Arrow Financial (AROW) AI Stock Analysis

• Market Cap: $550.17M
• Dividend Yield: 3.59%
• Average Volume (3M): 90.14K
• Price to Earnings (P/E): 11.8
• Beta (1Y): 0.86
• Revenue Growth: 6.86%
• EPS Growth: 6.11%
• Country: US
• Employees: 580
• Sector: Financial
• Sector Strength: 70
• Industry: Banks - Regional
• EPS (TTM): 0.85
• Shares Outstanding: 16,511,642
• 10 Day Avg. Volume: 90,933
• 30 Day Avg. Volume: 90,138
• PEG Ratio: 0.24
• Price to Book (P/B): 1.20
• Price to Sales (P/S): 2.14
• P/FCF Ratio: 14.32
• Enterprise Value/Market Cap: 1.00
• Enterprise Value/Revenue: 2.27
• Enterprise Value/Gross Profit: 3.48
• Enterprise Value/Ebitda: 9.24
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 3.45
• Revenue Forecast (FY): $182.50M

• Rating: 66 Neutral
• Price Target: $36.00 ▲(18.07% Upside)
• Action: Downgraded Date: 03/07/26
• Date: Action: Downgraded 03/07/26

The score is primarily held back by the sharp 2025 cash flow deterioration despite improved profitability and a strong, low-leverage balance sheet. Valuation (low P/E and solid dividend yield) and positive corporate actions (dividend raise and expansion-oriented acquisition announcement) provide support, while technical indicators are mixed and do not add strong momentum.

Positive Factors

Conservative balance sheet and growing tangible equity

A very low debt-to-equity ratio and a sizable, growing tangible equity base give Arrow durable capital resilience. That conservatism supports regulatory cushions, loss-absorbing capacity in downturns, ability to fund organic growth or M&A and underpins dividend policy over the medium term.

Steady revenue growth and stronger margins in 2025

Consistent top-line growth alongside improved operating and net margins reflects durable core banking profitability driven by higher asset yields and improving funding costs. This strengthens net interest income reliability and provides ongoing cash flow potential if margins are sustained.

Strategic acquisition and dividend increase

The Adirondack deal and a modest dividend raise signal strategic expansion and shareholder return discipline. Acquisition increases scale and local market density for cross-sell, while a higher payout reflects management confidence in recurring earnings and capital management over the next several quarters.

Negative Factors

Sharp deterioration in operating and free cash flow

A collapse in operating/free cash flow despite reported earnings raises durable concerns about earnings quality and cash convertibility. Weak cash generation can strain the ability to fund dividends, organic investments or acquisitions without raising external capital, reducing financial flexibility.

Margin volatility; profitability below prior-cycle peaks

Though profitability recovered, material compression from prior-cycle net margins implies structural pressure on return generation. If higher funding costs, competition, or asset-yield pressures persist, restoring historical ROE will require sustained revenue gains or expense reduction, challenging medium-term earnings durability.

Acquisition execution and regulatory approval risk

The Adirondack transaction materially changes scale but depends on regulatory and shareholder approvals and post-close integration. Delays, approval conditions, or integration costs could dilute near-term returns, consume management bandwidth, and require additional capital or expense to realize projected synergies.

Arrow Financial Business Overview & Revenue Model

Company Description

Arrow Financial Corporation, a bank holding company, provides commercial and consumer banking, and financial products and services. The company's deposit products include demand deposits, interest-bearing checking accounts, savings deposits, time deposits, and other time deposits. Its lending activities comprise commercial loans, such as term loans, time notes, and lines of credit; and commercial real estate loans to finance real estate purchases, refinancing, expansions, and improvements to commercial properties, as well as commercial construction and land development loans to finance projects. The company's lending activities also include consumer installment loans to finance personal expenditures, personal lines of credit, overdraft protection, and automobile loans; and residential real estate loans, fixed home equity loans, and home equity lines of credit for consumers to finance home improvements, debt consolidation, education, and other uses. In addition, it maintains an indirect lending program; and sells residential real estate loan originations into the secondary market. Further, the company provides retirement planning, trust, and estate administration services for individuals; and pension, profit-sharing, and employee benefit plan administration services for corporations. Additionally, it offers insurance agency services comprising group health care policies and life insurance, and property and casualty insurance products; and investment advisory services to its proprietary mutual funds, as well as holds a real estate investment trust. The company operates in the northeastern region of New York State in Warren, Washington, Saratoga, Essex, Clinton, Rensselaer, Albany, and Schenectady counties, as well as surrounding areas. It owns 26 branch banking offices; and leases 12 branch banking offices, as well as two residential loan origination offices. Arrow Financial Corporation was founded in 1851 and is headquartered in Glens Falls, New York.

How the Company Makes Money

Arrow Financial generates revenue through multiple streams, primarily from interest income on loans and mortgages, as well as fees associated with its banking services. The company earns significant income from its insurance operations through premiums collected from policyholders. Additionally, it may derive revenue from investment income generated by managing assets and investing in securities. Strategic partnerships with other financial institutions and service providers further enhance its offerings and contribute to its earnings, allowing for cross-selling opportunities and expanded market reach.

Arrow Financial Financial Statement Overview

Summary

Income statement and balance sheet are solid (steady revenue growth, profitability rebound in 2025, low leverage and growing equity base), but this is materially offset by a sharp deterioration in 2025 operating/free cash flow that raises concerns about earnings-to-cash quality.

Income Statement

Revenue has grown steadily from 2020 to 2025 (2025 up ~3% vs. 2024), showing a generally positive top-line trajectory. Profitability remains solid in 2025 with an operating margin of ~23% and net margin of ~18%, and net income rebounded strongly versus 2024. The key weakness is margin volatility: profitability peaked in 2021–2022 (net margin ~30–34%) and then compressed meaningfully in 2023–2025, indicating a less favorable earnings environment versus the prior cycle.

Balance Sheet

The balance sheet appears conservatively positioned, with low leverage in 2025 (debt-to-equity ~0.07) and a sizable equity base that has grown over time. Returns improved in 2025 (return on equity ~10%), up from 2023–2024 levels, indicating better earnings power on the capital base. A notable risk is that returns are still below the 2021–2022 peak (~13–14%), suggesting profitability is not fully back to prior-cycle strength despite stronger capital positioning.

Cash Flow

Cash generation weakened sharply in 2025: operating cash flow and free cash flow fell to roughly $2.0M, down dramatically from 2024 levels, and free cash flow growth was deeply negative. While free cash flow still covered net income in 2025 per the provided figures, the very low level of operating cash flow relative to earnings raises concerns about the sustainability/quality of cash generation versus reported profitability. Prior years were healthier (e.g., 2020–2022 generated meaningfully higher operating and free cash flow), highlighting the 2025 drop as the main red flag.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	242.58M	223.07M	191.68M	160.55M	147.92M
Gross Profit	158.32M	134.63M	130.57M	144.44M	142.45M
EBITDA	55.39M	42.72M	44.24M	70.46M	72.23M
Net Income	43.95M	29.71M	30.07M	48.80M	49.86M
Balance Sheet
Total Assets	4.45B	4.31B	4.17B	3.97B	4.03B
Cash, Cash Equivalents and Short-Term Investments	29.13M	617.66M	640.30M	638.15M	1.02B
Total Debt	29.19M	33.60M	71.57M	106.92M	70.17M
Total Liabilities	4.01B	3.91B	3.79B	3.62B	3.66B
Stockholders Equity	431.85M	400.90M	379.77M	353.54M	371.19M
Cash Flow
Free Cash Flow	36.19M	28.87M	13.50M	45.46M	61.07M
Operating Cash Flow	41.28M	34.47M	20.58M	59.71M	68.21M
Investing Cash Flow	-61.45M	-88.95M	-82.65M	-393.06M	-274.60M
Financing Cash Flow	79.81M	66.49M	139.95M	-59.69M	283.10M

Arrow Financial Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 30.49
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AROW, the sentiment is Neutral. The current price of 30.49 is below the 20-day moving average (MA) of 33.05, below the 50-day MA of 33.42, and above the 200-day MA of 29.39, indicating a neutral trend. The MACD of -0.46 indicates Positive momentum. The RSI at 40.31 is Neutral, neither overbought nor oversold. The STOCH value of 25.68 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for AROW.

Arrow Financial Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
AROW	66 Neutral	$550.17M	11.79	10.58%	3.59%	6.86%	6.11%
ACNB	63 Neutral	$489.20M	13.39	9.18%	2.78%	41.95%	-4.72%
BWB	63 Neutral	$482.48M	10.41	8.63%	―	13.96%	25.74%
FFIC	53 Neutral	$514.35M	27.71	2.67%	5.16%	-11.91%	-235.73%
NFBK	49 Neutral	$562.98M	576.05	0.11%	4.38%	6.08%	52.64%
FFWM	46 Neutral	$485.12M	-15.87	-15.74%	―	-6.47%	-75.82%

Arrow Financial Corporate Events

Arrow Financial to Acquire Adirondack Bancorp in Merger

Arrow Financial Corporation said on February 25, 2026, that it signed an agreement to acquire Adirondack Bancorp in a two-step merger, followed by the combination of Adirondack Bank into Arrow Bank National Association. Adirondack shareholders are set to receive Arrow stock and cash, while governance plans include adding Adirondack’s CEO Rocco Arcuri Sr. to Arrow’s boards and naming him Regional President, underscoring Arrow’s push to expand its banking footprint.

The deal, which is structured as a tax-free reorganization, is subject to Adirondack shareholder approval, multiple bank regulatory clearances and Nasdaq listing of the new Arrow shares. Arrow has secured voting and lock-up agreements from key Adirondack shareholders to support the transaction and manage post-closing share sales, signaling strong deal support but leaving completion dependent on customary regulatory and closing conditions.

The most recent analyst rating on (AROW) stock is a Buy with a $36.00 price target. To see the full list of analyst forecasts on Arrow Financial stock, see the AROW Stock Forecast page.

Arrow Financial boosts dividend after record 2025 earnings

On January 28, 2026, Arrow Financial said long-serving director Elizabeth A. Miller will retire from its board after the 2026 annual meeting, ending a tenure that began in 2017. The company also reported record fourth-quarter 2025 net income of $14.0 million, or $0.85 per share, up sharply from $4.5 million and $0.27 a year earlier, and full-year 2025 earnings of $44.0 million, or $2.65 per share, compared with $29.7 million and $1.77 in 2024, driven by strong net interest margin expansion, higher net interest income and improved asset yields alongside lower funding costs. Return on average assets reached 1.24% for the quarter and 1.00% for the year, tangible book value per share grew more than 10% in 2025, and credit quality remained solid with low net charge-offs, underscoring the operational benefits of its recent system integration and strategic execution. Reflecting the stronger performance and signaling confidence in future earnings capacity, the board on January 28, 2026 declared a first-quarter 2026 cash dividend of $0.30 per share, payable on February 25, 2026 to shareholders of record on February 11, 2026, a 3.4% increase from the prior quarterly payout.

The most recent analyst rating on (AROW) stock is a Buy with a $35.00 price target. To see the full list of analyst forecasts on Arrow Financial stock, see the AROW Stock Forecast page.