95M borrowings with callable brokered CDs and ongoing pricing discipline aided NII and NIM; liability-sensitive positioning is favorable if funding costs ease.
  • Credit quality remains a support: NCOs were just 6 bps (annualized) and ACL/Loans at ~1%, with NPAs ~0.50% of assets.
  • Capital and TBV are trending up; dividend raised to $0.28/share, signaling confidence while maintaining CET1 at 12.71%.
  • Watch the noninterest income reset: underlying fee businesses (wealth, insurance) grew vs. prior year, but Q4 was impacted by the securities loss and branding write-off; a cleaner run-rate should emerge in 2025.
  • Near-term catalysts: post-unification operating efficiencies, continued NIM expansion, stable credit, and dividend policy; absence of formal guidance keeps focus on quarterly trajectory and portfolio mix.

Appendix: Other Relevant Q4 2024 Period Press Releases

  • Subsidiary unification and rebranding to Arrow Bank: legal unification completed; branding roll-out in January 2025.
  • Allpoint ATM network partnership: expanded surcharge-free access at 50k+ ATMs; deposit convenience enhancement.
  • Board refresh: four new directors appointed (effective Nov 5, 2024).

Sources: Arrow Financial Corporation press releases and tables for Q2–Q4 2024 and related company materials.