Arrow Financial Corporation Reports $10.96 Million Net Income in Q2 2026, Driven by Increased Net Interest Income

Arrow Financial Corporation reported a net income of $10.96 million for the second quarter of 2026, a slight increase from $10.81 million in the same period last year. This growth was primarily driven by a 10.4% rise in net interest income, which reached $35.93 million, compared to $32.53 million in the prior year. The increase in net interest income was attributed to higher interest and fees on loans, which rose to $47.18 million from $45.60 million, alongside a decrease in interest expenses to $17.69 million from $19.04 million. The net interest margin improved to 3.42%, up from 3.15% a year earlier, reflecting a favorable shift in the yield on earning assets and a reduction in the cost of interest-bearing liabilities.

In terms of overall financial performance, Arrow's total assets increased to $4.48 billion as of June 30, 2026, marking a 0.8% rise from $4.45 billion at the end of 2025. The growth in assets was primarily driven by an increase in loans, which rose to $3.50 billion, up 1.3% from $3.45 billion. However, total deposits decreased by 7.2% to $3.66 billion, largely due to a reduction in brokered CDs, which were replaced by lower-cost FHLB borrowings. The company’s allowance for credit losses also increased to $36.18 million, representing 1.03% of total loans, compared to 0.99% at the end of 2025.

Strategically, Arrow Financial completed the acquisition of Adirondack Bancorp, Inc. on July 1, 2026, which is expected to enhance its market presence in Upstate and Central New York by adding 20 branches. The acquisition involved the issuance of approximately 1.98 million shares of Arrow common stock and cash payments totaling around $19.9 million. This merger is anticipated to provide significant operational synergies and expand Arrow's customer base.

Operationally, Arrow's non-interest income for the second quarter of 2026 was $8.26 million, an increase from $7.61 million in the previous year, driven by higher income from fiduciary activities and insurance commissions. Non-interest expenses also rose to $27.46 million, reflecting increased salaries and benefits costs, as well as expenses related to the acquisition of Adirondack Bancorp. The efficiency ratio improved slightly to 62.02% from 63.41%, indicating better expense management relative to income.

Looking ahead, Arrow Financial remains optimistic about its growth trajectory, bolstered by the recent acquisition and ongoing improvements in net interest income and asset quality. The company continues to monitor market conditions and adjust its strategies accordingly, particularly in light of potential interest rate fluctuations and economic uncertainties.