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."
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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 31,2026
December 31,2025
March 31,2025
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 31,2026
December 31, 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, 2026and $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 Authorizedat 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, 2026and 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
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