Arrow Financial (AROW) investor relations material

Executive summary

• Net income for Q1 2026 was $13.5 million, or $0.82 per share; adjusted EPS was $0.85 excluding merger-related expenses, up 113.7% year-over-year but down from Q4 2025.

• Net interest margin expanded to 3.48% (3.47% FTE), up from 3.25% in Q4 2025 and 3.07% in Q1 2025, driven by loan and deposit repricing.

• Return on average assets was 1.23% (1.29% excl. merger expenses); return on average equity was 12.46%.

• Announced acquisition of Adirondack Bancorp, Inc., expected to close in Q3 2026, adding $950 million in assets and 19 branches.

• Total assets reached $4.52 billion, up 1.7% from year-end 2025, with deposit growth driven by seasonal municipal inflows.

Financial highlights

• Net revenue for Q1 2026 was $44.8 million.

• Net interest income rose to $36.1 million, up 15.2% year-over-year and 2.8% sequentially.

• Non-interest income increased to $8.6 million, up from $8.3 million in Q4 2025 and $7.8 million in Q1 2025.

• Operating expenses were $26.9 million, including $800,000 in merger-related costs.

• Tangible book value per share increased to $25.09.

Outlook and guidance

• NIM expansion expected to continue in 2026, barring Federal Reserve rate cuts.

• Efficiency ratio targeted below 60%; Q1 2026 efficiency ratio was 59.89% (58.1% excl. merger expenses).

• Management expects tax strategies to lower the effective tax rate for the remainder of 2026.

• Loan growth is expected to rebound in Q2 2026 after weather-related softness in Q1.

• Retail deposit costs projected to decline further as $155 million in CDs reprice in Q2 2026.