Core EPS of $0.97 beat the $0.94 consensus, and NIM expansion to 3.81% signals the ADK acquisition is delivering on accretion. However, TBV dilution of 9.4% and a CET1 ratio decline to 11.63% from 13.21% warrant monitoring. The Nov 7-8 core system conversion is a key operational milestone; successful integration and realization of the targeted 95% cost savings by Q1 2027 will determine whether the deal's strategic benefits materialize.
Price Chart
Executive Summary
Arrow Financial reported Q3 2026 GAAP net income of $5.7M ($0.31 EPS), down from $11.0M ($0.66 EPS) in Q2 2026, due to $15.6M in merger-related expenses from the July 1 acquisition of Adirondack Bancorp. Core EPS (excluding MRE) was $0.97, above the $0.94 consensus. Net interest margin expanded to 3.81% from 3.43% linked quarter, driven by the acquisition's lower-cost deposits and purchase accounting accretion. Tangible book value per share fell to $23.03 from $25.44 in Q2, reflecting $2.39 of TBV dilution from the deal and a $0.69 impact from rising rates on the investment portfolio.
Key Financial Metrics
Key Facts
- Q3 2026 GAAP net income $5.7M ($0.31 diluted EPS) vs Q2 2026 $11.0M ($0.66 EPS)
- Core EPS (excl. MRE) $0.97 vs consensus $0.94
- Net interest income $48.7M, up 35.6% linked quarter; NIM (FTE) 3.81% vs 3.43%
- Merger-related expenses of $15.6M in Q3; core ROAA 1.33% vs reported 0.42%
- Organic loan growth ~$60M (6.8% annualized); total loans $4.14B after adding ~$600M from ADK
- Tangible book value per share $23.03, down from $25.44 in Q2 (9.4% dilution from acquisition)
- CET1 ratio 11.63% vs 13.21% in Q2; still above well-capitalized minimums
- Quarterly dividend maintained at $0.30 per share
- Core system conversion scheduled for Nov 7-8; 95% of cost savings expected by Q1 2027
Financial Impact
Reported net income fell $5.3M QoQ due to $15.6M MRE; core net income was $18.1M vs $11.7M in Q2. NIM expanded 38bps to 3.81%. TBV declined $2.41 per share.
Risk Factors
- Integration risk from the ADK acquisition; core system conversion on Nov 7-8 could cause operational disruptions
- TBV dilution of 9.4% and elevated goodwill ($69.8M) reduce book value protection
- Net charge-offs rose to 0.21% annualized from 0.08% in Q2, partly from a previously reserved CRE loan
- AOCI loss deepened to $18.3M from $5.4M at year-end due to rising rates, pressuring capital ratios
- Cost savings not yet fully realized; operating expenses remain elevated with dual systems
Market Snapshot
Investment Themes
Documents Analyzed
This report is based on 7 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| 8-K Filing (Primary) | 0000717538-26-000134 |
| Document: q32026investorpresentati.htm | 0000717538-26-000134 |
| Document: arow-20261028.htm | 0000717538-26-000134 |
| Document: 0000717538-26-000134-index-headers.html | 0000717538-26-000134 |
| Document: 0000717538-26-000134-index.html | 0000717538-26-000134 |
| Document: 0000717538-26-000134.txt | 0000717538-26-000134 |
| 8-K Data (Synthetic) | 0000717538-26-000134 |
Filters
| Type | Now | ||||
|---|---|---|---|---|---|
Oct 29, 2026 3d ago | 8-K | $38.67 | awaiting T+60 | awaiting T+60 | $38.36 (−0.79%) |
Sep 10, 2026 7w ago | 8-K | $39.07 | awaiting T+60 | awaiting T+60 | $38.36 (−1.82%) |
Jul 23, 2026 14w ago | 8-K | $39.14 $36.80 | ▲ +5.98% | ▲ +10.53% | $38.36 (+1.99%) |
Jul 1, 2026 17w ago | 8-K | $42.07 $37.33 | ▼ −11.27% | ▼ −14.22% | $38.36 (−8.82%) |
Jun 3, 2026 21w ago | 8-K | $35.78 $38.30 | ▲ +7.04% | ▲ +4.54% | $38.36 (+7.21%) |
May 8, 2026 25w ago | EFFECT | $36.84 $40.79 | ▲ +10.71% | ▲ +5.87% | $38.36 (+4.12%) |
Apr 30, 2026 26w ago | 8-K | $36.55 $40.17 | ▲ +9.92% | ▲ +6.81% | $38.36 (+4.96%) |
Apr 23, 2026 27w ago | DEFA14A | $36.24 $41.29 | ▲ +13.94% | ▲ +8.92% | $38.36 (+5.85%) |
Mar 27, 2026 31w ago | 10-K/A | $32.75 $40.41 | ▲ +23.40% | ▲ +7.33% | $38.36 (+17.14%) |
Feb 26, 2026 35w ago | 8-K | $34.02 $36.76 | ▲ +8.06% | ▲ +0.31% | $38.36 (+12.77%) |
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