PR Newswire | Jan 28, 2021 08:10AM EST

01/28 07:09 CST

Arrow Reports Annual Net Income of $40.8 million and Continued COVID-19 Response- Net income for 2020 reached a record high of $40.8 million, up 8.9% year-over-year.- Diluted Earnings Per Share (EPS) grew to $2.64 for the year.- Profitability ratios remained solid in 2020, as return on average equity (ROE) was 12.77% and return on average assets (ROA) was 1.17%.- Record highs were also achieved at year-end for total assets and total equity.- Significant support provided throughout the pandemic for employees, customers and the community. GLENS FALLS, N.Y., Jan. 28, 2021

GLENS FALLS, N.Y., Jan. 28, 2021 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS(r) - AROW) announced operating results for the three- and 12-month periods ended December 31, 2020. For the fourth quarter of 2020, net income was $12.5 million, an increase of $2.8 million, or 28.3%, from the fourth quarter of 2019. For the year ended December 31, 2020, net income was a record $40.8 million, up 8.9% over net income of $37.5 million for 2019. Diluted EPS was $0.81 for the fourth quarter, up 28.6% from $0.63 from the comparable 2019 quarter, and $2.64 for 2020, up 8.5% from $2.43 in 2019.

Profitability ratios remained solid in 2020, as return on average equity (ROE) and return on average assets (ROA) were 12.77% and 1.17%, respectively, as compared to 13.17% and 1.24%, respectively, for 2019. ROE was 14.98% for the fourth quarter, up from 13.05% from the fourth quarter of 2019. ROA was 1.34% for the fourth quarter, which represents an increase from 1.24% for the comparable 2019 quarter.

"Arrow delivered a strong performance in 2020 amid the challenges of a global pandemic, ending the year with record earnings, steady growth, sustained profitability and credit quality," said Arrow President and CEO Thomas J. Murphy. "As we reflect on the year, we are proud to have provided temporary financial assistance, stimulus program support, Paycheck Protection Program loans and charitable contributions in our communities. I thank our team for their continued focus on safety and customer needs during these unprecedented times."

In 2020, Arrow opened a 12th Saratoga National Bank Branch, as well as a Capital Region Business Development Office in Latham, New York. Additionally, Glens Falls National Bank consolidated Branches in Queensbury and Greenwich into nearby locations.

COVID-19 Response:As part of our continued focus on health and safety, Arrow again limited access at its facilities to appointment-only in early 2021. Drive-ins and ATMs are currently open, and we continue to promote digital banking alternatives. Inside our facilities, safety measures continue to be followed, including required face coverings, social distancing and personal protective equipment such as shields and hand sanitizing stations, along with frequent cleanings.

Requests in our banks for financial hardship assistance were reduced from early pandemic levels. Loans being deferred as a result of the COVID-19 pandemic were $15.3 million as of December 31, 2020. We also worked closely with small business borrowers from the first round of Small Business Administration Paycheck Protection Program (PPP) loans on the forgiveness process. Currently, we are helping customers obtain funding through an additional round of PPP support. As of year-end, we had assisted more than 1,400 small businesses, with more than $142.7 million in aggregate PPP loans.

We continue to monitor the impact of the pandemic on our business and results of operations. Remote work is encouraged whenever feasible for our employees. In addition, work-related travel remains paused and in-person meetings have been minimized. We remain committed to delivering essential financial services to our communities.

The following expands on fourth quarter and 2020 results:

Loan Growth:At December 31, 2020, total loan balances reached $2.6 billion, up $209 million, or 8.8%, from the prior-year level. The consumer loan portfolio grew by $48.6 million, or 6.0%, over the balance at December 31, 2019, primarily as a result of continued strength in the indirect automobile lending program. The residential real estate loan portfolio increased $9.2 million, or 1.0%. The increase in the real estate loan portfolio is net of approximately $83.9 million of loans sold in 2020. Commercial loans, including commercial real estate, increased $151.1 million, or 22.9%, over the balances at December 31, 2019. The increase in commercial loans includes $114.6 million in remaining PPP loans.

Deposit Growth:At December 31, 2020, total deposit balances reached $3.2 billion, up by $618.7 million, or 23.6%, from the prior-year level. Noninterest-bearing deposits grew by $216.4 million, or 44.6%, during 2020, and represented 21.7% of total deposits at year-end as compared to the prior-year level of 18.5%. At December 31, 2020, total time deposits decreased $117.7 million from the prior-year level, including $80.6 million in brokered time deposits.

Net Interest Income:Net interest income for the year ending December 31, 2020 was $99.2 million, an increase of $11.2 million, or 12.7%, from the prior year. Loan growth generated $100.5 million in interest and fees on loans, an increase of 5.3% from the $95.5 million in interest and fees on loans for the year ending December 31, 2019. Interest expense for the year ending December 31, 2020 was $12.7 million. This is a decrease of $9.0 million, or 41.5%, from the $21.7 million in expense for the year ending December 31, 2019. The net interest margin was 2.99% for the year ending December 31, 2020, as compared to 3.05% for the year ended December 31, 2019. In the fourth quarter of 2020, the net interest margin was 2.96%, as compared to 3.06% for the fourth quarter of 2019. The decrease in net interest margin from the prior year was due to a variety of factors, including lower interest rates and increased cash balances.

Noninterest Income:Noninterest income was $32.7 million for the year ending December 31, 2020, an increase of 14.4% as compared to $28.6 million for the year ending December 31, 2019. Favorable market conditions in 2020 contributed to a $3.3 million increase in the gain on the sale of loans. Income generated from fiduciary activities as well as fees for other services from customers were flat compared to the prior year. Insurance revenue decreased by $306 thousand from the prior year. Noninterest income represented 24.8% of total revenues in 2020 as compared to 24.5% for the year ending December 31, 2019. Other operating income increased in 2020 as compared to 2019 as a result of several factors, including gain on sale of fixed assets and other real estate owned, as well as increased income related to interest rate swap agreements and bank owned life insurance.

Noninterest Expense:Noninterest expense for the year ending December 31, 2020 increased by $3.2 million, or 4.8%, to $70.7 million compared to $67.5 million in 2019. The largest component of noninterest expense is salaries and benefits paid to our employees, which totaled $42.1 million in 2020. Noninterest expense for the three-month period ended December 31, 2020 increased $1.1 million, or 6.4%, as compared to the fourth quarter of 2019.

Provision for Income Taxes:The provision for income taxes for 2020 was $11.0 million compared to $9.6 million for 2019. The effective income tax rates for 2020 and 2019 were 21.3% and 20.4%, respectively.

Asset Quality:Asset quality remained strong in 2020, as evidenced by low levels of nonperforming assets and charge-offs. Net loan losses for the fourth quarter of 2020, expressed as an annualized percentage of average loans outstanding, were 0.07%, an increase from 0.06% for the fourth quarter of 2019. Net loan losses for the full year 2020 were 0.05% of average loans outstanding, consistent with the 2019 ratio. Nonperforming assets of $6.6 million at December 31, 2020, represented 0.18% of period-end assets, consistent with December 31, 2019.

Arrow's allowance for loan losses was $29.2 million at December 31, 2020, which represented 1.13% of loans outstanding, an increase from 0.89% at year-end 2019. Although credit quality remains strong, the increase in the allowance reflects the uncertainty related to the COVID-19 pandemic. When expressed as a percentage of nonperforming loans, the allowance for loan loss coverage ratio was 456.3% at year-end 2020. Arrow adopted the Current Expected Credit Losses (CECL) accounting standard as of January 1, 2021.

Liquidity:At December 31, 2020, Arrow's liquidity position was strong. Interest-bearing cash balances at December 31, 2020 were $338.9 million. Arrow continues to be well-prepared to address any unexpected volatility, which may affect cash flow and deposit balances. At December 31, 2020, contingent collateralized lines of credit were established and available through the Federal Home Loan Bank of New York and Federal Reserve Bank, totaling $1.5 billion. Arrow also has additional liquidity options currently available, including unsecured lines of credit such as Fed Funds and brokered markets.

Capital:Total shareholders' equity grew to a record of $334.4 million at period-end, an increase of $32.7 million, or 10.8%, above the year-end 2019 balance. Arrow's regulatory capital ratios remained strong in 2020. At December 31, 2020, Arrow's Common Equity Tier 1 Capital Ratio was 13.39% and Total Risk-Based Capital Ratio was 15.48%. The capital ratios of Arrow and both its subsidiary banks continued to significantly exceed the "well capitalized" regulatory standards.

Cash and Stock Dividends:On December 15, 2020, Arrow distributed a cash dividend of $0.26 per share. The cash dividend was 3% higher than the cash dividend paid by Arrow in the fourth quarter of 2019 when adjusted for the 3% stock dividend distributed on September 25, 2020.

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 North Country Investment Advisers, Inc. and Upstate Agency, LLC.

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 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. 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.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts - Unaudited)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

INTEREST AND DIVIDEND INCOME

Interest and Fees on Loans $ 25,835 $ 24,924 $ 100,492 $ 95,467

Interest on Deposits at Banks 92 150 321 722

Interest and Dividends on InvestmentSecurities:

Fully Taxable 1,510 2,212 7,131 8,883

Exempt from Federal Taxes 935 1,081 3,952 4,687

Total Interest and Dividend Income 28,372 28,367 111,896 109,759

INTEREST EXPENSE

Interest-Bearing Checking Accounts 231 550 1,292 1,985

Savings Deposits 640 2,473 5,090 8,399

Time Deposits over $250,000 202 570 1,465 1,932

Other Time Deposits 422 1,125 2,782 4,224

Federal Funds Purchased and

Securities Sold Under Agreements to Repurchase 5 25 60 100

Federal Home Loan Bank Advances 198 439 1,063 3,952

Junior Subordinated Obligations Issued to 172 239 746 1,019Unconsolidated Subsidiary Trusts

Interest on Financing Leases 48 28 196 99

Total Interest Expense 1,918 5,449 12,694 21,710

NET INTEREST INCOME 26,454 22,918 99,202 88,049

Provision for Loan Losses 1,236 634 9,319 2,079

NET INTEREST INCOME AFTER PROVISION FOR LOAN 25,218 22,284 89,883 85,970LOSSES

NONINTEREST INCOME

Income From Fiduciary Activities 2,277 2,238 8,890 8,809

Fees for Other Services to Customers 2,655 2,606 10,003 10,176

Insurance Commissions 1,799 1,592 6,876 7,182

Net Gain (Loss) on Securities 88 67 (464) 289

Net Gain on Sales of Loans 1,696 121 3,889 622

Other Operating Income 588 457 3,464 1,477

Total Noninterest Income 9,103 7,081 32,658 28,555

NONINTEREST EXPENSE

Salaries and Employee Benefits 11,058 9,341 42,061 38,402

Occupancy Expenses, Net 1,393 1,384 5,614 5,407

Technology and Equipment Expense 3,169 3,365 12,976 13,054

FDIC Assessments 293 213 1,063 157

Other Operating Expense 2,279 2,796 8,964 10,430

Total Noninterest Expense 18,192 17,099 70,678 67,450

INCOME BEFORE PROVISION FOR INCOME TAXES 16,129 12,266 51,863 47,075

Provision for Income Taxes 3,634 2,526 11,036 9,600

NET INCOME $ 12,495 $ $ 40,827 $ 37,475 9,740

Average Shares Outstanding^1:

Basic 15,499 15,427 15,465 15,388

Diluted 15,515 15,476 15,479 15,433

Per Common Share: $ $ $ 0.81 0.63 $ 2.64 2.44Basic Earnings

Diluted Earnings 0.81 0.63 2.64 2.43

^1 Share and per share data have been restated for the September 25, 2020, 3%stock dividend.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Amounts - Unaudited)

December 31, December 31,

2020 2019

ASSETS

Cash and Due From Banks $ 42,116 $ 47,035

Interest-Bearing Deposits at Banks 338,875 23,186

Investment Securities:

Available-for-Sale 365,287 357,334

Held-to-Maturity (Approximate Fair Value of $226,576 at December 31, 2020, 218,405 245,065and $249,618 at December 31, 2019)

Equity Securities 1,636 2,063

Other Investments 5,349 10,317

Loans 2,595,030 2,386,120

Allowance for Loan Losses (29,232) (21,187)

Net Loans 2,565,798 2,364,933

Premises and Equipment, Net 42,612 40,629

Goodwill 21,873 21,873

Other Intangible Assets, Net 1,950 1,661

Other Assets 84,735 70,179

Total Assets $ 3,688,636 $ 3,184,275

LIABILITIES

Noninterest-Bearing Deposits $ 701,341 $ 484,944

Interest-Bearing Checking Accounts 832,434 689,221

Savings Deposits 1,423,358 1,046,568

Time Deposits over $250,000 123,622 123,968

Other Time Deposits 153,971 271,353

Total Deposits 3,234,726 2,616,054

Federal Funds Purchased and 17,486 51,099 Securities Sold Under Agreements to Repurchase

Federal Home Loan Bank Overnight Advances - 130,000

Federal Home Loan Bank Term Advances 45,000 30,000

Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts 20,000 20,000

Finance Leases 5,217 5,254

Other Liabilities 31,815 30,140

Total Liabilities 3,354,244 2,882,547

STOCKHOLDERS' EQUITY

Preferred Stock, $1 Par Value, 1,000,000 Shares Authorized - -

Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,194,474Shares Issued at December 31, 2020, and 19,606,449 Shares Issued at

December 31, 2019) 20,194 19,606

Additional Paid-in Capital 353,662 335,355

Retained Earnings 41,899 33,218

Accumulated Other Comprehensive Loss (816) (6,357)

Treasury Stock, at Cost (4,678,736 Shares at December 31, 2020, and (80,547) (80,094)4,608,258 Shares at December 31, 2019)

Total Stockholders' Equity 334,392 301,728

Total Liabilities and Stockholders' Equity $ 3,688,636 $ 3,184,275

Arrow Financial Corporation

Selected Quarterly Information

(Dollars In Thousands, Except Per Share Amounts - Unaudited)

Quarter Ended 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019

Net Income $ 12,495 $ 11,046 $ $ $ 9,159 8,127 9,740

Transactions Recorded in Net Income (Net of Tax):

Net Gain (Loss) on Securities 66 (53) (80) (279) 50

Share and Per Share Data:^1

Period End Shares Outstanding 15,516 15,489 15,461 15,432 15,448

Basic Average Shares Outstanding 15,499 15,472 15,441 15,446 15,427

Diluted Average Shares Outstanding 15,515 15,481 15,448 15,476 15,476

Basic Earnings Per Share $ $ $ $ $ 0.81 0.71 0.59 0.53 0.63

Diluted Earnings Per Share 0.81 0.71 0.59 0.53 0.63

Cash Dividend Per Share 0.260 0.252 0.252 0.252 0.252

Selected Quarterly Average Balances:

Interest-Bearing Deposits at Banks $ 349,430 $ 242,928 $ 155,931 $ 32,787 $ 28,880

Investment Securities 590,151 592,457 607,094 603,748 582,982

Loans 2,610,834 2,582,253 2,518,198 2,394,346 2,358,110

Deposits 3,256,238 3,082,499 2,952,432 2,670,009 2,607,421

Other Borrowed Funds 95,047 136,117 129,383 170,987 177,877

Shareholders' Equity 331,899 324,269 316,380 306,527 296,124

Total Assets 3,721,954 3,583,322 3,437,155 3,180,857 3,113,114

Return on Average Assets, annualized 1.34 % 1.23 % 1.07 % 1.03 % 1.24 %

Return on Average Equity, annualized 14.98 % 13.55 % 11.64 % 10.66 % 13.05 %

Return on Average Tangible Equity, annualized ^2 16.13 % 14.61 % 12.58 % 11.55 % 14.18 %

Average Earning Assets 3,550,415 3,417,638 3,281,223 3,030,881 2,969,972

Average Paying Liabilities 2,674,795 2,545,435 2,457,690 2,362,515 2,293,804

Interest Income 28,372 27,296 28,002 28,226 28,367

Tax-Equivalent Adjustment ^3 251 284 281 288 321

Interest Income, Tax-Equivalent ^3 28,623 27,580 28,283 28,514 28,688

Interest Expense 1,918 2,396 3,160 5,220 5,449

Net Interest Income 26,454 24,900 24,842 23,006 22,918

Net Interest Income, Tax-Equivalent ^3 26,705 25,184 25,123 23,294 23,239

Net Interest Margin, annualized 2.96 % 2.90 % 3.05 % 3.05 % 3.06 %

Net Interest Margin, Tax-Equivalent, annualized ^3 2.99 % 2.93 % 3.08 % 3.09 % 3.10 %

Efficiency Ratio Calculation: ^4

Noninterest Expense $ 18,192 $ 17,487 $ 17,245 $ 17,754 $ 17,099

Less: Intangible Asset Amortization 56 56 57 58 60

Net Noninterest Expense $ 18,136 $ 17,431 $ 17,188 $ 17,696 $ 17,039

Net Interest Income, Tax-Equivalent $ 26,705 $ 25,184 $ 25,123 $ 23,294 $ 23,239

Noninterest Income 9,103 8,697 7,164 7,694 7,081

Less: Net Gain (Loss) on Securities 88 (72) (106) (374) 67

Net Gross Income $ 35,720 $ 33,953 $ 32,393 $ 31,362 $ 30,253

Efficiency Ratio 50.77 % 51.34 % 53.06 % 56.42 % 56.32 %

Period-End Capital Information:

Total Stockholders' Equity (i.e. Book Value) $ 334,392 $ 325,660 $ 317,687 $ 309,398 $ 301,728

Book Value per Share ^1 21.55 21.02 20.55 20.05 19.53

Goodwill and Other Intangible Assets, net 23,823 23,662 23,535 23,513 23,534

Tangible Book Value per Share ^1,2 20.02 19.50 19.03 18.53 18.01

Capital Ratios:^5

Tier 1 Leverage Ratio 9.07 % 9.17 % 9.32 % 9.87 % 9.98 %

Common Equity Tier 1 Capital Ratio 13.39 % 13.20 % 13.07 % 12.84 % 12.94 %

Tier 1 Risk-Based Capital Ratio 14.24 % 14.06 % 13.94 % 13.72 % 13.83 %

Total Risk-Based Capital Ratio 15.48 % 15.28 % 15.10 % 14.76 % 14.78 %

Assets Under Trust Administration & Investment Mgmt $1,659,029 $1,537,128 $1,502,866 $1,342,531 $1,543,653

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.

Non-GAAP Financial Measure Reconciliation: Tangible Book Value, Tangible Equity, and Return on Tangible Equity exclude goodwill and other intangible2. assets, net from total equity. These are non-GAAP financial measures which we believe provide investors with information that is useful in understanding our financial performance.

12/31/ 9/30/2020 6/30/2020 3/31/2020 12/31/ 2020 2019

Total Stockholders' Equity (GAAP) $ 334,392 $ 325,660 $ 317,687 $ 309,398 $ 301,728

Less: Goodwill and Other Intangible

assets, net 23,823 23,662 23,535 23,513 23,534

Tangible Equity (Non-GAAP) $ $ 301,998 $ 294,152 $ 285,885 $ 310,569 278,194

Period End Shares Outstanding 15,516 15,489 15,461 15,432 15,448

Tangible Book Value per Share $ $ $ $ $ (Non-GAAP) 20.02 19.50 19.03 18.53 18.01

Net Income 12,495 11,046 9,159 8,127 9,740

Return on Tangible Equity (Net

Income/Tangible Equity - Annualized) 16.13 % 14.61 % 12.58 % 11.55 % 14.18 %

Non-GAAP Financial Measure Reconciliation: Net Interest Margin is the ratio of3. our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which we believe provides investors with information that is useful in understanding our financial performance.

12/31/ 9/30/2020 6/30/2020 3/31/2020 12/31/ 2020 2019

Interest Income (GAAP) $ $ 27,296 $ 28,002 $ 28,226 $ 28,372 28,367

Add: Tax Equivalent Adjustment 251 284 281 288 321 (Non-GAAP)

Interest Income - Tax Equivalent $ $ 27,580 $ 28,283 $ 28,514 $ (Non-GAAP) 28,623 28,688

Net Interest Income (GAAP) $ $ 24,900 $ 24,842 $ 23,006 $ 26,454 22,918

Add: Tax-Equivalent adjustment

(Non-GAAP) 251 284 281 288 321

Net Interest Income - Tax Equivalent $ $ 25,184 $ 25,123 $ 23,294 $ (Non-GAAP) 26,705 23,239

Average Earning Assets 3,550,415 3,417,638 3,281,223 3,030,881 2,969,972

Net Interest Margin (Non-GAAP)* 2.99 % 2.93 % 3.08 % 3.09 % 3.10 %

Non-GAAP Financial Measure Reconciliation: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. We4. believe the efficiency ratio provides investors with information that is useful in understanding our financial performance. We define our efficiency ratio as the ratio of our noninterest expense to our net gross income (which equals our tax-equivalent net interest income plus noninterest income, as adjusted).

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, and5. calculated in accordance with bank regulatory capital rules. All prior quarters reflect actual results. The December 31, 2020 CET1 ratio listed in the tables (i.e., 13.39%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).

12/31/ 9/30/2020 6/30/2020 3/31/2020 12/31/ 2020 2019

Total Risk Weighted Assets 2,357,094 2,321,637 2,283,430 2,275,902 2,237,127

Common Equity Tier 1 Capital 315,696 306,356 298,362 292,165 289,409

Common Equity Tier 1 Ratio 13.39 % 13.20 % 13.07 % 12.84 % 12.94 %

* Quarterly ratios have been annualized

Arrow Financial Corporation

Consolidated Financial Information

(Dollars in Thousands - Unaudited)

Quarter Ended: 12/31/2020 12/31/2019

Loan Portfolio

Commercial Loans $ $ 240,554 150,660

Commercial Real Estate Loans 571,787 510,541

Subtotal Commercial Loan Portfolio 812,341 661,201

Consumer Loans 859,768 811,198

Residential Real Estate Loans 922,921 913,721

Total Loans $ 2,595,030 $ 2,386,120

Allowance for Loan Losses

Allowance for Loan Losses, Beginning of Quarter $ $ 28,446 20,931

Loans Charged-off (630) (503)

Recoveries of Loans Previously Charged-off 179 125

Net Loans Charged-off (451) (378)

Provision for Loan Losses 1,237 634

Allowance for Loan Losses, End of Quarter $ $ 29,232 21,187

Nonperforming Assets

Nonaccrual Loans $ $ 6,033 4,005

Loans Past Due 90 or More Days and Accruing 228 253

Loans Restructured and in Compliance with Modified 145 143Terms

Total Nonperforming Loans 6,406 4,401

Repossessed Assets 155 139

Other Real Estate Owned - 1,122

Total Nonperforming Assets $ $ 6,561 5,662

Key Asset Quality Ratios

Net Loans Charged-off to Average Loans, 0.07 % 0.06 %Quarter-to-date Annualized

Provision for Loan Losses to Average 0.19 % 0.11 %Loans, Quarter-to-date Annualized

Allowance for Loan Losses to Period-End Loans 1.13 % 0.89 %

Allowance for Loan Losses to Period-End 456.32 % 481.41 %Nonperforming Loans

Nonperforming Loans to Period-End Loans 0.25 % 0.18 %

Nonperforming Assets to Period-End Assets 0.18 % 0.18 %

Twelve-Month Period Ended:

Allowance for Loan Losses

Allowance for Loan Losses, Beginning of Year $ $ 21,187 20,196

Loans Charged-off (1,989) (1,735)

Recoveries of Loans Previously Charged-off 715 647

Net Loans Charged-off (1,274) (1,088)

Provision for Loan Losses 9,319 2,079

Allowance for Loan Losses, End of Year $ $ 29,232 21,187

Key Asset Quality Ratios

Net Loans Charged-off to Average Loans 0.05 % 0.05 %

Provision for Loan Losses to Average Loans 0.37 % 0.09 %

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SOURCE Arrow Financial Corporation