PR Newswire | Oct 26, 2021 07:55AM EDT

Assets

10/26 06:55 CDT

Arrow Reports $13.0 million in Q3 Net Income, Surpasses $4 Billion in Total Assets-- Net income was $13.0 million and diluted earnings per share (EPS) was $0.81 for the third quarter.-- Key profitability ratios were strong in the third quarter with return on average assets (ROA) of 1.32% and return on average equity (ROE) of 14.34%.-- Third-quarter revenue increased $2.7 million, or 8.1%, over the prior-year comparative quarter.-- Over $56 million of Small Business Administration Paycheck Protection Program (PPP) loans were forgiven in the third quarter of 2021.-- Arrow continues to focus on optimization of digital and physical delivery channels to meet changing customer needs. GLENS FALLS, N.Y., Oct. 26, 2021

GLENS FALLS, N.Y., Oct. 26, 2021 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS(r) - AROW) announced operating results for the three- and nine-month periods ended September 30, 2021. Net income for the third quarter of 2021 was $13.0 million, compared to $11.0 million in the third quarter of 2020. Net interest income increased to $28.6 million in the third quarter of 2021, compared to $24.9 million for the comparable quarter of 2020. For the nine months ended September 30, 2021, net interest income and net income were $83.2 million and $39.5 million, respectively, as compared to $72.7 million and $28.3 million for the nine months ended September 30, 2020.

Annualized key profitability ratios remained strong, as measured by a return on average equity (ROE) of 14.34% and a return on average assets (ROA) of 1.32% for the third quarter, compared to 13.55% and 1.23%, respectively, for the prior-year quarter.

"Arrow delivered another quarter of solid earnings, strong profitability ratios, and asset growth to a new record of more than $4 billion," said Arrow President and CEO Thomas J. Murphy. "I commend our team members for their dedication to continuous improvement and exceptional service for our customers during these challenging times. I am thankful for and humbled by their unwavering commitment to achieve our mission."

In the third quarter, Arrow advanced its focus on technology and digital experience with the launch of a new mortgage application platform and upgrades to our Business Online Banking platform. Additionally, branch network enhancement plans continued. Glens Falls National Bank announced the consolidation of two branches in Fort Edward located less than a mile apart before year-end, with the remaining full- service branch undergoing improvements; Saratoga National Bank likewise renovated a new full-service location in Wilton, which will open in the fourth quarter and replace its smaller Jones and Ballard road branches.

The following expands on our third-quarter financial results:

COVID-19 Response: In the third quarter, our lending team further advanced the forgiveness process for PPP borrowers, with about three quarters of loans forgiven as of September 30, 2021. Frontline teams also assisted customers with additional stimulus programs and provided fraud education around pandemic-related scams.

Arrow also complied with the New York State HERO Act by implementing required face coverings for employees. The Arrow Business Continuity Plan Committee continues to meet regularly to evaluate pandemic metrics and our response, including our plan for pending OSHA guidance on vaccination requirements for large employers.

Additionally, Arrow recognized the team's outstanding performance and tremendous dedication during this pandemic with a special recognition bonus, following a similar bonus in 2020.

Loan Growth:Total loans were $2.7 billion as of September 30, 2021. Loan growth for the third quarter of 2021 was $10.7 million and increased $62.3 million, or 2.4%, from September 30, 2020. In the third quarter, total outstanding commercial loans decreased $37.8 million, or 4.5%. PPP loans, included in the commercial portfolio, decreased $56.7 million in the third quarter as a result of the continued loan forgiveness processed by the Small Business Administration. The consumer loan portfolio grew by $28.6 million, or 3.2% in the third quarter, primarily within the indirect automobile lending program. Total outstanding residential real estate loans, net of approximately $4.0 million of loans sold, increased $19.8 million, or 2.2%, for the third quarter of 2021.

Deposit Growth:At September 30, 2021, deposit balances were $3.6 billion. Deposits increased in the third quarter of 2021 by $167.5 million and increased by $340.7 million, or 10.4%, from the prior-year level. Municipal deposits increased $118.4 million in the third quarter and $134.0 million, or 15.8% from September 30, 2020. Non-municipal deposits increased $49.1 million for the quarter and $206.7 million, or 8.6% from September 30, 2020. Noninterest-bearing deposits represented 23.4% of total deposits at September 30, 2021, compared to 21.1% of total deposits at September 30, 2020. At September 30, 2021, other time deposits were $138.7 million, a decrease of $55.4 million compared to the prior year.

Net Interest Income:Net interest income for the third quarter was $28.6 million, up 15.0% from $24.9 million in the comparable quarter of 2020. Interest and fees on loans were $27.2 million for the third quarter of 2021, an increase of 9.9% from $24.7 million for the quarter ending September 30, 2020. Interest and fees related to PPP loans, included in the $27.2 million, were $2.5 million in the third quarter of 2021. Interest expense for the third quarter of 2021 was $1.2 million, a decrease of $1.2 million, or 51.2%, from the $2.4 million in expense for the comparable quarter ending September 30, 2020. The net interest margin was 3.04% for the quarter, compared to 2.90% for the third quarter of 2020. The increase in net interest margin from the prior year was due to a variety of factors, including the timing of the forgiveness of PPP loans partially offset by lower interest rates and increased cash balances.

Noninterest Income:Noninterest income for the three months ended September 30, 2021 was $7.7 million, compared to $8.7 million in the comparable 2020 quarter. Income from fiduciary activities for the three months ended September 30, 2021, increased by $306 thousand over the comparable quarter of 2020. Fees and other services to customers increased $347 thousand over the comparable quarter of 2020. Interchange fees related to increased customer activity of debit card usage was the largest driver of the increase. Gain on sales of loans decreased $1.2 million from the third quarter of 2020 as a result of the strategic decision to retain more newly originated real estate loans.

Noninterest Expense:Noninterest expense for the third quarter of 2021 was $19.4 million, an increase from $17.5 million for the third quarter of 2020. The largest component of noninterest expense was salaries and benefits paid to our employees, which totaled $11.4 million for the third quarter of 2021. The increase is primarily due to a special recognition bonus of approximately $510 thousand which was paid in the third quarter. Technology expenses increased from the prior year in part due to variable costs related to increased utilization of consumer banking technology. Other non-interest expense included the expense for estimated credit losses on off-balance sheet credit exposures of $300 thousand in the third quarter.

Provision for Income Taxes:The provision for income taxes was $3.8 million for the third quarter of 2021, compared to $2.8 million for the same quarter of 2020. The effective income tax rates for the three- month periods ended September 30, 2021 and 2020, were 22.7% and 20.2%, respectively.

Asset Quality: Asset quality remained solid at September 30, 2021, as evidenced by low levels of nonperforming assets and charge-offs. Net loan losses, expressed as an annualized percentage of average loans outstanding, were 0.02% for the three-month period ended September 30, 2021, consistent with the three-month period ended September 30, 2020. Nonperforming loans at September 30, 2021 were $11.3 million, up $5.1 million from September 30, 2020 which was primarily the result of two commercial real estate loans being classified as nonaccrual during 2021. Nonperforming assets of $11.7 million at September 30, 2021 represented 0.29% of period-end assets up from 0.17% at September 30, 2020.

For the third quarter of 2021, the provision for credit losses was $99 thousand and the expense for estimated credit losses on off-balance sheet credit exposures included in other liabilities was $300 thousand. The allowance for credit losses was $27.0 million on September 30, 2021, which represented 1.02% of loans outstanding, as compared to 1.10% at September 30, 2020.

Liquidity:As of September 30, 2021, Arrow's liquidity position remained strong with interest-bearing cash balances of $548.9 million. Arrow continues to be well-positioned to address any unexpected volatility, which may affect cash flow and deposit balances. At September 30, 2021, contingent collateralized lines of credit were in place and available through the Federal Home Loan Bank of New York (FHLB) and the Federal Reserve Bank, totaling $1.4 billion. Arrow has additional liquidity options currently available, including access to unsecured lines of credit such as Fed funds and brokered markets.

Capital:Total stockholders' equity was $360.2 million on September 30, 2021, up $34.5 million, or 10.6%, from September 30, 2020. Arrow's regulatory capital ratios remained strong in the third quarter of 2021. As of September 30, 2021, Arrow's Common Equity Tier 1 Capital Ratio was 13.71% and Total Risk-Based Capital Ratio was 15.66%. The capital ratios of Arrow and both its subsidiary banks continued to exceed the "well capitalized" regulatory standards.

Cash and Stock Dividends:On September 15, 2021, 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 third quarter of 2020 when adjusted for the 3% stock dividend distributed on September 25, 2020. Additionally, a 3% stock dividend was distributed on September 24, 2021. This is the 13th consecutive year Arrow has declared a stock dividend.

Industry Recognition:In the third quarter of 2021, Arrow was selected as one of the top 35 banks and thrifts that comprise the Piper Sandler Sm-All Stars Class of 2021. Arrow is one of just five New York financial institutions on the list, and the only one headquartered locally. Additionally, 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.

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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. Arrow 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). Some 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. These 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 Arrow from are useful in evaluating Arrow'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. Arrow 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 Arrow's Annual Report on Form 10-K for the year ended December 31, 2020, 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 Nine Months Ended September 30 September 30

2021 2020 2021 2020

INTEREST AND DIVIDEND INCOME

Interest and Fees on Loans $ 27,157 $ 24,706 $ 79,354 $ 74,657

Interest on Deposits at Banks 163 64 351 229

Interest and Dividends on Investment Securities:

Fully Taxable 1,632 1,557 4,809 5,621

Exempt from Federal Taxes 855 969 2,682 3,017

Total Interest and Dividend Income 29,807 27,296 87,196 83,524

INTEREST EXPENSE

Interest-Bearing Checking Accounts 155 264 566 1,061

Savings Deposits 424 806 1,490 4,450

Time Deposits over $250,000 39 292 228 1,263

Other Time Deposits 133 576 511 2,360

Federal Funds Purchased and

Securities Sold Under Agreements to Repurchase - 17 3 55

Federal Home Loan Bank Advances 197 219 586 865

Junior Subordinated Obligations Issued to

Unconsolidated Subsidiary Trusts 173 173 513 574

Interest on Financing Leases 48 49 146 148

Total Interest Expense 1,169 2,396 4,043 10,776

NET INTEREST INCOME 28,638 24,900 83,153 72,748

Provision for Credit Losses 99 2,271 (286) 8,083

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 28,539 22,629 83,439 64,665

NONINTEREST INCOME

Income From Fiduciary Activities 2,571 2,265 7,538 6,613

Fees for Other Services to Customers 2,966 2,619 8,494 7,348

Insurance Commissions 1,576 1,713 4,842 5,077

Net (Loss) Gain on Securities (106) (72) 250 (552)

Net Gain on Sales of Loans 211 1,433 2,251 2,193

Other Operating Income 476 739 1,405 2,876

Total Noninterest Income 7,694 8,697 24,780 23,555

NONINTEREST EXPENSE

Salaries and Employee Benefits 11,377 10,408 33,360 31,003

Occupancy Expenses, Net 1,403 1,427 4,480 4,221

Technology and Equipment Expense 3,833 3,228 11,002 9,807

FDIC Assessments 249 309 764 770

Other Operating Expense 2,561 2,115 7,582 6,685

Total Noninterest Expense 19,423 17,487 57,188 52,486

INCOME BEFORE PROVISION FOR INCOME TAXES 16,810 13,839 51,031 35,734

Provision for Income Taxes 3,821 2,793 11,483 7,402

NET INCOME $ 12,989 $ 11,046 $ 39,548 $ 28,332

Average Shares Outstanding ^1:

Basic 16,027 15,936 16,015 15,917

Diluted 16,085 15,946 16,072 15,931

Per Common Share:

Basic Earnings $ 0.81 $ 0.69 $ 2.47 $ 1.78

Diluted Earnings 0.81 0.69 2.46 1.78

^ 2020 Share and Per Share Amounts have been restated for the September 24, 2021, 3% stock dividend.1



ARROW FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

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



September 30, December 31, September 30,

2021 2020 2020

ASSETS

Cash and Due From Banks $ 49,430 $ 42,116 $ 54,286

Interest-Bearing Deposits at Banks 548,936 338,875 396,380

Investment Securities:

Available-for-Sale at Fair Value 486,900 365,287 374,928

Held-to-Maturity (Approximate Fair Value of $203,936 at

September 30, 2021; $226,576 at December 31, 2020; and

$233,501 at September 30, 2020) 198,337 218,405 224,799

Equity Securities 1,886 1,636 1,511

FHLB and Federal Reserve Bank Stock 5,380 5,349 5,574

Loans 2,654,751 2,595,030 2,592,455

Allowance for Credit Losses (26,956) (29,232) (28,446)

Net Loans 2,627,795 2,565,798 2,564,009

Premises and Equipment, Net 44,003 42,612 42,075

Goodwill 21,873 21,873 21,873

Other Intangible Assets, Net 2,006 1,950 1,789

Other Assets 84,558 84,735 90,460

Total Assets $ 4,071,104 $ 3,688,636 $ 3,777,684

LIABILITIES

Noninterest-Bearing Deposits 841,910 701,341 690,232

Interest-Bearing Checking Accounts 1,035,358 832,434 912,980

Savings Deposits 1,515,692 1,423,358 1,354,956

Time Deposits over $250,000 73,889 123,622 112,555

Other Time Deposits 138,714 153,971 194,135

Total Deposits 3,605,563 3,234,726 3,264,858

Federal Funds Purchased and

Securities Sold Under Agreements to Repurchase 2,426 17,486 73,949

Federal Home Loan Bank Term Advances 45,000 45,000 50,000

Junior Subordinated Obligations Issued to Unconsolidated

Subsidiary Trusts 20,000 20,000 20,000

Finance Leases 5,181 5,217 5,228

Other Liabilities 32,763 31,815 37,989

Total Liabilities 3,710,933 3,354,244 3,452,024

STOCKHOLDERS' EQUITY

Preferred Stock, $1 Par Value and 1,000,000 Shares

Authorized at September 30, 2021, December 31, 2020 and

September 30, 2020 - - -

Common Stock, $1 Par Value; 30,000,000 Shares Authorized

(20,800,144 Shares Issued at September 30, 2021 and 20,800 20,194 20,194December 31, 2020 and 20,194,474 at September 30, 2020)

Additional Paid-in Capital 377,349 353,662 353,062

Retained Earnings 47,936 41,899 33,434

Accumulated Other Comprehensive Loss (3,719) (816) (253)

Treasury Stock, at Cost (4,780,496 Shares at September 30,

2021; 4,678,736 Shares at December 31, 2020 and 4,705,102

Shares at September 30, 2020) (82,195) (80,547) (80,777)

Total Stockholders' Equity 360,171 334,392 325,660

Total Liabilities and Stockholders' Equity $ 4,071,104 $ 3,688,636 $ 3,777,684



Arrow Financial Corporation Selected Quarterly Information

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



Quarter Ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Net Income $ 12,989 $ 13,279 $ 13,280 $ 12,495 $ 11,046

Transactions in Net Income (Net of Tax):

Net Changes in Fair Value of Equity Investments (79) 145 119 66 (53)

Share and Per Share Data:^1

Period End Shares Outstanding 16,020 16,039 16,009 15,981 15,954

Basic Average Shares Outstanding 16,027 16,024 15,994 15,964 15,936

Diluted Average Shares Outstanding 16,085 16,085 16,030 15,981 15,946

Basic Earnings Per Share $ 0.81 $ 0.83 $ 0.83 $ 0.78 $ 0.69

Diluted Earnings Per Share 0.81 0.83 0.82 0.78 0.69

Cash Dividend Per Share 0.252 0.252 0.252 0.252 0.245

Selected Quarterly Average Balances:

Interest-Bearing Deposits at Banks $ 416,500 $ 369,034 $ 334,155 $ 349,430 $ 242,928

Investment Securities 675,980 668,089 593,822 590,151 592,457

Loans 2,641,726 2,651,449 2,618,362 2,610,834 2,582,253

Deposits 3,435,933 3,395,271 3,254,815 3,256,238 3,082,499

Other Borrowed Funds 72,187 74,957 82,659 95,047 136,117

Shareholders' Equity 359,384 350,203 340,708 331,899 324,269

Total Assets 3,902,041 3,851,921 3,712,020 3,721,954 3,583,322

Return on Average Assets, annualized 1.32 % 1.38 % 1.45 % 1.34 % 1.23 %

Return on Average Equity, annualized 14.34 % 15.21 % 15.81 % 14.98 % 13.55 %

Return on Average Tangible Equity, annualized ^2 15.36 % 16.32 % 17.00 % 16.13 % 14.61 %

Average Earning Assets $ 3,734,206 $ 3,688,572 $ 3,546,339 $ 3,550,415 $ 3,417,638

Average Paying Liabilities 2,705,283 2,721,961 2,639,240 2,674,795 2,545,435

Interest Income 29,807 29,695 27,694 28,372 27,296

Tax-Equivalent Adjustment ^3 292 293 235 251 284

Interest Income, Tax-Equivalent ^3 30,099 29,988 27,929 28,623 27,580

Interest Expense 1,169 1,335 1,539 1,918 2,396

Net Interest Income 28,638 28,360 26,155 26,454 24,900

Net Interest Income, Tax-Equivalent ^3 28,930 28,653 26,390 26,705 25,184

Net Interest Margin, annualized 3.04 % 3.08 % 2.99 % 2.96 % 2.90 %

Net Interest Margin, Tax-Equivalent, annualized ^3 3.07 % 3.12 % 3.02 % 2.99 % 2.93 %

Efficiency Ratio Calculation: ^4

Noninterest Expense $ 19,423 $ 19,087 $ 18,678 $ 18,192 $ 17,487

Less: Intangible Asset Amortization 51 53 54 56 56

Net Noninterest Expense $ 19,372 $ 19,034 $ 18,624 $ 18,136 $ 17,431

Net Interest Income, Tax-Equivalent $ 28,930 $ 28,653 $ 26,390 $ 26,705 $ 25,184

Noninterest Income 7,694 8,478 8,608 9,103 8,697

Less: Net (Loss) Gain on Securities (106) 196 160 88 (72)

Net Gross Income $ 36,730 $ 36,935 $ 34,838 $ 35,720 $ 33,953

Efficiency Ratio 52.74 % 51.53 % 53.46 % 50.77 % 51.34 %

Period-End Capital Information:

Total Stockholders' Equity (i.e. Book Value) $ 360,171 $ 353,033 $ 342,413 $ 334,392 $ 325,660

Book Value per Share ^1 22.48 22.01 21.39 20.91 20.41

Goodwill and Other Intangible Assets, net 23,879 23,955 23,922 23,823 23,662

Tangible Book Value per Share ^1,2 20.99 20.52 19.89 19.43 18.93

Capital Ratios:^5

Tier 1 Leverage Ratio 9.39 % 9.29 % 9.37 % 9.07 % 9.17 %

Common Equity Tier 1 Capital Ratio 13.71 % 13.79 % 13.56 % 13.39 % 13.20 %

Tier 1 Risk-Based Capital Ratio 14.51 % 14.61 % 14.39 % 14.24 % 14.06 %

Total Risk-Based Capital Ratio 15.66 % 15.78 % 15.55 % 15.48 % 15.28 %

Assets Under Trust Admin. & Investment Mgmt. $ 1,778,659 $ 1,804,854 $ 1,725,754 $ 1,659,029 $ 1,537,128

Arrow Financial CorporationSelected Quarterly Information - Continued

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

Footnotes:

1. Share and Per Share Data have been restated for the September 24, 2021, 3% stock dividend.

Non-GAAP Financial Measures Reconciliation: Tangible Book Value and Tangible Equity exclude goodwill and other intangible assets, net from total2. equity. These are non-GAAP financial measures which Arrow believes provides investors with information that is useful in understanding its financial performance.

9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Total Stockholders' Equity (GAAP) $ 360,171 $ 353,033 $ 342,413 $ 334,392 $ 325,660

Less: Goodwill and Other Intangible 23,879 23,955 23,922 23,823 23,662assets, net

Tangible Equity (Non-GAAP) $ 336,292 $ 329,078 $ 318,491 $ 310,569 $ 301,998

Period End Shares Outstanding 16,020 16,039 16,009 15,981 15,954

Tangible Book Value per Share (Non- $ 20.99 $ 20.52 $ 19.89 $ 19.43 $ 18.93GAAP)

Net Income 12,989 13,279 13,280 12,495 11,046

Return on Average Tangible Equity

(Net Income/Tangible Equity -

Annualized) 15.36 % 16.32 % 17.00 % 16.13 % 14.61 %

Non-GAAP Financial Measures Reconciliation: Net Interest Margin, Tax-Equivalent is the ratio of our annualized3. 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.

9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Interest Income (GAAP) $ 29,807 $ 29,695 $ 27,694 $ 28,372 $ 27,296

Add: Tax-Equivalent adjustment 292 293 235 251 284(Non-GAAP)

Interest Income - Tax Equivalent $ 30,099 $ 29,988 $ 27,929 $ 28,623 $ 27,580(Non-GAAP)

Net Interest Income (GAAP) $ 28,638 $ 28,360 $ 26,155 $ 26,454 $ 24,900

Add: Tax-Equivalent adjustment 292 293 235 251 284(Non-GAAP)

Net Interest Income - Tax Equivalent $ 28,930 $ 28,653 $ 26,390 $ 26,705 $ 25,184(Non-GAAP)

Average Earning Assets $3,734,206 $3,688,572 $3,546,339 $3,550,415 $3,417,638

Net Interest Margin (Non-GAAP)* 3.07 % 3.12 % 3.02 % 2.99 % 2.93 %

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 provides4. 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).

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 5. in accordance with, bank regulatory capital rules. All prior quarters reflect actual results. The CET1 ratio at September 30, 2021 listed in the tables (i.e., 13.71%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).

9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Total Risk Weighted Assets $2,511,910 $2,438,445 $2,404,456 $2,357,094 $2,321,637

Common Equity Tier 1 Capital 344,507 336,265 326,039 315,696 306,356

Common Equity Tier 1 Ratio 13.71 % 13.79 % 13.56 % 13.39 % 13.20 %

* Quarterly ratios have been annualized.

Arrow Financial Corporation Consolidated Financial Information

(Dollars in Thousands - Unaudited)

Quarter Ended: 9/30/2021 12/31/2020 9/30/2020

Loan Portfolio

Commercial Loans $ 188,191 $ 240,554 $ 275,921

Commercial Real Estate Loans 615,080 571,787 541,233

Subtotal Commercial Loan Portfolio 803,271 812,341 817,154

Consumer Loans 921,189 859,768 849,526

Residential Real Estate Loans 930,291 922,921 925,775

Total Loans $ 2,654,751 $ 2,595,030 $ 2,592,455

Allowance for Credit Losses

Allowance for Credit Losses, Beginning of Quarter $ 27,010 $ 28,446 $ 26,300

Loans Charged-off (444) (630) (392)

Less Recoveries of Loans Previously Charged-off 291 179 267

Net Loans Charged-off (153) (451) (125)

Provision for Credit Losses 99 1,237 2,271

Allowance for Credit Losses, End of Quarter $ 26,956 $ 29,232 $ 28,446

Nonperforming Assets

Nonaccrual Loans $ 10,723 $ 6,033 $ 6,004

Loans Past Due 90 or More Days and Accruing 555 228 121

Loans Restructured and in Compliance with Modified Terms 67 145 157

Total Nonperforming Loans 11,345 6,406 6,282

Repossessed Assets 272 155 126

Other Real Estate Owned 79 - -

Total Nonperforming Assets $ 11,696 $ 6,561 $ 6,408

Key Asset Quality Ratios

Net Loans Charged-off to Average Loans,

Quarter-to-date Annualized 0.02 % 0.07 % 0.02 %

Provision for Credit Losses to Average Loans, Quarter-to-date Annualized 0.01 % 0.19 % 0.35 %

Allowance for Credit Losses to Period-End Loans 1.02 % 1.13 % 1.10 %

Allowance for Credit Losses to Period-End Nonperforming Loans 237.60 % 456.32 % 452.82 %

Nonperforming Loans to Period-End Loans 0.43 % 0.25 % 0.24 %

Nonperforming Assets to Period-End Assets 0.29 % 0.18 % 0.17 %

Nine Month Period Ended:

Allowance for Loan Losses

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

Impact of the Adoption of ASU 2016-13 (1,300) -

Loans Charged-off (1,520) (1,360)

Less Recoveries of Loans Previously Charged-off 830 536

Net Loans Charged-off (690) (824)

Provision for Loan Losses (286) 8,083

Allowance for Loan Losses, End of Period $ 26,956 $ 28,446

Key Asset Quality Ratios

Net Loans Charged-off to Average Loans, Annualized 0.03 % 0.04 %

Provision for Loan Losses to Average Loans, Annualized (0.01)% 0.43 %

View original content: https://www.prnewswire.com/news-releases/arrow-reports-13-0-million-in-q3-net-income-surpasses-4-billion-in-total-assets-301408596.html

SOURCE Arrow Financial Corporation