GLENS FALLS, N.Y., April 30, 2026 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS$(R)$ -- AROW) ("Arrow" or the "Company") announced financial results for the three-month period ended March 31, 2026. Reported net income for the first quarter of 2026 was $13.5 million and fully diluted earnings per share ("EPS") was $0.82, versus net income of $14.0 million and EPS of $0.85 for the fourth quarter of 2025.
The Board of Directors of Arrow declared a quarterly cash dividend of $0.30 per share; payable May 26, 2026 to shareholders of record as of May 12, 2026.
This quarter's results include approximately $790 thousand ($0.03 per share) of non-core merger expenses related to the announced acquisition of Adirondack Bancorp, Inc. based in Utica, New York. Excluding the merger expenses, Arrow achieved record operating results of $0.85 for the first quarter of 2026. Pending regulatory approvals, the transaction is expected to close early in the third quarter of 2026 and will add approximately $950 million in assets and 19 new branch locations.
This Earnings Release and related commentary should be read in conjunction with the Company's April 30, 2026 Form 8-K and related First 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:
"As we celebrate our 175th anniversary, building on the strong year-end momentum, the Arrow team delivered exceptional financial results for the first quarter of 2026. We achieved strong net interest margin expansion as well as a return on average assets close to 1.30% on an operating basis. Credit performance was even better with non-performing loans dipping to 13 basis points. During the first quarter, we also announced the acquisition of Adirondack Bank, which is expected to close in the third quarter of 2026. We look forward to expanding our market with this high-quality, low-cost deposit franchise, adding approximately $950 million to our balance sheet. We expect the transaction to provide significant EPS accretion in 2027 and beyond. Arrow is well positioned to continue to deliver strong results for its shareholders while continuing to execute on its strategic initiatives to build a premier banking franchise for its customers and the communities it serves."
First-Quarter Highlights and Key Metrics
-- Net Income of $13.5 million (EPS of $0.82); $0.85 adjusted for
merger-related expenses ("MRE")1
-- Efficiency ratio of 59.89%; 58.13% excluding MRE1
-- Net Interest Income of $36.1 million
-- Net Interest Margin improved to 3.47% (3.48% FTE2), from 3.24% (3.25%
FTE) in the prior quarter
-- Return on Average Assets (ROA) of 1.23%; 1.29% adjusted for MRE1
-- Strong credit metrics: annualized charge-offs of 10bps and non-performing
loans of 13bps
-- Loan-to-Deposit ratio of 85.7%
-- Cost of retail deposits3 decreased by 11bps to 1.62% from the prior
quarter
Income Statement
-- Net Income: Net income for the first quarter of 2026 was $13.5 million,
decreasing from $14.0 million in the fourth quarter of 2025.
-- Compared to the prior quarter, net income decreased due to an
increase in income tax expense of $1.1 million and an increase in
non-interest expense of $1.1 million offset by an increase in net
interest income of $1.0 million and an increase in non-interest
income of $0.4 million.
-- Net Interest Income: Net interest income for the first quarter of 2026
was $36.1 million, increasing 2.8% from the fourth quarter of 2025.
-- Total interest and dividend income was $53.8 million for the first
quarter of 2026, a decrease from $54.6 million in the fourth
quarter of 2025. Interest expense for the first quarter of 2026
was $17.7 million, a decrease from $19.5 million in the fourth
quarter of 2025.
-- Net Interest Margin: Net interest margin, on an FTE basis, for the first
quarter of 2026 increased to 3.48%, compared to 3.25% for the fourth
quarter of 2025. The increase in net interest margin compared to the
fourth quarter of 2025 was primarily the result of continued yield
expansion on earning assets combined with the reduced cost of
interest-bearing liabilities.
Three Months Ended
(Dollars in Thousands)
March 31, 2026 December 31, 2025 March 31, 2025
------------------ ------------------ ------------------
Interest and
Dividend Income $ 53,794 $ 54,610 $ 50,366
Interest Expense 17,664 19,467 19,009
Net Interest
Income 36,130 35,143 31,357
Average Earning
Assets$(A)$ 4,222,574 4,302,305 4,143,939
Average
Interest-Bearing
Liabilities 3,244,709 3,280,856 3,184,196
Average Yield on
Earning
Assets(A) 5.17 % 5.04 % 4.93 %
Average Cost of
Interest-Bearing
Liabilities 2.21 2.35 2.42
Net Interest
Spread 2.96 2.69 2.51
Net Interest
Margin 3.47 3.24 3.07
Net Interest
Margin - FTE 3.48 3.25 3.08
(A) Includes
Nonaccrual
Loans.
-- Provision for Credit Losses: For the first quarter of 2026, the provision
for credit losses was $548 thousand compared to $846 thousand in the
fourth quarter of 2025, primarily driven by low net charge-offs and lower
loan growth in the first quarter of 2026.
-- Non-Interest Income: Non-interest income for the three months ended
March 31, 2026, was $8.6 million, an increase from $8.3 million in the
fourth quarter of 2025. Revenue related to wealth management was
consistent with the prior quarter, while insurance commissions and
interchange fees improved in the first quarter from the linked quarter.
The first quarter of 2026 included a positive valuation adjustment
related to an equity position.
-- Non-Interest Expense: Non-interest expense for the first quarter of 2026
was $26.9 million, an increase from $25.8 million in the fourth quarter
of 2025. The first quarter of 2026 included approximately $800 thousand
of expenses related to the announced acquisition of Adirondack Bancorp,
Inc. which is expected to close early in the third quarter of 2026.
-- Provision for Income Taxes: The provision for income taxes and effective
tax rate were $3.9 million and 22.3%, respectively for the first quarter
of 2026, and $2.7 million and 22.2%, respectively for the fourth quarter
of 2025. The effective tax rate does not reflect the anticipated
implementation of certain tax strategies that are expected to lower the
tax rate for the rest of 2026.
Balance Sheet
-- Total Assets: Total assets were $4.5 billion at March 31, 2026, an
increase of $76.2 million, or 1.7%, as compared to December 31, 2025. For
the first quarter of 2026, the overall change in the balance sheet was
primarily attributable to the seasonal surge in municipal deposits.
-- Investments: Total investments were $594.6 million as of March 31, 2026,
an increase of $21.8 million, or 3.8%, compared to December 31, 2025. The
increase from December 31, 2025 was driven primarily by $46 million of
additional investments, partially offset by paydowns and maturities.
There were no credit quality issues related to the investment portfolio.
-- Loans: Total loans were $3.4 billion as of March 31, 2026. Loans
outstanding decreased in the first quarter of 2026 by $14.1 million. Loan
growth was negatively impacted by severe winter weather, which slowed
indirect auto and residential loan originations. Volume is expected to
rebound in the second quarter. Please see the loan detail included in the
Consolidated Financial Information table on page 12.
-- Allowance for Credit Losses: The allowance for credit losses was $34.1
million as of March 31, 2026, which represented 0.99% of loans
outstanding, as compared to $34.3 million, or 0.99% of loans outstanding,
at December 31, 2025. Net charge-offs, expressed as an annualized
percentage of average loans outstanding, were 0.10% for the three-month
period ended March 31, 2026, as compared to 0.08% for the three-month
period ended December 31, 2025. Nonperforming assets were $5.1 million as
of March 31, 2026, representing 0.11% of period-end assets, a decrease
from $8.7 million, or 0.20%, at December 31, 2025. Nonperforming assets
decreased to the payoff of a $2.6 million nonperforming loan in the first
quarter.
-- Deposits: At March 31, 2026, deposit balances were $4.0 billion, an
increase of $74.5 million from December 31, 2025. The change from
December 31, 2025 was primarily attributable to the seasonality of
municipal deposits. Please refer to page 6 for further details related to
deposits.
-- Capital: Total stockholders' equity was $440.1 million at March 31, 2026,
an increase of $8.3 million, or 1.9%, from December 31, 2025. The
increase from December 31, 2025 was primarily attributable to net income
of $13.5 million offset by other comprehensive loss of $0.7 million and
dividends of $5.0 million and other stock-based activity. Arrow's
regulatory capital ratios remain strong. As of March 31, 2026, Arrow's
Common Equity Tier 1 Capital Ratio was 13.30% and Total Risk-Based
Capital Ratio was 15.04%. 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 76
consecutive quarters, securing its prominent position as an "Exceptional
Performance Bank."
------------
About Arrow: Arrow Financial Corporation is a holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. The Company is the parent of Arrow Bank, a full-service commercial bank, and Upstate Agency, LLC, a comprehensive insurance agency.
Non-GAAP Financial Measures Reconciliation: In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). The following measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission ("SEC") and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules. Certain non-GAAP financial measures include: 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 the Arrow's growth, competition, changes in law or the regulatory environment, risks relating to the announced merger with Adirondack Bancorp, Inc. and changes in general business and economic trends. Arrow undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. This earnings release should be read in conjunction with Arrow's Annual Report on Form 10-K for the year ended December 31, 2025, and other filings with the SEC.
____________________
(1) EPS, efficiency ratio and ROA excluding merger-related expenses are
non-GAAP measures. See reconciliation on 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
March 31, December 31, March 31,
2026 2025 2025
--------------- --------------- ---------------
INTEREST AND
DIVIDEND INCOME
Interest and Fees on
Loans $ 47,126 $ 47,087 $ 44,550
Interest on Deposits
at Banks 1,675 2,598 1,621
Interest and
Dividends on
Investment
Securities:
Fully Taxable 4,529 4,500 3,608
Exempt from Federal
Taxes 464 425 587
--------------- --------------- ---------------
Total Interest and
Dividend Income 53,794 54,610 50,366
--------------- --------------- ---------------
INTEREST EXPENSE
Interest-Bearing
Checking Accounts 2,100 2,117 1,803
Savings Deposits 8,716 9,722 9,483
Time Deposits over
$250,000 1,196 1,562 1,811
Other Time Deposits 5,436 5,846 5,529
Borrowings -- -- 167
Junior Subordinated
Obligations Issued
to Unconsolidated
Subsidiary Trusts 169 173 169
Interest on Financing
Leases 47 47 47
--------------- --------------- ---------------
Total Interest
Expense 17,664 19,467 19,009
--------------- --------------- ---------------
NET INTEREST INCOME 36,130 35,143 31,357
--------------- --------------- ---------------
Provision for Credit
Losses 548 846 5,019
--------------- --------------- ---------------
NET INTEREST INCOME
AFTER PROVISION FOR
CREDIT LOSSES 35,582 34,297 26,338
--------------- --------------- ---------------
NON-INTEREST INCOME
Income From Fiduciary
Activities 2,713 2,771 2,535
Fees for Other
Services to
Customers 2,727 2,854 2,600
Insurance Commissions 2,113 2,050 1,826
Net Gain (Loss) on
Securities 145 (127) 317
Net Gain on Sales of
Loans 290 246 101
Other Operating
Income 640 474 460
--------------- --------------- ---------------
Total Non-Interest
Income 8,628 8,268 7,839
--------------- --------------- ---------------
NON-INTEREST EXPENSE
Salaries and Employee
Benefits 14,922 14,309 13,555
Occupancy Expenses,
Net 2,459 1,881 2,022
Technology and
Equipment Expense 5,052 5,152 5,087
FDIC Assessments 585 563 670
Other Operating
Expense 3,847 3,899 4,711
--------------- --------------- ---------------
Total Non-Interest
Expense 26,865 25,804 26,045
--------------- --------------- ---------------
INCOME BEFORE
PROVISION FOR INCOME
TAXES 17,345 16,761 8,132
Provision for Income
Taxes 3,860 2,748 1,822
--------------- --------------- ---------------
NET INCOME $ 13,485 $ 14,013 $ 6,310
=============== =============== ===============
Average Shares
Outstanding:
Basic 16,382 16,390 16,665
Diluted 16,403 16,413 16,673
Per Common Share:
Basic Earnings $ 0.82 $ 0.85 $ 0.38
Diluted Earnings 0.82 0.85 0.38
ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
March 31, December 31,
2026 2025
----------------- -----------------
ASSETS
Cash and Due From Banks $ 29,102 $ 29,132
Interest-Earning Deposits at Banks 256,504 185,051
Investment Securities:
Available-for-Sale at Fair Value 518,803 495,868
Held-to-Maturity (Fair Value of
$65,321 at March 31, 2026 and
$66,569 at December 31, 2025) 65,646 66,975
Equity Securities 5,742 5,597
Other Investments 4,375 4,372
Loans 3,438,966 3,453,093
Allowance for Credit Losses (34,055) (34,322)
----------------- -----------------
Net Loans 3,404,911 3,418,771
----------------- -----------------
Premises and Equipment, Net 59,561 59,433
Goodwill 23,789 23,789
Other Intangible Assets, Net 1,692 1,741
Other Assets 151,894 155,133
----------------- -----------------
Total Assets $ 4,522,019 $ 4,445,862
================= =================
LIABILITIES
Noninterest-Bearing Deposits 721,734 722,374
Interest-Bearing Checking Accounts 898,168 862,192
Savings Deposits 1,618,309 1,557,638
Time Deposits over $250,000 140,899 155,802
Other Time Deposits 634,829 641,463
----------------- -----------------
Total Deposits 4,013,939 3,939,469
----------------- -----------------
Borrowings 4,265 4,265
Junior Subordinated Obligations Issued
to Unconsolidated Subsidiary Trusts 20,000 20,000
Finance Leases 4,908 4,929
Other Liabilities 38,764 45,347
----------------- -----------------
Total Liabilities 4,081,876 4,014,010
----------------- -----------------
STOCKHOLDERS' EQUITY
Preferred Stock, $1 Par Value;
1,000,000 Shares Authorized at
March 31, 2026 and December 31, 2025
(none issued) -- --
Common Stock, $1 Par Value: 30,000,000
Shares Authorized; 22,066,559 Shares
Issued; 16,526,929 and 16,445,342
Shares Outstanding at March 31, 2026
and December 31, 2025) 22,067 22,067
Additional Paid-in Capital 414,431 414,506
Retained Earnings 110,804 102,271
Accumulated Other Comprehensive Loss (4,764) (4,037)
Treasury Stock, at Cost (5,539,630
Shares at March 31, 2026 and
5,621,217 Shares at December 31,
2025) (102,395) (102,955)
----------------- -----------------
Total Stockholders' Equity 440,143 431,852
----------------- -----------------
Total Liabilities and Stockholders'
Equity $ 4,522,019 $ 4,445,862
================= =================
Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended 3/31/2026 12/31/2025 9/30/2025 6/30/2025 3/31/2025
------------------ ------------ ------------ ------------ ------------ ------------
Net Income $ 13,485 $ 14,013 $ 12,825 $ 10,805 $ 6,310
Share and Per
Share Data:
Period End Shares
Outstanding 16,527 16,445 16,438 16,484 16,670
Basic Average
Shares
Outstanding 16,382 16,390 16,402 16,545 16,665
Diluted Average
Shares
Outstanding 16,403 16,413 16,406 16,551 16,673
Basic Earnings Per
Share $ 0.82 $ 0.85 $ 0.77 $ 0.65 $ 0.38
Diluted Earnings
Per Share 0.82 0.85 0.77 0.65 0.38
Cash Dividend Per
Share 0.30 0.29 0.29 0.28 0.28
Selected Quarterly
Average Balances:
Interest-Earning
Deposits at
Banks $ 183,252 $ 260,806 $ 200,251 $ 145,473 $ 146,023
Investment
Securities 598,817 596,994 574,080 582,380 591,841
Loans 3,440,505 3,444,505 3,424,784 3,415,140 3,406,075
Deposits 3,928,761 4,002,221 3,913,721 3,849,093 3,825,124
Other Borrowed
Funds 29,181 29,203 30,539 33,579 48,375
Stockholders'
Equity 438,846 425,042 413,058 406,529 404,394
Total Assets 4,439,833 4,499,195 4,399,815 4,332,339 4,324,917
Return on Average
Assets,
annualized 1.23 % 1.24 % 1.16 % 1.00 % 0.59 %
Return on Average
Equity,
annualized 12.46 % 13.08 % 12.32 % 10.66 % 6.33 %
Return on Average
Tangible Equity,
annualized (1) 13.23 % 13.92 % 13.13 % 11.38 % 6.76 %
Average Earning
Assets $ 4,222,574 $ 4,302,305 $ 4,199,115 $ 4,142,993 $ 4,143,939
Average Paying
Liabilities 3,244,709 3,280,856 3,193,789 3,191,906 3,184,196
Interest Income 53,794 54,610 53,598 51,573 50,366
Tax-Equivalent
Adjustment (2) 123 114 121 148 155
Interest Income,
Tax-Equivalent
(2) 53,917 54,724 53,719 51,721 50,521
Interest Expense 17,664 19,467 19,467 19,040 19,009
Net Interest
Income 36,130 35,143 34,131 32,533 31,357
Net Interest
Income,
Tax-Equivalent
(2) 36,253 35,258 34,252 32,681 31,512
Net Interest
Margin,
annualized 3.47 % 3.24 % 3.22 % 3.15 % 3.07 %
Net Interest
Margin,
Tax-Equivalent,
annualized (2) 3.48 % 3.25 % 3.24 % 3.16 % 3.08 %
Efficiency Ratio
Calculation: (3)
------------------
Non-Interest
Expense $ 26,865 $ 25,804 $ 25,433 $ 25,652 $ 26,045
Less: Intangible
Asset
Amortization 72 74 76 80 81
------------ ------------ ------------ ------------ ------------
Net Non-Interest
Expense $ 26,793 $ 25,730 $ 25,357 $ 25,572 $ 25,964
------------ ------------ ------------ ------------ ------------
Net Interest
Income,
Tax-Equivalent $ 36,253 $ 35,257 $ 34,252 $ 32,681 $ 31,512
Non-Interest
Income 8,628 8,268 8,716 7,609 7,839
Less: Net Gain
(Loss) on
Securities 145 (127) 392 (40) 317
------------ ------------ ------------ ------------ ------------
Net Gross Income $ 44,736 $ 43,652 $ 42,576 $ 40,330 $ 39,034
------------ ------------ ------------ ------------ ------------
Efficiency Ratio 59.89 % 58.94 % 59.56 % 63.41 % 66.52 %
Period-End Capital
Information:
------------------
Total
Stockholders'
Equity (i.e. Book
Value) $ 440,143 $ 431,852 $ 417,687 $ 408,506 $ 404,409
Book Value per
Share 26.63 26.26 25.41 24.78 24.26
Goodwill and Other
Intangible
Assets, net 25,481 25,530 25,594 25,659 25,743
Tangible Book
Value per Share
(1) 25.09 24.71 23.85 23.23 22.72
Capital Ratios:(4)
Tier 1 Leverage
Ratio 10.02 % 9.68 % 9.66 % 9.64 % 9.61 %
Common Equity Tier
1 Capital Ratio 13.30 % 13.01 % 13.07 % 12.73 % 12.59 %
Tier 1 Risk-Based
Capital Ratio 13.93 % 13.64 % 13.71 % 13.37 % 13.23 %
Total Risk-Based
Capital Ratio 15.04 % 14.76 % 14.86 % 14.51 % 14.48 %
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
1. with information that is useful in understanding its financial performance.
3/31/2026 12/31/2025 9/30/2025 6/30/2025 3/31/2025
----------- ----------- ----------- ----------- -----------
Total Stockholders' Equity
(GAAP) $ 440,143 $ 431,852 $ 417,687 $ 408,506 $ 404,409
Less: Goodwill and Other
Intangible assets, net 25,481 25,530 25,594 25,659 25,743
----------- ----------- ----------- ----------- -----------
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