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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report: April 24, 2024
(Date of earliest event reported)

ARROW FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
New York 0-12507 22-2448962
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)
250 Glen Street Glens Falls New York 12801
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 518  745-1000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of each exchange on which registered
Common Stock, Par Value $1.00 per share AROW NASDAQ Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐






Item 2.02.     Results of Operations and Financial Condition.

On April 30, 2024, Arrow Financial Corporation (the "Company") issued a press release containing unaudited financial information and accompanying discussion for the quarter and year-to-date period ended March 31, 2024.  A copy of this press release is furnished as Exhibit 99.1 to this report on Form 8-K.

Item 7.01.     Regulation FD Disclosure.

On April 30, 2024, the Company made available certain presentation material (the "First Quarter 2024 Investor Presentation"), which includes among other things, a review of financial results and trends through the period ended March 31, 2024. The furnished First Quarter 2024 Investor Presentation should be read in conjunction with our Earnings Release for the quarter ended March 31, 2024.
A copy of the presentation material is included as Exhibit 99.2 to this current report on Form 8-K and is incorporated herein by reference.

The information furnished under this Report, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that section. The information shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission made by the Company, regardless of any general incorporation language in such filing.

Item 8.01.     Other Events.
On April 24, 2024, the Board of Directors (the “Board”) of the Company declared a quarterly cash dividend of $0.27 per share payable May 24, 2024 to shareholders of record on May 13, 2024.

Additionally on April 24, 2024, the Board approved a new stock repurchase program, under which the Board authorized management, in its discretion, to repurchase from time to time, in the open market or in privately negotiated transactions, up to $5 million of Arrow common stock. This approval follows the Company’s full utilization of the prior $9.1 million stock repurchase program.

As previously disclosed in the Company’s definitive proxy statement filed on April 25, 2024, on April 22, 2024, the parties reached an agreement in principle to settle the previously disclosed a class action complaint against the Company filed on June 23, 2023 by Robert C. Ashe in the United States District Court for the Northern District of New York, subject to final documentation and court approval. Management believes that the settlement will not have a material effect on the Company’s financial results.
    

Item 9.01.    Financial Statements and Exhibits.

Exhibits:

Exhibit No. Description
Exhibit 99.1 Arrow Financial Corporation Earnings Press Release April 30, 2024
Exhibit 99.2 Arrow Financial Corporation First Quarter 2024 Investor Presentation
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
    



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




ARROW FINANCIAL CORPORATION
                       Registrant
Date: April 30, 2024 /s/ Penko Ivanov
  Penko Ivanov
Chief Financial Officer


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

afcnewsreleaselogorgba14a.jpg
 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 million1 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 FTE2 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 $0.7 million is tied to overdraft balances from an isolated instance of check fraud from one customer relationship.
2


•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.

•Loans3: 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 approximately $15 million, which moved into non-performing status during the fourth quarter of 2023.
3


•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 attendant risk.
4

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.

6


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
EX-99.2 3 q12024investorpresentati.htm EX-99.2 q12024investorpresentati
1Q 2024 Investor Presentation April 30, 2024

 
2 Safe Harbor This presentation may contain certain forward-looking statements about Arrow Financial Corporation (“Arrow” or the “Company”). Forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934, as amended, include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “would,” “should,” “could,” or “may.” Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the banking industry or securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged. We are not obligated to revise or update these statements to reflect unanticipated events. This document should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”), other filings with the SEC, and the first quarter 2024 earnings release issued April 30, 2024.

 
3 Table of Contents • 1Q 2024 Results and Performance Metrics • Funding Sources, Liquidity and Investments • Non-Interest Income • Non-Interest Expense • Loans • Credit Quality • Capital • Arrow Overview and History

 
1Q 2024 Results 4

 
5 1Q 2024 Summary 1Q24 Highlights • Net income of $7.7 million; Earnings per share (EPS) of $0.45 • Gross loans grew approximately $50.5 million or 6.1% on an annualized basis • Deposit balances increased to $3.8 billion, growing $91.5 million, or 2.5% • Net interest margin improved to 2.60% (2.62% FTE), up from 2.53% (2.55% FTE) from the prior quarter • Loan yields increased to 5.01% for 1Q24, up from 4.86% for 4Q23 • Average loan portfolio exit rate at end of 1Q24 reached 5.14% • Cost of funds increased to 2.13% for 1Q24, up from 1.98% for 4Q23 • Average cost of funds exit rate at end of 1Q24 equal to 2.17% • Strong credit quality; Net charge-offs to average loans were 0.04% as compared to 0.05% for the previous quarter • Operating expenses negatively impacted by elevated costs primarily to finalize the 2023 audit and legal fees incurred to reach a settlement in a class action complaint (“Ashe Lawsuit”) - more fully described in Arrow’s 2023 Form 10-K • Repurchased 244,387 shares for $6.0 million during the quarter • Tangible Book Value per Share increased to $21.25 • Announced acquisition of a branch with approximately $40 million in deposits – transaction expected to close in 3Q24, subject to regulatory approval Noteworthy activity post 1Q24 • Reached an agreement in principle to settle Ashe Lawsuit, subject to final documentation and court approval; the terms of the settlement are not material to the financial statements Financial information provided in this document is unaudited. Please refer to the 1Q24 Earnings Release for a reconciliation of any non-GAAP measures.

 
6 1Q 2024 Consolidated Financial Statements 1 Variances are rounded based on actual whole dollar amounts 2 Pre-tax, pre-provision net revenue per share is a non-GAAP metric and excludes provision for loan losses and income tax expense UNAUDITED Dollars in millions, except per share data Linked Quarter Income Statement 1Q24 4Q23 Fav/(Unfav) Var1 Total Interest Income $ 46.7 $ 44.3 2.4 Total Interest Expense 20.2 18.7 (1.5) Net Interest Income 26.5 25.6 0.9 Non-Interest Income 7.9 7.5 0.4 Non-Interest Expense 24.0 23.2 (0.8) Pre-Tax, Pre-Provision Net Revenue2 $ 10.3 $ 9.9 0.4 Provision for Credit Losses $ 0.6 $ 0.5 (0.1) Pre-Tax Income $ 9.7 $ 9.4 0.3 Income Tax Expense $ 2.0 $ 1.7 (0.3) Reported Net Income $ 7.7 $ 7.7 (0.0) EPS $ 0.45 $ 0.46 (0.01) Balance Sheet 1Q24 4Q23 Var1 Cash & Cash Equivalents $ 282.5 $ 142.5 140.0 Investment Securities 620.0 636.1 (16.1) Loans Receivable, net 3,227.2 3,181.6 45.6 All Other Assets 203.9 209.7 (5.7) Total Assets $ 4,333.6 $ 4,169.9 163.7 Total Deposits $ 3,779.0 $ 3,687.6 91.4 Total Borrowings 131.6 51.6 80.0 Other Liabilities 45.1 50.9 (5.8) Total Liabilities $ 3,955.6 $ 3,790.1 165.5 Equity $ 378.0 $ 379.8 (1.8) Total Liabilities & Equity $ 4,333.6 $ 4,169.9 163.7

 
7 1Q 2024 Consolidated Financial Statements 1 Variances are rounded based on actual whole dollar amounts 2 Pre-tax, pre-provision net revenue per share is a non-GAAP metric and excludes provision for loan losses and income tax expense UNAUDITED Dollars in millions, except per share data Comparative Quarter Income Statement 1Q24 1Q23 Fav/(Unfav) Var1 Total Interest Income $ 46.7 $ 36.1 10.6 Total Interest Expense 20.2 8.0 (12.2) Net Interest Income 26.5 28.1 (1.6) Non-Interest Income 7.9 6.7 1.2 Non-Interest Expense 24.0 22.3 (1.7) Pre-Tax, Pre-Provision Net Revenue2 $ 10.3 $ 12.5 (2.2) Provision for Credit Losses $ 0.6 $ 1.6 0.9 Pre-Tax Income $ 9.7 $ 10.9 (1.2) Income Tax Expense $ 2.0 $ 2.4 0.3 Reported Net Income $ 7.7 $ 8.6 (0.9) EPS $ 0.45 $ 0.50 (0.05) Balance Sheet 1Q24 1Q23 Var1 Cash & Cash Equivalents $ 282.5 $ 203.5 79.0 Investment Securities 620.0 745.1 (125.1) Loans Receivable, net 3,227.2 2,974.6 252.6 All Other Assets 203.9 191.5 12.5 Total Assets $ 4,333.6 $ 4,114.6 219.0 Total Deposits $ 3,779.0 $ 3,546.3 232.7 Total Borrowings 131.6 167.9 (36.4) Other Liabilities 45.1 37.0 8.1 Total Liabilities $ 3,955.6 $ 3,751.3 204.4 Equity $ 378.0 $ 363.4 14.6 Total Liabilities & Equity $ 4,333.6 $ 4,114.6 219.0

 
8 Net Interest Margin 2.97% 3.03% 2.65% 2.60% 3.97% 4.00% 4.62% 5.01% 0.10% 0.27% 1.43% 2.06% 2021 2022 2023 1Q24 NIM Average Loan Yield for the Period Shown Cost of Funds 1 1Yield includes the impact of deferred fees and loan origination costs amortization 1Q2024 4Q2023 Loan Origination Avg. Rate 7.53% 7.26% Loan Portfolio Rate at Quarter End 5.14% 5.01% Deposit Exit Rate at Quarter End 1.98% 1.92% 2.90% 3.02% 3.14% 3.08% 2.96% 2.61% 2.53% 2.53% 2.60% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 YTD '24 NIM Trend YTD 2024 Full Tax Equivalent NIM 2.62%

 
9 Earnings per Share $0.45 Net Interest Margin* 2.60% Profitability Net Revenue $34.3 million Return on Average Assets (ROA) 0.73% Return on Average Equity (ROE) 8.12% $3.26 billion of gross loans 86.2% loan-to-deposit ratio Balance Sheet $3.78 billion of deposits 6.49% wholesale funding ratio 0.97% Allowance for Credit Losses (ACL) 0% digital deposits $21.25 Fully Diluted Tangible Book Value per Share Capital Strong Capital Position Q1 2024 Results *FTE for 1Q24 is 2.62%; 4Q’23 is 2.55%; FY 2023 is 2.67% Arrow GFNB SNB Tier 1 Leverage Ratio 9.63% 8.76% 9.40% CET 1 Capital Ratio 12.84% 13.03% 12.37% Tier 1 Risk-Based Capital Ratio 13.50% 13.03% 12.37%

 
10 Performance Trends $2.23 $2.41 $2.92 $2.86 $1.77 $0.45 2019 2020 2021 2022 2023 1Q24 Diluted EPS $16.48 $18.32 $20.42 $19.37 $21.06 $21.25 2019 2020 2021 2022 2023 1Q24 Fully Diluted Tangible Book Value 13.17% 12.77% 14.09% 13.55% 8.29% 8.12% 2019 2020 2021 2022 2023 1Q24 Return on Average Equity 1.24% 1.17% 1.28% 1.21% 0.74% 0.73% 2019 2020 2021 2022 2023 1Q24 Return on Average Assets On track to deliver meaningful rebound in EPS and TBV growth in 2024 compared to 2023 History of strong earnings and performance metrics

 
Funding, Liquidity and Investments 11

 
12 Deposit Balances – Excl. Brokered CDs 26.5% 25.8% 27.5% 27.0% 25.5% 26.5% 26.6% 27.2% 25.2% 26.5% 24.6% 26.3% 24.3% 27.1% 25.2% 26.8% 23.3% 26.5% 47.0% 49.8% 46.2% 48.7% 47.4% 48.3% 46.7% 49.5% 48.3% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Axis Title Non-Municipal Municipal Business Dollars in billions $3.72 $3.55 $3.80 $3.50 $3.55 $3.50 $3.67 $3.51 $3.60 • Stable deposit franchise with diverse funding sources • Municipal deposits are from county and local governments, including school, water, fire, sewer districts and housing authorities • $175M in brokered CDs obtained in 4Q23, excluded from chart • Subject to three-year swap arrangement • No digital (e.g., bitcoin, etc.) deposit balances

 
13 Deposit Balances – Excl. Brokered CDs 21.8% 23.3% 24.1% 23.9% 22.3% 21.8% 21.8% 21.5% 19.3% 31.1% 29.5% 29.3% 28.5% 27.0% 24.4% 25.1% 22.8% 25.2% 42.3% 42.4% 41.7% 41.6% 42.2% 43.3% 40.8% 41.8% 41.5% 4.8% 4.8% 4.9% 6.0% 8.5% 10.5% 12.3% 13.9% 13.9% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Axis Title Deposit Balances Time Deposits Savings Deposits Interest-Bearing Checking Noninterest-Bearing Dollars in billions $3.72 $3.55 $3.80 $3.50 $3.55 $3.50 $3.67 $3.51 $3.60 • Increase in overall deposit balances • Migration from low to high-cost products a key driver for slow(er) NIM expansion • Shifting deposit mix contributing to higher interest expense

 
14 Funding Sources and 1Q2024 Exit Rates • Retail CD pricing currently at 4.75% for six months – lower than the average maturing CD specials for the next six months Dollars in millions Balance Rate Balance Rate Balance Rate Balance Rate Demand (Non-Interest Bearing) $ 294 0.00% $ 395 0.00% $ 7 0.00% $ 697 0.00% Interest Bearing Checking 312 0.06% 247 3.11% 349 0.26% 908 0.97% Savings and Money Market 694 1.06% 243 3.24% 560 4.81% 1,497 2.81% Time Deposits 440 4.18% 24 3.87% 38 2.82% 502 4.06% Total Deposits $ 1,740 1.49% $ 909 1.81% $ 955 3.03% $ 3,604 1.98% Brokered CD's - Net of Swap Effect 175 4.41% Other Borrowings 112 4.44% Junior Subordinated Obligations - TRUPS 20 3.43% Total Deposits and Borrowings $ 1,740 1.49% $ 909 1.81% $ 955 3.03% $ 3,911 2.17% Consumer Business Municipal Total

 
15 Deposit Rate Analysis Balance Exit Rate Balance Exit Rate Balance Exit Rate Demand (Non-Interest Bearing) $697 0.00% $758 0.00% -$62 0.00% Interest Bearing Checking $908 0.97% $800 1.00% $109 -0.03% Savings and Money Market $1,497 2.81% $1,466 2.73% $31 0.08% Time Deposits $502 4.06% $488 4.01% $14 0.05% Total $3,604 1.98% $3,513 1.92% $91 0.06% 1Q 2024 4Q 2023 Variance Deposit pricing discipline challenged by changes in deposit mix

 
16 Liquidity FDIC Insured Deposits ~70% Uninsured Deposits ~30% Total Deposits = $3.78 billion • ~ $2.6 billion in deposits are insured • ~ 10% on-balance sheet liquidity (cash and unencumbered AFS securities) at March 31, 2024 • ~$180 million of unencumbered securities at March 31, 2024 • Available Borrowing Capacity: Brokered Deposits $0.7 billion Borrowing Capacity1 $1.3 billion $2.0 billion • Liquidity and borrowing capacity provide in excess of 2X coverage of uninsured deposits • National Listing Services also available as additional sources of liquidity • Securities, Mortgage and Auto Loan Portfolios provide steady source of cash flow 1 FHLB, FRB and other bank lines Ample coverage of uninsured deposits Uninsured deposit accounts consist of municipal, business and high net worth individuals – many of which have a broad and deep banking relationship with Arrow

 
17 Duration Wtd Avg Remaining LifeCurrent Book Value Market ValueCategoy Unrealized Gain / (Loss) Book Yield • Increase of $4.6M in unrealized losses from December 31, 2023 (impact of higher interest rates) • Book yield increased from 2.33% to 2.35% and duration decreased from 2.68 to 2.58 in the 1Q2024 • Approximately $60M of principal reduction expected by the end of the 2Q2024 Investment Portfolio – AFS and HTM 1 1 Unrealized Gain/(Loss) on HTM for informational purposes only – not reflected in OCI Dollars in thousands March 31, 2024 (38)$ 5.07% 0.91 0.86 (7,251) Agency CMO Municipal - Local Other Total AFS US Treasuries 7.12% 8.35% 2.26% 0 (65) (44,495)$ Market Value 152,749 104,816 14,926 2,994 2,830 14,926 280 935 485,833$ 5,083$ 74,190$ 74,152$ Category 2.58 7,217 6,797 (420) 3.93% 287,641 250,920 (36,721) 1.62% Unrealized Gain / (Loss)1 Book Yield 2.00% Current Book Value 160,000 Total Investments US Agencies 280 1,000 530,328$ 5,315$ Agency MBS (47,685)$ 2.41% 2.61% 124,861$ Agency MBS Agency CMO Municipal Municipal - Local Total HTM 102,022 128,051$ (232)$ (164) Duration 1.67 4.02 3.95 2.94 Wtd Avg Rema ning Life 1.74 4.74 4.66 1.42 0.66 1.35 3.06 5.58 3.31 1.80 2.15 1.48 0.66 1.41 3.06 4.15 2.88 1.67 1.95 658,379$ 610,694$ 2.40% 5.13% 2.72% 2.35% (2,794) 0 (3,190)$

 
Non-Interest Income 18

 
19 1Q24 Non-Interest Income • 1Q2024 fees consistent with prior year comparable quarter • Wealth Management benefited primarily from higher AUM due to strong market performance • Other operating income included approximately $500K in gains on non-marketable securities Dollars in thousands March 31, 2024 December 31, 2023 March 31, 2023 Fees for Other Services to Customers $ 2,543 $ 2,725 $ 2,595 Fiduciary Activities/Wealth Management 2,457 2,363 2,275 Insurance Commissions 1,682 1,723 1,520 Other Operating Income 1,176 673 287 Total Noninterest Income $ 7,858 $ 7,484 $ 6,677 Three Months Ended

 
Non-Interest Expense 20

 
21 1Q24 Non-Interest Expense • Increase in compensation and benefits related to building out organization for growth • Technology expenses increased to enhance performance and customer experience • Legal and professional expenses increased as a result of the finalization of the financial audit and settlement of the Ashe Lawsuit Dollars in thousands March 31, 2024 December 31, 2023 March 31, 2023 Salaries and Employee Benefits $ 12,893 $ 11,693 $ 11,947 Occupancy Expenses 1,771 1,826 1,628 Technology and Equipment 4,820 4,458 4,417 Advertising & Contributions 205 274 351 Legal & Professional 2,210 1,776 1,740 FDIC Assessment 715 572 479 Fraud Expenses 50 664 29 All Other Expenses 1,348 1,927 1,705 Total Noninterest Expense $ 24,012 $ 23,190 $ 22,296 Three Months Ended

 
22 Operating Expenses - Efficiency Trends 57.1% 52.8% 54.2% 54.3% 68.8% 2.22% 2.02% 2.00% 2.01% 2.28% 2019 2020 2021 2022 2023 Efficiency Ratio Net Non-interest Expense / Average Assets 2023 impacted by margin compression and elevated expenses due to regulatory filing delays 63.4% 72.7% 69.9% 69.9% 69.5% 2.27% 2.36% 2.26% 2.21% 2.27% 1Q23 2Q23 3Q23 4Q23 1Q24 Efficiency Ratio Net Non-interest Expense / Average Assets 1Q24 expense remain elevated • Higher audit and professional expenses related to finalizing 2023 financial statement audit • Legal costs associated with settlement of Ashe Lawsuit • Higher Salary and Benefit expenses from increased staffing levels and inflation driven compensation adjustments • Expecting lower run-rate as a portion of professional expenses from 1Q24 are non-recurring

 
Loans 23

 
24 Loan Balances $2.20 $2.39 $2.37 $2.58 $2.98 $3.21 $3.26 2018 2019 2020 2021 2022 2023 1Q24 Consistent Loan Growth 2023 and 2024 balances exclude $5.8M and $1.2M, respectively, fair value (FV) mark to loan balances Excludes PPP loans Dollars in billions • 1Q24 loan growth > $50 million • 6.1% annualized growth rate ~8% CAGR

 
25 $316 $350 $357 $358 $442 $497 $544 $555 $921 $1,065 $1,112 $1,126 $946 $1,071 $1,194 $1,218 2021 2022 2023 1Q24 Residential Real Estate (RRE) Consumer Commercial Real Estate (CRE) Commercial (C&I) $2,668 $2,983 $3,207 $3,257 Loan Balances Dollars in millions Consistent Loan Growth Across Multiple Portfolios Excludes all PPP loans CRE excludes owner-occupied real estate loans Owner-occupied real estate loans shown as part of the C&I portfolio RRE and total loans do not include FV hedge mark of $1.2M

 
26 Loan Yields Steadily Increasing $2.60 $2.64 $2.64 $2.66 $2.67 $2.74 $2.85 $2.93 $2.98 $3.01 $3.07 $3.14 $3.21 $3.26 3.94% 3.90% 4.04% 4.08% 3.82% 3.90% 3.85% 4.09% 4.13% 4.32% 4.57% 4.70% 4.86% 5.01% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Loan Portfolio Yields experiencing meaningful increase during 1Q24, continuing trend from 2023 Loan Balance Average Loan Portfolio Yield for the Periods Shown Dollars in billions Pre 2020 4.95% 2020 4.29% 2021 3.84% 2022 4.73% 2023 6.77% 2024 7.53% Rate by Vintage • ~50% of balances are 2022-2024 vintages • Loan rates averaged 5.14% as of March 31, 2024 • Increases in loan rates exceeded increases in deposit costs 1Yield includes the impact of deferred fees and loan origination costs amortization 1

 
27 Loan Portfolio Composition Commercial (C&I) 11.0% Commercial Real Estate 17.0% Consumer 34.6% Residential Real Estate 37.4% • No single relationship represents more than ~1.75% of total loans as of March 31, 2024 • CRE concentration ratio of ~125% of risk-based capital • CRE loans not in major metropolitan areas • C&I portfolio can be a source of deposit growth Total Loan Portfolio ~ $3.26 billion Commercial (C&I) includes owner-occupied real estate loans

 
28 Consumer Loan Portfolio $860 $861 $893 $921 $921 $977 $1,031 $1,056 $1,065 $1,073 $1,088 $1,108 $1,112 $1,126 3.95%3.94%3.92%3.93%3.87%3.84%3.83% 4.10%4.02% 4.26% 4.61% 4.83% 5.11% 5.36% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • 99.6% of the portfolio, or $1.12 billion are collateralized auto loans; only $4 million in unsecured personal loans • Auto loans sourced through a network of >480 dealers in New York and Vermont with customers extending beyond those states • Loans are underwritten/credit scored by Arrow • Essentially 100% of auto loans are fully amortizing, fixed rate loans • > 73% of auto loan balances have customers with FICO scores >700 • Average portfolio FICO score is 740; Average debt to income ratio ~31%; average LTV is 87% • Less than 3% of indirect loans have FICO scores < 620 • Annual losses over last 5 years were 9-20 bps • ~29% new, ~71% used vehicles exposure 2 1Yield includes the impact of deferred fees and loan origination costs amortization 2 Based on MSRP or used National Automobile Dealers Association (NADA) retail value at time of origination 1 Portfolio rates at March 31, 2024 - 5.70% Average origination rate for 1Q24 - 7.90% Rate excludes the impact of deferred fees/loan origination costs

 
29 Commercial Real Estate Portfolio $393 $407 $412 $431 $442 $441 $455 $468 $497 $507 $519 $529 $543 $555 3.66% 4.90%5.08%5.19% 4.88%5.07% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • CRE loans extended to businesses / borrowers primarily located in our regional market area • No CRE exposure to large metropolitan areas – e.g., no NYC exposure • As of March 31, 2024: – ~$124 million, or ~22%, of CRE loans are variable- rate loans or are fixed-rate loans that reprice within 12 months – Non-owner occupied Office exposure accounted for ~11% of CRE and ~2% of total loans – Non-owner occupied Retail exposure accounted for ~15% of CRE and ~2% of total loans outstanding – Total Hotels and Motels exposure accounted for ~24% of CRE and ~4% of total loans outstanding – The majority of the remaining CRE exposure is comprised of multi-family and other residential investment properties 1 Yield includes the impact of deferred fees and loan origination costs amortization Commercial real estate excludes owner-occupied real estate loans 1 Portfolio rates trending upward March 31, 2024 - 5.34% Rate excludes the impact of deferred fees/loan origination costs

 
30 Commercial (C&I) Portfolio $305 $301 $312 $312 $316 $334 $346 $350 $350 $344 $352 $354 $359 $358 4.17% 4.35% 4.57% 4.89% 5.38% 5.53% $200 $250 $300 $350 $400 $450 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • C&I loans extended to businesses/ borrowers primarily located in our regional market area • C&I portfolio a potential source for deposit acquisition • As of March 31, 2024: – ~$57 million, or ~16%, of C&I loans are variable-rate loans or are fixed-rate loans that reprice within 12 months 1Yield includes the impact of deferred fees and loan origination costs amortization Commercial (C&I) includes owner-occupied real estate loans 1 Portfolio exit rates trending upward 1Q24 at 5.14% vs 4Q23 at 5.10% Rate excludes the impact of deferred fees/loan origination costs

 
31 Residential Real Estate Loans $923 $908 $911 $930 $946 $967 $1,012 $1,051 $1,071 $1,081 $1,111 $1,148 $1,194 $1,218 3.83% 3.79% 3.77% 3.76% 3.73% 3.71% 3.70% 3.78% 3.80% 4.10% 4.17% 4.25% 4.52% 4.57% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • 1Q24 yields include ~19bps related to FV balance sheet hedge • One-to-four family residential real estate secured by first or second mortgages on residences and home equity lines located in our market area • LTV generally does not exceed 80% at time of origination (lower of purchase price or appraised value) • Loans exceeding 80% LTV at origination require private mortgage insurance or other guarantees • ~ $60MM, or 5%, of residential loan portfolio is for construction purposes • ~10% of the portfolio are home equity lines • As of March 31, 2024: • ~27% of portfolio subject to adjustable rates • ~73% of portfolio is fixed RRE loan balances exclude FV hedge mark 1Yield includes the impact of deferred fees and loan origination costs amortization 1 As of March 31, 2024, the average Residential Mortgage portfolio rate was ~4.13% and the Home Equity Line portfolio rate was ~7.45%, resulting in overall portfolio rate of ~4.41% Rates exclude the impact of deferred fees/loan origination costs

 
Credit Quality and Capital 32

 
33 Credit Quality 0.25% 0.44% 0.40% 0.37% 0.21% 0.20% 0.66% 0.66% 2020 2021 2022 1Q23 2Q23 3Q23 4Q23 1Q24 Non-Performing Loans (NPL) / Gross Loans Dollars in millions $6.4 $11.7 $12.0 $11.2 $7.1 $6.9 $21.2 $21.4 • ~$15.3M Commercial Loan relationship went into non-accrual status in 4Q23  Strong collateral position; no loss anticipated  Forbearance negotiation ongoing; expecting agreement and resumption of payments by end of 2Q24 • Charge-offs were 4 bps in 1Q24 – trending favorably, low by historical standards • Excluding large NPL relationship, allowance for credit losses coverage ratio of NPLs is ~510% Well reserved and collateralized portfolio • One NPL relationship • Well collateralized • No specific reserve required 0.47% 0.19%

 
34 Allowance for Credit Losses Provision for Credit Losses $617K

 
35 Fully Diluted Tangible Book Value (TBV) Share Repurchases – reaching previously authorized limit •244,387 shares during 1Q24 at avg. price of $24.27 (~$6.0 million) •Additional 18,924 shares in April 2024 New buy-back authorization of $5 million approved by Arrow Board of Directors TBV growth despite challenging economic environment and aggressive share repurchase activity

 
36 Capital Position 9.63% 12.84% 13.50% 14.57% 8.24% 9.84% 13.00% 13.66% 14.74% 8.60% 4.00% 4.50% 6.00% 8.00% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% Tier 1 Leverage Ratio Common Equity Tier 1 Capital Tier 1 Risk-Based Capital Total Risk-Based Capital Tangible Common Equity Capital Ratios – Arrow Minimum Regulatory Capital Ratios 2023 Q1 2024 1Q’24 Capital impacted by balance sheet growth and share repurchases

 
Overview and History 37

 
38 Our Profile Insurance Offices Bank Branches 937 • Multi-Bank Holding company • Glens Falls National Bank and Trust Company • Saratoga National Bank and Trust Company • Upstate Agency, LLC • Wealth Management Services • $4.3 billion in assets • 500 plus employees • Primary service area population of more than 1.1 million

 
39 Financial Snapshot 2019 2020 2021 2022 2023 1Q2024 Total assets $3,184,275 $3,688,636 $4,027,952 $3,969,509 $4,169,868 $4,333,623 Loans $2,386,120 $2,595,030 $2,667,941 $2,983,207 $3,212,908 $3,258,758 Loan-to-deposit ratio 91.2% 80.2% 75.1% 85.3% 87.1% 86.2% Return on average assets 1.24% 1.17% 1.28% 1.21% 0.74% 0.73% Efficiency ratio 57.08% 52.80% 54.16% 54.26% 68.81% 69.54% Net interest margin 3.05% 2.99% 2.97% 3.03% 2.65% 2.60% Tier 1 Leverage Ratio 9.98% 9.07% 9.20% 9.80% 9.84% 9.63% Return on average equity 13.17% 12.77% 14.09% 13.55% 8.29% 8.12% Tangible book value per share $16.48 $18.32 $20.41 $19.37 $21.06 $21.25 Net interest income $88,049 $99,202 $110,355 $118,343 $104,832 $26,455 Net income $37,475 $40,827 $49,857 $48,799 $30,075 $7,660 EPS (fully diluted) $2.23 $2.41 $2.92 $2.86 $1.77 $0.45 Dollars in thousands, except per share amounts

 
40 Our History 1851 Glens Falls Bank opened for business in a newly constructed building on Ridge Street. 1932 1912 > 1949 Changed name to Glens Falls National Bank and Trust Company. Broke ground at 250 Glen Street — our current headquarters. > 1965 addition 1981 Glens Falls National Bank (GFNB) went public on NASDAQ as GFAL. 1983 Formed Arrow Bank Corporation (now Arrow Financial Corporation) and trading began on NASDAQ as AROW.

 
41 Our History 1988 Formed Saratoga National Bank and Trust Company (SNB) and expanded footprint 1999 Surpassed $1 billion in assets 2004 2021 Bought first insurance agency Topped $4 billion in assets. 2018 Consolidated our insurance business into the Upstate Agency brand. 2012 Reached $2 billion in assets. 2001 Added to the Russell 2000 Index

 
42 President and Chief Executive Officer Mr. DeMarco joined the Company in 1987 as a commercial lender and since that time has served in positions of increasing responsibility within the organization. In 2012, he was named President and CEO of Saratoga National Bank. In May 2023, he was named President and CEO of Arrow Financial Corporation and Glens Falls National Bank. He holds a bachelor’s degree in finance from the University of Texas at Austin. Mr. DeMarco is a graduate of the Adirondack Regional Chamber of Commerce’s Leadership Program and the Stonier Graduate School of Banking. He serves as a Director of the Company and its subsidiary banks and sits on the boards of various non-profits dedicated to healthcare and economic development. David S. DeMarco, President and CEO

 
43 Experienced Leadership Team Mr. Kaiser joined the Company in 2001 as Vice President and Commercial Loan Officer. He served as Corporate Banking Manager and was later promoted to Senior Vice President, before being named Chief Credit Officer in 2011, followed by promotions to Executive Vice President and Senior Executive Vice President. Prior to joining the Company, he spent 15 years in the Capital Region as a Commercial Loan Officer. Mr. Kaiser has a bachelor’s degree in business administration from Siena College. Mr. Kaiser actively serves on boards of numerous community organizations. David D. Kaiser, Senior Executive Vice President and CCO Mr. Ivanov joined the Company in 2023 with more than 30 years of experience in Financial Planning & Analysis, Controllership, SOX, Financial Reporting and Treasury. Mr. Ivanov previously served as CFO for Bankwell Financial Group, helping it almost double in size over six-plus years to $3.3 billion. He has held CFO positions at Darien Rowayton Bank and for Doral Bank’s U.S. Operations. He began his career with Ernst & Young and held accounting/ finance positions at PepsiCo, GE Capital and Bridgewater Associates. Mr. Ivanov holds an MBA and bachelor’s degree in accounting and finance from the University of South Florida. He is also Six Sigma Black Belt certified. Penko Ivanov, Senior Executive Vice President, CFO, Treasurer and CAO Mr. Wise joined the Company in 2016 as Senior Vice President of Administration for Glens Falls National Bank. He has since been promoted to Senior Executive Vice President and Chief Risk Officer of the Company. He has more than 30 years of experience building and leading both community banks and bank-owned insurance agencies. Mr. Wise previously served as Vice President and CISO for The Adirondack Trust Company and acted as Executive Vice President, COO for Wise Insurance Brokers, Inc. He has extensive experience in designing, implementing and managing workflows and delivering operational efficiency. He holds a bachelor’s degree from Boston University’s School of Management. Andrew J. Wise, Senior Executive Vice President and CRO

 
44 Experienced Leadership Team Ms. Pancoe joined the Company in 2018 as Director of Human Resources. In her current role as Chief Human Resources Officer, she has executive oversight of the Company’s human resource strategies, which includes organizational design and succession planning, talent acquisition and retention, performance management, professional development and compensation and benefits. Prior to joining the Company, Ms. Pancoe held various human resource management roles within the power generation and engineering services industry. Ms. Pancoe holds a bachelor’s degree in psychology from Clark University in Worcester, MA, and an MBA from the University at Albany. In addition, she maintains a certified professional human resources designation. Brooke Pancoe, Executive Vice President, Chief Human Resources Officer Mr. Yrsha joined the Company in 2015. He currently is the Chief Banking Officer and oversees the strategic direction of the Retail Banking unit, which includes retail deposits and lending, business development, consumer payments, business services, municipal banking, as well as small business and retail lending. In addition, Marc oversees the Wealth Management division and Marketing. Prior to joining our Company, Mr. Yrsha spent time in retail leadership, retail and commercial lending at large regional and community banks within the Arrow footprint. Mr. Yrsha is active in the community serving in leadership roles on a variety of boards. He is a graduate of Castleton University in Vermont and the Adirondack Regional Chamber of Commerce’s Leadership Adirondack Program. Marc Yrsha, Senior Executive Vice President, Chief Banking Officer Mr. Jacobs joined Glens Falls National Bank in 2003 as Information Systems Manager. He was later promoted to Senior Vice President and then Executive Vice President. As Chief Information Officer, Mr. Jacobs guides the Company’s strategic technology plans. He has more than 30 years of experience in the community banking industry, having previously served as Operations Manager at Cohoes Savings Bank and Item Processing Manager at Hudson River Bank and Trust. Mr. Jacobs earned a bachelor’s degree in finance from Siena College and an associate degree in business administration from Hudson Valley Community College. Michael Jacobs, Executive Vice President, Chief Information Officer

 
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