Arrow Financial in Glens Falls, New York, is entering 2025 with a new brand, an expanded board and a reconfigured investment portfolio.
The $4.4 billion-asset Arrow announced Thursday that it had consolidated its two bank subsidiaries, Glens Falls National Bank and Trust and Saratoga National Bank and Trust . Arrow styled the unified institution Arrow Bank.
The consolidation aims to align "our mission, vision and values across all areas of our business," President and CEO David DeMarco said in a press release. "While our brand evolves, our unwavering commitment to quality service, trusted relationships and community engagement remains unchanged."
Arrow's fourth-quarter results will reflect approximately $1.2 million in rebranding-related expenses: $500,000 in professional and legal fees, along with a $700,000 charge for branding materials and signage, according to the company.
Arrow initially signaled its intent to refresh its brand in July, after receiving the Office of the Comptroller of the Currency's permission to consolidate its subsidiary banks.
According to Hovde analyst Feddie Strickland, the consolidation effort probably won't yield an appreciable amount of savings for Arrow, though it should result in streamlined operations. "The elimination of duplicative charter-level duties frees up employees for other tasks, reducing the need for additional headcount longer-term," Strickland wrote in a Dec. 27 research note.
Arrow paired its rebranding with a balance sheet restructuring transaction that saw the company offload $75 million in lower-yielding securities, then reinvest the proceeds in higher-yielding investments. Arrow, which disclosed the move Dec. 26, said the securities it sold carried an average book yield of approximately 0.6%. Their weighted average remaining life was 1.3 years. While the newly acquired securities are longer duration — weighted average remaining life of 4.5 years — their average book yield is approximately 4.4%.
The transaction will result in a $3 million hit to fourth-quarter earnings, but the earn-back is relatively brisk at 1.3 years, the company estimated. Going forward, the deal is expected to boost Arrow's annual 2025 earnings by $2.7 million.
"We like the securities restructuring and short earnback," Strickland wrote in his Dec. 27 note.
Arrow reported net income totaling $9 million for the quarter ended Sept. 30. Thus, the cumulative securities losses and rebranding costs aren't likely to produce a fourth-quarter loss. Profit through the first nine months of 2024 totaled $25.2 million, a 13% increase from the same period in 2023.
Arrow's asset sale comes on the heels of similar restructuring moves by other financial institutions in recent weeks. The $23.8 billion-asset First Hawaiian Bancorp in Honolulu
Arrow disclosed its board expansion on Dec. 19. It added four members to what had been a nine-member board. Three of the new directors, James Dawsey, Kristine Duffy and Philip Morris, had served on the boards of Arrow's subsidiary banks. The fourth new director, Daniel White, is a certified public accountant who recently retired as office managing partner of KPMG's Albany and upstate offices.
"We're confident their leadership and insights will help guide our organization as we continue to grow, innovate and serve our community with excellence," DeMarco said in a statement to American Banker.
