EX-99.1 2 ex99-earningsq12024.htm EX-99.1

| 250 Glen Street Glens Falls, NY 12801
NASDAQ® Symbol: "AROW" Website: arrowfinancial.com Media Contact: Rachael Murray Tel: (518) 742-6505

Arrow Reports 1st Quarter Net Income of $7.7 Million, or $0.45 per Share, Declares Dividend of $0.27 per Share
GLENS FALLS, N.Y. (April 30, 2024) – Arrow Financial Corporation (NasdaqGS® – AROW) ("Arrow" or "the Company") announced financial results for the three-month period ended March 31, 2024. Net income for the first quarter of 2024 was $7.7 million and fully diluted earnings per share ("EPS") was $0.45, versus $8.6 million and EPS of $0.50, for the same period in 2023.
The Board of Directors of Arrow declared a quarterly cash dividend of $0.27 per share payable May 24, 2024 to shareholders of record as of May 13, 2024. This is Arrow's 44th consecutive quarterly cash dividend.
This Earnings Release and related commentary should be read in conjunction with the Company's April 30, 2024 Form 8-K and related First Quarter 2024 Investor Presentation, which can also be found on Arrow's website: arrowfinancial.com/documents/investor-presentations.
Arrow President and CEO David S. DeMarco:
"Arrow delivered a solid quarter with healthy loan growth and strong credit performance in a challenging interest rate and overall unsettled economic environment. I am very excited about our growth prospects in the Capital Region of New York, having recently added several experienced loan and deposit team members in the region. This comes on the heels of our recently announced branch acquisition in Whitehall, NY which we hope to finalize in the third quarter pending regulatory approval. I would also like to note that we returned approximately $6.0 million to our shareholders in the form of share repurchases in addition to our normal quarterly dividend."
First-Quarter Highlights and Key Metrics
•Gross loans grew $50.5 million 1 or 6.1% on an annualized basis.
•Deposit balances increased to $3.8 billion, growing $91.5 million, or 2.5%
•Net charge-offs to average loans were 0.04% as compared to 0.05% for the previous quarter
•Net interest margin improved to 2.60% (2.62% on a FTE 2 basis), up from 2.53% (2.55% on a FTE basis) from the prior quarter
•Loan-to-deposit ratio of approximately 86%
•Strong on-balance sheet liquidity of $450 million, or 10.4% of total assets
•Repurchased 244,387 shares for $6.0 million during the first quarter
•On March 4, Arrow announced the acquisition of a branch in Whitehall, NY with approximately $40 million in deposits; transaction expected to close in 3Q24, subject to regulatory approval
Other Highlights
•On April 27, Arrow reached an agreement in principle to settle a class action complaint (the "Ashe Lawsuit"), fully described in Arrow's 2023 Form 10-K and 2024 Proxy filing, subject to final documentation and court approval. The terms of the settlement do not have a material impact on the financial results.
1 Excludes both $1.2 million fair value hedge adjustment at March 31, 2024 and $5.8 million fair value hedge adjustment at December 31, 2023
2 Full tax equivalent
1

Income Statement
•Net Income: Net income for the first quarter of 2024 was $7.7 million, consistent with $7.7 million in the fourth quarter of 2023, while decreasing from $8.6 million in the first quarter of 2023.
◦As compared to the prior quarter, net income benefited from an increase of $0.8 million in net interest income as well as an increase in non-interest income of $0.4 million, offset by an increase in non-interest expense of $0.8 million.
◦As compared to the first quarter of 2023, net interest income decreased $1.6 million primarily on higher deposit costs. Non-interest income increased $1.2 million and non-interest expense increased $1.7 million.
•Net Interest Income: Net interest income for the first quarter of 2024 was $26.5 million, increasing 3.3% from $25.6 million for the fourth quarter of 2023 and decreasing 5.8% from $28.1 million in the comparable quarter of 2023.
◦Total interest and dividend income was $46.7 million for the first quarter of 2024, an increase from $44.3 million in the fourth quarter of 2023 and from $36.1 million for the first quarter of 2023. These increases were primarily driven by loan growth and higher loan rates. Interest expense for the first quarter of 2024 was $20.2 million, an increase from $18.7 million for the fourth quarter of 2023 and from $8.0 million for the first quarter of 2023. The increases for both comparison periods were driven primarily by higher deposit rates and changes in deposit composition.
•Net Interest Margin: Net interest margin was 2.60% for the first quarter of 2024, compared to 2.53% for the fourth quarter of 2023 and 2.96% for the first quarter of 2023. The increase in net interest margin compared to the fourth quarter in 2023 was primarily the result of the continued expansion on the yield of earning assets combined with the moderating increase in the cost of interest-bearing liabilities. As compared to the first quarter of 2023, the decline in net interest margin was primarily the result of costs of interest-bearing liabilities increasing at a faster pace than the yield on average earning assets. In addition, deposits have continued to migrate to higher costs products, such as money market savings and time deposits.

| Three Months Ended |  |  |  |
| (Dollars in Thousands) |  |  |  |
| March 31, 2024 |  | December 31, 2023 |  | March 31, 2023 |  |  |  |
Interest and Dividend Income | $ | 46,677 |  |  | $ | 44,324 |  |  | $ | 36,110 |  |  |  |  |
Interest Expense | 20,222 |  |  | 18,711 |  |  | 8,016 |  |  |  |  |
Net Interest Income | 26,455 |  |  | 25,613 |  |  | 28,094 |  |  |  |  |
Average Earning Assets(A) | 4,085,398 |  |  | 4,019,432 |  |  | 3,845,825 |  |  |  |  |
Average Interest-Bearing Liabilities | 3,108,093 |  |  | 2,985,717 |  |  | 2,782,299 |  |  |  |  |
Yield on Earning Assets(A) | 4.60 | % |  | 4.38 | % |  | 3.81 | % |  |  |  |
Cost of Interest-Bearing Liabilities | 2.62 |  |  | 2.49 |  |  | 1.17 |  |  |  |  |
Net Interest Spread | 1.98 |  |  | 1.89 |  |  | 2.64 |  |  |  |  |
Net Interest Margin | 2.60 |  |  | 2.53 |  |  | 2.96 |  |  |  |  |
Net Interest Margin - FTE | 2.62 |  |  | 2.55 |  |  | 2.98 |  |  |  |  |
(A) Includes Nonaccrual Loans. |  |  |  |  |  |  |  |  |

•Provision for Credit Losses: For the first quarter of 2024, the provision for credit losses was $0.6 million compared to $0.5 million in the fourth quarter of 2023 and $1.6 million in the first quarter of 2023. The key drivers for the provision for credit losses in the first quarter of 2024 were an increase in specific reserves and loan growth, partially offset by changes to the economic forecast factors embedded in the credit loss allowance model. The increase in specific reserves of
2

$0.7 million is tied to overdraft balances from an isolated instance of check fraud from one customer relationship.
•Non-Interest Income: Non-interest income for the three months ended March 31, 2024, was $7.9 million, compared to $7.5 million in the fourth quarter of 2023 and $6.7 million in the first quarter of 2023. The increase was primarily driven by gains on other equity investments as well as income from fiduciary activities, which includes Wealth Management services, which benefited from strong equity markets.
•Non-Interest Expense: Non-interest expense for the first quarter of 2024 was $24.0 million, an increase from $23.2 million in the fourth quarter of 2023 and an increase from $22.3 million for the first quarter of 2023. The increase from the prior year was primarily due to increased salaries and benefits related to new employees hired to support growth initiatives, increased legal and professional expenses associated with the finalization of the 2023 audit, and costs incurred to reach a settlement in the Ashe Lawsuit.
•Provision for Income Taxes: The provision for income taxes was 20.9% or $2.0 million for the first quarter of 2024, 17.7% or $1.7 million for the fourth quarter of 2023 and 21.6% or $2.4 million for the first quarter of 2023. The change in the effective tax rate from the previous quarter was primarily due to a change in pre-tax income combined with decreases in tax advantaged items.
Balance Sheet
•Total Assets: Total assets were $4.3 billion at March 31, 2024, an increase of $163.8 million, or 3.9%, as compared to December 31, 2023 and an increase of $219.0 million, or 5.3%, as compared to March 31, 2023. For the first quarter of 2024, overall balance sheet growth was attributable to growth in the loan portfolio and an increase in cash balances.
•Investments: Total investments were $620.0 million as of March 31, 2024, a decrease of $16.0 million, or 2.5%, compared to December 31, 2023 and a decrease of $125.1 million, or 16.8%, compared to March 31, 2023. The decrease from December 31, 2023 was driven primarily by paydowns and maturities. The change from March 31, 2023 was also impacted by the fourth quarter 2023 repositioning of the investment portfolio, reducing the portfolio by approximately $25 million at the time of the transaction. There were no credit quality issues related to the investment portfolio.
•Loans 3: Total loans reached $3.3 billion as of March 31, 2024. Loan growth for the first quarter of 2024 was $50.5 million, and $252.2 million compared to March 31, 2023. Loan growth was spread across all loan products. Please see the loan detail included in the Consolidated Financial Information table on page 12.
•Allowance for Credit Losses: The allowance for credit losses was $31.6 million as of March 31, 2024, which represented 0.97% of loans outstanding, as compared to $31.3 million, or 0.97%, at December 31, 2023 and $30.8 million, or 1.02%, at March 31, 2023. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.04% for the three-month period ended March 31, 2024, as compared to 0.05% for the three-month period ended December 31, 2023 and 0.10% for the three-month period ended March 31, 2023. Nonperforming assets were $21.8 million as of March 31, 2024, representing 0.50% of period-end assets, compared to 0.51% at December 31, 2023 and 0.27% at March 31, 2023. The increase from the first quarter of 2023 was primarily due to one large, well collateralized loan relationship of
3 Excludes both $1.2 million fair value hedge adjustment at March 31, 2024 and $5.8 million fair value hedge adjustment at December 31, 2023
3

approximately $15 million, which moved into non-performing status during the fourth quarter of 2023.
•Deposits: At March 31, 2024, deposit balances were $3.8 billion, an increase of $91.5 million from December 31, 2023 and $232.7 million from March 31, 2023. The increase from March 31, 2023 was partially attributable to $175 million of brokered CDs, primarily used to reduce borrowings by $160 million. Arrow simultaneously entered into three-year swaps to strategically manage its asset-liability profile and cost of funds. Please refer to page 6 for further details related to deposits.
•Capital: Total stockholders’ equity was $378.0 million at March 31, 2024, a decrease of $1.8 million, or 0.5%, from December 31, 2023 and an increase of $14.6 million, or 4.0%, from the March 31, 2023 level of $363.4 million. The net decrease in equity in the first quarter of 2024 was attributable to dividends paid ($4.6 million) and share repurchases ($6.0 million) exceeding the net income for the quarter. Arrow's regulatory capital ratios remained strong. As of March 31, 2024, Arrow's Common Equity Tier 1 Capital Ratio was 12.84% and Total Risk-Based Capital Ratio was 14.57%. The capital ratios of Arrow's subsidiary banks, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, continued to exceed the “well capitalized” regulatory standards.
Additional Commentary
•Bauer Financial Ratings: Both Glens Falls National Bank and Saratoga National Bank continued to maintain their 5-Star Exceptional Performance ratings from Bauer Financial, for the 67th and 59th quarters, respectively.
About Arrow
Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. Arrow is the parent of Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company. Other subsidiaries include Upstate Agency, LLC and North Country Investment Advisers, Inc.
Non-GAAP Financial Measures Reconciliation
In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). Some measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission ("SEC") and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules. These non-GAAP financial measures include: tangible equity, return on tangible equity, tax-equivalent adjustment and related net interest income, tax-equivalent, the efficiency ratio and net interest margin. Management believes that the non-GAAP financial measures disclosed by Arrow are useful in evaluating Arrow's performance and that such information should be considered as supplemental in nature and not as a substitute for, or superior to, the related financial information prepared in accordance with GAAP. Non-GAAP financial measures may differ from similar measures presented by other companies. See the reconciliation of GAAP to non-GAAP measures in the section "Selected Quarterly Information."
Safe Harbor Statement
The information in this document may contain statements based on management’s beliefs, assumptions, expectations, estimates and projections about the future. Such "forward-looking statements," as defined in Section 21E of the Securities Exchange Act of 1934, as amended, involve a degree of uncertainty and
4

attendant risk. Actual outcomes and results may differ, explicitly or by implication. We are not obligated to revise or update these statements to reflect unanticipated events. This document should be read in conjunction with Arrow's 2023 Form 10-K and other filings with the SEC.
5

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)

|  | Three Months Ended: |  |
|  | March 31, 2024 |  | December 31, 2023 |  | March 31, 2023 |  |  |  |
INTEREST AND DIVIDEND INCOME |  |  |  |  |  |  |  |  |  |
Interest and Fees on Loans |  | $ | 40,376 |  |  | $ | 38,813 |  |  | $ | 31,886 |  |  |  |  |
Interest on Deposits at Banks |  | 2,447 |  |  | 1,873 |  |  | 479 |  |  |  |  |
Interest and Dividends on Investment Securities: |  |  |  |  |  |  |  |  |  |
Fully Taxable |  | 3,186 |  |  | 2,941 |  |  | 2,948 |  |  |  |  |
Exempt from Federal Taxes |  | 668 |  |  | 697 |  |  | 797 |  |  |  |  |
Total Interest and Dividend Income |  | 46,677 |  |  | 44,324 |  |  | 36,110 |  |  |  |  |
INTEREST EXPENSE |  |  |  |  |  |  |  |  |  |
Interest-Bearing Checking Accounts |  | 1,641 |  |  | 1,317 |  |  | 370 |  |  |  |  |
Savings Deposits |  | 10,230 |  |  | 10,513 |  |  | 5,587 |  |  |  |  |
Time Deposits over $250,000 |  | 1,973 |  |  | 1,807 |  |  | 574 |  |  |  |  |
Other Time Deposits |  | 5,083 |  |  | 3,406 |  |  | 474 |  |  |  |  |
Borrowings |  | 1,076 |  |  | 1,447 |  |  | 793 |  |  |  |  |
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts |  | 171 |  |  | 173 |  |  | 169 |  |  |  |  |
Interest on Financing Leases |  | 48 |  |  | 48 |  |  | 49 |  |  |  |  |
Total Interest Expense |  | 20,222 |  |  | 18,711 |  |  | 8,016 |  |  |  |  |
NET INTEREST INCOME |  | 26,455 |  |  | 25,613 |  |  | 28,094 |  |  |  |  |
Provision for Credit Losses |  | 617 |  |  | 525 |  |  | 1,554 |  |  |  |  |
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |  | 25,838 |  |  | 25,088 |  |  | 26,540 |  |  |  |  |
NON-INTEREST INCOME |  |  |  |  |  |  |  |  |  |
Income From Fiduciary Activities |  | 2,457 |  |  | 2,363 |  |  | 2,275 |  |  |  |  |
Fees for Other Services to Customers |  | 2,543 |  |  | 2,725 |  |  | 2,595 |  |  |  |  |
Insurance Commissions |  | 1,682 |  |  | 1,723 |  |  | 1,520 |  |  |  |  |
Net Gain (Loss) on Securities |  | 17 |  |  | 122 |  |  | (104) |  |  |  |  |
Net Gain on Sales of Loans |  | 4 |  |  | 7 |  |  | 4 |  |  |  |  |
Other Operating Income |  | 1,155 |  |  | 544 |  |  | 387 |  |  |  |  |
Total Non-Interest Income |  | 7,858 |  |  | 7,484 |  |  | 6,677 |  |  |  |  |
NON-INTEREST EXPENSE |  |  |  |  |  |  |  |  |  |
Salaries and Employee Benefits |  | 12,893 |  |  | 11,693 |  |  | 11,947 |  |  |  |  |
Occupancy Expenses, Net |  | 1,771 |  |  | 1,826 |  |  | 1,628 |  |  |  |  |
Technology and Equipment Expense |  | 4,820 |  |  | 4,458 |  |  | 4,417 |  |  |  |  |
FDIC Assessments |  | 715 |  |  | 572 |  |  | 479 |  |  |  |  |
Other Operating Expense |  | 3,813 |  |  | 4,641 |  |  | 3,825 |  |  |  |  |
Total Non-Interest Expense |  | 24,012 |  |  | 23,190 |  |  | 22,296 |  |  |  |  |
INCOME BEFORE PROVISION FOR INCOME TAXES |  | 9,684 |  |  | 9,382 |  |  | 10,921 |  |  |  |  |
Provision for Income Taxes |  | 2,024 |  |  | 1,659 |  |  | 2,359 |  |  |  |  |
NET INCOME |  | $ | 7,660 |  |  | $ | 7,723 |  |  | $ | 8,562 |  |  |  |  |
Average Shares Outstanding 1: |  |  |  |  |  |  |  |  |  |
Basic |  | 16,865 |  |  | 17,002 |  |  | 17,048 |  |  |  |  |
Diluted |  | 16,867 |  |  | 17,004 |  |  | 17,060 |  |  |  |  |
Per Common Share: |  |  |  |  |  |  |  |  |  |
Basic Earnings |  | $ | 0.45 |  |  | $ | 0.46 |  |  | $ | 0.50 |  |  |  |  |
Diluted Earnings |  | 0.45 |  |  | 0.46 |  |  | 0.50 |  |  |  |  |
1 March 31, 2023 Share and Per Share Amounts have been restated for the September 26, 2023, 3% stock dividend.

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ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)

| March 31, 2024 |  | December 31, 2023 |  | March 31, 2023
ASSETS |  |  |  |  |
Cash and Due From Banks | $ | 27,356 |  |  | $ | 36,755 |  |  | $ | 25,107 |
Interest-Bearing Deposits at Banks | 255,109 |  |  | 105,781 |  |  | 178,365 |
Investment Securities: |  |  |  |  |
Available-for-Sale at Fair Value | 485,833 |  |  | 497,769 |  |  | 565,693 |
Held-to-Maturity (Fair Value of $124,861 at March 31, 2024; $128,837 at December 31, 2023; and $164,439 at March 31, 2023) | 128,051 |  |  | 131,395 |  |  | 167,347 |
Equity Securities | 1,942 |  |  | 1,925 |  |  | 2,070 |
Other Investments | 4,208 |  |  | 5,049 |  |  | 10,027 |
Loans | 3,258,758 |  |  | 3,212,908 |  |  | 3,005,352 |
Allowance for Credit Losses | (31,561) |  |  | (31,265) |  |  | (30,784) |
Net Loans | 3,227,197 |  |  | 3,181,643 |  |  | 2,974,568 |
Premises and Equipment, Net | 59,494 |  |  | 59,642 |  |  | 58,233 |
Goodwill | 21,873 |  |  | 21,873 |  |  | 21,873 |
Other Intangible Assets, Net | 1,018 |  |  | 1,110 |  |  | 1,400 |
Other Assets | 121,542 |  |  | 126,926 |  |  | 109,947 |
Total Assets | $ | 4,333,623 |  |  | $ | 4,169,868 |  |  | $ | 4,114,630 |
LIABILITIES |  |  |  |  |
Noninterest-Bearing Deposits | 696,519 |  |  | 758,425 |  |  | 788,690 |
Interest-Bearing Checking Accounts | 908,453 |  |  | 799,785 |  |  | 958,490 |
Savings Deposits | 1,497,466 |  |  | 1,466,280 |  |  | 1,497,326 |
Time Deposits over $250,000 | 173,976 |  |  | 179,301 |  |  | 122,827 |
Other Time Deposits | 502,607 |  |  | 483,775 |  |  | 179,016 |
Total Deposits | 3,779,021 |  |  | 3,687,566 |  |  | 3,546,349 |
Borrowings | 106,500 |  |  | 26,500 |  |  | 142,800 |
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 20,000 |  |  | 20,000 |  |  | 20,000 |
Finance Leases | 5,053 |  |  | 5,066 |  |  | 5,106 |
Other Liabilities | 45,063 |  |  | 50,964 |  |  | 37,004 |
Total Liabilities | 3,955,637 |  |  | 3,790,096 |  |  | 3,751,259 |
STOCKHOLDERS’ EQUITY |  |  |  |  |
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at March 31, 2024, December 31, 2023 and March 31, 2023 | — |  |  | — |  |  | — |
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (22,066,559 Shares Issued at March 31, 2024 and 21,423,992 Shares Issued at December 31, 2023 and March 31, 2023) | 22,067 |  |  | 22,067 |  |  | 21,424 |
Additional Paid-in Capital | 412,823 |  |  | 412,551 |  |  | 400,944 |
Retained Earnings | 68,887 |  |  | 65,792 |  |  | 69,499 |
Accumulated Other Comprehensive Loss | (32,714) |  |  | (33,416) |  |  | (43,983) |
Treasury Stock, at Cost (5,356,335 Shares at March 31, 2024; 5,124,073 Shares at December 31, 2023 and 4,870,935 Shares at March 31, 2023) | (93,077) |  |  | (87,222) |  |  | (84,513) |
Total Stockholders’ Equity | 377,986 |  |  | 379,772 |  |  | 363,371 |
Total Liabilities and Stockholders’ Equity | $ | 4,333,623 |  |  | $ | 4,169,868 |  |  | $ | 4,114,630 |

7

Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)

Quarter Ended | 3/31/2024 |  | 12/31/2023 |  | 9/30/2023 |  | 6/30/2023 |  | 3/31/2023
Net Income | $ | 7,660 |  |  | $ | 7,723 |  |  | $ | 7,743 |  |  | $ | 6,047 |  |  | $ | 8,562 |
Transactions in Net Income (Net of Tax): |  |  |  |  |  |  |  |  |
Net Changes in Fair Value of Equity Investments | 13 |  |  | 90 |  |  | 52 |  |  | (133) |  |  | (76) |
Share and Per Share Data:1 |  |  |  |  |  |  |  |  |
Period End Shares Outstanding | 16,710 |  |  | 16,942 |  |  | 17,049 |  |  | 17,050 |  |  | 17,050 |
Basic Average Shares Outstanding | 16,865 |  |  | 17,002 |  |  | 17,050 |  |  | 17,050 |  |  | 17,048 |
Diluted Average Shares Outstanding | 16,867 |  |  | 17,004 |  |  | 17,050 |  |  | 17,050 |  |  | 17,060 |
Basic Earnings Per Share | $ | 0.45 |  |  | $ | 0.46 |  |  | $ | 0.46 |  |  | $ | 0.35 |  |  | $ | 0.50 |
Diluted Earnings Per Share | 0.45 |  |  | 0.46 |  |  | 0.46 |  |  | 0.35 |  |  | 0.50 |
Cash Dividend Per Share | 0.270 |  |  | 0.270 |  |  | 0.262 |  |  | 0.262 |  |  | 0.262 |
Selected Quarterly Average Balances: |  |  |  |  |  |  |  |  |
Interest-Bearing Deposits at Banks | $ | 178,452 |  |  | $ | 136,026 |  |  | $ | 131,814 |  |  | $ | 130,057 |  |  | $ | 40,436 |
Investment Securities | 671,105 |  |  | 713,144 |  |  | 745,693 |  |  | 787,175 |  |  | 813,461 |
Loans | 3,235,841 |  |  | 3,170,262 |  |  | 3,096,240 |  |  | 3,036,410 |  |  | 2,991,928 |
Deposits | 3,693,325 |  |  | 3,593,949 |  |  | 3,491,028 |  |  | 3,460,711 |  |  | 3,480,279 |
Other Borrowed Funds | 122,033 |  |  | 149,507 |  |  | 208,527 |  |  | 220,616 |  |  | 100,596 |
Stockholders' Equity | 379,446 |  |  | 363,753 |  |  | 362,701 |  |  | 365,070 |  |  | 359,556 |
Total Assets | 4,245,484 |  |  | 4,159,313 |  |  | 4,109,995 |  |  | 4,087,653 |  |  | 3,978,851 |
Return on Average Assets, annualized | 0.73 | % |  | 0.74 | % |  | 0.75 | % |  | 0.59 | % |  | 0.87 | %
Return on Average Equity, annualized | 8.12 | % |  | 8.42 | % |  | 8.47 | % |  | 6.64 | % |  | 9.66 | %
Return on Average Tangible Equity, annualized 2 | 8.64 | % |  | 8.99 | % |  | 9.05 | % |  | 7.10 | % |  | 10.33 | %
Average Earning Assets | $ | 4,085,398 |  |  | $ | 4,019,432 |  |  | $ | 3,973,747 |  |  | $ | 3,953,642 |  |  | $ | 3,845,825 |
Average Paying Liabilities | 3,108,093 |  |  | 2,985,717 |  |  | 2,920,518 |  |  | 2,924,743 |  |  | 2,782,299 |
Interest Income | 46,677 |  |  | 44,324 |  |  | 42,117 |  |  | 40,013 |  |  | 36,110 |
Tax-Equivalent Adjustment 3 | 176 |  |  | 184 |  |  | 183 |  |  | 196 |  |  | 202 |
Interest Income, Tax-Equivalent 3 | 46,853 |  |  | 44,508 |  |  | 42,117 |  |  | 40,013 |  |  | 36,110 |
Interest Expense | 20,222 |  |  | 18,711 |  |  | 16,764 |  |  | 14,241 |  |  | 8,016 |
Net Interest Income | 26,455 |  |  | 25,613 |  |  | 25,353 |  |  | 25,772 |  |  | 28,094 |
Net Interest Income, Tax-Equivalent 3 | 26,631 |  |  | 25,797 |  |  | 25,536 |  |  | 25,968 |  |  | 28,296 |
Net Interest Margin, annualized | 2.60 | % |  | 2.53 | % |  | 2.53 | % |  | 2.61 | % |  | 2.96 | %
Net Interest Margin, Tax-Equivalent, annualized 3 | 2.62 | % |  | 2.55 | % |  | 2.55 | % |  | 2.63 | % |  | 2.98 | %
Efficiency Ratio Calculation: 4 |  |  |  |  |  |  |  |  |
Non-Interest Expense | $ | 24,012 |  |  | $ | 23,190 |  |  | $ | 23,479 |  |  | $ | 24,083 |  |  | $ | 22,296 |
Less: Intangible Asset Amortization | 41 |  |  | 43 |  |  | 43 |  |  | 44 |  |  | 45 |
Net Non-Interest Expense | $ | 23,971 |  |  | $ | 23,147 |  |  | $ | 23,436 |  |  | $ | 24,039 |  |  | $ | 22,251 |
Net Interest Income, Tax-Equivalent | $ | 26,631 |  |  | $ | 25,797 |  |  | $ | 25,536 |  |  | $ | 25,968 |  |  | $ | 28,296 |
Non-Interest Income | 7,858 |  |  | 7,484 |  |  | 8,050 |  |  | 6,906 |  |  | 6,677 |
Less: Net Gain (Loss) on Securities | 17 |  |  | 122 |  |  | 71 |  |  | (181) |  |  | (104) |
Net Gross Income | $ | 34,472 |  |  | $ | 33,159 |  |  | $ | 33,515 |  |  | $ | 33,055 |  |  | $ | 35,077 |
Efficiency Ratio | 69.54 | % |  | 69.81 | % |  | 69.93 | % |  | 72.72 | % |  | 63.43 | %
Period-End Capital Information: |  |  |  |  |  |  |  |  |
Total Stockholders' Equity (i.e. Book Value) | $ | 377,986 |  |  | $ | 379,772 |  |  | $ | 360,014 |  |  | $ | 361,443 |  |  | $ | 363,371 |
Book Value per Share 1 | 22.62 |  |  | 22.42 |  |  | 21.12 |  |  | 21.20 |  |  | 21.31 |
Goodwill and Other Intangible Assets, net | 22,891 |  |  | 22,983 |  |  | 23,078 |  |  | 23,175 |  |  | 23,273 |
Tangible Book Value per Share 1,2 | 21.25 |  |  | 21.06 |  |  | 19.76 |  |  | 19.84 |  |  | 19.95 |
Capital Ratios:5 |  |  |  |  |  |  |  |  |
Tier 1 Leverage Ratio | 9.63 | % |  | 9.84 | % |  | 9.94 | % |  | 9.92 | % |  | 10.13 | %
Common Equity Tier 1 Capital Ratio | 12.84 | % |  | 13.00 | % |  | 13.17 | % |  | 13.27 | % |  | 13.34 | %
Tier 1 Risk-Based Capital Ratio | 13.50 | % |  | 13.66 | % |  | 13.84 | % |  | 13.96 | % |  | 14.03 | %
Total Risk-Based Capital Ratio | 14.57 | % |  | 14.74 | % |  | 14.94 | % |  | 15.08 | % |  | 15.15 | %
Assets Under Trust Admin. & Investment Mgmt. | $ | 1,829,266 |  |  | $ | 1,763,194 |  |  | $ | 1,627,522 |  |  | $ | 1,711,460 |  |  | $ | 1,672,117 |

8

Arrow Financial Corporation
Selected Quarterly Information - Continued
(Dollars In Thousands, Except Per Share Amounts - Unaudited)

Footnotes: |  |  |  |  |  |  |  |
1. | Share and per share data have been restated for the September 26, 2023, 3% stock dividend.
2. | Non-GAAP Financial Measure Reconciliation: Tangible Book Value, Tangible Equity, and Return on Tangible Equity exclude goodwill and other intangible assets, net from total equity. These are non-GAAP financial measures which Arrow believes provide investors with information that is useful in understanding its financial performance.
|  | 3/31/2024 |  | 12/31/2023 |  | 9/30/2023 |  | 6/30/2023 |  | 3/31/2023
| Total Stockholders' Equity (GAAP) | $ | 377,986 |  |  | $ | 379,772 |  |  | $ | 360,014 |  |  | $ | 361,443 |  |  | $ | 363,371 |
| Less: Goodwill and Other Intangible assets, net | 22,891 |  |  | 22,983 |  |  | 23,078 |  |  | 23,175 |  |  | 23,273 |
| Tangible Equity (Non-GAAP) | $ | 355,095 |  |  | $ | 356,789 |  |  | $ | 336,936 |  |  | $ | 338,268 |  |  | $ | 340,098 |
| Period End Shares Outstanding | 16,710 |  |  | 16,942 |  |  | 17,049 |  |  | 17,050 |  |  | 17,050 |
| Tangible Book Value per Share (Non-GAAP) | $ | 21.25 |  |  | $ | 21.06 |  |  | $ | 19.76 |  |  | $ | 19.84 |  |  | $ | 19.95 |
| Net Income | 7,660 |  |  | 7,723 |  |  | 7,743 |  |  | 6,047 |  |  | 8,562 |
| Return on Tangible Equity (Net Income/Tangible Equity - Annualized) | 8.64 | % |  | 8.99 | % |  | 9.05 | % |  | 7.10 | % |  | 10.33 | %
3. | Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which Arrow believes provides investors with information that is useful in understanding its financial performance.
|  | 3/31/2024 |  | 12/31/2023 |  | 9/30/2023 |  | 6/30/2023 |  | 3/31/2023
| Interest Income (GAAP) | $ | 46,677 |  |  | $ | 44,324 |  |  | $ | 42,117 |  |  | $ | 40,013 |  |  | $ | 36,110 |
| Add: Tax-Equivalent adjustment (Non-GAAP) | 176 |  |  | 184 |  |  | 183 |  |  | 196 |  |  | 202 |
| Interest Income - Tax Equivalent (Non-GAAP) | $ | 46,853 |  |  | $ | 44,508 |  |  | $ | 42,300 |  |  | $ | 40,209 |  |  | $ | 36,312 |
| Net Interest Income (GAAP) | $ | 26,455 |  |  | $ | 25,613 |  |  | $ | 25,353 |  |  | $ | 25,772 |  |  | $ | 28,094 |
| Add: Tax-Equivalent adjustment (Non-GAAP) | 176 |  |  | 184 |  |  | 183 |  |  | 196 |  |  | 202 |
| Net Interest Income - Tax Equivalent (Non-GAAP) | $ | 26,631 |  |  | $ | 25,797 |  |  | $ | 25,536 |  |  | $ | 25,968 |  |  | $ | 28,296 |
| Average Earning Assets | $ | 4,085,398 |  |  | $ | 4,019,432 |  |  | $ | 3,973,747 |  |  | $ | 3,953,642 |  |  | $ | 3,845,825 |
| Net Interest Margin (Non-GAAP)* | 2.62 | % |  | 2.55 | % |  | 2.55 | % |  | 2.63 | % |  | 2.98 | %
4. | Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. Arrow believes the efficiency ratio provides investors with information that is useful in understanding its financial performance. Arrow defines efficiency ratio as the ratio of non-interest expense to net gross income (which equals tax-equivalent net interest income plus non-interest income, as adjusted).
5. | For the current quarter, all of the regulatory capital ratios as well as the Total Risk-Weighted Assets are calculated in accordance with bank regulatory capital rules. The March 31, 2024 CET1 ratio listed in the tables (i.e., 12.84%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
|  | 3/31/2024 |  | 12/31/2023 |  | 9/30/2023 |  | 6/30/2023 |  | 3/31/2023
| Total Risk Weighted Assets | $ | 3,049,525 |  |  | $ | 3,032,188 |  |  | $ | 2,988,438 |  |  | $ | 2,937,837 |  |  | $ | 2,909,610 |
| Common Equity Tier 1 Capital | 391,706 |  |  | 394,166 |  |  | 393,541 |  |  | 389,966 |  |  | 388,228 |
| Common Equity Tier 1 Ratio | 12.84 | % |  | 13.00 | % |  | 13.17 | % |  | 13.27 | % |  | 13.34 | %
* Quarterly ratios have been annualized. |  |  |  |  |  |  |  |  |

9

Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)

Quarter Ended: | March 31, 2024 |  | March 31, 2023
|  |  | Interest |  | Rate |  |  |  | Interest |  | Rate
| Average |  | Income/ |  | Earned/ |  | Average |  | Income/ |  | Earned/
| Balance |  | Expense |  | Paid |  | Balance |  | Expense |  | Paid
Interest-Bearing Deposits at Banks | $ | 178,452 |  |  | $ | 2,447 |  |  | 5.52 | % |  | $ | 40,436 |  |  | $ | 479 |  |  | 4.80 | %
Investment Securities: |  |  |  |  |  |  |  |  |  |  |
Fully Taxable | 550,538 |  |  | 3,186 |  |  | 2.33 |  |  | 652,743 |  |  | 2,948 |  |  | 1.83 |
Exempt from Federal Taxes | 120,567 |  |  | 668 |  |  | 2.23 |  |  | 160,718 |  |  | 797 |  |  | 2.01 |
Loans | 3,235,841 |  |  | 40,376 |  |  | 5.02 |  |  | 2,991,928 |  |  | 31,886 |  |  | 4.32 |
Total Earning Assets | 4,085,398 |  |  | 46,677 |  |  | 4.60 |  |  | 3,845,825 |  |  | 36,110 |  |  | 3.81 |
Allowance for Credit Losses | (31,416) |  |  |  |  |  |  | (29,792) |  |  |  |  |
Cash and Due From Banks | 29,804 |  |  |  |  |  |  | 30,518 |  |  |  |  |
Other Assets | 161,698 |  |  |  |  |  |  | 132,300 |  |  |  |  |
Total Assets | $ | 4,245,484 |  |  |  |  |  |  | $ | 3,978,851 |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |
Interest-Bearing Checking Accounts | $ | 830,918 |  |  | 1,641 |  |  | 0.79 |  |  | $ | 964,735 |  |  | 370 |  |  | 0.16 |
Savings Deposits | 1,481,001 |  |  | 10,230 |  |  | 2.78 |  |  | 1,474,251 |  |  | 5,587 |  |  | 1.54 |
Time Deposits of $250,000 or More | 177,328 |  |  | 1,973 |  |  | 4.47 |  |  | 94,415 |  |  | 574 |  |  | 2.47 |
Other Time Deposits | 496,813 |  |  | 5,083 |  |  | 4.11 |  |  | 148,302 |  |  | 474 |  |  | 1.30 |
Total Interest-Bearing Deposits | 2,986,060 |  |  | 18,927 |  |  | 2.55 |  |  | 2,681,703 |  |  | 7,005 |  |  | 1.06 |
Borrowings | 96,984 |  |  | 1,076 |  |  | 4.46 |  |  | 40,138 |  |  | 490 |  |  | 4.95 |
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 20,000 |  |  | 171 |  |  | 3.44 |  |  | 55,356 |  |  | 472 |  |  | 3.46 |
Finance Leases | 5,049 |  |  | 48 |  |  | 3.82 |  |  | 5,102 |  |  | 49 |  |  | 3.89 |
Total Interest-Bearing Liabilities | 3,108,093 |  |  | 20,222 |  |  | 2.62 |  |  | 2,782,299 |  |  | 8,016 |  |  | 1.17 |
Noninterest-Bearing Deposits | 707,265 |  |  |  |  |  |  | 798,576 |  |  |  |  |
Other Liabilities | 50,680 |  |  |  |  |  |  | 38,420 |  |  |  |  |
Total Liabilities | 3,866,038 |  |  |  |  |  |  | 3,619,295 |  |  |  |  |
Stockholders’ Equity | 379,446 |  |  |  |  |  |  | 359,556 |  |  |  |  |
Total Liabilities and Stockholders’ Equity | $ | 4,245,484 |  |  |  |  |  |  | $ | 3,978,851 |  |  |  |  |
Net Interest Income |  |  | $ | 26,455 |  |  |  |  |  |  | $ | 28,094 |  |  |
Net Interest Spread |  |  |  |  | 1.98 | % |  |  |  |  |  | 2.64 | %
Net Interest Margin |  |  |  |  | 2.60 | % |  |  |  |  |  | 2.96 | %

10

Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)

Quarter Ended: | March 31, 2024 |  | December 31, 2023
|  |  | Interest |  | Rate |  |  |  | Interest |  | Rate
| Average |  | Income/ |  | Earned/ |  | Average |  | Income/ |  | Earned/
| Balance |  | Expense |  | Paid |  | Balance |  | Expense |  | Paid
Interest-Bearing Deposits at Banks | $ | 178,452 |  |  | $ | 2,447 |  |  | 5.52 | % |  | $ | 136,026 |  |  | $ | 1,873 |  |  | 5.46 | %
Investment Securities: |  |  |  |  |  |  |  |  |  |  |
Fully Taxable | 550,538 |  |  | 3,186 |  |  | 2.33 |  |  | 586,227 |  |  | 2,941 |  |  | 1.99 |
Exempt from Federal Taxes | 120,567 |  |  | 668 |  |  | 2.23 |  |  | 126,917 |  |  | 697 |  |  | 2.18 |
Loans | 3,235,841 |  |  | 40,376 |  |  | 5.02 |  |  | 3,170,262 |  |  | 38,813 |  |  | 4.86 |
Total Earning Assets | 4,085,398 |  |  | 46,677 |  |  | 4.60 |  |  | 4,019,432 |  |  | 44,324 |  |  | 4.38 |
Allowance for Credit Losses | (31,416) |  |  |  |  |  |  | (31,417) |  |  |  |  |
Cash and Due From Banks | 29,804 |  |  |  |  |  |  | 30,402 |  |  |  |  |
Other Assets | 161,698 |  |  |  |  |  |  | 140,896 |  |  |  |  |
Total Assets | $ | 4,245,484 |  |  |  |  |  |  | $ | 4,159,313 |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |
Interest-Bearing Checking Accounts | $ | 830,918 |  |  | 1,641 |  |  | 0.79 |  |  | $ | 801,923 |  |  | 1,317 |  |  | 0.65 |
Savings Deposits | 1,481,001 |  |  | 10,230 |  |  | 2.78 |  |  | 1,509,946 |  |  | 10,513 |  |  | 2.76 |
Time Deposits of $250,000 or More | 177,328 |  |  | 1,973 |  |  | 4.47 |  |  | 169,854 |  |  | 1,807 |  |  | 4.22 |
Other Time Deposits | 496,813 |  |  | 5,083 |  |  | 4.11 |  |  | 354,487 |  |  | 3,406 |  |  | 3.81 |
Total Interest-Bearing Deposits | 2,986,060 |  |  | 18,927 |  |  | 2.55 |  |  | 2,836,210 |  |  | 17,043 |  |  | 2.38 |
Borrowings | 96,984 |  |  | 1,076 |  |  | 4.46 |  |  | 124,445 |  |  | 1,447 |  |  | 4.61 |
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts | 20,000 |  |  | 171 |  |  | 3.44 |  |  | 20,000 |  |  | 173 |  |  | 3.43 |
Finance Leases | 5,049 |  |  | 48 |  |  | 3.82 |  |  | 5,062 |  |  | 48 |  |  | 3.76 |
Total Interest-Bearing Liabilities | 3,108,093 |  |  | 20,222 |  |  | 2.62 |  |  | 2,985,717 |  |  | 18,711 |  |  | 2.49 |
Noninterest-bearing deposits | 707,265 |  |  |  |  |  |  | 757,739 |  |  |  |  |
Other Liabilities | 50,680 |  |  |  |  |  |  | 52,104 |  |  |  |  |
Total Liabilities | 3,866,038 |  |  |  |  |  |  | 3,795,560 |  |  |  |  |
Stockholders’ Equity | 379,446 |  |  |  |  |  |  | 363,753 |  |  |  |  |
Total Liabilities and Stockholders’ Equity | $ | 4,245,484 |  |  |  |  |  |  | $ | 4,159,313 |  |  |  |  |
Net Interest Income |  |  | $ | 26,455 |  |  |  |  |  |  | $ | 25,613 |  |  |
Net Interest Spread |  |  |  |  | 1.98 | % |  |  |  |  |  | 1.89 | %
Net Interest Margin |  |  |  |  | 2.60 | % |  |  |  |  |  | 2.53 | %

11

Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)

Quarter Ended: | 3/31/2024 |  | 12/31/2023 |  | 3/31/2023
Loan Portfolio |  |  |  |  |
Commercial Loans | $ | 162,389 |  |  | $ | 156,224 |  |  | $ | 135,917 |
Commercial Real Estate Loans | 750,969 |  |  | 745,487 |  |  | 715,357 |
Subtotal Commercial Loan Portfolio | 913,358 |  |  | 901,711 |  |  | 851,274 |
Consumer Loans | 1,125,754 |  |  | 1,111,667 |  |  | 1,073,369 |
Residential Real Estate Loans | 1,219,646 |  |  | 1,199,530 |  |  | 1,080,709 |
Total Loans | $ | 3,258,758 |  |  | $ | 3,212,908 |  |  | $ | 3,005,352 |
Allowance for Credit Losses |  |  |  |  |
Allowance for Credit Losses, Beginning of Quarter | $ | 31,265 |  |  | $ | 31,112 |  |  | $ | 29,952 |
Loans Charged-off | (1,283) |  |  | (1,366) |  |  | (1,328) |
Less Recoveries of Loans Previously Charged-off | 962 |  |  | 994 |  |  | 606 |
Net Loans Charged-off | (321) |  |  | (372) |  |  | (722) |
Provision for Credit Losses | 617 |  |  | 525 |  |  | 1,554 |
Allowance for Credit Losses, End of Quarter | $ | 31,561 |  |  | $ | 31,265 |  |  | $ | 30,784 |
Nonperforming Assets |  |  |  |  |
Nonaccrual Loans | $ | 20,244 |  |  | $ | 20,645 |  |  | $ | 10,852 |
Loans Past Due 90 or More Days and Accruing | 1,147 |  |  | 452 |  |  | 241 |
Loans Restructured and in Compliance with Modified Terms | 49 |  |  | 54 |  |  | 62 |
Total Nonperforming Loans | 21,440 |  |  | 21,151 |  |  | 11,155 |
Repossessed Assets | 312 |  |  | 312 |  |  | 144 |
Other Real Estate Owned | — |  |  | — |  |  | — |
Total Nonperforming Assets | $ | 21,752 |  |  | $ | 21,463 |  |  | $ | 11,299 |
Key Asset Quality Ratios |  |  |  |  |
Net Loans Charged-off to Average Loans, Quarter-to-date Annualized | 0.04 | % |  | 0.05 | % |  | 0.10 | %
Provision for Credit Losses to Average Loans, Quarter-to-date Annualized | 0.08 | % |  | 0.07 | % |  | 0.21 | %
Allowance for Credit Losses to Period-End Loans | 0.97 | % |  | 0.97 | % |  | 1.02 | %
Allowance for Credit Losses to Period-End Nonperforming Loans | 147.21 | % |  | 147.82 | % |  | 275.97 | %
Nonperforming Loans to Period-End Loans | 0.66 | % |  | 0.66 | % |  | 0.37 | %
Nonperforming Assets to Period-End Assets | 0.50 | % |  | 0.51 | % |  | 0.27 | %

12