ARROW FINANCIAL CORP
For the period ended Jun 30, 2026. Filed Aug 6, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 6, 2026
AROW$38.47-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0000717538-26-000060
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0000717538-26-000117
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 168 previous paragraphs and 186 current paragraphs.
109 unchanged; 46 reworded; 27 added; 13 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 25 previous and 33 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
The transaction was completed on July 1, 2026 and therefore, this Quarterly Report on Form 10-Q does not include the assets, liabilities or operating results of Adirondack. Under the terms of the merger agreement, Arrow acquired 100% of the outstanding voting equity interests of Adirondack. At the effective date, each share of Adirondack common stock outstanding immediately prior to the effective date, was converted into the right to receive 1.8610 shares of Arrow common stock and $18.72 in cash. Total consideration paid was $101 million.
Current report
Total non-interest income in the current quarter was $8.3 million, an increase of $647 thousand from the second quarter of 2025. Insurance commissions increased during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 due to the combination of the increase in average premiums and onboarding of new, larger commercial insurance relationships. Income from fiduciary activity increased primarily due to additions of new wealth management accounts as well as improved market performance. Net gain on security transactions of $155 thousand for the three months ended June 30, 2026, resulted from the increase in the fair value of equity securities.
Current report
The provision for income taxes and effective tax rate were $2.9 million and 21.1%, respectively, for the second quarter of 2026, and $3.1 million and 22.2%, respectively, for the second quarter of 2025. 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.
Current report
Total loans were $3.5 billion as of June 30, 2026, an increase of $43.4 million, or 1.3%, compared to December 31, 2025. The increase was primarily due to growth in commercial loans.
Current report
At June 30, 2026, deposit balances were $3.7 billion, a decrease of $284.3 million from December 31, 2025. The decrease was primarily attributable to $300 million of brokered CDs, being replaced by lower costing FHLB borrowings.
Current report
The maturities of time deposits of $250,000 or more at June 30, 2026 are presented below. (Dollars in Thousands)
Current report
The following table presents an analysis of the interest rate sensitivity of our commercial, commercial real estate, consumer and residential real estate loan portfolios due after one year as of June 30, 2026
Current report
The allowance for credit losses was $36.2 million as of June 30, 2026, which represented 1.03% of loans outstanding, as compared to $34.3 million, or 0.99%, at December 31, 2025. The overall change in the allowance from December 31, 2025 was primarily the result of a $1.6 million specific reserve related to a non-performing commercial loan due to a sudden personal and corporate bankruptcy declared in June 2026 as well as growth in the loan portfolio.
Current report
No shares were repurchased during the six month period ended June 30, 2026 under the Company's current repurchase authorization and as of June 30, 2026, $5,066,228 remained available. The repurchase authorization has no expiration date.
Current report
Non-interest expense for the second quarter of 2026 was $27.5 million, an increase of $1.8 million, or 7.1%, from the second quarter of 2025. Salaries and benefit expenses increased $1.0 million, or 7.2%, from the prior year comparable quarter as a result of overall growth in the organization, increased benefits cost and a competitive labor market. Technology expenses in the second quarter decreased $832 thousand, or 14.9%, from the second quarter of 2025. Occupancy expenses increased $149 thousand due to increases in utility and building maintenance costs. The second quarter of 2026 included approximately $1.0 million of expenses related to the acquisition of Adirondack Bancorp, Inc. The second quarter of 2025 had no expenses related to the acquisition of Adirondack Bancorp, Inc.
Current report
The decrease in the effective tax rate for the second quarter of 2026 compared to the second quarter of 2025 reflects the impact of tax credits recognized from energy production tax credit purchases made in June 2026 partially offset by nondeductible expenses related to the acquisition of Adirondack Bank.
Current report
RESULTS OF OPERATIONS
Current report
Six Months Ended June 30, 2025
Current report
Summary of Earnings Performance
Current report
Net Interest Income
Current report
Summary of Net Interest Income
Current report
Net interest margin for the first six months of 2026 increased 34 basis points to 3.45%, from 3.11% for the first six months of 2025. Average earning asset yields were 18 basis points higher as compared to the first six months of 2025, primarily due to higher market rates. The average cost of interest-bearing liabilities decreased 21 basis points from the first six months of 2025 as a result of managing deposit costs in a competitive interest rate environment. Further detailed information is presented above under the section entitled "Average Consolidated Balance Sheets and Net Interest Income Analysis."
Current report
As previously discussed under the heading "Asset Quality" beginning on page 53, the provision for credit losses for the first six months of 2026 was $3.4 million, compared to $5.6 million for the first six months of 2025. The sizable year-over-year decrease reflects the recognition of a specific reserve related to the CRE Participation that was charged off in the second quarter of 2025 and moved to other assets.
Current report
Non-interest Income
Current report
Summary of Non-interest Income
Current report
Total non-interest income for the first six months of 2026 was $16.9 million, an increase of $1.4 million from the first six months of 2025. Income from fiduciary activities increased from the prior year period as a result of improved market performance as well as growth in assets under management. . Insurance commissions increased during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 due to the combination of the increase in average premiums and onboarding of new, larger commercial insurance relationships. Net gain on security transactions of $300 thousand for the first six months of 2026 resulted from the increase in the fair value of equity securities.
Current report
Non-interest Expense
Current report
Summary of Non-interest Expense
Current report
Salaries and employee benefits expense for the first six months of 2026 increased $2.4 million, or 8.6%, from the comparable period in 2025 primarily driven by the overall growth in the organization and inflation driven wage increases. Technology expenses decreased $0.9 million, or 8.1%, from the first six months of 2025 primarily due to increased costs in the first six months of 2025 related to the unification of Arrow's subsidiary banks. Other non-interest expense increased $0.8 million for the first six months of 2026, as compared to the first six months of 2025 primarily due to costs related to the acquisition of Adirondack Bancorp, Inc. The first six months of 2026 included approximately $1.8 million of expenses related to the acquisition of Adirondack Bancorp, Inc. The first six months of 2025 had no expenses related to the acquisition of Adirondack Bancorp, Inc.
Current report
Income Taxes
Current report
Summary of Income Taxes
Current report
The decrease in the effective tax rate for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 reflects the impact of tax credits recognized from energy production tax credit purchases made in June 2026 partially offset by nondeductible expenses related to the acquisition of Adirondack Bank and higher pre-tax income, which diluted the proportional impact of tax-exempt income.
Removed paragraphs (13)
Previous report
Upon the terms and subject to the conditions of the Agreement, Adirondack shareholders will receive a combination of stock and cash upon closing of the Merger with Arrow. Each outstanding share of Adirondack common stock will be converted into 1.8610 shares of Arrow common stock plus $18.72 in cash.
Previous report
Closing of the transaction is expected early in the third quarter of 2026 following receipt of approvals from regulatory authorities, the approval of Adirondack shareholders, and the satisfaction of other customary closing conditions.
Previous report
•The Agreement may be terminated in accordance with its terms and the Merger may not be completed.
Previous report
Net interest income for the first quarter of 2026 was $36.1 million, increasing $4.8 million or 15.2% from the first quarter of 2025. Total interest and dividend income was $53.8 million for the first quarter of 2026, an increase from $50.4 million in the first quarter of 2025. Interest expense for the first quarter of 2026 was $17.7 million, a decrease from $19.0 million in the first quarter of 2025.
Previous report
Non-interest income for the three months ended March 31, 2026, was $8.6 million, an increase from $7.8 million in the first quarter of 2025. Revenue related to wealth management and insurance commissions increased in the first quarter of 2026 compared to the first quarter of 2025. The first quarter of 2026 included a positive valuation adjustment of $145 thousand related to equity positions.
Previous report
Non-interest expense for the first quarter of 2026 was $26.9 million, an increase from $26.0 million in the first 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.
Previous report
The provision for income taxes and effective tax rate were $3.9 million and 22.3%, respectively, for the first quarter of 2026, and $1.8 million and 22.4%, respectively, for the first 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. The March 31, 2026 Consolidated Statements of Cash Flows reflects the settlement of the remaining $4 million balance on the energy production tax credits which had been purchased in 2025 and reflected in the 2025 tax rate.
Previous report
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.
Previous report
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.
Previous report
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%, at December 31, 2025. The overall change in the allowance from December 31, 2025 was primarily driven by charge-offs, the decrease in loan balances and changes to the economic forecast factors embedded in the credit loss allowance model. Further, during the first quarter of 2026, the Company performed an annual update to its prepayment and curtailment model assumptions.
Previous report
On April 24, 2024, the Board authorized management, in its discretion, to repurchase from time to time, in the open market or in privately negotiated transactions, up to $5 million of Arrow common stock. On April 30, 2025, the Board authorized management, in its discretion, to repurchase from time to time, in the open market or in privately negotiated transactions, an additional $5 million of Arrow common stock. On July 23, 2025, the Board increased management's share repurchase authority by another $5 million.
Previous report
In the first quarter of 2026, there were no repurchases under this authorization.
Previous report
The Company's effective tax rate differs from the statutory federal rate of 21.0% primarily due to the effects of state income taxes net of federal benefit and non-deductible expenses offset by the benefit related to tax exempt income.
Reworded paragraphs (46)
Previous wording
In this Report, the terms "Arrow," "the registrant," "the Company," "we," "us," and "our" generally refer to Arrow Financial Corporation and its subsidiaries as a group, except where the context indicates otherwise. At certain points in this Report, Arrow's performance is compared with that of the Company's "peer group" of financial institutions. Unless otherwise specifically stated, the peer group for the purposes of this Report is comprised of the group of 200 domestic bank holding companies with $3 to $10 billion in total consolidated assets as identified in the FRB’s "Bank Holding Company Performance Report" for December 31, 2025 (the most recent such report currently available), and peer group data contained herein has been derived from such report.
Current wording
In this Report, the terms "Arrow," "the registrant," "the Company," "we," "us," and "our" generally refer to Arrow Financial Corporation and its subsidiaries as a group, except where the context indicates otherwise. At certain points in this Report, Arrow's performance is compared with that of the Company's "peer group" of financial institutions. Unless otherwise specifically stated, the peer group for the purposes of this Report is comprised of the group of 207 domestic bank holding companies with $3 to $10 billion in total consolidated assets as identified in the FRB’s "Bank Holding Company Performance Report" for March 31, 2026 (the most recent such report currently available), and peer group data contained herein has been derived from such report.
Previous wording
Adirondack Bancorp, Inc. Merger: On February 25, 2026, Arrow and Adirondack, the parent company of Adirondack Bank, entered into a definitive agreement pursuant to which Adirondack and Adirondack Bank will merge with and into into Arrow and Arrow Bank, respectively.
Current wording
Adirondack Bancorp, Inc. Merger: On February 25, 2026, Arrow and Adirondack, the parent company of Adirondack Bank, entered into a definitive agreement pursuant to which Adirondack and Adirondack Bank merged with and into Arrow and Arrow Bank, respectively.
Previous wording
Adirondack Bank is a New York state-chartered financial institution headquartered in Utica, New York. Adirondack Bank operates 19 branch locations spanning Oneida, Herkimer, Franklin, Essex and Clinton counties, and a loan production office in Onondaga County. As of December 31, 2025, Adirondack reported total consolidated assets of $942 million, total deposits of $848 million, total loans of $624 million and total equity of $67 million.
Current wording
Prior to the merger, Adirondack Bank was a New York state-chartered financial institution headquartered in Utica, New York. Adirondack Bank operated 19 branch locations spanning Oneida, Herkimer, Franklin, Essex and Clinton counties, and a loan production office in Onondaga County. As of December 31, 2025, Adirondack reported total consolidated assets of $942 million, total deposits of $848 million, total loans of $624 million and total equity of $67 million.
Previous wording
•The market price of Arrow’s common stock may decline as a result of the Merger.
Current wording
•The market price of Arrow’s common stock may decline as a result of the acquisition of Adirondack.
Previous wording
•Combining Arrow and Adirondack may be more difficult, costly or time-consuming than expected, and Arrow may fail to realize the anticipated benefits of the Merger.
Current wording
•Combining Arrow and Adirondack may be more difficult, costly or time-consuming than expected, and Arrow may fail to realize the anticipated benefits of the acquisition of Adirondack.
Previous wording
The following discussion and analysis focuses on and reviews the results of operations for the three-month periods ended March 31, 2026 and March 31, 2025 and the financial conditions as of March 31, 2026 and December 31, 2025. The discussion below should be read in conjunction with the selected quarterly and annual information set forth above and the Unaudited Interim Consolidated Financial Statements and other financial data presented elsewhere in this Report. When necessary, prior-year financial information has been reclassified to conform to the current-year presentation.
Current wording
The following discussion and analysis focuses on and reviews the results of operations for the three months ended June 30, 2026 and June 30, 2025 and the financial conditions as of June 30, 2026 and December 31, 2025. The discussion below should be read in conjunction with the selected quarterly and annual information set forth above and the Unaudited Interim Consolidated Financial Statements and other financial data presented elsewhere in this Report. When necessary, prior-year financial information has been reclassified to conform to the current-year presentation.
Previous wording
Summary of Q1 2026 Financial Results: Net income for the first quarter of 2026 was $13.5 million, increasing from $6.3 million in the first quarter of 2025. Compared to the first quarter of 2025, net income increased primarily due to an increase in net interest income and a decrease in the provision for credit losses on loans.
Current wording
Summary of Q2 2026 Financial Results: Net income for the second quarter of 2026 was $11.0 million, increasing from $10.8 million in the second quarter of 2025. Compared to the second quarter of 2025, net income increased primarily due to an increase in net interest income offset by an increase in the provision for credit losses on loans.
Previous wording
Net interest margin, on an FTE basis, for the first quarter of 2026 increased to 3.48%, compared to 3.08% for the first quarter of 2025. The increase in net interest margin compared to the first quarter of 2025 was primarily the result of continued yield expansion on earning assets combined with the moderating cost of interest-bearing liabilities. See the disclosure on page 38 related to the use of non-GAAP financial measures.
Current wording
Net interest margin increased 27 basis points in the second quarter of 2026 to 3.42%, from 3.15% during the second quarter of 2025. On an FTE basis, net interest margin increased to 3.43% in the second quarter of 2026 from 3.16% during the second quarter of 2025. Average earning asset yields were 12 basis points higher as compared to the second quarter of 2025. The average cost of interest-bearing liabilities decreased 19 basis points from the quarter ended June 30, 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 moderating cost of interest-bearing liabilities. See the disclosure on page 39 related to the use of non-GAAP financial measures.
Previous wording
Non-interest expense for the first quarter of 2026 was $26.9 million, an increase of $0.8 million, or 3.1%, from the first quarter of 2025. Salaries and benefit expenses increased $1.4 million, or 10.1%, from the prior year comparable quarter as a result of overall growth in the organization, increased benefits cost and a competitive labor market. Technology expenses in the first quarter decreased $35 thousand, or 0.7%, from the first quarter of 2025. The first quarter of 2025 included Unification expenses of approximately $600 thousand. Occupancy expenses increased $437 thousand due to increases in utility and building maintenance costs.
Current wording
Non-interest expense for the second quarter of 2026 was $27.5 million, an increase of $1.8 million, or 7.1%, from the second quarter of 2025. Salaries and benefit expenses increased $1.0 million, or 7.2%, from the prior year comparable quarter as a result of overall growth in the organization, increased benefits cost and a competitive labor market. Technology expenses in the second quarter decreased $832 thousand, or 14.9%, from the second quarter of 2025. Occupancy expenses increased $149 thousand due to increases in utility and building maintenance costs. The second quarter of 2026 included approximately $1.0 million of expenses related to the acquisition of Adirondack Bancorp, Inc.
Previous wording
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 as well as fluctuations in cash balances and maturities of investments.
Current wording
Total assets were $4.5 billion at June 30, 2026, an increase of $36.5 million, or 0.8%, as compared to December 31, 2025. For the second quarter of 2026, the increase in the balance sheet total assets was primarily attributable to loan growth and an increase in other investments.
Previous wording
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 purchases of additional investments offset by paydowns and maturities. There were no credit quality issues related to the investment portfolio.
Current wording
Total investments were $587.9 million as of June 30, 2026, an increase of $15.1 million, or 2.6%, compared to December 31, 2025. The increase from December 31, 2025 was driven primarily by a $14 million purchase of FHLB stock. There were no material credit quality issues related to the investment portfolio.
Previous wording
The changes in net income, net interest income and net interest margin between the three-month periods are discussed in detail under the heading "RESULTS OF OPERATIONS," beginning on page 55.
Current wording
The changes in net income, net interest income and net interest margin between the three and six month periods are discussed in detail under the heading "RESULTS OF OPERATIONS," beginning on page 57.
Previous wording
Stockholders’ equity was $440.1 million at March 31, 2026, an increase of $8.3 million, or 1.9%, from the December 31, 2025 level of $431.9 million. The increase in stockholders' equity over the first three months of 2026 principally reflected the following factors: the addition of (i) $13.5 million of net income for the period, and (ii) the issuance of $0.6 million of common stock through employee benefit and dividend reinvestment plans, reduced by (iii) other comprehensive loss of $0.7 million, and (iv) cash dividends of $5.0 million. The components of the change in stockholders’ equity since year-end 2025 are presented in the Consolidated Statements of Changes in Stockholders’ Equity on page 6, and are discussed in more detail in the next section.
Current wording
Stockholders’ equity was $446.3 million at June 30, 2026, an increase of $14.5 million, or 3.3%, from the December 31, 2025 level of $431.9 million. The increase in stockholders' equity over the first six months of 2026 principally reflected the following factors: the addition of (i) $24.4 million of net income for the period and (ii) the issuance of $1.8 million of common stock through employee benefit plans, reduced by (iii) other comprehensive loss of $1.4 million and (iv) cash dividends of $9.9 million. The components of the change in stockholders’ equity since year-end 2025 are presented in the Consolidated Statements of Changes in Stockholders’ Equity on page 6, and are discussed in more detail in the next section.
Previous wording
At March 31, 2026, book value per share was $26.63, up 1.4% from year-end 2025. Tangible book value per share was $25.09, an increase of $0.38, or 1.54%, from December 31, 2025. See the disclosure on page 38 related to the use of non-GAAP financial measures.
Current wording
At June 30, 2026, book value per share was $26.98, up 2.7% from year-end 2025. Tangible book value per share was $25.44, an increase of $0.73, or 2.95%, from December 31, 2025. See the disclosure on page 39 related to the use of non-GAAP financial measures.
Previous wording
In the first quarter of 2026, Arrow paid a quarterly cash dividend of $0.30 per share.
Current wording
In the second quarter of 2026, Arrow paid a quarterly cash dividend of $0.30 per share.
Previous wording
Loan Quality: 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.
Current wording
Loan Quality: Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.08% for the three-month period ended June 30, 2026, consistent with the three-month period ended December 31, 2025.
Previous wording
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%, at December 31, 2025.
Current wording
The allowance for credit losses was $36.2 million as of June 30, 2026, which represented 1.03% of loans outstanding, as compared to $34.3 million, or 0.99%, at December 31, 2025.
Previous wording
Nonperforming loans were $4.4 million at March 31, 2026, representing 0.13% of period-end loans, a decrease from the December 31, 2025 of 0.24% of period-end loans. Nonperforming assets of $4.9 million at March 31, 2026 represented 0.11% of period-end assets, down from 0.20% of period-end assets at December 31, 2025.
Current wording
Nonperforming loans were $8.3 million at June 30, 2026, representing 0.24% of period-end loans, consistent with December 31, 2025 non performing loans of $8.5 million, representing 0.24% of period-end loans. Nonperforming assets of $8.7 million at June 30, 2026 represented 0.19% of period-end assets, down from 0.20% of period-end assets at December 31, 2025.
Previous wording
Loan Segments: As of March 31, 2026, including the fair value marks associated with derivatives, total loans decreased by $14.1 million, or 0.4%, as compared to the balance at December 31, 2025. The largest decrease was in the residential real estate loan portfolio which decreased $7.0 million, or 0.5%. Consumer loans, primarily comprised of automobile loans, decreased $4.5 million. Commercial and commercial real estate loans decreased by $2.6 million, or 0.3%, from December 31, 2025. Loan balances were negatively impacted by severe winter weather, which slowed indirect auto and residential loan originations.
Current wording
Loan Segments: As of June 30, 2026, including the fair value marks associated with derivatives, total loans increased by $43.4 million, or 1.3%, as compared to the balance at December 31, 2025. The largest increase was in the commercial and commercial real estate loans portfolio which increased by $26.5 million, or 2.7%, from December 31, 2025. Consumer loans, primarily comprised of automobile loans, increased $7.2 million. The residential real estate loan portfolio increased $9.8 million, or 0.7%.
Previous wording
•Commercial and Commercial Real Estate Loans: Combined, these loans comprise 28.5% of the total loan portfolio at March 31, 2026. Commercial loans are extended to businesses primarily located in Arrow's regional market area. There are no commercial real estate loans in major metropolitan areas. In addition, only approximately 2% of the total loan portfolio is composed of office related property at March 31, 2026. Retail loans were approximately 3% of the total loan portfolio and hotels and motels were approximately 4% of the total loan portfolio at March 31, 2026. Commercial property values in Arrow's region have largely remained stable. Appraisals on nonperforming and watched commercial real estate loan properties are updated as necessary, usually when the loan is downgraded or when there has been significant market deterioration since the last appraisal.
Current wording
•Commercial and Commercial Real Estate Loans: Combined, these loans comprise 28.9% of the total loan portfolio at June 30, 2026. Commercial loans are extended to businesses primarily located in Arrow's regional market area. There are no commercial real estate loans in major metropolitan areas. In addition, only approximately 2% of the total loan portfolio is composed of office related property at June 30, 2026. Retail loans were approximately 3% of the total loan portfolio and hotels and motels were approximately 4% of the total loan portfolio at June 30, 2026. Commercial property values in Arrow's region have largely remained stable. Appraisals on nonperforming and watched commercial real estate loan properties are updated as necessary, usually when the loan is downgraded or when there has been significant market deterioration since the last appraisal.
Previous wording
•Consumer Loans: These loans comprised 31.3% of the total loan portfolio at period-end. Consumer automobile loans at March 31, 2026, were 99.6% of this portfolio segment. The vast majority of automobile loans are initiated through automobile dealers. Inflation and the uncertain economic environment may limit the potential growth in this category.
Current wording
•Consumer Loans: These loans comprised 31.1% of the total loan portfolio at period-end. Consumer automobile loans at June 30, 2026, were 99.6% of this portfolio segment. The vast majority of automobile loans are initiated through automobile dealers. Inflation and the uncertain economic environment may limit the potential growth in this category.
Previous wording
•Residential Real Estate Loans: These loans, including home equity loans, made up 40.3% of the total loan portfolio at March 31, 2026. Demand for residential real estate has continued to remain strong. Arrow originated nearly all of the residential real estate loans currently held in the loan portfolio and applies conservative underwriting standards. Arrow may sell a portion of the residential real estate mortgage originations into the secondary market. The ratio of the sales of originations to total originations tends to fluctuate from period to period based on market conditions and other factors such as prevailing mortgage rates, other lending opportunities, capital and liquidity needs, and the availability of a market for such transactions.
Current wording
•Residential Real Estate Loans: These loans, including home equity loans, made up 40.1% of the total loan portfolio at June 30, 2026. Demand for residential real estate has continued to remain strong. Arrow originated nearly all of the residential real estate loans currently held in the loan portfolio and applies conservative underwriting standards. Arrow may sell a portion of the residential real estate mortgage originations into the secondary market. The ratio of the sales of originations to total originations tends to fluctuate from period to period based on market conditions and other factors such as prevailing mortgage rates, other lending opportunities, capital and liquidity needs, and the availability of a market for such transactions.
Previous wording
Liquidity and Access to Credit Markets: Arrow has not experienced, nor is it currently experiencing, any liquidity events. Arrow’s liquidity position should provide the necessary flexibility to address any unexpected near-term liquidity needs. Interest-earning cash balances at March 31, 2026 were $256.5 million compared to $185.1 million at December 31, 2025. Contingent lines of credit are also available. Operating collateralized lines of credit are established and available through the FHLBNY, FRB and other bank lines totaling approximately $1.4 billion. The general terms of Arrow's lines of credit have not changed significantly in recent periods (see the general liquidity discussion on page 53). Historically, Arrow has principally relied on asset-based liquidity (i.e., funds in overnight investments and cash flow from maturing investments and loans) with liability-based liquidity as a secondary source of funds (the main liability-based sources are an overnight borrowing arrangement with correspondent banks, an arrangement for overnight borrowing and term credit advances from the FHLBNY, and an additional arrangement for short-term advances at the FRB discount window). Regular liquidity stress tests and tests of the contingent liquidity plan are performed to ensure that an adequate amount of available funds can be generated to meet a wide variety of potential liquidity crises.
Current wording
Liquidity and Access to Credit Markets: Arrow has not experienced, nor is it currently experiencing, any liquidity events. Arrow’s liquidity position should provide the necessary flexibility to address any unexpected near-term liquidity needs. Interest-earning cash balances at June 30, 2026 were $155.9 million compared to $185.1 million at December 31, 2025. Contingent lines of credit are also available. Operating collateralized lines of credit are established and available through the FHLBNY, FRB and other bank lines totaling approximately $1.1 billion. The general terms of Arrow's lines of credit have not changed significantly in recent periods (see the general liquidity discussion on page 55). Historically, Arrow has principally relied on asset-based liquidity (i.e., funds in overnight investments and cash flow from maturing investments and loans) with liability-based liquidity as a secondary source of funds (the main liability-based sources are an overnight borrowing arrangement with correspondent banks, an arrangement for overnight borrowing and term credit advances from the FHLBNY, and an additional arrangement for short-term advances at the FRB discount window). Regular liquidity stress tests and tests of the contingent liquidity plan are performed to ensure that an adequate amount of available funds can be generated to meet a wide variety of potential liquidity crises.
Previous wording
Changes in Earning Assets: The loan portfolio at March 31, 2026, was $3.4 billion, a decrease of $14.1 million, or 0.4%, from December 31, 2025. The following trends were experienced in our largest segments:
Current wording
Changes in Earning Assets: The loan portfolio at June 30, 2026, was $3.5 billion, an increase of $43.4 million, or 1.3%, from December 31, 2025. The following trends were experienced in our largest segments:
Previous wording
•Commercial and commercial real estate loans: This segment of the loan portfolio decreased by $2.6 million, or 0.3%, during the first three months of 2026. In the first three months of 2026, loans decreased due to various factors including, general rate environment, and pricing discipline.
Current wording
•Commercial and commercial real estate loans: This segment of the loan portfolio increased by $26.5 million, or 2.7%, during the first six months of 2026. In the first six months of 2026, loans increased due to various factors including the strength of the local economy and expanding customer relationships.
Previous wording
•Consumer loans: As of March 31, 2026, these loans, primarily auto loans originated through dealerships in New York and Vermont, decreased by $4.5 million, or 0.4%, from the December 31, 2025 balance. Loan growth was negatively impacted by severe winter weather, which slowed indirect auto originations. Inflation, high interest rates and prepayment/refinancing activity may continue to slow demand.
Current wording
•Consumer loans: As of June 30, 2026, these loans, primarily auto loans originated through dealerships in New York and Vermont, increased by $7.2 million, or 0.7%, from the December 31, 2025 balance. Inflation, high interest rates and prepayment/refinancing activity may continue to slow demand.
Previous wording
•Residential real estate loans: This segment decreased during the first three months of 2026 by $7.0 million, or 0.5%. Loan growth was negatively impacted by severe winter weather, which slowed residential loan originations.Overall economic conditions, including the level of interest rates may impact future origination levels.
Current wording
•Residential real estate loans: This segment increased during the first six months of 2026 by $9.8 million, or 0.7%. Overall economic conditions, including the level of interest rates may impact future origination levels.
Previous wording
Changes in Sources of Funds: Deposit balances reached $4.0 billion, an increase of $74.5 million. or 1.9% from December 31, 2025. The increase from December 31, 2025 was primarily due to seasonality of municipal deposits in the first quarter. Noninterest-bearing deposits represented 18.0% of total deposits at March 31, 2026, compared to 18.3% of total deposits on December 31, 2025. At March 31, 2026, total time deposits were $775.7 million. Municipal deposits increased $131.5 million, or 16.7% from December 31, 2025.
Current wording
Changes in Sources of Funds: Deposit balances reached $3.7 billion, a decrease of $284.3 million, or 7.2% from December 31, 2025. The decrease from December 31, 2025 was primarily due to the replacement of $300 million of brokered CDs with lower-costing FHLB term advances. The borrowings are used with the cash flow hedge to lower the overall cost of funds for the Bank. In addition, balances were affected by seasonality of municipal deposits in the first quarter. Noninterest-bearing deposits represented 20.1% of total deposits at June 30, 2026, compared to 18.3% of total deposits on December 31, 2025. At June 30, 2026, total time deposits were $456.5 million. Municipal deposits increased $131.5 million, or 16.7% from December 31, 2025.
Previous wording
Arrow uses reciprocal deposits for a select group of municipalities to reduce the amount of investment securities required to be pledged as collateral for municipal deposits where municipal deposits in excess of the FDIC insurance coverage limits were transferred to other participating banks, divided into portions so as to qualify for FDIC insurance coverage at each transferee bank. In return, reciprocal amounts are transferred to Arrow in equal amounts of deposits from the participant banks. The balances of reciprocal deposits were $709.3 million and $614.9 million at March 31, 2026 and December 31, 2025, respectively.
Current wording
Arrow uses reciprocal deposits for a select group of municipalities to reduce the amount of investment securities required to be pledged as collateral for municipal deposits where municipal deposits in excess of the FDIC insurance coverage limits were transferred to other participating banks, divided into portions so as to qualify for FDIC insurance coverage at each transferee bank. In return, reciprocal amounts are transferred to Arrow in equal amounts of deposits from the participant banks. The balances of reciprocal deposits were $678.8 million and $614.9 million at June 30, 2026 and December 31, 2025, respectively.
Previous wording
Uninsured Deposits: Arrow's deposit base includes both insured and uninsured deposits. Arrow continually monitors levels and composition of uninsured deposits. Uninsured deposit balances at March 31, 2026 and December 31, 2025 were estimated to be $1.1 billion and $917.6 million, respectively.
Current wording
Uninsured Deposits: Arrow's deposit base includes both insured and uninsured deposits. Arrow continually monitors levels and composition of uninsured deposits. Uninsured deposit balances were estimated to be $1.1 billion and $917.6 million at June 30, 2026 and December 31, 2025, respectively.
Previous wording
U.S. Government & Agency Obligations consisted solely of agency bonds issued by GSEs. These securities generally pay fixed semi-annual coupons with principal payments at maturity. For some, callable options are included that may impact the timing of these principal payments. Arrow's practice has been to purchase agency securities that are issued or guaranteed by GSEs with limited embedded optionality (call features). Final maturities are generally less than 5 years.
Current wording
U.S. Government & Agency Obligations consisted solely of agency bonds issued by GSEs. These securities generally pay fixed semi-annual coupons with principal payments at maturity. For some, callable options are included that may impact the timing of these principal payments. Arrow's practice has been to purchase agency securities that are issued or guaranteed by GSEs with limited embedded optionality (call features).
Previous wording
There were no sales of investment securities during the three month periods ended March 31, 2026 or 2025.
Current wording
There were no sales of investment securities during the six month periods ended June 30, 2026 or 2025.
Previous wording
The following table summarizes purchases of investment securities within the AFS and HTM portfolios for the three month periods ended March 31, 2026 and 2025, as well as proceeds from the maturity and calls of investment securities within each portfolio for the respective periods presented:
Current wording
The following table summarizes purchases of investment securities within the AFS and HTM portfolios for the three and six month periods ended June 30, 2026 and 2025, as well as proceeds from the maturity and calls of investment securities within each portfolio for the respective periods presented:
Previous wording
The table below shows the maturity schedule of loans outstanding as of March 31, 2026 classified according to fixed interest rates and variable interest rates (in thousands):
Current wording
The table below shows the maturity schedule of loans outstanding as of June 30, 2026 classified by loan category and according to fixed interest rates and variable interest rates (in thousands):
Previous wording
In the fourth quarter of 2025, the targeted Federal Funds rate fell 25 basis points. Future rate cuts are difficult to determine. However, Arrow believes it is well positioned for a variety of rate environments, see Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," on page 57 for further discussion.
Current wording
In the fourth quarter of 2025, the targeted Federal Funds rate fell 25 basis points. The Federal Funds rate has not changed subsequently. Future rate cuts are difficult to determine. See Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," on page 61 for further discussion.
Previous wording
Nonperforming assets at March 31, 2026 amounted to $4.9 million, a decrease from $8.7 million at December 31, 2025 and from $19.5 million at March 31, 2025. Historically, ratios of nonperforming assets to total assets have remained fairly consistent to the average ratios for our peer group (see page 37 for a discussion of the peer group). At December 31, 2025, the ratio of loans past due 90 or more days plus nonaccrual loans plus other real estate owned to total assets was 0.20% as compared to the 0.56% ratio of the peer group (the latest date for which peer group information is available). At March 31, 2026 the ratio was 0.11%.
Current wording
Nonperforming assets at June 30, 2026 amounted to $8.7 million, consistent with December 31, 2025 and an increase from $6.8 million at June 30, 2025. Historically, ratios of nonperforming assets to total assets have remained fairly consistent to the average ratios for our peer group (see page 37 for a discussion of the peer group). At March 31, 2026, the ratio of loans past due 90 or more days plus nonaccrual loans plus other real estate owned to total assets was 0.11% as compared to the 0.60% ratio of our peer group (the latest date for which peer group information is available). At June 30, 2026 the ratio was 0.19%.
Previous wording
At March 31, 2026, the loans in the above-referenced category totaled $25.1 million, a decrease from the $28.9 million of such loans at December 31, 2025. The March 31, 2026 total of non-current loans equaled 0.73% of loans then outstanding, compared to 0.84% at December 31, 2025.
Current wording
At June 30, 2026, the loans in the above-referenced category totaled $23.4 million, a decrease from the $28.9 million of such loans at December 31, 2025. The June 30, 2026 total of non-current loans equaled 0.67% of loans then outstanding, compared to 0.84% at December 31, 2025.
Previous wording
Stockholders' Equity: Stockholders’ equity was $440.1 million at March 31, 2026, an increase of $8.3 million, or 1.9%, from the December 31, 2025 level of $431.9 million. The increase in stockholders' equity over the first three months of 2026 principally reflected the following factors: the addition of (i) $13.5 million of net income for the period, (ii) other comprehensive loss of $0.7 million, and (iii) the issuance of $0.6 million of common stock through employee benefit plans, reduced by (iv) cash dividends of $5.0 million.
Current wording
Stockholders' Equity: Stockholders’ equity was $446.3 million at June 30, 2026, an increase of $14.5 million, or 3.3%, from the December 31, 2025 level of $431.9 million. The increase in stockholders' equity over the first six months of 2026 principally reflected the following factors: the addition of (i) $24.4 million of net income for the period and (ii) the issuance of $1.8 million of common stock through employee benefit plans, reduced by (iii) other comprehensive loss of $1.4 million and (iv) cash dividends of $9.9 million.
Previous wording
Arrow's primary sources of available liquidity are overnight investments in federal funds sold, interest-earning bank balances at the FRBNY, and cash flow from investment securities and loans. Certain investment securities are categorized as available-for-sale at time of purchase. The available-for-sale portfolio was $518.8 million at March 31, 2026, an increase of $22.9 million from the year-end 2025 level. Due to the potential for volatility in market values, Arrow may not always be able to sell securities on short notice at their carrying value, even to provide needed liquidity. Arrow also held interest-earning cash balances at March 31, 2026 of $256.5 million compared to $185.1 million at December 31, 2025.
Current wording
Arrow's primary sources of available liquidity are overnight investments in federal funds sold, interest-earning bank balances at the FRBNY, and cash flow from investment securities and loans. Certain investment securities are categorized as available-for-sale at time of purchase. The available-for-sale portfolio was $498.2 million at June 30, 2026, an increase of $2.3 million from the year-end 2025 level. Due to the potential for volatility in market values, Arrow may not always be able to sell securities on short notice at their carrying value, even to provide needed liquidity. Arrow also held interest-earning cash balances at June 30, 2026 of $155.9 million compared to $185.1 million at December 31, 2025.
Previous wording
In addition to liquidity from cash, short-term investments, investment securities and loans, Arrow has supplemented available operating liquidity with additional off-balance sheet sources such as a federal funds lines of credit with correspondent banks and credit lines with the FHLBNY. The federal funds lines of credit are with two correspondent banks totaling $23 million which were not drawn on during 2025 or the three months ended March 31, 2026.
Current wording
In addition to liquidity from cash, short-term investments, investment securities and loans, Arrow has supplemented available operating liquidity with additional off-balance sheet sources such as a federal funds lines of credit with correspondent banks and credit lines with the FHLBNY. The federal funds lines of credit are with two correspondent banks totaling $23 million which were not drawn on during 2025 or the three and six months ended June 30, 2026.
Showing the first 40 of 46 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Net interest income for the quarter increased by $3.4 million, or 10.4%, from the second quarter of 2025. Interest and fees on loans were $47.2 million for the second quarter of 2026, an increase from $45.6 million for the quarter ended June 30, 2025, primarily due to loan growth and higher loan yields. Interest expense for the second quarter of 2026 was $17.7 million, a decrease of $1.4 million versus the comparable quarter ended June 30, 2025, primarily due to active management of rates on interest-bearing deposits.
Current report — wording carried from elsewhere
Six Months Ended June 30, 2026 Compared With
Current report — wording carried from elsewhere
(Dollars in Thousands, Except Per Share Amounts)
Current report — wording carried from elsewhere
The following narrative discusses the period-to-period changes in net interest income, non-interest income, non-interest expense and income taxes: