Completes Acquisition of Adirondack Bancorp Inc. and Recognizes $15.6 Million in Merger Related Expenses
GLENS FALLS, N.Y., Oct. 29, 2026 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS(R) -- AROW) ("Arrow" or the "Company") announced financial results for the three-month period ended September 30, 2026. Reported net income for the third quarter of 2026 was $5.7 million and fully diluted earnings per share ("EPS") was $0.31, versus net income of $11.0 million and EPS of $0.66 for the second quarter of 2026.
The Board of Directors of Arrow declared a quarterly cash dividend of $0.30 per share; payable November 23, 2026 to shareholders of record as of November 11, 2026.
Arrow posted core EPS of $0.97 for the third quarter of 2026. Core results exclude approximately $15.6 million ($0.66 per share) of merger-related expenses ("MRE"(1) ) related to the July 1, 2026 acquisition of Adirondack Bancorp, Inc. and Adirondack Bank based in Utica, New York ("Acquisition").
This earnings release and related commentary should be read in conjunction with the Company's October 29, 2026 Form 8-K and related Third Quarter 2026 Investor Presentation, which can also be found on Arrow's website: arrowfinancial.com/documents/investor-presentations.
Arrow President and CEO David S. DeMarco:
"We are excited to report our third-quarter financial results, marking the first quarter of financial performance following our acquisition of Adirondack Bancorp. Reflecting the collaboration and commitment of our combined team, Arrow is already delivering on expected benefits from the strategic acquisition with strong loan growth, net interest margin expansion, significant increase in non-interest income, core earnings of $0.97 per share and core ROA growth. We expect to complete the core banking system integration over the next few weeks and remain on track to realize approximately 95 percent of the anticipated cost savings by the first quarter of 2027. We also continued to celebrate our bank's 175th anniversary year by ringing the Nasdaq closing bell in late September. I would like to thank all of our valued team members, both past and present, for their dedication and hard work to mark this milestone as Arrow continues to grow to better serve our expanding communities."
Acquisition Highlights
-- Successfully closed Adirondack Bancorp, Inc. acquisition on July 1, 2026
-- Added approximately $600 million in loans and approximately $900 million
in deposits
-- Key purchase accounting items:
-- Loan fair value discount of $26.7 million
-- $21 million, or 3.46%, is expected to amortize over
approximately 4.5 years
-- Allowance for credit losses of $5.7 million, or 0.93%, on
acquired loans
-- Core deposit intangible of $16.4 million, or 2.62%; expected to
amortize over 10 years
-- Goodwill of $44.7 million
-- Core system conversion scheduled for November 7 and 8
Third-Quarter Highlights and Key Metrics
-- Net Income of $5.7 million (GAAP EPS of $0.31; Core EPS of $0.97
excluding MRE1)
-- Strong organic loan growth of approximately $60 million, 6.8% annualized
-- Net Interest Income of $48.7 million
-- Net Interest Margin of 3.80% (3.81% fully taxable equivalent ("FTE"2)),
versus 3.42% (3.43% FTE2) in the prior quarter
-- Return on Average Assets ("ROA") of 0.42%; 1.33% excluding MRE1
-- YTD Net Charge-offs of 0.14%
-- Loan yield of 5.69% versus 5.46% for the previous quarter
-- Cost of retail deposits3 was 1.45% versus 1.61% in the second quarter,
benefitting from the Acquisition
-- Purchased Skene Valley Agency, Inc., an independent insurance agency in
Washington County, NY
Income Statement
-- Net Income: Net income for the third quarter of 2026 was $5.7 million,
decreasing from $11.0 million in the second quarter of 2026.
-- Compared to the prior quarter, net income decreased primarily due
to $15.6 million of MRE as well as other non-interest expenses due
to the Acquisition, as expected cost savings are not yet fully
realized.
-- Net Interest Income: Net interest income for the third quarter of 2026
was $48.7 million, increasing 35.6% from the second quarter of 2026.
-- Total interest and dividend income was $68.1 million for the third
quarter of 2026, an increase from $53.6 million in the second
quarter of 2026. The increase was attributable to higher average
earning assets driven by the Acquisition. Interest expense for the
third quarter of 2026 was $19.3 million, an increase from $17.7
million in the second quarter of 2026 as the Acquisition generated
an increase in overall deposit balances while simultaneously
decreasing the cost of funds.
-- Net Interest Margin: Net interest margin, on an FTE basis, for the third
quarter of 2026 increased to 3.81%, compared to 3.43% for the second
quarter of 2026. The increase in net interest margin compared to the
second quarter of 2026 was primarily the result of the Acquisition, which
included lower costing deposit balances, while loan yields continued to
expand. Net interest margin also benefitted by 14bps, comprised of 9bps
related to the net accretion of purchase accounting adjustments and 5bps
on the accretion of the acquired investment portfolio.
Three Months Ended
(Dollars in Thousands)
September 30, 2026 December 31, 2025 September 30, 2025
------------------ ------------------ ------------------
Interest and
Dividend Income $ 68,075 $ 54,610 $ 53,598
Interest Expense 19,342 19,467 19,467
Net Interest
Income 48,733 35,143 34,131
Average Earning
Assets(A) 5,089,406 4,302,305 4,199,115
Average
Interest-Bearing
Liabilities 3,729,983 3,280,856 3,193,789
Average Yield on
Earning
Assets(A) 5.31 % 5.04 % 5.06 %
Average Cost of
Interest-Bearing
Liabilities 2.06 2.35 2.42
Net Interest
Spread 3.25 2.69 2.64
Net Interest
Margin 3.80 3.24 3.22
Net Interest
Margin - FTE 3.81 3.25 3.24
(A) Includes
Nonaccrual
Loans.
-- Provision for Credit Losses: For the third quarter of 2026, the provision
for credit losses was $1.5 million compared to $2.8 million in the second
quarter of 2026, which included a $1.6 million specific reserve related
to a non-performing commercial loan that was subsequently charged-off in
the third quarter of 2026. The third quarter provision was driven by loan
growth and net charge-offs.
-- Non-Interest Income: Non-interest income for the three months ended
September 30, 2026, was $11.4 million, an increase from $8.3 million in
the second quarter of 2026. The increase was the result of fee income for
services to customers from the Acquisition as well as an increase in
insurance commissions. Insurance commissions also included one month of
revenue from the Skene Valley Agency, Inc. acquired during the quarter.
Other operating income included increased bank-owned life insurance
income and a gain on the termination of a portion of the cash flow hedges,
as the Acquisition enabled a change to Arrow's asset-liability management
strategy.
-- Non-Interest Expense: Non-interest expense for the third quarter of 2026
was $51.8 million, an increase from $27.5 million in the second quarter
of 2026. The third quarter of 2026 included approximately $15.6 million
of MRE versus $1.0 million in the second quarter of 2026. In addition,
other operating expense included $745 thousand in core deposit intangible
amortization for the quarter related to the Acquisition.
-- Provision for Income Taxes: The provision for income taxes and effective
tax rate were $1.2 million and 16.8%, respectively for the third quarter
of 2026, and $2.9 million and 21.1%, respectively for the second quarter
of 2026. The effective tax rate for the third quarter of 2026 reflected
the impact of closing the Acquisition.
Balance Sheet
-- Total Assets: Total assets were $5.5 billion at September 30, 2026, an
increase of $1.1 billion, or 23.8%, as compared to June 30, 2026. For the
third quarter of 2026, the overall change in assets was primarily driven
by the Acquisition, as well as an increase in cash balances.
-- Investments: Total investments were $693.6 million as of September 30,
2026, an increase of $105.6 million, or 18.0%, compared to June 30, 2026.
The increase from June 30, 2026 was driven primarily by the Acquisition,
partially offset by the subsequent sale of $73 million of investments as
well as additional paydowns and maturities. There were no material credit
quality issues related to the investment portfolio.
-- Loans: Total loans were $4.1 billion as of September 30, 2026. Loans
outstanding increased in the third quarter of 2026 by $648.0 million (net
of approximately $21 million of amortizing discount), driven by the
Acquisition and approximately $60 million in organic growth. Please see
the loan detail included in the Consolidated Financial Information table
on page 14.
-- Allowance for Credit Losses: The allowance for credit losses was $41.1
million as of September 30, 2026, which represented 0.99% of loans
outstanding, as compared to $36.2 million, or 1.03% of loans outstanding,
at June 30, 2026. The increase in the allowance was primarily the result
of $5.7 million of additional reserve for the newly acquired loans. Net
charge-offs, expressed as an annualized percentage of average loans
outstanding, were 0.21% for the three-month period ended September 30,
2026, as compared to 0.08% for the three-month period ended June 30,
2026. Nonperforming assets were $12.7 million as of September 30, 2026,
representing 0.23% of period-end assets, an increase from $8.7 million,
or 0.19%, at June 30, 2026.
-- Deposits: At September 30, 2026, deposit balances were $4.7 billion, an
increase of $1.1 billion from June 30, 2026. The change from June 30,
2026 was primarily attributable to the acquisition as well as the
seasonal inflow of municipal deposits. Please refer to page 7 for further
details related to deposits.
-- Capital: Total stockholders' equity was $515.1 million at September 30,
2026, an increase of $68.8 million, or 15.4%, from June 30, 2026. The
increase from June 30, 2026 was primarily attributable to the issuance of
1.98 million shares of common stock with a value of approximately
$81 million in connection with the Acquisition as well as net income of
$5.7 million offset by other comprehensive loss of $12.9 million and
dividends of $5.6 million. Arrow's regulatory capital ratios remain
strong. As of September 30, 2026, Arrow's Common Equity Tier 1 Capital
Ratio was 11.63% and Total Risk-Based Capital Ratio was 13.46%. The
capital ratios of Arrow and its subsidiary bank continued to exceed the
"well capitalized" regulatory standards. Regulatory capital ratios are
preliminary, subject to finalization as part of the current quarter Call
Report.
Additional Commentary
-- BauerFinancial Ratings: Arrow Bank National Association ("Arrow Bank")
received a 5-Star Superior rating from BauerFinancial, Inc., the nation's
premier bank rating firm. Arrow Bank has earned this designation for 78
consecutive quarters, securing its prominent position as an "Exceptional
Performance Bank."
About Arrow: Arrow Financial Corporation is a holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern and central New York. The Company is the parent of Arrow Bank, a full-service commercial bank, and Upstate Agency, LLC, a comprehensive insurance agency.
Non-GAAP Financial Measures Reconciliation: In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). The following measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission ("SEC") and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules: tangible book value, tangible equity, return on tangible equity, tax-equivalent adjustment and related net interest income, tax-equivalent net interest margin and the efficiency ratio. Management believes that the non-GAAP financial measures disclosed by Arrow from time to time are useful in evaluating Arrow's performance and that such information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Non-GAAP financial measures may differ from similar measures presented by other companies. See the reconciliation of GAAP to non-GAAP measures in the section "Selected Quarterly Information."
Safe Harbor Statement: The information contained in this earnings release may contain statements that are not historical in nature but rather are based on management's beliefs, assumptions, expectations, estimates and projections about the future. These statements can sometimes be identified by Arrow's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." These statements may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, involving a degree of uncertainty and attendant risk. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast, explicitly or by implication because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, tariffs, cybersecurity risks, changes in FDIC assessments, bank failures, geopolitical events, difficulties in managing Arrow's growth, competition, changes in law or the regulatory environment, risks relating to the integration of Adirondack Bancorp, Inc. and Adirondack Bank, and changes in general business and economic trends. Arrow undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. This earnings release should be read in conjunction with Arrow's Annual Report on Form 10-K for the year ended December 31, 2025, and other filings with the SEC.
1 EPS and ROA excluding merger-related expenses are non-GAAP measures. See
reconciliation in Note 5 to the Selected Quarterly Information
2 FTE Net interest margin is a non-GAAP measure. See reconciliation on Note 2
to the Selected Quarterly Information
3 Retail deposits exclude wholesale funding sources
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2026 2025 2026 2025
-------------- -------------- -------------- --------------
INTEREST AND
DIVIDEND INCOME
Interest and Fees
on Loans $ 58,896 $ 46,832 $ 153,203 $ 136,982
Interest on
Deposits at
Banks 1,962 2,245 4,837 5,488
Interest and
Dividends on
Investment
Securities:
Fully Taxable 6,059 4,066 15,305 11,464
Exempt from
Federal Taxes 1,158 455 2,141 1,603
-------------- -------------- -------------- --------------
Total Interest
and Dividend
Income 68,075 53,598 175,486 155,537
-------------- -------------- -------------- --------------
INTEREST EXPENSE
Interest-Bearing
Checking
Accounts 2,567 2,160 6,829 5,904
Savings Deposits 9,472 9,534 27,121 28,384
Time Deposits over
$250,000 1,612 1,695 3,860 5,232
Other Time
Deposits 3,089 5,859 12,829 17,181
Borrowings 2,230 -- 3,249 167
Junior
Subordinated
Obligations
Issued to
Unconsolidated
Subsidiary
Trusts 326 173 666 513
Interest on
Financing Leases 46 46 138 135
-------------- -------------- -------------- --------------
Total Interest
Expense 19,342 19,467 54,692 57,516
-------------- -------------- -------------- --------------
NET INTEREST
INCOME 48,733 34,131 120,794 98,021
-------------- -------------- -------------- --------------
Provision for
Credit Losses 1,467 815 4,842 6,428
-------------- -------------- -------------- --------------
NET INTEREST
INCOME AFTER
PROVISION FOR
CREDIT LOSSES 47,266 33,316 115,952 91,593
-------------- -------------- -------------- --------------
NON-INTEREST
INCOME
Income From
Fiduciary
Activities 2,609 2,600 8,028 7,533
Fees for Other
Services to
Customers 4,243 2,857 9,939 8,244
Insurance
Commissions 2,145 1,986 6,232 5,616
Net Gain on
Securities 114 392 414 669
Net Gain on Sales
of Loans 180 261 624 573
Other Operating
Income 2,124 620 3,062 1,529
-------------- -------------- -------------- --------------
Total
Non-Interest
Income 11,415 8,716 28,299 24,164
-------------- -------------- -------------- --------------
NON-INTEREST
EXPENSE
Salaries and
Employee
Benefits 19,391 14,339 49,410 41,980
Occupancy
Expenses, Net 2,805 1,907 7,365 5,881
Technology and
Equipment
Expense 6,976 4,963 16,785 15,639
FDIC Assessments 903 634 1,929 1,953
Other Operating
Expense 21,753 3,590 30,668 11,677
-------------- -------------- -------------- --------------
Total
Non-Interest
Expense 51,828 25,433 106,157 77,130
-------------- -------------- -------------- --------------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 6,853 16,599 38,094 38,627
Provision for
Income Taxes 1,153 3,774 7,947 8,687
-------------- -------------- -------------- --------------
NET INCOME $ 5,700 $ 12,825 $ 30,147 $ 29,940
============== ============== ============== ==============
Average Shares
Outstanding:
Basic 18,421 16,402 17,084 16,541
Diluted 18,462 16,406 17,119 16,543
Per Common Share:
Basic Earnings $ 0.31 $ 0.77 $ 1.75 $ 1.80
Diluted Earnings 0.31 0.77 1.75 1.80
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
September 30, 2026 December 31, 2025
--------------------- ---------------------
ASSETS
Cash and Due From Banks $ 53,172 $ 29,132
Interest-Earning Deposits at
Banks 325,600 185,051
Investment Securities:
Available-for-Sale at Fair
Value 609,085 495,868
Held-to-Maturity (Fair Value
of $63,866 at September 30,
2026 and $66,569 at
December 31, 2025) 64,258 66,975
Equity Securities 6,011 5,597
Other Investments 14,220 4,372
Loans 4,144,587 3,453,093
Allowance for Credit Losses (41,131) (34,322)
--------------------- ---------------------
Net Loans 4,103,456 3,418,771
--------------------- ---------------------
Premises and Equipment, Net 76,206 59,433
Goodwill 69,813 23,789
Other Intangible Assets, Net 18,379 1,741
Other Assets 206,854 155,133
--------------------- ---------------------
Total Assets $ 5,547,054 $ 4,445,862
===================== =====================
LIABILITIES
Noninterest-Bearing Deposits 1,137,492 722,374
Interest-Bearing Checking
Accounts 1,154,313 862,192
Savings Deposits 1,839,409 1,557,638
Time Deposits over $250,000 229,694 155,802
Other Time Deposits 377,989 641,463
--------------------- ---------------------
Total Deposits 4,738,897 3,939,469
--------------------- ---------------------
Borrowings 185,190 4,265
Junior Subordinated
Obligations Issued to
Unconsolidated Subsidiary
Trusts 28,248 20,000
Finance Leases 4,866 4,929
Other Liabilities 74,761 45,347
--------------------- ---------------------
Total Liabilities 5,031,962 4,014,010
--------------------- ---------------------
STOCKHOLDERS' EQUITY
Preferred Stock, $1 Par Value;
1,000,000 Shares Authorized at
September 30, 2026 and
December 31, 2025 (none
issued) -- --
Common Stock, $1 Par Value:
30,000,000 Shares Authorized;
22,066,559 Shares Issued;
18,535,102 and 16,445,342
Shares Outstanding at
September 30, 2026 and
December 31, 2025 22,067 22,067
Additional Paid-in Capital 468,436 414,506
Retained Earnings 116,948 102,271
Accumulated Other
Comprehensive Loss (18,324) (4,037)
Treasury Stock, at Cost
(3,531,457 Shares at
September 30, 2026 and
5,621,217 Shares at
December 31, 2025) (74,035) (102,955)
--------------------- ---------------------
Total Stockholders' Equity 515,092 431,852
--------------------- ---------------------
Total Liabilities and
Stockholders' Equity $ 5,547,054 $ 4,445,862
===================== =====================
Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended 9/30/2026 6/30/2026 3/31/2026 12/31/2025 9/30/2025
------------------ ------------ ------------ ------------ ------------ ------------
Net Income $ 5,700 $ 10,962 $ 13,485 $ 14,013 $ 12,825
Share and Per
Share Data:
Period End Shares
Outstanding 18,535 16,545 16,527 16,445 16,438
Basic Average
Shares
Outstanding 18,421 16,428 16,382 16,390 16,402
Diluted Average
Shares
Outstanding 18,462 16,467 16,403 16,413 16,406
Basic Earnings Per
Share $ 0.31 $ 0.66 $ 0.82 $ 0.85 $ 0.77
Diluted Earnings
Per Share 0.31 0.66 0.82 0.85 0.77
Cash Dividend Per
Share 0.30 0.30 0.30 0.29 0.29
Selected Quarterly
Average Balances:
Interest-Earning
Deposits at
Banks $ 211,383 $ 129,628 $ 183,252 $ 260,806 $ 200,251
Investment
Securities 770,629 614,771 598,817 596,994 574,080
Loans 4,107,394 3,466,810 3,440,505 3,444,505 3,424,784
Deposits 4,566,546 3,788,961 3,928,761 4,002,221 3,913,721
Other Borrowed
Funds 267,225 149,307 29,181 29,203 30,539
Stockholders'
Equity 530,861 445,887 438,846 425,042 413,058
Total Assets 5,407,135 4,425,821 4,439,833 4,499,195 4,399,815
Return on Average
Assets,
annualized 0.42 % 0.99 % 1.23 % 1.24 % 1.16 %
Return on Average
Equity,
annualized 4.26 % 9.86 % 12.46 % 13.08 % 12.32 %
Return on Average
Tangible Equity,
annualized (1) 5.08 % 10.46 % 13.23 % 13.92 % 13.13 %
Average Earning
Assets $ 5,089,406 $ 4,211,209 $ 4,222,574 $ 4,302,305 $ 4,199,115
Average Paying
Liabilities 3,729,983 3,222,939 3,244,709 3,280,856 3,193,789
Interest Income 68,075 53,617 53,794 54,610 53,598
Tax-Equivalent
Adjustment (2) 148 133 123 114 121
Interest Income,
Tax-Equivalent
(2) 68,223 53,750 53,917 54,724 53,719
Interest Expense 19,342 17,686 17,664 19,467 19,467
Net Interest
Income 48,733 35,931 36,130 35,143 34,131
Net Interest
Income,
Tax-Equivalent
(2) 48,881 36,064 36,253 35,258 34,252
Net Interest
Margin,
annualized 3.80 % 3.42 % 3.47 % 3.24 % 3.22 %
Net Interest
Margin,
Tax-Equivalent,
annualized (2) 3.81 % 3.43 % 3.48 % 3.25 % 3.24 %
Efficiency Ratio
Calculation: (3)
------------------
Non-Interest
Expense $ 51,828 $ 27,464 $ 26,865 $ 25,804 $ 25,433
Less: Intangible
Asset
Amortization 812 71 72 74 76
------------ ------------ ------------ ------------ ------------
Net Non-Interest
Expense $ 51,016 $ 27,393 $ 26,793 $ 25,730 $ 25,357
------------ ------------ ------------ ------------ ------------
Net Interest
Income,
Tax-Equivalent $ 48,881 $ 36,064 $ 36,253 $ 35,257 $ 34,252
Non-Interest
Income 11,415 8,255 8,628 8,268 8,716
Less: Net Gain
(Loss) on
Securities 114 155 145 (127) 392
------------ ------------ ------------ ------------ ------------
Net Gross Income $ 60,182 $ 44,165 $ 44,736 $ 43,652 $ 42,576
------------ ------------ ------------ ------------ ------------
Efficiency Ratio 84.77 % 62.02 % 59.89 % 58.94 % 59.56 %
Period-End Capital
Information:
------------------
Total
Stockholders'
Equity (i.e. Book
Value) $ 515,092 $ 446,306 $ 440,143 $ 431,852 $ 417,687
Book Value per
Share 27.79 26.98 26.63 26.26 25.41
Goodwill and Other
Intangible
Assets, net 88,192 25,401 25,481 25,530 25,594
Tangible Book
Value per Share
(1) 23.03 25.44 25.09 24.71 23.85
Capital Ratios:(4)
Tier 1 Leverage
Ratio 8.93 % 10.19 % 10.02 % 9.68 % 9.66 %
Common Equity Tier
1 Capital Ratio 11.63 % 13.21 % 13.30 % 13.01 % 13.07 %
Tier 1 Risk-Based
Capital Ratio 12.35 % 13.83 % 13.93 % 13.64 % 13.71 %
Total Risk-Based
Capital Ratio 13.46 % 14.98 % 15.04 % 14.76 % 14.86 %
Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Footnotes:
Non-GAAP Financial Measure Reconciliation: Tangible Book Value, Tangible Equity, and Return on Tangible Equity exclude goodwill and other intangible
assets, net from total equity. These are non-GAAP financial measures, which Arrow believes provide investors with information that is useful in
1. understanding its financial performance.
9/30/2026 6/30/2026 3/31/2026 12/31/2025 9/30/2025
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Total Stockholders' Equity
(GAAP) $ 515,092 $ 446,306 $ 440,143 $ 431,852 $ 417,687
Less: Goodwill and Other
Intangible assets, net 88,192 25,401 25,481 25,530 25,594
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Tangible Equity (Non-GAAP) $ 426,900 $ 420,905 $ 414,662 $ 406,322 $ 392,093
Period End Shares
Outstanding 18,535 16,545 16,527 16,445 16,438
Tangible Book Value per
Share (Non-GAAP) $ 23.03 $ 25.44 $ 25.09 $ 24.71 $ 23.85
Net Income 5,700 10,962 13,485 14,013 12,825
Return on Tangible Equity
(Net Income/Tangible
Equity - Annualized) 5.08 % 10.46 % 13.23 % 13.92 % 13.13 %
Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of annualized tax-equivalent net interest income to average earning
assets. This is also a non-GAAP financial measure, which Arrow believes provides investors with information that is useful in understanding its
2. financial performance.
9/30/2026 6/30/2026 3/31/2026 12/31/2025 9/30/2025
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Interest Income (GAAP) $ 68,075 $ 53,617 $ 53,794 $ 54,610 $ 53,598
Add: Tax-Equivalent
adjustment (Non-GAAP) 148 133 123 114 121
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Interest Income - Tax
Equivalent (Non-GAAP) $ 68,223 $ 53,750 $ 53,917 $ 54,724 $ 53,719
Net Interest Income (GAAP) $ 48,733 $ 35,931 $ 36,130 $ 35,143 $ 34,131
Add: Tax-Equivalent
adjustment (Non-GAAP) 148 133 123 114 121
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Net Interest Income - Tax
Equivalent (Non-GAAP) $ 48,881 $ 36,064 $ 36,253 $ 35,257 $ 34,252
Average Earning Assets $ 5,089,406 $ 4,211,209 $ 4,222,574 $ 4,302,305 $ 4,199,115
Net Interest Margin
(Non-GAAP)* 3.81 % 3.43 % 3.48 % 3.25 % 3.24 %
Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense
control. Arrow believes the efficiency ratio provides investors with information that is useful in understanding its financial performance. Arrow
defines efficiency ratio as the ratio of non-interest expense to net gross income (which equals tax-equivalent net interest income plus non-interest
3. income, as adjusted).
For the current quarter, all of the regulatory capital ratios as well as the Total Risk-Weighted Assets are calculated in accordance with bank
regulatory capital rules. The September 30, 2026 CET1 ratio listed in the tables (i.e., 11.63%) exceeds the sum of the required minimum CET1 ratio plus
the fully phased-in Capital Conservation Buffer (i.e., 7.00%). Regulatory capital ratios are estimated, subject to finalization as part of the current
4. quarter Call Report.
9/30/2026 6/30/2026 3/31/2026 12/31/2025 9/30/2025
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Total Risk Weighted Assets $ 3,863,576 $ 3,253,881 $ 3,180,782 $ 3,182,240 $ 3,095,225
Common Equity Tier 1
Capital 449,211 429,971 423,139 414,050 404,426
Common Equity Tier 1 Ratio 11.63 % 13.21 % 13.30 % 13.01 % 13.07 %
Non-GAAP Financial Measure Reconciliation: Net Income and Net Non-Interest Expense adjusted for non-core expenses. Non-core expenses include
merger-related expenses, which are related to the announced acquisition of Adirondack Bancorp, Inc., and unification expenses, which are related to the
system conversion and operational merger of the Company's two banking subsidiaries during the year ended December 31, 2025. EPS, efficiency ratio, and
ROA are presented on an adjusted basis to reflect these exclusions. In the third quarter of 2026, Arrow issued approximately 1.98 million shares of
common stock. These are non-GAAP financial measures, which Arrow believes provides investors with information that is useful in understanding its
5. financial performance.
9/30/2026 6/30/2026 3/31/2026 12/31/2025 9/30/2025
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Net Income $ 5,700 $ 10,962 $ 13,485 $ 14,013 $ 12,825
Non-Core Expenses:
Merger-Related Expenses 15,609 971 790 -- --
Unification Expenses -- -- -- -- 543
Less: Tax Benefit (3,247) (214) (174) -- (119)
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Net Non-Core Expenses
(Non-GAAP) 12,362 757 616 -- 424
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Core Net Income (Non-GAAP) $ 18,062 $ 11,719 $ 14,101 $ 14,013 $ 13,249
Net Non-Interest Expense $ 51,016 $ 27,393 $ 26,793 $ 25,730 $ 25,357
Non-Core Expenses:
Merger-Related Expenses 15,609 971 790 -- --
Unification Expenses -- -- -- -- 543
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Core Net Non-Interest
Expense (Non-GAAP) $ 35,407 $ 26,422 $ 26,003 $ 25,730 $ 24,814
Core Earnings Per Share
(Non-GAAP) $ 0.97 $ 0.71 $ 0.85 $ 0.85 $ 0.80
Core Return on Average
Assets (Non-GAAP) 1.33 % 1.06 % 1.29 % 1.24 % 1.20 %
Core Efficiency Ratio
(Non-GAAP) 58.83 % 59.83 % 58.13 % 58.94 % 58.28 %
* Quarterly ratios have been annualized.
Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)
Quarter Ended: September 30, 2026 September 30, 2025
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
---------------------- ---------- ------- ---------------------- ---------- -------
Interest-Earning
Deposits at Banks $ 211,383 $ 1,962 3.68 % $ 200,251 $ 2,245 4.45 %
Investment
Securities:
Fully Taxable 695,702 6,059 3.46 509,599 4,066 3.17
Exempt from Federal
Taxes 74,927 1,158 6.13 64,481 455 2.80
Loans (1) 4,107,394 58,896 5.69 3,424,784 46,832 5.43
---------------------- ---------- ---------------------- ----------
Total Earning Assets
(1) 5,089,406 68,075 5.31 4,199,115 53,598 5.06
---------------------- ---------- ---------------------- ----------
Allowance for Credit
Losses (41,602) (34,143)
Cash and Due From
Banks 40,281 33,984
Other Assets 319,050 200,859
---------------------- ----------------------
Total Assets $ 5,407,135 $ 4,399,815
====================== ======================
Deposits:
Interest-Bearing
Checking Accounts $ 1,030,495 2,567 0.99 $ 848,622 2,160 1.01
Savings Deposits 1,819,689 9,472 2.07 1,492,204 9,534 2.53
Time Deposits over
$250,000 235,470 1,612 2.72 177,826 1,695 3.78
Other Time Deposits 377,104 3,089 3.25 644,598 5,859 3.61
---------------------- ---------- ---------------------- ----------
Total
Interest-Bearing
Deposits 3,462,758 16,740 1.92 3,163,250 19,248 2.41
Borrowings 234,103 2,230 3.78 5,583 -- --
Junior Subordinated
Obligations Issued
to Unconsolidated
Subsidiary Trusts 28,248 326 4.58 20,000 173 3.43
Finance Leases 4,874 46 3.74 4,956 46 3.68
---------------------- ---------- ---------------------- ----------
Total
Interest-Bearing
Liabilities 3,729,983 19,342 2.06 3,193,789 19,467 2.42
---------------------- ---------- ---------------------- ----------
Noninterest-Bearing
Deposits 1,103,788 750,471
Other Liabilities 42,503 42,497
---------------------- ----------------------
Total Liabilities 4,876,274 3,986,757
Stockholders' Equity 530,861 413,058
---------------------- ----------------------
Total Liabilities
and Stockholders'
Equity $ 5,407,135 $ 4,399,815
====================== ---------- ====================== ----------
Net Interest Income $ 48,733 $ 34,131
========== ==========
Net Interest Spread 3.25 % 2.64 %
Net Interest Margin 3.80 % 3.22 %
(1) Includes Nonaccrual Loans.
Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)
Quarter Ended: September 30, 2026 June 30, 2026
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
---------------------- ---------- ------- ---------------------- ---------- -------
Interest-Earning
Deposits at Banks $ 211,383 $ 1,962 3.68 % $ 129,628 $ 1,200 3.71 %
Investment
Securities:
Fully Taxable 695,702 6,059 3.46 548,084 4,717 3.45
Exempt from Federal
Taxes 74,927 1,158 6.13 66,687 519 3.12
Loans (1) 4,107,394 58,896 5.69 3,466,810 47,181 5.46
---------------------- ---------- ---------------------- ----------
Total Earning Assets
(1) 5,089,406 68,075 5.31 4,211,209 53,617 5.11
---------------------- ---------- ---------------------- ----------
Allowance for Credit
Losses (41,602) (34,305)
Cash and Due From
Banks 40,281 29,874
Other Assets 319,050 219,043
---------------------- ----------------------
Total Assets $ 5,407,135 $ 4,425,821
====================== ======================
Deposits:
Interest-Bearing
Checking Accounts $ 1,030,495 2,567 0.99 $ 827,385 2,162 1.05
Savings Deposits 1,819,689 9,472 2.07 1,596,055 8,933 2.24
Time Deposits over
$250,000 235,470 1,612 2.72 139,256 1,052 3.03
Other Time Deposits 377,104 3,089 3.25 510,936 4,304 3.38
---------------------- ---------- ---------------------- ----------
Total
Interest-Bearing
Deposits 3,462,758 16,740 1.92 3,073,632 16,451 2.15
Borrowings 234,103 2,230 3.78 124,411 1,019 3.29
Junior Subordinated
Obligations Issued
to Unconsolidated
Subsidiary Trusts 28,248 326 4.58 20,000 171 3.43
Finance Leases 4,874 46 3.74 4,896 45 3.69
---------------------- ---------- ---------------------- ----------
Total
Interest-Bearing
Liabilities 3,729,983 19,342 2.06 3,222,939 17,686 2.20
---------------------- ---------- ---------------------- ----------
Noninterest-Bearing
Deposits 1,103,788 715,329
Other Liabilities 42,503 41,666
---------------------- ----------------------
Total Liabilities 4,876,274 3,979,934
Stockholders' Equity 530,861 445,887
---------------------- ----------------------
Total Liabilities
and Stockholders'
Equity $ 5,407,135 $ 4,425,821
====================== ---------- ====================== ----------
Net Interest Income $ 48,733 $ 35,931
========== ==========
Net Interest Spread 3.25 % 2.91 %
Net Interest Margin 3.80 % 3.42 %
(1) Includes Nonaccrual Loans.
Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)
Year to Date Period
Ended: September 30, 2026 September 30, 2025
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
---------------------- ---------- ------- ---------------------- ---------- -------
Interest-Earning
Deposits at Banks $ 174,857 $ 4,837 3.70 % $ 164,114 $ 5,488 4.47 %
Investment
Securities:
Fully Taxable 593,943 15,305 3.45 502,075 11,464 3.05
Exempt from Federal
Taxes 68,091 2,141 4.20 80,628 1,603 2.66
Loans (1) 3,674,013 153,203 5.58 3,415,401 136,982 5.36
---------------------- ---------- ---------------------- ----------
Total Earning Assets
(1) 4,510,904 175,486 5.20 4,162,218 155,537 5.00
---------------------- ---------- ---------------------- ----------
Allowance for Credit
Losses (36,786) (34,359)
Cash and Due From
Banks 33,506 31,598
Other Assets 251,971 193,174
---------------------- ----------------------
Total Assets $ 4,759,595 $ 4,352,631
====================== ======================
Deposits:
Interest-Bearing
Checking Accounts $ 906,273 6,829 1.01 $ 844,774 5,904 0.93
Savings Deposits 1,663,027 27,121 2.18 1,500,944 28,384 2.53
Time Deposits over
$250,000 174,373 3,860 2.96 181,291 5,232 3.86
Other Time Deposits 507,870 12,829 3.38 625,557 17,181 3.67
---------------------- ---------- ---------------------- ----------
Total
Interest-Bearing
Deposits 3,251,543 50,639 2.08 3,152,566 56,701 2.40
Borrowings 121,768 3,249 3.57 12,455 167 1.79
Junior Subordinated
Obligations Issued
to Unconsolidated
Subsidiary Trusts 22,780 666 3.91 20,000 513 3.43
Finance Leases 4,895 138 3.77 4,977 135 3.63
---------------------- ---------- ---------------------- ----------
Total
Interest-Bearing
Liabilities 3,400,986 54,692 2.15 3,189,998 57,516 2.41
---------------------- ---------- ---------------------- ----------
Noninterest-Bearing
Deposits 845,547 710,404
Other Liabilities 40,859 44,203
---------------------- ----------------------
Total Liabilities 4,287,392 3,944,605
Stockholders' Equity 472,203 408,026
---------------------- ----------------------
Total Liabilities
and Stockholders'
Equity $ 4,759,595 $ 4,352,631
====================== ======================
Net Interest Income $ 120,794 $ 98,021
========== ==========
Net Interest Spread 3.05 % 2.59 %
Net Interest Margin 3.58 % 3.15 %
(1) Includes
Nonaccrual Loans.
Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
Quarter Ended: 9/30/2026 12/31/2025
----------------------------------------------- ------------ -------------
Loan Portfolio
Commercial Loans $ 256,574 $ 165,729
Commercial Real Estate Loans 1,068,892 818,259
------------ -------------
Subtotal Commercial Loan Portfolio 1,325,466 983,988
Consumer Loans 1,100,061 1,076,007
Residential Real Estate Loans 1,719,060 1,393,098
------------ -------------
Total Loans $ 4,144,587 $ 3,453,093
============ =============
Allowance for Credit Losses
Allowance for Credit Losses, Beginning of
Quarter $ 36,183 $ 34,176
Acquisition of Adirondack Bank 5,678 --
Loans Charged-off (3,093) (1,477)
Less Recoveries of Loans Previously Charged-off 896 777
------------ -------------
Net Loans Charged-off (2,197) (700)
Provision for Credit Losses 1,467 846
------------ -------------
Allowance for Credit Losses, End of Quarter $ 41,131 $ 34,322
============ =============
Nonperforming Assets
Nonaccrual Loans $ 10,117 $ 6,415
Loans Past Due 90 or More Days and Accruing 2,382 2,040
Loans Restructured and in Compliance with
Modified Terms -- --
------------ -------------
Total Nonperforming Loans 12,499 8,455
Repossessed Assets 231 280
Other Real Estate Owned -- --
------------ -------------
Total Nonperforming Assets $ 12,730 $ 8,735
============ =============
Key Asset Quality Ratios
Net Loans Charged-off to Average Loans,
Quarter-to-date Annualized 0.21 % 0.08 %
Provision for Credit Losses to Average Loans,
Quarter-to-date Annualized 0.14 % 0.10 %
Allowance for Credit Losses to Period-End Loans 0.99 % 0.99 %
Allowance for Credit Losses to Period-End
Nonperforming Loans 329.07 % 405.94 %
Nonperforming Loans to Period-End Loans 0.30 % 0.24 %
Nonperforming Assets to Period-End Assets 0.23 % 0.20 %
Year-to-Date Period Ended: 9/30/2026 12/31/2025
----------------------------------------------- ------------ -------------
Allowance for Credit Losses
Allowance for Credit Losses, Beginning of Year $ 34,322 $ 33,598
Comments