Regulatory Matters

12 Months Ended

Dec. 31, 2017

Banking and Thrift [Abstract]

Regulatory Matters

REGULATORY MATTERS (Dollars in Thousands)

In the normal course of business, Arrow and its subsidiaries operate under certain regulatory restrictions, such as the extent and structure of covered inter-company borrowings and maintenance of reserve requirement balances.

The principal source of the funds for the payment of stockholder dividends by Arrow has been from dividends declared and paid to Arrow by its bank subsidiaries.  As of December 31, 2017, the maximum amount that could have been paid by subsidiary banks to Arrow, without prior regulatory approval, was approximately $44.1 million.

Under current Federal Reserve regulations, Arrow is prohibited from borrowing from the subsidiary banks unless such borrowings are secured by specific obligations.  Additionally, the maximum of any such borrowings from any one subsidiary bank(aggregated with all other "covered transactions between the bank and Arrow) is limited to 10% of that bank’s capital and surplus. Loans and other covered transactions between any one subsidiary bank and all of its affiliates cannot exceed 20% of that bank's capital and surplus.

Arrow and its subsidiary banks are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on an institution’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Arrow and its subsidiary banks must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.  Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require Arrow and its subsidiary banks to maintain minimum capital amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined).  Management believes, as of December 31, 2017 and 2016, that Arrow and both subsidiary banks meet all capital adequacy requirements to which they are subject.

As of December 31, 2017, Arrow and both subsidiary banks qualified as well-capitalized under the regulatory framework for prompt corrective action.  To be categorized as “well-capitalized,” Arrow and its subsidiary banks must maintain minimum total risk-based, Tier I risk-based, Tier I leverage, and CET1 risk-based ratios as set forth in the table below.  There are no conditions or events that management believes have changed Arrow’s or its subsidiary banks’ categories. The actual capital amounts and ratios for Arrow and its subsidiary banks, Glens Falls National Bank and Trust Company (“Glens Falls National”) and Saratoga National Bank and Trust Company (“Saratoga National”), are presented in the table below as of December 31, 2017 and 2016:

	Actual				Minimum Amounts For Capital Adequacy Purposes				Minimum Amounts To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2017
Total Capital  (to Risk Weighted Assets):
Arrow	$	278,163	15.0	%	$	172,461	9.3	%	$	185,442	10.0	%
Glens Falls National	220,275		14.6	%	140,312		9.3	%	150,873		10.0	%
Saratoga National	48,822		14.0	%	32,432		9.3	%	34,873		10.0	%
Tier I Capital  (to Risk Weighted Assets):
Arrow	259,378		14.0	%	135,247		7.3	%	148,216		8.0	%
Glens Falls National	205,200		13.6	%	110,144		7.3	%	120,706		8.0	%
Saratoga National	45,311		13.0	%	25,444		7.3	%	27,884		8.0	%
Tier I Capital  (to Average Assets):
Arrow	259,378		9.5	%	109,212		4.0	%	136,515		5.0	%
Glens Falls National	205,200		9.1	%	90,198		4.0	%	112,747		5.0	%
Saratoga National	45,311		9.4	%	19,281		4.0	%	24,102		5.0	%
Common Equity Tier 1 Capital  (to Risk Weighted Assets):
Arrow	239,326		12.9	%	107,604		5.8	%	120,591		6.5	%
Glens Falls National	205,148		13.6	%	87,490		5.8	%	98,049		6.5	%
Saratoga National	45,311		13.0	%	20,216		5.8	%	22,656		6.5	%
As of December 31, 2016
Total Capital  (to Risk Weighted Assets):
Arrow	258,653		15.2	%	146,343		8.6	%	170,166		10.0	%
Glens Falls National	205,573		15.0	%	117,862		8.6	%	137,049		10.0	%
Saratoga National	42,168		12.8	%	28,332		8.6	%	32,944		10.0	%
Tier I Capital  (to Risk Weighted Assets):
Arrow	241,523		14.1	%	113,053		6.6	%	137,034		8.0	%
Glens Falls National	191,679		14.0	%	90,363		6.6	%	109,531		8.0	%
Saratoga National	39,050		11.9	%	21,658		6.6	%	26,252		8.0	%
Tier I Capital  (to Average Assets):
Arrow	241,523		9.5	%	101,694		4.0	%	127,117		5.0	%
Glens Falls National	191,679		9.1	%	84,255		4.0	%	105,318		5.0	%
Saratoga National	39,050		8.9	%	17,551		4.0	%	21,938		5.0	%
Common Equity Tier 1 Capital  (to Risk Weighted Assets):
Arrow	221,472		13.0	%	86,885		5.1	%	110,736		6.5	%
Glens Falls National	191,628		13.9	%	70,310		5.1	%	89,610		6.5	%
Saratoga National	39,050		11.9	%	16,736		5.1	%	21,330		6.5	%