AROW Arrow Financial Corporation

NASDAQ
$39.25

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

Thursday, July 23, 2026 · 8:00 AM ET PR Newswire

GLENS FALLS, N.Y., July 23, 2026 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) ("Arrow" or the "Company") announced financial results for the three-month period ended June 30, 2026. Reported net income for the second quarter of 2026 was $11.0 million and fully diluted earnings per share ("EPS") was $0.66, versus net income of $13.5 million and EPS of $0.82 for the first quarter of 2026.

Arrow Financial Corporation

The Board of Directors of Arrow declared a quarterly cash dividend of $0.30 per share; payable August 25, 2026 to shareholders of record as of August 11, 2026.

This quarter's results include approximately $1.0 million ($0.05 per share) of merger-related expenses related to the July 1, 2026 acquisition of Adirondack Bancorp, Inc. and Adirondack Bank based in Utica, New York. Excluding the merger-related expenses, Arrow achieved EPS of $0.71 for the second quarter of 2026. The transaction added approximately $1.0 billion in assets and 19 new branch locations.

Second-quarter results were impacted by a specific reserve of $1.6 million ($0.08 per share) for an isolated commercial real estate credit due to a sudden personal and corporate bankruptcy declared in June 2026 (for more details on this credit, please refer to our Second Quarter Investor Presentation), as well as an elevated loan provision due to strong loan growth.

This earnings release and related commentary should be read in conjunction with the Company's July 23, 2026 Form 8-K and related Second Quarter 2026 Investor Presentation, which can also be found on Arrow's website: arrowfinancial.com/documents/investor-presentations. 

Arrow President and CEO David S. DeMarco: 

"The Arrow team delivered another quarter of strong operating results. While our results were negatively impacted by recognizing a reserve on one isolated commercial credit, the credit metrics of the loan portfolio remain strong with low charge-offs and low non-performing loan balances. The overall health and trajectory of the business continues to perform well. I am particularly excited about the return to significant loan growth and the closing of our acquisition of Adirondack Bank, which will provide us with increased growth opportunities. We look forward to expanding our market with this high-quality, low-cost deposit franchise, adding approximately $1.0 billion to our balance sheet. We expect the transaction to provide significant EPS accretion in 2027 and beyond. Arrow remains well-positioned to deliver shareholder value and execute on its strategic initiatives to build a premier banking franchise for its customers and the communities it serves."

Second-Quarter Highlights and Key Metrics

  • Net Income of $11.0 million (EPS of $0.66; or $0.71 adjusted for merger-related expenses "MRE"1)
  • Insurance revenue 1H26 versus 1H25 up 12.6%
  • Wealth management revenue 1H26 versus 1H25 up 9.9%
  • Loan growth of $57.6 million (6.7% annualized)
  • Annualized charge-offs of 8bps and non-performing loans of 24bps
  • Moved $3.8 million loan to non-performing (11bps) due to bankruptcy and recorded $1.6 million specific reserve ($0.08 per share)
  • Efficiency ratio of 62.02%; 59.83% excluding MRE1
  • Net Interest Income of $35.9 million
  • Net Interest Margin of 3.42% (3.43% fully taxable equivalent ("FTE")2), versus 3.47% (3.48% FTE2) in the prior quarter
  • Return on Average Assets (ROA) of 0.99%; 1.06% adjusted for MRE1
  • Cost of retail deposits3 decreased to 1.61%

Income Statement

  • Net Income: Net income for the second quarter of 2026 was $11.0 million, decreasing from $13.5 million in the first quarter of 2026.
    • Compared to the prior quarter, net income decreased primarily due to an increase in the provision for credit losses of $2.3 million, including $1.6 million related to a specific reserve for a commercial loan where the borrower and guarantors entered into bankruptcy during the quarter. Net income was also impacted by a decrease in non-interest income of $0.4 million, an increase in MRE of $0.2 million and lower net interest income of $0.2 million. The decreases were partially offset by lower income tax expenses of $0.9 million.

  • Net Interest Income: Net interest income for the second quarter of 2026 was $35.9 million, decreasing 0.6% from the first quarter of 2026.
    • Total interest and dividend income was $53.6 million for the second quarter of 2026, a decrease from $53.8 million in the first quarter of 2026. The decrease was attributable to lower average earning assets throughout the quarter as well as the increase in non-performing loans. Interest expense for the second quarter of 2026 was $17.7 million, consistent with the first quarter of 2026 as lower deposit costs were offset by timing and a change in the mix of deposit balances toward higher cost deposits.

  • Net Interest Margin: Net interest margin, on an FTE basis, for the second quarter of 2026 decreased to 3.43%, compared to 3.48% for the first quarter of 2026. The decrease in net interest margin compared to the first quarter of 2026 was primarily the result of a seasonal change in the deposit mix toward higher costing interest-bearing liabilities. Net interest margin was also impacted by the reversal of interest income related to the aforementioned commercial loan migrating to non-performing.

Three Months Ended


(Dollars in Thousands)


June 30, 2026


December 31, 2025


June 30, 2025

Interest and Dividend Income

$           53,617


$           54,610


$           51,573

Interest Expense

17,686


19,467


19,040

Net Interest Income

35,931


35,143


32,533

Average Earning Assets(A)

4,211,209


4,302,305


4,142,993

Average Interest-Bearing Liabilities

3,222,939


3,280,856


3,191,906







Average Yield on Earning Assets(A)

5.11 %


5.04 %


4.99 %

Average Cost of Interest-Bearing Liabilities

2.20


2.35


2.39

Net Interest Spread

2.91


2.69


2.60

Net Interest Margin

3.42


3.24


3.15

Net Interest Margin - FTE

3.43


3.25


3.16







(A) Includes Nonaccrual Loans.






  • Provision for Credit Losses: For the second quarter of 2026, the provision for credit losses was $2.8 million compared to $0.5 million in the first quarter of 2026, primarily driven by a $1.6 million specific reserve related to the non-performing commercial loan as well as an increase to the provision due to loan growth in the second quarter of 2026.

  • Non-Interest Income: Non-interest income for the three months ended June 30, 2026, was $8.3 million, a decrease from $8.6 million in the first quarter of 2026. The decrease was the result of the season fluctuation of insurance premiums of $0.1 million as well as a $0.3 million charge related to the impairment of a property held for future use. This was partially offset by an increase in interchange fees from the linked quarter and a positive equity position valuation adjustment of approximately $0.2 million

  • Non-Interest Expense: Non-interest expense for the second quarter of 2026 was $27.5 million, an increase from $26.9 million in the first quarter of 2026. The second quarter of 2026 included approximately $1.0 million of MRE versus $0.8 million in the first quarter of 2026.

  • Provision for Income Taxes: The provision for income taxes and effective tax rate were $2.9 million and 21.1%, respectively for the second quarter of 2026, and $3.9 million and 22.3%, respectively for the first quarter of 2026. The lower tax expense was driven by lower pre-tax income and a lower effective tax rate. The effective tax rate for the second quarter of 2026 reflects the impact of tax credits recognized from energy production tax credit purchases made in June 2026 offset by nondeductible expenses related to the acquisition of Adirondack Bancorp, Inc. and Adirondack Bank.

Balance Sheet

  • Total Assets: Total assets were $4.5 billion at June 30, 2026, a decrease of $39.7 million, or 0.9%, as compared to March 31, 2026. For the second quarter of 2026, the overall change in asset was driven by a decline in cash balances attributable to a net decrease in deposits. 

  • Investments: Total investments were $587.9 million as of June 30, 2026, a decrease of $6.6 million, or 1.1%, compared to March 31, 2026. The decrease from March 31, 2026 was driven primarily by paydowns and maturities. There were no material credit quality issues related to the investment portfolio. 

  • Loans: Total loans were $3.5 billion as of June 30, 2026. Loans outstanding increased in the second quarter of 2026 by $57.6 million, driven by growth in commercial loans. Please see the loan detail included in the Consolidated Financial Information table on page 14.

  • Allowance for Credit Losses: The allowance for credit losses was $36.2 million as of June 30, 2026, which represented 1.03% of loans outstanding, as compared to $34.1 million, or 0.99% of loans outstanding, at March 31, 2026. The increase in the allowance was the result of a $1.6 million specific reserve related to the previously referenced non-performing commercial loan as well as an increase to the allowance for growth in the loan portfolio, partially offset by charge-offs. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.08% for the three-month period ended June 30, 2026, as compared to 0.10% for the three-month period ended March 31, 2026. Nonperforming assets were $8.7 million as of June 30, 2026, representing 0.19% of period-end assets, an increase from $4.9 million, or 0.11%, at March 31, 2026. Nonperforming assets increased due to the $3.8 million non-performing commercial loan previously referenced.

  • Deposits: At June 30, 2026, deposit balances were $3.7 billion, a decrease of $358.7 million from March 31, 2026. The change from March 31, 2026 was primarily attributable to $300 million of brokered CDs, being replaced by lower costing FHLB borrowings. In addition, the seasonality of municipal deposits contributed to decreased deposits in the quarter. Please refer to page 7 for further details related to deposits.

  • Capital: Total stockholders' equity was $446.3 million at June 30, 2026, an increase of $6.2 million, or 1.4%, from March 31, 2026. The increase from March 31, 2026 was primarily attributable to net income of $11.0 million and other stock-based activity of $0.8 million offset by other comprehensive loss of $0.6 million and dividends of $5.0 million. Arrow's regulatory capital ratios remain strong. As of June 30, 2026, Arrow's Common Equity Tier 1 Capital Ratio was 13.21% and Total Risk-Based Capital Ratio was 14.98%. The capital ratios of Arrow and its subsidiary bank continued to exceed the "well capitalized" regulatory standards. Regulatory capital ratios are preliminary, subject to finalization as part of the current quarter Call Report.

Additional Commentary

  • BauerFinancial Ratings: Arrow Bank National Association ("Arrow Bank") received a 5-Star Superior rating from BauerFinancial, Inc., the nation's premier bank rating firm. Arrow Bank has earned this designation for 77 consecutive quarters, securing its prominent position as an "Exceptional Performance Bank."

About Arrow:  Arrow Financial Corporation is a holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. The Company is the parent of Arrow Bank, a full-service commercial bank, and Upstate Agency, LLC, a comprehensive insurance agency.

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

Safe Harbor Statement:  The information contained in this earnings release may contain statements that are not historical in nature but rather are based on management's beliefs, assumptions, expectations, estimates and projections about the future. These statements can sometimes be identified by Arrow's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." These statements may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, involving a degree of uncertainty and attendant risk. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast, explicitly or by implication because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, tariffs, cybersecurity risks, changes in FDIC assessments, bank failures, geopolitical events, difficulties in managing Arrow's growth, competition, changes in law or the regulatory environment, risks relating to the integration of Adirondack Bancorp, Inc. and Adirondack Bank, and changes in general business and economic trends. Arrow undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. This earnings release should be read in conjunction with Arrow's Annual Report on Form 10-K for the year ended December 31, 2025, and other filings with the SEC.









1 EPS, efficiency ratio and ROA excluding merger-related expenses are non-GAAP measures. See reconciliation in Note 5 to the Selected Quarterly Information

2 FTE Net interest margin is a non-GAAP measure. See reconciliation on Note 2 to the Selected Quarterly Information

3 Retail deposits exclude wholesale funding sources

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts - Unaudited)




Three Months Ended June 30,


Six Months Ended June 30,



2026


2025


2026


2025

INTEREST AND DIVIDEND INCOME









Interest and Fees on Loans


$       47,181


$       45,600


$      94,307


$      90,150

Interest on Deposits at Banks


1,200


1,622


2,875


3,243

Interest and Dividends on Investment Securities:









Fully Taxable


4,717


3,790


9,246


7,398

Exempt from Federal Taxes


519


561


983


1,148

Total Interest and Dividend Income


53,617


51,573


107,411


101,939

INTEREST EXPENSE









Interest-Bearing Checking Accounts


2,162


1,941


4,262


3,744

Savings Deposits


8,933


9,367


17,649


18,850

Time Deposits over $250,000


1,052


1,726


2,248


3,537

Other Time Deposits


4,304


5,793


9,740


11,322

Borrowings


1,019


—


1,019


167

Junior Subordinated Obligations Issued to

  Unconsolidated Subsidiary Trusts


171


171


340


340

Interest on Financing Leases


45


42


92


89

Total Interest Expense


17,686


19,040


35,350


38,049

NET INTEREST INCOME


35,931


32,533


72,061


63,890

Provision for Credit Losses


2,827


594


3,375


5,613

NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES


33,104


31,939


68,686


58,277

NON-INTEREST INCOME









Income From Fiduciary Activities


2,706


2,398


5,419


4,933

Fees for Other Services to Customers


2,969


2,787


5,696


5,387

Insurance Commissions


1,974


1,804


4,087


3,630

Net Gain (Loss) on Securities


155


(40)


300


277

Net Gain on Sales of Loans


154


213


444


314

Other Operating Income


298


447


938


907

Total Non-Interest Income


8,256


7,609


16,884


15,448

NON-INTEREST EXPENSE









Salaries and Employee Benefits


15,097


14,086


30,019


27,641

Occupancy Expenses, Net


2,101


1,952


4,560


3,974

Technology and Equipment Expense


4,757


5,589


9,809


10,676

FDIC Assessments


441


649


1,026


1,319

Other Operating Expense


5,068


3,376


8,915


8,087

Total Non-Interest Expense


27,464


25,652


54,329


51,697

INCOME BEFORE PROVISION FOR INCOME TAXES


13,896


13,896


31,241


22,028

Provision for Income Taxes


2,934


3,091


6,794


4,913

NET INCOME


$       10,962


$       10,805


$      24,447


$      17,115

Average Shares Outstanding:









Basic


16,428


16,545


16,408


16,611

Diluted


16,467


16,551


16,438


16,618

Per Common Share:









Basic Earnings


$           0.66


$           0.65


$          1.48


$          1.03

Diluted Earnings


0.66


0.65


1.48


1.03

 

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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



June 30, 2026


December 31, 2025

ASSETS




Cash and Due From Banks

$              30,881


$              29,132

Interest-Earning Deposits at Banks

155,907


185,051

Investment Securities:




Available-for-Sale at Fair Value

498,202


495,868

Held-to-Maturity (Fair Value of $65,270 at June 30, 2026 and
$66,569 at December 31, 2025)

65,490


66,975

Equity Securities

5,897


5,597

Other Investments

18,351


4,372

Loans

3,496,541


3,453,093

Allowance for Credit Losses

(36,183)


(34,322)

Net Loans

3,460,358


3,418,771

Premises and Equipment, Net

62,530


59,433

Goodwill

23,789


23,789

Other Intangible Assets, Net

1,612


1,741

Other Assets

159,342


155,133

Total Assets

$         4,482,359


$         4,445,862

LIABILITIES




Noninterest-Bearing Deposits

736,087


722,374

Interest-Bearing Checking Accounts

871,965


862,192

Savings Deposits

1,590,680


1,557,638

Time Deposits over $250,000

132,350


155,802

Other Time Deposits

324,123


641,463

Total Deposits

3,655,205


3,939,469

Borrowings

310,190


4,265

Junior Subordinated Obligations Issued to Unconsolidated

  Subsidiary Trusts

20,000


20,000

Finance Leases

4,887


4,929

Other Liabilities

45,771


45,347

Total Liabilities

4,036,053


4,014,010

STOCKHOLDERS' EQUITY




Preferred Stock, $1 Par Value; 1,000,000 Shares Authorized
at June 30, 2026 and December 31, 2025 (none issued)

—


—

Common Stock, $1 Par Value: 30,000,000 Shares Authorized;
22,066,559 Shares Issued; 16,545,170 and 16,445,342
Shares Outstanding at June 30, 2026 and December 31,
2025)

22,067


22,067

Additional Paid-in Capital

415,357


414,506

Retained Earnings

116,806


102,271

Accumulated Other Comprehensive Loss

(5,390)


(4,037)

Treasury Stock, at Cost (5,521,389 Shares at June 30, 2026
and 5,621,217 Shares at December 31, 2025)

(102,534)


(102,955)

Total Stockholders' Equity

446,306


431,852

Total Liabilities and Stockholders' Equity

$         4,482,359


$         4,445,862

 

Arrow Financial Corporation

Selected Quarterly Information

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


Quarter Ended

6/30/2026


3/31/2026


12/31/2025


9/30/2025


6/30/2025

Net Income

$      10,962


$      13,485


$      14,013


$      12,825


$      10,805





















Share and Per Share Data:










Period End Shares Outstanding

16,545


16,527


16,445


16,438


16,484

Basic Average Shares Outstanding

16,428


16,382


16,390


16,402


16,545

Diluted Average Shares Outstanding

16,467


16,403


16,413


16,406


16,551

Basic Earnings Per Share

$          0.66


$          0.82


$          0.85


$          0.77


$          0.65

Diluted Earnings Per Share

0.66


0.82


0.85


0.77


0.65

Cash Dividend Per Share

0.30


0.30


0.29


0.29


0.28











Selected Quarterly Average Balances:










  Interest-Earning Deposits at Banks

$    129,628


$    183,252


$    260,806


$    200,251


$    145,473

  Investment Securities

614,771


598,817


596,994


574,080


582,380

  Loans

3,466,810


3,440,505


3,444,505


3,424,784


3,415,140

  Deposits

3,788,961


3,928,761


4,002,221


3,913,721


3,849,093

  Other Borrowed Funds

149,307


29,181


29,203


30,539


33,579

  Stockholders' Equity

445,887


438,846


425,042


413,058


406,529

  Total Assets

4,425,821


4,439,833


4,499,195


4,399,815


4,332,339

Return on Average Assets, annualized

0.99 %


1.23 %


1.24 %


1.16 %


1.00 %

Return on Average Equity, annualized

9.86 %


12.46 %


13.08 %


12.32 %


10.66 %

Return on Average Tangible Equity, annualized 1

10.46 %


13.23 %


13.92 %


13.13 %


11.38 %

Average Earning Assets

$ 4,211,209


$ 4,222,574


$ 4,302,305


$ 4,199,115


$ 4,142,993

Average Paying Liabilities

3,222,939


3,244,709


3,280,856


3,193,789


3,191,906

Interest Income

53,617


53,794


54,610


53,598


51,573

Tax-Equivalent Adjustment 2

133


123


114


121


148

Interest Income, Tax-Equivalent 2

53,750


53,917


54,724


53,719


51,721

Interest Expense

17,686


17,664


19,467


19,467


19,040

Net Interest Income

35,931


36,130


35,143


34,131


32,533

Net Interest Income, Tax-Equivalent 2

36,064


36,253


35,258


34,252


32,681

Net Interest Margin, annualized

3.42 %


3.47 %


3.24 %


3.22 %


3.15 %

Net Interest Margin, Tax-Equivalent, annualized 2

3.43 %


3.48 %


3.25 %


3.24 %


3.16 %











Efficiency Ratio Calculation: 3










Non-Interest Expense

$      27,464


$      26,865


$      25,804


$      25,433


$      25,652

Less: Intangible Asset Amortization

71


72


74


76


80

Net Non-Interest Expense

$      27,393


$      26,793


$      25,730


$      25,357


$      25,572

Net Interest Income, Tax-Equivalent

$      36,064


$      36,253


$      35,257


$      34,252


$      32,681

Non-Interest Income

8,256


8,628


8,268


8,716


7,609

Less: Net Gain (Loss) on Securities

155


145


(127)


392


(40)

Net Gross Income

$      44,165


$      44,736


$      43,652


$      42,576


$      40,330

Efficiency Ratio

62.02 %


59.89 %


58.94 %


59.56 %


63.41 %











Period-End Capital Information:










Total Stockholders' Equity (i.e. Book Value)

$    446,306


$    440,143


$    431,852


$    417,687


$    408,506

Book Value per Share 

26.98


26.63


26.26


25.41


24.78

Goodwill and Other Intangible Assets, net

25,401


25,481


25,530


25,594


25,659

Tangible Book Value per Share 1

25.44


25.09


24.71


23.85


23.23











Capital Ratios:4










Tier 1 Leverage Ratio

10.19 %


10.02 %


9.68 %


9.66 %


9.64 %

Common Equity Tier 1 Capital Ratio 

13.21 %


13.30 %


13.01 %


13.07 %


12.73 %

Tier 1 Risk-Based Capital Ratio

13.83 %


13.93 %


13.64 %


13.71 %


13.37 %

Total Risk-Based Capital Ratio

14.98 %


15.04 %


14.76 %


14.86 %


14.51 %

 


Arrow Financial Corporation



Selected Quarterly Information



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
















Footnotes:
























1.

Non-GAAP Financial Measure Reconciliation: Tangible Book Value, Tangible Equity, and Return on Tangible Equity exclude
goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures, which Arrow believes provide
investors with information that is useful in understanding its financial performance.





6/30/2026


3/31/2026


12/31/2025


9/30/2025


6/30/2025




Total Stockholders' Equity (GAAP)

$     446,306


$    440,143


$    431,852


$    417,687


$    408,506




Less:  Goodwill and Other Intangible assets, net

25,401


25,481


25,530


25,594


25,659




Tangible Equity (Non-GAAP)

$     420,905


$    414,662


$    406,322


$    392,093


$    382,847

















Period End Shares Outstanding

16,545


16,527


16,445


16,438


16,484




Tangible Book Value per Share (Non-GAAP)

$         25.44


$        25.09


$        24.71


$        23.85


$        23.23




Net Income

10,962


13,485


14,013


12,825


10,805




Return on Tangible Equity (Net Income/Tangible
Equity - Annualized)

10.46 %


13.23 %


13.92 %


13.13 %


11.38 %
















2.

Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of annualized tax-equivalent net interest income to
average earning assets.  This is also a non-GAAP financial measure, which Arrow believes provides investors with information that
is useful in understanding its financial performance.





6/30/2026


3/31/2026


12/31/2025


9/30/2025


6/30/2025




Interest Income (GAAP)

$       53,617


$      53,794


$      54,610


$      53,598


$      51,573




Add:  Tax-Equivalent adjustment (Non-GAAP)

133


123


114


121


148




Interest Income - Tax Equivalent (Non-GAAP)

$       53,750


$      53,917


$      54,724


$      53,719


$      51,721




Net Interest Income (GAAP)

$       35,931


$      36,130


$      35,143


$      34,131


$      32,533




Add:  Tax-Equivalent adjustment  (Non-GAAP)

133


123


114


121


148




Net Interest Income - Tax Equivalent (Non-GAAP)

$       36,064


$      36,253


$      35,257


$      34,252


$      32,681




Average Earning Assets

$  4,211,209


$ 4,222,574


$ 4,302,305


$ 4,199,115


$ 4,142,993




Net Interest Margin (Non-GAAP)*

3.43 %


3.48 %


3.25 %


3.24 %


3.16 %
















3.

Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a
measure of expense control.  Arrow believes the efficiency ratio provides investors with information that is useful in understanding
its financial performance.  Arrow defines efficiency ratio as the ratio of non-interest expense to net gross income (which equals tax-
equivalent net interest income plus non-interest income, as adjusted).





























4.

For the current quarter, all of the regulatory capital ratios as well as the Total Risk-Weighted Assets are calculated in accordance
with bank regulatory capital rules.  The June 30, 2026 CET1 ratio listed in the tables (i.e., 13.21%) exceeds the sum of the
required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%). Regulatory capital ratios are
estimated, subject to finalization as part of the current quarter Call Report.





6/30/2026


3/31/2026


12/31/2025


9/30/2025


6/30/2025




Total Risk Weighted Assets

$  3,253,881


$ 3,180,782


$ 3,182,240


$ 3,095,225


$ 3,121,451




Common Equity Tier 1 Capital

429,971


423,139


414,050


404,426


397,432




Common Equity Tier 1 Ratio

13.21 %


13.30 %


13.01 %


13.07 %


12.73 %
















5.

Non-GAAP Financial Measure Reconciliation: Net Income and Net Non-Interest Expense adjusted for non-core expenses. Non-
core expenses include merger-related expenses, which are related to the announced acquisition of Adirondack Bancorp, Inc., and
unification expenses, which are related to the system conversion and operational merger of the Company's two banking
subsidiaries during the year ended December 31, 2025.  EPS, efficiency ratio, and ROA are presented on an adjusted basis to
reflect these exclusions. These are non-GAAP financial measures, which Arrow believes provides investors with information that is
useful in understanding its financial performance.





6/30/2026


3/31/2026


12/31/2025


9/30/2025


6/30/2025




Net Income

$       10,962


$      13,485


$      14,013


$      12,825


$      10,805




Non-Core Expenses:













Merger-Related Expenses

971


790


—


—


—




Unification Expenses

—


—


—


543


1,134




Less:  Tax Benefit

(214)


(174)


—


(119)


(249)




Net Non-Core Expenses (Non-GAAP)

757


616


—


424


885




Core Net Income (Non-GAAP)

$       11,719


$      14,101


$      14,013


$      13,249


$      11,690

















Net Non-Interest Expense

$       27,393


$      26,793


$      25,730


$      25,357


$      25,572




Non-Core Expenses:













Merger-Related Expenses

971


790


—


—


—




Unification Expenses

—


—


—


543


1,134




Core Net Non-Interest Expense (Non-GAAP)

$       26,422


$      26,003


$      25,730


$      24,814


$      24,438

















Core Earnings Per Share (Non-GAAP)

$           0.71


$          0.85


$          0.85


$          0.80


$          0.70




Core Return on Average Assets (Non-GAAP)

1.06 %


1.29 %


1.24 %


1.20 %


1.08 %




Core Efficiency Ratio (Non-GAAP)

59.83 %


58.13 %


58.94 %


58.28 %


60.60 %




* Quarterly ratios have been annualized.











 

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)


Quarter Ended:

June 30, 2026


June 30, 2025




Interest


Rate




Interest


Rate


Average


Income/


Earned/


Average


Income/


Earned/


Balance


Expense


Paid


Balance


Expense


Paid

Interest-Earning Deposits at Banks

$    129,628


$     1,200


3.71 %


$    145,473


$     1,622


4.47 %

Investment Securities:












Fully Taxable

548,084


4,717


3.45


496,614


3,790


3.06

Exempt from Federal Taxes

66,687


519


3.12


85,766


561


2.62

Loans (1)

3,466,810


47,181


5.46


3,415,140


45,600


5.36

Total Earning Assets (1)

4,211,209


53,617


5.11


4,142,993


51,573


4.99

Allowance for Credit Losses

(34,305)






(35,238)





Cash and Due From Banks

29,874






29,267





Other Assets

219,043






195,317





Total Assets

$ 4,425,821






$ 4,332,339





Deposits:












Interest-Bearing Checking Accounts

$    827,385


2,162


1.05


$    845,041


1,941


0.92

Savings Deposits

1,596,055


8,933


2.24


1,494,930


9,367


2.51

Time Deposits over $250,000

139,256


1,052


3.03


179,980


1,726


3.85

Other Time Deposits

510,936


4,304


3.38


638,376


5,793


3.64

Total Interest-Bearing Deposits

3,073,632


16,451


2.15


3,158,327


18,827


2.39

Borrowings

124,411


1,019


3.29


8,601


—


—

Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts

20,000


171


3.43


20,000


171


3.43

Finance Leases

4,896


45


3.69


4,978


42


3.38

Total Interest-Bearing Liabilities

3,222,939


17,686


2.20


3,191,906


19,040


2.39

Noninterest-Bearing Deposits

715,329






690,766





Other Liabilities

41,666






43,138





Total Liabilities

3,979,934






3,925,810





Stockholders' Equity

445,887






406,529





Total Liabilities and Stockholders' Equity

$ 4,425,821






$ 4,332,339





Net Interest Income



$   35,931






$   32,533



Net Interest Spread





2.91 %






2.60 %

Net Interest Margin





3.42 %






3.15 %


(1) Includes Nonaccrual Loans.

 

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)


Quarter Ended:

June 30, 2026


March 31, 2026




Interest


Rate




Interest


Rate


Average


Income/


Earned/


Average


Income/


Earned/


Balance


Expense


Paid


Balance


Expense


Paid

Interest-Earning Deposits at Banks

$    129,628


$     1,200


3.71 %


$    183,252


$     1,675


3.71 %

Investment Securities:












Fully Taxable

548,084


4,717


3.45


536,293


4,529


3.42

Exempt from Federal Taxes

66,687


519


3.12


62,524


464


3.01

Loans (1)

3,466,810


47,181


5.46


3,440,505


47,126


5.56

Total Earning Assets (1)

4,211,209


53,617


5.11


4,222,574


53,794


5.17

Allowance for Credit Losses

(34,305)






(34,370)





Cash and Due From Banks

29,874






30,253





Other Assets

219,043






221,376





Total Assets

$ 4,425,821






$ 4,439,833





Deposits:












Interest-Bearing Checking Accounts

$    827,385


2,162


1.05


$    859,054


2,100


0.99

Savings Deposits

1,596,055


8,933


2.24


1,570,598


8,716


2.25

Time Deposits over $250,000

139,256


1,052


3.03


147,425


1,196


3.29

Other Time Deposits

510,936


4,304


3.38


638,451


5,436


3.45

Total Interest-Bearing Deposits

3,073,632


16,451


2.15


3,215,528


17,448


2.20

Borrowings

124,411


1,019


3.29


4,265


—


—

Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts

20,000


171


3.43


20,000


169


3.43

Finance Leases

4,896


45


3.69


4,916


47


3.88

Total Interest-Bearing Liabilities

3,222,939


17,686


2.20


3,244,709


17,664


2.21

Noninterest-Bearing Deposits

715,329






713,233





Other Liabilities

41,666






43,045





Total Liabilities

3,979,934






4,000,987





Stockholders' Equity

445,887






438,846





Total Liabilities and Stockholders' Equity

$ 4,425,821






$ 4,439,833





Net Interest Income



$   35,931






$   36,130



Net Interest Spread





2.91 %






2.96 %

Net Interest Margin





3.42 %






3.47 %


(1) Includes Nonaccrual Loans.

 

Arrow Financial Corporation

Average Consolidated Balance Sheets and Net Interest Income Analysis

(Dollars in Thousands - Unaudited)


Year to Date Period Ended:

June 30, 2026


June 30, 2025




Interest


Rate




Interest


Rate


Average


Income/


Earned/


Average


Income/


Earned/


Balance


Expense


Paid


Balance


Expense


Paid

Interest-Earning Deposits at Banks

$     156,292


$     2,875


3.71 %


$          145,746


$     3,243


4.49 %

Investment Securities:












Fully Taxable

542,221


9,246


3.44


498,250


7,398


2.99

Exempt from Federal Taxes

64,617


983


3.07


88,835


1,148


2.61

Loans (1)

3,453,730


94,307


5.51


3,410,632


90,150


5.33

Total Earning Assets (1)

4,216,860


107,411


5.14


4,143,463


101,939


4.96

Allowance for Credit Losses

(34,338)






(34,469)





Cash and Due From Banks

30,062






30,385





Other Assets

220,117






189,269





Total Assets

$  4,432,701






$       4,328,648





Deposits:












Interest-Bearing Checking Accounts

$     843,132


4,262


1.02


$          842,818


3,744


0.90

Savings Deposits

1,583,396


17,649


2.25


1,505,387


18,850


2.53

Time Deposits over $250,000

143,318


2,248


3.16


183,053


3,537


3.90

Other Time Deposits

574,341


9,740


3.42


615,878


11,322


3.71

Total Interest-Bearing Deposits

3,144,187


33,899


2.17


3,147,136


37,453


2.40

 Borrowings

64,671


1,019


3.18


15,949


167


2.11

Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts

20,000


340


3.43


20,000


340


3.43

Finance Leases

4,905


92


3.78


4,987


89


3.60

Total Interest-Bearing Liabilities

3,233,763


35,350


2.20


3,188,072


38,049


2.41

Noninterest-Bearing Deposits

714,287






690,039





Other Liabilities

42,264






45,069





Total Liabilities

3,990,314






3,923,180





Stockholders' Equity

442,387






405,468





Total Liabilities and Stockholders' Equity

$  4,432,701






$       4,328,648





























Net Interest Income



$   72,061






$   63,890



Net Interest Spread





2.94 %






2.55 %

Net Interest Margin





3.45 %






3.11 %




(1) Includes Nonaccrual Loans.

 

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)


Quarter Ended:

6/30/2026


12/31/2025

Loan Portfolio




Commercial Loans

$     173,057


$     165,729

Commercial Real Estate Loans

837,461


818,259

  Subtotal Commercial Loan Portfolio

1,010,518


983,988

Consumer Loans

1,083,169


1,076,007

Residential Real Estate Loans

1,402,854


1,393,098

Total Loans

$  3,496,541


$  3,453,093

Allowance for Credit Losses




Allowance for Credit Losses, Beginning of Quarter

$       34,055


$       34,176

Loans Charged-off

(1,770)


(1,477)

Less Recoveries of Loans Previously Charged-off

1,071


777

Net Loans Charged-off

(699)


(700)

Provision for Credit Losses

2,827


846

Allowance for Credit Losses, End of Quarter

$       36,183


$       34,322

Nonperforming Assets




Nonaccrual Loans

$         6,814


$         6,415

Loans Past Due 90 or More Days and Accruing

1,487


2,040

Loans Restructured and in Compliance with Modified Terms

—


—

Total Nonperforming Loans

8,301


8,455

Repossessed Assets

363


280

Other Real Estate Owned

—


—

Total Nonperforming Assets

$         8,664


$         8,735





Key Asset Quality Ratios




Net Loans Charged-off to Average Loans,

   Quarter-to-date Annualized

0.08 %


0.08 %

Provision for Credit Losses to Average Loans,

  Quarter-to-date Annualized

0.33 %


0.10 %

Allowance for Credit Losses to Period-End Loans

1.03 %


0.99 %

Allowance for Credit Losses to Period-End Nonperforming Loans

435.89 %


405.94 %

Nonperforming Loans to Period-End Loans

0.24 %


0.24 %

Nonperforming Assets to Period-End Assets

0.19 %


0.20 %





Year-to-Date Period Ended:

6/30/2026


12/31/2025

Allowance for Credit Losses




Allowance for Credit Losses, Beginning of Year

$       34,322


$       33,598

Loans Charged-off

(3,344)


(9,554)

Less Recoveries of Loans Previously Charged-off

1,830


3,004

Net Loans Charged-off

(1,514)


(6,550)

Provision for Credit Losses

3,375


7,274

Allowance for Credit Losses, End of Period

$       36,183


$       34,322





Key Asset Quality Ratios




Net Loans Charged-off to Average Loans, Annualized

0.09 %


0.19 %

Provision for Loan Losses to Average Loans, Annualized

0.20 %


0.21 %

 

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SOURCE Arrow Financial Corporation

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