[10-Q] Arrow Financial Corp Quarterly Earnings Report

Rhea-AI Filing Summary

Arrow Financial (AROW) Q2 2025 10-Q highlights

• Net income climbed 26% YoY to $10.8 M; diluted EPS $0.65 vs $0.52.
• Net interest income rose 20% to $32.5 M as earning-asset growth and lower funding costs offset rate pressure; interest expense fell 8%.
• Quarterly provision only $0.6 M, but 1H-25 provisioning surged to $5.6 M (vs $1.4 M YTD-24), lifting the allowance to $34.2 M (≈1.0% of loans).
• Non-interest income slipped 3% while operating expenses grew 10%, tempering margin gains.
• Loans inched up 0.9% YTD to $3.43 B; deposits advanced 2.6% to $3.93 B, trimming the loan-to-deposit ratio to 87%.
• Liquidity strengthened: cash & equivalents $268 M (+74% YTD). Unrealized securities losses narrowed, generating $7.6 M OCI and boosting total equity to $408.5 M (+1.9%).
• Capital actions: $0.56/sh dividends and repurchase of 327 k shares left 16.47 M shares outstanding.

Six-month view: net income $17.1 M (+5%), EPS $1.03. Operating cash flow $20.3 M; securities redemptions exceeded purchases by $56.2 M.

Takeaways: Wider spreads and deposit growth drove earnings, while rising credit provisions and expense inflation warrant monitoring.

Positive

• Q2 net income rose 26% and EPS reached $0.65
• Net interest income expanded 20% on lower funding costs
• Deposits grew $101 M in 1H-25, improving liquidity
• AOCI improved $7.6 M, strengthening tangible equity
• CRE nonaccrual balance eliminated versus $14.9 M at YE-24

Negative

• Provision for credit losses YTD jumped to $5.6 M from $1.4 M
• Non-interest expense increased 10% YoY, pressuring efficiency
• Loan growth modest at 0.9%, trailing deposit expansion

Insights

Bank Equity Analyst

TL;DR—Earnings beat, balance-sheet liquidity up, credit costs creeping higher.

Q2 results are fundamentally positive. Net interest income expanded nearly 20% and deposit growth outpaced loans, easing funding risk. Lower market rates improved AOCI, adding $7.6 M to equity. Return on average equity ran ~10.7% versus ~9.0% last year, demonstrating solid profitability. Management continued buybacks without compromising capital ratios. Watch expense growth, but overall trajectory supports a constructive view on AROW shares.

Bank Risk Analyst

TL;DR—Credit provisioning spike offsets asset-quality gains; monitor consumer delinquencies.

While CRE nonaccruals fell sharply, 1H-25 credit loss provision quadrupled to $5.6 M, signalling management’s caution amid macro softness. Consumer past-due balances (17.1 M) remain elevated. The allowance now equals 1.0% of loans—adequate but less than peers near 1.2%. Rising technology and salary costs (+10%) also pressure future efficiency. I view the filing as neutral: strong liquidity and capital are positives, yet higher credit and cost trends temper enthusiasm.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2025

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-12507

ARROW FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

New York						22-2448962
(State or other jurisdiction of incorporation or organization)						(I.R.S. 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

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes    ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes     ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☐			Accelerated filer			☑
Non-accelerated filer			☐			Smaller reporting company			☐
						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 standard provided pursuant to Section 13(a) of the Exchange Act.									☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes   ☑ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class						Outstanding as of July 31, 2025
Common Stock, par value $1.00 per share						16,469,026

ARROW FINANCIAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS

			Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements			3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			40
Item 3. Quantitative and Qualitative Disclosures About Market Risk			61
Item 4. Controls and Procedures			62
PART II - OTHER INFORMATION
Item 1. Legal Proceedings			63
Item 1.A. Risk Factors			63
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			63
Item 3. Defaults Upon Senior Securities			64
Item 4. Mine Safety Disclosures			64
Item 5. Other Information			64
Item 6. Exhibits			65
SIGNATURES			66

2

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

			June 30, 2025						December 31, 2024
ASSETS
Cash and Due From Banks			$	40,976					$	27,422
Interest-Bearing Deposits at Banks			227,472						127,124
Investment Securities:
Available-for-Sale at Fair Value			447,678						463,111
Held-to-Maturity (Fair Value of $70,027 at June 30, 2025 and $96,586 at December 31, 2024)			70,828						98,261
Equity Securities			5,332						5,055
Other Investments			4,557						4,353
Loans			3,424,754						3,394,541
Allowance for Credit Losses			(34,191)						(33,598)
Net Loans			3,390,563						3,360,943
Premises and Equipment, Net			60,701						59,717
Goodwill			23,789						23,789
Other Intangible Assets, Net			1,870						2,058
Other Assets			140,953						134,515
Total Assets			$	4,414,719					$	4,306,348
LIABILITIES
Noninterest-Bearing Deposits			$	736,535					$	702,978
Interest-Bearing Checking Accounts			884,130						810,834
Savings Deposits			1,484,666						1,520,024
Time Deposits over $250,000			179,254						191,962
Other Time Deposits			644,745						602,132
Total Deposits			3,929,330						3,827,930
Borrowings			8,600						8,600
Junior Subordinated Obligations Issued to Unconsolidated   Subsidiary Trusts			20,000						20,000
Finance Leases			4,969						5,005
Other Liabilities			43,314						43,912
Total Liabilities			4,006,213						3,905,447
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at June 30, 2025 and December 31, 2024			—						—
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (22,066,559 Shares Issued at June 30, 2025 and December 31, 2024)			22,067						22,067
Additional Paid-in Capital			413,880						413,476
Retained Earnings			84,970						77,215
Accumulated Other Comprehensive Loss			(10,889)						(18,453)
Treasury Stock, at Cost (5,582,833 Shares at June 30, 2025 and 5,323,638 Shares at December 31, 2024)			(101,522)						(93,404)
Total Stockholders’ Equity			408,506						400,901
Total Liabilities and Stockholders’ Equity			$	4,414,719					$	4,306,348

    See Notes to Unaudited Interim Consolidated Financial Statements.

3

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,
			2025						2024						2025						2024
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans			$	45,600					$	42,141					$	90,150					$	82,517
Interest on Deposits at Banks			1,622						2,185						3,243						4,632
Interest and Dividends on Investment Securities:
Fully Taxable			3,790						3,009						7,398						6,195
Exempt from Federal Taxes			561						637						1,148						1,305
Total Interest and Dividend Income			51,573						47,972						101,939						94,649
INTEREST EXPENSE
Interest-Bearing Checking Accounts			1,941						1,903						3,744						3,544
Savings Deposits			9,367						10,571						18,850						20,801
Time Deposits over $250,000			1,726						1,869						3,537						3,842
Other Time Deposits			5,793						5,074						11,322						10,157
Borrowings			—						1,186						167						2,262
Junior Subordinated Obligations Issued to   Unconsolidated Subsidiary Trusts			171						170						340						341
Interest on Financing Leases			42						47						89						95
Total Interest Expense			19,040						20,820						38,049						41,042
NET INTEREST INCOME			32,533						27,152						63,890						53,607
Provision for Credit Losses on Loans			594						775						5,613						1,392
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES			31,939						26,377						58,277						52,215
NON-INTEREST INCOME
Income From Fiduciary Activities			2,398						2,451						4,933						4,908
Fees for Other Services to Customers			2,787						2,706						5,387						5,249
Insurance Commissions			1,804						1,662						3,630						3,344
Net (Loss) Gain on Securities			(40)						54						277						71
Net Gain on Sales of Loans			213						5						314						9
Other Operating Income			447						978						907						2,133
Total Non-Interest Income			7,609						7,856						15,448						15,714
NON-INTEREST EXPENSE
Salaries and Employee Benefits			14,086						13,036						27,641						25,929
Occupancy Expenses, Net			1,952						1,774						3,974						3,545
Technology and Equipment Expense			5,589						4,734						10,676						9,554
FDIC Assessments			649						698						1,319						1,413
Other Operating Expense			3,376						3,076						8,087						6,889
Total Non-Interest Expense			25,652						23,318						51,697						47,330
INCOME BEFORE PROVISION FOR INCOME TAXES			13,896						10,915						22,028						20,599
Provision for Income Taxes			3,091						2,311						4,913						4,335
NET INCOME			$	10,805					$	8,604					$	17,115					$	16,264
Average Shares Outstanding:
Basic			16,545						16,685						16,611						16,764
Diluted			16,551						16,709						16,618						16,789
Per Common Share:
Basic Earnings			$	0.65					$	0.52					$	1.03					$	0.97
Diluted Earnings			0.65						0.52						1.03						0.97

See Notes to Unaudited Interim Consolidated Financial Statements.

4

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)

			Three Months Ended June 30,												Six Months Ended June 30,
			2025						2024						2025						2024
Net Income			$	10,805					$	8,604					$	17,115					$	16,264
Other Comprehensive Income, Net of Tax:
Net Unrealized Securities Holding Gain (Loss)   Arising During the Period			3,256						751						9,672						(779)
Net Unrealized (Loss) Gain on Cash Flow Hedge   Agreements			(154)						505						(1,308)						2,895
Reclassification of Net Unrealized (Gain) on   Cash Flow Hedge Agreements to Interest Expense			(414)						(159)						(733)						(317)
Amortization of Net Retirement Plan Actuarial (Gain)			(118)						(66)						(189)						(116)
Amortization of Net Retirement Plan Prior Service Cost			61						51						122						101
Other Comprehensive Income			2,631						1,082						7,564						1,784
Comprehensive Income			$	13,436					$	9,686					$	24,679					$	18,048

    See Notes to Unaudited Interim Consolidated Financial Statements.

5

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

			Six Months Ended June 30, 2025
			Common Stock						Additional Paid-In Capital						Retained Earnings												Accumu-lated Other Com- prehensive Loss						Treasury Stock						Total
Balance at December 31, 2024			$	22,067					$	413,476					$	77,215											$	(18,453)					$	(93,404)					$	400,901
Net Income			—						—						17,115												—						—						17,115
Other Comprehensive Income			—						—						—												7,564						—						7,564
Cash Dividends Paid, $.56 per Share			—						—						(9,360)												—						—						(9,360)
Stock Options Exercised, Net  (5,144 Shares)			—						62						—												—						40						102
Shares Issued Under the Directors’ Stock   Plan  (9,645 Shares)			—						174						—												—						77						251
Shares Issued Under the Employee Stock   Purchase Plan  (6,880 Shares)			—						110						—												—						55						165
Shares Issued Related to Restricted Stock Units (2,753 Shares)			—						(22)						—												—						22						—
Shares Issued Related to Restricted Share Awards (43,250 Shares)			—						(342)						—												—						342						—
Compensation expense related to Employee Stock Purchase Plan			—						17						—												—						—						17
Stock-Based Compensation Expense			—						405						—												—						—						405
Purchase of Treasury Stock   (326,867 Shares) 1			—						—						—												—						(8,654)						(8,654)
Balance at June 30, 2025			$	22,067					$	413,880					$	84,970											$	(10,889)					$	(101,522)					$	408,506
			Three Months Ended June 30, 2025
			Common Stock						Additional Paid-In Capital						Retained Earnings												Accumu-lated Other Com- prehensive Loss						Treasury Stock						Total
Balance at March 31, 2025			$	22,067					$	413,469					$	78,827											$	(13,520)					$	(96,434)					$	404,409
Net Income			—						—						10,805												—						—						10,805
Other Comprehensive Income			—						—						—												2,631						—						2,631
Cash Dividends Paid, $.28 per Share			—						—						(4,662)												—						—						(4,662)
Shares Issued Under the Directors’ Stock   Plan  (4,656 Shares)			—						82						—												—						37						119
Shares Issued Under the Employee Stock   Purchase Plan  (3,553 Shares)			—						54						—												—						28						82
Shares Issued Related to Restricted Stock Units (2,753 Shares)			—						(22)						—												—						22						—
Compensation expense related to Employee Stock Purchase Plan			—						8						—												—						—						8
Stock-Based Compensation Expense			—						289						—												—						—						289
Purchase of Treasury Stock   (196,766 Shares) 1			—						—						—												—						(5,175)						(5,175)
Balance at June 30, 2025			$	22,067					$	413,880					$	84,970											$	(10,889)					$	(101,522)					$	408,506

6

			Six Months Ended June 30, 2024
			Common Stock						Additional Paid-In Capital						Retained Earnings												Accumu-lated Other Com- prehensive Loss						Treasury Stock						Total
Balance at December 31, 2023			$	22,067					$	412,551					$	65,792											$	(33,416)					$	(87,222)					$	379,772
Net Income			—						—						16,264												—						—						16,264
Other Comprehensive Income			—						—						—												1,784						—						1,784
Cash Dividends Paid, $.54 per Share			—						—						(9,076)												—						—						(9,076)
Stock Options Exercised, Net (8,620 Shares)			—						97						—												—						69						166
Shares Issued Under the Directors’ Stock   Plan  (10,602 Shares)			—						172						—												—						84						256
Shares Issued Under the Employee Stock   Purchase Plan  (5,843 Shares)			—						82						—												—						47						129
Shares Issued Related to Restricted Share Awards (22,230 Shares)			—						(179)						—												—						179						—
Compensation expense related to Employee Stock Purchase Plan			—						13						—												—						—						13
Stock-Based Compensation Expense			—						151						—												—						—						151
Tax Benefit for Exercise of Stock Options			—						30						—												—						—						30
Purchase of Treasury Stock  (266,517 Shares) 1			—						—						—												—						(6,471)						(6,471)
Balance at June 30, 2024			$	22,067					$	412,917					$	72,980											$	(31,632)					$	(93,314)					$	383,018
			Three Months Ended June 30, 2024
			Common Stock						Additional Paid-In Capital						Retained Earnings												Accumu-lated Other Com- prehensive Loss						Treasury Stock						Total
Balance at March 31, 2024			$	22,067					$	412,823					$	68,887											$	(32,714)					$	(93,077)					$	377,986
Net Income			—						—						8,604												—						—						8,604
Other Comprehensive Loss			—						—						—												1,082						—						1,082
Cash Dividends Paid, $.27 per Share			—						—						(4,511)												—						—						(4,511)
Stock Options Exercised, Net (2,560 Shares)			—						30						—												—						20						50
Shares Issued Under the Directors’ Stock   Plan  (5,715 Shares)			—						83						—												—						45						128
Shares Issued Under the Employee Stock   Purchase Plan  (3,572 Shares)			—						49						—												—						29						78
Shares Issued Related to Restricted Share Awards (22,230 Shares)			—						(179)						—												—						179						—
Compensation expense related to Employee Stock Purchase Plan			—						8						—												—						—						8
Stock-Based Compensation Expense			—						73						—												—						—						73
Tax Benefit from Exercise of Stock Options			—						30						—												—						—						30
Purchase of Treasury Stock  (21,037 Shares) 1			—						—						—												—						(510)						(510)
Balance at June 30, 2024			$	22,067					$	412,917					$	72,980											$	(31,632)					$	(93,314)					$	383,018

1 Cost of Treasury Stock includes the Stock Buyback Tax Under the Inflation Reduction Act of 2022.

See Notes to Unaudited Interim Consolidated Financial Statements.

7

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

			Six Months Ended June 30,
Cash Flows from Operating Activities:			2025						2024
Net Income			$	17,115					$	16,264
Provision for Credit Losses			5,613						1,392
Depreciation and Amortization			2,619						2,644
Net Gain on Equity Securities			(277)						(71)
Loans Originated and Held-for-Sale			(14,514)						(833)
Proceeds from the Sale of Loans Held-for-Sale			11,013						9
Net Gain on the Sale of Loans			(314)						(9)
Net Gain on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets			(59)						(334)
Contributions to Retirement Benefit Plans			(339)						(336)
Deferred Income Tax Benefit			(123)						(252)
Shares Issued Under the Directors’ Stock Plan			251						256
Stock-Based Compensation Expense			422						164
Tax Benefit from Exercise of Stock Options			111						39
Net Decrease (Increase) in Other Assets			1,027						(2,970)
Net (Decrease) Increase in Other Liabilities			(2,197)						3,465
Net Cash Provided By Operating Activities			20,348						19,428
Cash Flows from Investing Activities:
Proceeds from maturities, calls, and principal repayments of securities AFS			68,437						46,298
Purchases of securities AFS			(39,623)						—
Proceeds from maturities, calls, and principal repayments of securities HTM			33,932						33,076
Purchases of securities HTM			(6,570)						(1,197)
Net increase in loans			(42,488)						(109,992)
Proceeds from Sales of Premises and Equipment, OREO and Repos			1,439						2,230
Purchases of premises and equipment			(3,276)						(2,719)
(Purchase) Redemption of FHLB stock			(204)						775
Net Cash Provided (Used) By Investing Activities			11,647						(31,529)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits			101,400						(3,927)
Finance Lease Payments			(36)						(28)
Other borrowings - Advances			—						100,000
Other borrowings - Paydowns			—						(20,000)
Net Cash Collateral (paid to) received from derivative counterparties			(1,710)						8,970
Purchase of Treasury Stock			(8,654)						(6,471)
Stock options exercised, net			102						166
Shares issued under ESPP			165						129
Cash Dividends paid			(9,360)						(9,076)
Net Cash Provided By Financing Activities			81,907						69,763
Net Increase in Cash and Cash Equivalents			113,902						57,662
Cash and Cash Equivalents at Beginning of Period			154,546						142,536
Cash and Cash Equivalents at End of Period			$	268,448					$	200,198
Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings			$	37,730					$	37,625
Income Taxes			4,207						3,553
Transfer of Loans to Other Real Estate Owned and Repossessed Assets			1,431						1,079
Total fair value of Commercial Loan Participation transferred to Other Assets			10,648						—

See Notes to Unaudited Interim Consolidated Financial Statements.

8

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.RISKS AND UNCERTAINTIES

Nature of Operations - Arrow Financial Corporation, a New York corporation ("Arrow," the "Company," "we," or "us"), was incorporated on March 21, 1983 and is registered as a bank holding company within the meaning of the Bank Holding Company Act of 1956.  The banking subsidiary is Arrow Bank National Association® ("Arrow Bank™") whose main office is located in Glens Falls, New York. Arrow Bank provides a full range of services to individuals and small to mid-size businesses in northeastern New York State from Albany, the State's capitol, to the Canadian border. The bank has wealth management departments which provide investment management and administrative services. An active subsidiary of Arrow Bank is Upstate Agency LLC ("Upstate"), offering insurance services including property and casualty insurance, group health insurance and individual life insurance products. North Country Investment Advisers, Inc., a registered investment adviser that provided investment advice to Arrow's proprietary mutual fund until the fund was transferred to a new investment advisor in the first half of 2025, and Arrow Properties, Inc., a real estate investment trust (REIT), are subsidiaries of Arrow Bank. Arrow also owns directly two subsidiary business trusts, organized in 2003 and 2004 to issue trust preferred securities (TRUPs), which are still outstanding.

Concentrations of Credit - With the exception of some indirect auto lending, Arrow's loans are primarily with borrowers in upstate New York.  Although the loan portfolio of Arrow Bank is well diversified, tourism has a substantial impact on the northeastern New York economy. The commitments to extend credit are fairly consistent with the distribution of loans presented in Note 5, "Loans," and generally have the same credit risk and are subject to normal credit policies.  Generally, the loans are secured by assets and are expected to be repaid from cash flow or the sale of selected assets of the borrowers.  Arrow evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Arrow upon extension of credit, is based upon Management's credit evaluation of the counterparty.  The nature of the collateral varies with the type of loan and may include: residential real estate, cash and securities, inventory, accounts receivable, property, plant and equipment, income producing commercial properties and automobiles.

Liquidity - The objective of effective liquidity management is to ensure that Arrow has the ability to raise cash when needed at a reasonable cost.  This includes the capability of meeting expected and unexpected obligations to Arrow's customers at any time. Given the uncertain nature of customer demands and the need to maximize earnings, Arrow maintains reasonably priced sources of funds, both on- and off-balance sheet, that can be accessed quickly in times of need. Arrow’s liquidity position should provide the Company with the necessary flexibility to address any unexpected near-term disruptions such as reduced cash flows from the investment and loan portfolio, unexpected deposit runoff, or increased loan originations.

Arrow's primary sources of available liquidity are overnight investments in federal funds sold, interest-bearing bank balances at the FRBNY, and cash flow from investment securities and borrowings.  

In addition to liquidity from cash, short-term investments, investment securities and borrowings, Arrow has supplemented available operating liquidity with additional off-balance sheet sources such as a federal funds lines of credit with correspondent banks and credit lines with the FHLBNY.

Note 2.     ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial statements contain all of the adjustments necessary to present fairly the financial position as of June 30, 2025 and December 31, 2024; the results of operations for the three and six month periods ended June 30, 2025 and 2024; the consolidated statements of comprehensive income for the three and six month periods ended June 30, 2025 and 2024; the changes in stockholders' equity for the three and six month periods ended June 30, 2025 and 2024; and the cash flows for the six month periods ended June 30, 2025 and 2024. All such adjustments are of a normal recurring nature. The unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements of Arrow for the year ended December 31, 2024 included in Arrow's Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K").

Recently Issued Accounting Standards

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2024-03 Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) to improve disclosures about a public business entity’s expenses, by providing more detailed information about the types of expenses in commonly presented expense captions. As amended by ASU 2025-01 issued in January 2025, the amendment is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendment may be applied prospectively or retrospectively. The Company is currently evaluating the impact of this accounting standard on its condensed consolidated financial statements.

Other ASUs issued but not effective until after June 30, 2025, are not expected to have a material effect on the Company’s consolidated financial position, annual results of operations and/or cash flows

Recently Adopted Accounting Standards

In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires additional disclosures related to rate reconciliation, income taxes paid, and other disclosures. Under

9

ASU 2023-09, for each annual period presented, public entities are required to (1) disclose specific categories in the tabular rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires all reporting entities to disclose on an annual basis the amount of income taxes paid disaggregated by federal, state, and foreign taxes as well as the amount of income taxes paid by individual jurisdiction. ASU 2023-09 is effective for public companies for annual periods beginning after December 15, 2024, and can be applied on a prospective basis with an option to apply the standard retrospectively. Early adoption is permitted. The Company adopted ASU 2023-09 January 1, 2025 and the additional disclosures will be reflected on Arrow's Annual Report on Form 10-K for the year ended December 31, 2025.

Management’s Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.  Management utilized estimates and assumptions in its evaluation of potential impairment of Arrow's right-of-use lease assets, goodwill and intangible assets. Our most significant estimate is the allowance for credit losses. Other estimates include the fair value of financial instruments, evaluation of pension and other post-retirement liabilities, an analysis of a need for a valuation allowance for deferred tax assets and a reserve for unfunded loan commitments. Actual results could differ from those estimates.

A material estimate that is particularly susceptible to significant change in the near term is the allowance for credit losses.  In connection with the determination of the allowance for credit losses management obtains economic forecasts from reliable sources and appraisals for properties.  The allowance for credit losses is management’s best estimate of the life of loan losses as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for credit losses may be necessary based on changes in economic conditions.

Allowance for Credit Losses – Loans - ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL) approach requires an estimate of the credit losses expected over the life of a loan (or pool of loans). The allowance for credit losses is a valuation account that is deducted from, or added to, the loans’ amortized cost basis to present the net lifetime amount expected to be collected on the loans. Credit losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.

Management estimates the allowance using relevant available information from internal and external sources related to past events, current conditions, and a reasonable and supportable single economic forecast. Historical credit loss experience provides the basis for the estimation of expected credit losses. Arrow's historical loss experience is supplemented with peer information when there is insufficient loss data for Arrow. Peer selection is based on a review of institutions with comparable loss experience as well as loan yield, bank size, portfolio concentration and geography. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in credit concentrations, delinquency level, collateral values and underwriting standards as well as changes in economic conditions or other relevant factors. Management judgment is required at each point in the measurement process.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed portfolio segments for estimating loss based on type of borrower and collateral as follows:

Commercial Loans

Commercial Real Estate Loans

Consumer Loans

Residential Loans

Further details related to loan portfolio segments is included in Note 5 Loans.

Historical credit loss experience for both Arrow and segment-specific peers provides the basis for the estimation of expected credit losses. Arrow utilized regression analyses of peer data where observed credit losses and selected economic factors were utilized to determine suitable loss drivers for modeling lifetime probability of default (PD) rates. Arrow uses the discounted cash flow (DCF) method to estimate expected credit losses for the commercial, commercial real estate, and residential segments. For each of these loan segments, Arrow generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, PD, and segment-specific loss given default (LGD) risk factors. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data and adjusted, if necessary, based on the reasonable and supportable forecast of economic conditions.

For the loan segments utilizing the DCF method, (commercial, commercial real estate, and residential) management utilizes externally developed economic forecast of the following economic factors as loss drivers: national unemployment, gross domestic product and Case-Shiller U.S. National Home Price Index (HPI). The economic forecast is applied over a reasonable and supportable forecast period. Arrow utilizes a six quarter reasonable and supportable forecast period with an eight quarter reversion to the historic mean on a straight-line basis.

The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (NPV). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis.

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Arrow uses the vintage analysis method to estimate expected credit losses for the consumer loan segment. The vintage method was selected since the loans within the consumer loan segment are homogeneous, not just by risk characteristic, but by loan structure. Under the vintage analysis method, a loss rate is calculated based on the quarterly net charge-offs to the outstanding loan balance for each vintage year over the lookback period. Once this periodic loss rate is calculated for each quarter in the lookback period, the periodic rates are averaged into the loss rate. The loss rate is then applied to the outstanding loan balances based on the loan's vintage year. Arrow maintains, over the life of the loan, the loss curve by vintage year. If estimated losses computed by the vintage method need to be adjusted based on current conditions and the reasonable and supportable economic forecast, these adjustments would be incorporated over a six quarter reasonable and supportable forecast period, reverting to historical losses using a straight-line method over an eight quarter period.

The vintage and DCF models also consider the need to qualitatively adjust expected loss estimates for information not already captured in the quantitative loss estimation process. Qualitative considerations include limitations inherent in the quantitative model; trends experienced in nonperforming and delinquent loans; changes in value of underlying collateral; changes in lending policies and procedures; nature and composition of loans; portfolio concentrations that may affect loss experience across one or more components or the portfolio; the experience, ability and depth of lending management and staff; Arrow's credit review system; and the effect of external factors such as competition, legal and regulatory requirements. These qualitative factor adjustments may increase or decrease Arrow's estimate of expected credit losses so that the allowance for credit loss is reflective of the estimate of lifetime losses that exist in the loan portfolio at the balance sheet date.

All loans that exceed $250,000 which are on nonaccrual, are evaluated on an individual basis. For collateral dependent financial assets where Arrow has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and Arrow expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, Arrow has elected to measure the allowance for credit loss as the difference between the fair value of the collateral less cost to sell, and the amortized cost basis of the asset as of the measurement date. In the event the repayment of a collateral dependent financial asset is expected to be provided substantially through the operation of the collateral, Arrow will use fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

As part of ASU No. 2022-02, Arrow evaluates whether the modification represents a new loan or a continuation of an existing loan, consistent with the current GAAP treatment for other loan modifications. In addition, Arrow evaluates and if necessary, discloses if loan modifications made to borrowers experiencing financial difficulty contain a financial concession.

Estimated Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities - Arrow estimates expected credit losses over the contractual period in which Arrow has exposure to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by Arrow. The allowance for credit losses on off-balance sheet credit exposures recognized in other liabilities, is adjusted as an expense in other non-interest expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. Estimating credit losses on unfunded commitments requires Arrow to consider the following categories of off-balance sheet credit exposure: unfunded commitments to extend credit, unfunded lines of credit, and standby letters of credit. Each of these unfunded commitments is then analyzed for a probability of funding to calculate a probable funding amount. The life of loan loss factor by related portfolio segment from the loan allowance for credit loss calculation is then applied to the probable funding amount to calculate the estimated credit losses on off-balance sheet credit exposures recognized as other liabilities.

Accrued Interest Receivable - Arrow has made the following elections regarding accrued interest receivable: (1) presented accrued interest receivable balances separately within the Other Assets balance sheet line item; (2) excluded interest receivable that is included in amortized cost of financing receivables from related disclosures requirements and (3) continued its policy to write off accrued interest receivable by reversing interest income. For loans, write off typically occurs upon becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, Arrow has not experienced uncollectible accrued interest receivable on investment securities.

Allowance for Credit Losses – Held-to-Maturity (HTM) Debt Securities - Arrow's HTM debt securities are also required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on HTM debt securities on a collective basis by major security types that share similar risk characteristics, such as financial asset type and collateral type adjusted for current conditions and reasonable and supportable forecasts. Management classifies the HTM portfolio into the following major security types: U.S. government agency or U.S. government sponsored mortgage-backed and collateralized mortgage obligations securities, and state and municipal debt securities.

Arrow's HTM debt securities are comprised of U.S. government-sponsored enterprises (GSEs) or state and municipal obligations. GSE securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Therefore, Arrow did not record a credit loss for these securities.

State and municipal bonds carry an investment rating from an accredited ratings agency, primarily with an investment grade rating. In addition, Arrow has a limited amount of New York state local municipal bonds that are not rated. The estimate of expected credit losses on the HTM portfolio is based on the expected cash flows of each individual CUSIP over its contractual life and utilized a municipal loss forecast model for determining PD and LGD rates. Management may exercise discretion to make adjustments based on environmental factors. A calculated expected credit loss for individual securities was determined using the PD and LGD rates. Arrow determined that the expected credit loss on its municipal bond portfolio was de minimis, and therefore, an allowance for credit losses was not recorded.

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Allowance for Credit Losses – Available-for-Sale (AFS) Debt Securities - Arrow's AFS debt securities are comprised of U.S. Treasuries, U.S. Government & Agency Obligations, State and Municipal Obligations, Mortgage-Backed Securities and Corporate and Other Debt Securities. The impairment model for AFS debt securities differs from the CECL approach utilized by HTM debt securities since AFS debt securities are measured at fair value rather than amortized cost. For AFS debt securities in an unrealized loss position, Arrow first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, in making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, failure of the issuer of the debt security to make scheduled interest or principal payments, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. The cash flows are estimated using information relevant to the collectability of the security, including information about past events, current conditions and reasonable and supportable forecasts. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Investments in Federal Reserve Bank ("FRB") and Federal Home Loan Bank ("FHLB") stock are required for membership in those organizations and are carried at cost since there is no market value available. The FHLB New York ("FHLBNY") continues to pay dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of FRB and FHLB stock.

Note 3. CASH AND CASH EQUIVALENTS (In Thousands)

The following table is the schedule of Cash and Cash Equivalents at June 30, 2025 and December 31, 2024:
						June 30, 2025						December 31, 2024
Cash and Due From Banks						$	40,976					$	27,422
Interest-bearing Deposits at Banks						227,472						127,124
Total Cash and Cash Equivalents						$	268,448					154,546

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Note 4.    INVESTMENT SECURITIES (In Thousands)

The following table is the schedule of Available-For-Sale Securities at June 30, 2025 and December 31, 2024:

Available-For-Sale Securities
						U.S. Treasuries						U.S. Government & Agency Obligations						State and Municipal Obligations						Mortgage- Backed Securities						Corporate and Other Debt Securities												Total Available- For-Sale Securities
June 30, 2025
Available-For-Sale Securities,   at Amortized Cost						$	98,179					$	25,000					$	200					$	341,829					$	6,000											$	471,208
Gross Unrealized Gains						1,934						—						—						647						39												2,620
Gross Unrealized Losses						—						(380)						—						(25,748)						(22)												(26,150)
Available-For-Sale Securities,   at Fair Value						100,113						24,620						200						316,728						6,017												447,678
Available-For-Sale Securities,   Pledged as Collateral, at Fair   Value																																										235,865
Maturities of Debt Securities,   at Amortized Cost:
Within One Year						$	24,980					$	—					$	—					$	1,843					$	—											$	26,823
From 1 - 5 Years						48,762						25,000						200						184,422						1,000												259,384
From 5 - 10 Years						24,437						—						—						155,564						5,000												185,001
Over 10 Years						—						—						—						—						—												—
Maturities of Debt Securities,   at Fair Value:
Within One Year						$	25,012					$	—					$	—					$	1,814					$	—											$	26,826
From 1 - 5 Years						49,926						24,620						200						172,895						978												248,619
From 5 - 10 Years						25,175						—						—						142,019						5,039												172,233
Over 10 Years						—						—						—						—						—												—
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months						$	—					$	—					$	—					$	31,039					$	—											$	31,039
12 Months or Longer						—						24,620						—						209,621						978												235,219
Total						$	—					$	24,620					$	—					$	240,660					$	978											$	266,258
Number of Securities in a   Continuous Loss Position						—						3						—						92						1												96
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months						$	—					$	—					$	—					$	46					$	—											$	46
12 Months or Longer						—						380						—						25,702						22												26,104
Total						$	—					$	380					$	—					$	25,748					$	22											$	26,150
December 31, 2024
Available-For-Sale Securities,   at Amortized Cost						$	97,985					$	70,000					$	240					$	330,448					$	1,000											$	499,673
Gross Unrealized Gains						90						32						—						29						—												151
Gross Unrealized Losses						(5)						(818)						—						(35,869)						(21)												(36,713)
Available-For-Sale Securities,   at Fair Value						98,070						69,214						240						294,608						979												463,111
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value																																										181,759
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months						$	48,370					$	—					$	—					$	66,958					$	—											$	115,328

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Available-For-Sale Securities
						U.S. Treasuries						U.S. Government & Agency Obligations						State and Municipal Obligations						Mortgage- Backed Securities						Corporate and Other Debt Securities												Total Available- For-Sale Securities
12 Months or Longer						—						54,182						—						221,305						979												276,466
Total						$	48,370					$	54,182					$	—					$	288,263					$	979											$	391,794
Number of Securities in a   Continuous Loss Position						2						7						—						97						1												107
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months						$	5					$	—					$	—					$	2,037					$	—											$	2,042
12 Months or Longer						—						818						—						33,832						21												34,671
Total						$	5					$	818					$	—					$	35,869					$	21											$	36,713

There was no allowance for credit losses for the AFS debt securities portfolio at either June 30, 2025 or December 31, 2024.

The following table is the schedule of Held-To-Maturity Securities at June 30, 2025 and December 31, 2024:

Held-To-Maturity Securities
						State and Municipal Obligations						Mortgage- Backed Securities												Total Held-To Maturity Securities
June 30, 2025
Held-To-Maturity Securities,   at Amortized Cost						$	65,601					$	5,227											$	70,828
Gross Unrealized Losses						(664)						(137)												(801)
Held-To-Maturity Securities,   at Fair Value						64,937						5,090												70,027
Held-To-Maturity Securities,   Pledged as Collateral, at Carrying Value																								43,201
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value																								42,400
Maturities of Debt Securities,   at Amortized Cost:
Within One Year						$	43,149					$	536											$	43,685
From 1 - 5 Years						20,911						4,691												25,602
From 5 - 10 Years						1,541						—												1,541
Over 10 Years						—						—												—
Maturities of Debt Securities,   at Fair Value:
Within One Year						$	42,869					$	530											$	43,399
From 1 - 5 Years						20,534						4,560												25,094
From 5 - 10 Years						1,534						—												1,534
Over 10 Years						—						—												—
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months						$	205					$	—											$	205
12 Months or Longer						40,205						5,090												45,295
Total						$	40,410					$	5,090											$	45,500

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Held-To-Maturity Securities
						State and Municipal Obligations						Mortgage- Backed Securities												Total Held-To Maturity Securities
Number of Securities in a   Continuous Loss Position						138						16												154
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months						$	—					$	—											$	—
12 Months or Longer						664						137												801
Total						$	664					$	137											$	801
December 31, 2024
Held-To-Maturity Securities,   at Amortized Cost						$	91,829					$	6,432											$	98,261
Gross Unrealized Losses						(1,456)						(219)												(1,675)
Held-To-Maturity Securities,   at Fair Value						90,373						6,213												96,586
Held-To-Maturity Securities,   Pledged as Collateral, at Carrying Value																								72,506
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value																								70,831
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months						$	378					$	—											$	378
12 Months or Longer						68,112						6,212												74,324
Total						$	68,490					$	6,212											$	74,702
Number of Securities in a   Continuous Loss Position						219						16												235
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months						$	2					$	—											$	2
12 Months or Longer						1,454						219												1,673
Total						$	1,456					$	219											$	1,675

In the tables above, maturities of mortgage-backed securities are included based on their contractual lives. Actual maturities will differ because issuers may have the right to call or prepay obligations with or without prepayment penalties.

Arrow's investment policy requires that investments held in our portfolio be investment grade or better at the time of purchase. Arrow performs an analysis of the creditworthiness of municipal obligations to determine if a security is of investment grade. The analysis may include but may not solely rely upon credit analysis conducted by external credit rating agencies.

Arrow evaluates AFS debt securities in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or non-credit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized within the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. Arrow determined that at June 30, 2025 and December 31, 2024, gross unrealized losses were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. Arrow does not intend to sell, nor is it more likely than not that Arrow will be required to sell, any securities before recovery of its amortized cost basis, which may be at maturity. Therefore, Arrow carried no allowance for credit loss at June 30, 2025 or December 31, 2024 and there was no credit loss expense recognized by Arrow with respect to the securities portfolio during the three months ended June 30, 2025 or the year ended December 31, 2024.  

Arrow's HTM debt securities are comprised of U.S. government-sponsored enterprises (GSEs) or state and municipal obligations. GSE securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long

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history of zero credit loss. Arrow determined that the expected credit loss on its HTM debt portfolio was immaterial and therefore no allowance for credit loss was recorded as of June 30, 2025.

The following table is the schedule of Equity Securities at June 30, 2025 and December 31, 2024:

Equity Securities

June 30, 2025

December 31, 2024

Equity Securities, at Fair Value

$5,332

$5,055

The following is a summary of realized and unrealized gains and losses recognized in income on equity securities during the three and six month periods ended June 30, 2025 and 2024:

			Three Months Ended June 30,												For the Six Months Ended June 30,
			2025												2024						2025						2024
Net (Loss) Gain on Equity Securities			$	(40)											$	54					$	277					$	71
Less: Net gain recognized during the reporting period on equity securities sold during the period			—												—						—						—
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date			$	(40)											$	54					$	277					$	71

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Note 5.    LOANS (In Thousands)

Loan Categories and Past Due Loans

The following two tables present loan balances outstanding as of June 30, 2025 and December 31, 2024 and an analysis of the recorded investment in loans that are past due at these dates. Generally, Arrow considers a loan past due 30 or more days when the borrower is two payments past due. Loans held-for-sale of $4.5 million and $759 thousand as of June 30, 2025 and December 31, 2024, respectively, are included in the residential real estate balances for current loans.

Schedule of Past Due Loans by Loan Category
									Commercial
			Commercial						Real Estate						Consumer						Residential						Total
June 30, 2025
Loans Past Due 30-59 Days			$	549					$	—					$	10,627					$	391					$	11,567
Loans Past Due 60-89 Days			196						312						5,548						3,150						9,206
Loans Past Due 90 or more Days			88						—						925						2,488						3,501
Total Loans Past Due			833						312						17,100						6,029						24,274
Current Loans			161,370						807,854						1,092,172						1,339,084						3,400,480
Total Loans			$	162,203					$	808,166					$	1,109,272					$	1,345,113					$	3,424,754
December 31, 2024
Loans Past Due 30-59 Days			$	355					$	—					$	11,211					$	391					$	11,957
Loans Past Due 60-89 Days			156						318						5,417						2,685						8,576
Loans Past Due 90 or more Days			102						14,902						2,225						2,239						19,468
Total Loans Past Due			613						15,220						18,853						5,315						40,001
Current Loans			158,378						781,145						1,100,128						1,314,889						3,354,540
Total Loans			$	158,991					$	796,365					$	1,118,981					$	1,320,204					$	3,394,541

Schedule of Non Accrual Loans by Category
									Commercial
June 30, 2025			Commercial						Real Estate						Consumer						Residential						Total
Loans 90 or More Days Past Due   and Still Accruing Interest			$	—					$	—					$	24					$	916					$	940
Nonaccrual Loans			170						—						1,154						3,951						5,275
Nonaccrual With No Allowance for Credit Loss			170						—						868						3,951						4,989
Interest Income on Nonaccrual Loans			—						—						—						—						—
December 31, 2024
Loans 90 or More Days Past Due   and Still Accruing Interest			$	—					$	—					$	19					$	379					$	398
Nonaccrual Loans			102						14,902						2,241						3,376						20,621

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Arrow disaggregates its loan portfolio into the following four categories:

Commercial - Arrow offers a variety of loan options to meet the specific needs of our commercial customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower. In the event of default by the borrower, Arrow may be required to liquidate collateral at deeply discounted values. To reduce the risk, management usually obtains personal guarantees to support the borrowing, as permitted by applicable law.

Commercial Real Estate - Arrow offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. Commercial real estate loans are made to finance the purchases of real property which generally consists of real estate with completed structures. These commercial real estate loans are typically secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and both owner- and non-owner-occupied facilities. Arrow also offers commercial construction and land development loans to finance projects. Many projects will ultimately be used by the borrowers' businesses, while others are developed for resale. These real estate loans are also typically secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities and both owner-occupied and non-owner-occupied facilities. There is elevated risk during the construction period, since the loan is secured by an incomplete project. Arrow’s Commercial Real Estate loans are primarily located within the footprint of the Company’s branch network, with some loans extending into the greater upstate New York area. Arrow does not provide Commercial Real Estate loans in major metropolitan areas such as New York City, Boston, etc.

Consumer Loans - This category is primarily comprised of automobile loans. Arrow primarily finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont. Most automobile loans carry a fixed rate of interest with principal repayment terms typically ranging from three to seven years. Automobile loans are underwritten on a secured basis using the underlying collateral being financed. Arrow also offers a variety of consumer installment loans to finance personal expenditures. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to five years, based upon the nature of the collateral and the size of the loan. In addition to installment loans, Arrow also offers personal lines of credit and overdraft protection. Several of these consumer loans are unsecured, which carry a higher risk of loss.

Residential - Residential real estate loans consist primarily of loans secured by first or second mortgages on primary residences. Arrow originates fixed-rate and adjustable-rate one-to-four-family residential real estate loans for the construction, purchase of real estate or refinancing of an existing mortgage. These loans are collateralized primarily by owner-occupied properties generally located in Arrow's market area. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 80% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance. Arrow’s underwriting analysis for residential mortgage loans typically includes credit verification, independent appraisals, and a review of the borrower’s financial condition. Mortgage title insurance and hazard insurance are normally required. It is Arrow's general practice to underwrite residential real estate loans to secondary market standards. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period. In addition, Arrow offers fixed home equity loans, as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses.  Arrow's policy allows for a maximum loan to value ratio of 80%, although periodically higher advances are allowed.  Arrow originates home equity lines of credit and second mortgage loans (loans secured by a second junior lien position on one-to-four-family residential real estate).  Risk is generally reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows.  A security interest, with title insurance when necessary, is taken in the underlying real estate.

Allowance for Credit Losses

Loan segments were selected by class code and application code to ensure each segment is comprised of loans with homogenous loan characteristics and similar risk profiles. The resulting loan segments are commercial, commercial real estate, consumer and residential real estate loans. Please see Note 2 Accounting Policies for additional detail on our Allowance for Credit Losses.

June 30, 2025 allowance for credit losses calculation incorporated a reasonable and supportable forecast period to account for economic conditions utilized in the measurement. The quantitative model utilized a six-quarter economic forecast sourced from reputable third-parties that projects an unfavorable change of approximately 0.28% in the forecasted national unemployment rate, forecasted gross domestic product projected to decline by approximately 0.60%, and the home price index (HPI) forecast to improve by approximately 1.18% from the previous quarter economic forecast.

The second quarter provision for credit losses was $0.6 million. In addition, Arrow recorded a decrease for estimated credit losses on off-balance sheet credit exposures in other liabilities of $38 thousand in the second quarter of 2025. Management's evaluation considers the allowance for credit losses for loans to be appropriate as of June 30, 2025.

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The following table details activity in the allowance for credit losses on loans for the three and six months ended June 30, 2025 and June 30, 2024:

Allowance for Credit Losses
			Commercial						Commercial Real Estate						Consumer						Residential												Total
March 31, 2025			$	1,801					$	18,236					$	4,147					$	13,587											$	37,771
Charge-offs			$	—					$	(3,818)					$	(1,225)					$	(20)											$	(5,063)
Recoveries			$	—					$	75					$	814					$	—											$	889
Provision			$	974					$	1,519					$	657					$	(2,556)											$	594
June 30, 2025			$	2,775					$	16,012					$	4,393					$	11,011											$	34,191
December 31, 2024			$	1,925					$	14,507					$	3,882					$	13,284											$	33,598
Charge-offs			$	—					$	(3,818)					$	(2,744)					$	(51)											$	(6,613)
Recoveries			$	—					$	75					$	1,518					$	—											$	1,593
Provision			$	850					$	5,248					$	1,737					$	(2,222)											$	5,613
June 30, 2025			$	2,775					$	16,012					$	4,393					$	11,011											$	34,191
March 31, 2024			$	2,842					$	14,168					$	2,756					$	11,795											$	31,561
Charge-offs			$	—					$	—					$	(1,850)					$	—											$	(1,850)
Recoveries			$	—					$	—					$	523					$	—											$	523
Provision			$	(811)					$	(57)					$	1,556					$	87											$	775
June 30, 2024			$	2,031					$	14,111					$	2,985					$	11,882											$	31,009
December 31, 2023			$	1,958					$	15,521					$	2,566					$	11,220											$	31,265
Charge-offs			$	(9)					$	—					$	(3,124)					$	—											$	(3,133)
Recoveries			$	—					$	—					$	1,485					$	—											$	1,485
Provision			$	82					$	(1,410)					$	2,058					$	662											$	1,392
June 30, 2024			$	2,031					$	14,111					$	2,985					$	11,882											$	31,009

Estimated Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities

As of June 30, 2025, the total unfunded commitment off-balance sheet credit exposure was $1.3 million, a decrease from the March 31, 2025 balance of $38 thousand.

Individually Evaluated Loans

As of June 30, 2025, there were three total relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $2.7 million.

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The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2025 and December 31, 2024:

June 30, 2025			Collateral Type -Residential Real Estate						Collateral Type - Commercial Real Estate						Total Loans
Commercial			$	—					$	—					$	—
Commercial Real Estate			—						—						—
Consumer			—						—						—
Residential			2,688						—						2,688
Total			$	2,688					$	—					$	2,688

December 31, 2024			Collateral Type -Residential Real Estate						Collateral Type - Commercial Real Estate						Total Loans
Commercial			$	—					$	—					$	—
Commercial Real Estate			—						14,902						14,902
Consumer			—						—						—
Residential			1,417						—						1,417
Total			$	1,417					$	14,902					$	16,319

Allowance for Credit Losses - Collectively and Individually Evaluated
			Commercial						Commercial Real Estate						Consumer						Residential												Total
June 30, 2025
Ending Loan Balance - Collectively Evaluated			$	162,203					$	808,166					$	1,109,272					$	1,342,425											$	3,422,066
Allowance for Credit Losses - Loans Collectively Evaluated			2,775						16,012						4,093						11,011												33,891
Ending Loan Balance - Individually Evaluated			—						—						—						2,688												2,688
Allowance for Credit Losses - Loans Individually Evaluated			—						—						300						—												300
December 31, 2024
Ending Loan Balance - Collectively Evaluated			$	158,991					$	781,463					$	1,118,981					$	1,318,787											$	3,378,222
Allowance for Credit Losses - Loans Collectively Evaluated			1,925						14,507						3,882						13,284												33,598
Ending Loan Balance - Individually Evaluated			—						14,902						—						1,417												16,319
Allowance for Credit Losses - Loans Individually Evaluated			—						—						—						—												—

Arrow's loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with certain criticized and classified commercial-related relationships. In addition, the independent internal loan review department performs periodic reviews of the credit quality indicators on individual loans in the commercial loan portfolio.

Arrow considers the need to qualitatively adjust expected credit loss estimates for information not already captured in the loss estimation process. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses. Adjustments are not made for information that has already been considered and included in the loss estimation process.

Arrow considers the qualitative factors that are relevant as of the reporting date, which may include, but are not limited to the following factors:

•The nature and volume of Arrow's financial assets;

•The existence, growth, and effect of any concentrations of credit;

•The volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

•The value of the underlying collateral for loans that are not collateral-dependent;

•Arrow's lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries;

•The quality of Arrow's loan review function;

•The experience, ability, and depth of Arrow's lending, investment, collection, and other relevant management/staff;

•The effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters;

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the institution operates that affect the collectability of financial assets; and

•Other qualitative factors not reflected in quantitative loss rate calculations.

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Loan Credit Quality Indicators and Modifications

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction.

In some cases, the Company provides multiple types of concession on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, may be granted.

The following tables present the amortized cost basis of loan at June 30, 2025 that were both experiencing financial difficulty and modified during the six months ended June 30, 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class financing receivable is also present below. We had no reportable loan modifications for the year ended December 31, 2024.

June 30, 2025			Principal Forgiveness						Payment Delay						Term Extension						Interest Rate Reduction						Combination Term Extension and Principal Forgiveness						Combination Term Extension and Interest Rate Reduction						Total Class of Financing Receivable
Commercial			$	—					$	—					$	—					$	—					$	—					$	—					—		%
Commercial Real Estate			—						—						—						—						—						—						—		%
Consumer			—						—						—						—						—						—						—		%
Residential			—						705						—						—						—						—						0.05		%
Total			$	—					$	705					$	—					$	—					$	—					$	—					0.02		%

The Company has not committed to lend additional amounts to the borrowers in the previous table.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the last 12 months. There were no reportable loan modifications for the year ended December 31, 2024.

June 30, 2025			Current						Loans Past Due 30-59 Days						Loans Past Due 60-89 Days						Loans Past Due 90 or more Days						Total Loans Past Due
Commercial			$	—					$	—					$	—					$	—					$	—
Commercial Real Estate			—						—						—						—						—
Consumer			—						—						—						—						—
Residential			705						—						—						—						—
Total			$	705					$	—					$	—					$	—					$	—

The following table presents the financial effect of the loan modification presented above to a borrower experiencing financial difficulty for the six months ended June 30, 2025. There were no reportable loan modifications for the year ended December 31, 2024.

June 30, 2025			Principal Forgiveness						Weighted-Average Interest Rate Reduction						Weighted-Average Term Extension
Commercial			$	—					—		%				0
Commercial Real Estate			—						—		%				0
Consumer			—						—		%				0
Residential			—						—		%				0
Total			—						—		%				0

There were no defaults during the six months ended June 30, 2025.

The following tables present credit quality indicators by total loans amortized cost basis by origination year as of June 30, 2025 and December 31, 2024:

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			Term Loans Amortized Cost Basis by Origination Year																		Revolving Loans Amortized Cost Basis			Revolving Loan Converted to Term			Total
June 30, 2025			2025			2024			2023			2022			2021			Prior
Commercial:
Risk rating
Satisfactory			$	18,018		$	45,640		$	24,474		$	19,884		$	14,728		$	22,123		$	11,354		$	—		$	156,221
Special mention			208			—			65			174			—			—			481			—			928
Substandard			—			—			467			113			—			2,964			1,510			—			5,054
Doubtful			—			—			—			—			—			—			—			—			—
Total Commercial Loans			$	18,226		$	45,640		$	25,006		$	20,171		$	14,728		$	25,087		$	13,345		$	—		$	162,203
Current-period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial Real Estate:
Risk rating
Satisfactory			$	34,837		$	108,474		$	95,905		$	134,044		$	101,383		$	283,479		$	4,349		$	—		$	762,471
Special mention			305			4,751			278			12,508			4,831			4,809			—			—			27,482
Substandard			—			—			344			1,320			312			14,570			1,667			—			18,213
Doubtful			—			—			—			—			—			—			—			—			—
Total Commercial Real Estate Loans			$	35,142		$	113,225		$	96,527		$	147,872		$	106,526		$	302,858		$	6,016		$	—		$	808,166
Current-period gross charge-offs			$	—		$	—		$	—		$	—		$	1,656		$	2,162		$	—		$	—		$	3,818
Consumer:
Risk rating
Performing			$	206,582		$	338,067		$	243,023		$	191,311		$	89,591		$	39,077		$	442		$	—		$	1,108,093
Nonperforming			151			217			243			213			265			85			5			—			1,179
Total Consumer Loans			$	206,733		$	338,284		$	243,266		$	191,524		$	89,856		$	39,162		$	447		$	—		$	1,109,272
Current-period gross charge-offs			$	17		$	691		$	741		$	618		$	536		$	141		$	—		$	—		$	2,744
Residential:
Risk rating
Performing			$	58,615		$	175,993		$	168,417		$	213,071		$	176,292		$	419,389		$	128,469		$	—		$	1,340,246
Nonperforming			—			—			110			2,082			397			1,863			415			—			4,867
Total Residential Loans			$	58,615		$	175,993		$	168,527		$	215,153		$	176,689		$	421,252		$	128,884		$	—		$	1,345,113
Current-period gross charge-offs			$	—		$	—		$	—		$	20		$	—		$	31		$	—		$	—		$	51
Total Loans			$	318,716		$	673,142		$	533,326		$	574,720		$	387,799		$	788,359		$	148,692		$	—		$	3,424,754
Total gross charge-offs			$	17		$	691		$	741		$	638		$	2,192		$	2,334		$	—		$	—		$	6,613

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			Term Loans Amortized Cost Basis by Origination Year																		Revolving Loans Amortized Cost Basis			Revolving Loan Converted to Term			Total
December 31, 2024			2024			2023			2022			2021			2020			Prior
Commercial:
Risk rating
Satisfactory			$	42,767		$	28,988		$	23,808		$	16,941		$	6,183		$	19,211		$	15,686		$	—		$	153,584
Special mention			107			229			930			—			72			—			483			—			1,821
Substandard			—			280			264			—			—			3,030			12			—			3,586
Doubtful			—			—			—			—			—			—			—			—			—
Total Commercial Loans			$	42,874		$	29,497		$	25,002		$	16,941		$	6,255		$	22,241		$	16,181		$	—		$	158,991
Current-period gross charge-offs			$	—		$	—		$	—		$	—		$	9		$	—		$	—		$	—		$	9
Commercial Real Estate:
Risk rating
Satisfactory			$	90,049		$	96,783		$	137,146		$	109,086		$	115,576		$	187,202		$	2,799		$	—		$	738,641
Special mention			3,002			200			12,680			—			—			9,506			—			—			25,388
Substandard			—			146			172			1,985			2,309			26,853			871			—			32,336
Doubtful			—			—			—			—			—			—			—			—			—
Total Commercial Real Estate Loans			$	93,051		$	97,129		$	149,998		$	111,071		$	117,885		$	223,561		$	3,670		$	—		$	796,365
Current-period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Consumer:
Risk rating
Performing			$	386,004		$	297,698		$	243,484		$	121,803		$	48,268		$	18,994		$	473		$	—		$	1,116,724
Nonperforming			345			424			602			593			178			115			—			—			2,257
Total Consumer Loans			$	386,349		$	298,122		$	244,086		$	122,396		$	48,446		$	19,109		$	473		$	—		$	1,118,981
Current-period gross charge-offs			$	1,272		$	949		$	1,669		$	1,270		$	434		$	243		$	—		$	—		$	5,837
Residential:
Risk rating
Performing			$	162,087		$	177,071		$	225,398		$	181,934		$	106,695		$	334,576		$	128,687		$	—		$	1,316,448
Nonperforming			—			201			254			201			464			2,386			250			—			3,756
Total Residential Loans			$	162,087		$	177,272		$	225,652		$	182,135		$	107,159		$	336,962		$	128,937		$	—		$	1,320,204
Current-period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	49		$	—		$	—		$	49
Total Loans			$	684,361		$	602,020		$	644,738		$	432,543		$	279,745		$	601,873		$	149,261		$	—		$	3,394,541
Total gross charge-offs			$	1,272		$	949		$	1,669		$	1,270		$	443		$	292		$	—		$	—		$	5,895

For the purposes of the table above, nonperforming consumer and residential loans were those loans on nonaccrual status or were 90 days or more past due and still accruing interest.

As of June 30, 2025, the amortized cost of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $1.8 million.

For the allowance calculation, an internally developed system of five credit quality indicators is used to rate the credit worthiness of each commercial loan defined as follows:

1) Satisfactory - "Satisfactory" borrowers have acceptable financial condition with satisfactory record of earnings and sufficient historical and projected cash flow to service the debt.  Borrowers have satisfactory repayment histories and primary and secondary sources of repayment can be clearly identified;

2) Special Mention - Loans in this category have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit

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position at some future date.  "Special mention" assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.  Loans which might be assigned this credit quality indicator include loans to borrowers with deteriorating financial strength and/or earnings record and loans with potential for problems due to weakening economic or market conditions;

3) Substandard - Loans classified as “substandard” are inadequately protected by the current net worth or paying capacity of the borrower or the collateral pledged, if any.  Loans in this category have well defined weaknesses that jeopardize the repayment. They are characterized by the distinct possibility that Arrow will sustain some loss if the deficiencies are not corrected. “Substandard” loans may include loans which are likely to require liquidation of collateral to effect repayment, and other loans where character or ability to repay has become suspect. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard;

4) Doubtful - Loans classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable.  Although possibility of loss is extremely high, classification of these loans as “loss” has been deferred due to specific pending factors or events which may strengthen the value (e.g. possibility of additional collateral, injection of capital, collateral liquidation, debt restructure, economic recovery, etc).  Loans classified as “doubtful” need to be placed on nonaccrual; and

5) Loss - Loans classified as “loss” are considered uncollectible with collateral of such little value that their continuance as bankable assets is not warranted.  As of the date of the balance sheet, all loans in this category have been charged-off to the allowance for loan losses.  

Commercial loans are generally evaluated on an annual basis depending on the size and complexity of the loan relationship, unless the credit related quality indicator falls to a level of "special mention" or below, when the loan is evaluated quarterly.  The credit quality indicator is one of the factors used in assessing the level of incurred risk of loss in our commercial related loan portfolios.

Note 6. DEBT (Dollars in Thousands)

Schedule of Borrowings:

			June 30, 2025						December 31, 2024
Balance:
FHLBNY Overnight Advances			—						—
FHLBNY Term Advances			8,600						8,600
Total Borrowings			$	8,600					$	8,600
Maximum Borrowing Capacity:
Federal Funds Purchased			$	23,000					$	23,000
Federal Home Loan Bank of New York			695,187						654,890
Federal Reserve Bank of New York			761,715						571,107
Available Borrowing Capacity:
Federal Funds Purchased			$	23,000					$	23,000
Federal Home Loan Bank of New York			656,587						616,290
Federal Reserve Bank of New York			761,715						571,107

Arrow Bank has in place unsecured federal funds lines of credit with two correspondent banks. As a member of the FHLBNY, Arrow participates in the advance program which allows for overnight and term advances up to the limit of pledged collateral, including FHLBNY stock and any loans secured by real estate such as commercial real estate, residential real estate and home equity loans (see Notes 4: Investment Securities, and 5: Loans to the Consolidated Financial Statements). The maximum borrowing capacities at the FHLBNY and FRB are determined based on the fair value of the collateral pledged, subject to discounts determined by the respective lenders. As of June 30, 2025, the carrying cost for the FHLBNY collateral was approximately $1.0 billion and approximately $1.0 billion for the FRB. As of June 30, 2025, the fair value for the FHLBNY collateral was approximately $865.8 million and approximately $1.0 billion for the FRB.  The investment in FHLBNY stock is proportional to the total of Arrow's overnight and term advances (see the Schedule of FFRB and FHLB Stock in Note 4, Investment Securities, to the Consolidated Financial Statements). Arrow Bank has also established borrowing facilities with the FRB of New York for potential “discount window” advances, pledging certain consumer loans as collateral (see Note 5, Loans, to the Consolidated Financial Statements).

Long Term Debt - FHLBNY Term Advances

In addition to overnight advances, Arrow Bank also borrows longer-term funds from the FHLBNY.

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Maturity Schedule of FHLBNY Term Advances:

						Balances												Weighted Average Rate 1
Final Maturity						6/30/2025						12/31/2024												6/30/2025						12/31/2024
First Year						$	6,900					$	6,900											5.34		%				5.34		%
Second Year						—						—												—		%				—		%
Third Year						1,700						1,700												4.85		%				4.85		%
Fourth Year						—						—												—		%				—		%
Total						$	8,600					$	8,600											5.24		%				5.24		%
1The effective rate on the FHLBNY Advances is 0% due to subsidized funding in the form of interest rate credits.

Long Term Debt - Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated Debentures

At June 30, 2025, Arrow had two classes of financial instruments issued by two separate subsidiary business trusts of Arrow, Arrow Capital Statutory Trust II ("ACST II") and Arrow Capital Statutory Trust III ("ACST III" and, together with ACST II, the "Trusts"), identified as “Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts” on the Consolidated Balance Sheets and the Consolidated Statements of Income.

The first of the two classes of trust-issued instruments outstanding at June 30, 2025 was issued by ACST II, a Delaware business trust established on July 16, 2003, upon the filing of a certificate of trust with the Delaware Secretary of State.  In July 2003, ACST II issued all of its voting (common) stock to Arrow and issued and sold to an unaffiliated purchaser 30-year guaranteed preferred beneficial interests in the trust's assets ("ACST II TRUPS"). The rate on the securities is variable and tied to the 3-month Secured Overnight Financing Rate (SOFR) plus 3.15%. ACST II used the proceeds of the sale of the ACST II TRUPS to purchase an identical amount of junior subordinated debentures issued by Arrow that bear an interest rate identical at all times to the rate payable on the ACST II TRUPS.  The ACST II TRUPS became redeemable after July 23, 2008 and mature on July 23, 2033.

The second of the two classes of trust-issued instruments outstanding at year-end was issued by ACST III, a Delaware business trust established on December 23, 2004, upon the filing of a certificate of trust with the Delaware Secretary of State. On December 28, 2004, the ACST III issued all of its voting (common) stock to Arrow and issued and sold to an unaffiliated purchaser 30-year guaranteed preferred beneficial interests in the trust's assets ("ACST III TRUPS").  The rate on the ACST III TRUPS is a variable rate, adjusting quarterly to the 3-month SOFR plus 2.00%. ACST III used the proceeds of the sale of the ACST III TRUPS to purchase an identical amount of junior subordinated debentures issued by Arrow that bear an interest rate identical at all times to the rate payable on the ACST III TRUPS.  The ACST III TRUPS became redeemable on or after March 31, 2010 and mature on December 28, 2034.

Arrow has entered into interest rate swaps to synthetically fix the variable rate interest payments associated with $20 million in outstanding subordinated trust securities attributable to the Trusts. These agreements are designated as cash flow hedges.

The primary assets of the Trusts are Arrow's junior subordinated debentures discussed above, and the sole revenues of the Trusts are payments received by them from Arrow with respect to the junior subordinated debentures.  The trust preferred securities issued by the Trusts are non-voting.  All common voting securities of the Trusts are owned by Arrow.  Arrow used the net proceeds from its sale of junior subordinated debentures to the Trusts, facilitated by the Trusts' sale of their trust preferred securities to the purchasers thereof, for general corporate purposes.  The trust preferred securities and underlying junior subordinated debentures, with associated expense that is tax deductible, qualify as Tier I capital under regulatory definitions.

Arrow's primary source of funds to pay interest on the debentures that are held by the Trusts are current dividends received by Arrow from Arrow Bank.  Accordingly, Arrow's ability to make payments on the debentures, and the ability of the Trusts to make payments on their trust preferred securities, are dependent upon the continuing ability of Arrow Bank to pay dividends to Arrow.  Since the trust preferred securities issued by the subsidiary trusts and the underlying junior subordinated debentures issued by Arrow at June 30, 2025 and December 31, 2024 are classified as debt for financial statement purposes, the expense associated with these securities is recorded as interest expense in the Consolidated Statements of Income for the three years.

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Schedule of Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated Debentures

			June 30, 2025						December 31, 2024
ACST II
Balance			$	10,000					$	10,000
Period End:
Variable Interest Rate			7.71		%				7.74		%
Fixed Interest Rate resulting from cash flow hedge agreement			4.00		%				4.00		%
ACST III
Balance			$	10,000					$	10,000
Period End:
Variable Interest Rate			6.56		%				6.59		%
Fixed Interest Rate resulting from cash flow hedge agreement			2.86		%				2.86		%

Note 7.    COMMITMENTS AND CONTINGENCIES (In Thousands)

The following table presents the notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit as of June 30, 2025 and December 31, 2024:

Commitments to Extend Credit and Letters of Credit
			June 30, 2025						December 31, 2024
Notional Amount:
Commitments to Extend Credit			$	464,508					$	449,491
Standby Letters of Credit			3,980						4,306
Fair Value:
Commitments to Extend Credit			$	—					$	—
Standby Letters of Credit			(7)						(7)

Arrow is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Commitments to extend credit include home equity lines of credit, commitments for residential and commercial construction loans and other personal and commercial lines of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  The contract or notional amounts of those instruments reflect the extent of the involvement Arrow has in particular classes of financial instruments.

Arrow's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments.  Arrow uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are not expected to be fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Arrow evaluates each customer's creditworthiness on a case-by-case basis.  Home equity lines of credit are secured by residential real estate.  Construction lines of credit are secured by underlying real estate.  For other lines of credit, the amount of collateral obtained, if deemed necessary by Arrow upon extension of credit, is based on management's credit evaluation of the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.  Most of the commitments are variable rate instruments.

Arrow does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit. Arrow has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party.  Standby letters of credit generally arise in connection with commercial lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit at June 30, 2025 and December 31, 2024 represent the maximum potential future payments Arrow could be required to make.  Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements.  Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Arrow's policies governing loan collateral apply to standby letters of credit at the time of credit extension. Loan-to-value ratios will generally range from 50% for movable assets, such as inventory, to 100% for liquid assets, such as bank CD's. Fees for standby letters of credit range from 1% to 3% of the notional amount.  Fees are collected upfront and amortized over the life of the commitment. The carrying amount and fair value of Arrow's standby letters of credit at June 30, 2025 and December 31, 2024, were insignificant.  The fair

26

value of standby letters of credit is based on the fees currently charged for similar agreements or the cost to terminate the arrangement with the counterparties.

The fair value of commitments to extend credit is determined by estimating the fees to enter into similar agreements, taking into account the remaining terms and present creditworthiness of the counterparties, and for fixed rate loan commitments, the difference between the current and committed interest rates.  Arrow provides several types of commercial lines of credit and standby letters of credit to its commercial customers.  The pricing of these services is not isolated as Arrow considers the customer's complete deposit and borrowing relationship in pricing individual products and services.  The commitments to extend credit also include commitments under home equity lines of credit, for which Arrow charges no fee.  The carrying value and fair value of commitments to extend credit are not material and Arrow does not expect to incur any material loss as a result of these commitments.

In the normal course of business, Arrow and Arrow Bank become involved in a variety of routine legal proceedings.  At present, there are no legal proceedings pending or threatened, which in the opinion of management and counsel, would result in a material loss to Arrow. Legal expenses incurred in connection with loss contingencies are expensed as incurred. Please see Part II, Item 1. Legal Proceedings for additional detail on our ongoing legal proceedings.

Note 8.    COMPREHENSIVE INCOME (In Thousands)

The following table presents the components of other comprehensive income (loss) for the three and six month periods ended June 30, 2025 and 2024:

Schedule of Comprehensive Income (Loss)
			Three Months Ended June 30,																		Six Months Ended June 30,
									Tax																		Tax
			Before-Tax						(Expense)						Net-of-Tax						Before-Tax						(Expense)						Net-of-Tax
			Amount						Benefit						Amount						Amount						Benefit						Amount
2025
Net Unrealized Securities Holding Gain on Securities Available-for-Sale Arising During the Period			$	4,387					$	(1,131)					$	3,256					$	13,032					$	(3,360)					$	9,672
Net Unrealized (Loss) on Cash Flow Swap			(208)						54						(154)						(1,762)						454						(1,308)
Reclassification of Net Unrealized (Gain) on Cash Flow Hedge Agreements to Interest Expense			(558)						144						(414)						(988)						255						(733)
Amortization of Net Retirement Plan Actuarial (Gain)			(159)						41						(118)						(255)						66						(189)
Amortization of Net Retirement Plan Prior Service Cost			83						(22)						61						166						(44)						122
Other Comprehensive Income			$	3,545					$	(914)					$	2,631					$	10,193					$	(2,629)					$	7,564
2024
Net Unrealized Securities Holding Gain (Loss) on Securities Available-for-Sale Arising During the Period			$	1,014					$	(263)					$	751					$	(1,048)					$	269					$	(779)
Net Unrealized Gain on Cash Flow Swap			680						(175)						505						3,901						(1,006)						2,895
Reclassification of Net Unrealized (Gain) on Cash Flow Hedge Agreements to Interest Expense			(215)						56						(159)						(428)						111						(317)
Amortization of Net Retirement Plan Actuarial (Gain)			(91)						25						(66)						(157)						41						(116)
Amortization of Net Retirement Plan Prior Service Cost			68						(17)						51						137						(36)						101
Other Comprehensive Income			$	1,456					$	(374)					$	1,082					$	2,405					$	(621)					$	1,784

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The following table presents the changes in accumulated other comprehensive (loss) income by component:

Changes in Accumulated Other Comprehensive (Loss) Income by Component (1)
			Unrealized Loss on Available-for-Sale Securities						Unrealized Gain on Cash Flow Swap						Defined Benefit Plan Items												Total
															Net Actuarial Gain (Loss)						Net Prior Service Cost
For the quarter-to-date periods ended:
March 31, 2025						$	(20,876)											$	3,204											$	4,856					$	(704)					$	(13,520)
Other comprehensive income or loss before reclassifications			3,256						(154)						—						—						3,102
Amounts reclassified from accumulated other comprehensive income or loss			—						(414)						(118)						61						(471)
Net current-period other comprehensive income or loss			3,256						(568)						(118)						61						2,631
June 30, 2025			$	(17,620)					$	2,636					$	4,738					$	(643)					$	(10,889)
March 31, 2024			$	(33,178)					$	3,943					$	(2,889)					$	(590)					$	(32,714)
Other comprehensive income or loss before reclassifications			751						505						—						—						1,256
Amounts reclassified from accumulated other comprehensive income or loss			—						(159)						(66)						51						(174)
Net current-period other comprehensive income or loss			751						346						(66)						51						1,082
June 30, 2024			$	(32,427)					$	4,289					$	(2,955)					$	(539)					$	(31,632)
For the Year-To-Date periods ended:
December 31, 2024			$	(27,292)					$	4,677					$	4,927					$	(765)					$	(18,453)
Other comprehensive income or loss before reclassifications			9,672						(1,308)						—						—						8,364
Amounts reclassified from accumulated other comprehensive income or loss			—						(733)						(189)						122						(800)
Net current-period other comprehensive income or loss			9,672						(2,041)						(189)						122						7,564
June 30, 2025			$	(17,620)					$	2,636					$	4,738					$	(643)					$	(10,889)
December 31, 2023			$	(31,648)					$	1,711					$	(2,839)					$	(640)					$	(33,416)
Other comprehensive income or loss before reclassifications			(779)						2,895						—						—						2,116
Amounts reclassified from accumulated other comprehensive income or loss			—						(317)						(116)						101						(332)
Net current-period other comprehensive income or loss			(779)						2,578						(116)						101						1,784
June 30, 2024			$	(32,427)					$	4,289					$	(2,955)					$	(539)					$	(31,632)

(1) All amounts are net of tax.

The following table presents the reclassifications out of accumulated other comprehensive income or loss:

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Reclassifications Out of Accumulated Other Comprehensive Income or Loss
Details about Accumulated Other Comprehensive Income or Loss Components						Amounts Reclassified from Accumulated Other Comprehensive Income or Loss						Affected Line Item in the Statement Where Net Income Is Presented
For the quarter-to-date periods ended:
June 30, 2025
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense						$	558					Interest expense
Amortization of defined benefit pension items:
Prior-service costs						(83)			(1)			Salaries and Employee Benefits
Actuarial gain						159			(1)			Salaries and Employee Benefits
						634						Total before Tax
						(163)						Provision for Income Taxes
Total reclassifications for the period						$	471					Net of Tax
June 30, 2024
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense						$	215					Interest expense
Amortization of defined benefit pension items:
Prior-service costs						$	(68)		(1)			Salaries and Employee Benefits
Actuarial gain						91			(1)			Salaries and Employee Benefits
						238						Total before Tax
						(64)						Provision for Income Taxes
Total reclassifications for the period						$	174					Net of Tax
For the Year-to-date periods ended:
June 30, 2025
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense						$	988					Interest expense
Amortization of defined benefit pension items:
Prior-service costs						(166)			(1)			Salaries and Employee Benefits
Actuarial gain						255			(1)			Salaries and Employee Benefits
						1,077						Total before Tax
						(277)						Provision for Income Taxes
Total reclassifications for the period						$	800					Net of Tax
June 30, 2024
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense						$	428					Interest expense
Amortization of defined benefit pension items:
Prior-service costs						(137)			(1)			Salaries and Employee Benefits
Actuarial gain						157			(1)			Salaries and Employee Benefits
						448						Total before Tax
						(116)						Provision for Income Taxes
Total reclassifications for the period						$	332					Net of Tax
(1) These accumulated other comprehensive gain or loss components are included in the computation of net periodic pension cost.

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Note 9.    STOCK-BASED COMPENSATION (Dollars In Thousands, Except Share and Per Share Amounts)

Arrow has established three stock-based compensation plans: a Long Term Incentive Plan (LTIP), an Employee Stock Purchase Plan (ESPP) and an Employee Stock Ownership Plan (ESOP).

Long Term Incentive Plan

The LTIP provides for the grant of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock units, performance units and performance shares. The Compensation Committee of the Board of Directors administers the LTIP.

Restricted Stock Awards - In the three and six months ended June 30, 2025, the Company granted restricted stock awards which will generally vest over a three to four-year period. Unvested restricted stock will generally be forfeited if the recipient ceases to be employed by the Company, with limited exceptions. Grantees of restricted stock awards are entitled to receive all dividends and distributions declared and paid on restricted stock, or cash payments equivalent to such dividends or distributions, including those declared and paid during the vesting period.

The following table summarizes information about restricted stock awards for the year to date period ended June 30, 2025:

			Restricted Stock Awards						Weighted Average Grant Date Fair Value
Outstanding at January 1, 2025			21,818						24.54
Granted			43,250						27.50
Vested			(11,504)						25.68
Forfeited			—						—
Outstanding at June 30, 2025			53,564						26.68

The following table presents information on the amounts expensed related to restricted stock for the three and six month periods ended June 30, 2025 and 2024:

						Three Months Ended June 30,												Six Months Ended June 30,
						2025						2024						2025						2024
Amount expensed						$	262					$	21					$	343					$	21

Stock Options - Options may be granted at a price no less than the greater of the par value or fair market value of such shares on the date on which such option is granted, and generally expire ten years from the date of grant.  The options usually vest over a four-year period.

The following table summarizes information about stock option activity for the six month period ended June 30, 2025:

			Shares						Weighted Average Exercise Price
Outstanding at January 1, 2025			246,453						$	29.50
Exercised			(5,144)						20.09
Forfeited			(6,485)						27.37
Outstanding at June 30, 2025			234,824						29.76
Vested at Period-End			210,284						29.48
Expected to Vest			24,540						32.16

The following table presents information on the amounts expensed related to stock options for the three and six month periods ended June 30, 2025 and 2024:

						Three Months Ended June 30,												Six Months Ended June 30,
						2025						2024						2025						2024
Amount expensed						$	28					$	81					$	62					$	159

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Employee Stock Purchase Plan

In October 2023, the Board of Directors approved the adoption of the 2023 ESPP, which is intended to satisfy the requirements of Section 423 of the Internal Revenue Code. Under this plan, the amount of the discount is 10%. The Qualified ESPP was approved by Arrow shareholders at the 2024 annual meeting of shareholders.

Director Stock Plan

Arrow maintains a director stock plan, pursuant to which a portion of the directors’ fees, as determined by the Board in its sole discretion, is paid to the directors in shares of Company common stock, as opposed to cash or any other form of compensation, subject to applicable law. Each director may elect to receive a greater amount or percentage of his or her directors’ fees payable in common stock from the portion that would otherwise have been payable in cash to the director.

Employee Stock Ownership Plan

Arrow maintains an ESOP, pursuant to which substantially all employees of Arrow and its subsidiaries are eligible to participate upon satisfaction of applicable service requirements. The Company may make, and historically has made, a cash contribution to the ESOP each year.

Note 10.    RETIREMENT BENEFIT PLANS (Dollars in Thousands)

Arrow sponsors qualified and non-qualified defined benefit pension plans and other postretirement benefit plans for its employees. Arrow maintains a non-contributory pension plan, which covers substantially all employees. Arrow also maintains a supplemental non-qualified unfunded retirement plan to provide eligible employees of Arrow and its subsidiaries with benefits in excess of qualified plan limits imposed by federal tax law.

Arrow has multiple non-pension postretirement benefit plans.  The health care, dental and life insurance plans are contributory, with participants’ contributions adjusted annually.  Arrow’s policy is to fund the cost of postretirement benefits based on the current cost of the underlying policies.  However, the health care plan provision allows for grandfathered participants to receive automatic increases of Company contributions each year based on the increase in inflation, limited to a maximum of 5%.

The following tables provide the components of net periodic benefit costs for the three and six-month periods ended June 30, 2025 and 2024:

						Employees'						Select Executive						Postretirement
						Pension						Retirement						Benefit
						Plan						Plan						Plans
Net Periodic Benefit Cost (Benefit)
For the Three Months Ended June 30, 2025:
Service Cost 1						$	402					$	21					$	5
Interest Cost 2						577						76						60
Expected Return on Plan Assets 2						(977)						—						—
Amortization of Prior Service Cost 2						48						10						25
Amortization of Net (Gain) 2						—						—						(159)
Net Periodic Cost (Benefit)						$	50					$	107					$	(69)
Plan Contributions During the Period						$	—					$	128					$	34
For the Three Months Ended June 30, 2024:
Service Cost 1						$	380					$	22					$	8
Interest Cost 2						595						2						79
Expected Return on Plan Assets 2						(923)						—						—
Amortization of Prior Service Cost 2						33						10						25
Amortization of Net (Gain) 2						—						(9)						(82)
Net Periodic Cost						$	85					$	25					$	30
Plan Contributions During the Period						$	—					$	128					$	54

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Net Periodic Benefit Cost
For the Six Months Ended June 30, 2025:
Service Cost 1						$	802					$	47					$	16
Interest Cost 2						1,161						148						139
Expected Return on Plan Assets 2						(1,986)						—						—
Amortization of Prior Service Cost 2						95						20						51
Amortization of Net (Gain) 2						—						—						(255)
Net Periodic Cost (Benefit)						$	72					$	215					$	(49)
Plan Contributions During the Period						$	—					$	248					$	91
Estimated Future Contributions in the Current Fiscal Year						$	—					$	248					$	91
For the Six Months Ended June 30, 2024:
Service Cost 1						$	846					$	39					$	23
Interest Cost 2						1,120						160						160
Expected Return on Plan Assets 2						(1,855)						—						—
Amortization of Prior Service Cost 2						66						20						51
Amortization of Net Loss (Gain) 2						—						12						(169)
Net Periodic Cost						$	177					$	231					$	65
Plan Contributions During the Period						$	—					$	255					$	81

Footnotes:

1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income

2. Included in Other Operating Expense on the Consolidated Statements of Income

A contribution to the qualified pension plan was not required during the six month period ended June 30, 2025 and currently, additional contributions in 2025 are not expected. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.

Note 11.    EARNINGS PER COMMON SHARE (In Thousands, Except Per Share Amounts)

The following table presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per common share ("EPS") for periods ended June 30, 2025 and 2024.

Earnings Per Share
			Three Months Ended												Six Months Ended
			June 30, 2025						June 30, 2024						June 30, 2025						June 30, 2024
Earnings Per Share - Basic:
Net Income			$	10,805					$	8,604					$	17,115					$	16,264
Weighted Average Shares - Basic			16,545						16,685						16,611						16,764
Earnings Per Share - Basic			$	0.65					$	0.52					$	1.03					$	0.97
Earnings Per Share - Diluted:
Net Income			$	10,805					$	8,604					$	17,115					$	16,264
Weighted Average Shares - Basic			16,545						16,685						16,611						16,764
Dilutive Average Shares Attributable to Stock Options			6						24						7						25
Weighted Average Shares - Diluted			16,551						16,709						16,618						16,789
Earnings Per Share - Diluted			$	0.65					$	0.52					$	1.03					$	0.97

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Note 12.    FAIR VALUES (Dollars In Thousands)

FASB defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. There are no nonfinancial assets or liabilities measured at fair value on a recurring basis. The only assets or liabilities that Arrow measured at fair value on a recurring basis at June 30, 2025 and December 31, 2024 were AFS securities, equity securities and derivatives. Arrow held no securities or liabilities for trading on such dates.

The table below presents the financial instrument's fair value and the amounts within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement:

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
									Fair Value Measurements at Reporting Date Using:
			Fair Value						Quoted Prices In Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Fair Value of Assets and Liabilities Measured on a Recurring Basis:
June 30, 2025
Assets:
Securities Available-for Sale:
U.S. Treasuries			$	100,113					$	100,113					$	—					$	—
U.S. Government & Agency Obligations			24,620						—						24,620						$	—
State and Municipal Obligations			200						—						200						—
Mortgage-Backed Securities			316,728						—						316,728						—
Corporate and Other Debt Securities			6,017						—						6,017						—
Total Securities Available-for-Sale			447,678						100,113						347,565						—
Equity Securities			5,332						—						5,332						—
Total Securities Measured on a Recurring Basis			453,010						100,113						352,897						—
Derivative Assets			9,169						—						9,169						—
Total Measured on a Recurring Basis			$	462,179					$	100,113					$	362,066					$	—
Liabilities:
Derivative Liabilities			8,908						—						8,908						—
Total Measured on a Recurring Basis			$	8,908					$	—					$	8,908					$	—
December 31, 2024
Assets:
Securities Available-for Sale:
U.S. Treasuries			$	98,070					$	98,070					$	—					$	—
U.S. Government & Agency Obligations			69,214						—						69,214						—
State and Municipal Obligations			240						—						240						—
Mortgage-Backed Securities			294,608						—						294,608						—
Corporate and Other Debt Securities			979						—						979						—
Total Securities Available-for-Sale			463,111						98,070						365,041						—
Equity Securities			5,055						—						5,055						—
Total Securities Measured on a Recurring Basis			468,166						98,070						370,096						—
Derivative Assets			12,659						—						12,659						—
Total Measured on a Recurring Basis			$	480,825					$	98,070					$	382,755					$	—
Liabilities:
Derivative Liabilities			$	8,638					$	—					$	8,638					$	—
Total Measured on a Recurring Basis			$	8,638					$	—					$	8,638					$	—

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			Fair Value						Quoted Prices In Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Gains (Losses) Recognized in Earnings
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
June 30, 2025
Collateral Dependent Evaluated Loans			$	—					$	—					$	—					$	—
Other Real Estate Owned and Repossessed Assets, Net			590						—						—						590						—
December 31, 2024
Collateral Dependent Impaired Loans			$	—					$	—					$	—					$	—
Other Real Estate Owned and Repossessed Assets, Net			458						—						—						458						—

The fair value of financial instruments is determined under the following hierarchy:

•Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and,

•Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Fair Value Methodology for Assets and Liabilities Measured on a Recurring Basis

The fair value of Level 1 AFS securities are based on unadjusted, quoted market prices from exchanges in active markets. The fair value of Level 2 AFS securities are based on an independent bond and equity pricing service for identical assets or significantly similar securities and an independent equity pricing service for equity securities not actively traded.  The pricing services use a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows. The fair value of Level 2 equities are based on the last observable price in open markets.  The fair value of Level 2 derivatives is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes.

Fair Value Methodology for Assets and Liabilities Measured on a Nonrecurring Basis

The fair value of collateral dependent individually evaluated loans and other real estate owned is based on the fair value of the underlying collateral which is based on the appraised value less costs to sell. Significant unobservable inputs used in this valuation technique include capitalization rates which ranged from 7% - 10%. The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. Arrow evaluates each of these assets for impairment at least annually, with no impairment recognized for these assets at June 30, 2025 and December 31, 2024.

Fair Value Methodology for Financial Instruments Not Measured on a Recurring or Nonrecurring Basis

The fair value for securities held-to-maturity is determined utilizing an independent bond pricing service for identical assets or significantly similar securities.  The pricing service uses a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.

Local municipal held-to-maturity securities are recorded at cost on the financial statements. That determination is due to several factors including that there is no reliable external pricing available, the vast majority of maturities are under 1-year, and each are guaranteed by their respective municipalities, who are in turn guaranteed by the State of New York.

ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities" requires that the fair value for loans must be disclosed using the "exit price" notion which is a reasonable estimate of what another party might pay in an orderly transaction. Fair values for loans are calculated for portfolios of loans with similar financial characteristics.  Loans are segregated by type such as commercial, commercial real estate, residential mortgage, indirect auto and other consumer loans.  Each loan category is further segmented into fixed and adjustable interest rate terms and by performing and nonperforming categories.  The fair value of performing loans is calculated by determining the estimated future cash flow, which is the contractual cash flow adjusted for estimated prepayments. The discount rate is determined by starting with current market yields, and first adjusting for a liquidity premium. This premium is separately determined for each loan type. Then a credit loss component is determined utilizing the credit loss assumptions used in the allowance for credit loss model. Finally, a discount spread is applied separately for consumer loans vs. commercial loans based on market information and utilization of the swap curve. 

34

The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rates are estimated using the FHLBNY yield curve, which is considered representative of Arrow’s time deposit rates.

The fair value of FHLBNY advances is calculated by the FHLBNY.

The carrying amount of FHLBNY and FRB stock approximates fair value. If the stock was redeemed, Arrow will receive an amount equal to the par value of the stock.

Fair Value by Balance Sheet Grouping

The following table presents a summary of the carrying amount, the fair value (exit price) or an amount approximating fair value and the fair value hierarchy of Arrow’s financial instruments:

Schedule of Fair Values by Balance Sheet Grouping
															Fair Value Hierarchy
			Carrying Value						Fair Value						Level 1						Level 2						Level 3
June 30, 2025
Cash and Cash Equivalents			$	268,448					$	268,448					$	268,448					$	—					$	—
Securities Available-for-Sale			447,678						447,678						100,113						347,565						—
Securities Held-to-Maturity			70,828						70,027						—						45,620						24,407
Equity Securities			5,332						5,332						—						5,332						—
Federal Home Loan Bank and Federal   Reserve Bank Stock			4,557						4,557						—						4,557						—
Net Loans			3,390,563						3,213,929						—						—						3,213,929
Accrued Interest Receivable			15,009						15,009						—						15,009						—
Derivative Assets			9,169						9,169												9,169
Deposits			3,929,330						3,926,424						—						3,926,424						—
Borrowings			8,600						8,576						—						8,576						—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts			20,000						19,563						—						19,563						—
Accrued Interest Payable			5,418						5,418						—						5,418						—
Derivative Liabilities			8,908						8,908						—						8,908						—
December 31, 2024
Cash and Cash Equivalents			$	154,546					$	154,546					$	154,546					$	—					$	—
Securities Available-for-Sale			463,111						463,111						98,070						365,041						—
Securities Held-to-Maturity			98,261						96,586						—						75,262						21,324
Equity Securities			5,055						5,055												5,055
Federal Home Loan Bank and Federal   Reserve Bank Stock			4,353						4,353						—						4,353						—
Net Loans			3,360,943						3,137,721						—						—						3,137,721
Accrued Interest Receivable			13,229						13,229						—						13,229						—
Derivative Assets			12,659						12,659						—						12,659						—
Deposits			3,827,930						3,824,699						—						3,824,699						—
Borrowings			8,600						8,386						—						8,386						—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts			20,000						20,000						—						20,000						—
Accrued Interest Payable			5,099						5,099						—						5,099						—
Derivative Liabilities			8,638						8,638						—						8,638						—

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Note 13.    LEASES (Dollars In Thousands)

Arrow leases real property, primarily for financial services locations, and corporate vehicles. These leases generally require Arrow to pay third-party expenses on behalf of the Lessor, which are referred to as variable payments. Under some leases, Arrow pays the variable payments to the lessor, and in other leases, Arrow pays the variable payments directly to the applicable third party. None of Arrow's current leases include any residual value guarantees or any subleases, and there are no significant rights and obligations of Arrow for leases that have not commenced as of the reporting date.

Arrow leases three of its branch offices, at market rates, from Stewart’s Shops Corp. Additionally on June 14th, 2024, Arrow entered into a sale-leaseback agreement with Stewart’s Shops Corp. for a bank branch location. The sale price of the property was $1.1 million which resulted in a gain of $377 thousand. The lease agreement began in June 2024 and runs through May 2029, with rent totaling $5 thousand per month for the remainder of the lease. Mr. Gary C. Dake, President of Stewart’s Shops Corp., served as a Director on the Board of Directors of Arrow and Arrow Bank. Mr. Dake retired from the Board at the Annual Meeting on June 4, 2025.

The following includes quantitative data related to Arrow's leases as of and for the six months ended June 30, 2025 and June 30, 2024:

						Six Months Ended
Finance Lease Amounts:			Classification			June 30, 2025						June 30, 2024
Right-of-Use Assets			Premises and Equipment, Net			$	4,194					$	4,371
Lease Liabilities			Finance Leases			4,969						5,038
Operating Lease Amounts:
Right-of-Use Assets			Other Assets			$	4,516					$	4,956
Lease Liabilities			Other Liabilities			4,731						5,167
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases						$	89					$	95
Operating Outgoing Cash Flows From Operating Leases						506						311
Financing Outgoing Cash Flows From Finance Leases						36						28
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities						—						—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities						395						326
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)						24.87						25.82
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)						9.73						10.55
Weighted-average Discount Rate—Finance Leases						3.75		%				3.75		%
Weighted-average Discount Rate—Operating Leases						3.44		%				3.23		%

Lease cost information for Arrow's leases is as follows:
			Three Months Ended												Six Months Ended
			June 30, 2025						June 30, 2024						June 30, 2025						June 30, 2024
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets			$	45					$	44					$	89					$	88
Interest on Lease Liabilities			42						47						89						95
Operating Lease Cost			198						199						413						394
Short-term Lease Cost			19						11						28						21
Variable Lease Cost			18						70						55						145
Total Lease Cost			$	322					$	371					$	674					$	743

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Future Lease Payments at June 30, 2025 are as follows:
			Operating Leases						Financing Leases
Twelve Months Ended:
6/30/2026			$	818					$	266
6/30/2027			741						268
6/30/2028			638						268
6/30/2029			617						270
6/30/2030			524						283
Thereafter			2,275						6,577
Total Undiscounted Cash Flows			$	5,613					$	7,932
Less: Net Present Value Adjustment			882						2,963
Lease Liability			$	4,731					$	4,969

Note 14.    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (In Thousands)

Arrow is exposed to certain risks arising from both its business operations and economic conditions. Arrow principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Arrow manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative instruments. Specifically, Arrow enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Arrow's derivative financial instruments are used to manage differences in the amount, timing and duration of known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate borrowings. Arrow also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Arrow's assets or liabilities. Arrow's goal is to have a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

Derivatives Not Designated as Hedging Instruments

Arrow enters into interest rate swap agreements with its commercial customers to provide them with a long-term fixed rate, while simultaneously entering into offsetting interest rate swap agreements with a counterparty to swap the fixed rate to a variable rate to manage interest rate exposure.

These interest rate swap agreements are not designated as a hedge for accounting purposes. As the interest rate swap agreements have substantially equivalent and offsetting terms, they do not present material interest rate exposure to Arrow's consolidated statements of income. Arrow records its interest rate swap agreements at fair value and is presented on a gross basis within other assets and other liabilities on the consolidated balance sheets. Changes in the fair value of assets and liabilities arising from these derivatives are included, net, in other income in the consolidated statement of income.

The following table depicts the fair value adjustment recorded related to the notional amount of derivatives, not designated as hedging instruments, outstanding as well as the notional amount of the interest rate swap agreements:

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Agreements
			June 30, 2025						December 31, 2024
Fair value adjustment included in other assets			$	3,995					$	5,520
Fair value adjustment included in other liabilities			3,995						5,520
Notional amount			128,224						104,897

Derivatives Designated as Hedging Instruments

Arrow entered into two pay-fixed portfolio layer method ("PLM") fair value swaps, designated as hedging instruments, with a total notional amount of $250 million and $50 million, respectively, in the third quarter of 2023. Arrow is designating the fair value swaps under PLM. Under PLM, the hedged items are designated as hedged layers of a closed portfolio of financial loans that are anticipated to remain outstanding for the designated hedged period. Adjustments will be made to record the swaps at fair value on the Consolidated Balance Sheets, with changes in fair value recognized in interest income. The carrying value of the fair value swaps on the Consolidated Balance Sheets will also be adjusted through interest income, based on changes in fair value attributable to changes in the hedged risk.

The following table depicts the fair value adjustment recorded related to the notional amount of derivatives, designed as hedging instruments, outstanding as well as the notional amount of the interest rate swap agreements:

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Derivatives Designated as Hedging Instruments - Fair Value Agreements
			June 30, 2025						December 31, 2024
Fair value adjustment included in other assets			$	—					$	—
Fair value adjustment included in other liabilities			3,274						2,263
Notional amount			300,000						300,000

The following table summarizes the effect of the fair value hedging relationship recognized on the unaudited interim consolidated statement of income:

Derivatives Designated as Hedging Instruments - Fair Value Agreements
															Six Months Ended												Six Months Ended
															June 30, 2025												June 30, 2024
Hedged Asset															$	3,243											$	366
Fair value derivative designated as hedging instrument															(3,274)												(392)
Cumulative (loss) gain recognized in the consolidated statements of income with interest and fees on loans															(31)												(26)

The following table represents the carrying value of the PLM hedged assets and the cumulative fair value hedging adjustment included in the carrying value of the hedged asset:

Derivatives Designated as Hedging Instruments - Fair Value Swap Agreements
			June 30, 2025						December 31, 2024
Carrying Value of Portfolio Layer Method Hedged Asset			$	303,243					$	302,234
Cumulative Fair Value Hedging Adjustment			3,243						2,234

In the third quarter of 2024, Arrow entered into a forward interest rate swap agreement which commenced in the first quarter of 2025, designated as hedging instruments, to add stability to interest expense and to manage its exposure to the variability of the future cash flows attributable to the contractually specified interest rates. The notional amount is $125 million and will synthetically fix the variable rate interest payments. The effective fixed rate is 3.29% until maturity. Arrow entered into pay-fixed interest rate swaps to convert rolling 90 days brokered deposits.

The following table indicates the effect of cash flow hedge accounting on accumulated other comprehensive income (“AOCI”) and on the consolidated statement of income.

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
			Three Months Ended						Three Months Ended						Six Months Ended												Six Months Ended
			June 30, 2025						June 30, 2024						June 30, 2025												June 30, 2024
Fair value adjustment included in other assets			$	551					$	—					$	551											$	—
Amount of (loss) gain recognized in AOCI			(91)						—						(682)												—
Amount of gain reclassified from AOCI interest expense			337						—						524												—

In the fourth quarter of 2023, Arrow entered into two interest rate swaps, designated as hedging instruments, to add stability to interest expense and to manage its exposure to the variability of the future cash flows attributable to the contractually specified interest rates. The notional amounts were $100 million and $75 million, respectively. Arrow entered into pay-fixed interest rate swaps to convert rolling 90 days brokered deposits.

For derivatives that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings.

The following table indicates the effect of cash flow hedge accounting on AOCI and on the consolidated statement of income.

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
			Three Months Ended						Three Months Ended						Six Months Ended												Six Months Ended
			June 30, 2025						June 30, 2024						June 30, 2025												June 30, 2024
Fair value adjustment included in other liabilities			$	1,639					$	352					$	1,639											$	352
Amount of (loss) gain recognized in AOCI			(38)						906						(738)												3,974
Amount of gain reclassified from AOCI interest expense			21						457						47												912

In 2019, Arrow entered into interest rate swaps to synthetically fix the variable rate interest payments associated with $20 million in outstanding subordinated trust securities. These agreements are designated as cash flow hedges.

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The following table indicates the effect of cash flow hedge accounting on AOCI and on the consolidated statement of income.

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
			Three Months Ended						Three Months Ended						Six Months Ended												Six Months Ended
			June 30, 2025						June 30, 2024						June 30, 2025												June 30, 2024
Fair value adjustment included in other assets			$	4,623					$	5,409					$	4,623											$	5,409
Amount of (loss) recognized in AOCI			(78)						(226)						(342)												$	(73)
Amount of gain (loss) reclassified from AOCI to interest expense			200						(242)						417												(484)

For derivatives that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings.

Note 15:    Segment Reporting

The Company's revenue is primarily derived from community banking. Arrow's Chief Executive Officer ("CEO") is considered to be the Company's Chief Operating Decision Maker ("CODM"). The CEO manages its operations and monitors its financial performance on a consolidated basis. The Executive Management Team includes the following officers of the Company:

•President and CEO,

•Senior Executive Vice President, Chief Financial Officer, Treasurer & Chief Accounting Officer,

•Senior Executive Vice President, Chief Risk Officer,

•Senior Executive Vice President, Chief Credit Officer,

•Senior Executive Vice President, Chief Banking Officer,

•Executive Vice President, Chief Information Officer and

•Executive Vice President, Chief Human Resources Officer.

Financial performance is reported to the CODM monthly. Net consolidated income and EPS are the primary measures used by the Executive Management Team to evaluate Arrow's performance. Secondary measures include metrics like return on average assets and Net Interest Margin. All measures are reviewed and either affirmed or changed annually by the CODM and the Board of Directors. The presentation of financial performance to the CODM is consistent with the amounts and financial statement captions shown on the Company's consolidated balance sheets and consolidated statements of income. Significant expenses of the Company are adequately segmented in the consolidated statements of income to include all significant items when considering both quantitative and qualitative factors. These significant expenses include salaries and employee benefits, occupancy expense, technology and equipment expense, FDIC assessments and other operating expense.

All of the Company's financial results are considered by the Executive Management Team to be aggregated into one reportable segment which is community banking. While the Company does designate management responsibilities by certain business-lines, the Company's CODM evaluates financial performance on a Company-wide basis. The primary source of Arrow's revenue is from its community banking operation. All of Arrow's designated business lines have either similar characteristics, products and services, or are complementary products. Therefore, the operations of the Company are managed and considered by the Executive Management Team as one reportable segment.

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Item 2.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

June 30, 2025

NOTE ON TERMINOLOGY

In this Report, the terms "Arrow," "the registrant," "the Company," "we," "us," and "our" generally refer to Arrow Financial Corporation and its subsidiaries as a group, except where the context indicates otherwise. At certain points in this Report, Arrow's performance is compared with that of the Company's "peer group" of financial institutions. Unless otherwise specifically stated, the peer group for the purposes of this Report is comprised of the group of 191 domestic bank holding companies with $3 to $10 billion in total consolidated assets as identified in the FRB’s "Bank Holding Company Performance Report" for March 31, 2025 (the most recent such report currently available), and peer group data contained herein has been derived from such report.

THE COMPANY AND ITS SUBSIDIARIES

Effective December 31, 2024, the Company unified its former subsidiary banks, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, and became a single bank holding company headquartered in Glens Falls, New York. The post-unification banking subsidiary is Arrow Bank National Association®, or Arrow Bank™, whose main office is located in Glens Falls, New York. Active subsidiaries of Arrow Bank include Upstate Agency, LLC (an insurance agency that sells property and casualty insurance and also specializes in selling and servicing group health care policies and life insurance), North Country Investment Advisers, Inc. (a registered investment adviser that provided investment advice to Arrow's proprietary mutual fund until the fund was transferred to a new investment advisor in the first half of 2025) and Arrow Properties, Inc. (a real estate investment trust, or REIT). Arrow also owns directly two subsidiary business trusts, organized in 2003 and 2004 to issue trust preferred securities (TRUPs), which are still outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Report") contains statements that are not historical in nature but rather are based on Arrow's beliefs, assumptions, expectations, estimates and projections about the future. These statements are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"), as amended, and involve a degree of uncertainty and attendant risk. Words such as "may," "will," "expect," "believe," "anticipate," "estimate," "continue," and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include statements regarding Arrow's asset quality, the level of allowance for credit losses, the sufficiency of liquidity sources, interest rate change exposure, changes in accounting standards, and Arrow's tax plans and strategies. Some of these statements, such as those included in the interest rate sensitivity analysis in Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," are merely presentations of what future performance or changes in future performance would look like based on hypothetical assumptions and on simulation models. Other forward-looking statements are based on Arrow's general perceptions of market conditions and trends in business activity, both Arrow's and in the banking industry generally, as well as current management strategies for future operations and development.

These forward-looking statements may not be exhaustive, are not guarantees of future performance and involve certain risks and uncertainties that are difficult to quantify or, in some cases, to identify. You should not place undue reliance on any such forward-looking statements. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast. Factors that could cause or contribute to such differences include, but are not limited to the following:  

•Arrow remains subject to inflationary risk which could adversely impact our business and our customers.

•Market conditions could present significant challenges to the U.S. commercial banking industry and its core business of making and servicing loans. Any substantial downturn in the regional markets in which Arrow operates or in the U.S. economy generally could adversely affect Arrow's ability to maintain and/or grow earnings.

•Any future economic or financial downturn, including any significant correction in the equity markets, could adversely affect Arrow's volume of income attributable to, and demand for, fee-based services of Arrow Bank, including the Company's fiduciary business, which could negatively impact Arrow's financial condition and results of operations.

•Arrow operates in a highly competitive industry and market areas that could negatively affect growth and profitability.

•The financial services industry is faced with technological advances and changes on a continuing basis, and failure to adapt to these advances and changes could have a material adverse impact on Arrow's business.

•Problems encountered by other financial institutions could adversely affect Arrow.

•Arrow faces continuing and growing security risks to its information base including the information maintained relating to customers, and any breaches in the security systems implemented to protect this information could have a material negative effect on Arrow's business operations and financial condition.

•Business could suffer if Arrow loses key personnel unexpectedly.

•Health emergencies may adversely affect Arrow’s business activities, financial condition and results of operations.

•Arrow may not realize the anticipated benefits of unifying its two former subsidiary banks into one bank.

•Arrow is subject to interest rate risk, which could adversely affect profitability.

•Arrow Bank's allowance for credit losses may be insufficient, and an increase in the allowance would reduce earnings.

•The increasing complexity of Arrow's operations presents varied risks that could affect earnings and financial condition.

•Arrow’s financial condition and the results of its operations could be negatively impacted by changes in its liquidity position.

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•Arrow could recognize losses on securities held in its securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

•The Company relies on the operations of its subsidiaries to provide liquidity, which, if limited, could impact Arrow's ability to pay dividends to its shareholders or to repurchase its common stock.

•Federal banking statutes and regulations could change in the future, which may adversely affect Arrow.

•Capital and liquidity standards require banks and bank holding companies to maintain more and higher quality capital and greater liquidity than has historically been the case.

•Non-compliance with the Patriot Act, Bank Secrecy Act, or other anti-money laundering laws and regulations could result in fines or sanctions and restrictions on conducting acquisitions or establishing new branches.

•Arrow, through Arrow Bank, is subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties.

Arrow is under no duty to update any of the forward-looking statements after the date of this Report to conform such statements to actual results. All forward-looking statements, express or implied, included in this Report and the documents incorporated by reference and that are attributable to Arrow are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Arrow or any persons acting on its behalf may issue. This Report should be read in conjunction with the 2024 Form 10-K and our other filings with the Securities and Exchange Commission ("SEC").

USE OF NON-GAAP FINANCIAL MEASURES

The SEC has adopted Regulation G, which applies to all public disclosures, including earnings releases, made by registered companies that contain “non-GAAP financial measures.” GAAP is generally accepted accounting principles in the United States of America. Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure and a statement of the Company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures. The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP. When these exempted measures are included in public disclosures, supplemental information is not required. The following measures used in this Report, which are commonly utilized by financial institutions, have not been specifically exempted by the SEC and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules.

Tax-Equivalent Net Interest Income and Net Interest Margin: Net interest income, as a component of the tabular presentation by financial institutions of Selected Financial Information regarding their recently completed operations, as well as disclosures based on that tabular presentation, is commonly presented on a tax-equivalent basis. That is, to the extent that some component of the institution's net interest income, which is presented on a before-tax basis, is exempt from taxation (e.g., is received by the institution as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added to the actual before-tax net interest income total. This adjustment is considered helpful in comparing one financial institution's net interest income to that of another institution or in analyzing any institution’s net interest income trend line over time, to correct any analytical distortion that might otherwise arise from the fact that financial institutions vary widely in the proportions of their portfolios that are invested in tax-exempt securities. Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average earning assets. For purposes of this measure as well, tax-equivalent net interest income is generally used by financial institutions, again to provide a better basis of comparison from institution to institution and to better demonstrate a single institution’s performance over time. The Company follows these practices.

The Efficiency Ratio: Financial institutions often use an "efficiency ratio" as a measure of expense control. The efficiency ratio typically is defined as the ratio of non-interest expense to net interest income and non-interest income. Net interest income as utilized in calculating the efficiency ratio is typically the same as the net interest income presented in Selected Financial Information table discussed in the preceding paragraph, i.e., it is expressed on a tax-equivalent basis. Moreover, many financial institutions, in calculating the efficiency ratio, also adjust both non-interest expense and non-interest income to exclude from these items (as calculated under GAAP) certain recurring component elements of income and expense, such as intangible asset amortization (which is included in non-interest expense under GAAP but may not be included therein for purposes of calculating the efficiency ratio) and securities gains or losses (which are reflected in the calculation of non-interest income under GAAP but may be ignored for purposes of calculating the efficiency ratio). The Company makes these adjustments.

Tangible Book Value per Share: Tangible equity is total stockholders’ equity less intangible assets. Tangible book value per share is tangible equity divided by total shares issued and outstanding. Tangible book value per share is often regarded as a more meaningful comparative ratio than book value per share as calculated under GAAP, that is, total stockholders’ equity including intangible assets divided by total shares issued and outstanding.  

Adjustments for Certain Items of Income or Expense: In addition to our regular utilization in our public filings and disclosures of the various non-GAAP measures commonly utilized by financial institutions discussed above, we also may elect from time to time, in connection with our presentation of various financial measures prepared in accordance with GAAP, such as net income, earnings per share (i.e., EPS), return on average assets (i.e., ROA), and return on average equity (i.e., ROE), to additionally provide certain comparative disclosures that adjust these GAAP financial measures, typically by removing therefrom the impact of certain transactions or other material items of income or expense that are unusual or unlikely to be repeated. The Company does so only if it believes that

41

inclusion of the resulting non-GAAP financial measures may improve the average investor's understanding of Arrow's results of operations by separating out items that have a disproportional positive or negative impact on the particular period in question or by otherwise permitting a better comparison from period-to-period in the results of operations with respect to the Company's fundamental lines of business, including the commercial banking business.

Arrow believes that the non-GAAP financial measures disclosed from time-to-time are useful in evaluating our 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.

42

OVERVIEW

The following discussion and analysis focuses on and reviews the results of operations for the three-month period ended June 30, 2025 and the financial conditions as of June 30, 2025 and December 31, 2024. The discussion below should be read in conjunction with the selected quarterly and annual information set forth above and the Unaudited Interim Consolidated Financial Statements and other financial data presented elsewhere in this Report. When necessary, prior-year financial information has been reclassified to conform to the current-year presentation.

Summary of Q2 2025 Financial Results: Net income for the second quarter of 2025 was $10.8 million, increasing from $6.3 million in the first quarter of 2025. Compared to the prior quarter, net income benefited from an increase of $1.2 million in net interest income, a decrease in the provision for credit losses of $4.4 million and a slight decrease in non-interest expense of $0.4 million.

Net interest income for the second quarter of 2025 was $32.5 million, increasing 3.8% from the first quarter of 2025. Total interest and dividend income was $51.6 million for the second quarter of 2025, an increase from $50.4 million in the first quarter of 2025. Interest expense for the second quarter of 2025 was $19.0 million, consistent with the first quarter of 2025.

Net interest margin, on an fully taxable-equivalent basis, for the second quarter of 2025 increased to 3.16%, compared to 3.08% for the first quarter of 2025. The increase in net interest margin compared to the first quarter of 2025 was primarily the result of continued yield expansion on earning assets combined with the moderating cost of interest-bearing liabilities. See the disclosure on page 41 related to the use of non-GAAP financial measures.

For the second quarter of 2025, the provision for credit losses was $0.6 million compared to $5.0 million in the first quarter of 2025. The sizeable quarter-over-quarter decrease in the second quarter provision reflects the recognition of a specific reserve related to the CRE Participation that was charged off in the second quarter of 2025 and moved to other assets.

Non-interest income for the three months ended June 30, 2025, was $7.6 million, a decrease from $7.8 million in the first quarter of 2025. Revenue related to wealth management decreased from the prior quarter primarily as a result of weaker overall market performance. Interchange fees improved in the second quarter from the linked quarter. Other operating income was negatively affected by small valuation adjustments to Other Assets.

Non-interest expense for the second quarter of 2025 was $25.7 million, a decrease from $26.0 million in the first quarter of 2025. The second quarter of 2025 included unification expenses of approximately $1.1 million as compared to $0.6 million in the first quarter of 2025. The unification expenses were primarily comprised of project management and information technology costs related to the July 2025 system conversion. Arrow continues to focus on overall expense management.

The provision for income taxes and effective tax rate were $3.1 million and 22.2%, respectively, for the second quarter of 2025, and $1.8 million and 22.4%, respectively, for the first quarter of 2025.

Total assets were $4.4 billion at June 30, 2025, a decrease of $34.2 million, or 0.8%, as compared to March 31, 2025. For the second quarter of 2025, overall change in the balance sheet was primarily attributable to fluctuations in cash balances, maturities of investments and growth in the loan portfolio.

Total investments were $528.4 million as of June 30, 2025, a decrease of $24.6 million, or 4.4%, compared to March 31, 2025. The decrease from March 31, 2025 was driven primarily by paydowns and maturities. There were no credit quality issues related to the investment portfolio.

Total loans1 were $3.4 billion as of June 30, 2025. Loan growth for the second quarter of 2025 was $7.9 million. Loan growth was primarily driven by an increase in residential real estate loans and to a lesser extent by commercial loan relationships.

At June 30, 2025, deposit balances were $3.9 billion, a decrease of $38.8 million from March 31, 2025. The change from March 31, 2025 was primarily attributable to the seasonality of municipal deposits.

The changes in net income, net interest income and net interest margin between the three-month are discussed in detail under the heading "RESULTS OF OPERATIONS," beginning on page 57.

Regulatory Capital and Change in Stockholders' Equity: At June 30, 2025, Arrow continued to exceed all required minimum capital ratios under the current bank regulatory capital rules as implemented under Dodd-Frank (the "Capital Rules") at both the holding company and bank levels.  At that date, Arrow Bank continues to qualify as "well-capitalized" under the capital classification guidelines as defined by the Capital Rules. Because of continued profitability and strong asset quality, the regulatory capital levels throughout recent years have consistently remained well in excess of the various required regulatory minimums in effect.

Stockholders’ equity was $408.5 million at June 30, 2025, an increase of $7.6 million, or 1.9%, from the December 31, 2024 level of $400.9 million. The increase in stockholders' equity over the first six months of 2025 principally reflected the following factors: the addition of (i) $17.1 million of net income for the period, (ii) other comprehensive gain of $7.6 million, and (iii) the issuance of $0.9 million of common stock through employee benefit and dividend reinvestment plans, reduced by (iv) cash dividends of $9.4 million and (v) repurchases of common stock of $8.7 million. The components of the change in stockholders’ equity since year-end 2024 are presented in the Consolidated Statements of Changes in Stockholders’ Equity on page 6, and are discussed in more detail in the next section.

At June 30, 2025, book value per share was $24.78, up 3.5% from year-end 2024. Tangible book value per share was $23.23, an increase of $0.83, or 3.71%, over December 31, 2024. See the disclosure on page 41 related to the use of non-GAAP financial measures.

On June 30, 2025, Arrow's closing stock price was $26.42 per share, representing a trading multiple of 1.14 to tangible book value per share. In the second quarter of 2025, Arrow paid a quarterly cash dividend of $0.28 per share. Further discussion of dividends is included in the Capital Components; Stock Repurchases; Dividends section located on page 55.

1 Excludes both $3.2 million fair value hedge adjustment at June 30, 2025 and $3.3 million fair value hedge adjustment at March 31, 2025

43

Loan Quality: Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.49% for the three-month period ended June 30, 2025, as compared to 0.10% for the three-month period ended March 31, 2025. The increase was the result of the charge-off of the previously reserved CRE Participation.

For the second quarter of 2025, the provision for credit losses was $0.6 million compared to $5.0 million in the first quarter of 2025. The quarter-over-quarter decrease in the second quarter provision reflects the recognition of the specific reserve on the CRE Participation in the first quarter of 2025. Arrow recorded a decrease for estimated credit losses on off-balance sheet credit exposures in other liabilities of $38 thousand in the second quarter of 2025.

The allowance for credit losses was $34.2 million as of June 30, 2025, which represented 1.00% of loans outstanding, as compared to $37.8 million, or 1.11%, at March 31, 2025 and $33.6 million, or 0.99% at December 31, 2024 . The decrease in the allowance for credit losses was primarily driven by the recognition of a specific reserve of $3.75 million in the first quarter of 2025 and subsequent charge-off of the reserved loan balances during the second quarter. The remaining loan balance has been reclassified to Other Assets after the participating banks assumed control of the collateral properties. The participating banks have appointed a property manager to manage the day-to-day activities while exploring further options. The properties itself are being held in an unconsolidated LLC in which Arrow has an ownership interest equivalent to its rights under the former loan participation. As previously disclosed, the properties are generating positive cash flow and a majority is tenant occupied.

Nonperforming loans were $6.2 million at June 30, 2025, representing 0.18% of period-end loans, a decrease from the December 31, 2024 of 0.62%. The ratio compares favorably with the weighted average ratio of the peer group of 0.61% at March 31, 2025. Nonperforming assets of $6.8 million at June 30, 2025 represented 0.15% of period-end assets, down from 0.50% at December 31, 2024.

Loan Segments: As of June 30, 2025, including the fair value marks associated with derivatives, total loans grew by $30.2 million, or 0.9%, as compared to the balance at December 31, 2024. The largest increase was in the residential real estate loan portfolio which increased $24.9 million, or 1.9%. Consumer loans, primarily comprised of automobile loans, decreased $9.7 million. Commercial and commercial real estate loans increased by $15.0 million, or 1.6%, from December 31, 2024.

•Commercial and Commercial Real Estate Loans: Combined, these loans comprise 28.3% of the total loan portfolio at period-end. Commercial loans are extended to businesses primarily located in Arrow's regional market area. There are no commercial real estate loans in major metropolitan areas. In addition, only approximately 2% of the total loan portfolio is composed of office related property. Retail loans were approximately 3% of the total loan portfolio and hotels and motels were approximately 4% of the total loan portfolio. Commercial property values in Arrow's region have largely remained stable. Appraisals on nonperforming and watched commercial real estate loan properties are updated as necessary, usually when the loan is downgraded or when there has been significant market deterioration since the last appraisal.

•Consumer Loans: These loans comprised 32.4% of the total loan portfolio at period-end. Consumer automobile loans at June 30, 2025, were 99.6% of this portfolio segment. The vast majority of automobile loans are initiated through automobile dealers. Inflation and the uncertain economic environment may limit the potential growth in this category.

•Residential Real Estate Loans: These loans, including home equity loans, made up 39.3% of the total loan portfolio at period-end. Demand for residential real estate has continued to remain strong. Arrow originated nearly all of the residential real estate loans currently held in the loan portfolio and applies conservative underwriting standards. Arrow may sell a portion of the residential real estate mortgage originations into the secondary market. The ratio of the sales of originations to total originations tends to fluctuate from period to period based on market conditions and other factors such as prevailing mortgage rates, other lending opportunities, capital and liquidity needs, and the availability of a market for such transactions.

Liquidity and Access to Credit Markets: Arrow has not, nor is it currently, experiencing any liquidity events. Arrow’s liquidity position should provide the necessary flexibility to address any unexpected near-term liquidity needs.  Interest-bearing cash balances at June 30, 2025 were $227.5 million compared to $127.1 million at December 31, 2024. Contingent lines of credit are also available. Operating collateralized lines of credit are established and available through the FHLBNY, FRB and other bank lines totaling approximately $1.4 billion. The general terms of Arrow's lines of credit have not changed significantly in recent periods (see the general liquidity discussion on page 56). Historically, Arrow has principally relied on asset-based liquidity (i.e., funds in overnight investments and cash flow from maturing investments and loans) with liability-based liquidity as a secondary source of funds (the main liability-based sources are an overnight borrowing arrangement with correspondent banks, an arrangement for overnight borrowing and term credit advances from the FHLBNY, and an additional arrangement for short-term advances at the FRB discount window). Regular liquidity stress tests and tests of the contingent liquidity plan are performed to ensure that an adequate amount of available funds can be generated to meet a wide variety of potential liquidity crises.

44

Average Consolidated Balance Sheets and Net Interest Income Analysis
(GAAP Basis)
(Dollars In Thousands)
Quarter Ended:			June 30, 2025																		March 31, 2025
									Interest						Rate												Interest						Rate
			Average						Income/						Earned/						Average						Income/						Earned/
			Balance						Expense						Paid						Balance						Expense						Paid
Interest-Bearing Deposits at Banks			$	145,473					$	1,622					4.47		%				$	146,023					$	1,621					4.50		%
Investment Securities:
Fully Taxable			496,614						3,790						3.06						499,903						3,608						2.93
Exempt from Federal Taxes			85,766						561						2.62						91,938						587						2.59
Loans (1)			3,415,140						45,600						5.36						3,406,075						44,550						5.30
Total Earning Assets (1)			4,142,993						51,573						4.99						4,143,939						50,366						4.93
Allowance for Credit Losses			(35,238)																		(33,691)
Cash and Due From Banks			29,267																		31,515
Other Assets			195,317																		183,154
Total Assets			$	4,332,339																	$	4,324,917
Deposits:
Interest-Bearing Checking Accounts			$	845,041					1,941						0.92						$	840,571					1,803						0.87
Savings Deposits			1,494,930						9,367						2.51						1,515,961						9,483						2.54
Time Deposits of $250,000 or More			179,980						1,726						3.85						186,159						1,811						3.95
Other Time Deposits			638,376						5,793						3.64						593,130						5,529						3.78
Total Interest-Bearing Deposits			3,158,327						18,827						2.39						3,135,821						18,626						2.41
Borrowings			8,601						—						—						23,378						167						2.90
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts			20,000						171						3.43						20,000						169						3.43
Finance Leases			4,978						42						3.38						4,997						47						3.81
Total Interest-Bearing Liabilities			3,191,906						19,040						2.39						3,184,196						19,009						2.42
Noninterest-Bearing Deposits			690,766																		689,303
Other Liabilities			43,138																		47,024
Total Liabilities			3,925,810																		3,920,523
Stockholders’ Equity			406,529																		404,394
Total Liabilities and Stockholders’ Equity			$	4,332,339																	$	4,324,917
Net Interest Income									$	32,533																	$	31,357
Net Interest Spread															2.60		%																2.51		%
Net Interest Margin															3.15		%																3.07		%

45

Average Consolidated Balance Sheets and Net Interest Income Analysis
(GAAP Basis)
(Dollars In Thousands)
Quarter Ended:			June 30, 2025																		June 30, 2024
									Interest						Rate												Interest						Rate
			Average						Income/						Earned/						Average						Income/						Earned/
			Balance						Expense						Paid						Balance						Expense						Paid
Interest-Bearing Deposits at Banks			$	145,473					$	1,622					4.47		%				$	159,336					$	2,185					5.52		%
Investment Securities:
Fully Taxable			496,614						3,790						3.06						530,869						3,009						2.28
Exempt from Federal Taxes			85,766						561						2.62						113,323						637						2.26
Loans (1)			3,415,140						45,600						5.36						3,280,285						42,141						5.17
Total Earning Assets (1)			4,142,993						51,573						4.99						4,083,813						47,972						4.72
Allowance for Credit Losses			(35,238)																		(31,459)
Cash and Due From Banks			29,267																		28,611
Other Assets			195,317																		156,394
Total Assets			$	4,332,339																	$	4,237,359
Deposits:
Interest-Bearing Checking Accounts			$	845,041					1,941						0.92						$	832,087					1,903						0.92
Savings Deposits			1,494,930						9,367						2.51						1,487,062						10,571						2.86
Time Deposits of $250,000 or More			179,980						1,726						3.85						172,655						1,869						4.35
Other Time Deposits			638,376						5,793						3.64						504,076						5,074						4.05
Total Interest-Bearing Deposits			3,158,327						18,827						2.39						2,995,880						19,417						2.61
Borrowings			8,601						—						—						106,502						1,186						4.48
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts			20,000						171						3.43						20,000						170						3.42
Finance Leases			4,978						42						3.38						5,035						47						3.75
Total Interest-Bearing Liabilities			3,191,906						19,040						2.39						3,127,417						20,820						2.68
Noninterest-Bearing Deposits			690,766																		683,077
Other Liabilities			43,138																		48,609
Total Liabilities			3,925,810																		3,859,103
Stockholders’ Equity			406,529																		378,256
Total Liabilities and Stockholders’ Equity			$	4,332,339																	$	4,237,359
Net Interest Income									$	32,533																	$	27,152
Net Interest Spread															2.60		%																2.04		%
Net Interest Margin															3.15		%																2.67		%

46

Average Consolidated Balance Sheets and Net Interest Income Analysis
(GAAP Basis)
(Dollars In Thousands)
Year to Date Period Ended:			June 30, 2025																		June 30, 2024
									Interest						Rate												Interest						Rate
			Average						Income/						Earned/						Average						Income/						Earned/
			Balance						Expense						Paid						Balance						Expense						Paid
Interest-Bearing Deposits at Banks			$	145,746					$	3,243					4.49		%				$	168,894					$	4,632					5.52		%
Investment Securities:
Fully Taxable			498,250						7,398						2.99						540,704						6,195						2.30
Exempt from Federal Taxes			88,835						1,148						2.61						116,945						1,305						2.24
Loans (1)			3,410,632						90,150						5.33						3,258,063						82,517						5.09
Total Earning Assets (1)			4,143,463						101,939						4.96						4,084,606						94,649						4.66
Allowance for Credit Losses			(34,469)																		(31,437)
Cash and Due From Banks			30,385																		29,207
Other Assets			189,269																		159,046
Total Assets			$	4,328,648																	$	4,241,422
Deposits:
Interest-Bearing Checking Accounts			$	842,818					3,744						0.90						$	831,502					3,544						0.86
Savings Deposits			1,505,387						18,850						2.53						1,484,031						20,801						2.82
Time Deposits of $250,000 or More			183,053						3,537						3.90						174,991						3,842						4.42
Other Time Deposits			615,878						11,322						3.71						500,444						10,157						4.08
Total Interest-Bearing Deposits			3,147,136						37,453						2.40						2,990,968						38,344						2.58
Borrowings			15,949						167						2.11						101,743						2,262						4.47
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts			20,000						340						3.43						20,000						341						3.43
Finance Leases			4,987						89						3.60						5,042						95						3.79
Total Interest-Bearing Liabilities			3,188,072						38,049						2.41						3,117,753						41,042						2.65
Noninterest-Bearing Deposits			690,039																		695,171
Other Liabilities			45,069																		49,648
Total Liabilities			3,923,180																		3,862,572
Stockholders’ Equity			405,468																		378,850
Total Liabilities and Stockholders’ Equity			$	4,328,648																	$	4,241,422
Net Interest Income									$	63,890																	$	53,607
Net Interest Spread															2.55		%																2.01		%
Net Interest Margin															3.11		%																2.64		%

(1) Includes Nonaccrual Loans.

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CHANGE IN FINANCIAL CONDITION

Summary of Selected Consolidated Balance Sheet Data

(Dollars in Thousands)

			At Period-End
			6/30/2025						12/31/2024												$ Change From December												% Change From December (not annualized)
Interest-Bearing Bank Balances			$	227,472					$	127,124											$	100,348											78.9		%
Securities Available-for-Sale			447,678						463,111												(15,433)												(3.3)		%
Securities Held-to-Maturity			70,828						98,261												(27,433)												(27.9)		%
Equity Securities			5,332						5,055												277												5.5		%
Loans (1)			3,424,754						3,394,541												30,213												0.9		%
Allowance for Credit Losses			34,191						33,598												593												1.8		%
Earning Assets (1)			4,180,621						4,092,445												88,176												2.2		%
Total Assets			$	4,414,719					$	4,306,348											$	108,371											2.5		%
Noninterest-Bearing Deposits			$	736,535					$	702,978											$	33,557											4.8		%
Interest-Bearing Checking   Accounts			884,130						810,834												73,296												9.0		%
Savings Deposits			1,484,666						1,520,024												(35,358)												(2.3)		%
Time Deposits over $250,000			179,254						191,962												(12,708)												(6.6)		%
Other Time Deposits			644,745						602,132												42,613												7.1		%
Total Deposits			$	3,929,330					$	3,827,930											$	101,400											2.6		%
Borrowings			$	8,600					$	8,600											$	—											—		%
Junior Subordinated Obligations Issued to Unconsolidated   Subsidiary Trusts			20,000						20,000												—												—		%
Stockholders' Equity			408,506						400,901												7,605												1.9		%

(1) Includes Nonaccrual Loans.

Changes in Earning Assets: The loan portfolio at June 30, 2025, was $3.4 billion, an increase of $30.2 million, or 0.9%, from the December 31, 2024 level. The following trends were experienced in our largest segments:

•Commercial and commercial real estate loans: This segment of the loan portfolio increased by $15.0 million, or 1.6%, during the first six months of 2025. In the first six months of 2025, loan growth was negatively impacted as loan pay-off activity accelerated. In addition, approximately $10.6 million of the previously reserved commercial real estate loans have been reclassified to Other Assets after the participating banks assumed control of the collateral properties related to the CRE Participation. The participating banks have appointed a property manager to manage the day-to-day activities while exploring further options. The properties are being held in an unconsolidated LLC in which Arrow has an ownership interest equivalent to its rights under the former CRE Participation. As previously disclosed, the properties are generating positive cash flow and a majority is tenant occupied.

•Consumer loans: As of June 30, 2025, these loans, primarily auto loans originated through dealerships in New York and Vermont, decreased by $9.7 million, or 0.9%, from the December 31, 2024 balance. Inflation, high interest rates and prepayment/refinancing activity may continue to slow demand.

•Residential real estate loans: This segment increased during the first six months of 2025 by $24.9 million, or 1.9%. Loan origination activity continued to be strong through the end of the second quarter. Overall economic conditions, including the level of interest rates may impact future origination levels.

Changes in Sources of Funds: Deposit balances reached $3.9 billion, an increase of $101.4 million. or 2.6% from December 31, 2024. The increase from December 31, 2024 was primarily attributable to the additional of $125 million of brokered CDs. The brokered CDs partially replaced previous wholesale funding sources and are part of a cash flow hedge using interest rate swaps to reduce overall funding costs. Noninterest-bearing deposits represented 18.7% of total deposits at June 30, 2025, compared to 18.4% of total deposits on December 31, 2024. At June 30, 2025, total time deposits were $824.0 million. Municipal deposits increased $117.4 million, or 14.5% from December 31, 2024.

Municipal Deposits: Municipal deposits have historically averaged between 20% to 30% of total deposits. Municipal deposits are typically placed in interest-bearing checking, savings and various time deposit accounts.

In general, there is a seasonal pattern to municipal deposits which dip to a low point in August each year.  Account balances tend to increase throughout the fall and into early winter from tax deposits, flatten out after the beginning of the ensuing calendar year, and increase again at the end of March from the electronic deposit of NYS aid payments to school districts.  In addition to seasonal patterns, the overall level of municipal deposit balances fluctuates from year-to-year as a result of local economic factors as well as competition from other banks and non-bank entities.

48

Arrow uses reciprocal deposits for a select group of municipalities to reduce the amount of investment securities required to be pledged as collateral for municipal deposits where municipal deposits in excess of the FDIC insurance coverage limits were transferred to other participating banks, divided into portions so as to qualify for FDIC insurance coverage at each transferee bank. In return, reciprocal amounts are transferred to Arrow in equal amounts of deposits from the participant banks. The balances of reciprocal deposits were $650.0 million and $648.5 million at June 30, 2025 and December 31, 2024, respectively.

Uninsured Deposits: Arrow's deposit base includes both insured and uninsured deposits. Arrow continually monitors levels and composition of uninsured deposits. Uninsured deposit balances at June 30, 2025 were less than 30% of the total deposit base.

FINANCIAL CONDITION

Investment Portfolio Trends

The table below presents the changes in the period-end balances for AFS and HTM securities from December 31, 2024 to June 30, 2025 (in thousands):

			(Dollars in Thousands)
			Fair Value at Period-End																		Net Unrealized Gains (Losses) For Period Ended
			6/30/2025						12/31/2024						Change						6/30/2025						12/31/2024						Change
Securities Available-for-Sale:
U.S. Treasury Securities			$	100,113					$	98,070					$	2,043					$	1,934					$	85					$	1,849
U.S. Agency Securities			24,620						69,214						(44,594)						(380)						(786)						406
State and Municipal Obligations			200						240						(40)						—						—						—
Mortgage-Backed Securities			316,728						294,608						22,120						(25,101)						(35,840)						10,739
Corporate and Other Debt Securities			6,017						979						5,038						17						(21)						38
Total			$	447,678					$	463,111					$	(15,433)					$	(23,530)					$	(36,562)					$	13,032
Securities Held-to-Maturity:
State and Municipal Obligations			$	64,937					$	90,373					$	(25,436)					$	(664)					$	(1,456)					$	792
Mortgage-Backed Securities			5,090						6,213						(1,123)						(137)						(219)						82
Total			$	70,027					$	96,586					$	(26,559)					$	(801)					$	(1,675)					$	874

The table below presents the weighted average yield for AFS and HTM securities, at amortized cost, as of June 30, 2025 (in thousands).

			June 30, 2025
			Within One Year												After One But Within Five Years												After Five But Within Ten Years												After Ten Years												Total
			Amount						Yield						Amount						Yield						Amount						Yield						Amount						Yield						Amount						Yield
Securities Available-for-Sale:
U.S. Treasury Securities			$	24,980					4.7		%				$	48,762					4.4		%				$	24,437					4.5		%				$	—					—		%				$	98,179					4.5		%
U.S. Agency Securities			—						—		%				25,000						2.9		%				—						—		%				—						—		%				25,000						2.9		%
State and Municipal Obligations			—						—		%				200						6.8		%				—						—		%				—						—		%				200						6.8		%
Mortgage-Backed Securities			1,843						2.3		%				184,422						2.2		%				155,564						3.0		%				—						—		%				341,829						2.6		%
Corporate and Other Debt Securities			—						—		%				1,000						7.3		%				5,000						8.0		%				—						—		%				6,000						7.8		%
Total			$	26,823					4.5		%				$	259,384					2.7		%				$	185,001					3.3		%				$	—					—		%				$	471,208					3.1		%
Securities Held-to-Maturity:
State and Municipal Obligations			$	43,149					3.5		%				$	20,911					3.2		%				$	1,541					4.5		%				$	—					—		%				$	65,601					3.4		%
Mortgage-Backed Securities			536						2.8		%				4,691						2.4		%				—						—		%				—						—		%				5,227						2.5		%
Total			$	43,685					3.5		%				$	25,602					3.0		%				$	1,541					4.5		%				$	—					—		%				$	70,828					3.4		%

At June 30, 2025, Arrow's securities portfolios did not include, directly or indirectly, obligations of foreign governments or governmental agencies of foreign issuers.

In the periods referenced above, mortgage-backed securities consisted solely of mortgage pass-through securities and collateralized mortgage obligations (CMOs) issued or guaranteed by U.S. federal agencies or by government-sponsored enterprises (GSEs). Mortgage pass-through securities provide the investor monthly portions of principal and interest pursuant to the contractual obligations of the underlying mortgages. CMOs are pools of mortgage-backed securities, the repayments on which have generally been separated into two or more components (tranches), where each tranche has a separate estimated life and yield. Arrow's practice has been to purchase pass-through securities and CMOs that are issued or guaranteed by U.S. federal agencies or GSEs, and the tranches

49

of CMOs purchased generally have shorter average lives and/or durations. Lower market interest rates and/or payment deferrals on underlying loans that make up mortgage-backed security collateral may impact cashflows.

U.S. Government & Agency Obligations consisted solely of agency bonds issued by GSEs. These securities generally pay fixed semi-annual coupons with principal payments at maturity. For some, callable options are included that may impact the timing of these principal payments. Arrow's practice has been to purchase agency securities that are issued or guaranteed by GSEs with limited embedded optionality (call features). Final maturities are generally less than 5 years.

Changes in net unrealized gains or losses during recent periods have been primarily attributable to changes in market rates during the periods in question and not due to the credit-worthiness of the issuers.

Investment Sales, Purchases and Maturities

There were no sales of investment securities within the six month periods ended June 30, 2025 or 2024.

The following table summarizes purchases of investment securities within the AFS and HTM portfolios for the three and six month periods ended June 30, 2025 and 2024, as well as proceeds from the maturity and calls of investment securities within each portfolio for the respective periods presented:

(In Thousands)			Three Months Ended												Six Months Ended
Purchases:			6/30/2025						6/30/2024						6/30/2025						6/30/2024
Available-for-Sale Portfolio
U.S. Agency Securities			$	—					$	—					$	—					$	—
Mortgage-Backed Securities			34,623						—						34,623						—
Other			5,000						—						5,000						—
Total Purchases			$	39,623					$	—					$	39,623					$	—
Maturities & Calls			$	42,265					$	35,936					$	68,437					$	46,298

(In Thousands)			Three Months Ended												Six Months Ended
Purchases:			6/30/2025						6/30/2024						6/30/2025						6/30/2024
Held-to-Maturity Portfolio
State and Municipal Obligations			$	3,671					$	447					$	6,570					$	1,197
Maturities & Calls			$	30,303					$	29,073					$	33,932					$	33,076

Loan Trends

The following three tables present the quarterly average balances by loan type, the percentage of total loans represented by each loan type and the annualized yield of each loan category for each specified period:

Quarterly Average Loan Balances

(Dollars in Thousands)

			Quarter Ended
			6/30/2025												12/31/2024
Commercial			$	160,330											$	158,991
Commercial Real Estate			801,445												796,365
Consumer			1,111,187												1,118,981
Residential Real Estate			1,342,178												1,320,204
Total Loans			$	3,415,140											$	3,394,541

Percentage of Total Quarterly Average Loans

			Quarter Ended
			6/30/2025												12/31/2024
Commercial			4.7		%										4.7		%
Commercial Real Estate			23.5		%										23.4		%
Consumer			32.5		%										33.0		%
Residential Real Estate			39.3		%										38.9		%
Total Loans			100.0		%										100.0		%

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Quarterly Yield on Loans

			Quarter Ended
			6/30/2025												12/31/2024
Commercial			5.74		%										5.88		%
Commercial Real Estate			5.26		%										5.18		%
Consumer			6.17		%										6.08		%
Residential Real Estate			4.70		%										4.66		%
Total Loans			5.36		%										5.30		%

Market rates have fluctuated which impacts new loan yields for fixed rate loans, and variable loan yields as these loans reach their repricing dates.

The table below shows the maturity schedule of loans outstanding as of June 30, 2025 classified according to fixed interest rates and variable interest rates (in thousands):

			June 30, 2025
			Within One Year						After One But Within Five Years						After Five But Within 15 Years						After 15 Years						Total
Commercial			$	42,223					$	79,527					$	40,357					$	96					$	162,203
Commercial Real Estate			229,844						339,576						232,281						6,465						808,166
Consumer			10,058						614,610						484,164						440						1,109,272
Residential Real Estate			140,406						120,172						387,797						696,738						1,345,113
Total			$	422,531					$	1,153,885					$	1,144,599					$	703,739					$	3,424,754
									After One But Within Five Years						After Five But Within 15 Years						After 15 Years						Total
Loans maturing with:
Fixed Interest Rates									$	747,407					$	826,094					$	699,845					$	2,273,346
Variable Interest Rates									406,478						318,505						3,894						728,877
Total									$	1,153,885					$	1,144,599					$	703,739					$	3,002,223

Maintenance of High Quality Credit in the Loan Portfolio: The allowance for credit losses was impacted in 2025 by the recognition of a specific reserve of $3.75 million in the first quarter of 2025 related to the CRE Participation and the subsequent charge-off of the reserved loan balances during the second quarter. The remaining loan balance has been reclassified to Other Assets after the participating banks assumed control of the collateral properties and appointed a property manager to manage the day-to-day activities while exploring further options. The properties are being held in an unconsolidated LLC in which Arrow has an ownership interest equivalent to its rights under the former loan participation. As previously disclosed, the properties are generating positive cash flow and a majority is tenant occupied.

Overall, there have been no other material fluctuations in the quality of the loan portfolio. In general, residential real estate loans have historically been underwritten to secondary market standards and Arrow has not engaged in subprime mortgage lending. Similarly, high underwriting standards have been applied to the commercial, commercial real estate and indirect lending program as well.

Commercial Loans and Commercial Real Estate Loans: Commercial and commercial real estate loans in the loan portfolio were extended to businesses or borrowers primarily located in Arrow's regional markets. There are no commercial real estate loans in major metropolitan areas. Approximately 2% of the loan portfolio are comprised of office related property. Retail loans were approximately 3% of the loan portfolio and hotels and motels were approximately 4% of the portfolio. A portion of the loans in the commercial portfolio have variable rates tied to market indices, such as Prime, SOFR or FHLBNY.

Consumer Loans: At June 30, 2025, consumer loans continue to be a significant component of Arrow's business, comprising approximately one third of the total loan portfolio.

For credit quality purposes, Arrow assigns automobile loan customers into one of four tiers, ranging from lower to higher quality in terms of anticipated credit risk. Arrow's experienced lending staff not only utilizes credit evaluation software tools but also reviews and evaluates each loan individually prior to the loan being funded. Arrow believes that this disciplined approach to evaluating credit risk has contributed to maintaining the strong credit quality in this portfolio.

Residential Real Estate Loans: Demand for residential real estate has continued to remain strong. Arrow may sell a portion of its residential real estate originations into the secondary market. Overall economic conditions, including the level of interest rates, can impact future origination levels.

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Deposit Trends

The following tables provide information on trends in the quarterly average balances and mix of the deposit portfolio by deposit type and the percentage of total deposits represented by each deposit type.

Quarterly Average Deposit Balances
(Dollars in Thousands)
			Quarter Ended
			6/30/2025												12/31/2024
Noninterest-Bearing Deposits			$	690,766											$	711,566
Interest-Bearing Checking Accounts			845,041												802,808
Savings Deposits			1,494,930												1,567,455
Time Deposits over $250,000			179,980												183,325
Other Time Deposits			638,376												582,537
Total Deposits			$	3,849,093											$	3,847,691

			Quarter Ended
			6/30/2025												12/31/2024
Non-Municipal Deposits			$	2,979,700											$	2,954,292
Municipal Deposits			869,393												893,399
Total Deposits			$	3,849,093											$	3,847,691

Percentage of Total Quarterly Average Deposits

			Quarter Ended
			6/30/2025												12/31/2024
Noninterest-Bearing Deposits			17.9		%										18.5		%
Interest-Bearing Checking Accounts			22.0		%										20.9		%
Savings Deposits			38.8		%										40.7		%
Time Deposits over $250,000			4.7		%										4.8		%
Other Time Deposits			16.6		%										15.1		%
Total Deposits			100.0		%										100.0		%

Quarterly Cost of Deposits

			Quarter Ended
			6/30/2025												12/31/2024
Demand Deposits			—		%										—		%
Interest-Bearing Checking Accounts			0.92		%										0.96		%
Savings Deposits			2.51		%										2.83		%
Time Deposits over $250,000			3.85		%										3.94		%
Other Time Deposits			3.64		%										4.03		%
Total Deposits			1.96		%										2.15		%

In the second half of 2024, the targeted Federal Funds rate fell 100 basis points and rate decreases later in 2025 are possible. Arrow is well positioned for a variety of rate environments, see Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," on page 61 for further discussion.

Non-Deposit Sources of Funds

$20 million of Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts listed on the consolidated balance sheet as of June 30, 2025 (i.e., previously issued TRUPs) will, subject to certain limits, continue to qualify as Tier 1 regulatory capital for Arrow until such TRUPs mature or are redeemed. This is further discussed under "Capital Resources" beginning on page 54 of this Report.

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ASSET QUALITY

The following table presents information related to the allowance and provision for credit losses:

Summary of the Allowance and Provision for Credit Losses

(Dollars in Thousands, Loans Stated Net of Unearned Income)

			6/30/2025						12/31/2024																		6/30/2024
Loan Balances:
Period-End Loans			$	3,424,754					$	3,394,541																	$	3,315,523
Average Loans, Year-to-Date			3,410,632						3,300,346																		3,258,063
Average Loans, Quarter-to-Date			3,415,140						3,354,463																		3,280,285
Period-End Assets			4,414,719						4,306,348																		4,244,407
Allowance for Credit Losses, Year-to-Date:
Allowance for Credit Losses, Beginning of Period			$	33,598					$	31,265																	$	31,265
Provision for Credit Losses, YTD			5,613						5,180																		1,392
Loans Charged-off, YTD			(6,613)						(5,895)																		(3,133)
Recoveries of Loans Previously Charged-off			1,593						3,048																		1,485
Net Charge-offs, YTD			(5,020)						(2,847)																		(1,648)
Allowance for Credit Losses, End of Period			$	34,191					$	33,598																	$	31,009
Nonperforming Assets, at Period-End:
Nonaccrual Loans			$	5,275					$	20,621																	$	20,118
Loans Past Due 90 or More Days   and Still Accruing Interest			940						398																		915
Restructured and in Compliance with   Modified Terms			12						20																		36
Total Nonperforming Loans			6,227						21,039																		21,069
Repossessed Assets			590						382																		239
Other Real Estate Owned			—						76																		34
Total Nonperforming Assets			$	6,817					$	21,497																	$	21,342
Asset Quality Ratios:
Allowance to Nonperforming Loans			549.08		%				159.69		%																147.18		%
Allowance to Period-End Loans			1.00		%				0.99		%																0.94		%
Provision to Average Loans (Quarter) (1)			0.07		%				0.34		%																0.10		%
Provision to Average Loans (YTD) (1)			0.33		%				0.16		%																0.09		%
Net Charge-offs to Average Loans (Quarter) (1)			0.49		%				0.06		%																0.16		%
Net Charge-offs to Average Loans (YTD) (1)			0.30		%				0.09		%																0.10		%
Nonperforming Loans to Total Loans			0.18		%				0.62		%																0.64		%
Nonperforming Assets to Total Assets			0.15		%				0.50		%																0.50		%
(1) Annualized

Provision for Credit Losses

The allowance for credit losses was $34.2 million as of June 30, 2025, which represented 1.00% of loans outstanding, as compared to $37.8 million, or 1.11%, at March 31, 2025 and $33.6 million, or 0.99%, at December 31, 2024. The provision for credit losses for the second quarter of 2025 was $0.6 million compared to $5.0 million in the first quarter of 2025. The primary driver of the decrease was Arrow's recognition of a specific reserve in the first quarter of 2025 related to the CRE Participation. Factors that impact the provision for credit losses in the second quarter of 2025 were charge-offs, growth in loan balances and changes to the economic forecast factors embedded in the credit loss allowance model. In addition, Arrow recorded an increase for estimated credit losses on off-balance sheet credit exposures in other liabilities of $38 thousand in the second quarter of 2025. The overall change in the allowance from March 31, 2025 was primarily driven by the following factors: net loan growth contributed $457 thousand, changes in macro economic conditions decreased the allowance by $587 thousand, net charge-offs of $4.2 million, and a specific reserve of $300 thousand. The specific reserve of $3.75 million in the first quarter of 2025 related to a large commercial loan participation (the "CRE Participation") was subsequently charged-off during the second quarter and the remaining loan balance has been reclassified to Other Assets after the participating banks assumed control of the collateral properties and appointed a property manager to manage the day-to-day activities while exploring further options. The properties itself are being held in an unconsolidated limited liability company (LLC) in which Arrow has an ownership interest equivalent to its rights under the former CRE Participation. As previously disclosed, the properties are generating positive net operating income and the majority is tenant occupied.

See Note 2 to the unaudited interim consolidated financial statements for additional discussion related to CECL.

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Risk Elements

Nonperforming assets at June 30, 2025 amounted to $6.8 million, a decrease from the $21.5 million at December 31, 2024 and from $21.3 million at June 30, 2024. Historically, ratios of nonperforming assets to total assets have remained fairly consistent to the average ratios for our peer group (see page 40 for a discussion of the peer group). At March 31, 2025, the ratio of loans past due 90 or more days plus nonaccrual loans plus other real estate owned to total assets was 0.44% as compared to the 0.49% ratio of the peer group (the latest date for which peer group information is available). At December 31, 2024 the ratio was 0.50% and at June 30, 2025 the ratio was 0.15%.

The following table presents the balance of other non-current loans at period-end as to which interest income was being accrued (i.e., loans 30 to 89 days past due, as defined in bank regulatory guidelines). These non-current loans are not included in nonperforming assets, but entail heightened risk:

Loans Past Due 30-89 Days and Accruing Interest ($ in 000's)
			6/30/2025						12/31/2024
Commercial Loans			$	745					$	511
Commercial Real Estate Loans			312						318
Residential Real Estate Loans			3,421						3,076
Consumer Loans - Primarily Indirect Automobile			16,126						16,620
Total Loans Past Due 30-89 Days    and Accruing Interest			$	20,604					$	20,525

At June 30, 2025, the loans in the above-referenced category totaled $20.6 million, an increase from the $20.5 million of such loans at December 31, 2024. The June 30, 2025 total of non-current loans equaled 0.60% of loans then outstanding, compared to 0.60% at December 31, 2024.

The number and dollar amount of performing loans that demonstrate characteristics of potential weakness from time-to-time (potential problem loans) typically is a very small percentage of the loan portfolio. See the table of Credit Quality Indicators in Note 5 to the unaudited interim consolidated financial statements. Arrow considers all performing commercial and commercial real estate loans classified as substandard or lower (as reported in Note 5) to be potential problem loans. These loans will continue to be closely monitored and Arrow currently expects to collect all contractual principal and interest payments in full on these classified loans.

As of June 30, 2025, Arrow held no other real estate owned properties.

CAPITAL RESOURCES

Regulatory Capital Standards

Capital Adequacy Requirements. An important area of banking regulation is the federal banking system's promulgation and enforcement of minimum capitalization standards for banks and bank holding companies. The banking regulators have established guidelines for capital requirements, expressed in terms of Tier 1, or core capital, as a percentage of average assets, to measure the financial health of the institution. Banking regulators have also established risk-based capital guidelines for U.S. banking organizations.

Capital Ratio			2025
Minimum CET1 Ratio			4.500		%
Capital Conservation Buffer ("Buffer")			2.500		%
Minimum CET1 Ratio Plus Buffer			7.000		%
Minimum Tier 1 Risk-Based Capital Ratio			6.000		%
Minimum Tier 1 Risk-Based Capital Ratio Plus Buffer			8.500		%
Minimum Total Risk-Based Capital Ratio			8.000		%
Minimum Total Risk-Based Capital Ratio Plus Buffer			10.500		%
Minimum Leverage Ratio			4.000		%

Current Capital Ratios: The table below sets forth the regulatory capital ratios of Arrow and Arrow Bank under the current Capital Rules, as of June 30, 2025:

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			Common Equity Tier 1 Capital Ratio						Tier 1 Risk-Based Capital Ratio						Total Risk-Based Capital Ratio						Tier 1 Leverage Ratio
Arrow Financial Corporation			12.73		%				13.37		%				14.51		%				9.64		%
Arrow Bank			12.93		%				12.93		%				14.07		%				9.26		%
FDICIA's Prompt Corrective Action - "Well-Capitalized" Standard (2019)			6.50		%				8.00		%				10.00		%				5.00		%
Regulatory Minimum			7.00		%				8.50		%				10.50		%				4.00		%

At June 30, 2025, Arrow Bank exceeded the minimum regulatory capital ratios established under the current Capital Rules and qualified as "well-capitalized", the highest category in the capital classification scheme established by federal bank regulatory agencies under the "prompt corrective action" standards, as described above.

Capital Components; Stock Repurchases; Dividends

Stockholders' Equity: Stockholders’ equity was $408.5 million at June 30, 2025, an increase of $7.6 million, or 1.9%, from the December 31, 2024 level of $400.9 million. The increase in stockholders' equity over the first six months of 2025 principally reflected the following factors: the addition of (i) $17.1 million of net income for the period, (ii) other comprehensive gain of $7.6 million, and (iii) the issuance of $0.9 million of common stock through employee benefit plans, reduced by (iv) cash dividends of $9.4 million and (v) repurchases of common stock of $8.7 million.

Trust Preferred Securities: In each of 2003 and 2004, Arrow issued $10 million of TRUPs in a private placement. Under the FRB's regulatory capital rules then in effect, TRUPs proceeds qualified as Tier 1 capital for bank holding companies such as Arrow, but only in amounts up to 25% of Tier 1 capital, net of goodwill less any associated deferred tax liability. For Arrow, TRUPs outstanding prior to the grandfathering cutoff date set forth in Dodd-Frank (May 19, 2010) would continue to qualify as Tier 1 capital until maturity or redemption, subject to limitations.

In the first quarter of 2020, Arrow entered into interest rate swap agreements to synthetically fix the variable rate interest payments associated with $20 million in outstanding subordinated trust securities. The effective fixed rate is 3.43% until maturity. These agreements are designated as cash flow hedges.

Stock Repurchases:

On April 24, 2024, the Board authorized management, in its discretion, to repurchase from time to time, in the open market or in privately negotiated transactions, up to $5 million of Arrow common stock. In addition, on April 30, 2025, the Board authorized management, in its discretion, to repurchase from time to time, in the open market or in privately negotiated transactions, an additional $5 million of Arrow common stock.

In the second quarter of 2025, Arrow repurchased approximately $5.1 million (approximately 196 thousand shares of its common stock) under this authorization.

On July 23, 2025, the Board increased management's share repurchase authority by another $5 million.

From time to time, Arrow may establish a written trading plan in accordance with Rule 10b5-1 of the Exchange Act, pursuant to which it may repurchase shares of its common stock. Arrow currently does not have a Rule 10b5-1 plan in place. Repurchases may be made by Arrow, at times and in amounts as it deems appropriate, and may be made through open market transactions in compliance with Rule 10b-18 of the Exchange Act, subject to market conditions, applicable legal requirements, and other factors.

Dividends: Arrow's common stock is traded on NasdaqGS® under the symbol AROW. The high and low stock prices for the past five quarters listed below represent actual stock trades, as reported by NASDAQ.

															Cash
			Market Price												Dividends
			Low						High						Declared
2024
First Quarter			$	23.11					$	28.62					$	0.27
Second Quarter			21.50						26.14						0.27
Third Quarter			25.17						32.92						0.27
Fourth Quarter			27.15						34.63						0.28
2025
First Quarter			$	25.10					$	29.87					$	0.28
Second Quarter			22.72						27.42						0.28
Third Quarter (dividend paid August 25, 2025)			TBD						TBD						0.29

55

			Quarter Ended June 30
			2025						2024
Cash Dividends Per Share			$	0.280					$	0.270
Diluted Earnings Per Share			0.65						0.52
Dividend Payout Ratio			43.08		%				51.92		%
Total Equity (in thousands)			408,506						$	383,018
Shares Issued and Outstanding (in thousands)			16,484						16,723
Book Value Per Share			$	24.78					$	22.90
Intangible Assets (in thousands)			25,659						22,800
Tangible Book Value Per Share			$	23.23					$	21.54

LIQUIDITY

The objective of effective liquidity management is to ensure that Arrow has the ability to raise cash when needed at a reasonable cost.  This includes the capability of meeting expected and unexpected obligations to Arrow's customers at any time. Given the uncertain nature of customer demands and the need to maximize earnings, Arrow maintains reasonably priced sources of funds, both on- and off-balance sheet, that can be accessed quickly in times of need. Arrow’s liquidity position provides the Company with the necessary flexibility to address any unexpected near-term disruptions such as reduced cash flows from the investment and loan portfolio, unexpected deposit runoff, or increased loan originations.

Arrow's primary sources of available liquidity are overnight investments in federal funds sold, interest-bearing bank balances at the FRBNY, and cash flow from investment securities and loans.  Certain investment securities are categorized as available-for-sale at time of purchase. The available-for-sale portfolio was $447.7 million at June 30, 2025, a decrease of $15.4 million, from the year-end 2024 level. Due to the potential for volatility in market values, Arrow may not always be able to sell securities on short notice at their carrying value, even to provide needed liquidity. Arrow also held interest-bearing cash balances at June 30, 2025 of $227.5 million compared to $127.1 million at December 31, 2024.

In addition to liquidity from cash, short-term investments, investment securities and loans, Arrow has supplemented available operating liquidity with additional off-balance sheet sources such as a federal funds lines of credit with correspondent banks and credit lines with the FHLBNY. The federal funds lines of credit are with two correspondent banks totaling $23 million which were not drawn on during 2024 or the six months ended June 30, 2025.

To support the borrowing relationship with the FHLBNY, Arrow has pledged collateral, including residential mortgage, home equity and commercial real estate loans. At June 30, 2025, Arrow had outstanding collateralized obligations with the FHLBNY of $9 million; as of that date, the unused borrowing capacity at the FHLBNY was approximately $657 million. Brokered deposits are another source of funding accessible in a relatively short time period. At June 30, 2025, there were $300 million in brokered CD deposits. In addition, Arrow Bank has established a borrowing facility with the FRBNY, pledging certain consumer loans as collateral for potential "discount window" advances, which are maintained for contingency liquidity purposes. At June 30, 2025, the amount available under this facility was approximately $762 million in the aggregate, and there were no advances outstanding.

Arrow performs regular liquidity stress tests and tests of the contingent liquidity plan to ensure that an adequate amount of available funds can be generated to meet a wide variety of potential liquidity events. Additionally, Arrow continually monitors levels and composition of uninsured deposits. Uninsured deposit balances in excess of the FDIC insurance limit at June 30, 2025, were less than 30% of the total deposit base.

Arrow measures and monitors basic liquidity as a ratio of liquid assets to total short-term liabilities, both with and without the availability of borrowing arrangements. Based on the level of overnight investments, available liquidity from the investment securities portfolio, cash flows from the loan portfolio, the stable core deposit base and the significant borrowing capacity, Arrow believes that the available liquidity is sufficient to meet all reasonably likely events. At June 30, 2025, Arrow's primary liquidity ratio was approximately 10.6% of total assets, well in excess of the internal policy limit of 5%. Total primary liquidity was approximately $442 million, comprised of $227 million of unencumbered cash and $215 million in unencumbered securities.

Arrow did not experience any liquidity constraints in the six month period ended June 30, 2025, in 2024 or in any recent prior period. Arrow has not at any time during such periods been forced to pay above-market rates to obtain retail deposits or other funds from any source.

56

RESULTS OF OPERATIONS

Three Months Ended June 30, 2025 Compared With

Three Months Ended June 30, 2024

Summary of Earnings Performance

(Dollars in Thousands, Except Per Share Amounts)

			Three Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Net Income			$	10,805					$	8,604					$	2,201					25.6		%
Diluted Earnings Per Share			0.65						0.52						0.13						25.0		%
Return on Average Assets			1.00		%				0.82		%				0.18		%				22.0		%
Return on Average Equity			10.66		%				9.15		%				1.51		%				16.5		%

The following narrative discusses the quarter-to-quarter changes in net interest income, non-interest income, non-interest expense and income taxes:

Net Interest Income

Summary of Net Interest Income

(Dollars in Thousands)

			Three Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Interest and Dividend Income			$	51,573					$	47,972					$	3,601					7.5		%
Interest Expense			19,040						20,820						(1,780)						(8.5)		%
Net Interest Income			32,533						27,152						5,381						19.8		%
Average Earning Assets(1)			4,142,993						4,083,813						59,180						1.4		%
Average Interest-Bearing Liabilities			3,191,906						3,127,417						64,489						2.1		%
Yield on Earning Assets(1)			4.99		%				4.72		%				0.27		%				5.7		%
Cost of Interest-Bearing Liabilities			2.39						2.68						(0.29)						(10.8)		%
Net Interest Spread			2.60						2.04						0.56						27.5		%
Net Interest Margin			3.15						2.67						0.48						18.0		%
(1) Includes Nonaccrual Loans.

Net interest income for the quarter increased by $5.4 million, or 19.8%, from the second quarter of 2024. Interest and fees on loans were $45.6 million for the second quarter of 2025, an increase from $42.1 million for the quarter ending June 30, 2024, primarily due to loan growth and higher loan rates. Interest expense for the second quarter of 2025 was $19.0 million, a decrease of $1.8 million versus the comparable quarter ending June 30, 2024, primarily due to active management of deposit rates. Net interest margin increased 48 basis points in the second quarter of 2025 to 3.15%, from 2.67% during the second quarter of 2024. Average earning asset yields were 27 basis points higher as compared to the second quarter of 2024. The cost of interest-bearing liabilities decreased 29 basis points from the quarter ended June 30, 2024. Arrow defines net interest margin as net interest income divided by average earning assets, annualized. Further detailed information is presented above under the section entitled "Average Consolidated Balance Sheets and Net Interest Income Analysis" on page 45 to 47 The impact of recent interest rate changes on Arrow's deposit and loan portfolios are discussed above in this Report under the sections entitled "Deposit Trends" on page 52 and "Loan Trends" on page 50.

As discussed previously under the heading "Asset Quality" beginning on page 53, the provision for loan losses for the second quarter of 2025 was $594 thousand, compared to a provision of $775 thousand for the second quarter of 2024.

57

Non-interest Income

Summary of Non-interest Income

(Dollars in Thousands)

			Three Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Income From Fiduciary Activities			$	2,398					$	2,451					$	(53)					(2.2)		%
Fees for Other Services to Customers			2,787						2,706						81						3.0		%
Insurance Commissions			1,804						1,662						142						8.5		%
Net Gain on Securities			(40)						54						(94)						(174.1)		%
Net Gain on the Sale of Loans			213						5						208						4,160.0		%
Other Operating Income			447						978						(531)						(54.3)		%
Total Non-interest Income			$	7,609					$	7,856					$	(247)					(3.1)		%

Total non-interest income in the current quarter was $7.6 million, a decrease of $247 thousand from the second quarter of 2024. The increase in insurance commissions was primarily attributable to the A&B Acquisition which occurred in the third quarter of 2024. Net loss on security transactions of $40 thousand for the three months ending June 30, 2025 was the result of the decrease in the fair value of equity securities. Other operating income decreased from the prior year comparable quarter as a result of gains recognized in 2024 on Other Assets.

Non-interest Expense

Summary of Non-interest Expense

(Dollars in Thousands)

			Three Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Salaries and Employee Benefits			$	14,086					$	13,036					$	1,050					8.1		%
Occupancy Expense of Premises, Net			1,952						1,774						178						10.0		%
Technology and Equipment Expense			5,589						4,734						855						18.1		%
FDIC and FICO Assessments			649						698						(49)						(7.0)		%
Amortization			80						40						40						100.0		%
Other Operating Expense			3,296						3,036						260						8.6		%
Total Non-interest Expense			$	25,652					$	23,318					$	2,334					10.0		%
Efficiency Ratio			63.41		%				66.29		%				(2.9)		%				(4.4)		%

Non-interest expense for the second quarter of 2025 was $25.7 million, an increase of $2.3 million, or 10.0%, from the second quarter of 2024. Salaries and benefit expenses increased $1.1 million, or 8.1%, from the prior year comparable quarter. Technology expenses in the second quarter increased $855 thousand, or 18.1%, from the second quarter of 2024. The second quarter of 2025 included Unification expenses of approximately $1.1 million. The Unification expenses were primarily comprised of project management and information technology costs related to the July 2025 system conversion.

Income Taxes

Summary of Income Taxes

(Dollars in Thousands)

			Three Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Provision for Income Taxes			$	3,091					$	2,311					$	780					33.8		%
Effective Tax Rate			22.2		%				21.2		%				1.0		%				4.7		%

The increase in the effective tax rate for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was primarily due to an increase in forecasted pre-tax income combined with a decrease in the forecasted amount of tax exempt income.

58

RESULTS OF OPERATIONS

Six Months Ended June 30, 2025 Compared With

Six Months Ended June 30, 2024

Summary of Earnings Performance

(Dollars in Thousands, Except Per Share Amounts)

			Six Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Net Income			$	17,115					$	16,264					$	851					5.2		%
Diluted Earnings Per Share			1.03						0.97						0.06						6.2
Return on Average Assets			0.80		%				0.77		%				0.03		%				3.9
Return on Average Equity			8.51		%				8.63		%				(0.12)		%				(1.4)

The following narrative discusses the period-to-period changes in net interest income, non-interest income, non-interest expense and income taxes:

Net Interest Income

Summary of Net Interest Income

(Dollars in Thousands)

			Six Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Interest and Dividend Income			$	101,939					$	94,649					$	7,290					7.7		%
Interest Expense			38,049						41,042						(2,993)						(7.3)		%
Net Interest Income			63,890						53,607						10,283						19.2		%
Average Earning Assets (1)			4,143,463						4,084,606						58,857						1.4		%
Average Interest-Bearing Liabilities			3,188,072						3,117,753						70,319						2.3		%
Yield on Earning Assets (1)			4.96		%				4.66		%				0.30		%				6.4		%
Cost of Interest-Bearing Liabilities			2.41						2.65						(0.24)						(9.1)		%
Net Interest Spread			2.55						2.01						0.54						26.9		%
Net Interest Margin			3.11						2.64						0.47						17.8		%
(1) Includes Nonaccrual Loans.

Net interest margin for the first six months of 2025 increased 47 basis point to 3.11%, from 2.64% for the first six months of 2024. Average earning asset yields were 30 basis points higher as compared to the first six months of 2024, primarily due to higher market rates. The cost of interest-bearing liabilities decreased 24 basis points from the first six months of 2024. Further detailed information is presented above under the section entitled "Average Consolidated Balance Sheets and Net Interest Income Analysis." The impact of recent interest rate changes on Arrow's deposit and loan portfolios are discussed above in this Report under the sections entitled "Deposit Trends" on page 52 and "Loan Trends" on page 50.

As previously discussed under the heading "Asset Quality" beginning on page 53, the provision for loan losses for the first six months of 2025 was $5.6 million, compared to $1.4 million for the first six months of 2024.

Non-interest Income

Summary of Non-interest Income

(Dollars in Thousands)

			Six Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Income From Fiduciary Activities			4,933						4,908						$	25					0.5		%
Fees for Other Services to Customers			5,387						5,249						138						2.6
Insurance Commissions			3,630						3,344						286						8.6
Net Gain (Loss) on Securities			277						71						206						290.1
Net Gain on the Sale of Loans			314						9						305						3,388.9
Other Operating Income			907						2,133						(1,226)						(57.5)
Total Non-interest Income			$	15,448					$	15,714					$	(266)					(1.7)		%

Total non-interest income for the first six months of 2025 was $15.4 million, a decrease of $266 thousand from the first six months of 2024. The increase in insurance commissions was primarily attributable to the acquisition of assets of A&B Agency, Inc. (the "A&B

59

Acquisition"). Net gain on security transactions of $277 thousand for the first six months of 2025 resulting from the increase in the fair value of equity securities. Other operating income decreased from the prior year comparable quarter as a result of gains recognized in 2024 on Other Assets.

Non-interest Expense

Summary of Non-interest Expense

(Dollars in Thousands)

			Six Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Salaries and Employee Benefits			$	27,641					$	25,929					$	1,712					6.6		%
Occupancy Expense of Premises, Net			3,974						3,545						429						12.1
Technology and Equipment Expense			10,676						9,554						1,122						11.7
FDIC and FICO Assessments			1,319						1,413						(94)						(6.7)
Amortization			161						80						81						101.3
Other Operating Expense			7,926						6,809						1,117						16.4
Total Non-interest Expense			$	51,697					$	47,330					$	4,367					9.2
Efficiency Ratio			64.94		%				67.90		%				(2.96)		%				(4.4)		%

Non-interest expense for the first six months of 2025 was $51.7 million, an increase of $4.4 million, or 9.2%, from the first six months of 2024. Salaries and benefit expenses increased $1.7 million, or 6.6%, from the comparable period in 2024 primarily driven by the overall growth in organization and inflation driven wage increases. Technology expenses increased $1.1 million, or 11.7%, from the first six months of 2024. Other non-interest expense increased $1.1 million for the first six months of 2025, as compared to the first six months of 2024. The first six months of 2025 included Unification expenses of approximately $1.7 million. The Unification expenses were primarily comprised of project management and information technology costs related to the July 2025 system conversion.

Income Taxes

Summary of Income Taxes

(Dollars in Thousands)

			Three Months Ended
			June 30, 2025						June 30, 2024						Change						% Change
Provision for Income Taxes			$	4,913					$	4,335					$	578					13.3		%
Effective Tax Rate			22.3		%				21.0		%				1.3		%				6.2		%

The increase in the effective tax rate for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was primarily due to an increase in forecasted pre-tax income combined with a decrease in the forecasted amount of tax exempt income.

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Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to credit risk in the loan portfolio and liquidity risk, discussed earlier, Arrow's business activities also generate market risk.  Market risk is the possibility that changes in future market rates (interest rates) or prices (market value of financial instruments) will make Arrow's position (i.e., assets and operations) less valuable.  Arrow's primary market risk is interest rate volatility. The ongoing monitoring and management of interest rate risk is an important component of the asset/liability management process, which is governed by policies that are reviewed and approved annually by the Board of Directors.  The Board of Directors delegates responsibility for carrying out asset/liability oversight and control to management's Asset/Liability Committee (ALCO).  In this capacity ALCO develops guidelines and strategies impacting the asset/liability profile based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends.  

Changes in market interest rates, whether increases or decreases, can trigger repricing and changes in the pace of payments for both assets and liabilities (prepayment risk). This may individually or in combination affect net interest income, net interest margin, and ultimately net income, either positively or negatively. ALCO utilizes the results of a detailed and dynamic simulation model to quantify this interest rate risk by projecting net interest income in various interest rate scenarios.  

Arrow's standard simulation model applies a parallel shift in interest rates, ramped over a 12-month period, to capture the impact of changing interest rates on net interest income.  The results are compared to ALCO policy limits which specify a maximum tolerance level for net interest income exposure over a one-year horizon, assuming no balance sheet growth and a 100 and 200 basis point downward and a 200 basis point upward shift in interest rates. Additional tools to monitor potential longer-term interest rate risk, including periodic stress testing involving hypothetical sudden and significant interest rate spikes, are also evaluated.

The following table summarizes the percentage change in net interest income as compared to the base scenario, which assumes no change in market interest rates as generated from the standard simulation model. The results are presented for each of the first two years of the simulation period for the 100 and 200 basis point decreases in interest rate scenario and the 200 basis point increase in interest rate scenario. These results are well within the ALCO policy limits.

As of June 30, 2025:

Change in Interest Rate						Calculated change in Net Interest Income - Year 1						Calculated change in Net Interest Income - Year 2
- 200 basis points						1.1%						5.6%
- 100 basis points						0.7%						7.0%
+200 basis points						(2.5)%						3.3%

The balance sheet shows an inverse relationship between changes in prevailing rates and Arrow's net interest income in the near term, suggesting that liabilities and sources of funds generally reprice more quickly than earning assets. However, when net interest income is simulated over a longer time frame, the balance sheet shows a relatively neutral profile with long-term asset sensitivity, as asset yields continue to reprice while the cost of funding reaches assumed ceilings or floors.

The hypothetical estimates underlying the sensitivity analysis are based upon numerous assumptions, including: the nature and timing of changes in interest rates including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. While assumptions are developed based upon current economic and local market conditions, Arrow cannot make any assurance as to the predictive nature of these assumptions including how customer preferences or competitor influences might change.

Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate changes on caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes, unanticipated shifts in the yield curve and other internal/external variables. Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates.

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Item 4.

CONTROLS AND PROCEDURES

Management, under the supervision and with the participation of the Chief Executive Officer ("CEO") (who is our principal executive officer) and Chief Financial Officer ("CFO") (who is our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d15(e) of the Exchange Act, as of June 30, 2025. Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the SEC (1) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (2) is accumulated and communicated to management, including the principal executive and principal financial officers, or persons and committees performing similar functions, such as the Audit Committee, as appropriate to allow timely decisions regarding required disclosure.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of June 30, 2025.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended June 30, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

Arrow, including its subsidiaries, is not currently the subject of any material pending legal proceedings, other than ordinary routine litigation occurring in the normal course of their business. On an ongoing basis, Arrow is often the subject of, or a party to, various legal claims by other parties against Arrow, by Arrow against other parties, or involving Arrow, which arise in the normal course of business. The various pending legal claims against Arrow will not, in the opinion of management based upon consultation with counsel, result in any material liability. Legal expenses incurred in connection with loss contingencies are expensed as incurred.

As previously disclosed in certain of the Company’s filings with the SEC, on June 23, 2023, Robert C. Ashe filed a putative class action complaint (the "Ashe Lawsuit") against the Company in the United States District Court for the Northern District of New York. In addition to the Company, the complaint names as defendants Thomas J. Murphy, the Company’s former CEO and from September 30, 2022 to February 20, 2023, its interim CFO, Edward J. Campanella, the Company’s former CFO, and Penko Ivanov, the Company’s current CFO (“Individual Defendants” and, together with the Company, the "Defendants"). The complaint alleges that the Defendants made materially false and misleading statements regarding the Company’s business, operations and compliance policies in the Company’s public filings between March 12, 2022 and May 12, 2023. The complaint further alleges that the Individual Defendants are liable for these materially false and misleading statements as "controlling persons" of the Company. Based on these allegations, the complaint brings two claims for violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and of Section 20(a) of the Exchange Act. Mr. Ashe, on behalf of a purported class of shareholders, seeks compensatory damages as well as recovery of the costs and fees associated with the litigation. On December 5, 2023, plaintiff Ashe filed an amended complaint that changed the putative class period to the period from August 5, 2022 through May 12, 2023, but challenged substantially the same statements on the same basis. On February 9, 2024, the Company moved to dismiss the action in its entirety. On June 7, 2024, the parties reached a settlement (subject to court approval). On February 13, 2025 the court approved the settlement, which did not have a material impact on the Company’s financial results or financial position and was fully recognized during 2023 and the first quarter of 2024.

On December 12, 2023 the Company became aware that Stephen Bull filed a complaint (the "Shareholder Derivative Complaint") on behalf of Arrow against the three Individual Defendants, as well as against all members of Arrow’s board of directors during the class period in Ashe. The Company is named solely as a nominal defendant in the action and would be the beneficiary of any recovery. The Shareholder Derivative Complaint alleges breaches of fiduciary duty (i) by the Ashe individual defendants based on substantially the same allegedly misleading statements pleaded in the Ashe complaint; and (ii) the director defendants by failing to adequately oversee the individual defendants and maintain internal and disclosure controls. Plaintiffs seek (i) unspecified damages (which would be payable to the Company) for costs incurred as a result of the alleged misstatements, including costs of investigation, remediation, and litigation, (ii) repayment of the director defendants’ compensation on an unjust enrichment theory, (iii) an order directing the Company to take all necessary actions to reform and improve its corporate governance, and (iv) the recovery of costs and fees associated with the litigation. The Shareholder Derivative Complaint also asserts various federal securities claims based on the same alleged misrepresentations as set forth in the Ashe Lawsuit. On April 30, 2025, the parties filed a motion preliminarily to approve a settlement under which the Company has agreed to make certain adjustments to its governance structure and processes. The parties are continuing to negotiate any attorneys’ fee and expense award to plaintiff’s counsel. The settlement is not expected to have a material impact on the Company's financial results or position.

Item 1.A.

Risk Factors

The Risk Factors identified in the 2024 Form 10-K continue to represent the most significant risks to Arrow's future results of operations and financial conditions, without further modification or amendment.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

The following table presents information about purchases of common stock (our only class of equity securities registered pursuant to Section 12 of the Exchange Act) by Arrow during the three months ended June 30, 2025. On April 24, 2024, the Board authorized management, in its discretion to repurchase from time to time, in the open market or in privately negotiated transactions, up to $5 million of Arrow common stock. On April 30, 2025, the Board increased the available amount for share repurchase by $5 million, authorizing management, in its discretion, to repurchase from time to time, in the open market or in privately negotiated transactions, shares of Arrow common stock. 196,497 shares were purchased during the three months ended June 30, 2025. As of June 30, 2025, $1,488,717 remained available under that authorization for the repurchase of shares.

On July 23, 2025, the Board increased the available amount for share repurchase by $5 million, authorizing management, in its discretion, to repurchase from time to time, in the open market or in privately negotiated transactions, shares of Arrow common stock. This additional authorization left the total authorization as of July 23, 2025 at $6,488,717.

In the third quarter of 2025 through August 4, 2025, Arrow repurchased approximately $796 thousand (29,614 shares) of its common stock under the new repurchase authorization.

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Second Quarter 2025 Calendar Month			(A) Total Number of Shares Purchased 1						(B) Average Price Paid Per Share 1,2						(C) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs						(D) Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs 3
April			—						$	—					—						6,609,390
May			119,671						26.48						119.671						3,468,858
June			76,826						26.03						76.826						1,488,717
Total			196,497						26.31						196.497

1In the months indicated, the listed number of shares purchased were purchased by Arrow through such methods: April - none; May - repurchased under the repurchase authorization (119,671 shares); and June - repurchased under the repurchase authorization (76,826 shares).

2 Average price paid per share excludes the Stock Buyback Tax Under the Inflation Reduction Act of 2022.

3 Reflects the approximate dollar value of shares that may yet be purchased under the Program as of June 30, 2025.

Item 3.

Defaults Upon Senior Securities - None

Item 4.

Mine Safety Disclosures - None

Item 5.

Other Information

Rule 10b5-1 Trading Arrangements

During the three months ended June 30, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6.

Exhibits

Exhibit Number			Exhibit
3.(i)			Certificate of Incorporation of the Registrant as Amended through June 3, 2019, incorporated by reference from the Registrant's Current Report on Form 8-K filed June 5, 2019, Exhibit 3.1
3.(ii)			By-laws of the Registrant, as amended, incorporated herein by reference from the Registrant’s Current Report on Form 8-K filed on February 1, 2024, Exhibit 3.1

The following exhibits are submitted herewith:

Exhibit Number			Exhibit
31.1			Certification of Chief Executive Officer under SEC Rule 13a-14(a)/15d-14(a)
31.2			Certification of Chief Financial Officer under SEC Rule 13a-14(a)/15d-14(a)
32			Certification of Chief Executive Officer under 18 U.S.C. Section 1350 and Certification of Chief Financial Officer under 18 U.S.C. Section 1350
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Labels Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

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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 thereunto duly authorized.

ARROW FINANCIAL CORPORATION

Registrant

August 8, 2025			/s/ David S. DeMarco
Date			David S. DeMarco
			President and Chief Executive Officer
			(Principal Executive Officer)
August 8, 2025			/s/ Penko Ivanov
Date			Penko Ivanov
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

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FAQ

What were Arrow Financial's (AROW) Q2 2025 earnings per share?

Diluted EPS for Q2 2025 was $0.65, up from $0.52 in Q2 2024.

How much did AROW's net interest income change in Q2 2025?

Net interest income increased 19.9% year over year to $32.5 million.

What is Arrow Financial's loan portfolio size as of June 30, 2025?

Total loans stood at $3.425 billion with an allowance of $34.2 million.

How much did deposits grow during the first half of 2025?

Deposits rose by $101 million to $3.93 billion since December 31, 2024.

Why did other comprehensive income improve in Q2 2025?

Lower market rates reduced unrealized losses on the securities portfolio, adding $2.6 million OCI in the quarter and $7.6 million YTD.

What was the provision for credit losses in the first half of 2025?

AROW recorded a $5.6 million provision, up sharply from $1.4 million in 1H-2024.