Financial Instruments with Off-Balance Sheet Risk and Contingent Liabilities

9 Months Ended

Sep. 30, 2012

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONTINGENT LIABILITIES

(In Thousands)

The following table presents the balance for standby letters of credit for the periods ended September 30, 2012, December 31, 2011 and September 30, 2011:



Outstanding Guarantees Under Letters of Credit
	09/30/2012		12/31/2011		09/30/2011
Standby Letters of Credit	$	11,367	$	11,641	$	8,301

Arrow does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit. Standby and other letters of credit are conditional commitments issued by Arrow to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including bond financing and similar transactions. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. Typically, these instruments have terms of twelve months or less. Some expire unused, and therefore, the total amounts do not necessarily represent future cash requirements. Some have automatic renewal provisions.

For letters of credit, the amount of the collateral obtained, if any, is based on management's credit evaluation of the counter-party, most of which will expire within one year and some of which were not collateralized. All standby letters of credit were for private borrowing arrangements. The fair value of Arrow's standby letters of credit at September 30, 2012, December 31, 2011 and September 30, 2011 was insignificant.