8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report: August 8, 2023

(Date of earliest event reported)

ARROW FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

New York	0-12507	22-2448962
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

250 Glen Street	Glens Falls	New York	12801
(Address of principal executive offices)			(Zip Code)
Registrant’s telephone number, including area code:			518	745-1000

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

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, Par Value $1.00 per share	AROW	NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act	☐

Item 2.02.     Results of Operations and Financial Condition.

On August 8, 2023, Arrow Financial Corporation (the "Company") issued a press release containing unaudited financial information and accompanying discussion for the quarter and year-to-date period ended June 30, 2023.  A copy of this press release is furnished as Exhibit 99 .1 to this report on Form 8-K.

Item 7.01.     Regulation FD Disclosure.

On August 8, 2023, the Company made available certain presentation material (the "Second Quarter 2023 Investor Presentation"), which includes among other things, a review of financial results and trends through the period ended June 30, 2023. The furnished Second Quarter 2023 Investor Presentation should be read in conjunction with our Earnings Release for the quarter ended June 30, 2023.

A copy of the presentation material is included as Exhibit 99.2 to this current report on Form 8-K and is incorporated herein by reference.

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

Item 9.01.    Financial Statements and Exhibits.

Exhibits:

Exhibit No. Description

Exhibit 99.1 Arrow Financial Corporation Earnings Press Release August 8, 2023

Exhibit 99.2 Arrow Financial Corporation Second Quarter 2023 Investor Presentation

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

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

		ARROW FINANCIAL CORPORATION
		Registrant
Date:	August 8, 2023	/s/ Penko Ivanov
		Penko Ivanov
		Chief Financial Officer

EX-99.1

	250 Glen Street Glens Falls, NY 12801
	NASDAQ® Symbol: "AROW" Website: arrowfinancial.com Media Contact: Rachael Murray Tel: (518) 742-6505

Arrow Reports $6.0 million in Q2 2023 Net Income, Loans Reach Record High of $3.1 Billion

GLENS FALLS, N.Y. (August 8, 2023) – Arrow Financial Corporation (NasdaqGS® – AROW) ("Arrow") announced financial results for the three-month period ended June 30, 2023. Net income for the second quarter of 2023 was $6.0 million and fully diluted earnings per share was $0.36. Nonperforming assets decreased $4.2 million in the second quarter, with the allowance for credit losses reaching 477% of nonperforming loans.

Arrow President and CEO David S. DeMarco:

"I am pleased to announce that we are back in full compliance with our NASDAQ® filing requirements. While this is an important step, it did not distract us from growing the business to a new record high for loans while maintaining sound credit quality. As always, our team is dedicated to serving our communities and our customers throughout our eight-county footprint. We remain focused on further enhancing the customer experience and optimizing our operations.”

"Now that the Arrow team has returned to our fully renovated headquarters in downtown Glens Falls, New York, we are opening our Main Office branch and lending areas to customers. The renovated campus offers a collaborative and modern space for both customers and our team. This investment is a key part of the revitalization of downtown Glens Falls and represents Arrow's approach to community banking, based on long-lasting and meaningful relationships with our shareholders, customers, communities and employees."

This Earnings Release and related commentary should be read in conjunction with our August 8, 2023 Form 8-K and related Second Quarter 2023 Investor Presentation, which can be found on our website: arrowfinancial.com/investor-presentations.

Second-Quarter Highlights and Key Metrics

•Total loans reached a record high of $3.1 billion as of June 30, 2023,growing at an annualized rate of 8.6%, or $64.5 million, for the quarter.

•Strong on-balance sheet liquidity of $376 million, or 9% of total assets; 4% cash and 5% unencumbered readily marketable securities.

•Additional $1.3 billion of immediately available liquidity with FHLB, FRB and other bank lines.

•Replaced FHLB advances with $150 million of flexible term and lower cost advances from the FRB of NY Bank Term Funding Program (BTFP).

•Immediately available liquidity provides in excess of 200% coverage of uninsured deposits which are less than 30% of total deposits.

•Loan-to-deposit ratio was 88%.

•Nonperforming assets decreased to $7.1 million at June 30, 2023, representing 0.17% of period-end assets.

•Net charge-offs to average loans for the second quarter of 2023 were 0.07% as compared to 0.10% for the previous quarter.

•Allowance for Credit Losses to Nonperforming Loans coverage was 477%.

•Total assets and deposits remained relatively unchanged at $4.1 billion and $3.5 billion respectively.

•Non-interest expenses included $2.0 million in incremental expenses related to the delay in filing the 2022 Form 10-K and the First Quarter Form 10-Q.

•Net interest margin was 2.61%.

1

•Return on average assets (ROA) was 0.59%; excluding incremental expenses related to the delayed filings it was 0.75%.

•Return on average equity (ROE) was 6.64%; excluding incremental expense related to the delayed filings it was 8.41%.

Income Statement

•Net Income: Net income for the second quarter of 2023 was $6.0 million, decreasing from $8.6 million and $12.0 million in the first quarter of 2023 and the second quarter of 2022, respectively. The decline from the first quarter of 2023 was primarily due to an increase of $6.2 million in interest expense and an increase in non-interest expense of $1.8 million, partially offset by an increase in interest and dividend income of $3.9 million. The decline from the the same period in the prior year was due to an increase of $12.7 million in interest expense, an increase in non-interest expense of $3.7 million and a decrease in non-interest income of $838 thousand. The decrease was partially offset by an increase in interest and dividend income of $9.4 million.

•Net Interest Income: Net interest income for the second quarter was $25.8 million, decreasing 8.3% from $28.1 million in the first quarter of 2023 and 11.2% from $29.0 million in the comparable quarter of 2022. Interest and fees on loans were $34.6 million for the second quarter of 2023, an increase from $31.9 million in the first quarter of 2023 and from $26.9 million for the quarter ended June 30, 2022. These increases are driven by loan growth and higher loan rates. Interest expense for the second quarter of 2023 was $14.2 million, an increase of $6.2 million versus first quarter of 2023 and $12.7 million from the comparable quarter ended June 30, 2022. The increases for both comparison periods were driven by higher deposit rates and changes in deposit composition.

•Net Interest Margin: Net interest margin was 2.61% for the quarter, compared to 2.96% for the first quarter of 2023 and 3.02% for the second quarter of 2022. The decrease in net interest margin compared to the first quarter in 2023 was the result of the cost of interest-bearing liabilities increasing at a faster pace than the yield on average earning assets.The year-over-year decrease in net interest margin was also impacted by lower cash balances as a result of deposit outflows in the fourth quarter of 2022 that temporarily reduced average earning asset balances year-over- year.

	Three Months Ended
	(Dollars in Thousands)
	June 30, 2023			March 31, 2023			June 30, 2022
Interest and Dividend Income	$	40,013		$	36,110		$	30,593
Interest Expense	14,241			8,016			1,555
Net Interest Income	25,772			28,094			29,038
Average Earning Assets(1)	3,953,642			3,845,825			3,858,837
Average Interest-Bearing Liabilities	2,924,743			2,782,299			2,808,287
Yield on Earning Assets(1)	4.06		%	3.81		%	3.18		%
Cost of Interest-Bearing Liabilities	1.95			1.17			0.22
Net Interest Spread	2.11			2.88			2.96
Net Interest Margin	2.61			2.96			3.02
Income Earned on PPP Loans included in Net Interest Income	$	—		$	—		$	438
Net Interest Income excluding PPP loans	25,772			28,094			28,600
Net Interest Margin excluding PPP loans	2.61		%	2.96		%	2.98		%
(1) Includes Nonaccrual Loans.

•Provision for Credit Losses: For the second quarter of 2023, the provision for credit losses was $948 thousand compared to $1.6 million in the first quarter of 2023 and $905 thousand in the prior-year quarter. The key drivers for the provision for credit losses in the second quarter of 2023

2

were loan growth and, to a lesser extent, charge-offs. The second quarter 2023 provision for credit losses was not impacted by changes to the economic forecast factors embedded in the allowance model. The provision for the first quarter of 2023 was driven by charge-offs and by changes made to the economic forecast within the model.

•Non-Interest Income: Non-interest income for the three months ended June 30, 2023, was $6.9 million, compared to $6.7 million in the first quarter of 2023 and $7.7 million in the comparable quarter of 2022. Income from fiduciary activities, which includes Wealth Management services, rebounded in the second quarter of 2023 after a downturn in 2022 caused by declining market performance. Fees and other services to customers declined versus the linked quarter and year-over-year driven by lower interchange fees. Other income was consistent with both the first quarter of 2023 and the comparable quarter of 2022.

•Non-Interest Expense: Non-interest expense for the second quarter of 2023 was $24.1 million, an increase from $22.3 million in the first quarter of 2023 and $20.3 million for the second quarter of 2022. The increase was related to $3.0 million of additional legal and professional fees incurred in the first half of 2023 associated with the delay in the filing of the 2022 Form 10-K and the First Quarter Form 10-Q. Salaries and benefits increased $0.5 million year-over-year as a result of pension and other benefit expenses.

•Provision for Income Taxes: The provision for income taxes was $1.6 million for the second quarter of 2023, $2.4 million for the first quarter of 2023 and $3.6 million for the second quarter of 2022. The reduction in the provision for income taxes was the result of lower pre-tax income. The effective tax rate as of June 30, 2023 was 20.9%.

Balance Sheet

•Total Assets: Total assets were $4.1 billion at June 30, 2023, comparable to March 31, 2023 and an increase of $134.1 million, or 3.4%, compared to December 31, 2022. Growth in the balance sheet is in line with growth in the loan portfolio and higher cash balances.

•Investments: Total investments were $694.0 million as of June 30, 2023, a decrease of $51.1 million, or 6.9%, compared to March 31, 2023 and a decrease of $57.0 million compared to December 31, 2022. The decrease for both periods was driven primarily by paydowns and maturities (net of purchases) of $56.7 million and $45.3 million respectively. The proceeds were primarily used to fund loan growth and for general corporate purposes. The rising rate environment led to unrealized losses of $5.2 million within the available-for-sale portfolio in the second quarter of 2023

•Loans: Total loans reached a record high of $3.1 billion as of June 30, 2023. Loan growth for the second quarter of 2023 was $64.5 million, or 2.1%, and $86.7 million, or 2.9%, from December 31, 2022. Loan growth was spread across all segments. Please see the loan detail included in the consolidated financial information table on page 11.

•Allowance for Credit Losses: The allowance for credit losses was $31.2 million on June 30, 2023, which represented 1.02% of loans outstanding, as compared to $30.8 million or 1.02% at March 31, 2023 and $30.0 million or 1.00% at December 31, 2022. Asset quality improved at June 30, 2023. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.07% for the three-month period ended June 30, 2023, as compared to 0.10% for the three-month period ended March 31, 2023 and 0.09% for the three-month period ended December 31, 2022. Nonperforming assets of $7.1 million at June 30, 2023, represented 0.17% of period-end assets, compared to $11.3 million or 0.27% at March 31, 2023 and $12.6 million or 0.32% at December 31, 2022.

3

•Deposits: At June 30, 2023, deposit balances were $3.5 billion, relatively unchanged from March 31, 2023 and December 31, 2022. While overall deposit balances have remained stable, the deposit mix has continued to shift from non-interest bearing accounts to higher cost money market and time deposit accounts. Please refer to page 6 for further details related to deposits.

•Capital: Total stockholders’ equity was $361.4 million at June 30, 2023, a decrease of $1.9 million, or 0.5%, from the March 31, 2023 level of $363.4 million, and an increase of $7.9 million, or 2.2%, from December 31, 2022. Arrow's regulatory capital ratios remained strong in the second quarter of 2023. As of June 30, 2023, Arrow's Common Equity Tier 1 Capital Ratio was 13.27% and Total Risk-Based Capital Ratio was 15.08%. The capital ratios of Arrow and both its 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

•Cash and Stock Dividends: On June 15, 2023, Arrow distributed a cash dividend of $0.27 per share. On July 28, 2023, Arrow declared a cash dividend of $.27 per share, payable on September 15, 2023, to shareholders of record as of September 1, 2023. This marks the 41st consecutive quarterly cash dividend.

About Arrow

Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. Arrow is the parent of Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company. Other subsidiaries include Upstate Agency, LLC and North Country Investment Advisers, Inc.

Non-GAAP Financial Measures Reconciliation

In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). Some measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission ("SEC") and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules. These non-GAAP financial measures include: tangible equity, return on tangible equity, tax-equivalent adjustment and related net interest income, tax-equivalent, the efficiency ratio and net interest margin. Management believes that the non-GAAP financial measures disclosed by Arrow are useful in evaluating Arrow's performance and that such information should be considered as supplemental in nature and not as a substitute for, or superior to, the related financial information prepared in accordance with GAAP. Non-GAAP financial measures may differ from similar measures presented by other companies. See the reconciliation of GAAP to non-GAAP measures in the section "Selected Quarterly Information."

Safe Harbor Statement

The information in this document may contain statements based on management’s beliefs, assumptions, expectations, estimates and projections about the future. Such "forward-looking statements," as defined in Section 21E of the Securities Exchange Act of 1934, as amended, involve a degree of uncertainty and attendant risk. Actual outcomes and results may differ, explicitly or by implication. We are not obliged 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, 2022 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 Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans	$	34,618	$	26,906	$	66,504	$	52,645
Interest on Deposits at Banks	1,674		427		2,153		625
Interest and Dividends on Investment Securities:
Fully Taxable	2,951		2,444		5,899		4,633
Exempt from Federal Taxes	770		816		1,567		1,637
Total Interest and Dividend Income	40,013		30,593		76,123		59,540
INTEREST EXPENSE
Interest-Bearing Checking Accounts	820		199		1,190		362
Savings Deposits	8,514		892		14,101		1,309
Time Deposits over $250,000	1,119		26		1,693		54
Other Time Deposits	1,196		111		1,670		220
Borrowings	2,373		108		3,166		295
Junior Subordinated Obligations Issued to   Unconsolidated Subsidiary Trusts	171		171		340		340
Interest on Financing Leases	48		48		97		97
Total Interest Expense	14,241		1,555		22,257		2,677
NET INTEREST INCOME	25,772		29,038		53,866		56,863
Provision for Credit Losses	948		905		2,502		1,674
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	24,824		28,133		51,364		55,189
NON-INTEREST INCOME
Income From Fiduciary Activities	2,428		2,517		4,703		5,113
Fees for Other Services to Customers	2,717		3,050		5,312		5,845
Insurance Commissions	1,560		1,622		3,080		3,133
Net (Loss) Gain on Securities	(181)		154		(285)		284
Net Gain on Sales of Loans	—		10		4		62
Other Operating Income	382		391		769		1,469
Total Non-Interest Income	6,906		7,744		13,583		15,906
NON-INTEREST EXPENSE
Salaries and Employee Benefits	12,039		11,687		23,986		22,973
Occupancy Expenses, Net	1,583		1,602		3,211		3,200
Technology and Equipment Expense	4,362		3,974		8,779		7,753
FDIC Assessments	484		291		963		598
Other Operating Expense	5,615		2,791		9,440		4,766
Total Non-Interest Expense	24,083		20,345		46,379		39,290
INCOME BEFORE PROVISION FOR INCOME TAXES	7,647		15,532		18,568		31,805
Provision for Income Taxes	1,600		3,558		3,959		7,256
NET INCOME	$	6,047	$	11,974	$	14,609	$	24,549
Average Shares Outstanding 1:
Basic	16,553		16,494		16,552		16,503
Diluted	16,553		16,535		16,552		16,551
Per Common Share:
Basic Earnings	$	0.36	$	0.72	$	0.88	$	1.48
Diluted Earnings	0.36		0.72		0.88		1.48
1 2022 Share and Per Share Amounts have been restated for the September 23, 2022, 3% stock dividend.

5

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Amounts - Unaudited)

	June 30, 2023		December 31, 2022		June 30, 2022
ASSETS
Cash and Due From Banks	$	33,803	$	31,886	$	51,549
Interest-Bearing Deposits at Banks	139,798		32,774		165,705
Investment Securities:
Available-for-Sale at Fair Value	543,708		573,495		582,741
Held-to-Maturity (Fair Value of $139,143 at June 30, 2023; $171,623 at December 31, 2022; and $180,511 at June 30, 2022)	143,460		175,364		182,096
Equity Securities	1,889		2,174		2,031
FHLB and Federal Reserve Bank Stock	4,932		6,064		4,718
Loans	3,069,897		2,983,207		2,844,802
Allowance for Credit Losses	(31,170)		(29,952)		(28,090)
Net Loans	3,038,727		2,953,255		2,816,712
Premises and Equipment, Net	59,773		56,491		50,141
Goodwill	21,873		21,873		21,873
Other Intangible Assets, Net	1,302		1,500		1,710
Other Assets	114,388		114,633		111,929
Total Assets	$	4,103,653	$	3,969,509	$	3,991,205
LIABILITIES
Noninterest-Bearing Deposits	759,495		836,871		824,842
Interest-Bearing Checking Accounts	856,016		997,694		1,046,570
Savings Deposits	1,517,937		1,454,364		1,504,791
Time Deposits over $250,000	140,694		76,224		40,021
Other Time Deposits	228,082		133,211		129,436
Total Deposits	3,502,224		3,498,364		3,545,660
Borrowings	171,800		54,800		25,000
Junior Subordinated Obligations Issued to Unconsolidated   Subsidiary Trusts	20,000		20,000		20,000
Finance Leases	5,093		5,119		5,144
Other Liabilities	43,093		37,688		38,903
Total Liabilities	3,742,210		3,615,971		3,634,707
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at June 30, 2023, December 31, 2022 and June 30, 2022	—		—		—
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (21,423,992 Shares Issued at June 30, 2023 and December 31, 2022 and 20,800,144 Shares Issued at June 30, 2022)	21,424		21,424		20,800
Additional Paid-in Capital	401,069		400,270		379,423
Retained Earnings	71,076		65,401		69,980
Accumulated Other Comprehensive Loss	(47,613)		(49,655)		(29,564)
Treasury Stock, at Cost (4,870,934 Shares at June 30, 2023; 4,872,355 Shares at December 31, 2022 and 4,777,605 Shares at June 30, 2022)	(84,513)		(83,902)		(84,141)
Total Stockholders’ Equity	361,443		353,538		356,498
Total Liabilities and Stockholders’ Equity	$	4,103,653	$	3,969,509	$	3,991,205

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Arrow Financial Corporation

Selected Quarterly Information

(Dollars In Thousands, Except Per Share Amounts- Unaudited)

Quarter Ended	6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
Net Income	$	6,047		$	8,562		$	12,087		$	12,163		$	11,974
Transactions in Net Income (Net of Tax):
Net Changes in Fair Value of Equity Investments	(133)			(76)			35			70			114
Share and Per Share Data:1
Period End Shares Outstanding	16,553			16,553			16,552			16,523			16,503
Basic Average Shares Outstanding	16,553			16,552			16,535			16,512			16,494
Diluted Average Shares Outstanding	16,553			16,564			16,589			16,558			16,535
Basic Earnings Per Share	$	0.36		$	0.52		$	0.73		$	0.74		$	0.72
Diluted Earnings Per Share	0.36			0.52			0.73			0.74			0.72
Cash Dividend Per Share	0.270			0.270			0.270			0.262			0.262
Selected Quarterly Average Balances:
Interest-Bearing Deposits at Banks	$	130,057		$	40,436		$	143,499		$	209,001		$	232,545
Investment Securities	787,175			813,461			845,859			821,052			822,112
Loans	3,036,410			2,991,928			2,951,547			2,872,066			2,804,180
Deposits	3,460,711			3,480,279			3,614,945			3,598,519			3,569,754
Other Borrowed Funds	220,616			100,596			63,304			50,125			50,140
Shareholders' Equity	365,070			359,556			351,402			361,675			357,228
Total Assets	4,087,653			3,978,851			4,074,028			4,047,738			4,012,999
Return on Average Assets, annualized	0.59		%	0.87		%	1.18		%	1.19		%	1.20		%
Return on Average Equity, annualized	6.64		%	9.66		%	13.65		%	13.34		%	13.44		%
Return on Average Tangible Equity, annualized 2	7.10		%	10.33		%	14.62		%	14.27		%	14.40		%
Average Earning Assets	$	3,953,642		$	3,845,825		$	3,940,905		$	3,902,119		$	3,858,837
Average Paying Liabilities	2,924,743			2,782,299			2,891,092			2,781,985			2,808,287
Interest Income	40,013			36,110			35,904			34,207			30,593
Tax-Equivalent Adjustment 3	196			202			279			268			269
Interest Income, Tax-Equivalent 3	40,209			36,312			36,183			34,475			30,862
Interest Expense	14,241			8,016			5,325			3,306			1,555
Net Interest Income	25,772			28,094			30,579			30,901			29,038
Net Interest Income, Tax-Equivalent 3	25,968			28,296			30,858			31,169			29,307
Net Interest Margin, annualized	2.61		%	2.96		%	3.08		%	3.14		%	3.02		%
Net Interest Margin, Tax-Equivalent, annualized 3	2.63		%	2.98		%	3.11		%	3.17		%	3.05		%
Efficiency Ratio Calculation: 4
Non-Interest Expense	$	24,083		$	22,296		$	20,792		$	21,448		$	20,345
Less: Intangible Asset Amortization	44			45			47			48			48
Net Non-Interest Expense	$	24,039		$	22,251		$	20,745		$	21,400		$	20,297
Net Interest Income, Tax-Equivalent	$	25,968		$	28,296		$	30,858		$	31,169		$	29,307
Non-Interest Income	6,906			6,677			7,165			7,827			7,744
Less: Net (Loss) Gain on Securities	(181)			(104)			48			95			154
Net Gross Income	$	33,055		$	35,077		$	37,975		$	38,901		$	36,897
Efficiency Ratio	72.72		%	63.43		%	54.63		%	55.01		%	55.01		%
Period-End Capital Information:
Total Stockholders' Equity (i.e. Book Value)	$	361,443		$	363,371		$	353,538		$	345,550		$	356,498
Book Value per Share 1	21.84			21.95			21.36			20.91			21.60
Goodwill and Other Intangible Assets, net	23,175			23,273			23,373			23,477			23,583
Tangible Book Value per Share 1,2	20.44			20.55			19.95			19.49			20.17
Capital Ratios:5
Tier 1 Leverage Ratio	9.92		%	10.13		%	9.80		%	9.71		%	9.60		%
Common Equity Tier 1 Capital Ratio	13.27		%	13.34		%	13.32		%	13.14		%	13.14		%
Tier 1 Risk-Based Capital Ratio	13.96		%	14.03		%	14.01		%	13.85		%	13.86		%
Total Risk-Based Capital Ratio	15.08		%	15.15		%	15.11		%	14.93		%	14.93		%
Assets Under Trust Admin. & Investment Mgmt.	$	1,711,460		$	1,672,117		$	1,606,132		$	1,515,994		$	1,589,178

7

Arrow Financial Corporation

Selected Quarterly Information - Continued

(Dollars In Thousands, Except Per Share Amounts- Unaudited)

Footnotes:
1.	Share and Per Share Data have been restated for the September 23, 2022, 3% stock dividend.
2.	Non-GAAP Financial Measure Reconciliation: Tangible Book Value, Tangible Equity, and Return on Tangible Equity exclude goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures which Arrow believes provides investors with information that is useful in understanding its financial performance.
		6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
	Total Stockholders' Equity (GAAP)	$	361,443		$	363,371		$	353,538		$	345,550		$	356,498
	Less: Goodwill and Other Intangible assets, net	23,175			23,273			23,373			23,477			23,583
	Tangible Equity (Non-GAAP)	$	338,268		$	340,098		$	330,165		$	322,073		$	332,915
	Period End Shares Outstanding	16,553			16,553			16,552			16,523			16,503
	Tangible Book Value per Share (Non-GAAP)	$	20.44		$	20.55		$	19.95		$	19.49		$	20.17
	Net Income	6,047			8,562			12,087			12,163			11,974
	Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)	7.10		%	10.33		%	14.62		%	14.27		%	14.40		%
3.	Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which Arrow believes provides investors with information that is useful in understanding its financial performance.
		6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
	Interest Income (GAAP)	$	40,013		$	36,110		$	35,904		$	34,207		$	30,593
	Add: Tax-Equivalent adjustment      (Non-GAAP)	196			202			279			268			269
	Interest Income - Tax Equivalent      (Non-GAAP)	$	40,209		$	36,312		$	36,183		$	34,475		$	30,862
	Net Interest Income (GAAP)	$	25,772		$	28,094		$	30,579		$	30,901		$	29,038
	Add: Tax-Equivalent adjustment      (Non-GAAP)	196			202			279			268			269
	Net Interest Income - Tax Equivalent      (Non-GAAP)	$	25,968		$	28,296		$	30,858		$	31,169		$	29,307
	Average Earning Assets	$	3,953,642		$	3,845,825		$	3,940,905		$	3,902,119		$	3,858,837
	Net Interest Margin (Non-GAAP)*	2.63		%	2.98		%	3.11		%	3.17		%	3.05		%
4.	Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. Arrow believes the efficiency ratio provides investors with information that is useful in understanding its financial performance. Arrow defines efficiency ratio as the ratio of non-interest expense to net gross income (which equals tax-equivalent net interest income plus non-interest income, as adjusted).
5.	For the current quarter, all of the regulatory capital ratios as well as the Total Risk-Weighted Assets are calculated in accordance with bank regulatory capital rules. The June 30, 2023 CET1 ratio listed in the tables (i.e., 13.27%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
		6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
	Total Risk Weighted Assets	$	2,937,837		$	2,909,610		$	2,883,902		$	2,856,224		$	2,790,520
	Common Equity Tier 1 Capital	389,966			388,228			384,003			375,394			366,798
	Common Equity Tier 1 Ratio	13.27		%	13.34		%	13.32		%	13.14		%	13.14		%
* Quarterly ratios have been annualized.

8

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)

Quarter Ended:	June 30, 2023						June 30, 2022
			Interest		Rate				Interest		Rate
	Average		Income/		Earned/		Average		Income/		Earned/
	Balance		Expense		Paid		Balance		Expense		Paid
Interest-Bearing Deposits at Banks	$	130,057	$	1,674	5.16	%	$	232,545	$	427	0.74	%
Investment Securities:
Fully Taxable	637,018		2,951		1.86		644,443		2,444		1.52
Exempt from Federal Taxes	150,157		770		2.06		177,669		816		1.84
Loans	3,036,410		34,618		4.57		2,804,180		26,906		3.85
Total Earning Assets	3,953,642		40,013		4.06		3,858,837		30,593		3.18
Allowance for Credit Losses	(30,577)						(27,558)
Cash and Due From Banks	28,742						40,105
Other Assets	135,846						141,615
Total Assets	$	4,087,653					$	4,012,999
Deposits:
Interest-Bearing Checking Accounts	$	863,892	820		0.38		$	1,048,752	199		0.08
Savings Deposits	1,504,412		8,514		2.27		1,541,616		892		0.23
Time Deposits of $250,000 or More	133,897		1,119		3.35		37,418		26		0.28
Other Time Deposits	201,926		1,196		2.38		130,361		111		0.34
Total Interest-Bearing Deposits	2,704,127		11,649		1.73		2,758,147		1,228		0.18
Borrowings	195,527		2,373		4.87		25,000		108		1.73
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		171		3.43		20,000		171		3.43
Finance Leases	5,089		48		3.78		5,140		48		3.75
Total Interest-Bearing Liabilities	2,924,743		14,241		1.95		2,808,287		1,555		0.22
Noninterest-Bearing Deposits	756,584						811,607
Other Liabilities	41,256						35,877
Total Liabilities	3,722,583						3,655,771
Stockholders’ Equity	365,070						357,228
Total Liabilities and Stockholders’ Equity	$	4,087,653					$	4,012,999
Net Interest Income			$	25,772					$	29,038
Net Interest Spread					2.11	%					2.96	%
Net Interest Margin					2.61	%					3.02	%

9

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)

Quarter Ended:	June 30, 2023						March, 31, 2023
			Interest		Rate				Interest		Rate
	Average		Income/		Earned/		Average		Income/		Earned/
	Balance		Expense		Paid		Balance		Expense		Paid
Interest-Bearing Deposits at Banks	$	130,057	$	1,674	5.16	%	$	40,436	$	479	4.80	%
Investment Securities:
Fully Taxable	637,018		2,951		1.86		652,743		2,948		1.83
Exempt from Federal Taxes	150,157		770		2.06		160,718		797		2.01
Loans	3,036,410		34,618		4.57		2,991,928		31,886		4.32
Total Earning Assets	3,953,642		40,013		4.06		3,845,825		36,110		3.81
Allowance for Credit Losses	(30,577)						(29,792)
Cash and Due From Banks	28,742						30,518
Other Assets	135,846						132,300
Total Assets	$	4,087,653					$	3,978,851
Deposits:
Interest-Bearing Checking Accounts	$	863,892	820		0.38		$	964,735	370		0.16
Savings Deposits	1,504,412		8,514		2.27		1,474,251		5,587		1.54
Time Deposits of $250,000 or More	133,897		1,119		3.35		94,415		574		2.47
Other Time Deposits	201,926		1,196		2.38		148,302		474		1.30
Total Interest-Bearing Deposits	2,704,127		11,649		1.73		2,681,703		7,005		1.06
Borrowings	195,527		2,373		4.87		75,494		793		4.26
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		171		3.43		20,000		169		3.43
Finance Leases	5,089		48		3.78		5,102		49		3.89
Total Interest-Bearing Liabilities	2,924,743		14,241		1.95		2,782,299		8,016		1.17
Noninterest-bearing deposits	756,584						798,576
Other Liabilities	41,256						38,420
Total Liabilities	3,722,583						3,619,295
Stockholders’ Equity	365,070						359,556
Total Liabilities and Stockholders’ Equity	$	4,087,653					$	3,978,851
Net Interest Income			$	25,772					$	28,094
Net Interest Spread					2.11	%					2.64	%
Net Interest Margin					2.61	%					2.96	%

10

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)

Quarter Ended:	6/30/2023			12/31/2022			6/30/2022
Loan Portfolio
Commercial Loans	$	147,518		$	140,293		$	138,675
Commercial Real Estate Loans	723,948			707,022			663,234
Subtotal Commercial Loan Portfolio	871,466			847,315			801,909
Consumer Loans	1,087,765			1,065,135			1,031,111
Residential Real Estate Loans	1,110,666			1,070,757			1,011,782
Total Loans	$	3,069,897		$	2,983,207		$	2,844,802
Allowance for Credit Losses
Allowance for Credit Losses, Beginning of Quarter	$	30,784		$	29,232		$	27,661
Loans Charged-off	(1,280)			(1,261)			(907)
Less Recoveries of Loans Previously Charged-off	718			572			431
Net Loans Charged-off	(562)			(689)			(476)
Provision for Credit Losses	948			1,409			905
Allowance for Credit Losses, End of Quarter	$	31,170		$	29,952		$	28,090
Nonperforming Assets
Nonaccrual Loans	$	5,997		$	10,757		$	7,999
Loans Past Due 90 or More Days and Accruing	467			1,157			1,641
Loans Restructured and in Compliance with Modified Terms	67			69			77
Total Nonperforming Loans	6,531			11,983			9,717
Repossessed Assets	342			593			297
Other Real Estate Owned	182			—			—
Total Nonperforming Assets	$	7,055		$	12,576		$	10,014
Key Asset Quality Ratios
Net Loans Charged-off to Average Loans,    Quarter-to-date Annualized	0.07		%	0.09		%	0.07		%
Provision for Credit Losses to Average Loans,   Quarter-to-date Annualized	0.13		%	0.19		%	0.13		%
Allowance for Credit Losses to Period-End Loans	1.02		%	1.00		%	0.99		%
Allowance for Credit Losses to Period-End Nonperforming Loans	477.26		%	249.95		%	289.08		%
Nonperforming Loans to Period-End Loans	0.21		%	0.40		%	0.34		%
Nonperforming Assets to Period-End Assets	0.17		%	0.32		%	0.25		%
Year-to-Date Period Ended:	6/30/2023			12/31/2022			6/30/2022
Allowance for Credit Losses
Allowance for Credit Losses, Beginning of Year	$	29,952		$	27,281		$	27,281
Loans Charged-off	(2,608)			(4,143)			(1,736)
Less Recoveries of Loans Previously Charged-off	1,324			2,016			871
Net Loans Charged-off	(1,284)			(2,127)			(865)
Provision for Credit Losses	2,502			4,798			1,674
Allowance for Credit Losses, End of Period	$	31,170		$	29,952		$	28,090
Key Asset Quality Ratios
Net Loans Charged-off to Average Loans, Annualized	0.09		%	0.08		%	0.06		%
Provision for Loan Losses to Average Loans, Annualized	0.17		%	0.17		%	0.12		%

11

EX-99.2

Q2 2023 Investor Presentation August 8, 2023

2 Safe Harbor This presentation may contain certain forward-looking statements about Arrow Financial Corporation (“Arrow” or the “Company”). Forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934, as amended, include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “would,” “should,” “could,” or “may.” Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the banking industry or securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged. We are not obligated to revise or update these statements to reflect unanticipated events. This document should be read in conjunction with Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”), the Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, other filings with the SEC, and the second quarter 2023 earnings release issued August 8, 2023.

3 Table of Contents • Arrow History and Overview • Q2 2023 Results and Performance Metrics • Funding Sources, Investments and Liquidity • Non-Interest Income • Loans • Credit Quality • Capital

History and Overview 4

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

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

7 Our Profile Insurance Offices Bank Branches 937 • Multi-Bank Holding company • Glens Falls National Bank and Trust Company • Saratoga National Bank and Trust Company • Upstate Agency, LLC • Wealth Management Services • $4.1 billion in assets • 500 plus employees • Primary service area population of more than 1.1 million

8 Experienced Leadership Team David S. DeMarco, President and CEO 35+ Years Experience Mr. DeMarco joined the Company in 1987 as a commercial lender and since that time has served in positions of increasing responsibility within the organization. In 2012, he was named President and CEO of Saratoga National Bank. In May 2023, he was named President and CEO of Arrow Financial Corporation and Glens Falls National Bank. He holds a bachelor’s degree in finance from the University of Texas at Austin. Mr. DeMarco is a graduate of the Adirondack Regional Chamber of Commerce’s Leadership Program and the Stonier Graduate School of Banking. He serves as a Director of Saratoga National Bank and sits on the boards of various non- profits dedicated to healthcare and economic development. David D. Kaiser, Senior Executive Vice President and CCO 35+ Years Experience Mr. Kaiser joined the Company in 2001 as Vice President and Commercial Loan Officer. He served as Corporate Banking Manager and was later promoted to Senior Vice President, before being named Chief Credit Officer in 2011, followed by promotions to Executive Vice President and Senior Executive Vice President. Prior to joining the Company, he spent 15 years in the Capital Region as a Commercial Loan Officer. Mr. Kaiser has a bachelor’s degree in business administration from Siena College. Mr. Kaiser actively serves on boards of numerous community organizations. Andrew J. Wise, Senior Executive Vice President and COO 30+ Years Experience Mr. Wise joined the Company in 2016 as Senior Vice President of Administration for Glens Falls National Bank. He has since been promoted to Executive Vice President and Chief Operating Officer and Senior Executive Vice President. He has more than 30 years of experience building and leading both community banks and bank-owned insurance agencies. Mr. Wise previously served as Vice President and CISO for The Adirondack Trust Company and acted as Executive Vice President, COO for Wise Insurance Brokers, Inc. He has extensive experience in designing, implementing and managing workflows and delivering operational efficiency. He holds a bachelor’s degree from Boston University’s School of Management.

9 Experienced Leadership Team Penko K. Ivanov, Senior Executive Vice President, CFO, Treasurer and CAO 30+ Years Experience Mr. Ivanov joined the Company in 2023 with more than 30 years of experience in Financial Planning & Analysis, Controllership, SOX, Financial Reporting and Treasury. Mr. Ivanov previously served as CFO for Bankwell Financial Group, helping it almost double in size over six-plus years to $3.3 billion. He has held CFO positions at Darien Rowayton Bank and for Doral Bank’s U.S. Operations. He began his career with Ernst & Young and held accounting/finance positions at PepsiCo, GE Capital and Bridgewater Associates. Mr. Ivanov holds an MBA and bachelor’s degree in accounting and finance from the University of South Florida. He is also Six Sigma Black Belt certified. Marc Yrsha, Executive Vice President, Director of Relationship Banking 20+ Years Experience Mr. Yrsha joined the Company in 2015. He currently is the Chief Banking Officer, and oversees the strategic direction of the Retail Banking unit, which includes retail deposits and lending, business development, consumer payments, business services, municipal banking, as well as small business and retail lending. Prior to joining our Company, Mr. Yrsha spent time in retail leadership, retail and commercial lending at large regional and community banks within the Arrow footprint. Mr. Yrsha is active in the community serving in leadership roles on a variety of boards. He is a graduate of Castleton University in Vermont and the Adirondack Regional Chamber of Commerce’s Leadership Adirondack Program. Michael Jacobs, Executive Vice President, Chief Information Officer 30+ Years Experience Mr. Jacobs joined Glens Falls National Bank in 2003 as Information Systems Manager. He was later promoted to Senior Vice President and then Executive Vice President. As Chief Information Officer, Mr. Jacobs guides the company’s strategic technology plans. He has more than 30 years of experience in the community banking industry, having previously served as Operations Manager at Cohoes Savings Bank and Item Processing Manager at Hudson River Bank and Trust. Mr. Jacobs holds a bachelor’s degree in finance from Siena College and an associate degree in business administration from Hudson Valley Community College.

Q2 2023 Performance 10

11 Q2 2023 Summary • Assets of $4.1 billion • Net income of $6.0 million; Fully diluted earnings per share (EPS) of $0.36 • Deposit balances of $3.5 billion; a decrease of $44 million during 2Q23, slightly up from year-end 2022 • Loans reached a record of $3.1 billion, an increase of $65 million during 2Q23 • Annualized loan growth rate in excess of 8% • Loan-to-deposit ratio at 88% • Strong credit quality metrics: • Net charge-offs were 0.07% as compared to 0.10% for the previous quarter • Nonperforming assets decreased by $4.6 million • Nonperforming assets are $7.1 million or 0.17% of period-end assets • Loan yields increased by 25bps from 1Q23 to 4.57% while loan rates reached 4.75% at 6/30 and 4.81% at 7/31 • Net interest margin was 2.61% • Non-interest expense included incremental ~$2.0 million (~$0.10/share) related to the 10-K/10-Q filing delays • ROA of 0.59% and ROE of 6.64%; excluding the incremental expenses ROA of ~0.75% and ROE of ~8.40% Financial information provided in this document is unaudited. Please refer to the 2Q23 Earnings Release for a reconciliation of any non-GAAP measures.

12 Net Interest Margin 2.61% Profitability Revenue $32.7 million Return on Average Assets 0.59% Return on Average Equity 6.64% $3.1 billion of gross loans 87.7% loan-to-deposit ratio Balance Sheet $3.5 billion of gross deposits 0% brokered deposits 1.02% Allowance for Credit Losses (ACL) 0% digital deposits Dividend of $0.27/share paid in Q2 and declared same for Q3 Capital $20.44 Fully Diluted Tangible Book Value per Share Well Capitalized Q2 2023 Results Arrow GFNB SNB Tier 1 Leverage Ratio 9.92% 9.22% 10.23% Common Equity Tier 1 Capital Ratio 13.27% 13.51% 13.38% Tier 1 Risk-Based Capital Ratio 13.96% 13.51% 13.38%

13 Q2 2023 Consolidated Financial Statements 1Variances are rounded based on actual whole dollar amounts 2 Pre-tax, pre-provision net revenue per share is a non-GAAP metric and excludes provision for loan losses and income tax expense UNAUDITED Dollars in millions, except per share data Linked Quarter Income Statement 2Q23 1Q23 Fav/(Unfav) Var1 Total Interest Income $ 40.0 36.1 3.9 Total Interest Expense 14.2 8.0 (6.2) Net Interest Income 25.8 28.1 (2.3) Non-Interest Income 6.9 6.7 0.2 Non-Interest Expense 24.1 22.3 (1.8) Pre-Tax, Pre-Provision Net Revenue2 $ 8.6 12.5 (3.9) Provision for Credit Losses $ 0.9 1.6 0.7 Pre-Tax Income $ 7.7 10.9 (3.2) Income Tax Expense $ 1.6 2.4 0.8 Reported Net Income $ 6.1 8.5 (2.4) EPS 0.36$ 0.52 (0.16) Balance Sheet 2Q23 1Q23 Var1 Cash & Cash Equivalents $ 173.6 203.5 (29.9) Investment Securities 694.0 745.1 (51.1) Loans Receivable, net 3,038.7 2,974.6 64.1 All Other Assets 197.3 191.5 5.8 Total Assets $ 4,103.6 4,114.7 (11.1) Total Deposits $ 3,502.2 3,546.4 (44.2) Total Borrowings 171.8 162.8 9.0 Other Liabilities 68.2 42.1 26.1 Total Liabilities $ 3,742.2 3,751.3 (9.1) Equity $ 361.4 363.4 2.0 Total Liabilities & Equity $ 4,103.6 4,114.7 (11.1)

14 Q2 2023 Consolidated Financial Statements 1Variances are rounded based on actual whole dollar amounts 2 Pre-tax, pre-provision net revenue per share is a non-GAAP metric and excludes provision for loan losses and income tax expense UNAUDITED Dollars in millions, except per share data Comparative Quarter Income Statement 2Q23 2Q22 Fav/(Unfav) Var1 Total Interest Income $ 40.0 30.6 9.4 Total Interest Expense 14.2 1.6 (12.6) Net Interest Income 25.8 29.0 (3.2) Non-Interest Income 6.9 7.7 (0.8) Non-Interest Expense 24.1 20.3 (3.8) Pre-Tax, Pre-Provision Net Revenue2 $ 8.6 16.4 (7.8) Provision for Credit Losses $ 0.9 0.9 0.0 Pre-Tax Income $ 7.7 15.5 (7.8) Income Tax Expense $ 1.6 3.5 1.9 Reported Net Income $ 6.1 12.0 (5.9) EPS 0.36$ 0.72 (0.36)

15 Performance Trends $2.22 $2.29 $2.49 $3.01 $2.95 $0.88 2018 2019 2020 2021 2022 2Q23 YTD Diluted EPS $15.09 $16.97 $18.87 $21.03 $19.95 $20.44 2018 2019 2020 2021 2022 2Q23 YTD Fully Diluted Tangible Book Value 13.96% 13.17% 12.77% 14.09% 13.55% 8.13% 2018 2019 2020 2021 2022 2Q23 YTD Return on Average Equity 1.27% 1.24% 1.17% 1.28% 1.21% 0.73% 2018 2019 2020 2021 2022 2Q23 YTD Return on Average Assets YTD metrics affected by lower margins and expenses related to delayed filings Track record of strong earnings and performance metrics

16 Net Interest Margin 3.05% 2.99% 2.97% 3.03% 2.79% 4.18% 3.98% 3.97% 4.00% 4.45% 0.67% 0.36% 0.10% 0.27% 1.08% 2019 2020 2021 2022 2Q23 YTD Net Interest Margin (NIM) Average Loan Yield for the Period Shown Cost of Deposits • NIM compression expected to continue, but slowing in 2H23 - Fed “higher for longer” environment - Arrow balance sheet structure is liability sensitive • Deposits repricing faster than loans 2.90% 3.02% 3.14% 3.08% 2.96% 2.61% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Quarterly NIM • Q2 loans originated at average rate of 6.55% • YTD originations at average rate of 6.36% • Portfolio rate at July 31, 2023 averaged 4.81% • Cost of deposits at June 30, 2023 at 1.53% Rate excludes the impact of deferred fees/loan origination costs 1 1Yield includes the impact of deferred fees and loan origination costs amortization

17 Operating Expenses - Efficiency Trends 56.6% 57.1% 52.8% 54.2% 54.3% 67.9% 2.27% 2.22% 2.02% 2.00% 2.01% 2.30% 2018 2019 2020 2021 2022 2Q23 YTD Efficiency Ratio Net Non-interest Expense / Average Assets Efficiency Ratio trend driven primarily by margin compression and by elevated expenses due to regulatory filing delays $65.1 $67.5 $70.7 $78.0 $81.5 $46.4 2018 2019 2020 2021 2022 2Q23 YTD Non-Interest Expenses (in millions) • 64.4 % excl. elevated expenses • Remaining increase driven by margin compression

Funding, Investments and Liquidity 18

19 Deposit Balances 26.5% 25.8% 27.5% 27.0% 26.5% 26.5% 24.6% 26.3% 24.3% 25.2% 47.1% 49.7% 46.2% 48.7% 48.2% 1Q22 2Q22 3Q22 4Q22 2Q23 Axis Title Deposit BalancesNon-Municipal Municipal Business Dollars in billions $3.72 $3.55 $3.80 $3.50 $3.50 • Stable deposit franchise with diverse funding sources • Municipal deposits include county and local governments, including school, water, fire, sewer districts and housing authorities • Loan-to-deposit ratio at 88% • No brokered deposit balances • No digital deposit balances

20 Deposit Balances 21.9% 23.3% 24.0% 23.9% 21.7% 31.1% 29.5% 29.3% 28.5% 24.4% 42.3% 42.4% 41.7% 41.6% 43.3% 4.8% 4.8% 4.9% 6.0% 10.5% 1Q22 2Q22 3Q22 4Q22 2Q23 Axis Title Deposit BalancesTime Deposits Savings Deposits Interest-Bearing Checking Noninterest-Bearing Dollars in billions $3.72 $3.55 $3.80 $3.50 $3.50 Deposit franchise with diverse product offerings and long-standing customer base

21 Funding Sources & Rates • Deposit Beta through current rate cycle Q1 2022 to Q2 2023 is 37.3% • 2023 YTD Deposit Beta is 153.3% • CD and Money Market specials are currently priced at or above 5% • Limited wholesale borrowing; short to medium-term borrowing costs are currently above 5% • Replaced higher cost FHLB advances with $150 million from the FRB Bank Term Funding Program • Cost of Deposits at 7/31 was 1.61% Dollars in millions Deposit cost rate increases moderating going into 3Q23 Balance Rate Balance Rate Balance Rate Balance Rate Demand (Non-Interest Bearing) $ 306 0.00% $ 450 0.00% $ 3 0.00% $ 759 0.00% Interest Bearing Checking 337 0.05% 203 3.13% 316 0.01% 856 0.77% Savings and Money Market 745 0.69% 248 3.04% 525 4.34% 1,518 2.34% Time Deposits 301 3.14% 28 2.92% 40 3.28% 369 3.14% Total Deposits $ 1,689 0.88% $ 929 1.58% $ 884 2.73% $ 3,502 1.53% Other Borrowings 172 4.87% Junior Subordinated Obligations - TRUPS 20 3.43% Total Deposits and Borrowings $ 1,689 0.88% $ 929 1.58% $ 884 2.73% $ 3,694 1.95% Consumer Business Municipal Total

22 Duration Wtd Avg Remaining LifeCurrent Book Value Market ValueCategoy Unrealized Gain / (Loss) Book Yield • Unrealized Losses at ~10% of carrying value; moderate impact due to relative short duration • A change in rates of ~ 25 bps impacts Other Comprehensive Income (OCI) by ~$5MM • Q2 2023 mark-to-market adjustment resulted in a negative impact to OCI of ~$3.8MM (tax effected) Investment Portfolio 1 1Unrealized Gain/(Loss) on HTM for informational purposes only – not reflected in OCI Dollars in thousands June 30, 2023 Category 3.19 7,573 7,048 (525) 3.70% 407,423 359,564 (47,859) 1.77% Unrealized Gain / (Loss)1 (13,984)$ Book Yield 1.72% Current Book Value 190,000$ Total Investments US Agency Agency MBS Agency CMO Municipal - Local Other Total AFS Agency MBS Agency CMO Municipal Municipal - Local Total HTM 113,773 Market Value 176,016$ 117,490 15,687 143,461$ 749,737$ 280 800 543,708$ 6,389$ 280 1,000 606,276$ 6,768$ 3,516 3,295 15,687 139,144$ 7.12% 7.97% 1.79% 2.41% 2.62% 682,852$ 0 (200) (62,568)$ (379)$ (221) 2.39% 4.28% 2.60% 1.95% (3,717) 0 (4,317)$ (66,885)$ Duration 2.56 3.97 4.40 3.60 Wtd Avg Remaining Life 2.53 4.68 5.16 1.80 0.65 1.70 3.40 6.25 4.02 1.99 2.41 1.97 0.65 1.84 3.52 4.80 3.55 1.91 2.23

23 Liquidity FDIC Insured Deposits 71% Uninsured Deposits 29% Total Deposits = $3.5 billion • ~ $2.4 billion in deposits are insured • ~ 9% on-balance sheet liquidity (Cash and unencumbered AFS securities) • Available Borrowing Capacity Brokered Deposits $0.8 billion Borrowing Capacity1 $1.3 billion $2.1 billion • Liquidity and borrowing capacity provide in excess of 2X coverage of uninsured deposits • National Listing Services also available as additional sources of liquidity • Securities, Mortgage, and Auto Loan Portfolios provide steady source of cash flow 1FHLB, FRB and other bank lines Ample coverage of uninsured deposits Uninsured deposit accounts consist of municipal, business, and high net worth individuals – many have a broader and deeper banking relationship with Arrow

Non-Interest Income 24

25 Non-Interest Income • Decrease in fee income related to post-pandemic slow down in consumer use of debit cards • Wealth Management performance recovering from broader market pull-back in ’22 • Minimal gains from loan sale activity (Residential, SBA) over the last 18 months Dollars in thousands June 30, 2023 March 31, 2023 June 30, 2022 Fees for Other Services to Customers $ 2,717 $ 2,595 $ 3,050 Fiduciary Activities/Wealth Management 2,428 2,275 2,517 Insurance Commissions 1,560 1,520 1,622 Other Operating Income 201 287 555 Total Noninterest Income $ 6,906 $ 6,677 $ 7,744 Three Months Ended

26 Wealth Management • $1.7 billion Assets under Management (AUM) at June 30, 2023 • YTD AUM increased ~$105.3 million (6.6%) • YTD New (net) accounts contributed ~$39 million • Serving New York (Upper Hudson Valley, Capital Region, North Country) • Based in Glens Falls, NY • 33 employees • Services • Asset Management Accounts • Trust and Estate Management • Employer Retirement Plans • Individual Retirement Plans • Brokerage Services (offered through LPL Financial) • Revenues • 2022 Revenue was $10.3 million on average AUM of ~$1.73B while S&P declined ~20% • Q2 2023 Revenue was $2.6 million on average AUM of ~$1.69B with S&P up ~8.3%

27 Insurance • Upstate Agency - Headquartered in South Glens Falls, NY - Total of 9 locations in New York (Capital Region, North Country) - 37 employees - Majority of policy holders reside within our geographic footprint • Insurance Products - Personal, Commercial, and Employee Benefit Plans • Revenues • 2022 Revenue of $6.5 million • 2Q23 Revenue of $1.6 million, in line with 2Q22 • 2023 YTD Revenue of $3.1 million

Loans 28

29 Loan Balances $2.20 $2.39 $2.37 $2.58 $2.98 $3.07 2018 2019 2020 2021 2022 2Q23 Consistent Loan Growth Excludes PPP loans Dollars in billions • 2Q23 loan growth rebounded with strong $65 million • 2Q23 loan growth exceeded 8% on an annualized basis • July 2023 annualized loan growth ~6%

30 $2,595 $2,639 $2,644 $2,655 $2,668 $2,737 $2,845 $2,925 $2,983 $3,005 $3,070 Loan Balances Dollars in millions $305 $301 $312 $312 $316 $334 $345 $350 $350 $344 $352 $393 $407 $412 $431 $442 $441 $455 $468 $497 $507 $519 $860 $861 $893 $921 $921 $977 $1,031 $1,056 $1,065 $1,073 $1,088 $923 $908 $911 $930 $946 $967 $1,012 $1,051 $1,071 $1,081 $1,111 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Residential Real Estate Consumer Commercial Real Estate (CRE) Commercial (C&I) Consistent Loan Growth Across Multiple Portfolios Commercial real estate excludes owner-occupied real estate loans Owner-occupied real estate shown as part of the C&I portfolio

31 Loan Yields Steadily Increasing $2.60 $2.64 $2.64 $2.66 $2.67 $2.74 $2.85 $2.93 $2.98 $3.01 $3.07 3.94% 3.90% 4.04% 4.08% 3.82% 3.90% 3.85% 4.09% 4.13% 4.32% 4.57% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Loan Portfolio Yields experiencing meaningful increase during 2023 Loan Balance Average Loan Portfolio Yield for the Periods Shown Dollars in billions Pre 2020 4.80% 2020 4.24% 2021 3.86% 2022 4.70% 2023 6.55% June 2023 Yield by Vintage • 39% of balances are 2022 - 2023 vintages • As of June 30, 2023, loan rates averaged 4.75% • As of July 31, 2023 loan rates averaged 4.81% 1Yield includes the impact of deferred fees and loan origination costs amortization 1

32 Loan Portfolio Composition Commercial (C&I) 12.5% Commercial Real Estate 16.9% Consumer 35.4% Residential Real Estate 36.2% • No single relationship represents more than ~1.5% of total loans as of June 30, 2023 • CRE concentration ratio of ~120% of risk based capital • C&I portfolio can be a source of deposit growth Total Loan Portfolio ~ $3.1 billion Commercial (C&I) includes owner-occupied real estate loans

33 Consumer Loan Portfolio $860 $861 $893 $921 $921 $977 $1,031 $1,056 $1,065 $1,073 $1,088 3.95% 3.94% 3.92% 3.93% 3.87% 3.84% 3.83% 4.10% 4.02% 4.26% 4.61% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • 99.6% of the portfolio, or $1.08 billion are collateralized auto loans; only $4 million in unsecured personal loans • Auto loans sourced through a network of 450+ dealers in New York and Vermont with customers extending beyond those states • Loans are underwritten/credit scored by Arrow • 100% of auto loans are fully amortizing, fixed rate loans • > 72% of auto loan balances have customers with FICO scores >700 • Average portfolio FICO score is 726; Average debt to income ratio ~30%; average LTV is 87% • Annual Losses over last 5 years were 9-20bps • ~35% new, ~65% used vehicles exposure 2 1Yield includes the impact of deferred fees & loan origination costs amortization 2 Based on MSRP or used National Automobile Dealers Association (NADA) retail value at time of origination 1 Portfolio rates meaningfully increasing June 30 - 5.16% July 31 - 5.26% Rate excludes the impact of deferred fees/loan origination costs

34 Commercial Real Estate Portfolio $393 $407 $412 $431 $442 $441 $455 $468 $497 $507 $519 3.66% 4.90% 5.08% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • CRE loans extended to businesses / borrowers primarily located in our regional market area • No CRE exposure to large Metropolitan areas – e.g. no NYC exposure • As of June 30, 2023: – ~$334 million or ~ 67% of loans have rates tied to market indices, such as Prime, SOFR or FHLBNY – ~$116 million of loans will reprice within next 12 months – ~$24 million of fixed rate loans mature within 12 months – Total non-owner occupied Office exposure accounted for ~11% of CRE and ~1.9% of total loans – Total non-owner occupied Retail exposure accounted for ~15% of CRE and ~2.5% of total loans outstanding. – Total Hotels and Motels exposure accounted for ~24% of CRE and ~4.0% of total loans outstanding. – Total Other Accommodation and Food Services2 exposure accounted for ~8% of CRE and ~1.3% of total loans outstanding. – The majority of the remaining CRE exposure is comprised of multi-family and other residential investment properties 1Yield includes the impact of deferred fees and loan origination costs amortization 2Other Accommodation and Food Services includes RV parks, recreational camps, restaurants and other eating places. Commercial real estate excludes owner-occupied real estate loans 1 Portfolio rates trending upward June 30 - 5.10% July 31 - 5.12% Rate excludes the impact of deferred fees/loan origination costs

35 Commercial (C&I) Portfolio $305 $301 $312 $312 $316 $334 $346 $350 $350 $344 $352 4.17% 4.35% 4.57% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • C&I loans extended to businesses / borrowers primarily located in Arrow’s regional market area • Growing C&I Portfolio a potential source for deposit acquisition – ~$191 million or ~ 54% of loans have rates tied to market indices, such as Prime, SOFR or FHLBNY – ~$53 million of loans will reprice within next 12 months – Only ~$4 million of fixed rate loans mature within 12 months 1Yield includes the impact of deferred fees and loan origination costs amortization Commercial (C&I) includes owner-occupied real estate loans 1 Portfolio rates on strong upward trend June 30 - 4.75% July 31 - 4.83% Rate excludes the impact of deferred fees/loan origination costs

36 Residential Real Estate Loans $923 $908 $911 $930 $946 $967 $1,012 $1,051 $1,071 $1,081 $1,111 3.83% 3.79% 3.77% 3.76% 3.73% 3.71% 3.70% 3.78% 3.80% 4.10% 4.17% 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Period-End Loan Balance Average Loan Portfolio Yield for the Period Shown Dollars in millions • One-to-four family residential real estate secured by first or second mortgages on residences and home equity lines located in Arrow’s market area • LTV generally does not exceed 80% at time of origination (lower of purchase price or appraised value) • Loans exceeding 80% LTV at origination require private mortgage insurance or govt. guarantee • ~ $100MM, or 9%, of residential loan portfolio is for construction purposes • ~9% of the portfolio are home equity loans and lines • At June 30, 2023: • ~20% of portfolio subject to adjustable rates • ~80% of portfolio is fixed • ~$90MM or ~39% of the adjustable rate portfolio is within the active reset period 1Yield includes the impact of deferred fees and loan origination costs amortization 1 As of July 31, 2023, the average Residential Mortgage portfolio rate was ~3.89% and the Home Equity Line portfolio rate was ~7.34%, resulting in overall portfolio rate of ~4.20% Rates exclude the impact of deferred fees/loan origination costs

Credit Quality and Capital 37

38 Credit Quality 0.25% 0.44% 0.40% 0.37% 0.21% 2020 2021 2022 1Q23 2Q23 Non Performing Loans (NPL) / Gross Loans Dollars in millions $6.4 $11.7 $12.0 $11.2 $7.1 • ACL of 1.02% available to address potential credit issues • Charge-offs were 7bps in 2Q23; down from 10bps in 1Q23 and 9bps in 4Q22 • A $3.1 million CRE loan returned to accrual status during 2Q23 Strong Credit Quality & Allowance is 477% of NPL

39 Fully Diluted Tangible Book Value (TBV) Increasing TBV in challenging industry environment

40 Capital Position 10.13% 13.34% 14.03% 15.15% 8.31% 9.92% 13.27% 13.96% 15.08% 8.24% 4.00% 4.50% 6.00% 8.00% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% Tier 1 Leverage Ratio Common Equity Tier 1 Capital Tier 1 Risk-Based Capital Total Risk-Based Capital Tangible Common Equity Capital Ratios – Arrow Minimum Regulatory Capital Ratios 2Q23 1Q23 Strong Capital Ratios

41 Financial Snapshot 2018 2019 2020 2021 2022 2Q23 YTD Total assets $2,988,334 $3,184,275 $3,688,636 $4,027,952 $3,969,509 $4,103,653 Loans $2,196,215 $2,386,120 $2,595,030 $2,667,941 $2,983,207 $3,069,897 Loan-to-deposit ratio 93.6% 91.2% 80.2% 75.1% 85.3% 87.7% Return on average assets 1.27% 1.24% 1.17% 1.28% 1.21% 0.73% Efficiency ratio 56.60% 57.08% 52.80% 54.16% 54.26% 67.94% Net interest margin 3.07% 3.05% 2.99% 2.97% 3.03% 2.79% Tier 1 Leverage Ratio 9.61% 9.98% 9.07% 9.20% 9.80% 9.92% Return on average equity 13.96% 13.17% 12.77% 14.09% 13.55% 8.13% Tangible book value per share1 $15.09 $16.98 $18.87 $21.03 $19.95 $20.44 Net interest income $84,018 $88,049 $99,202 $110,355 $118,343 $53,866 Net income $36,279 $37,475 $40,827 $49,857 $48,799 $14,609 EPS (fully diluted) $2.24 $2.28 $2.48 $3.00 $2.94 $0.88 Dollars in thousands, except per share amounts

Thank You

XML

Cover Page	Aug. 08, 2023
Cover [Abstract]
Document Type	8-K
Entity Registrant Name	ARROW FINANCIAL CORPORATION
Entity Incorporation, State or Country Code	NY
Entity File Number	0-12507
Entity Tax Identification Number	22-2448962
Entity Address, Address Line One	250 Glen Street
Entity Address, City or Town	Glens Falls
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	12801
City Area Code	518
Local Phone Number	745-1000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, Par Value $1.00 per share
Trading Symbol	AROW
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0000717538
Amendment Flag	false
Document Period End Date	Aug. 08, 2023