Arrow Reports 2nd Quarter Net Income of $11.0 Million, or $0.66 per Share, and Declares 3rd Quarter Dividend of $0.30 per Share

About this update from Arrow Financial Corporation

GLENS FALLS, N.Y. , July 23, 2026 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS ®  – AROW) ("Arrow" or the "Company") announced financial results for the three-month period ended June 30, 2026. Reported net income for the second quarter of 2026 was $11.0 million and fully diluted earnings per share ("EPS") was $0.66, versus net income of $13.5 million and EPS of $0.82 for the first quarter of 2026. The Board of Directors of Arrow declared a quarterly cash dividend of $0.30 per share; payable August 25, 2026 to shareholders of record as of August 11, 2026. This quarter's results include approximately $1.0 million ($0.05 per share) of merger-related expenses related to the July 1, 2026 acquisition of Adirondack Bancorp, Inc. and Adirondack Bank based in Utica, New York. Excluding the merger-related expenses, Arrow achieved EPS of $0.71 for the second quarter of 2026. The transaction added approximately $1.0 billion in assets and 19 new branch locations. Second-quarter results were impacted by a specific reserve of $1.6 million ($0.08 per share) for an isolated commercial real estate credit due to a sudden personal and corporate bankruptcy declared in June 2026 (for more details on this credit, please refer to our Second Quarter Investor Presentation), as well as an elevated loan provision due to strong loan growth. This earnings release and related commentary should be read in conjunction with the Company's July   23, 2026 Form 8-K and related Second Quarter 2026 Investor Presentation, which can also be found on Arrow's website: arrowfinancial.com/documents/investor-presentations.   Arrow President and CEO David S. DeMarco:   "The Arrow team delivered another quarter of strong operating results. While our results were negatively impacted by recognizing a reserve on one isolated commercial credit, the credit metrics of the loan portfolio remain strong with low charge-offs and low non-performing loan balances. The overall health and trajectory of the business continues to perform well. I am particularly excited about the return to significant loan growth and the closing of our acquisition of Adirondack Bank, which will provide us with increased growth opportunities. We look forward to expanding our market with this high-quality, low-cost deposit franchise, adding approximately $1.0 billion to our balance sheet. We expect the transaction to provide significant EPS accretion in 2027 and beyond. Arrow remains well-positioned to deliver shareholder value and execute on its strategic initiatives to build a premier banking franchise for its customers and the communities it serves." Second-Quarter Highlights and Key Metrics Net Income of $11.0 million (EPS of $0.66; or $0.71 adjusted for merger-related expenses "MRE" 1 ) Insurance revenue 1H26 versus 1H25 up 12.6% Wealth management revenue 1H26 versus 1H25 up 9.9% Loan growth of $57.6 million (6.7% annualized) Annualized charge-offs of 8bps and non-performing loans of 24bps Moved $3.8 million loan to non-performing (11bps) due to bankruptcy and recorded $1.6 million specific reserve ($0.08 per share) Efficiency ratio of 62.02%; 59.83% excluding MRE 1 Net Interest Income of $35.9 million Net Interest Margin of 3.42% (3.43% fully taxable equivalent ("FTE") 2 ), versus 3.47% (3.48% FTE 2 ) in the prior quarter Return on Average Assets (ROA) of 0.99%; 1.06% adjusted for MRE 1 Cost of retail deposits 3  decreased to 1.61% Income Statement Net Income: Net income for the second quarter of 2026 was $11.0 million, decreasing from $13.5 million in the first quarter of 2026. Compared to the prior quarter, net income decreased primarily due to an increase in the provision for credit losses of $2.3 million, including $1.6 million related to a specific reserve for a commercial loan where the borrower and guarantors entered into bankruptcy during the quarter. Net income was also impacted by a decrease in non-interest income of $0.4 million, an increase in MRE of $0.2 million and lower net interest income of $0.2 million. The decreases were partially offset by lower income tax expenses of $0.9 million. Net Interest Income: Net interest income for the second quarter of 2026 was $35.9 million, decreasing 0.6% from the first quarter of 2026. Total interest and dividend income was $53.6 million for the second quarter of 2026, a decrease from $53.8 million in the first quarter of 2026. The decrease was attributable to lower average earning assets throughout the quarter as well as the increase in non-performing loans. Interest expense for the second quarter of 2026 was $17.7 million, consistent with the first quarter of 2026 as lower deposit costs were offset by timing and a change in the mix of deposit balances toward higher cost deposits. Net Interest Margin: Net interest margin, on an FTE basis, for the second quarter of 2026 decreased to 3.43%, compared to 3.48% for the first quarter of 2026. The decrease in net interest margin compared to the first quarter of 2026 was primarily the result of a seasonal change in the deposit mix toward higher costing interest-bearing liabilities. Net interest margin was also impacted by the reversal of interest income related to the aforementioned commercial loan migrating to non-performing. Three Months Ended (Dollars in Thousands) June 30, 2026 December 31, 2025 June 30, 2025 Interest and Dividend Income $           53,617 $           54,610 $           51,573 Interest Expense 17,686 19,467 19,040 Net Interest Income 35,931 35,143 32,533 Average Earning Assets (A) 4,211,209 4,302,305 4,142,993 Average Interest-Bearing Liabilities 3,222,939 3,280,856 3,191,906 Average Yield on Earning Assets (A) 5.11 % 5.04 % 4.99 % Average Cost of Interest-Bearing Liabilities 2.20 2.35 2.39 Net Interest Spread 2.91 2.69 2.60 Net Interest Margin 3.42 3.24 3.15 Net Interest Margin - FTE 3.43 3.25 3.16 (A)  Includes Nonaccrual Loans. Provision for Credit Losses: For the second quarter of 2026, the provision for credit losses was $2.8 million compared to $0.5 million in the first quarter of 2026, primarily driven by a $1.6 million specific reserve related to the non-performing commercial loan as well as an increase to the provision due to loan growth in the second quarter of 2026. Non-Interest Income: Non-interest income for the three months ended June 30, 2026, was $8.3 million, a decrease from $8.6 million in the first quarter of 2026. The decrease was the result of the season fluctuation of insurance premiums of $0.1 million as well as a $0.3 million charge related to the impairment of a property held for future use. This was partially offset by an increase in interchange fees from the linked quarter and a positive equity position valuation adjustment of approximately $0.2 million Non-Interest Expense: Non-interest expense for the second quarter of 2026 was $27.5 million, an increase from $26.9 million in the first quarter of 2026. The second quarter of 2026 included approximately $1.0 million of MRE versus $0.8 million in the first quarter of 2026. Provision for Income Taxes:  The provision for income taxes and effective tax rate were $2.9 million and 21.1%, respectively for the second quarter of 2026, and $3.9 million and 22.3%, respectively for the first quarter of 2026. The lower tax expense was driven by lower pre-tax income and a lower effective tax rate. The effective tax rate for the second quarter of 2026 reflects the impact of tax credits recognized from energy production tax credit purchases made in June 2026 offset by nondeductible expenses related to the acquisition of Adirondack Bancorp, Inc. and Adirondack Bank. Balance Sheet Total Assets:  Total assets were $4.5 billion at June 30, 2026, a decrease of $39.7 million, or 0.9%, as compared to March 31, 2026. For the second quarter of 2026, the overall change in asset was driven by a decline in cash balances attributable to a net decrease in deposits.  Investments:  Total investments were $587.9 million as of June 30, 2026, a decrease of $6.6 million, or 1.1%, compared to March 31, 2026. The decrease from March 31, 2026 was driven primarily by paydowns and maturities. There were no material credit quality issues related to the investment portfolio.  Loans: Total loans were $3.5 billion as of June 30, 2026. Loans outstanding increased in the second quarter of 2026 by $57.6 million, driven by growth in commercial loans. Please see the loan detail included in the Consolidated Financial Information  table on page 14. Allowance for Credit Losses: The allowance for credit losses was $36.2 million as of June 30, 2026, which represented 1.03% of loans outstanding, as compared to $34.1 million, or 0.99% of loans outstanding, at March 31, 2026. The increase in the allowance was the result of a $1.6 million specific reserve related to the previously referenced non-performing commercial loan as well as an increase to the allowance for growth in the loan portfolio, partially offset by charge-offs. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.08% for the three-month period ended June 30, 2026, as compared to 0.10% for the three-month period ended March 31, 2026. Nonperforming assets were $8.7 million as of June 30, 2026, representing 0.19% of period-end assets, an increase from $4.9 million, or 0.11%, at March 31, 2026. Nonperforming assets increased due to the $3.8 million non-performing commercial loan previously referenced. Deposits:  At June 30, 2026, deposit balances were $3.7 billion, a decrease of $358.7 million from March 31, 2026. The change from March 31, 2026 was primarily attributable to $300 million of brokered CDs, being replaced by lower costing FHLB borrowings. In addition, the seasonality of municipal deposits contributed to decreased deposits in the quarter. Please refer to page 7 for further details related to deposits. Capital: Total stockholders' equity was $446.3 million at June 30, 2026, an increase of $6.2 million, or 1.4%, from March 31, 2026. The increase from March 31, 2026 was primarily attributable to net income of $11.0 million and other stock-based activity of $0.8 million offset by other comprehensive loss of $0.6 million and dividends of $5.0 million. Arrow's regulatory capital ratios remain strong. As of June 30, 2026, Arrow's Common Equity Tier 1 Capital Ratio was 13.21% and Total Risk-Based Capital Ratio was 14.98%. The capital ratios of Arrow and its subsidiary bank continued to exceed the "well capitalized" regulatory standards. Regulatory capital ratios are preliminary, subject to finalization as part of the current quarter Call Report. 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 77 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. 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: 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 "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, geopolitical events, difficulties in managing Arrow's growth, competition, changes in law or the regulatory environment, risks relating to the integration of Adirondack Bancorp, Inc. and Adirondack Bank, 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, 2025, and other filings with the SEC. 1 EPS, efficiency ratio and ROA excluding merger-related expenses are non-GAAP measures. See reconciliation in Note 5 to the Selected Quarterly Information 2  FTE Net interest margin is a non-GAAP measure. See reconciliation on Note 2 to the Selected Quarterly Information 3  Retail deposits exclude wholesale funding sources   ARROW FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts - Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 INTEREST AND DIVIDEND INCOME Interest and Fees on Loans $       47,181 $       45,600 $      94,307 $      90,150 Interest on Deposits at Banks 1,200 1,622 2,875 3,243 Interest and Dividends on Investment Securities: Fully Taxable 4,717 3,790 9,246 7,398 Exempt from Federal Taxes 519 561 983 1,148 Total Interest and Dividend Income 53,617 51,573 107,411 101,939 INTEREST EXPENSE Interest-Bearing Checking Accounts 2,162 1,941 4,262 3,744 Savings Deposits 8,933 9,367 17,649 18,850 Time Deposits over $250,000 1,052 1,726 2,248 3,537 Other Time Deposits 4,304 5,793 9,740 11,322 Borrowings 1,019 — 1,019 167 Junior Subordinated Obligations Issued to   Unconsolidated Subsidiary Trusts 171 171 340 340 Interest on Financing Leases 45 42 92 89 Total Interest Expense 17,686 19,040 35,350 38,049 NET INTEREST INCOME 35,931 32,533 72,061 63,890 Provision for Credit Losses 2,827 594 3,375 5,613 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 33,104 31,939 68,686 58,277 NON-INTEREST INCOME Income From Fiduciary Activities 2,706 2,398 5,419 4,933 Fees for Other Services to Customers 2,969 2,787 5,696 5,387 Insurance Commissions 1,974 1,804 4,087 3,630 Net Gain (Loss) on Securities 155 (40) 300 277 Net Gain on Sales of Loans 154 213 444 314 Other Operating Income 298 447 938 907 Total Non-Interest Income 8,256 7,609 16,884 15,448 NON-INTEREST EXPENSE Salaries and Employee Benefits 15,097 14,086 30,019 27,641 Occupancy Expenses, Net 2,101 1,952 4,560 3,974 Technology and Equipment Expense 4,757 5,589 9,809 10,676 FDIC Assessments 441 649 1,026 1,319 Other Operating Expense 5,068 3,376 8,915 8,087 Total Non-Interest Expense 27,464 25,652 54,329 51,697 INCOME BEFORE PROVISION FOR INCOME TAXES 13,896 13,896 31,241 22,028 Provision for Income Taxes 2,934 3,091 6,794 4,913 NET INCOME $       10,962 $       10,805 $      24,447 $      17,115 Average Shares Outstanding: Basic 16,428 16,545 16,408 16,611 Diluted 16,467 16,551 16,438 16,618 Per Common Share: Basic Earnings $           0.66 $           0.65 $          1.48 $          1.03 Diluted Earnings 0.66 0.65 1.48 1.03   ARROW FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts - Unaudited) June 30, 2026 December 31, 2025 ASSETS Cash and Due From Banks $              30,881 $              29,132 Interest-Earning Deposits at Banks 155,907 185,051 Investment Securities: Available-for-Sale at Fair Value 498,202 495,868 Held-to-Maturity (Fair Value of $65,270 at June 30, 2026 and $66,569 at December 31, 2025) 65,490 66,975 Equity Securities 5,897 5,597 Other Investments 18,351 4,372 Loans 3,496,541 3,453,093 Allowance for Credit Losses (36,183) (34,322) Net Loans 3,460,358 3,418,771 Premises and Equipment, Net 62,530 59,433 Goodwill 23,789 23,789 Other Intangible Assets, Net 1,612 1,741 Other Assets 159,342 155,133 Total Assets $         4,482,359 $         4,445,862 LIABILITIES Noninterest-Bearing Deposits 736,087 722,374 Interest-Bearing Checking Accounts 871,965 862,192 Savings Deposits 1,590,680 1,557,638 Time Deposits over $250,000 132,350 155,802 Other Time Deposits 324,123 641,463 Total Deposits 3,655,205 3,939,469 Borrowings 310,190 4,265 Junior Subordinated Obligations Issued to Unconsolidated   Subsidiary Trusts 20,000 20,000 Finance Leases 4,887 4,929 Other Liabilities 45,771 45,347 Total Liabilities 4,036,053 4,014,010 STOCKHOLDERS' EQUITY Preferred Stock, $1 Par Value; 1,000,000 Shares Authorized at June 30, 2026 and December 31, 2025 (none issued) — — Common Stock, $1 Par Value: 30,000,000 Shares Authorized; 22,066,559 Shares Issued; 16,545,170 and 16,445,342 Shares Outstanding at June 30, 2026 and December 31, 2025) 22,067 22,067 Additional Paid-in Capital 415,357 414,506 Retained Earnings 116,806 102,271 Accumulated Other Comprehensive Loss (5,390) (4,037) Treasury Stock, at Cost (5,521,389 Shares at June 30, 2026 and 5,621,217 Shares at December 31, 2025) (102,534) (102,955) Total Stockholders' Equity 446,306 431,852 Total Liabilities and Stockholders' Equity $         4,482,359 $         4,445,862   Arrow Financial Corporation Selected Quarterly Information (Dollars In Thousands, Except Per Share Amounts - Unaudited) Quarter Ended 6/30/2026 3/31/2026 12/31/2025 9/30/2025 6/30/2025 Net Income $      10,962 $      13,485 $      14,013 $      12,825 $      10,805 Share and Per Share Data: Period End Shares Outstanding 16,545 16,527 16,445 16,438 16,484 Basic Average Shares Outstanding 16,428 16,382 16,390 16,402 16,545 Diluted Average Shares Outstanding 16,467 16,403 16,413 16,406 16,551 Basic Earnings Per Share $          0.66 $          0.82 $          0.85 $          0.77 $          0.65 Diluted Earnings Per Share 0.66 0.82 0.85 0.77 0.65 Cash Dividend Per Share 0.30 0.30 0.29 0.29 0.28 Selected Quarterly Average Balances:   Interest-Earning Deposits at Banks $    129,628 $    183,252 $    260,806 $    200,251 $    145,473   Investment Securities 614,771 598,817 596,994 574,080 582,380   Loans 3,466,810 3,440,505 3,444,505 3,424,784 3,415,140   Deposits 3,788,961 3,928,761 4,002,221 3,913,721 3,849,093   Other Borrowed Funds 149,307 29,181 29,203 30,539 33,579   Stockholders' Equity 445,887 438,846 425,042 413,058 406,529   Total Assets 4,425,821 4,439,833 4,499,195 4,399,815 4,332,339 Return on Average Assets, annualized 0.99 % 1.23 % 1.24 % 1.16 % 1.00 % Return on Average Equity, annualized 9.86 % 12.46 % 13.08 % 12.32 % 10.66 % Return on Average Tangible Equity, annualized 1 10.46 % 13.23 % 13.92 % 13.13 % 11.38 % Average Earning Assets $ 4,211,209 $ 4,222,574 $ 4,302,305 $ 4,199,115 $ 4,142,993 Average Paying Liabilities 3,222,939 3,244,709 3,280,856 3,193,789 3,191,906 Interest Income 53,617 53,794 54,610 53,598 51,573 Tax-Equivalent Adjustment 2 133 123 114 121 148 Interest Income, Tax-Equivalent 2 53,750 53,917 54,724 53,719 51,721 Interest Expense 17,686 17,664 19,467 19,467 19,040 Net Interest Income 35,931 36,130 35,143 34,131 32,533 Net Interest Income, Tax-Equivalent 2 36,064 36,253 35,258 34,252 32,681 Net Interest Margin, annualized 3.42 % 3.47 % 3.24 % 3.22 % 3.15 % Net Interest Margin, Tax-Equivalent, annualized 2 3.43 % 3.48 % 3.25 % 3.24 % 3.16 % Efficiency Ratio Calculation: 3 Non-Interest Expense $      27,464 $      26,865 $      25,804 $      25,433 $      25,652 Less: Intangible Asset Amortization 71 72 74 76 80 Net Non-Interest Expense $      27,393 $      26,793 $      25,730 $      25,357 $      25,572 Net Interest Income, Tax-Equivalent $      36,064 $      36,253 $      35,257 $      34,252 $      32,681 Non-Interest Income 8,256 8,628 8,268 8,716 7,609 Less: Net Gain (Loss) on Securities 155 145 (127) 392 (40) Net Gross Income $      44,165 $      44,736 $      43,652 $      42,576 $      40,330 Efficiency Ratio 62.02 % 59.89 % 58.94 % 59.56 % 63.41 % Period-End Capital Information: Total Stockholders' Equity (i.e. Book Value) $    446,306 $    440,143 $    431,852 $    417,687 $    408,506 Book Value per Share  26.98 26.63 26.26 25.41 24.78 Goodwill and Other Intangible Assets, net 25,401 25,481 25,530 25,594 25,659 Tangible Book Value per Share 1 25.44 25.09 24.71 23.85 23.23 Capital Ratios: 4 Tier 1 Leverage Ratio 10.19 % 10.02 % 9.68 % 9.66 % 9.64 % Common Equity Tier 1 Capital Ratio  13.21 % 13.30 % 13.01 % 13.07 % 12.73 % Tier 1 Risk-Based Capital Ratio 13.83 % 13.93 % 13.64 % 13.71 % 13.37 % Total Risk-Based Capital Ratio 14.98 % 15.04 % 14.76 % 14.86 % 14.51 %   Arrow Financial Corporation Selected Quarterly Information (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. 6/30/2026 3/31/2026 12/31/2025 9/30/2025 6/30/2025 Total Stockholders' Equity (GAAP) $     446,306 $    440,143 $    431,852 $    417,687 $    408,506 Less:  Goodwill and Other Intangible assets, net 25,401 25,481 25,530 25,594 25,659 Tangible Equity (Non-GAAP) $     420,905 $    414,662 $    406,322 $    392,093 $    382,847 Period End Shares Outstanding 16,545 16,527 16,445 16,438 16,484 Tangible Book Value per Share (Non-GAAP) $         25.44 $        25.09 $        24.71 $        23.85 $        23.23 Net Income 10,962 13,485 14,013 12,825 10,805 Return on Tangible Equity (Net Income/Tangible Equity - Annualized) 10.46 % 13.23 % 13.92 % 13.13 % 11.38 % 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. 6/30/2026 3/31/2026 12/31/2025 9/30/2025 6/30/2025 Interest Income (GAAP) $       53,617 $      53,794 $      54,610 $      53,598 $      51,573 Add:  Tax-Equivalent adjustment (Non-GAAP) 133 123 114 121 148 Interest Income - Tax Equivalent (Non-GAAP) $       53,750 $      53,917 $      54,724 $      53,719 $      51,721 Net Interest Income (GAAP) $       35,931 $      36,130 $      35,143 $      34,131 $      32,533 Add:  Tax-Equivalent adjustment  (Non-GAAP) 133 123 114 121 148 Net Interest Income - Tax Equivalent (Non-GAAP) $       36,064 $      36,253 $      35,257 $      34,252 $      32,681 Average Earning Assets $  4,211,209 $ 4,222,574 $ 4,302,305 $ 4,199,115 $ 4,142,993 Net Interest Margin (Non-GAAP)* 3.43 % 3.48 % 3.25 % 3.24 % 3.16 % 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 June 30, 2026 CET1 ratio listed in the tables (i.e., 13.21%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%). Regulatory capital ratios are estimated, subject to finalization as part of the current quarter Call Report. 6/30/2026 3/31/2026 12/31/2025 9/30/2025 6/30/2025 Total Risk Weighted Assets $  3,253,881 $ 3,180,782 $ 3,182,240 $ 3,095,225 $ 3,121,451 Common Equity Tier 1 Capital 429,971 423,139 414,050 404,426 397,432 Common Equity Tier 1 Ratio 13.21 % 13.30 % 13.01 % 13.07 % 12.73 % 5. Non-GAAP Financial Measure Reconciliation: Net Income and Net Non-Interest Expense adjusted for non-core expenses. Non- core expenses include merger-related expenses, which are related to the announced acquisition of Adirondack Bancorp, Inc., and unification expenses, which are related to the system conversion and operational merger of the Company's two banking subsidiaries during the year ended December 31, 2025.  EPS, efficiency ratio, and ROA are presented on an adjusted basis to reflect these exclusions. These are non-GAAP financial measures, which Arrow believes provides investors with information that is useful in understanding its financial performance. 6/30/2026 3/31/2026 12/31/2025 9/30/2025 6/30/2025 Net Income $       10,962 $      13,485 $      14,013 $      12,825 $      10,805 Non-Core Expenses: Merger-Related Expenses 971 790 — — — Unification Expenses — — — 543 1,134 Less:  Tax Benefit (214) (174) — (119) (249) Net Non-Core Expenses (Non-GAAP) 757 616 — 424 885 Core Net Income (Non-GAAP) $       11,719 $      14,101 $      14,013 $      13,249 $      11,690 Net Non-Interest Expense $       27,393 $      26,793 $      25,730 $      25,357 $      25,572 Non-Core Expenses: Merger-Related Expenses 971 790 — — — Unification Expenses — — — 543 1,134 Core Net Non-Interest Expense (Non-GAAP) $       26,422 $      26,003 $      25,730 $      24,814 $      24,438 Core Earnings Per Share (Non-GAAP) $           0.71 $          0.85 $          0.85 $          0.80 $          0.70 Core Return on Average Assets (Non-GAAP) 1.06 % 1.29 % 1.24 % 1.20 % 1.08 % Core Efficiency Ratio (Non-GAAP) 59.83 % 58.13 % 58.94 % 58.28 % 60.60 % * Quarterly ratios have been annualized.   Arrow Financial Corporation Average Consolidated Balance Sheets and Net Interest Income Analysis (Dollars in Thousands - Unaudited) Quarter Ended: June 30, 2026 June 30, 2025 Interest Rate Interest Rate Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid Interest-Earning Deposits at Banks $    129,628 $     1,200 3.71 % $    145,473 $     1,622 4.47 % Investment Securities: Fully Taxable 548,084 4,717 3.45 496,614 3,790 3.06 Exempt from Federal Taxes 66,687 519 3.12 85,766 561 2.62 Loans (1) 3,466,810 47,181 5.46 3,415,140 45,600 5.36 Total Earning Assets (1) 4,211,209 53,617 5.11 4,142,993 51,573 4.99 Allowance for Credit Losses (34,305) (35,238) Cash and Due From Banks 29,874 29,267 Other Assets 219,043 195,317 Total Assets $ 4,425,821 $ 4,332,339 Deposits: Interest-Bearing Checking Accounts $    827,385 2,162 1.05 $    845,041 1,941 0.92 Savings Deposits 1,596,055 8,933 2.24 1,494,930 9,367 2.51 Time Deposits over $250,000 139,256 1,052 3.03 179,980 1,726 3.85 Other Time Deposits 510,936 4,304 3.38 638,376 5,793 3.64 Total Interest-Bearing Deposits 3,073,632 16,451 2.15 3,158,327 18,827 2.39 Borrowings 124,411 1,019 3.29 8,601 — — Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts 20,000 171 3.43 20,000 171 3.43 Finance Leases 4,896 45 3.69 4,978 42 3.38 Total Interest-Bearing Liabilities 3,222,939 17,686 2.20 3,191,906 19,040 2.39 Noninterest-Bearing Deposits 715,329 690,766 Other Liabilities 41,666 43,138 Total Liabilities 3,979,934 3,925,810 Stockholders' Equity 445,887 406,529 Total Liabilities and Stockholders' Equity $ 4,425,821 $ 4,332,339 Net Interest Income $   35,931 $   32,533 Net Interest Spread 2.91 % 2.60 % Net Interest Margin 3.42 % 3.15 % (1) Includes Nonaccrual Loans.   Arrow Financial Corporation Average Consolidated Balance Sheets and Net Interest Income Analysis (Dollars in Thousands - Unaudited) Quarter Ended: June 30, 2026 March 31, 2026 Interest Rate Interest Rate Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid Interest-Earning Deposits at Banks $    129,628 $     1,200 3.71 % $    183,252 $     1,675 3.71 % Investment Securities: Fully Taxable 548,084 4,717 3.45 536,293 4,529 3.42 Exempt from Federal Taxes 66,687 519 3.12 62,524 464 3.01 Loans (1) 3,466,810 47,181 5.46 3,440,505 47,126 5.56 Total Earning Assets (1) 4,211,209 53,617 5.11 4,222,574 53,794 5.17 Allowance for Credit Losses (34,305) (34,370) Cash and Due From Banks 29,874 30,253 Other Assets 219,043 221,376 Total Assets $ 4,425,821 $ 4,439,833 Deposits: Interest-Bearing Checking Accounts $    827,385 2,162 1.05 $    859,054 2,100 0.99 Savings Deposits 1,596,055 8,933 2.24 1,570,598 8,716 2.25 Time Deposits over $250,000 139,256 1,052 3.03 147,425 1,196 3.29 Other Time Deposits 510,936 4,304 3.38 638,451 5,436 3.45 Total Interest-Bearing Deposits 3,073,632 16,451 2.15 3,215,528 17,448 2.20 Borrowings 124,411 1,019 3.29 4,265 — — Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts 20,000 171 3.43 20,000 169 3.43 Finance Leases 4,896 45 3.69 4,916 47 3.88 Total Interest-Bearing Liabilities 3,222,939 17,686 2.20 3,244,709 17,664 2.21 Noninterest-Bearing Deposits 715,329 713,233 Other Liabilities 41,666 43,045 Total Liabilities 3,979,934 4,000,987 Stockholders' Equity 445,887 438,846 Total Liabilities and Stockholders' Equity $ 4,425,821 $ 4,439,833 Net Interest Income $   35,931 $   36,130 Net Interest Spread 2.91 % 2.96 % Net Interest Margin 3.42 % 3.47 % (1) Includes Nonaccrual Loans.   Arrow Financial Corporation Average Consolidated Balance Sheets and Net Interest Income Analysis (Dollars in Thousands - Unaudited) Year to Date Period Ended: June 30, 2026 June 30, 2025 Interest Rate Interest Rate Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid Interest-Earning Deposits at Banks $     156,292 $     2,875 3.71 % $          145,746 $     3,243 4.49 % Investment Securities: Fully Taxable 542,221 9,246 3.44 498,250 7,398 2.99 Exempt from Federal Taxes 64,617 983 3.07 88,835 1,148 2.61 Loans (1) 3,453,730 94,307 5.51 3,410,632 90,150 5.33 Total Earning Assets (1) 4,216,860 107,411 5.14 4,143,463 101,939 4.96 Allowance for Credit Losses (34,338) (34,469) Cash and Due From Banks 30,062 30,385 Other Assets 220,117 189,269 Total Assets $  4,432,701 $       4,328,648 Deposits: Interest-Bearing Checking Accounts $     843,132 4,262 1.02 $          842,818 3,744 0.90 Savings Deposits 1,583,396 17,649 2.25 1,505,387 18,850 2.53 Time Deposits over $250,000 143,318 2,248 3.16 183,053 3,537 3.90 Other Time Deposits 574,341 9,740 3.42 615,878 11,322 3.71 Total Interest-Bearing Deposits 3,144,187 33,899 2.17 3,147,136 37,453 2.40  Borrowings 64,671 1,019 3.18 15,949 167 2.11 Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts 20,000 340 3.43 20,000 340 3.43 Finance Leases 4,905 92 3.78 4,987 89 3.60 Total Interest-Bearing Liabilities 3,233,763 35,350 2.20 3,188,072 38,049 2.41 Noninterest-Bearing Deposits 714,287 690,039 Other Liabilities 42,264 45,069 Total Liabilities 3,990,314 3,923,180 Stockholders' Equity 442,387 405,468 Total Liabilities and Stockholders' Equity $  4,432,701 $       4,328,648 Net Interest Income $   72,061 $   63,890 Net Interest Spread 2.94 % 2.55 % Net Interest Margin 3.45 % 3.11 % (1) Includes Nonaccrual Loans.   Arrow Financial Corporation Consolidated Financial Information (Dollars in Thousands - Unaudited) Quarter Ended: 6/30/2026 12/31/2025 Loan Portfolio Commercial Loans $     173,057 $     165,729 Commercial Real Estate Loans 837,461 818,259   Subtotal Commercial Loan Portfolio 1,010,518 983,988 Consumer Loans 1,083,169 1,076,007 Residential Real Estate Loans 1,402,854 1,393,098 Total Loans $  3,496,541 $  3,453,093 Allowance for Credit Losses Allowance for Credit Losses, Beginning of Quarter $       34,055 $       34,176 Loans Charged-off (1,770) (1,477) Less Recoveries of Loans Previously Charged-off 1,071 777 Net Loans Charged-off (699) (700) Provision for Credit Losses 2,827 846 Allowance for Credit Losses, End of Quarter $       36,183 $       34,322 Nonperforming Assets Nonaccrual Loans $         6,814 $         6,415 Loans Past Due 90 or More Days and Accruing 1,487 2,040 Loans Restructured and in Compliance with Modified Terms — — Total Nonperforming Loans 8,301 8,455 Repossessed Assets 363 280 Other Real Estate Owned — — Total Nonperforming Assets $         8,664 $         8,735 Key Asset Quality Ratios Net Loans Charged-off to Average Loans,    Quarter-to-date Annualized 0.08 % 0.08 % Provision for Credit Losses to Average Loans,   Quarter-to-date Annualized 0.33 % 0.10 % Allowance for Credit Losses to Period-End Loans 1.03 % 0.99 % Allowance for Credit Losses to Period-End Nonperforming Loans 435.89 % 405.94 % Nonperforming Loans to Period-End Loans 0.24 % 0.24 % Nonperforming Assets to Period-End Assets 0.19 % 0.20 % Year-to-Date Period Ended: 6/30/2026 12/31/2025 Allowance for Credit Losses Allowance for Credit Losses, Beginning of Year $       34,322 $       33,598 Loans Charged-off (3,344) (9,554) Less Recoveries of Loans Previously Charged-off 1,830 3,004 Net Loans Charged-off (1,514) (6,550) Provision for Credit Losses 3,375 7,274 Allowance for Credit Losses, End of Period $       36,183 $       34,322 Key Asset Quality Ratios Net Loans Charged-off to Average Loans, Annualized 0.09 % 0.19 % Provision for Loan Losses to Average Loans, Annualized 0.20 % 0.21 %   View original content to download multimedia: https://www.prnewswire.com/news-releases/arrow-reports-2nd-quarter-net-income-of-11-0-million-or-0-66-per-share-and-declares-3rd-quarter-dividend-of-0-30-per-share-302832699.html SOURCE Arrow Financial Corporation

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