Arrow Financial Corporation

What they do

Arrow Financial is a New York corporation and registered bank holding company headquartered at 250 Glen Street, Glens Falls, New York. It operates as a national commercial bank, taking deposits and making loans, with total assets of $4.48 billion at June 30, 2026. It also reports insurance and wealth management revenue lines alongside its banking operations. The company had 16,511,643 common shares outstanding as of February 27, 2026.

Revenue drivers

• Net interest income (banking) — Core earnings engine; net interest income was $35.9 million in Q2 2026 with a net interest margin of 3.42% (3.43% FTE), down from 3.47% (3.48% FTE) in the prior quarter.
• Insurance revenue — Reported as a non-interest income line; insurance revenue for the first half of 2026 was up 12.6% versus the first half of 2025.
• Wealth management revenue — Reported as a non-interest income line; wealth management revenue for the first half of 2026 was up 9.9% versus the first half of 2025.
• Deposit franchise (funding) — Total deposits were $3.66 billion at June 30, 2026, comprising noninterest-bearing deposits of $736.1 million, interest-bearing checking of $872.0 million, and savings of $1.59 billion; cost of retail deposits fell to 1.61% in Q2 2026.

Recent performance

Second quarter 2026 net income was $11.0 million, or $0.66 per diluted share, compared with $13.5 million and $0.82 in the first quarter of 2026. Results included approximately $1.0 million ($0.05 per share) of merger-related expenses tied to the July 1, 2026 acquisition of Adirondack Bancorp and Adirondack Bank; excluding those, EPS was $0.71. A $1.6 million ($0.08 per share) specific reserve was recorded for an isolated commercial real estate credit whose borrower and guarantors declared bankruptcy in June 2026. Net interest income fell 0.6% sequentially to $35.9 million, and the efficiency ratio was 62.02% (59.83% excluding merger-related expenses). Annualized charge-offs were 8 basis points and non-performing loans 24 basis points.

Strategy

Management completed the July 1, 2026 acquisition of Adirondack Bancorp, Inc. and Adirondack Bank of Utica, New York, adding approximately $1.0 billion in assets and 19 branch locations. CEO David S. DeMarco described the deal as a high-quality, low-cost deposit franchise expected to provide significant EPS accretion in 2027 and beyond. The company also points to a return to significant loan growth and continued expansion of its market. Stated priorities include executing on strategic initiatives to build a premier banking franchise for customers and communities. Insurance and wealth management revenue growth are highlighted as part of the operating mix.

Risks

• Credit concentration risk — An isolated commercial real estate credit moved $3.8 million to non-performing and required a $1.6 million specific reserve in Q2 2026 after borrower and guarantor bankruptcies.
• Net interest margin compression — Net interest margin declined to 3.42% in Q2 2026 from 3.47% in Q1 2026, and net interest income fell 0.6% sequentially.
• Acquisition integration risk — The July 1, 2026 Adirondack Bancorp/Adirondack Bank acquisition added roughly $1.0 billion in assets and 19 branches, and generated about $1.0 million of merger-related expenses in Q2 2026.
• Provision volatility — The provision for credit losses increased $2.3 million quarter-over-quarter, including the specific reserve, and management noted an elevated loan provision due to strong loan growth.

Outlook

Management expects the Adirondack Bank transaction to deliver significant EPS accretion in 2027 and beyond and to expand the company's market with a high-quality, low-cost deposit franchise. The company says it remains well-positioned to execute on strategic initiatives and deliver shareholder value. Management characterized overall credit metrics as strong, with low charge-offs and low non-performing loan balances, and described the business trajectory as performing well. The board declared a third-quarter dividend of $0.30 per share payable August 25, 2026 to holders of record August 11, 2026.