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Form 8-K ARROW FINANCIAL CORP For: Oct 26

October 26, 2021 11:50 AM EDT

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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 $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. (October 26, 2021) – Arrow Financial Corporation (NasdaqGS® – 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
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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.
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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.
_________

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
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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.
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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
 2021202020212020
INTEREST AND DIVIDEND INCOME    
Interest and Fees on Loans$27,157 $24,706 $79,354 $74,657 
Interest on Deposits at Banks163 64 351 229 
Interest and Dividends on Investment Securities: 
Fully Taxable1,632 1,557 4,809 5,621 
Exempt from Federal Taxes855 969 2,682 3,017 
Total Interest and Dividend Income29,807 27,296 87,196 83,524 
INTEREST EXPENSE   
Interest-Bearing Checking Accounts155 264 566 1,061 
Savings Deposits424 806 1,490 4,450 
Time Deposits over $250,00039 292 228 1,263 
Other Time Deposits133 576 511 2,360 
Federal Funds Purchased and
  Securities Sold Under Agreements to Repurchase
— 17 55 
Federal Home Loan Bank Advances197 219 586 865 
Junior Subordinated Obligations Issued to
  Unconsolidated Subsidiary Trusts
173 173 513 574 
Interest on Financing Leases48 49 146 148 
Total Interest Expense1,169 2,396 4,043 10,776 
NET INTEREST INCOME28,638 24,900 83,153 72,748 
Provision for Credit Losses99 2,271 (286)8,083 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES28,539 22,629 83,439 64,665 
NONINTEREST INCOME   
Income From Fiduciary Activities2,571 2,265 7,538 6,613 
Fees for Other Services to Customers2,966 2,619 8,494 7,348 
Insurance Commissions1,576 1,713 4,842 5,077 
Net (Loss) Gain on Securities (106)(72)250 (552)
Net Gain on Sales of Loans211 1,433 2,251 2,193 
Other Operating Income476 739 1,405 2,876 
Total Noninterest Income7,694 8,697 24,780 23,555 
NONINTEREST EXPENSE   
Salaries and Employee Benefits11,377 10,408 33,360 31,003 
Occupancy Expenses, Net1,403 1,427 4,480 4,221 
Technology and Equipment Expense3,833 3,228 11,002 9,807 
FDIC Assessments249 309 764 770 
Other Operating Expense2,561 2,115 7,582 6,685 
Total Noninterest Expense19,423 17,487 57,188 52,486 
INCOME BEFORE PROVISION FOR INCOME TAXES16,810 13,839 51,031 35,734 
Provision for Income Taxes3,821 2,793 11,483 7,402 
NET INCOME$12,989 $11,046 $39,548 $28,332 
Average Shares Outstanding 1:
    
Basic16,027 15,936 16,015 15,917 
Diluted16,085 15,946 16,072 15,931 
Per Common Share:    
Basic Earnings$0.81 $0.69 $2.47 $1.78 
Diluted Earnings0.81 0.69 2.46 1.78 
1 2020 Share and Per Share Amounts have been restated for the September 24, 2021, 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,
2021
December 31, 2020September 30,
2020
ASSETS  
Cash and Due From Banks$49,430 $42,116 $54,286 
Interest-Bearing Deposits at Banks548,936 338,875 396,380 
Investment Securities:
Available-for-Sale at Fair Value486,900 365,287 374,928 
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 Securities1,886 1,636 1,511 
FHLB and Federal Reserve Bank Stock5,380 5,349 5,574 
Loans2,654,751 2,595,030 2,592,455 
Allowance for Credit Losses(26,956)(29,232)(28,446)
Net Loans2,627,795 2,565,798 2,564,009 
Premises and Equipment, Net44,003 42,612 42,075 
Goodwill21,873 21,873 21,873 
Other Intangible Assets, Net2,006 1,950 1,789 
Other Assets84,558 84,735 90,460 
Total Assets$4,071,104 $3,688,636 $3,777,684 
LIABILITIES  
Noninterest-Bearing Deposits841,910 701,341 690,232 
Interest-Bearing Checking Accounts1,035,358 832,434 912,980 
Savings Deposits1,515,692 1,423,358 1,354,956 
Time Deposits over $250,00073,889 123,622 112,555 
Other Time Deposits138,714 153,971 194,135 
Total Deposits3,605,563 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 Advances45,000 45,000 50,000 
Junior Subordinated Obligations Issued to Unconsolidated
  Subsidiary Trusts
20,000 20,000 20,000 
Finance Leases5,181 5,217 5,228 
Other Liabilities32,763 31,815 37,989 
Total Liabilities3,710,933 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 December 31, 2020 and 20,194,474 at September 30, 2020)
20,800 20,194 20,194 
Additional Paid-in Capital377,349 353,662 353,062 
Retained Earnings47,936 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’ Equity360,171 334,392 325,660 
Total Liabilities and Stockholders’ Equity$4,071,104 $3,688,636 $3,777,684 
6



Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended9/30/20216/30/20213/31/202112/31/20209/30/2020
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 Outstanding16,020 16,039 16,009 15,981 15,954 
Basic Average Shares Outstanding16,027 16,024 15,994 15,964 15,936 
Diluted Average Shares Outstanding16,085 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 Share0.81 0.83 0.82 0.78 0.69 
Cash Dividend Per Share0.252 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 Securities675,980 668,089 593,822 590,151 592,457 
  Loans2,641,726 2,651,449 2,618,362 2,610,834 2,582,253 
  Deposits3,435,933 3,395,271 3,254,815 3,256,238 3,082,499 
  Other Borrowed Funds72,187 74,957 82,659 95,047 136,117 
  Shareholders' Equity359,384 350,203 340,708 331,899 324,269 
  Total Assets3,902,041 3,851,921 3,712,020 3,721,954 3,583,322 
Return on Average Assets, annualized1.32 %1.38 %1.45 %1.34 %1.23 %
Return on Average Equity, annualized14.34 %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 Liabilities2,705,283 2,721,961 2,639,240 2,674,795 2,545,435 
Interest Income29,807 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 Expense1,169 1,335 1,539 1,918 2,396 
Net Interest Income28,638 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, annualized3.04 %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 Amortization51 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 Income7,694 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 Ratio52.74 %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, net23,879 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 Ratio9.39 %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 Ratio14.51 %14.61 %14.39 %14.24 %14.06 %
Total Risk-Based Capital Ratio15.66 %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 

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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 24, 2021, 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.
9/30/20216/30/20213/31/202112/31/20209/30/2020
Total Stockholders' Equity (GAAP)$360,171 $353,033 $342,413 $334,392 $325,660 
Less: Goodwill and Other Intangible assets, net23,879 23,955 23,922 23,823 23,662 
Tangible Equity (Non-GAAP)$336,292 $329,078 $318,491 $310,569 $301,998 
Period End Shares Outstanding16,020 16,039 16,009 15,981 15,954 
Tangible Book Value per Share (Non-GAAP)$20.99 $20.52 $19.89 $19.43 $18.93 
Net Income12,989 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 %
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.
9/30/20216/30/20213/31/202112/31/20209/30/2020
Interest Income (GAAP)$29,807 $29,695 $27,694 $28,372 $27,296 
Add: Tax-Equivalent adjustment
     (Non-GAAP)
292 293 235 251 284 
Interest Income - Tax Equivalent
     (Non-GAAP)
$30,099 $29,988 $27,929 $28,623 $27,580 
Net Interest Income (GAAP)$28,638 $28,360 $26,155 $26,454 $24,900 
Add: Tax-Equivalent adjustment
     (Non-GAAP)
292 293 235 251 284 
Net Interest Income - Tax Equivalent
     (Non-GAAP)
$28,930 $28,653 $26,390 $26,705 $25,184 
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 %
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, 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%).
9/30/20216/30/20213/31/202112/31/20209/30/2020
Total Risk Weighted Assets$2,511,910 $2,438,445 $2,404,456 $2,357,094 $2,321,637 
Common Equity Tier 1 Capital344,507 336,265 326,039 315,696 306,356 
Common Equity Tier 1 Ratio13.71 %13.79 %13.56 %13.39 %13.20 %
* Quarterly ratios have been annualized.

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Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
Quarter Ended:9/30/202112/31/20209/30/2020
Loan Portfolio  
Commercial Loans$188,191 $240,554 $275,921 
Commercial Real Estate Loans615,080 571,787 541,233 
  Subtotal Commercial Loan Portfolio803,271 812,341 817,154 
Consumer Loans921,189 859,768 849,526 
Residential Real Estate Loans930,291 922,921 925,775 
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-off291 179 267 
Net Loans Charged-off(153)(451)(125)
Provision for Credit Losses99 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 Accruing555 228 121 
Loans Restructured and in Compliance with Modified Terms67 145 157 
Total Nonperforming Loans11,345 6,406 6,282 
Repossessed Assets272 155 126 
Other Real Estate Owned79 — — 
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 Loans1.02 %1.13 %1.10 %
Allowance for Credit Losses to Period-End Nonperforming Loans237.60 %456.32 %452.82 %
Nonperforming Loans to Period-End Loans0.43 %0.25 %0.24 %
Nonperforming Assets to Period-End Assets0.29 %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-off830 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, Annualized0.03 %0.04 %
Provision for Loan Losses to Average Loans, Annualized(0.01)%0.43 %
9


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