Overview

• U.S. regional bank's Q2 net income and EPS declined from prior quarter

• Q2 results impacted by merger costs and a specific commercial loan reserve

• Company completed Adirondack Bancorp acquisition, adding $1 bln in assets and 19 branches

Outlook

• Company expects Adirondack Bank acquisition to provide significant EPS accretion in 2027 and beyond

Result Drivers

• CREDIT LOSS PROVISION - Q2 results impacted by a $1.6 mln specific reserve for a commercial real estate loan after borrower bankruptcy, and higher provision due to loan growth

• MERGER COSTS - $1.0 mln in merger-related expenses from Adirondack Bancorp acquisition reduced net income

• NET INTEREST MARGIN PRESSURE - Net interest margin declined due to a shift in deposit mix toward higher-cost deposits and reversal of interest income from the non-performing loan

Company press release: ID:nPn4Ywlnna

Key Details

Metric	Beat/Miss	Actual	Consensus Estimate
Q2 Net Income		$10.96 mln
Q2 Net Interest Income		$35.93 mln

Analyst Coverage

• The current average analyst rating on the shares is "hold" and the breakdown of recommendations is 1 "strong buy" or "buy", 2 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the banks peer group is "buy."

• Wall Street's median 12-month price target for Arrow Financial Corp is $42.00, about 3.1% above its July 22 closing price of $40.73

• The stock recently traded at 11 times the next 12-month earnings vs. a P/E of 9 three months ago

Reuters Recommended Reads

• July 22 - CVB Financial Q2 net interest income rises on Heritage Commerce acquisition

• July 22 - Eagle Bancorp Q2 net income falls on higher credit loss provision

• July 22 - Fulton Financial Q2 adjusted EPS rises on Blue Foundry deal

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