The Board of Directors of Arrow declared a quarterly cash dividend of $0.29 per share; payable November 24, 2025 to shareholders of record as of November 12, 2025.
This quarter's results include approximately $600 thousand ($0.03 per share) of non-core unification costs related to Arrow's system conversion and operational merger of its two banking subsidiaries, which were successfully completed in July 2025. Arrow does not expect to incur additional costs related to the unification effort.
This Earnings Release and related commentary should be read in conjunction with the Company's October 30, 2025 Form 8-K and related Third Quarter 2025 Investor Presentation, which can also be found on Arrow's website: arrowfinancial.com/documents/investor-presentations.
Arrow President and CEO David S. DeMarco:
"I am proud to report that on the heels of our unification effort, the Arrow team delivered a great financial quarter. EPS increased by almost 20% from the prior quarter and ROA improved by 16 bps to 1.16%, despite recognizing the last remaining unification expenses. Our third quarter delivered record net interest income, solid net interest margin expansion and more than 10% annualized growth in tangible book value. With the Federal Reserve enacting a first round of interest rate cuts late in the third quarter and again in late October, Arrow is well-positioned with our near-term liability sensitive balance sheet to deliver another great quarter to end the year. We are delighted that we can use our improved financial performance to continue to support our communities while delivering strong results to our shareholders."
Third-Quarter Highlights and Key Metrics
Net Income of $12.8 million (EPS of $0.77)
Record Net Interest Income of $34.1 million
Net Interest Margin improved to 3.22% (3.24% FTE1), from 3.15% (3.16% FTE1) in the prior quarter
Return on Average Assets (ROA) improved to 1.16%, an increase from 1.00% for the prior quarter
Loan-to-Deposit ratio of 84.0%
Quarter-end loan exit rates2 increased to 5.56% at September 30, 2025 vs. 5.51% at June 30, 2025
Cost of retail deposits3 decreased by 9 bps to 1.68% from the prior quarter
Approximately $2 billion of deposits subject to repricing with additional federal reserve rate cuts
Tangible Book Value per share increased to $23.85, an increase of 2.7% from the prior quarter
Repurchased $1.4 million of shares (52,947 shares at an average cost of $26.87 per share)
$5.1 million remaining under current repurchase authorization
Recently received preliminary court approval of the negotiated settlement in the Shareholder Derivative Complaint described in previous SEC filings. The preliminary approval has no material financial impact to the results of operations or financial position.
Income Statement
Net Income: Net income for the third quarter of 2025 was $12.8 million, increasing from $10.8 million in the second quarter of 2025.
Compared to the prior quarter, net income benefited from an increase of $1.6 million in net interest income, an increase in non-interest income of $1.1 million and a slight decrease in non-interest expense of $0.2 million.
Net Interest Income: Net interest income for the third quarter of 2025 was $34.1 million, increasing 4.9% from the second quarter of 2025.
Total interest and dividend income was $53.6 million for the third quarter of 2025, an increase from $51.6 million in the second quarter of 2025. Interest expense for the third quarter of 2025 was $19.5 million, an increase from $19.0 million in the second quarter of 2025.
Net Interest Margin: Net interest margin, on an FTE basis, for the third quarter of 2025 increased to 3.24%, compared to 3.16% for the second quarter of 2025. The increase in net interest margin compared to the second quarter of 2025 was primarily the result of continued yield expansion on earning assets combined with the stabilizing cost of interest-bearing liabilities.
Three Months Ended
(Dollars in Thousands)
September 30, 2025
June 30, 2025
September 30, 2024
Interest and Dividend Income
$ 53,598
$ 51,573
$ 49,443
Interest Expense
19,467
19,040
21,005
Net Interest Income
34,131
32,533
28,438
Average Earning Assets(A)
4,199,115
4,142,993
4,075,162
Average Interest-Bearing Liabilities
3,193,789
3,191,906
3,085,066
Average Yield on Earning Assets(A)
5.06 %
4.99 %
4.83 %
Average Cost of Interest-Bearing Liabilities
2.42
2.39
2.71
Net Interest Spread
2.64
2.60
2.12
Net Interest Margin
3.22
3.15
2.78
Net Interest Margin - FTE
3.24
3.16
2.79
(A) Includes Nonaccrual Loans
Provision for Credit Losses: For the third quarter of 2025, the provision for credit losses was $815 thousand compared to $594 thousand in the second quarter of 2025, primarily driven by third quarter 2025 charge-offs.
Non-Interest Income: Non-interest income for the three months ended September 30, 2025, was $8.7 million, an increase from $7.6 million in the second quarter of 2025. Revenue related to wealth management increased from the prior quarter as a result of overall market performance. Interchange fees improved in the third quarter from the linked quarter. The third quarter of 2025 included a positive valuation adjustment related to an equity position.
Non-Interest Expense: Non-interest expense for the third quarter of 2025 was $25.4 million, a decrease from $25.7 million in the second quarter of 2025. The third quarter of 2025 included unification expenses of approximately $600 thousand as compared to $1.1 million in the second quarter of 2025. The unification expenses were primarily comprised of project management and information technology costs related to the July 2025 system conversion. Arrow continues to focus on overall expense control.
Provision for Income Taxes: The provision for income taxes and effective tax rate were $3.8 million and 22.7%, respectively for the third quarter of 2025, and $3.1 million and 22.4%, respectively for the second quarter of 2025.
Balance Sheet
Total Assets: Total assets were $4.6 billion at September 30, 2025, an increase of $172.4 million, or 3.9%, as compared to June 30, 2025. For the third quarter of 2025, the overall change in the balance sheet was primarily attributable to the seasonal surge in municipal deposits as well as fluctuations in cash balances, maturities of investments and growth in the loan portfolio.
Investments: Total investments were $558.4 million as of September 30, 2025, an increase of $30.0 million, or 5.7%, compared to June 30, 2025. The increase from June 30, 2025 was driven primarily by $48 million of additional investments offset by paydowns and maturities. There were no credit quality issues related to the investment portfolio.]
Loans4: Total loans were $3.4 billion as of September 30, 2025. Loan growth for the third quarter of 2025 was $17.3 million. Loan growth was primarily driven by an increase in residential real estate loans and commercial loans. 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 $34.2 million as of September 30, 2025, which represented 0.99% of loans outstanding, as compared to $34.2 million, or 1.00% of loans outstanding, at June 30, 2025. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.10% for the three-month period ended September 30, 2025, as compared to 0.49% for the three-month period ended June 30, 2025. The decrease was the result of a charge-off of a previously reserved commercial loan participation in the second quarter of 2025. Nonperforming assets were $6.7 million as of September 30, 2025, representing 0.15% of period-end assets, compared to $6.8 million, or 0.15%, at June 30, 2025.
Deposits: At September 30, 2025, deposit balances were $4.1 billion, an increase of $170.7 million from June 30, 2025. The change from June 30, 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 $417.7 million at September 30, 2025, an increase of $9.2 million, or 2.2%, from June 30, 2025. The increase from June 30, 2025 was primarily attributable to net income of $12.8 million and other comprehensive income of $2.2 million offset by dividends of $4.8 million and share repurchases of $1.4 million and other stock-based activity. Arrow's regulatory capital ratios remain strong. As of September 30, 2025, Arrow's Common Equity Tier 1 Capital Ratio was 13.07% and Total Risk-Based Capital Ratio was 14.86%. Regulatory capital ratios are preliminary, subject to finalization as part of the current quarter Call Report. The capital ratios of Arrow and its subsidiary bank continued to exceed the "well capitalized" regulatory standards.
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 74 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, difficulties in managing the Arrow's growth, competition, changes in law or the regulatory environment, 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, 2024, and other filings with the SEC.
1 FTE Net interest margin is a non-GAAP measure. See reconciliation on Note 2 to the Selected Quarterly Information.2 The "loan exit rate" is the point in time interest rate in effect at the end of the reporting period.3 Retail deposits exclude wholesale funding sources4 Excludes $3.0 million and $3.2 million fair value hedge adjustments at September 30, 2025 and June 30, 2025, respectively.
ARROW FINANCIAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In Thousands, Except Per Share Amounts - Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans
$ 46,832
$ 44,122
$ 136,982
$ 126,639
Interest on Deposits at Banks
2,245
2,103
5,488
6,735
Interest and Dividends on Investment Securities:
Fully Taxable
4,066
2,656
11,464
8,851
Exempt from Federal Taxes
455
562
1,603
1,867
Total Interest and Dividend Income
53,598
49,443
155,537
144,092
INTEREST EXPENSE
Interest-Bearing Checking Accounts
2,160
1,966
5,904
5,510
Savings Deposits
9,534
10,905
28,384
31,706
Time Deposits over $250,000
1,695
1,803
5,232
5,645
Other Time Deposits
5,859
4,934
17,181
15,091
Borrowings
—
1,177
167
3,439
Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts
173
173
513
514
Interest on Financing Leases
46
47
135
142
Total Interest Expense
19,467
21,005
57,516
62,047
NET INTEREST INCOME
34,131
28,438
98,021
82,045
Provision for Credit Losses
815
934
6,428
2,326
NET INTEREST INCOME AFTER PROVISION FORCREDIT LOSSES
33,316
27,504
91,593
79,719
NON-INTEREST INCOME
Income From Fiduciary Activities
2,600
2,429
7,533
7,337
Fees for Other Services to Customers
2,857
2,881
8,244
8,130
Insurance Commissions
1,986
1,955
5,616
5,299
Net Gain on Securities
392
94
669
165
Net Gain on Sales of Loans
259
126
573
135
Other Operating Income
622
648
1,529
2,781
Total Non-Interest Income
8,716
8,133
24,164
23,847
NON-INTEREST EXPENSE
Salaries and Employee Benefits
14,339
13,446
41,980
39,375
Occupancy Expenses, Net
1,907
1,754
5,881
5,299
Technology and Equipment Expense
4,963
4,692
15,639
14,246
FDIC Assessments
634
698
1,953
2,111
Other Operating Expense
3,590
3,510
11,677
10,399
Total Non-Interest Expense
25,433
24,100
77,130
71,430
INCOME BEFORE PROVISION FOR INCOME TAXES
16,599
11,537
38,627
32,136
Provision for Income Taxes
3,774
2,562
8,687
6,897
NET INCOME
$ 12,825
$ 8,975
$ 29,940
$ 25,239
Average Shares Outstanding:
Basic
16,402
16,710
16,541
16,746
Diluted
16,406
16,742
16,543
16,772
Per Common Share:
Basic Earnings
$ 0.77
$ 0.54
$ 1.80
$ 1.51
Diluted Earnings
0.77
0.53
1.80
1.50
ARROW FINANCIAL CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In Thousands, Except Share and Per Share Amounts - Unaudited)
September 30,2025
December 31, 2024
ASSETS
Cash and Due From Banks
$ 45,925
$ 27,422
Interest-Earning Deposits at Banks
351,512
127,124
Investment Securities:
Available-for-Sale at Fair Value
485,583
463,111
Held-to-Maturity (Fair Value of $62,251 at September 30, 2025 and $96,586 at December 31, 2024)
62,744
98,261
Equity Securities
5,724
5,055
Other Investments
4,369
4,353
Loans
3,442,009
3,394,541
Allowance for Credit Losses
(34,176)
(33,598)
Net Loans
3,407,833
3,360,943
Premises and Equipment, Net
60,002
59,717
Goodwill
23,789
23,789
Other Intangible Assets, Net
1,805
2,058
Other Assets
137,829
134,515
Total Assets
$ 4,587,115
$ 4,306,348
LIABILITIES
Noninterest-Bearing Deposits
771,014
702,978
Interest-Bearing Checking Accounts
977,871
810,834
Savings Deposits
1,526,055
1,520,024
Time Deposits over $250,000
178,843
191,962
Other Time Deposits
646,268
602,132
Total Deposits
4,100,051
3,827,930
Borrowings
4,265
8,600
Junior Subordinated Obligations Issued to Unconsolidated
Subsidiary Trusts
20,000
20,000
Finance Leases
4,928
5,005
Other Liabilities
40,184
43,912
Total Liabilities
4,169,428
3,905,447
STOCKHOLDERS' EQUITY
Preferred Stock, $1 Par Value; 1,000,000 Shares Authorized at September 30, 2025 and December 31, 2024
—
—
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (22,066,559 Shares Issued at September 30, 2025 and December 31, 2024)
22,067
22,067
Additional Paid-in Capital
414,133
413,476
Retained Earnings
93,027
77,215
Accumulated Other Comprehensive Loss
(8,640)
(18,453)
Treasury Stock, at Cost (5,628,864 Shares at September 30, 2025 and 5,323,638 Shares at December 31, 2024)
(102,900)
(93,404)
Total Stockholders' Equity
417,687
400,901
Total Liabilities and Stockholders' Equity
$ 4,587,115
$ 4,306,348
Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended
9/30/2025
6/30/2025
3/31/2025
12/31/2024
9/30/2024
Net Income
$ 12,825
$ 10,805
$ 6,310
