EX-99.1 2 ex99-earningsq32024.htm EX-99.1 Document

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250 Glen Street
Glens Falls, NY 12801
NASDAQ® Symbol: "AROW"
Website: arrowfinancial.com

Media Contact: Rachael Murray
Tel: (518) 742-6505

Arrow Reports 3rd Quarter Net Income of $9.0 Million, or $0.53 per Share

GLENS FALLS, N.Y. (October 31, 2024) – Arrow Financial Corporation (NasdaqGS® – AROW) ("Arrow" or "the Company") announced financial results for the three-month period ended September 30, 2024. Net income for the third quarter of 2024 was $9.0 million and fully diluted earnings per share ("EPS") was $0.53, versus $7.7 million and EPS of $0.46 for the same period in 2023.

This Earnings Release and related commentary should be read in conjunction with the Company's October 31, 2024 Form 8-K and related Third 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:

“We delivered a solid third quarter with strong net interest margin expansion, improved core profitability, increased return on average assets and continued strong credit metrics. Stabilizing funding costs, increasing asset yields, and continued expense discipline have positioned us for increased core operating leverage for the upcoming quarters. Our incredible teamwork was recently recognized by being named to the prestigious Piper Sandler Sm-All Stars: Class of 2024, a list of 30 top-performing small-cap banks and thrifts in the country.

Among our third-quarter accomplishments, we completed two small acquisitions. We expanded our insurance business with the strategic acquisition of the assets of A&B Agency, Inc. and acquired a branch in Whitehall, New York. Our team continues to prepare for the unification of our banking subsidiaries, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, into a single entity renamed Arrow Bank National Association, or Arrow Bank, slated for December 31, 2024. Starting in early November, our customers will gain surcharge-free access to the Allpoint ATM Network of more than 55,000 locations. As we continue to strengthen our market position, we also rewarded our shareholders with an increase to the fourth-quarter cash dividend, which we announced in early October.”

Third-Quarter Highlights and Key Metrics
•EPS improved $0.07 to $0.53 versus the same period in 2023 and $0.01 over the previous quarter
•Results included approximately $450 thousand of non-core expenses related to our insurance agency and branch acquisitions as well as unification efforts
•Deposit balances were $3.8 billion, resulting in a Loan-to-Deposit ratio of 87.0%
•Net Interest Margin improved to 2.78% (2.79% FTE1), up from 2.67% (2.69% FTE) in the prior quarter
•Year-to-date loan growth reached $126.3 million2 (5.2% annualized)
•Resumed mortgage loan sales into the secondary market
•Average Loan Yields increased to 5.27% for 3Q24, up from 5.17% in the prior quarter
•Net Charge-Offs for the quarter were 8bps on an annualized basis
•Tangible Book Value increased to $21.95
•Accumulated Other Comprehensive Loss improved $5.7 million, or 18%, from the prior quarter
•Return on Average Assets (ROA) improved to 0.84%, up from 0.82% in the previous quarter
1 FTE Net interest margin is a non-GAAP measure. See reconciliation on Note 3 to the Selected Quarterly Information.
2 Excludes both $6.5 million fair value hedge adjustment at September 30, 2024 and $5.8 million fair value hedge adjustment at December 31, 2023
1

Income Statement

•Net Income: Net income for the third quarter of 2024 was $9.0 million, increasing from $8.6 million in the second quarter of 2024 and $7.7 million in the third quarter of 2023.
◦Compared to the prior quarter, net income benefited from an increase of $1.3 million in net interest income, partially offset by an increase in non-interest expense of $0.8 million.
◦Compared to the third quarter of 2023, net income growth was driven by an increase in net interest income of $3.1 million, partially offset by an increase in non-interest expense of $0.6 million.

•Net Interest Income: Net interest income for the third quarter of 2024 was $28.4 million, increasing 4.7% from $27.2 million for the second quarter of 2024 and increasing 12.2% from $25.4 million in the third quarter of 2023.
◦Total interest and dividend income was $49.4 million for the third quarter of 2024, an increase from $48.0 million in the second quarter of 2024 and from $42.1 million for the third quarter of 2023. These increases were primarily driven by loan growth and higher loan yields. Interest expense for the third quarter of 2024 was $21.0 million, an increase from $20.8 million for the second quarter of 2024 and from $16.8 million for the third quarter of 2023. The increase from the prior year was driven primarily by higher deposit rates and changes in deposit composition.

•Net Interest Margin: Net interest margin, on an FTE basis, for the third quarter of 2024 was 2.79% compared to 2.69% for the second quarter of 2024 and 2.55% for the third quarter of 2023. The increase in net interest margin compared to the second quarter in 2024 was primarily the result of continued yield expansion on earning assets combined with the moderating cost of interest-bearing liabilities. As compared to the third quarter of 2023, the increase in net interest margin was primarily the result of yield on average earning assets increasing at a faster pace than costs of interest-bearing liabilities. Net interest margin is affected by deposits continuing to migrate to higher costing products, such as money market savings and time deposits.

Three Months Ended
(Dollars in Thousands)
September 30, 2024June 30, 2024September 30, 2023
Interest and Dividend Income$49,443 $47,972 $42,117 
Interest Expense21,005 20,820 16,764 
Net Interest Income28,438 27,152 25,353 
Average Earning Assets(A)
4,075,162 4,083,813 3,973,747 
Average Interest-Bearing Liabilities3,085,066 3,127,417 2,920,518 
Yield on Earning Assets(A)
4.83 %4.72 %4.20 %
Cost of Interest-Bearing Liabilities2.71 2.68 2.28 
Net Interest Spread2.12 2.04 1.92 
Net Interest Margin2.78 2.67 2.53 
Net Interest Margin - FTE2.79 2.69 2.55 
(A) Includes Nonaccrual Loans.

•Provision for Credit Losses: For the third quarter of 2024, the provision for credit losses was $0.9 million compared to $0.8 million in the second quarter of 2024 and $0.4 million in the third quarter of 2023. The key drivers for the provision for credit losses in the third quarter of 2024 were replenishment of the allowance for charge-offs, growth in loan balances and changes to the economic forecast factors embedded in the credit loss allowance model.



2


•Non-Interest Income: Non-interest income for the three months ended September 30, 2024, was $8.1 million, an increase from $7.9 million in the second quarter of 2024 and consistent with the third quarter of 2023. The increases from the prior periods are primarily the result of the resumption of loan sales from current loan originations, higher wealth management fees resulting from improved market valuations of assets under management and increased insurance commissions resulting from the A&B asset acquisition. The third quarter of 2023 included one-time proceeds from bank-owned life insurance in other income.

•Non-Interest Expense: Non-interest expense for the third quarter of 2024 was $24.1 million, an increase from $23.3 million in the second quarter of 2024 and an increase from $23.5 million for the third quarter of 2023. The increase from the prior quarter was primarily attributable to several one-time non-core expenses related to the Whitehall and A&B asset acquisitions.

•Provision for Income Taxes: The provision for income taxes and effective tax rate were $2.6 million and 22.2%, for the third quarter of 2024, $2.3 million and 21.2%, for the second quarter of 2024 and $1.8 million and 19.1%, for the third quarter of 2023. The increase in the effective tax rate from the second quarter of 2024 was primarily attributable to a decrease in the amount of tax advantaged earning assets as a percentage of total earning assets, while the increase in the effective tax rate from the third quarter of 2023 was primarily due to a change in pre-tax income combined with a decrease in the amount of tax advantaged earning assets as a percentage of total earning assets.

Balance Sheet

•Total Assets: Total assets were $4.4 billion at September 30, 2024, an increase of $167.0 million, or 3.9%, as compared to June 30, 2024 and an increase of $138.5 million, or 3.2%, as compared to September 30, 2023. For the third quarter of 2024, overall growth in the balance sheet was attributable to changes in cash balances, primarily seasonal municipal and corporate deposits, as well as growth in the loan portfolio.

•Investments: Total investments were $549.8 million as of September 30, 2024, a decrease of $6.6 million, or 1.2%, compared to June 30, 2024 and a decrease of $117.0 million, or 17.6%, compared to September 30, 2023. The decrease from June 30, 2024 was driven primarily by paydowns and maturities. The decrease from September 30, 2023 was also driven by paydowns and maturities as well as the fourth quarter 2023 repositioning of the investment portfolio, which reduced 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 were $3.3 billion as of September 30, 2024. Loan growth for the third quarter of 2024 was $24.2 million, and $201.2 million since September 30, 2023. Loan growth was spread across all loan products. Please see the loan detail included in the Consolidated Financial Information table on page 13.

•Allowance for Credit Losses: The allowance for credit losses was $31.3 million as of September 30, 2024, which represented 0.94% of loans outstanding, as compared to $31.0 million, or 0.94%, at June 30, 2024, and $31.1 million, or 0.99%, at September 30, 2023. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.08% for the three-month period ended September 30, 2024, as compared to 0.16%4 for the three-month period ended June 30, 2024 and 0.05% for the three-month period ended September 30, 2023. Non
3 Includes both $6.5 million fair value hedge adjustment at September 30, 2024 and $0.4 million fair value hedge adjustment at June 30, 2024
4 Charge-offs for 2Q24 included 0.09% related to a previously specifically reserved amount for overdraft balances relating to one customer relationship
3

performing assets were $22.3 million as of September 30, 2024, representing 0.51% of period-end assets, compared to 0.50% at June 30, 2024 and 0.16% at September 30, 2023.

•Deposits: At September 30, 2024, deposit balances were $3.8 billion, an increase of $153.8 million from June 30, 2024 and an increase of $171.0 million from September 30, 2023. The increase from the second quarter was primarily attributable to the seasonality of municipal deposits. The increase from September 30, 2023 was partially attributable to $175 million of brokered CDs, primarily used to reduce borrowings and fund continued loan growth. Please refer to page 7 for further details related to deposits.

•Capital: Total stockholders’ equity was $393.3 million at September 30, 2024, an increase of $10.3 million, or 2.7%, from June 30, 2024 and an increase of $33.3 million, or 9.2%, from the September 30, 2023 level of $360.0 million. The increase from the second quarter was primarily attributable to net income of $9.0 million, other comprehensive income of $5.7 million offset by dividends of $4.5 million. The increase in stockholders' equity from September 30, 2023 was primarily attributable to income for the period of $32.9 million, other comprehensive income of $26.6 million and various capital items of $1.1 million offset by dividends of $18.1 million and stock repurchases of $9.2 million. Arrow's regulatory capital ratios remained strong. As of September 30, 2024, Arrow's Common Equity Tier 1 Capital Ratio was 12.77% and Total Risk-Based Capital Ratio was 14.46%. 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

•Piper Sandler Sm-All Stars: Arrow was recently named to the prestigious Piper Sandler Sm-All Stars: Class of 2024, a list of 30 top-performing small-cap banks and thrifts in the country. Arrow is one of just three New York financial institutions on the list and the only bank in Upstate New York. Piper Sandler, an independent investment bank and research firm, evaluated more than 300 institutions that trade on a major exchange, narrowing the field to the top 30.

•Bauer Financial Ratings: Both Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company continued to maintain their 5-Star Exceptional Performance ratings from Bauer Financial, for the 69th and 61st quarters, respectively.

•Subsidiary Bank Unification: Arrow received approval from the Office of the Comptroller of the Currency to combine its two subsidiary banks, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, into one bank that will be known as Arrow Bank National Association. The combination will create operational efficiencies, unify branding and enhance Arrow's ability to pursue its strategic growth objectives. The combination of the entities is anticipated to become effective December 31, 2024.

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.

4


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 (FTE). 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. 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 Annual Report on Form 10-K for the year ended December 31, 2023 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 September 30
Nine Months Ended September 30
 2024202320242023
INTEREST AND DIVIDEND INCOME    
Interest and Fees on Loans$44,122 $36,699 $126,639 $103,203 
Interest on Deposits at Banks2,103 1,805 6,735 3,958 
Interest and Dividends on Investment Securities: 
Fully Taxable2,656 2,924 8,851 8,823 
Exempt from Federal Taxes562 689 1,867 2,256 
Total Interest and Dividend Income49,443 42,117 144,092 118,240 
INTEREST EXPENSE   
Interest-Bearing Checking Accounts1,966 1,156 5,510 2,346 
Savings Deposits10,905 9,729 31,706 23,830 
Time Deposits over $250,0001,803 1,466 5,645 3,159 
Other Time Deposits4,934 2,051 15,091 3,721 
Borrowings1,177 2,143 3,439 5,309 
Junior Subordinated Obligations Issued to
  Unconsolidated Subsidiary Trusts		173 173 514 513 
Interest on Financing Leases47 46 142 143 
Total Interest Expense21,005 16,764 62,047 39,021 
NET INTEREST INCOME28,438 25,353 82,045 79,219 
Provision for Credit Losses934 354 2,326 2,856 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES27,504 24,999 79,719 76,363 
NON-INTEREST INCOME   
Income From Fiduciary Activities2,429 2,378 7,337 7,081 
Fees for Other Services to Customers2,881 2,761 8,130 8,073 
Insurance Commissions1,955 1,695 5,299 4,775 
Net Gain (Loss) on Securities 94 71 165 (214)
Net Gain on Sales of Loans126 21 135 25 
Other Operating Income648 1,124 2,781 1,893 
Total Non-Interest Income8,133 8,050 23,847 21,633 
NON-INTEREST EXPENSE   
Salaries and Employee Benefits13,446 11,988 39,375 35,974 
Occupancy Expenses, Net1,754 1,517 5,299 4,728 
Technology and Equipment Expense4,692 4,371 14,246 13,150 
FDIC Assessments698 515 2,111 1,478 
Other Operating Expense3,510 5,088 10,399 14,528 
Total Non-Interest Expense24,100 23,479 71,430 69,858 
INCOME BEFORE PROVISION FOR INCOME TAXES11,537 9,570 32,136 28,138 
Provision for Income Taxes2,562 1,827 6,897 5,786 
NET INCOME$8,975 $7,743 $25,239 $22,352 
Average Shares Outstanding:    
Basic16,710 17,050 16,746 17,049 
Diluted16,742 17,050 16,772 17,049 
Per Common Share:    
Basic Earnings$0.54 $0.46 $1.51 $1.31 
Diluted Earnings0.53 0.46 1.50 1.31 

6


ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
 September 30,
2024		December 31, 2023September 30,
2023
ASSETS  
Cash and Due From Banks$53,969 $36,755 $39,778 
Interest-Bearing Deposits at Banks286,119 105,781 254,961 
Investment Securities:
Available-for-Sale at Fair Value437,067 497,769 519,240 
Held-to-Maturity (Fair Value of $101,929 at September 30, 2024; $128,837 at December 31, 2023; and $134,811 at September 30, 2023)
103,337 131,395 140,577 
Equity Securities5,089 1,925 1,960 
Other Investments4,352 5,049 5,110 
Loans3,339,937 3,212,908 3,138,617 
Allowance for Credit Losses(31,262)(31,265)(31,112)
Net Loans3,308,675 3,181,643 3,107,505 
Premises and Equipment, Net59,932 59,642 60,311 
Goodwill23,789 21,873 21,873 
Other Intangible Assets, Net2,190 1,110 1,205 
Other Assets126,930 126,926 120,391 
Total Assets$4,411,449 $4,169,868 $4,272,911 
LIABILITIES  
Noninterest-Bearing Deposits740,170 758,425 798,392 
Interest-Bearing Checking Accounts875,365 799,785 920,250 
Savings Deposits1,544,868 1,466,280 1,496,193 
Time Deposits over $250,000177,990 179,301 167,614 
Other Time Deposits499,064 483,775 284,036 
Total Deposits3,837,457 3,687,566 3,666,485 
Borrowings103,600 26,500 174,300 
Junior Subordinated Obligations Issued to Unconsolidated
  Subsidiary Trusts		20,000 20,000 20,000 
Finance Leases5,022 5,066 5,080 
Other Liabilities52,059 50,964 47,032 
Total Liabilities4,018,138 3,790,096 3,912,897 
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at September 30, 2024, December 31, 2023 and September 30, 2023
— — — 
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (22,066,559 Shares Issued at September 30, 2024, December 31, 2023 and September 30, 2023)
22,067 22,067 22,067 
Additional Paid-in Capital413,065 412,551 412,397 
Retained Earnings77,429 65,792 62,647 
Accumulated Other Comprehensive Loss(25,968)(33,416)(52,584)
Treasury Stock, at Cost (5,332,907 Shares at September 30, 2024; 5,124,073 Shares at December 31, 2023 and 5,017,063 Shares at September 30, 2023)
(93,282)(87,222)(84,513)
Total Stockholders’ Equity393,311 379,772 360,014 
Total Liabilities and Stockholders’ Equity$4,411,449 $4,169,868 $4,272,911 
7


Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended9/30/20246/30/20243/31/202412/31/20239/30/2023
Net Income$8,975 $8,604 $7,660 $7,723 $7,743 
     
Net Changes in Fair Value of Equity Investments (Net of Tax)
69 39 13 90 52 
Share and Per Share Data:    
Period End Shares Outstanding16,734 16,723 16,710 16,942 17,049 
Basic Average Shares Outstanding16,710 16,685 16,865 17,002 17,050 
Diluted Average Shares Outstanding16,742 16,709 16,867 17,004 17,050 
Basic Earnings Per Share$0.54 $0.52 $0.45 $0.46 $0.46 
Diluted Earnings Per Share0.53 0.52 0.45 0.46 0.46 
Cash Dividend Per Share0.270 0.270 0.270 0.270 0.262 
Selected Quarterly Average Balances:    
  Interest-Bearing Deposits at Banks$154,937 $159,336 $178,452 $136,026 $131,814 
  Investment Securities590,352 644,192 671,105 713,144 745,693 
  Loans3,329,873 3,280,285 3,235,841 3,170,262 3,096,240 
  Deposits3,672,128 3,678,957 3,693,325 3,593,949 3,491,028 
  Other Borrowed Funds134,249 131,537 122,033 149,507 208,527 
  Stockholders' Equity
387,904 378,256 379,446 363,753 362,701 
  Total Assets4,245,597 4,237,359 4,245,484 4,159,313 4,109,995 
Return on Average Assets, annualized0.84 %0.82 %0.73 %0.74 %0.75 %
Return on Average Equity, annualized9.20 %9.15 %8.12 %8.42 %8.47 %
Return on Average Tangible Equity, annualized 1
9.79 %9.74 %8.64 %8.99 %9.05 %
Average Earning Assets$4,075,162 $4,083,813 $4,085,398 $4,019,432 $3,973,747 
Average Paying Liabilities3,085,066 3,127,417 3,108,093 2,985,717 2,920,518 
Interest Income49,443 47,972 46,677 44,324 42,117 
Tax-Equivalent Adjustment 2
149 163 176 184 183 
Interest Income, Tax-Equivalent 2
49,592 48,135 46,853 44,508 42,117 
Interest Expense21,005 20,820 20,222 18,711 16,764 
Net Interest Income28,438 27,152 26,455 25,613 25,353 
Net Interest Income, Tax-Equivalent 2
28,587 27,315 26,631 25,797 25,536 
Net Interest Margin, annualized2.78 %2.67 %2.60 %2.53 %2.53 %
Net Interest Margin, Tax-Equivalent, annualized 2
2.79 %2.69 %2.62 %2.55 %2.55 %
Efficiency Ratio Calculation: 3
    
Non-Interest Expense$24,100 $23,318 $24,012 $23,190 $23,479 
Less: Intangible Asset Amortization78 40 41 43 43 
Net Non-Interest Expense$24,022 $23,278 $23,971 $23,147 $23,436 
Net Interest Income, Tax-Equivalent$28,587 $27,315 $26,631 $25,797 $25,536 
Non-Interest Income8,133 7,856 7,858 7,484 8,050 
Less: Net Gain on Securities
94 54 17 122 71 
Net Gross Income$36,626 $35,117 $34,472 $33,159 $33,515 
Efficiency Ratio65.59 %66.29 %69.54 %69.81 %69.93 %
Period-End Capital Information:     
Total Stockholders' Equity (i.e. Book Value)$393,311 $383,018 $377,986 $379,772 $360,014 
Book Value per Share
23.50 22.90 22.62 22.42 21.12 
Goodwill and Other Intangible Assets, net25,979 22,800 22,891 22,983 23,078 
Tangible Book Value per Share 1
21.95 21.54 21.25 21.06 19.76 
Capital Ratios:4
  
Tier 1 Leverage Ratio9.78 %9.74 %9.63 %9.84 %9.94 %
Common Equity Tier 1 Capital Ratio
12.77 %12.88 %12.84 %13.00 %13.17 %
Tier 1 Risk-Based Capital Ratio13.41 %13.53 %13.50 %13.66 %13.84 %
Total Risk-Based Capital Ratio14.46 %14.57 %14.57 %14.74 %14.94 %
Assets Under Trust Admin. & Investment Mgmt.$1,944,239 $1,848,349 $1,829,266 $1,763,194 $1,627,522 

8



Arrow Financial Corporation
Selected Quarterly Information - Continued
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Footnotes:
1.
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.
9/30/20246/30/20243/31/202412/31/20239/30/2023
Total Stockholders' Equity (GAAP)$393,311 $383,018 $377,986 $379,772 $360,014 
Less: Goodwill and Other Intangible assets, net25,979 22,800 22,891 22,983 23,078 
Tangible Equity (Non-GAAP)$367,332 $360,218 $355,095 $356,789 $336,936 
Period End Shares Outstanding16,734 16,723 16,710 16,942 17,049 
Tangible Book Value per Share (Non-GAAP)$21.95 $21.54 $21.25 $21.06 $19.76 
Net Income8,975 8,604 7,660 7,723 7,743 
Return on Tangible Equity (Net Income/Tangible Equity - Annualized)
9.79 %9.74 %8.64 %8.99 %9.05 %
2.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.
9/30/20246/30/20243/31/202412/31/20239/30/2023
Interest Income (GAAP)$49,443 $47,972 $46,677 $44,324 $42,117 
Add: Tax-Equivalent adjustment
     (Non-GAAP)		149 163 176 184 183 
Interest Income - Tax Equivalent
     (Non-GAAP)		$49,592 $48,135 $46,853 $44,508 $42,300 
Net Interest Income (GAAP)$28,438 $27,152 $26,455 $25,613 $25,353 
Add: Tax-Equivalent adjustment
     (Non-GAAP)		149 163 176 184 183 
Net Interest Income - Tax Equivalent
     (Non-GAAP)		$28,587 $27,315 $26,631 $25,797 $25,536 
Average Earning Assets$4,075,162 $4,083,813 $4,085,398 $4,019,432 $3,973,747 
Net Interest Margin (Non-GAAP)*2.79 %2.69 %2.62 %2.55 %2.55 %
3.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).
4.
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 September 30, 2024 CET1 ratio listed in the tables (i.e., 12.77%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
9/30/20246/30/20243/31/202412/31/20239/30/2023
Total Risk Weighted Assets$3,110,178 $3,072,922 $3,049,525 $3,032,188 $2,988,438 
Common Equity Tier 1 Capital397,122 395,691 391,706 394,166 393,541 
Common Equity Tier 1 Ratio12.77 %12.88 %12.84 %13.00 %13.17 %
* Quarterly ratios have been annualized.

9


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

Quarter Ended:September 30, 2024September 30, 2023
InterestRateInterestRate
AverageIncome/Earned/AverageIncome/Earned/
BalanceExpensePaidBalanceExpensePaid
Interest-Bearing Deposits at Banks$154,937 $2,103 5.40 %$131,814 $1,805 5.43 %
Investment Securities:
Fully Taxable497,450 2,656 2.12 616,020 2,924 1.88 
Exempt from Federal Taxes92,902 562 2.41 129,673 689 2.11 
Loans (1)
3,329,873 44,122 5.27 3,096,240 36,699 4.70 
Total Earning Assets (1)
4,075,162 49,443 4.83 3,973,747 42,117 4.20 
Allowance for Credit Losses(31,147)(31,386)
Cash and Due From Banks33,159 32,874 
Other Assets168,423 134,760 
Total Assets$4,245,597 $4,109,995 
Deposits:
Interest-Bearing Checking Accounts$785,134 1,966 1.00 $795,627 1,156 0.58 
Savings Deposits1,492,888 10,905 2.91 1,505,916 9,729 2.56 
Time Deposits of $250,000 or More174,028 1,803 4.12 152,738 1,466 3.81 
Other Time Deposits498,767 4,934 3.94 257,710 2,051 3.16 
Total Interest-Bearing Deposits2,950,817 19,608 2.64 2,711,991 14,402 2.11 
Borrowings109,230 1,177 4.29 183,452 2,143 4.63 
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts20,000 173 3.44 20,000 173 3.43 
Finance Leases5,019 47 3.73 5,075 46 3.60 
Total Interest-Bearing Liabilities3,085,066 21,005 2.71 2,920,518 16,764 2.28 
Noninterest-Bearing Deposits721,311 779,037 
Other Liabilities51,316 47,739 
Total Liabilities3,857,693 3,747,294 
Stockholders’ Equity387,904 362,701 
Total Liabilities and Stockholders’ Equity$4,245,597 $4,109,995 
Net Interest Income$28,438 $25,353 
Net Interest Spread2.12 %1.92 %
Net Interest Margin2.78 %2.53 %

(1) Includes Nonaccrual Loans.






10



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



Quarter Ended:September 30, 2024June 30, 2024
InterestRateInterestRate
AverageIncome/Earned/AverageIncome/Earned/
BalanceExpensePaidBalanceExpensePaid
Interest-Bearing Deposits at Banks$154,937 $2,103 5.40 %$159,336 $2,185 5.52 %
Investment Securities:
Fully Taxable497,450 2,656 2.12 530,869 3,009 2.28 
Exempt from Federal Taxes92,902 562 2.41 113,323 637 2.26 
Loans (1)
3,329,873 44,122 5.27 3,280,285 42,141 5.17 
Total Earning Assets (1)
4,075,162 49,443 4.83 4,083,813 47,972 4.72 
Allowance for Credit Losses(31,147)(31,459)
Cash and Due From Banks33,159 28,611 
Other Assets168,423 156,394 
Total Assets$4,245,597 $4,237,359 
Deposits:
Interest-Bearing Checking Accounts$785,134 1,966 1.00 $832,087 1,903 0.92 
Savings Deposits1,492,888 10,905 2.91 1,487,062 10,571 2.86 
Time Deposits of $250,000 or More174,028 1,803 4.12 172,655 1,869 4.35 
Other Time Deposits498,767 4,934 3.94 504,076 5,074 4.05 
Total Interest-Bearing Deposits2,950,817 19,608 2.64 2,995,880 19,417 2.61 
Borrowings109,230 1,177 4.29 106,502 1,186 4.48 
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts20,000 173 3.44 20,000 170 3.42 
Finance Leases5,019 47 3.73 5,035 47 3.75 
Total Interest-Bearing Liabilities3,085,066 21,005 2.71 3,127,417 20,820 2.68 
Noninterest-Bearing Deposits721,311 683,077 
Other Liabilities51,316 48,609 
Total Liabilities3,857,693 3,859,103 
Stockholders’ Equity387,904 378,256 
Total Liabilities and Stockholders’ Equity$4,245,597 $4,237,359 
Net Interest Income$28,438 $27,152 
Net Interest Spread2.12 %2.04 %
Net Interest Margin2.78 %2.67 %

(1) Includes Nonaccrual Loans.

11

Average Consolidated Balance Sheets and Net Interest Income Analysis
(GAAP Basis)
(Dollars In Thousands)
Nine Months Ended September 30:20242023
InterestRateInterestRate
AverageIncome/Earned/AverageIncome/Earned/
BalanceExpensePaidBalanceExpensePaid
Interest-Bearing Deposits at Banks$164,208 $6,735 5.48 %$101,104 $3,958 5.23 %
Investment Securities:
Fully Taxable526,181 8,851 2.25 635,126 8,823 1.86 
Exempt from Federal Taxes108,872 1,867 2.29 146,736 2,256 2.06 
Loans (1)
3,282,175 126,639 5.15 3,041,909 103,203 4.54 
Total Earning Assets (1)
4,081,436 144,092 4.72 3,924,875 118,240 4.03 
Allowance for Credit Losses(31,340)(30,591)
Cash and Due From Banks30,534 30,720 
Other Assets162,194 134,310 
Total Assets$4,242,824 $4,059,314 
Deposits:
Interest-Bearing Checking Accounts$815,933 5,510 0.90 $874,132 2,346 0.36 
Savings Deposits1,487,005 31,706 2.85 1,494,976 23,830 2.13 
Time Deposits of $250,000 or More174,668 5,645 4.32 127,230 3,159 3.32 
Other Time Deposits499,881 15,091 4.03 203,047 3,721 2.45 
Total Interest-Bearing Deposits2,977,487 57,952 2.60 2,699,385 33,056 1.64 
 Borrowings104,257 3,439 4.41 151,887 5,309 4.67 
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts20,000 514 3.43 20,000 513 3.43 
Finance Leases5,034 142 3.77 5,088 1433.76 
Total Interest-Bearing Liabilities3,106,778 62,047 2.67 2,876,360 39,021 1.81 
Noninterest-Bearing Deposits703,948 777,994 
Other Liabilities50,207 42,506 
Total Liabilities3,860,933 3,696,860 
Stockholders’ Equity381,891 362,454 
Total Liabilities and Stockholders’ Equity$4,242,824 $4,059,314 
Net Interest Income$82,045 $79,219 
Net Interest Spread2.05 %2.22 %
Net Interest Margin2.69 %2.70 %

(1) Includes Nonaccrual Loans.



12


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

Quarter Ended:9/30/202412/31/20239/30/2023
Loan Portfolio  
Commercial Loans$169,884 $156,224 $148,066 
Commercial Real Estate Loans756,420 745,487 734,604 
  Subtotal Commercial Loan Portfolio926,304 901,711 882,670 
Consumer Loans1,120,241 1,111,667 1,107,638 
Residential Real Estate Loans1,293,392 1,199,530 1,148,309 
Total Loans$3,339,937 $3,212,908 $3,138,617 
Allowance for Credit Losses   
Allowance for Credit Losses, Beginning of Quarter$31,009 $31,112 $31,170 
Loans Charged-off(1,429)(1,366)(1,204)
Less Recoveries of Loans Previously Charged-off748 994 792 
Net Loans Charged-off(681)(372)(412)
Provision for Credit Losses934 525 354 
Allowance for Credit Losses, End of Quarter$31,262 $31,265 $31,112 
Nonperforming Assets   
Nonaccrual Loans$21,047 $20,645 $6,023 
Loans Past Due 90 or More Days and Accruing816 452 251 
Loans Restructured and in Compliance with Modified Terms30 54 60 
Total Nonperforming Loans21,893 21,151 6,334 
Repossessed Assets322 312 344 
Other Real Estate Owned76 — 182 
Total Nonperforming Assets$22,291 $21,463 $6,860 
Key Asset Quality Ratios   
Net Loans Charged-off to Average Loans,
   Quarter-to-date Annualized		0.08 %0.05 %0.05 %
Provision for Credit Losses to Average Loans,
  Quarter-to-date Annualized		0.11 %0.07 %0.05 %
Allowance for Credit Losses to Period-End Loans0.94 %0.97 %0.99 %
Allowance for Credit Losses to Period-End Nonperforming Loans142.79 %147.82 %491.19 %
Nonperforming Loans to Period-End Loans0.66 %0.66 %0.20 %
Nonperforming Assets to Period-End Assets0.51 %0.51 %0.16 %
Year-to-Date Period Ended:9/30/202412/31/20239/30/2023
Allowance for Credit Losses  
Allowance for Credit Losses, Beginning of Year$31,265 $29,952 $29,952 
Loans Charged-off(4,562)(5,177)(3,812)
Less Recoveries of Loans Previously Charged-off2,233 3,109 2,116 
Net Loans Charged-off(2,329)(2,068)(1,696)
Provision for Credit Losses2,326 3,381 2,856 
Allowance for Credit Losses, End of Period$31,262 $31,265 $31,112 
Key Asset Quality Ratios  
Net Loans Charged-off to Average Loans, Annualized0.09 %0.07 %0.07 %
Provision for Loan Losses to Average Loans, Annualized0.09 %0.11 %0.13 %
13