Arrow Posts Core Earnings of $0.97 per Share After Acquisition Added $900 Million in Deposits
Key Facts
Arrow Financial Corporation reported third-quarter 2026 results on October 29, posting core earnings per share of $0.97 after excluding merger expenses related to its acquisition of Adirondack Bancorp. The company said those expenses totaled about $15.6 million, or $0.66 per share, showing the difference between core profitability and the accounting impact of the costs of combining the two banks. The results followed the acquisition’s closing on July 1, in the first full quarter to reflect Arrow’s expansion through the deal. The transaction added about $600 million in loans and about $900 million in deposits. Business growth therefore coincided with ongoing integration costs, as operating indicators began to show the effect of the expanded business base.
Net interest income, the difference between the returns a company earns on its assets and what it pays for funding, rose to $48.7 million in the third quarter, up 35.6% from the second quarter. Arrow attributed the increase to higher average interest-earning assets as a result of the acquisition. Net interest margin on a tax-equivalent basis also rose to 3.81%, compared with 3.43% in the prior quarter. The company said the acquisition supported the improvement in margin, alongside an expansion of the bank’s balance sheet. The quarter-over-quarter comparison shows the effect of the addition on interest income and margin, while deal-related expenses continued to weigh on reported earnings during the integration period.
Apart from the deal’s impact, Arrow said loans grew organically by about $60 million during the quarter, equivalent to 6.8% on an annualized basis. The company’s total assets were about $5.5 billion at September 30, an increase of $1.1 billion, or 23.8%, from June 30. The company attributed most of the increase in assets to the acquisition and higher cash balances. This puts organic loan growth alongside the expansion achieved by adding Adirondack’s portfolio, with the balance sheet growing substantially during the quarter. Adirondack had assets of $942 million at December 31, 2025, along with $848 million in deposits and $624 million in loans.
The two companies announced the merger agreement on February 26, 2026, after their boards unanimously approved it. Under the deal’s terms, Adirondack shareholders were to receive 1.8610 Arrow shares and $18.72 in cash for each share; at the time of the announcement, the company estimated the total value at about $89.1 million, based on Arrow’s share price on February 25. On June 1, Arrow announced that it had received approval from the U.S. Office of the Comptroller of the Currency to proceed with the merger, with closing still subject to other approvals and customary closing conditions. At the acquisition’s closing on July 1, Arrow issued about 1.98 million shares with a fair value of approximately $81 million and paid about $19.9 million in cash, bringing total initial consideration to about $101 million. The deal added 20 branches to Arrow’s presence in northern and central New York State.
Arrow had estimated that the deal would add about 18% to earnings per share in 2027, with an internal rate of return of about 20% and a tangible book value earnback period of 2.9 years. Chief Executive David De Marco said the core banking system conversion was scheduled for the weeks following the results announcement. He added that the company remained on track to achieve about 95% of its targeted cost savings by the first quarter of 2027. Completing the systems integration marks the next operational phase after the deal’s closing, while the company has set the first quarter of 2027 as its target for realizing most of the savings. De Marco said: "We expect to complete the core banking system conversion over the next few weeks, and we remain on track to achieve about 95% of the projected cost savings by the first quarter of 2027."