ARROW FINANCIAL CORP - FORM 8-K - EX-99 - October 21, 2020

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250 Glen Street
Glens Falls, NY 12801
NASDAQ® Symbol: "AROW"
Website: arrowfinancial.com

Media Contact: Dori McDannold
Tel: (518) 415-4313

Arrow Reports $11.0 million in Q3 Net Income as COVID-19 Response Continues

•Net income was $11.0 million and diluted earnings per share (EPS) were $0.71 for the third quarter.
•Key profitability ratios were strong in the third quarter with return on average assets (ROA) of 1.23% and return on average equity (ROE) of 13.55%.
•Third quarter revenue increased $3.6 million, or 11.9%, over the prior year comparative quarter.
•Deposits were $3.3 billion at September 30, 2020, up $196.1 million from the previous quarter.
•$142.7 million in Small Business Administration Paycheck Protection Program loans have been funded.
•Provision for loan losses was $2.3 million in the third quarter, reflecting the continued uncertainty of the COVID-19 pandemic.

GLENS FALLS, N.Y. (October 21, 2020) – Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three month and nine month periods ended September 30, 2020. Net income for the third quarter of 2020 was $11.0 million, compared to $10.1 million in the third quarter of 2019. Net interest income increased to $24.9 million in the third quarter of 2020, compared to $22.3 million for the comparable quarter of 2019.

Arrow continues to manage its COVID-19 response with health and safety concerns as a top priority. In the third quarter, our Business Continuity Task Force focused on maintaining protocols that have allowed us to keep our team and customers healthy and our branches open. We actively monitor developments, and if future restrictions are imposed, we are confident in our ability to continue to provide essential banking services and meet our customers' needs.

"Throughout this pandemic, Arrow has remained strong, and we delivered again for our shareholders in the third quarter with solid earnings, and both a cash and stock dividend," said Thomas J. Murphy, President and CEO. "We continued to assist our customers and communities with temporary financial assistance, stimulus program support, and forgiveness assistance for our 1,400 Small Business Administration Paycheck Protection Program borrowers. As these challenging times continue, I thank our team for their commitment to safety while also demonstrating flexibility in adapting to the changing needs of our customers."

In the third quarter, Arrow opened a Saratoga National Bank Branch as well as a Capital Region Business Development Office in Latham, NY. Both locations continue our forward momentum and expansion into the Capital Region. Also in the third quarter, Arrow closed the Glens Falls National Bank Route 9 Queensbury Branch, consolidating the operations of that branch with those of other nearby branches.

The following expands on our COVID-19 response:

COVID-19 Safety Measures: Throughout the third quarter, Arrow maintained open lobbies for the majority of its bank branches and insurance offices. Safety measures continue to be followed, including clear shields for desks and teller lines, hand sanitizing stations, required face coverings, and social distancing markers. Traffic to lobbies is stable, and we continue to promote usage of no-contact alternatives such as digital banking, drive-ins and ATMs. While some positions have returned to the office, a significant portion of the Arrow workforce remains remote as part of our risk-mitigation strategy. Additionally, employee travel remains paused, self-quarantine protocol is in place for personal travel to hot spots, in-person meetings are minimized, social distancing is strongly enforced, and increased
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cleaning and sanitizing of our locations continues. We believe these measures have helped to keep our workforce healthy and has aided in community efforts to slow the spread of the COVID-19 virus in our footprint. We will continue to utilize these measures as appropriate based on public health guidance.

COVID-19 Customer Support: During the third quarter, support continued for customers experiencing financial hardship. We worked closely with individuals and businesses seeking temporary financial assistance. On the small business side, support for Small Business Administration Paycheck Protection Program borrowers shifted from taking new applications to preparing for loan forgiveness. In total, we have assisted more than 1,400 small businesses, and more than $142.7 million in such loans have been funded. Our team has engaged in regular communication around the ever-changing guidelines and the start of our digital forgiveness application process.

COVID-19 Operational Impact: While COVID-19 did not have a material adverse effect on our third quarter 2020 financial results, we are actively monitoring the impact of the pandemic on our business and results of operations and we can make no assurance as to the future negative impact on our operations or results. Currently, all of our banking locations and some of our insurance locations are open to the public, and through a mix of onsite and remote work amongst our team, we continue to meet customer needs and deliver high-quality service daily.

The following expands upon our third quarter financial results:

Loan Growth: Total loans reached $2.6 billion as of September 30, 2020, which represents an increase of $256.9 million, or 11.0%, from September 30, 2019. Loan growth for the third quarter of 2020 was $30.5 million. The consumer loan portfolio grew by $43.7 million, or 5.4%, as compared to September 30, 2019, primarily within the indirect automobile lending program. Total outstanding residential real estate loans increased $36.2 million, or 4.1%, as compared to September 30, 2019. Total outstanding commercial loans increased $176.9 million, or 27.6%, as compared to September 30, 2019. The increase in commercial loans includes $142.7 million in Small Business Administration Paycheck Protection Program loans.

Deposit Growth: At September 30, 2020, deposit balances reached $3.3 billion, up $650.3 million, or 24.9%, from the prior-year level. Deposit growth for the third quarter of 2020 was $196.1 million. Noninterest-bearing deposits represented 21.1% of total deposits at September 30, 2020, compared to 19.8% of total deposits on September 30, 2019. At September 30, 2020, other time deposits were $194.1 million, a decrease of $75.6 million compared to the prior year. Municipal deposits increased $218.8 million, or 34.6% from September 30, 2019.

Net Interest Income: Net interest income for the third quarter increased to $24.9 million, up 11.6% from $22.3 million in the comparable quarter of 2019. The net interest margin was 2.90% for the quarter, compared to 3.07% for the third quarter of 2019. The decrease in net interest margin from the prior year was due to a variety of factors, including lower interest rates, increased cash balances and the impact of participating in the Small Business Administration Paycheck Protection Program.

Noninterest Income: Noninterest income for the three months ended September 30, 2020 was $8.7 million, compared to $7.7 million in the comparable 2019 quarter. For the third quarter of 2020, the net gain on the sale of loans was $1.4 million. In addition, income from fiduciary activities for the three months ended September 30, 2020 increased over the comparable quarter of 2019.

Noninterest Expense: Noninterest expense for the third quarter of 2020 increased 4.1% to $17.5 million, from $16.8 million for the third quarter of 2019. Salaries and benefits increased $393 thousand. In the third quarter, both the Saratoga National Bank Latham Branch and the Capital Region Business Development Office opened, increasing occupancy expenses for the quarter.

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Provision for Income Taxes: The provision for income taxes was $2.8 million for the third quarter of 2020, compared to $2.6 million for the same quarter of 2019. The effective income tax rates for the nine month periods ended September 30, 2020 and 2019 were 20.7% and 20.3%, respectively.

Asset Quality: Asset quality remained strong at September 30, 2020, with continued low levels of nonperforming loans and net charge-offs. Nonperforming loans at September 30, 2020, were $6.3 million, up $1.6 million from the level at September 30, 2019. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.02% for the three month period ended September 30, 2020, a decrease from 0.05% for the three month period ended September 30, 2019. The allowance for loan losses was $28.4 million at September 30, 2020, which represented 1.10% of loans outstanding, as compared to 0.90% at September 30, 2019. Loan loss provision expense for the third quarter of 2020 was $2.3 million, up $1.8 million from the provision for loan losses for the comparable 2019 quarter. Although credit quality remains strong, the increase in provision for loan losses reflects the uncertainty resulting from the COVID-19 pandemic.

Liquidity: At September 30, 2020, Arrow’s liquidity position was strong. Deposit growth for the third quarter of 2020 was $196.1 million and interest-bearing cash balances at September 30, 2020 were $396.4 million. Arrow continues to be well-prepared to address volatility due to the COVID-19 pandemic, which may affect current cash and deposit balances. At September 30, 2020, contingent collateralized lines of credit were established and available through the Federal Home Loan Bank of New York and Federal Reserve Bank, totaling $1.3 billion. Arrow also has additional liquidity options available to it including unsecured lines of credit, such as Fed Funds and brokered markets.

Capital: Total stockholders’ equity was $325.7 million at September 30, 2020, up $33.4 million, or 11.4%, from September 30, 2019. Arrow's consistent earnings and measured dividend practices have created strong capital reserves, which make the company well-positioned to address the uncertainties related to the COVID-19 pandemic. Overall regulatory capital ratios also remained strong in 2020, with Arrow's common equity tier 1 ratio estimated to be 13.20% and the total risk-based capital ratio estimated to be 15.28% at September 30, 2020. These capital levels at Arrow and both of the subsidiary banks continue to exceed the "well capitalized" regulatory standard.

Cash and Stock Dividends: On September 15, 2020, the Company distributed a cash dividend of $0.26 per share. The cash dividend was 3% higher than the cash dividend paid by the Company in the third quarter of 2019 when adjusted for the 3% stock dividend distributed on September 27, 2019. Additionally, a 3% stock dividend was distributed on September 25, 2020. This is the 12th consecutive year the Company has declared a stock dividend.

Industry Recognition: Both of Arrow's banking subsidiaries, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, continue to hold BauerFinancial, Inc. 5-Star Superior Bank ratings.
_________

About Arrow: Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. The Company is the parent of Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company. Other subsidiaries include Upstate Agency, LLC and North Country Investment Advisers, Inc.

Non-GAAP Financial Measures Reconciliation: In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). The following measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission ("SEC") and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules. Certain non-GAAP financial measures
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include: tangible equity, return on tangible equity, tax-equivalent adjustment and related net interest income, tax-equivalent, and the efficiency ratio. Management believes that the non-GAAP financial measures disclosed by the Company from time to time are useful in evaluating the Company's performance and that such information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Non-GAAP financial measures may differ from similar measures presented by other companies. See the reconciliation of GAAP to non-GAAP measures in the section "Selected Quarterly Information."

Safe Harbor Statement: The information contained in this news release may contain statements that are not historical in nature but rather are based on management’s beliefs, assumptions, expectations, estimates and projections about the future, including, in particular, statements regarding the uncertainty surrounding the COVID-19 pandemic. These statements may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, involving a degree of uncertainty and attendant risk. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast, explicitly or by implication. The Company undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. This News Release should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, and other filings with the Securities and Exchange Commission.
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ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)
 Three Months Ended September 30Nine Months Ended September 30,
 2020201920202019
INTEREST AND DIVIDEND INCOME    
Interest and Fees on Loans$24,706 $24,620 $74,657 $70,543 
Interest on Deposits at Banks64 182 229 572 
Interest and Dividends on Investment Securities: 
Fully Taxable1,557 2,018 5,621 6,671 
Exempt from Federal Taxes969 1,132 3,017 3,606 
Total Interest and Dividend Income27,296 27,952 83,524 81,392 
INTEREST EXPENSE   
Interest-Bearing Checking Accounts264 500 1,061 1,435 
Savings Deposits806 2,317 4,450 5,926 
Time Deposits over $250,000292 451 1,263 1,362 
Other Time Deposits576 1,255 2,360 3,099 
Federal Funds Purchased and
Securities Sold Under Agreements to Repurchase		17 28 55 75 
Federal Home Loan Bank Advances219 820 865 3,513 
Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts		173 250 574 780 
Interest on Financing Leases49 28 148 71 
Total Interest Expense2,396 5,649 10,776 16,261 
NET INTEREST INCOME24,900 22,303 72,748 65,131 
Provision for Loan Losses2,271 518 8,083 1,445 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES22,629 21,785 64,665 63,686 
NONINTEREST INCOME   
Income From Fiduciary Activities2,265 2,212 6,613 6,571 
Fees for Other Services to Customers2,619 2,623 7,348 7,570 
Insurance Commissions1,713 1,936 5,077 5,590 
Net (Loss) Gain on Securities (72)146 (552)222 
Net Gain on Sales of Loans1,433 257 2,193 501 
Other Operating Income739 517 2,876 1,020 
Total Noninterest Income8,697 7,691 23,555 21,474 
NONINTEREST EXPENSE   
Salaries and Employee Benefits10,408 10,015 31,003 29,061 
Occupancy Expenses, Net1,427 1,324 4,221 4,023 
Technology and Equipment Expense3,228 3,305 9,807 9,689 
FDIC Assessments309 (480)770 (56)
Other Operating Expense2,115 2,627 6,685 7,634 
Total Noninterest Expense17,487 16,791 52,486 50,351 
INCOME BEFORE PROVISION FOR INCOME TAXES13,839 12,685 35,734 34,809 
Provision for Income Taxes2,793 2,618 7,402 7,074 
NET INCOME$11,046 $10,067 $28,332 $27,735 
Average Shares Outstanding 1:
    
Basic15,472 15,404 15,453 15,375 
Diluted15,481 15,441 15,467 15,417 
Per Common Share:    
Basic Earnings$0.71 $0.65 $1.83 $1.80 
Diluted Earnings0.71 0.65 1.83 1.80 
1 2019 Share and Per Share Amounts have been restated for the September 25, 2020, 3% stock dividend.

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ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
 September 30,
2020		December 31, 2019September 30,
2019
ASSETS  
Cash and Due From Banks$54,286 $47,035 $65,882 
Interest-Bearing Deposits at Banks396,380 23,186 26,416 
Investment Securities:
Available-for-Sale at Fair Value374,928 357,334 314,182 
Held-to-Maturity (Approximate Fair Value of $233,501 at September 30, 2020; $249,618 at December 31, 2019; and $259,128 at September 30, 2019)
224,799 245,065 255,095 
Equity Securities1,511 2,063 1,996 
FHLB and Federal Reserve Bank Stock5,574 10,317 6,627 
Loans2,592,455 2,386,120 2,335,591 
Allowance for Loan Losses(28,446)(21,187)(20,931)
Net Loans2,564,009 2,364,933 2,314,660 
Premises and Equipment, Net42,075 40,629 40,228 
Goodwill21,873 21,873 21,873 
Other Intangible Assets, Net1,789 1,661 1,713 
Other Assets90,460 70,179 64,150 
Total Assets$3,777,684 $3,184,275 $3,112,822 
LIABILITIES  
Noninterest-Bearing Deposits690,232 484,944 516,876 
Interest-Bearing Checking Accounts912,980 689,221 801,446 
Savings Deposits1,354,956 1,046,568 929,691 
Time Deposits over $250,000112,555 123,968 96,770 
Other Time Deposits194,135 271,353 269,764 
Total Deposits3,264,858 2,616,054 2,614,547 
Federal Funds Purchased and
Securities Sold Under Agreements to Repurchase		73,949 51,099 72,869 
Federal Home Loan Bank Overnight Advances— 130,000 48,000 
Federal Home Loan Bank Term Advances50,000 30,000 30,000 
Junior Subordinated Obligations Issued to Unconsolidated
Subsidiary Trusts		20,000 20,000 20,000 
Finance Leases5,228 5,254 5,263 
Other Liabilities37,989 30,140 29,915 
Total Liabilities3,452,024 2,882,547 2,820,594 
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at September 30, 2020, December 31, 2019 and September 30, 2019
— — — 
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,194,474 Shares Issued at September 30, 2020 and 19,606,449 at December 31, 2019 and September 30, 2019)
20,194 19,606 19,606 
Additional Paid-in Capital353,062 335,355 334,597 
Retained Earnings33,434 33,218 27,375 
Unallocated ESOP Shares (None at September 30, 2020 and December 31, 2019 and 5,151 Shares at September 30, 2019)— — (100)
Accumulated Other Comprehensive Loss(253)(6,357)(8,979)
Treasury Stock, at Cost (4,705,102 Shares at September 30, 2020; 4,608,258 Shares at December 31, 2019 and 4,632,657 Shares at September 30, 2019)
(80,777)(80,094)(80,271)
Total Stockholders’ Equity325,660 301,728 292,228 
Total Liabilities and Stockholders’ Equity$3,777,684 $3,184,275 $3,112,822 
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Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended9/30/20206/30/20203/31/202012/31/20199/30/2019
Net Income$11,046 $9,159 $8,127 $9,740 $10,067 
Transactions in Net Income (Net of Tax):     
Net Changes in Fair Value of Equity Investments(53)(80)(279)50 109 
Share and Per Share Data:1
    
Period End Shares Outstanding15,489 15,461 15,432 15,448 15,418 
Basic Average Shares Outstanding15,472 15,441 15,446 15,427 15,404 
Diluted Average Shares Outstanding15,481 15,448 15,476 15,476 15,441 
Basic Earnings Per Share$0.71 $0.59 $0.53 $0.63 $0.65 
Diluted Earnings Per Share0.71 0.59 0.53 0.63 0.65 
Cash Dividend Per Share0.252 0.252 0.252 0.252 0.245 
Selected Quarterly Average Balances:    
  Interest-Bearing Deposits at Banks$242,928 $155,931 $32,787 $28,880 $27,083 
  Investment Securities592,457 607,094 603,748 582,982 545,073 
  Loans2,582,253 2,518,198 2,394,346 2,358,110 2,308,879 
  Deposits3,082,499 2,952,432 2,670,009 2,607,421 2,472,528 
  Other Borrowed Funds136,117 129,383 170,987 177,877 231,291 
  Shareholders' Equity324,269 316,380 306,527 296,124 289,016 
  Total Assets3,583,322 3,437,155 3,180,857 3,113,114 3,023,043 
Return on Average Assets, annualized1.23 %1.07 %1.03 %1.24 %1.32 %
Return on Average Equity, annualized13.55 %11.64 %10.66 %13.05 %13.82 %
Return on Average Tangible Equity, annualized 2
14.61 %12.58 %11.55 %14.18 %15.05 %
Average Earning Assets$3,417,638 $3,281,223 $3,030,881 $2,969,972 $2,881,035 
Average Paying Liabilities2,545,435 2,457,690 2,362,515 2,293,804 2,213,642 
Interest Income27,296 28,002 28,226 28,367 27,952 
Tax-Equivalent Adjustment 3
284 281 288 321 344 
Interest Income, Tax-Equivalent 3
27,580 28,283 28,514 28,688 28,296 
Interest Expense2,396 3,160 5,220 5,449 5,649 
Net Interest Income24,900 24,842 23,006 22,918 22,303 
Net Interest Income, Tax-Equivalent 3
25,184 25,123 23,294 23,239 22,647 
Net Interest Margin, annualized2.90 %3.05 %3.05 %3.06 %3.07 %
Net Interest Margin, Tax-Equivalent, annualized 3
2.93 %3.08 %3.09 %3.10 %3.12 %
Efficiency Ratio Calculation: 4
    
Noninterest Expense$17,487 $17,245 $17,754 $17,099 $16,791 
Less: Intangible Asset Amortization56 57 58 60 61 
Net Noninterest Expense$17,431 $17,188 $17,696 $17,039 $16,730 
Net Interest Income, Tax-Equivalent$25,184 $25,123 $23,294 $23,238 $22,647 
Noninterest Income8,697 7,164 7,694 7,081 7,691 
Less: Net Changes in Fair Value of Equity Invest.(72)(106)(374)67 146 
Net Gross Income$33,953 $32,393 $31,362 $30,252 $30,192 
Efficiency Ratio51.34 %53.06 %56.42 %56.32 %55.41 %
Period-End Capital Information:     
Total Stockholders' Equity (i.e. Book Value)$325,660 $317,687 $309,398 $301,728 $292,228 
Book Value per Share 1
21.03 20.55 20.05 19.53 18.95 
Goodwill and Other Intangible Assets, net23,662 23,535 23,513 23,534 23,586 
Tangible Book Value per Share 1,2
19.50 19.03 18.53 18.01 17.42 
Capital Ratios:5
  
Tier 1 Leverage Ratio9.17 %9.32 %9.87 %9.98 %10.04 %
Common Equity Tier 1 Capital Ratio
13.20 %13.07 %12.84 %12.94 %12.93 %
Tier 1 Risk-Based Capital Ratio14.06 %13.94 %13.72 %13.83 %13.85 %
Total Risk-Based Capital Ratio15.28 %15.10 %14.76 %14.78 %14.81 %
Assets Under Trust Admin. & Investment Mgmt.$1,537,128 $1,502,866 $1,342,531 $1,543,653 $1,485,116 

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Arrow Financial Corporation
Selected Quarterly Information - Continued
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Footnotes:
1.
Share and Per Share Data have been restated for the September 25, 2020, 3% stock dividend.
2.Non-GAAP Financial Measures Reconciliation: Tangible Book Value and Tangible Equity exclude goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures which Arrow believes provides investors with information that is useful in understanding its financial performance.
9/30/20206/30/20203/31/202012/31/20199/30/2019
Total Stockholders' Equity (GAAP)$325,660 $317,687 $309,398 $301,728 $292,228 
Less: Goodwill and Other Intangible assets, net23,662 23,535 23,513 23,534 23,586 
Tangible Equity (Non-GAAP)$301,998 $294,152 $285,885 $278,194 $268,642 
Period End Shares Outstanding15,489 15,461 15,432 15,448 15,418 
Tangible Book Value per Share (Non-GAAP)$19.50 $19.03 $18.53 $18.01 $17.42 
Net Income11,046 9,159 8,127 9,740 10,067 
Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)14.61 %12.58 %11.55 %14.18 %15.05 %
3.Non-GAAP Financial Measures Reconciliation: Net Interest Margin, Tax-Equivalent is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which Arrow believes provides investors with information that is useful in understanding its financial performance.
9/30/20206/30/20203/31/202012/31/20199/30/2019
Interest Income (GAAP)$27,296 $28,002 $28,226 $28,367 $27,952 
Add: Tax-Equivalent adjustment
(Non-GAAP)		284 281 288 321 344 
Interest Income - Tax Equivalent
(Non-GAAP)		$27,580 $28,283 $28,514 $28,688 $28,296 
Net Interest Income (GAAP)$24,900 $24,842 $23,006 $22,918 $22,303 
Add: Tax-Equivalent adjustment
(Non-GAAP)		284 281 288 321 344 
Net Interest Income - Tax Equivalent
(Non-GAAP)		$25,184 $25,123 $23,294 $23,239 $22,647 
Average Earning Assets$3,417,638 $3,281,223 $3,030,881 $2,969,972 $2,881,035 
Net Interest Margin (Non-GAAP)*2.93 %3.08 %3.09 %3.10 %3.12 %
4.Non-GAAP Financial Measures: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. Arrow believes the efficiency ratio provides investors with information that is useful in understanding its financial performance. Arrow defines efficiency ratio as the ratio of noninterest expense to net gross income (which equals tax-equivalent net interest income plus noninterest income, as adjusted).
5.
For the current quarter, all of the regulatory capital ratios in the table above, as well as the Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below, are estimates based on, and calculated in accordance with, bank regulatory capital rules. All prior quarters reflect actual results. The CET1 ratio at September 30, 2020 listed in the tables (i.e., 13.20%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
9/30/20206/30/20203/31/202012/31/20199/30/2019
Total Risk Weighted Assets$2,321,637 $2,283,430 $2,275,902 $2,237,127 $2,184,214 
Common Equity Tier 1 Capital306,356 298,362 292,165 289,409 282,485 
Common Equity Tier 1 Ratio13.20 %13.07 %12.84 %12.94 %12.93 %

     * Quarterly ratios have been annualized
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Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
Quarter Ended:9/30/202012/31/20199/30/2019
Loan Portfolio  
Commercial Loans$275,921 $150,660 $142,135 
Commercial Real Estate Loans541,233 510,541 498,083 
  Subtotal Commercial Loan Portfolio817,154 661,201 640,218 
Consumer Loans849,526 811,198 805,798 
Residential Real Estate Loans925,775 913,721 889,575 
Total Loans$2,592,455 $2,386,120 $2,335,591 
Allowance for Loan Losses   
Allowance for Loan Losses, Beginning of Quarter$26,300 $20,931 $20,695 
Loans Charged-off(392)(503)(402)
Less Recoveries of Loans Previously Charged-off267 125 120 
Net Loans Charged-off(125)(378)(282)
Provision for Loan Losses2,271 634 518 
Allowance for Loan Losses, End of Quarter$28,446 $21,187 $20,931 
Nonperforming Assets   
Nonaccrual Loans$6,004 $4,005 $3,465 
Loans Past Due 90 or More Days and Accruing121 253 1,066 
Loans Restructured and in Compliance with Modified Terms157 143 150 
Total Nonperforming Loans6,282 4,401 4,681 
Repossessed Assets126 139 76 
Other Real Estate Owned— 1,122 1,198 
Total Nonperforming Assets$6,408 $5,662 $5,955 
Key Asset Quality Ratios   
Net Loans Charged-off to Average Loans,
Quarter-to-date Annualized		0.02 %0.06 %0.05 %
Provision for Loan Losses to Average Loans,
Quarter-to-date Annualized		0.35 %0.11 %0.09 %
Allowance for Loan Losses to Period-End Loans1.10 %0.89 %0.90 %
Allowance for Loan Losses to Period-End Nonperforming Loans452.82 %481.41 %447.15 %
Nonperforming Loans to Period-End Loans0.24 %0.18 %0.20 %
Nonperforming Assets to Period-End Assets0.17 %0.18 %0.19 %
Nine Month Period Ended:
Allowance for Loan Losses  
Allowance for Loan Losses, Beginning of Year$21,187 $20,196 
Loans Charged-off(1,360)(1,232)
Less Recoveries of Loans Previously Charged-off536 522 
Net Loans Charged-off(824)(710)
Provision for Loan Losses8,083 1,445 
Allowance for Loan Losses, End of Period$28,446 $20,931 
Key Asset Quality Ratios  
Net Loans Charged-off to Average Loans, Annualized0.04 %0.04 %
Provision for Loan Losses to Average Loans, Annualized0.43 %0.09 %
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