Arrow Financial : Material Event Form 8 K

About this update from Arrow Financial Corporation

Item 8.01. Other Events Arrow Financial Corporation ("Arrow" or the "Company") announces investment portfolio repositioning and 2024 fourth quarter expenses and charge-off related to its previously announced unification of its subsidiary banks Investment Portfolio Repositioning On December 20, 2024, Arrow completed an investment portfolio repositioning, selling approximately $75 million of lower-yielding available-for-sale investments with an average book yield of approximately 0.6% and weighted average remaining life of 1.3 years, recognizing a pre-tax loss on the sale of approximately $3.0 million. Proceeds from the sale have been redeployed into higher-yielding available-for-sale investments with an average book yield of approximately 4.4% and weighted average remaining life of 4.5 years. The expected earn-back period is approximately 1.1 years. Based on current market interest rates, the transaction is expected to improve Arrow's net interest income by approximately $2.7 million for 2025 and beyond, due to increased duration within the portfolio. Year end regulatory capital ratios are not expected to be materially impacted as the new investments carry a lower risk weighting than the securities that were sold. Year end Tangible Common Equity and Tangible Book Value (both Non-GAAP measures) are not expected to be impacted. Arrow expects the above transaction to be accretive to earnings, net interest margin and return on assets in future periods. Unification Charges As previously disclosed on Form 8-K dated July 22, 2024, 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 strategic unification simplifies the bank's brand identity, strengthens its market presence and better positions the bank for future growth while maintaining the same local, personalized service that's been its hallmark. The legal unification will be completed on December 31, 2024. Arrow's 2024 fourth quarter results will include approximately $0.5 million of professional and legal expenses as well as a $0.7 million charge-off related to branding items and signage as the company rolls out its new branding. Forward Looking Statements The information contained herein 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 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. Factors that could cause or contribute to such differences include, but are not limited to, interest rate fluctuations, a deterioration of market conditions and the other risks described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the " 2023 Form 10-K "). The Company undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. All forward-looking statements, express or implied, included in this Report and the documents incorporated by reference and that are attributable to Arrow are expressly qualified in their entirety by this cautionary statement. This filing should be read in conjunction with the Company's 2023 Form 10-K and other filings with the SEC.

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