EX-99.1 2 ex99-earningsye2025.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
P: (518) 742-6505
E: rachael.murray@arrowbank.com
FOR IMMEDIATE RELEASE

Arrow Reports 4th Quarter Net Income of $14.0 Million or $0.85 per Share and $44.0 Million or $2.65 per Share for 2025. Declares 1st Quarter Dividend of $0.30 per Share.

GLENS FALLS, N.Y. (January 29, 2026) — Arrow Financial Corporation (NasdaqGS® – AROW) ("Arrow") reported net income of $14.0 million, and fully diluted earnings per share ("EPS") of $0.85 for the fourth quarter of 2025, versus $4.5 million and EPS of $0.27, for the same period in 2024. For the year ended December 31, 2025, net income totaled $44.0 million, with EPS of $2.65, versus $29.7 million, and EPS of $1.77, for the prior year.

The Board of Directors of Arrow declared a quarterly cash dividend of $0.30 per share payable February 25, 2026 to shareholders of record as of February 11, 2026. This represents a 3.4% increase from the fourth quarter cash dividend, of $0.29 per share.

This Earnings Release and related commentary should be read in conjunction with our Form 8-K filed January 29, 2026 and related Fourth Quarter 2025 Investor Presentation, which can be found on our website: arrowfinancial.com/documents/investor-presentations.

Arrow President and CEO David S. DeMarco:

“Arrow finished the year by delivering fourth quarter record operating results with record net income of $14 million or $0.85 per share. For the year, Arrow is reporting strong net interest margin expansion, reaching a record 3.19%, and tangible book value growth of over 10%. Return on average assets exceeded 1.20%. Our outstanding team was able to deliver such exceptional results and continue executing on our strategic plan after recently completing the system integration of our former two subsidiary banks transforming Arrow Bank. Our strategy has enabled us to grow EPS 50% in 2025 as we enter 2026 with significant momentum and begin celebrating our 175th anniversary, we look forward to another strong year."

Fourth Quarter Highlights and Key Metrics

•Reported Record Net Income of $14.0 million or $0.85 EPS
•Record Net Interest Income of $35.1 million
•Record Net Interest Margin of 3.24% (3.25% FTE1) versus 3.22% (3.24% FTE) in the prior quarter
◦Elevated average municipal deposits negatively impacted FTE NIM by 4bps
•Tangible Book Value2 per share of $24.71, an increase from $23.85 or 3.6% from the prior quarter
•Return on Average Assets of 1.24%, favorably impacted by 9bps from the successful implementation of tax strategies
•Net Charge-Offs remained low at 0.08% (annualized) for the quarter
1 FTE (fully taxable equivalent basis) net interest margin is a non-GAAP measure. See reconciliation on Note 3 to the Selected Quarterly Information.
2 Tangible book value per share is a non-GAAP measure. See reconciliation Note 3 to the Selected Quarterly Information.
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Select 2025 Highlights and Key Metrics

•Reported Net Income of $44.0 million or $2.65 EPS
•Record Net Interest Margin improved to 3.17% (3.19% FTE3), up from 2.72% (2.74% FTE) in the prior year
•Tangible Book Value4 per share of $24.71, an increase from $22.40 or 10.3% from the prior year
•Return on Average Assets of 1.00%
•Net Charge-Offs were 0.19% for the year

Income Statement

•Net Income: Net income for the fourth quarter of 2025 was $14.0 million, increasing from $12.8 million in the third quarter of 2025. Net income for 2025 was $44.0 million, up from $29.7 million for 2024.
•Compared to the prior quarter, net income benefited from an increase of $1.0 million in net interest income, as interest expense remained flat to the previous quarter. During the fourth quarter of 2025, the Company successfully implemented tax planning strategies that lowered the effective tax rate versus the prior reported quarter.
•Compared to the prior year, the increase in net income was primarily the result of an increase in net interest income of $21.4 million as well as an increase in non-interest income of $4.4 million offset by an increase of non-interest expense of $5.7 million and a $2.1 million increase in the provision for credit losses.

•Net Interest Income: Net interest income for the fourth quarter of 2025 was $35.1 million, an increase of $1.0 million compared to the third quarter of 2025. Net interest income for the year ended December 31, 2025 was $133.2 million, an increase of $21.4 million, or 19.2%, from the prior year.
•Compared to the prior quarter, interest income increased $1.0 million while interest expense remained unchanged as a result of seasonally lower deposit balances and continued pricing discipline.
•Compared to the prior year, the increase was primarily due to the combination of increased interest income and decreased interest expense. Interest and fees on loans were $184.1 million for the year ended December 31, 2025, an increase of 7.4% from the $171.3 million for the year ended December 31, 2024. The increase was primarily driven by loan growth and higher loan rates. Interest expense for the year ended December 31, 2025 was $77.0 million. This represents a decrease of $6.3 million, or 7.5%, from the $83.3 million in interest expense for the prior year. The decrease in the interest expense was driven primarily by lower deposit rates and changes in deposit composition.

•Net Interest Margin: In the fourth quarter of 2025, the net interest margin was 3.24% (3.25% FTE), as compared to 3.22% (3.24% FTE) for the third quarter of 2025. Net interest margin was 3.17% (3.19% FTE) for the year ended December 31, 2025, as compared to 2.72% (2.74% FTE) for the year ended December 31, 2024. The increase in net interest margin compared to the third quarter of 2025 as well as the prior year was primarily the result of continued yield expansion on earning assets combined with the reduced cost of interest-bearing liabilities.

3 FTE Net interest margin is a non-GAAP measure. See reconciliation on Note 3 to the Selected Quarterly Information.
4 Tangible book value per share is a non-GAAP measure. See reconciliation Note 3 to the Selected Quarterly Information.
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Twelve Months Ended
(dollars in thousands)
December 31, 2025December 31, 2024
Interest and Dividend Income$210,147 $194,993 
Interest Expense76,983 83,261 
Net Interest Income133,164 111,732 
Average Earning Assets(1)
4,197,528 4,102,954 
Average Interest-Bearing Liabilities3,212,900 3,126,495 
Yield on Earning Assets(1)
5.01 %4.75 %
Cost of Interest-Bearing Liabilities2.40 2.66 
Net Interest Spread2.61 2.09 
Net Interest Margin3.17 2.72 
FTE Net Interest Margin(2)
3.19 2.74 
(1) Includes Nonaccrual Loans.
(2) FTE Net Interest Margin is a non-GAAP measure. See reconciliation on Note 3 to the Selected Quarterly Information

•Provision for Credit Losses: For the year ended December 31, 2025, the provision for credit losses related to the loan portfolio was $7.3 million, compared to $5.2 million in the prior year. The key drivers for the increase in provision for credit losses for 2025 were primarily the charge-off of the previously disclosed commercial loan participation in the second quarter of 2025 and overall loan growth.

•Non-Interest Income: Non-interest income was $8.3 million for the fourth quarter of 2025, a decrease from $8.7 million for the previous quarter. Non-interest income was $32.4 million for the year ended December 31, 2025, an increase of 15.5%, as compared to $28.1 million for the year ended December 31, 2024. The decrease from the prior quarter was primarily driven by a positive valuation adjustment related to an equity position recorded in the third quarter. The increase in non-interest income from the previous year was primarily driven by a 2024 net loss on securities from the repositioning of the investment portfolio as well as increases in 2025 revenue related to wealth management, insurance and interchange fees.

•Non-Interest Expense: Non-interest expense was $25.8 million for the fourth quarter of 2025, consistent with the fourth quarter of 2024. Non-interest expense for the year ended December 31, 2025 increased by $5.7 million, or 5.8%, to $102.9 million, as compared to $97.3 million in 2024. The largest component of non-interest expense is salaries and benefits paid to our employees, which totaled $56.3 million in 2025 and increased $3.6 million, or 6.8%, from the prior year. Salaries and benefits were impacted by inflation-driven wage increases and rising benefit costs.

•Provision for Income Taxes: The provision for income taxes for 2025 was $11.4 million, compared to $7.6 million for 2024. The effective income tax rates for 2025 and 2024 were 20.6% and 20.5%, respectively.

Balance Sheet

•Total Assets: Total assets were $4.4 billion at December 31, 2025, an increase of $139.5 million, or 3.2%, compared to December 31, 2024 and a decrease of $141.3 million, or 3.1%, from September 30, 2025. The increase over the prior year end was primarily driven by loan growth and an overall increase in deposits. The decrease in cash balances in the fourth quarter was primarily driven by the seasonal decrease of municipal deposit balances as of December 31, 2025.

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•Investments: Total investments were $572.8 million at December 31, 2025, an increase of $2.0 million, or 0.4%, compared to December 31, 2024. The increase reflected the reinvestment of the cash generated from paydowns and maturities of investments into higher yielding investments. There were no credit quality issues related to the investment portfolio.

•Loans: At December 31, 2025, total loan balances reached $3.5 billion. Loan growth for the fourth quarter was $11 million. Loan growth for the year was $59 million or 1.7%. Please see the loan detail included in the Consolidated Financial Information table.

•Allowance for Credit Losses: The allowance for credit losses was $34.3 million at December 31, 2025, an increase of $0.7 million from December 31, 2024. The allowance for credit losses at December 31, 2025 represented 0.99% of loans outstanding, unchanged from 0.99% at year end 2024. Asset quality remained strong at December 31, 2025. Net loan charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.19% for the year ended December 31, 2025, as compared to 0.09% for the prior year. The increase was the result of a charge-off of a previously reserved commercial loan participation in the second quarter of 2025. Nonperforming assets of $8.7 million at December 31, 2025, represented 0.20% of year end assets, compared to $21.5 million or 0.50% at December 31, 2024.

•Deposits: At December 31, 2025, total deposit balances were $3.9 billion, an increase of $111.5 million, or 2.9%, from the prior-year end level. Deposits decreased in the fourth quarter by $160.6 million. The decrease in the fourth quarter was primarily driven by the seasonality of municipal deposits. Non-municipal deposits, excluding brokered CDs, increased by $131.6 million and municipal deposits decreased by $20.1 million, each as compared to December 31, 2024. Non-interest bearing deposits increased by $19.4 million, or 2.8%, during 2025. At December 31, 2025, total time deposits, excluding brokered CDs, increased $3.2 million from the prior-year end level.

•Capital: Total shareholders’ equity was $431.9 million at December 31, 2025, an increase of $31.0 million, or 7.7%, from December 31, 2024 and an increase of $14.2 million in the fourth quarter. The increase from the third quarter was primarily attributable to net income of $14.0 million, other comprehensive income of $4.6 million and various capital items of $0.5 million, partially offset by dividends of $4.8 million. The increase in stockholders' equity from December 31, 2024 was primarily attributable to net income of $44.0 million, other comprehensive income of $14.4 million and various capital items of $1.7 million partially offset by dividends of $18.9 million and stock repurchases of $9.9 million. The change to other comprehensive income is primarily attributable to fair value adjustments on the available for sale investment portfolio. Arrow's regulatory capital ratios remained strong in 2025. At December 31, 2025, Arrow's Common Equity Tier 1 Capital Ratio was 13.10% and Total Risk-Based Capital Ratio was 14.86%. The capital ratios of Arrow and its subsidiary bank, Arrow Bank, continued to significantly exceed the “well capitalized” regulatory standards.


Additional Commentary

•BauerFinancial Ratings: Arrow Bank National Association ("Arrow Bank") received a 5-Star Superior rating from BauerFinancial, Inc., the nation’s premier bank rating firm. Arrow Bank has earned this designation for 75 consecutive quarters, securing its prominent position as an “Exceptional Performance Bank.”
——————

About Arrow: Arrow Financial Corporation is a holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. The Company is the parent of Arrow Bank, a full-service commercial bank, and Upstate Agency, LLC, a comprehensive insurance agency.

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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). The following 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. Certain non-GAAP financial measures include: tangible book value, tangible equity, return on tangible equity, tax-equivalent adjustment and related net interest income, tax-equivalent net interest margin and the efficiency ratio. Management believes that the non-GAAP financial measures disclosed by Arrow from time to time 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 titled "Selected Quarterly Information."

Safe Harbor Statement: The information contained in this earnings release may contain statements that are not historical in nature but rather are based on management’s beliefs, assumptions, expectations, estimates and projections about the future. These statements can sometimes be identified by Arrow's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." These statements may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, involving a degree of uncertainty and attendant risk. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast, explicitly or by implication because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, tariffs, cybersecurity risks, changes in FDIC assessments, bank failures, difficulties in managing the Arrow’s growth, competition, changes in law or the regulatory environment, and changes in general business and economic trends. Arrow undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. This earnings release should be read in conjunction with Arrow’s Annual Report on Form 10-K for the year ended December 31, 2024, and other filings with the SEC.


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

 Three Months EndedTwelve Months Ended
 December 31,December 31,
 2025202420252024
INTEREST AND DIVIDEND INCOME    
Interest and Fees on Loans$47,087 $44,703 $184,069 $171,342 
Interest on Deposits at Banks2,598 2,880 8,086 9,615 
Interest and Dividends on Investment Securities:
Fully Taxable4,500 2,728 15,964 11,579 
Exempt from Federal Taxes425 590 2,028 2,457 
Total Interest and Dividend Income54,610 50,901 210,147 194,993 
INTEREST EXPENSE    
Interest-Bearing Checking Accounts2,117 1,932 8,021 7,442 
Savings Deposits9,722 11,144 38,106 42,850 
Time Deposits over $250,0001,562 1,815 6,794 7,460 
Other Time Deposits5,846 5,906 23,027 20,997 
Borrowings— 198 167 3,637 
Junior Subordinated Obligations Issued to
  Unconsolidated Subsidiary Trusts		173 172 686 686 
Interest on Financing Leases47 47 182 189 
Total Interest Expense19,467 21,214 76,983 83,261 
NET INTEREST INCOME35,143 29,687 133,164 111,732 
Provision for Credit Losses846 2,854 7,274 5,180 
NET INTEREST INCOME AFTER PROVISION FOR
   CREDIT LOSSES		34,297 26,833 125,890 106,552 
NONINTEREST INCOME    
Income From Fiduciary Activities2,771 2,615 10,304 9,952 
Fees for Other Services to Customers2,854 2,763 11,098 10,892 
Insurance Commissions2,050 1,848 7,666 7,147 
Net (Loss) Gain on Securities(127)(3,072)542 (2,907)
Net Gain on Sales of Loans246 75 819 209 
Other Operating Income474 — 2,003 2,781 
Total Noninterest Income8,268 4,229 32,432 28,074 
NONINTEREST EXPENSE    
Salaries and Employee Benefits14,309 13,332 56,289 52,707 
Occupancy Expenses, Net1,881 1,870 7,762 7,169 
Technology and Equipment Expense5,152 5,119 20,791 19,365 
FDIC Assessments563 664 2,516 2,775 
Other Operating Expense3,899 4,853 15,576 15,252 
Total Noninterest Expense25,804 25,838 102,934 97,268 
INCOME BEFORE PROVISION FOR INCOME TAXES16,761 5,224 55,388 37,358 
Provision for Income Taxes2,748 752 11,435 7,649 
NET INCOME$14,013 $4,472 $43,953 $29,709 
Average Shares Outstanding:    
Basic16,390 16,718 16,503 16,739 
Diluted16,413 16,739 16,514 16,745 
Per Common Share:    
Basic Earnings$0.85 $0.26 $2.65 $1.77 
Diluted Earnings0.85 0.27 2.65 1.77 

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ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
 December 31, 2025December 31, 2024
ASSETS  
Cash and Due From Banks$29,132 $27,422 
Interest-Bearing Deposits at Banks185,051 127,124 
Investment Securities:
Available-for-Sale495,868 463,111 
Held-to-Maturity (Approximate Fair Value of $66,569 at
 December 31, 2025, and $96,586 at December 31, 2024)
66,975 98,261 
Equity Securities5,597 5,055 
Other Investments4,372 4,353 
Loans3,453,093 3,394,541 
Allowance for Credit Losses(34,322)(33,598)
Net Loans3,418,771 3,360,943 
Premises and Equipment, Net59,433 59,717 
Goodwill23,789 23,789 
Other Intangible Assets, Net1,741 2,058 
Other Assets155,133 134,515 
Total Assets$4,445,862 $4,306,348 
LIABILITIES
Noninterest-Bearing Deposits$722,374 $702,978 
Interest-Bearing Checking Accounts862,192 810,834 
Savings Deposits1,557,638 1,520,024 
Time Deposits over $250,000155,802 191,962 
Other Time Deposits641,463 602,132 
Total Deposits3,939,469 3,827,930 
Borrowings4,265 8,600 
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts20,000 20,000 
Finance Leases4,929 5,005 
Other Liabilities45,347 43,912 
Total Liabilities4,014,010 3,905,447 
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value, 1,000,000 Shares Authorized
— — 
Common Stock, $1 Par Value, 30,000,000 Shares Authorized (22,066,559 Shares Issued at December 31, 2025 and December 31, 2024)
22,067 22,067 
Additional Paid-in Capital414,506 413,476 
Retained Earnings 102,271 77,215 
Accumulated Other Comprehensive Loss(4,037)(18,453)
Treasury Stock, at Cost (5,621,217 Shares at December 31, 2025, and 5,323,638 Shares at December 31, 2024)
(102,955)(93,404)
Total Stockholders’ Equity431,852 400,901 
Total Liabilities and Stockholders’ Equity$4,445,862 $4,306,348 
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Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended12/31/20259/30/20256/30/20253/31/202512/31/2024
Net Income$14,013 $12,825 $10,805 $6,310 $4,470 
Share and Per Share Data:     
Period End Shares Outstanding16,445 16,438 16,484 16,670 16,743 
Basic Average Shares Outstanding16,390 16,402 16,545 16,665 16,718 
Diluted Average Shares Outstanding16,413 16,406 16,551 16,673 16,739 
Basic Earnings Per Share$0.85 $0.77 $0.65 $0.38 $0.26 
Diluted Earnings Per Share0.85 0.77 0.65 0.38 0.27 
Cash Dividend Per Share0.290 0.290 0.280 0.280 0.280 
Selected Quarterly Average Balances:     
  Interest-Bearing Deposits at Banks$260,806 $200,251 $145,473 $146,023 $233,469 
  Investment Securities596,994 574,080 582,380 591,841 579,107 
  Loans3,444,505 3,424,784 3,415,140 3,406,075 3,354,463 
  Deposits4,002,221 3,913,721 3,849,093 3,825,124 3,847,691 
  Other Borrowed Funds29,203 30,539 33,579 48,375 49,090 
  Shareholders’ Equity425,042 413,058 406,529 404,394 393,696 
  Total Assets4,499,195 4,399,815 4,332,339 4,324,917 4,339,833 
Return on Average Assets, annualized1.24 %1.16 %1.00 %0.59 %0.41 %
Return on Average Equity, annualized13.08 %12.32 %10.66 %6.33 %4.52 %
Return on Average Tangible Equity, annualized 1
13.92 %13.13 %11.38 %6.76 %4.84 %
Average Earning Assets4,302,305 4,199,115 4,142,993 4,143,939 4,167,039 
Average Paying Liabilities3,280,856 3,193,789 3,191,906 3,184,196 3,185,215 
Interest Income54,610 53,598 51,573 50,366 50,901 
Tax-Equivalent Adjustment 2
114 121 148 155 157 
Interest Income, Tax-Equivalent 2
54,724 53,719 51,721 50,521 51,058 
Interest Expense19,467 19,467 19,040 19,009 21,214 
Net Interest Income35,143 34,131 32,533 31,357 29,687 
Net Interest Income, Tax-Equivalent 2
35,257 34,252 32,681 31,512 29,844 
Net Interest Margin, annualized3.24 %3.22 %3.15 %3.07 %2.83 %
Net Interest Margin, Tax-Equivalent, annualized 2
3.25 %3.24 %3.16 %3.08 %2.85 %
Efficiency Ratio Calculation: 3
     
Noninterest Expense$25,804 $25,433 $25,652 $26,045 $25,838 
Less: Intangible Asset Amortization74 76 8081 89 
Net Noninterest Expense$25,730 $25,357 $25,572 $25,964 $25,749 
Net Interest Income, Tax-Equivalent$35,257 $34,252 $32,681 $31,512 $29,844 
Noninterest Income8,268 8,716 7,609 7,839 4,227 
Less: Net (Loss) Gain on Securities(127)392 (40)317 (3,072)
Net Gross Income$43,652 $42,576 $40,330 $39,034 $37,143 
Efficiency Ratio58.94 %59.56 %63.41 %66.52 %69.32 %
Period-End Capital Information:     
Total Stockholders’ Equity (i.e. Book Value)$431,852 $417,687 $408,506 $404,409 $400,901 
Book Value per Share
26.26 25.41 24.78 24.26 23.94 
Goodwill and Other Intangible Assets, net25,530 25,594 25,659 25,743 25,847 
Tangible Book Value per Share 1
24.71 23.85 23.23 22.72 22.40 
 
Capital Ratios:4
    
Tier 1 Leverage Ratio9.68 %9.66 %9.64 %9.61 %9.60 %
Common Equity Tier 1 Capital Ratio
13.10 %13.07 %12.73 %12.59 %12.71 %
Tier 1 Risk-Based Capital Ratio13.74 %13.71 %13.37 %13.23 %13.35 %
Total Risk-Based Capital Ratio14.86 %14.86 %14.51 %14.48 %14.47 %
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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 Average Tangible Equity exclude goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures which we believe provide investors with information that is useful in understanding our financial performance.
12/31/20259/30/20256/30/20253/31/202512/31/2024
Total Stockholders' Equity (GAAP)$431,852 $417,687 $408,506 $404,409 $400,901 
Less: Goodwill and Other Intangible assets, net25,530 25,594 25,659 25,743 25,847 
Tangible Equity (Non-GAAP)$406,322 $392,093 $382,847 $378,666 $375,054 
Period End Shares Outstanding16,445 16,438 16,484 16,670 16,743 
Tangible Book Value per Share (Non-GAAP)$24.71 $23.85 $23.23 $22.72 $22.40 
Net Income14,013 12,825 10,805 6,310 4,470 
Return on Average Tangible Equity (Net Income/Average Tangible Equity - Annualized)13.92 %13.13 %11.38 %6.76 %4.84 %
2.Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which we believe provides investors with information that is useful in understanding our financial performance.
12/31/20259/30/20256/30/20253/31/202512/31/2024
Interest Income (GAAP)$54,610 $53,598 $51,573 $50,366 $50,901 
Add: Tax Equivalent Adjustment (Non-GAAP)114 121 148 155 157 
Interest Income - Tax Equivalent (Non-GAAP)$54,724 $53,719 $51,721 $50,521 $51,058 
Net Interest Income (GAAP)$35,143 $34,131 $32,533 $31,357 $29,687 
Add: Tax-Equivalent adjustment (Non-GAAP)114 121 148 155 157 
Net Interest Income - Tax Equivalent (Non-GAAP)$35,257 $34,252 $32,681 $31,512 $29,844 
Average Earning Assets4,302,305 4,199,115 4,142,993 4,143,939 4,167,039 
Net Interest Margin (Non-GAAP)*3.25 %3.24 %3.16 %3.08 %2.85 %
3.Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. We believe the efficiency ratio provides investors with information that is useful in understanding our financial performance. We define our efficiency ratio as the ratio of our noninterest expense to our net gross income (which equals our tax-equivalent net interest income plus noninterest income, as adjusted).
4.
For the current quarter, all of the regulatory capital ratios in the table above, as well as the Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below, are estimates based on, and calculated in accordance with bank regulatory capital rules. All prior quarters reflect actual results. The December 31, 2025 CET1 ratio listed in the tables (i.e., 13.10%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
12/31/20259/30/20256/30/20253/31/202512/31/2024
Total Risk Weighted Assets3,160,095 3,095,225 3,121,451 3,143,547 3,126,364 
Common Equity Tier 1 Capital414,050 404,426 397,432 395,900 397,285 
Common Equity Tier 1 Ratio13.10 %13.07 %12.73 %12.59 %12.71 %
 * Quarterly ratios have been annualized

9

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

Quarter Ended:December 31, 2025December 31, 2024
InterestRateInterestRate
AverageIncome/Earned/AverageIncome/Earned/
BalanceExpensePaidBalanceExpensePaid
Interest-Bearing Deposits at Banks$260,806 $2,598 3.95 %$233,469 $2,880 4.91 %
Investment Securities:
Fully Taxable537,088 4,500 3.32 %484,860 2,728 2.24 %
Exempt from Federal Taxes59,906 425 2.81 %94,247 590 2.49 %
Loans (1)
3,444,505 47,087 5.42 %3,354,463 44,703 5.30 %
Total Earning Assets (1)
4,302,305 54,610 5.04 %4,167,039 50,901 4.86 %
Allowance for Credit Losses(34,288)(31,529)
Cash and Due From Banks25,827 30,706 
Other Assets205,351 173,617 
Total Assets$4,499,195 $4,339,833 
Deposits:
Interest-Bearing Checking Accounts$850,602 2,117 0.99 %$802,808 1,932 0.96 %
Savings Deposits1,584,844 9,721 2.43 %1,567,455 11,144 2.83 %
Time Deposits of $250,000 or More173,996 1,562 3.56 %183,325 1,815 3.94 %
Other Time Deposits642,211 5,847 3.61 %582,537 5,906 4.03 %
Total Interest-Bearing Deposits3,251,653 19,247 2.35 %3,136,125 20,797 2.64 %
Borrowings4,266 — — %24,089 198 3.27 %
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts20,000 173 3.43 %20,000 172 3.42 %
Finance Leases4,937 47 3.78 %5,001 47 3.74 %
Total Interest-Bearing Liabilities3,280,856 19,467 2.35 %3,185,215 21,214 2.65 %
Noninterest-Bearing Deposits750,568 711,566 
Other Liabilities42,729 49,356 
Total Liabilities4,074,153 3,946,137 
Stockholders’ Equity425,042 393,696 
Total Liabilities and Stockholders’ Equity$4,499,195 $4,339,833 
Net Interest Income$35,143 $29,687 
Net Interest Spread2.69 %2.21 %
Net Interest Margin3.24 %2.83 %

(1) Includes Nonaccrual Loans

10

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

Quarter Ended:December 31, 2025September 30, 2025
InterestRateInterestRate
AverageIncome/Earned/AverageIncome/Earned/
BalanceExpensePaidBalanceExpensePaid
Interest-Bearing Deposits at Banks$260,806 $2,598 3.95 %$200,251 $2,245 4.45 %
Investment Securities:
Fully Taxable537,088 4,500 3.32 %509,599 4,066 3.17 %
Exempt from Federal Taxes59,906 425 2.81 %64,481 455 2.80 %
Loans (1)
3,444,505 47,087 5.42 %3,424,784 46,832 5.43 %
Total Earning Assets (1)
4,302,305 54,610 5.04 %4,199,115 53,598 5.06 %
Allowance for Credit Losses(34,288)(34,143)
Cash and Due From Banks25,827 33,984 
Other Assets205,351 200,859 
Total Assets$4,499,195 $4,399,815 
Deposits:
Interest-Bearing Checking Accounts$850,602 2,117 0.99 %$848,622 2,160 1.01 %
Savings Deposits1,584,844 9,721 2.43 %1,492,204 9,534 2.53 %
Time Deposits of $250,000 or More173,996 1,562 3.56 %177,826 1,695 3.78 %
Other Time Deposits642,211 5,847 3.61 %644,598 5,859 3.61 %
Total Interest-Bearing Deposits3,251,653 19,247 2.35 %3,163,250 19,248 2.41 %
Borrowings4,266 — — %5,583 — — %
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts20,000 173 3.43 %20,000 173 3.43 %
Finance Leases4,937 47 3.78 %4,956 46 3.68 %
Total Interest-Bearing Liabilities3,280,856 19,467 2.35 %3,193,789 19,467 2.42 %
Noninterest-Bearing Deposits750,568 750,471 
Other Liabilities42,729 42,497 
Total Liabilities4,074,153 3,986,757 
Stockholders’ Equity425,042 413,058 
Total Liabilities and Stockholders’ Equity$4,499,195 $4,399,815 
Net Interest Income$35,143 $34,131 
Net Interest Spread2.69 %2.64 %
Net Interest Margin3.24 %3.22 %
11

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

Years Ended December 31:20252024
InterestRateInterestRate
AverageIncome/Earned/AverageIncome/Earned/
BalanceExpensePaidBalanceExpensePaid
Interest-Bearing Deposits at Banks$188,486 $8,086 4.29 %$181,618 $9,615 5.29 %
 Investment Securities:
   Fully Taxable510,900 15,964 3.12 %515,794 11,579 2.24 %
   Exempt from Federal Taxes75,405 2,028 2.69 %105,196 2,457 2.34 %
Loans3,422,737 184,069 5.38 %3,300,346 171,342 5.19 %
 Total Earning Assets4,197,528 210,147 5.01 %4,102,954 194,993 4.75 %
Allowance for Credit Losses(34,341)(31,387)
Cash and Due From Banks30,143 30,577 
Other Assets196,243 164,577 
 Total Assets$4,389,573 $4,266,721 
Deposits:
   Interest-Bearing Checking Accounts$846,243 8,021 0.95 %$812,634 7,442 0.92 %
  Savings Deposits1,522,092 38,106 2.50 %1,507,227 42,850 2.84 %
  Time Deposits of $250,000 or More179,453 6,794 3.79 %176,844 7,460 4.22 %
  Other Time Deposits629,754 23,027 3.66 %520,658 20,997 4.03 %
    Total Interest-Bearing Deposits3,177,542 75,948 2.39 %3,017,363 78,749 2.61 %
Borrowings10,391 167 1.61 %84,106 3,637 4.32 %
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts20,000 686 3.43 %20,000 686 3.43 %
Finance Leases4,967 182 3.66 %5,026 189 3.76 %
  Total Interest-Bearing Liabilities3,212,900 76,983 2.40 %3,126,495 83,261 2.66 %
Demand Deposits720,528 705,863 
Other Liabilities43,830 49,505 
 Total Liabilities3,977,258 3,881,863 
Stockholders’ Equity412,315 384,858 
 Total Liabilities and Stockholders’ Equity$4,389,573 $4,266,721 
Net Interest Income$133,164 $111,732 
Net Interest Spread2.61 %2.09 %
Net Interest Margin3.17 %2.72 %


12


Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
Quarter Ended:12/31/202512/31/2024
Loan Portfolio  
Commercial Loans$165,729 $158,991 
Commercial Real Estate Loans818,259 796,365 
  Subtotal Commercial Loan Portfolio983,988 955,356 
Consumer Loans 1,076,007 1,118,981 
Residential Real Estate Loans1,393,098 1,320,204 
Total Loans$3,453,093 $3,394,541 
Allowance for Credit Losses  
Allowance for Credit Losses, Beginning of Quarter$34,176 $31,262 
Loans Charged-off(1,477)(1,333)
Recoveries of Loans Previously Charged-off777 815 
Net Loans Charged-off(700)(518)
Provision for Credit Losses846 2,854 
Allowance for Credit Losses, End of Quarter$34,322 $33,598 
Nonperforming Assets  
Nonaccrual Loans$6,415 $20,621 
Loans Past Due 90 or More Days and Accruing2,040 398
Total Nonperforming Loans8,455 21,019 
Repossessed Assets280 382 
Other Real Estate Owned— 76 
Total Nonperforming Assets$8,735 $21,477 
Key Asset Quality Ratios  
Net Loans Charged-off to Average Loans, Quarter-to-date
  Annualized		0.08 %0.06 %
Provision for Credit Losses to Average Loans, Quarter-to-date
  Annualized		0.10 %0.34 %
Allowance for Credit Losses to Period-End Loans0.99 %0.99 %
Allowance for Credit Losses to Period-End Nonperforming Loans405.94 %159.69 %
Nonperforming Loans to Period-End Loans0.24 %0.62 %
Nonperforming Assets to Period-End Assets0.20 %0.50 %
Twelve-Month Period Ended:
Allowance for Credit Losses  
Allowance for Credit Losses, Beginning of Year33,598 31,265 
Loans Charged-off(9,554)(5,895)
Recoveries of Loans Previously Charged-off3,004 3,048 
Net Loans Charged-off(6,550)(2,847)
Provision for Credit Losses7,274 5,180 
Allowance for Credit Losses, End of Year$34,322 $33,598 
Key Asset Quality Ratios  
Net Loans Charged-off to Average Loans0.19 %0.09 %
Provision for Credit Losses to Average Loans0.21 %0.16 %
13