10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2019

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-12507

ARROW FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

New York	22-2448962
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
250 GLEN STREET, GLENS FALLS, NEW YORK 12801
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code:   (518) 745-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x  Yes     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  x  Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	Accelerated filer   x
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. __

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      x  No

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, Par Value $1.00 per share	AROW	NASDAQ Global Select Market

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of April 30, 2019
Common Stock, par value $1.00 per share	14,484,215

ARROW FINANCIAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3. Quantitative and Qualitative Disclosures About Market Risk	58
Item 4. Controls and Procedures	58
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	59
Item 1.A. Risk Factors	59
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3. Defaults Upon Senior Securities	59
Item 4. Mine Safety Disclosures	59
Item 5. Other Information	60
Item 6. Exhibits	60
SIGNATURES	61

# 2

PART I - FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts) (Unaudited)
	March 31, 2019			December 31, 2018			March 31, 2018
ASSETS
Cash and Due From Banks	$	36,198		$	56,529		$	29,525
Interest-Bearing Deposits at Banks	25,031			27,710			70,747
Investment Securities:
Available-for-Sale	298,812			317,535			305,589
Held-to-Maturity (Approximate Fair Value of $280,414 at March 31, 2019; $280,338 at December 31, 2018; and $324,937 at March 31, 2018)	279,400			283,476			330,124
Equity Securities	1,850			1,774			1,579
Other Investments	7,878			15,506			4,780
Loans	2,235,208			2,196,215			1,993,037
Allowance for Loan Losses	(20,373		)	(20,196		)	(19,057		)
Net Loans	2,214,835			2,176,019			1,973,980
Premises and Equipment, Net	34,949			30,446			27,815
Goodwill	21,873			21,873			21,873
Other Intangible Assets, Net	1,777			1,852			2,172
Other Assets	62,280			55,614			58,503
Total Assets	$	2,984,883		$	2,988,334		$	2,826,687
LIABILITIES
Noninterest-Bearing Deposits	$	453,089		$	472,768		$	452,347
Interest-Bearing Checking Accounts	823,301			790,781			944,161
Savings Deposits	866,861			818,048			762,220
Time Deposits over $250,000	83,834			73,583			85,403
Other Time Deposits	263,012			190,404			167,142
Total Deposits	2,490,097			2,345,584			2,411,273
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	58,407			54,659			74,957
Federal Home Loan Bank Overnight Advances	74,500			234,000			—
Federal Home Loan Bank Term Advances	35,000			45,000			45,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000			20,000			20,000
Finance Leases	2,946			—			—
Other Liabilities	27,324			19,507			22,723
Total Liabilities	2,708,274			2,718,750			2,573,953
STOCKHOLDERS’ EQUITY
Preferred Stock, $5 Par Value; 1,000,000 Shares Authorized	—			—			—
Common Stock, $1 Par Value; 20,000,000 Shares Authorized (19,035,565 Shares Issued at March 31, 2019; 19,035,565 at December 31, 2018 and 18,481,301 at March 31, 2018)	19,035			19,035			18,481
Additional Paid-in Capital	315,262			314,533			290,980
Retained Earnings	34,231			29,257			34,093
Unallocated ESOP Shares (5,001 Shares at March 31, 2019; 5,001 Shares at December 31, 2018 and 9,643 Shares at March 31, 2018)	(100		)	(100		)	(200		)
Accumulated Other Comprehensive Loss	(11,567		)	(13,810		)	(11,285		)
Treasury Stock, at Cost (4,556,083 Shares at March 31, 2019; 4,558,207 Shares at December 31, 2018 and 4,516,444 Shares at March 31, 2018)	(80,252		)	(79,331		)	(79,335		)
Total Stockholders’ Equity	276,609			269,584			252,734
Total Liabilities and Stockholders’ Equity	$	2,984,883		$	2,988,334		$	2,826,687

See Notes to Unaudited Interim Consolidated Financial Statements.

# 3

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts) (Unaudited)
	Three Months Ended March 31,
	2019		2018
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans	$	22,403	$	18,858
Interest on Deposits at Banks	195		134
Interest and Dividends on Investment Securities:
Fully Taxable	2,369		1,893
Exempt from Federal Taxes	1,246		1,533
Total Interest and Dividend Income	26,213		22,418
INTEREST EXPENSE
Interest-Bearing Checking Accounts	482		387
Savings Deposits	1,601		522
Time Deposits over $250,000	396		204
Other Time Deposits	713		259
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	22		16
Federal Home Loan Bank Advances	1,594		414
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	269		214
Interest on Financing Leases	15		—
Total Interest Expense	5,092		2,016
NET INTEREST INCOME	21,121		20,402
Provision for Loan Losses	472		746
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	20,649		19,656
NONINTEREST INCOME
Income From Fiduciary Activities	2,107		2,197
Fees for Other Services to Customers	2,402		2,380
Insurance Commissions	1,719		1,903
Net Gain on Securities Transactions	76		18
Net Gain on Sales of Loans	104		38
Other Operating Income	479		353
Total Noninterest Income	6,887		6,889
NONINTEREST EXPENSE
Salaries and Employee Benefits	9,319		9,369
Occupancy Expenses, Net	1,420		1,340
Technology and Equipment Expense	3,141		2,698
FDIC Assessments	212		217
Other Operating Expense	2,560		2,332
Total Noninterest Expense	16,652		15,956
INCOME BEFORE PROVISION FOR INCOME TAXES	10,884		10,589
Provision for Income Taxes	2,150		2,058
NET INCOME	$	8,734	$	8,531
Average Shares Outstanding 1:
Basic	14,469		14,354
Diluted	14,520		14,436
Per Common Share:
Basic Earnings	$	0.60	$	0.59
Diluted Earnings	0.60		0.59

¹2018 Share and Per Share Amounts have been restated for the September 27, 20183% stock dividend.

See Notes to Unaudited Interim Consolidated Financial Statements.

# 4

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands) (Unaudited)
	Three Months Ended March 31,
	2019		2018
Net Income	$	8,734	$	8,531
Other Comprehensive Income (Loss), Net of Tax:
Net Unrealized Securities Holding Gains (Losses) Arising During the Period	2,080		(2,485		)
Amortization of Net Retirement Plan Actuarial Loss	121		46
Amortization (Accretion) of Net Retirement Plan Prior Service Cost (Credit)	42		(1		)
Other Comprehensive Income (Loss)	2,243		(2,440		)
Comprehensive Income	$	10,977	$	6,091

See Notes to Unaudited Interim Consolidated Financial Statements.

# 5

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

	Common Stock		Additional Paid-In Capital		Retained Earnings			Unallo-cated ESOP Shares			Accumu-lated Other Com- prehensive Loss			Treasury Stock			Total
Balance at December 31, 2018	$	19,035	$	314,533	$	29,257		$	(100	)	$	(13,810	)	$	(79,331	)	$	269,584
Net Income	—		—		8,734			—			—			—			8,734
Other Comprehensive Income	—		—		—			—			2,243			—			2,243
Cash Dividends Paid, $.26 per Share	—		—		(3,760		)	—			—			—			(3,760		)
Stock Options Exercised, Net  (26,135 Shares)	—		249		—			—			—			286			535
Shares Issued Under the Employee Stock   Purchase Plan  (3,709 Shares)	—		76		—			—			—			41			117
Shares Issued for Dividend   Reinvestment Plans (13,132 Shares)	—		309		—			—			—			144			453
Stock-Based Compensation Expense	—		95		—			—			—			—			95
Purchase of Treasury Stock   (40,852 Shares)	—		—		—			—			—			(1,392		)	(1,392		)
Balance at March 31, 2019	$	19,035	$	315,262	$	34,231		$	(100	)	$	(11,567	)	$	(80,252	)	$	276,609
Balance at December 31, 2017	18,481		290,219		28,818			(200		)	$	(8,514	)	$	(79,201	)	$	249,603
Net Income	—		—		8,531			—			—			—			8,531
Other Comprehensive Loss	—		—		—			—			(2,440		)	—			(2,440		)
Impact of the Adoption of ASU 2014-09					(102		)										(102		)
Impact of the Adoption of ASU2016-01					331						(331		)				—
Cash Dividends Paid, $.243 per Share 1	—		—		(3,485		)	—			—			—			(3,485		)
Stock Options Exercised, Net (27,662 Shares)	—		307		—			—			—			303			610
Shares Issued Under the Employee Stock   Purchase Plan  (3,674 Shares)	—		76		—			—			—			40			116
Shares Issued for Dividend   Reinvestment Plans (12,459 Shares)	—		289		—			—			—			142			431
Stock-Based Compensation Expense	—		89		—			—			—			—			89
Purchase of Treasury Stock  (18,715 Shares)	—		—		—			—			—			(619		)	(619		)
Balance at March 31, 2018	$	18,481	$	290,980	$	34,093		$	(200	)	$	(11,285	)	$	(79,335	)	$	252,734

¹ Cash dividends paid per share have been adjusted for the September 27, 20183% stock dividend.

See Notes to Unaudited Interim Consolidated Financial Statements.

# 6

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Three Months Ended March 31,
Cash Flows from Operating Activities:	2019			2018
Net Income	$	8,734		$	8,531
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Loan Losses	472			746
Depreciation and Amortization	1,309			1,199
Net Gain on Securities Transactions	(76		)	(18		)
Loans Originated and Held-for-Sale	(4,223		)	(12,326		)
Proceeds from the Sale of Loans Held-for-Sale	3,718			12,520
Net Gain on the Sale of Loans	(104		)	(38		)
Net Loss on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	130			32
Contributions to Retirement Benefit Plans	(153		)	(134		)
Deferred Income Tax Benefit	(297		)	(220		)
Stock-Based Compensation Expense	95			89
Tax Benefit from Exercise of Stock Options	78			112
Net Increase in Other Assets	(1,565		)	(395		)
Net Increase in Other Liabilities	2,613			2,185
Net Cash Provided By Operating Activities	10,731			12,283
Cash Flows from Investing Activities:
Proceeds from the Maturities and Calls of Securities Available-for-Sale	21,261			9,380
Purchases of Securities Available-for-Sale	—			(19,979		)
Proceeds from the Maturities and Calls of Securities Held-to-Maturity	5,319			6,459
Purchases of Securities Held-to-Maturity	(1,457		)	(921		)
Net Increase in Loans	(39,545		)	(42,968		)
Proceeds from the Sales of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	442			437
Purchase of Premises and Equipment	(2,099		)	(627		)
Net Decrease in Other Investments	7,628			5,169
Net Cash Used By Investing Activities	(8,451		)	(43,050		)
Cash Flows from Financing Activities:
Net Increase in Deposits	144,513			166,157
Net Decrease in Short-Term Federal Home Loan Bank Borrowings	(159,500		)	(105,000		)
Net Increase in Short-Term Borrowings	3,748			9,991
Finance Lease Payments	(4		)	—
Repayments of Federal Home Loan Bank Term Advances	(10,000		)	(10,000		)
Purchase of Treasury Stock	(1,392		)	(619		)
Stock Options Exercised, Net	535			610
Shares Issued Under the Employee Stock Purchase Plan	117			116
Shares Issued for Dividend Reinvestment Plans	453			431
Cash Dividends Paid	(3,760		)	(3,485		)
Net Cash (Used) Provided By Financing Activities	(25,290		)	58,201
Net (Decrease) Increase in Cash and Cash Equivalents	(23,010		)	27,434
Cash and Cash Equivalents at Beginning of Period	84,239			72,838
Cash and Cash Equivalents at End of Period	$	61,229		$	100,272
Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings	$	4,924		$	1,949
Income Taxes	311			390
Non-cash Investing and Financing Activity:
Transfer of Loans to Other Real Estate Owned and Repossessed Assets	728			270

See Notes to Unaudited Interim Consolidated Financial Statements.

# 7

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.     ACCOUNTING POLICIES

In the opinion of the management of Arrow Financial Corporation (Arrow, the Company, we, or us), the accompanying unaudited interim consolidated financial statements contain all of the adjustments necessary to present fairly the financial position as of March 31, 2019, December 31, 2018 and March 31, 2018; the results of operations for the three-month periods endedMarch 31, 2019 and 2018; the consolidated statements of comprehensive income for the three-month periods endedMarch 31, 2019 and 2018; the changes in stockholders' equity for the three-month periods ended March 31, 2019 and 2018; and the cash flows for the three-month periods ended March 31, 2019 and 2018. All such adjustments are of a normal recurring nature.

Management’s Use of Estimates -The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.  Our most significant estimate is the allowance for loan losses. Other estimates include the evaluation of other-than-temporary impairment of investment securities, goodwill impairment, pension and other postretirement liabilities and an analysis of a need for a valuation allowance for deferred tax assets. Actual results could differ from those estimates.

A material estimate that is particularly susceptible to significant change in the near term is the allowance for loan losses.  In connection with the determination of the allowance for loan losses, management obtains appraisals for properties.  The allowance for loan losses is management’s best estimate of probable loan losses incurred as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for loan losses may be necessary based on changes in economic conditions.  

The unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements of Arrow for the year ended December 31, 2018 included in Arrow's Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Adopted and Recently Issued Accounting Standards

The following accounting standards have been adopted in the first three months of 2019:

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-08 "Receivables-Nonrefundable Fees and Other Costs" which amends the amortization period for certain purchased callable debt securities held at a premium. This shortens the amortization period for the premium to the earliest call date. Under United States generally accepted accounting principles (GAAP), entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. For Arrow, the standard was effective in the first quarter of 2019 and did not have a material impact on its financial position or the results of operations in the current quarter or in future periods.

In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842) which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): "Land Easement Practical Expedient for Transition to Topic 842". In July 2018, the FASB issued ASU 2018-10 "Codification Improvements to Topic 842, Leases" which provided clarification on certain components of the original guidance, including that the rate implicit in the lease cannot be less than zero. Also in July 2018, the FASB issued ASU 2018-11 "Targeted Improvements" to Leases (Topic 842) which amends the original guidance to allow for the adoption of this standard to be applied retrospectively at the beginning of the period of adoption, which was January 1, 2019 for Arrow, without revising prior comparative periods.

The Company adopted this standard as of January 1, 2019 using the effective date method, also known as the modified retrospective method, with the cumulative-effect adjustment recorded at the beginning of the period of adoption. As a result of this adoption, the Company's assets increased $7.9 million and the Company's liabilities increased $8.0 million with no adjustment required to retained earnings and no material impact to the Consolidated Statements of Income.

Practical Expedients Elected At Adoption: The package of practical expedients were elected that did not require the Company to reassess whether an existing contract contains a lease, to reassess existing leases between operating leases and finance leases and to not reassess initial direct costs for any existing leases. These practical expedients were applied together. In addition, the Company also elected a practical expedient, which was required to be applied consistently to all of its leases, to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and in assessing impairment in the right-of-use asset.

Accounting Policy Elections: The Company also made two accounting policy elections related to the adoption of this standard. The first is a determination not to separate lease and non-lease components and account for the resulting combined component as a single lease component. The second election is to account for short-term leases, those leases with a "lease term" of twelve months or less, like an operating lease under current GAAP.

Determination of the Discount Rate to Calculate the Lease Liability: Since the Company was unable to determine the rate implicit in its leases, the secured borrowing rate from the Federal Home Loan Bank of New York as of the January 1, 2019 adoption date was utilized for existing leases for the effective lease term beginning with the effective date of each existing lease. The expected expiration date of each lease was determined on a lease-by-lease basis based on the availability of renewal options in the lease contracts, the amount of leasehold improvements at each location, total branch deposits at each location in addition to the feasibility of growth potential at each location. A similar process is followed to determine the expected lease expiration date for all leases executed subsequent to the January 1, 2019 adoption date.

# 8

The following accounting standards have been issued and will become effective for the Company at a future date:

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses" (Topic 326) which will change the way financial entities measure expected credit losses for financial assets, primarily loans. Under this ASU, the "incurred loss" model will be replaced with an "expected loss" model which will recognize losses over the life of the instrument and requires consideration of a broader range of reasonable and supportable information. Currently, credit losses on available-for-sale securities reduce the carrying value of the instrument and cannot be reversed. Under this ASU, the amount of the credit loss is carried as a valuation allowance and can be reversed. The standard also requires expanded credit quality disclosures. For Arrow, the standard is effective for the first quarter of 2020 and early adoption is allowed in 2019. The Company plans on adopting the standard in the first quarter of 2020, in order to maximize the accumulation of data needed to calculate the new current expected credit loss (CECL) methodologies. The ASU describes several acceptable methodologies for calculating expected losses on a loan or a pool of loans and requires additional disclosures. The initial adjustment will not be reported in earnings, but as the cumulative effect of a change in accounting principle. The FASB’s Transition Research Group for credit losses still has several outstanding unresolved questions, some of which may have a significant impact on CECL calculations. The Company has continued its implementation efforts with the development and testing of various methods within its core model, and has tentatively identified the discounted cash flow method for determining losses for the commercial loan portfolios and the residential real estate portfolios, and the vintage method for the consumer indirect loan portfolio. Based on further testing, these methods may change prior to adoption. As a result of analyses performed, including the availability of future economic data, the Company plans to utilize a two-year reasonable and supportable forecast period and is in the process of identifying which economic data best correlates with expected loan losses. The Company continues to monitor new regulatory guidance and is updating relevant internal controls and processes. The adoption of this standard will likely have the effect of increasing the allowance for loan and lease losses and reducing shareholders' equity, the extent of which will depend upon the nature and characteristics of the Company's loan portfolio and economic conditions and forecasts at the adoption date. The Company expects to remain a well-capitalized financial institution under current regulatory calculations.     

In August 2018, the FASB issued ASU 2018-13 "Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement" which as part of its disclosure framework, the FASB has eliminated, amended and added disclosure requirements for fair value measurements. The following disclosure requirements were eliminated: Amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy of the timing of transfers between levels of the fair value hierarchy; the valuation processes for Level 3 fair value measurements. For public companies such as Arrow, the following new disclosures will be required: Changes in unrealized gains and losses for the period included in other comprehensive income (OCI); the range and weighted average of significant unobservable inputs used; alternatively, a company may choose to disclose other quantitative information if it determines that it is a more reasonable and rational method that reflects the distribution of unobservable inputs used. For Arrow, the standard becomes effective in the first quarter of 2020. The Company does not expect that the adoption of this change in fair value disclosure will have a material impact on its financial position or the results of operations in periods subsequent to its adoption.

In August 2018, the FASB issued ASU 2018-14 "Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans" which applies to all companies that provide defined benefit pension or other postretirement benefit plans for their employees. Certain disclosure requirements have been eliminated such as reporting the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next year, and reporting the effects of a one-percentage-point change in the assumed healthcare cost trend rate on the aggregate of the service cost and interest cost components of net periodic benefit cost and on the benefit obligation for postretirement healthcare benefits. New required disclosures for reporting the weighted-average interest rate used to credit cash balance and similar plans that have a promised interest credit, the reasons for significant gains and losses affecting benefit obligations and other requirements for reporting aggregate information related to pension plans. For Arrow, the standard becomes effective at December 31, 2020. The Company does not expect that the adoption of this change affecting defined benefit plan disclosures will have a material impact on its financial position or the results of operations.

In August 2018, the FASB issued ASU 2018-15 "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" which will require companies to defer potentially significant, specified implementation costs incurred in a cloud computing arrangement that are often expensed under current US GAAP. For Arrow, the standard becomes effective at January 1, 2020. The Company is in the process of assessing the impact of this new accounting standard on its financial position and the results of operations in periods subsequent to its adoption.

# 9

Note 2.    INVESTMENT SECURITIES (In Thousands)

The following table is the schedule of Available-For-Sale Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2019
Available-For-Sale Securities,   at Amortized Cost	$	35,519	$	1,114	$	263,347	$	1,000	$	300,980
Available-For-Sale Securities,   at Fair Value	35,383		1,116		261,513		800		298,812
Gross Unrealized Gains	—		2		657		—		659
Gross Unrealized Losses	136		—		2,491		200		2,827
Available-For-Sale Securities,   Pledged as Collateral									255,028
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	30,516	$	201	$	494	$	—	$	31,211
From 1 - 5 Years	5,003		433		125,267		—		130,703
From 5 - 10 Years	—		—		117,616		—		117,616
Over 10 Years	—		480		19,970		1,000		21,450
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	30,432	$	203	$	498	$	—	$	31,133
From 1 - 5 Years	4,951		433		124,175		—		129,559
From 5 - 10 Years	—		—		117,008		—		117,008
Over 10 Years	—		480		19,832		800		21,112
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	53,131	$	—	$	53,131
12 Months or Longer	35,383		—		155,108		800		191,291
Total	$	35,383	$	—	$	208,239	$	800	$	244,422
Number of Securities in a   Continuous Loss Position	7		—		80		1		88
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	258	$	—	$	258
12 Months or Longer	136		—		2,233		200		2,569
Total	$	136	$	—	$	2,491	$	200	$	2,827
Disaggregated Details:
US Treasury Obligations,   at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	35,519
US Agency Obligations, at Fair Value	35,383
US Government Agency   Securities, at Amortized Cost					$	70,358
US Government Agency   Securities, at Fair Value					70,034
Government Sponsored Entity   Securities, at Amortized Cost					192,989
Government Sponsored Entity Securities, at Fair Value					191,479

# 10

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
December 31, 2018
Available-For-Sale Securities,   at Amortized Cost	$	47,071	$	1,193	$	273,227	$	1,000	$	322,491
Available-For-Sale Securities,   at Fair Value	46,765		1,195		268,775		800		317,535
Gross Unrealized Gains	—		2		288		—		290
Gross Unrealized Losses	306		—		4,740		200		5,246
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									236,163
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	107,550	$	—	$	107,550
12 Months or Longer	46,765		—		124,627		800		172,192
Total	$	46,765	$	—	$	232,177	$	800	$	279,742
Number of Securities in a   Continuous Loss Position	10		—		86		1		97
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	841	$	—	$	841
12 Months or Longer	306		—		3,899		200		4,405
Total	$	306	$	—	$	4,740	$	200	$	5,246
Disaggregated Details:
US Treasury Obligations,   at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	47,071
US Agency Obligations, at Fair Value	46,765
US Government Agency   Securities, at Amortized Cost					$	72,095
US Government Agency   Securities, at Fair Value					71,800
Government Sponsored Entity   Securities, at Amortized Cost					201,132
Government Sponsored Entity Securities, at Fair Value					196,975

# 11

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2018
Available-For-Sale Securities,   at Amortized Cost	$	60,264	$	9,741	$	240,033	$	1,000	$	311,038
Available-For-Sale Securities,   at Fair Value	59,657		9,743		235,389		800		305,589
Gross Unrealized Gains	—		7		347		—		354
Gross Unrealized Losses	607		5		4,991		200		5,803
Available-For-Sale Securities,   Pledged as Collateral									229,857
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	17,128	$	7,421	$	112,078	$	—	$	136,627
12 Months or Longer	42,529		—		80,759		800		124,088
Total	$	59,657	$	7,421	$	192,837	$	800	$	260,715
Number of Securities in a   Continuous Loss Position	14		29		69		1		113
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	266	$	6	$	1,940	$	—	$	2,212
12 Months or Longer	341		—		3,050		200		3,591
Total	$	607	$	6	$	4,990	$	200	$	5,803
Disaggregated Details:
US Treasury Obligations, at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	60,264
US Agency Obligations, at Fair Value	59,657
US Government Agency   Securities, at Amortized Cost					$	59,446
US Government Agency   Securities, at Fair Value					59,469
Government Sponsored Entity   Securities, at Amortized Cost					180,587
Government Sponsored Entity Securities, at Fair Value					175,920

# 12

The following table is the schedule of Held-To-Maturity Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2019
Held-To-Maturity Securities,   at Amortized Cost	$	234,454	$	44,946	$	279,400
Held-To-Maturity Securities,   at Fair Value	235,576		44,838		280,414
Gross Unrealized Gains	1,695		97		1,792
Gross Unrealized Losses	573		205		778
Held-To-Maturity Securities,   Pledged as Collateral					265,465
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	25,205	$	—	$	25,205
From 1 - 5 Years	94,100		44,946		139,046
From 5 - 10 Years	112,788		—		112,788
Over 10 Years	2,361		—		2,361
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	25,244	$	—	$	25,244
From 1 - 5 Years	94,590		44,838		139,428
From 5 - 10 Years	113,343		—		113,343
Over 10 Years	2,399		—		2,399
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	71,450		26,021		97,471
Total	$	71,450	$	26,021	$	97,471
Number of Securities in a   Continuous Loss Position	193		29		222
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	573		205		778
Total	$	573	$	205	$	778
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	2,069
US Government Agency   Securities, at Fair Value			2,012
Government Sponsored Entity   Securities, at Amortized Cost			42,877
Government Sponsored Entity Securities, at Fair Value			42,826

# 13

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2018
Held-To-Maturity Securities,   at Amortized Cost	$	235,782	$	47,694	$	283,476
Held-To-Maturity Securities,   at Fair Value	233,359		46,979		280,338
Gross Unrealized Gains	486		—		486
Gross Unrealized Losses	2,909		715		3,624
Held-To-Maturity Securities,   Pledged as Collateral					266,341
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	32,093	$	33,309	$	65,402
12 Months or Longer	110,947		13,670		124,617
Total	$	143,040	$	46,979	$	190,019
Number of Securities in a   Continuous Loss Position	411		47		458
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	162	$	456	$	618
12 Months or Longer	2,747		259		3,006
Total	$	2,909	$	715	$	3,624
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	2,180
US Government Agency   Securities, at Fair Value			2,143
Government Sponsored Entity   Securities, at Amortized Cost			45,514
Government Sponsored Entity Securities, at Fair Value			44,836
March 31, 2018
Held-To-Maturity Securities,   at Amortized Cost	$	272,938	$	57,186	$	330,124
Held-To-Maturity Securities,   at Fair Value	268,604		56,333		324,937
Gross Unrealized Gains	646		—		646
Gross Unrealized Losses	4,979		853		5,832
Held-To-Maturity Securities,   Pledged as Collateral					307,273
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	101,695	$	53,076	$	154,771
12 Months or Longer	65,012		3,257		68,269
Total	$	166,707	$	56,333	$	223,040
Number of Securities in a   Continuous Loss Position	495		47		542
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,981	$	767	$	2,748
12 Months or Longer	2,998		86		3,084
Total	$	4,979	$	853	$	5,832

# 14

Held-To-Maturity Securities
	State and Municipal Obligations	Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2018
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost		$	2,530
US Government Agency   Securities, at Fair Value		2,483
Government Sponsored Entity   Securities, at Amortized Cost		54,656
Government Sponsored Entity Securities, at Fair Value		53,850

In the tables above, maturities of mortgage-backed securities are included based on their expected average lives. Actual maturities will differ because issuers may have the right to call or prepay obligations with or without prepayment penalties.

Securities in a continuous loss position, in the tables above for March 31, 2019, December 31, 2018 and March 31, 2018, do not reflect any deterioration of the credit worthiness of the issuing entities.  U.S. government agency securities, including mortgage-backed securities, are all rated AAA by Moody's and AA+ by Standard and Poor's.  The state and municipal obligations are general obligations supported by the general taxing authority of the issuer, and in some cases are insured.  Obligations issued by school districts are supported by state aid.  For any non-rated municipal securities, credit analysis is performed in-house based upon data that has been submitted by the issuers to the New York State Comptroller. That analysis shows no deterioration in the credit worthiness of the municipalities.  Subsequent to March 31, 2019, there were no securities downgraded below investment grade.  

The unrealized losses on these temporarily impaired securities are primarily the result of changes in interest rates for fixed rate securities where the interest rate received is less than the current rate available for new offerings of similar securities, changes in market spreads as a result of shifts in supply and demand, and/or changes in the level of prepayments for mortgage related securities. Because we do not currently intend to sell any of our temporarily impaired securities, and because it is not more likely-than-not we would be required to sell the securities prior to recovery, the impairment is considered temporary.

Pledged securities, in the tables above, are primarily used to collateralize state and municipal deposits, as required under New York State law. A small portion of the pledged securities are used to collateralize repurchase agreements and pooled deposits of our trust customers.

The following table is the schedule of Equity Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Equity Securities
	March 31, 2019	December 31, 2018	March 31, 2018
Equity Securities, at Fair Value	$1,850	$1,774	$1,579

The following is a summary of realized and unrealized gains and losses recognized in net income on equity securities during the three-month period endedMarch 31, 2019:

	Three months ended March 31, 2019
Net Gain on Equity Securities	$	76
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	—
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$	76

# 15

Note 3.    LOANS (In Thousands)

Loan Categories and Past Due Loans

The following table presents loan balances outstanding as of March 31, 2019, December 31, 2018 and March 31, 2018 and an analysis of the recorded investment in loans that are past due at these dates.  Generally, Arrow considers a loan past due 30 or more days when the borrower is two payments past due.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Loans Past Due 30-59 Days	$	168	$	208	$	4,758	$	1,345	$	6,479
Loans Past Due 60-89 Days	—		—		1,387		207		1,594
Loans Past Due 90 or more Days	17		108		369		1,610		2,104
Total Loans Past Due	185		316		6,514		3,162		10,177
Current Loans	133,091		493,071		740,285		858,584		2,225,031
Total Loans	$	133,276	$	493,387	$	746,799	$	861,746	$	2,235,208
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	64	$	64
Nonaccrual Loans	415		248		588		3,892		5,143
December 31, 2018
Loans Past Due 30-59 Days	$	121	$	108	$	5,369	$	281	$	5,879
Loans Past Due 60-89 Days	49		—		2,136		1,908		4,093
Loans Past Due 90 or more Days	—		789		572		1,844		3,205
Total Loans Past Due	170		897		8,077		4,033		13,177
Current Loans	136,720		483,665		711,433		851,220		2,183,038
Total Loans	$	136,890	$	484,562	$	719,510	$	855,253	$	2,196,215
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	144	$	1,081	$	1,225
Nonaccrual Loans	403		789		658		2,309		4,159
March 31, 2018
Loans Past Due 30-59 Days	$	45	$	156	$	3,673	$	1,711	$	5,585
Loans Past Due 60-89 Days	60		—		751		481		1,292
Loans Past Due 90 or more Days	41		807		252		321		1,421
Total Loans Past Due	146		963		4,676		2,513		8,298
Current Loans	127,528		454,095		621,964		781,152		1,984,739
Total Loans	$	127,674	$	455,058	$	626,640	$	783,665	$	1,993,037
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	—	$	—
Nonaccrual Loans	652		807		441		2,570		4,470

The Company disaggregates its loan portfolio into the following four categories:

Commercial - The Company offers a variety of loan options to meet the specific needs of commercial customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower. These loans carry a higher risk than commercial real estate loans due to the nature of the underlying collateral, which can be business assets such as equipment and accounts receivable and generally have a lower liquidation value than real estate. In the event of default by the borrower, the Company may be required to liquidate collateral at deeply discounted values. To reduce the risk, management usually obtains personal guarantees of the borrowers.

# 16

Commercial Real Estate - The Company offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. Commercial real estate loans are made to finance the purchases of real property which generally consists of real estate with completed structures. These commercial real estate loans are secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and both owner- and non-owner-occupied facilities. These loans are typically less risky than commercial loans, since they are secured by real estate and buildings, and are generally originated in amounts of no more than 80% of the appraised value of the property. However, the Company also offers commercial construction and land development loans to finance projects, primarily within the communities that we serve. Many projects will ultimately be used by the borrowers' businesses, while others are developed for resale. These real estate loans are also secured by first liens on the real estate, which may include apartments, commercial structures, housing business, healthcare facilities and both owner-occupied and non-owner-occupied facilities. There is enhanced risk during the construction period, since the loan is secured by an incomplete project.

Consumer Loans - The Company offers a variety of consumer installment loans to finance personal expenditures. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to five years, based upon the nature of the collateral and the size of the loan. In addition to installment loans, the Company also offers personal lines of credit and overdraft protection. Several loans are unsecured, which carry a higher risk of loss. Also included in this category are automobile loans. The Company primarily finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to seven years. Indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed.

Residential - Residential real estate loans consist primarily of loans secured by first or second mortgages on primary residences. The Company originates adjustable-rate and fixed-rate one-to-four-family residential real estate loans for the construction, purchase or refinancing of an existing mortgage. These loans are collateralized primarily by owner-occupied properties generally located in the Company’s market area. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 80% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance. The Company’s underwriting analysis for residential mortgage loans typically includes credit verification, independent appraisals, and a review of the borrower’s financial condition. Mortgage title insurance and hazard insurance are normally required. It is the Company's general practice to underwrite residential real estate loans to secondary market standards. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period. In addition, the Company offers fixed home equity loans as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses.  The Company's policy allows for a maximum loan to value ratio of 80%, although periodically higher advances are allowed.  The Company originates home equity lines of credit and second mortgage loans (loans secured by a second junior lien position on one-to-four-family residential real estate).  Risk is generally reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows.  A security interest, with title insurance when necessary, is taken in the underlying real estate.

Allowance for Loan Losses

The following table presents a roll-forward of the allowance for loan losses and other information pertaining to the allowance for loan losses:

Allowance for Loan Losses
				Commercial
	Commercial			Real Estate			Consumer			Residential			Total
Roll-forward of the Allowance for Loan Losses for the Quarterly Periods:
December 31, 2018	$	1,218		$	5,644		$	8,882		$	4,452		$	20,196
Charge-offs	(1		)	(29		)	(418		)	(14		)	(462		)
Recoveries	—			—			167			—			167
Provision	33			(26		)	778			(313		)	472
March 31, 2019	$	1,250		$	5,589		$	9,409		$	4,125		$	20,373
December 31, 2017	$	1,873		$	4,504		$	7,604		$	4,605		$	18,586
Charge-offs	(16		)	1			(347		)	(8		)	(370		)
Recoveries	—			9			86			—			95
Provision	311			(151		)	676			(90		)	746
March 31, 2018	$	2,168		$	4,363		$	8,019		$	4,507		$	19,057

# 17

Allowance for Loan Losses
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	—	$	—	$	—	$	—	$	—
Allowance for loan losses - Loans Collectively Evaluated for Impairment	1,250		5,589		9,409		4,125		20,373
Ending Loan Balance - Individually Evaluated for Impairment	40		387		101		2,417		2,945
Ending Loan Balance - Collectively Evaluated for Impairment	$	133,236	$	493,000	$	746,698	$	859,329	$	2,232,263
December 31, 2018
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	—	$	—	$	—	$	4	$	4
Allowance for loan losses - Loans Collectively Evaluated for Impairment	1,218		5,644		8,882		4,448		20,192
Ending Loan Balance - Individually Evaluated for Impairment	430		793		101		1,899		3,223
Ending Loan Balance - Collectively Evaluated for Impairment	$	136,460	$	483,769	$	719,409	$	853,354	$	2,192,992
March 31, 2018
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	92	$	42	$	—	$	58	$	192
Allowance for loan losses - Loans Collectively Evaluated for Impairment	2,076		4,321		8,019		4,449		18,865
Ending Loan Balance - Individually Evaluated for Impairment	489		815		91		1,564		2,959
Ending Loan Balance - Collectively Evaluated for Impairment	$	127,185	$	454,243	$	626,549	$	782,101	$	1,990,078

Through the provision for loan losses, an allowance for loan losses is maintained that reflects the best estimate of the incurred risk of loss in the Company’s loan portfolio as of the balance sheet date. Additions are made to the allowance for loan losses through a periodic provision for loan losses. Actual loan losses are charged against the allowance for loan losses when loans are deemed uncollectible and recoveries of amounts previously charged off are recorded as credits to the allowance for loan losses.

Our loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with certain criticized and classified commercial-related relationships. In addition, our independent internal loan review department performs periodic reviews of the credit quality indicators on individual loans in the commercial loan portfolio.

We use a two-step process to determine the provision for loan losses and the amount of the allowance for loan losses. We perform an evaluation of impaired loans on a quarterly basis. Impaired loans are generally nonaccrual loans over $250 thousand and all troubled debt restructured loans. Our impaired loans are generally considered to be collateral dependent with the charge-off, if any, determined based on the value of the collateral less estimated costs to sell.

The remainder of the portfolio is evaluated on a pooled basis, as described below. For each homogeneous loan pool, we estimate a total loss factor based on the historical net loss rates adjusted for applicable qualitative factors. We update the total loss factors assigned to each loan category on a quarterly basis. For the commercial, commercial construction and commercial real estate categories, we further segregate the loan categories by credit risk profile (pools of loans graded pass, special mention and accruing substandard). Additional description of the credit risk classifications is detailed in the Credit Quality Indicators section of this note.

# 18

We determine the historical net loss rate for each loan category using a trailing three-year net charge-off average. While historical net loss experience provides a reasonable starting point for analysis, historical net losses, or even recent trends in net losses, do not by themselves form a sufficient basis to determine the appropriate level of the allowance for loan losses. Therefore, we also consider and adjust historical net loss factors for qualitative factors that impact the incurred risk of loss associated with the loan categories within the total loan portfolio. These include:

• Changes in the volume and severity of past due, nonaccrual and adversely classified loans

• Changes in the nature and volume of the portfolio and in the terms of loans

• Changes in the value of the underlying collateral for collateral dependent loans

• Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses

• Changes in the quality of the loan review system

• Changes in the experience, ability, and depth of lending management and other relevant staff

• Changes in international, national, regional, and local economic and business conditions and developments that affect the collectibility of the portfolio

• The existence and effect of any concentrations of credit, and changes in the level of such concentrations

• The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the  existing portfolio or pool

Loan Credit Quality Indicators

The following table presents the credit quality indicators by loan category at March 31, 2019, December 31, 2018 and March 31, 2018:

Loan Credit Quality Indicators
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	125,918	$	465,216					$	591,134
Special Mention	133		2,268						2,401
Substandard	7,225		25,903						33,128
Doubtful	—		—						—
Credit Risk Profile Based on Payment Activity:
Performing					$	746,211	$	857,790	$	1,604,001
Nonperforming					588		3,956		4,544
December 31, 2018
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	129,584	$	456,868					$	586,452
Special Mention	—		—						—
Substandard	7,306		26,905						34,211
Doubtful	—		789						789
Credit Risk Profile Based on Payment Activity:
Performing					$	718,708	$	851,863	$	1,570,571
Nonperforming					802		3,390		4,192
March 31, 2018
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	107,838	$	430,121					$	537,959
Special Mention	17,220		611						17,831
Substandard	2,615		23,521						26,136
Doubtful	—		807						807
Credit Risk Profile Based on Payment Activity:
Performing					$	626,198	$	781,095	$	1,407,293
Nonperforming					441		2,570		3,011

# 19

For the purposes of the table above, nonperforming consumer and residential loans are those loans on nonaccrual status or are 90 days or more past due and still accruing interest.

For the allowance calculation, we use an internally developed system of five credit quality indicators to rate the credit worthiness of each commercial loan defined as follows:

1) Satisfactory - "Satisfactory" borrowers have acceptable financial condition with satisfactory record of earnings and sufficient historical and projected cash flow to service the debt.  Borrowers have satisfactory repayment histories and primary and secondary sources of repayment can be clearly identified;

2) Special Mention - Loans in this category have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date.  "Special mention" assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.  Loans which might be assigned this credit quality indicator include loans to borrowers with deteriorating financial strength and/or earnings record and loans with potential for problems due to weakening economic or market conditions;

3) Substandard - Loans classified as “substandard” are inadequately protected by the current sound net worth or paying capacity of the borrower or the collateral pledged, if any.  Loans in this category have well defined weaknesses that jeopardize the repayment.  They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.  “Substandard” loans may include loans which are likely to require liquidation of collateral to effect repayment, and other loans where character or ability to repay has become suspect. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard;

4) Doubtful - Loans classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values highly questionable and improbable.  Although possibility of loss is extremely high, classification of these loans as “loss” has been deferred due to specific pending factors or events which may strengthen the value (i.e. possibility of additional collateral, injection of capital, collateral liquidation, debt restructure, economic recovery, etc).  Loans classified as “doubtful” need to be placed on non-accrual; and

5) Loss - Loans classified as “loss” are considered uncollectible with collateral of such little value that their continuance as bankable assets is not warranted.  As of the date of the balance sheet, all loans in this category have been charged-off to the allowance for loan losses.  

Commercial loans are generally evaluated on an annual basis depending on the size and complexity of the loan relationship, unless the credit related quality indicator falls to a level of "special mention" or below, when the loan is evaluated quarterly.  The credit quality indicator is one of the factors used in assessing the level of incurred risk of loss in our commercial related loan portfolios.

# 20

Impaired Loans

The following table presents information on impaired loans based on whether the impaired loan has a recorded related allowance or has no recorded related allowance:

Impaired Loans
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Recorded Investment:
With No Related Allowance	$	38	$	389	$	101	$	2,417	$	2,945
With a Related Allowance	—		—		—		—		—
Unpaid Principal Balance:
With No Related Allowance	424		2		101		2,416		2,943
With a Related Allowance	—		—		—		—		—
December 31, 2018
Recorded Investment:
With No Related Allowance	$	430	$	793	$	101	$	1,605	$	2,929
With a Related Allowance	—		—		—		294		294
Unpaid Principal Balance:
With No Related Allowance	429		793		100		1,606		2,928
With a Related Allowance	—		—		—		293		293
March 31, 2018
Recorded Investment:
With No Related Allowance	$	—	$	8	$	90	$	1,276	$	1,374
With a Related Allowance	483		783		—		356		1,622
Unpaid Principal Balance:
With No Related Allowance	—		8		90		1,279		$	1,377
With a Related Allowance	489		807		—		286		1,582
For the Quarter Ended:
March 31, 2019
Average Recorded Balance:
With No Related Allowance	$	234	$	591	$	101	$	2,011	$	2,937
With a Related Allowance	—		—		—		147		147
Interest Income Recognized:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—
Cash Basis Income:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—
March 31, 2018
Average Recorded Balance:
With No Related Allowance	$	—	$	395	$	92	$	1,273	$	1,760
With a Related Allowance	484		754		—		345		1,583
Interest Income Recognized:
With No Related Allowance	—		—		—		16		16
With a Related Allowance	—		—		—		24		24
Cash Basis Income:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—

At March 31, 2019, December 31, 2018 and March 31, 2018, all impaired loans were considered to be collateral dependent and were therefore evaluated for impairment based on the fair value of collateral less estimated cost to sell. Interest income recognized in the table above, represents income earned after the loans became impaired and includes restructured loans in compliance with their modified terms and nonaccrual loans where we have recognized interest income on a cash basis.

# 21

Loans Modified in Trouble Debt Restructurings

The following table presents information on loans modified in trouble debt restructurings during the periods indicated.

Loans Modified in Trouble Debt Restructurings During the Period
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
For the Quarter Ended:
March 31, 2019
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	13	$	—	$	13
Post-Modification Outstanding Recorded Investment	—		—		13		—		13
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2018
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	3	$	—	$	3
Post-Modification Outstanding Recorded Investment	—		—		3		—		3
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

In general, loans requiring modification are restructured to accommodate the projected cash-flows of the borrower. Such modifications may involve a reduction of the interest rate, a significant deferral of payments or forgiveness of a portion of the outstanding principal balance. As indicated in the table above, no loans modified during the preceding twelve months subsequently defaulted as of March 31, 2019.

# 22

Note 4.    GUARANTEES (In Thousands)

The following table presents the notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit as of March 31, 2019, December 31, 2018 and March 31, 2018:

Commitments to Extend Credit and Letters of Credit
	March 31, 2019		December 31, 2018		March 31, 2018
Notional Amount:
Commitments to Extend Credit	$	310,749	$	321,143	$	328,774
Standby Letters of Credit	4,431		4,466		3,584
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	20		12		24

Arrow is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Commitments to extend credit include home equity lines of credit, commitments for residential and commercial construction loans and other personal and commercial lines of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  The contract or notional amounts of those instruments reflect the extent of the involvement Arrow has in particular classes of financial instruments.

Arrow's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments.  Arrow uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are not expected to be fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Arrow evaluates each customer's creditworthiness on a case-by-case basis.  Home equity lines of credit are secured by residential real estate.  Construction lines of credit are secured by underlying real estate.  For other lines of credit, the amount of collateral obtained, if deemed necessary by Arrow upon extension of credit, is based on management's credit evaluation of the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.  Most of the commitments are variable rate instruments.

Arrow does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.

Arrow has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party.  Standby letters of credit generally arise in connection with commercial lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit at March 31, 2019, December 31, 2018 and March 31, 2018 represent the maximum potential future payments Arrow could be required to make.  Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements.  Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Company policies governing loan collateral apply to standby letters of credit at the time of credit extension.  Loan-to-value ratios will generally range from 50% for movable assets, such as inventory, to 100% for liquid assets, such as bank CD's.  Fees for standby letters of credit range from 1% to 3% of the notional amount.  Fees are collected upfront and amortized over the life of the commitment. The carrying amount and fair value of Arrow's standby letters of credit at March 31, 2019, December 31, 2018 and March 31, 2018, were insignificant.  The fair value of standby letters of credit is based on the fees currently charged for similar agreements or the cost to terminate the arrangement with the counterparties.

The fair value of commitments to extend credit is determined by estimating the fees to enter into similar agreements, taking into account the remaining terms and present creditworthiness of the counterparties, and for fixed rate loan commitments, the difference between the current and committed interest rates.  Arrow provides several types of commercial lines of credit and standby letters of credit to its commercial customers.  The pricing of these services is not isolated as Arrow considers the customer's complete deposit and borrowing relationship in pricing individual products and services.  The commitments to extend credit also include commitments under home equity lines of credit, for which Arrow charges no fee.  The carrying value and fair value of commitments to extend credit are not material and Arrow does not expect to incur any material loss as a result of these commitments.

In the normal course of business, Arrow and its subsidiary banks become involved in a variety of routine legal proceedings.  At present, there are no legal proceedings pending or threatened, which in the opinion of management and counsel, would result in a material loss to Arrow.

# 23

Note 5.    COMPREHENSIVE INCOME (In Thousands)

The following table presents the components of other comprehensive income for the three-month periods endedMarch 31, 2019 and 2018:

Schedule of Comprehensive Income
	Three Months Ended March 31,
				Tax
	Before-Tax			(Expense)			Net-of-Tax
	Amount			Benefit			Amount
2019
Net Unrealized Securities Holding Gains on Securities Available-for-Sale Arising During the Period	2,788			$	(708	)	2,080
Amortization of Net Retirement Plan Actuarial Loss	163			(42		)	121
Amortization of Net Retirement Plan Prior Service Cost	56			(14		)	42
Other Comprehensive Income	$	3,007		$	(764	)	$	2,243
2018
Net Unrealized Securities Holding Losses on Securities Available-for-Sale Arising During the Period	(3,332		)	$	847		(2,485		)
Amortization of Net Retirement Plan Actuarial Loss	60			(14		)	46
Accretion of Net Retirement Plan Prior Service Credit	(1		)	—			(1		)
Other Comprehensive Loss	$	(3,273	)	$	833		$	(2,440	)

# 24

The following table presents the changes in accumulated other comprehensive income by component:

Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)
	Unrealized			Defined Benefit Plan Items
	Gains and
	Losses on						Net Prior
	Available-for-			Net Gain			Service
	Sale Securities			(Loss)			(Cost) Credit			Total
For the Quarter-To-Date periods ended:
December 31, 2018	$	(3,697	)	$	(8,971	)	$	(1,142	)	$	(13,810	)
Other comprehensive income before reclassifications	2,080			—			—			2,080
Amounts reclassified from accumulated other comprehensive income				121			42			163
Net current-period other comprehensive income	2,080			121			42			2,243
March 31, 2019	$	(1,617	)	$	(8,850	)	$	(1,100	)	$	(11,567	)
December 31, 2017	$	(1,250	)	$	(6,380	)	$	(884	)	$	(8,514	)
Other comprehensive loss before reclassifications	(2,485		)	—			—			(2,485		)
Amounts reclassified from accumulated other comprehensive loss	—			46			(1		)	45
Net current-period other comprehensive income (loss)	(2,485		)	46			(1		)	(2,440		)
Reclassification due to the adoption of ASU 2016-01	(331		)							(331		)
March 31, 2018	$	(4,066	)	$	(6,334	)	$	(885	)	$	(11,285	)

(1) All amounts are net of tax.

# 25

The following table presents the reclassifications out of accumulated other comprehensive income:

Reclassifications Out of Accumulated Other Comprehensive Income
	Amounts Reclassified
Details about Accumulated Other	from Accumulated Other				Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income				Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2019
Amortization of defined benefit pension items:
Prior-service costs	$	(56	)	(1)	Salaries and Employee Benefits
Actuarial gains/(losses)	(163		)	(1)	Salaries and Employee Benefits
	(219		)		Total before Tax
	56				Provision for Income Taxes
	$	(163	)		Net of Tax
Total reclassifications for the period	$	(163	)		Net of Tax
March 31, 2018
Amortization of defined benefit pension items:
Prior-service costs	$	(1	)	(1)	Salaries and Employee Benefits
Actuarial gains/(losses)	60			(1)	Salaries and Employee Benefits
	59				Total before Tax
	(14		)		Provision for Income Taxes
	$	45			Net of Tax
Total reclassifications for the period	$	45			Net of Tax

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

# 26

Note 6.    STOCK-BASED COMPENSATION (Dollars In Thousands, Except Share and Per Share Amounts)

Arrow has established three stock-based compensation plans: an Incentive and Non-qualified Stock Option Plan (Long Term Incentive Plan), an Employee Stock Purchase Plan (ESPP) and an Employee Stock Ownership Plan (ESOP). All share and per share data have been adjusted for the September 27, 20183% stock dividend.

Long Term Incentive Plan

The Long Term Incentive Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, performance units and performance shares. The Compensation Committee of the Board of Directors administers the Long Term Incentive Plan.

Stock Options - Options may be granted at a price no less than the greater of the par value or fair market value of such shares on the date on which such option is granted, and generally expire ten years from the date of grant.  The options usually vest over a four-year period.

The following table summarizes information about stock option activity for the year to date period ended March 31, 2019.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2019	284,522			$	25.67
Granted	52,000			31.71
Exercised	(26,135		)	20.46
Forfeited	(5,797		)	21.12
Outstanding at March 31, 2019	304,590			27.24
Vested at Period-End	183,685			24.34
Expected to Vest	120,905			31.63
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	5.75
Fair Value Assumptions:
Dividend Yield	3.26		%
Expected Volatility	22.58		%
Risk Free Interest Rate	2.63		%
Expected Lives (in years)	8.68

The following table presents information on the amounts expensed related to stock options for the periods ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019		2018
Amount expensed	$	79	$	83

Restricted Stock Units - The Company grants restricted stock units which gives the recipient the right to receive shares of Company stock upon vesting. The fair value of each restricted stock unit is the market value of Company stock on the date of grant. 100% of the restricted stock unit awards vest three years from the grant date. Once vested, the restricted stock units become vested units. Vested units settle upon retirement of the recipient. Unvested restricted stock unit awards will generally be forfeited if the recipient ceases to be employed by the Company, with limited exceptions.

# 27

The following table summarizes information about restricted stock unit activity for the period ended March 31, 2019.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2019	3,377	$	32.57
Granted	3,901	31.71
Non-vested at March 31, 2019	7,278	32.11

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019		2018
Amount expensed	$	16	$	6

Employee Stock Purchase Plan

Arrow sponsors an ESPP under which employees purchase Arrow's common stock at a 5% discount below market price. Under current accounting guidance, a stock purchase plan with a discount of 5% or less is not considered a compensatory plan.

Employee Stock Ownership Plan

Arrow maintains an employee stock ownership plan ("ESOP").  Substantially all employees of Arrow and its subsidiaries are eligible to participate upon satisfaction of applicable service requirements.  The ESOP borrowed funds from one of Arrow’s subsidiary banks to purchase outstanding shares of Arrow’s common stock.  The notes require annual payments of principal and interest through 2019.  As the debt is repaid, shares are released from collateral based on the proportion of debt paid to total debt outstanding for the year and allocated to active employees.  In addition, the Company makes additional cash contributions to the Plan each year.

Shares pledged as collateral are reported as unallocated ESOP shares in stockholders' equity. As shares are released from collateral, Arrow reports compensation expense equal to the current average market price of the shares, and the shares become outstanding for earnings per share computations.

# 28

Note 7.    RETIREMENT BENEFIT PLANS (Dollars in Thousands)

Arrow sponsors qualified and nonqualified defined benefit pension plans and other postretirement benefit plans for its employees. Arrow maintains a non-contributory pension plan, which covers substantially all employees.  Effective December 1, 2002, all active participants in the qualified defined benefit pension plan were given a one-time irrevocable election to continue participating in the traditional plan design, for which benefits were based on years of service and the participant’s final compensation (as defined), or to begin participating in the new cash balance plan design.  All employees who participate in the plan after December 1, 2002 automatically participate in the cash balance plan design.  The interest credits under the cash balance plan are based on the 30-year U.S. Treasury rate in effect for November of the prior year.  The service credits under the cash balance plan are equal to 6.0% of eligible salaries for employees who become participants on or after January 1, 2003.  For employees in the plan prior to January 1, 2003, the service credits are scaled based on the age of the participant, and range from 6.0% to 12.0%.  The funding policy is to contribute up to the maximum amount that can be deducted for federal income tax purposes and to make all payments required under ERISA.  Arrow also maintains a supplemental non-qualified unfunded retirement plan to provide eligible employees of Arrow and its subsidiaries with benefits in excess of qualified plan limits imposed by federal tax law.

Arrow has multiple non-pension postretirement benefit plans.  The health care, dental and life insurance plans are contributory, with participants’ contributions adjusted annually.  Arrow’s policy is to fund the cost of postretirement benefits based on the current cost of the underlying policies.  However, the health care plan provision for automatic increases of Company contributions each year is based on the increase in inflation and is limited to a maximum of 5%.  

As of December 31, 2018, Arrow updated its mortality assumption to the RP-2014 Mortality Table for annuitants and non-annuitants with projected generational mortality improvements using Scale MP-2018 for the pension plans and the RPH-2014 Mortality Table for annuitants and non-annuitants with projected generational mortality improvements using Scale MP-2018 for the retiree health plan. The revised assumptions resulted in a decrease in postretirement liabilities. As of December 31, 2018, Arrow also updated its mortality assumption for annuity/lump sum conversions for the pension plans to the 2019 IRC Section 417(e)(3)B) applicable mortality table. The revised assumption results in an increase in postretirement liabilities for the pension plans.

The interest rates used in determining the present value of a lump sum payment/annuitizing cash balance accounts were changed to the segment rates in effect for the January 1, 2019 plan year (3.43%, 4.46%, 4.88%) as of December 31, 2018. This change was made to more accurately reflect current expected long-term interest rates and resulted in an increase in liability for the Arrow Financial Corporation Employees' Pension Plan and Trust and the Arrow Financial Corporation Select Executive Retirement Plan.

The following tables provide the components of net periodic benefit costs for the three-month periods ended March 31, 2019 and 2018.

				Select
	Employees'			Executive		Postretirement
	Pension			Retirement		Benefit
	Plan			Plan		Plans
Net Periodic Benefit Cost
For the Three Months Ended March 31, 2019:
Service Cost 1	$	399		$	97	$	30
Interest Cost 2	397			52		89
Expected Return on Plan Assets 2	(770		)	—		—
Amortization of Prior Service (Credit) Cost 2	17			14		25
Amortization of Net Loss 2	153			27		(17		)
Net Periodic (Benefit) Cost	$	196		$	190	$	127
Plan Contributions During the Period	$	—		$	116	$	37
For the Three Months Ended March 31, 2018:
Service Cost 1	$	348		$	11	$	33
Interest Cost 2	525			50		99
Expected Return on Plan Assets 2	(785		)	—		—
Amortization of Prior Service (Credit) Cost 2	(12		)	14		(3		)
Amortization of Net Loss 2	33			33		(6		)
Net Periodic (Benefit) Cost	$	109		$	108	$	123
Plan Contributions During the Period	$	—		$	116	$	17

Footnotes:

1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income

2. Included in Other Operating Expense on the Consolidated Statements of Income

We are not required to make a contribution to the qualified pension plan in 2019, and currently, we do not expect to make additional contributions in 2019. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.

# 29

Note 8.    EARNINGS PER COMMON SHARE (In Thousands, Except Per Share Amounts)

The following table presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per common share (“EPS”) for periods ended March 31, 2019 and 2018.  All share and per share amounts have been adjusted for the September 27, 2018, 3% stock dividend.

Earnings Per Share
	Quarterly Period Ended:
	March 31, 2019		March 31, 2018
Earnings Per Share - Basic:
Net Income	$	8,734	$	8,531
Weighted Average Shares - Basic	14,469		14,354
Earnings Per Share - Basic	$	0.60	$	0.59
Earnings Per Share - Diluted:
Net Income	$	8,734	$	8,531
Weighted Average Shares - Basic	14,469		14,354
Dilutive Average Shares Attributable to Stock Options	51		82
Weighted Average Shares - Diluted	14,520		14,436
Earnings Per Share - Diluted	$	0.60	$	0.59

# 30

Note 9.    FAIR VALUES (Dollars In Thousands)

FASB ASC Subtopic 820-10 defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. We do not have any nonfinancial assets or liabilities measured at fair value on a recurring basis. The only assets or liabilities that Arrow measured at fair value on a recurring basis at March 31, 2019, December 31, 2018 and March 31, 2018 were securities available-for-sale and equity securities . Arrow held no securities or liabilities for trading on such dates.

The table below presents the financial instrument's fair value and the amounts within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement:

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value of Assets and Liabilities Measured on a Recurring Basis:
March 31, 2019
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	35,383	$	—	$	35,383	$	—
State and Municipal Obligations	1,116		—		1,116		—
Mortgage-Backed Securities	261,513		—		261,513		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	298,812		—		298,812		—
Equity Securities	1,850		—		1,850		—
Total Securities Measured on a Recurring Basis	$	300,662	$	—	$	300,662	$	—
December 31, 2018
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	46,765	$	—	$	46,765	$	—
State and Municipal Obligations	1,195		—		1,195		—
Mortgage-Backed Securities	268,775		—		268,775		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	317,535				317,535
Equity Securities	1,774		—		1,774		—
Total Securities Measured on a Recurring Basis	$	319,309	$	—	$	319,309	$	—
March 31, 2018
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	59,657	$	—	$	59,657	$	—
State and Municipal Obligations	9,743		—		9,743		—
Mortgage-Backed Securities	235,389		—		235,389		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	305,589				305,589
Equity Securities	1,579		—		1,579		—
Total Securities Measured on a Recurring Basis	$	307,168	$	—	$	307,168	$	—

# 31

	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Life-to-Date Gains (Losses)
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
March 31, 2019
Collateral Dependent Impaired Loans	$	684	$	—	$	—	$	684	$	—
Other Real Estate Owned and Repossessed Assets, Net	1,445		—		—		1,445		(826		)
December 31, 2018
Collateral Dependent Impaired Loans	$	—	$	—	$	—	$	—	$	—
Other Real Estate Owned and Repossessed Assets, Net	1,260		—		—		1,260		(669		)
March 31, 2018
Collateral Dependent Impaired Loans	$	1,295	$	—	$	—	$	1,295	$	(58	)
Other Real Estate Owned and Repossessed Assets, Net	1,647		—		—		1,647		(582		)

We determine the fair value of financial instruments under the following hierarchy:

• Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

• Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

• Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The Company determined that the previously reported U.S. Government & Agency Obligations of $59.7 million were incorrectly classified as Level 1 securities, instead of the correct classification as Level 2 securities. The Company corrected the fair value leveling disclosure to reflect the correction of this classification in the quarter ended March 31, 2018. This error had no impact on the fair value of U.S. Government & Agency Obligations or the total securities available-for-sale.

There were no transfers between Levels 1, 2 and 3 for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018.

Fair Value Methodology for Assets and Liabilities Measured on a Recurring Basis

The fair value of Level 1 securities available-for-sale are based on unadjusted, quoted market prices from exchanges in active markets. The fair value of Level 2 securities available-for-sale are based on an independent bond and equity pricing service for identical assets or significantly similar securities and an independent equity pricing service for equity securities not actively traded.  The pricing services use a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.  

Fair Value Methodology for Assets and Liabilities Measured on a Nonrecurring Basis

The fair value of collateral dependent impaired loans and other real estate owned was based on third-party appraisals less estimated cost to sell. The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. Other assets which might have been included in this table include mortgage servicing rights, goodwill and other intangible assets. Arrow evaluates each of these assets for impairment on an annual basis, with no impairment recognized for these assets at March 31, 2019, December 31, 2018 and March 31, 2018.

Fair Value Methodology for Financial Instruments Not Measured on a Recurring or Nonrecurring Basis

The fair value for securities held-to-maturity is determined utilizing an independent bond pricing service for identical assets or significantly similar securities.  The pricing service uses a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.

ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities" requires that the fair value for loans must be disclosed using the "exit price" notion which is a reasonable estimate of what another party might pay in an orderly transaction. Fair values for loans are calculated for portfolios of loans with similar financial characteristics.  Loans are segregated by type such as commercial,

# 32

commercial real estate, residential mortgage, indirect auto and other consumer loans.  Each loan category is further segmented into fixed and adjustable interest rate terms and by performing and nonperforming categories.  The fair value of performing loans is calculated by determining the estimated future cash flow, which is the contractual cash flow adjusted for estimated prepayments. The discount rate is determined by starting with current market yields, and first adjusting for a liquidity premium. This premium is separately determined for residential real estate loans vs. other loans. Then a credit loss component is determined utilizing the credit loss assumptions used in the allowance for loan and lease loss model. Finally, a discount spread is applied separately for consumer loans vs. commercial loans based on market information and utilization of the Swap Curve.  Fair value for nonperforming loans is generally based on recent external appraisals.  If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows.  Assumptions regarding credit risk, cash flows and discount rates are judgmentally determined using available market information and specific borrower information.

The fair value of time deposits is based on the discounted value of contractual cash flows, except that the fair value is limited to the extent that the customer could redeem the certificate after imposition of a premature withdrawal penalty.  The discount rates are estimated using the Federal Home Loan Bank of New York ("FHLBNY") yield curve, which is considered representative of Arrow’s time deposit rates. The fair value of all other deposits is equal to the carrying value.

The fair value of FHLBNY advances is estimated based on the discounted value of contractual cash flows.  The discount rate is estimated using current rates on FHLBNY advances with similar maturities and call features.

The book value of the outstanding trust preferred securities (Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts) are considered to approximate fair value since the interest rates are variable (indexed to LIBOR) and Arrow is well-capitalized.

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Fair Value by Balance Sheet Grouping

The following table presents a summary of the carrying amount, the fair value or an amount approximating fair value and the fair value hierarchy of Arrow’s financial instruments:

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2019
Cash and Cash Equivalents	$	61,229	$	61,229	$	61,229	$	—	$	—
Securities Available-for-Sale	298,812		298,812		—		298,812		—
Securities Held-to-Maturity	279,400		280,414		—		280,414		—
Equity Securities	1,850		1,850		—		1,850		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	7,878		7,878		—		7,878		—
Net Loans	2,214,835		2,164,298		—		—		2,164,298
Accrued Interest Receivable	8,180		8,180		—		8,180		—
Deposits	2,490,097		2,484,479		—		2,484,479		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	58,407		58,407		—		58,407		—
Federal Home Loan Bank Overnight Advances	74,500		74,500		—		74,500		—
Federal Home Loan Bank Term Advances	35,000		34,805		—		34,805		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	737		737		—		737		—
December 31, 2018
Cash and Cash Equivalents	$	84,239	$	84,239	$	84,239	$	—	$	—
Securities Available-for-Sale	317,535		317,535		—		317,535		—
Securities Held-to-Maturity	283,476		280,338		—		280,338		—
Equity Securities	1,774		1,774				1,774
Federal Home Loan Bank and Federal   Reserve Bank Stock	15,506		15,506		—		15,506		—
Net Loans	2,176,019		2,114,372		—		—		2,114,372
Accrued Interest Receivable	7,035		7,035		—		7,035		—
Deposits	2,345,584		2,338,410		—		2,338,410		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	54,659		54,659		—		54,659		—
Federal Home Loan Bank Overnight Advances	234,000		234,000		—		234,000		—
Federal Home Loan Bank Term Advances	45,000		44,652		—		44,652		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	570		570		—		570		—
March 31, 2018
Cash and Cash Equivalents	$	100,272	$	100,272	$	100,272	$	—	$	—
Securities Available-for-Sale	305,589		305,589		—		305,589		—
Securities Held-to-Maturity	330,124		324,937		—		324,937		—
Equity Securities	1,579		1,579		—		1,579
Federal Home Loan Bank and Federal   Reserve Bank Stock	4,780		4,780		—		4,780		—
Net Loans	1,973,980		1,915,978		—		—		1,915,978
Accrued Interest Receivable	7,662		7,692		—		7,692		—
Deposits	2,411,273		2,402,122		—		2,402,122		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	74,957		74,957		—		74,957		—
Federal Home Loan Bank Term Advances	45,000		44,484		—		44,484		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	361		361		—		361		—

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Note 10.    LEASES (Dollars In Thousands)

The Company is a lessee in its leases, which are mainly for financial services locations in addition to leases for corporate vehicles. These leases generally require the Company to pay third-party expenses on behalf of the Lessor, which are referred to as variable payments. Under some leases, the Company pays the variable payments to the lessor, and in other leases, the Company pays the variable payments directly to the applicable third party. None of the Company's current leases include any residual value guarantees or any subleases, and there are no significant rights and obligations of the Company for leases that have not commenced as of the reporting date.

Arrow leases five of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves on both the boards of Arrow and Saratoga National Bank and Trust Company.

The following includes quantitative data related to the Company's leases as of March 31, 2019:

Finance Lease Amounts:	Classification
Right-of-use Assets	Premises and Equipment, Net	$	2,922
Lease Liabilities	Finance Leases	2,946
Operating Lease Amounts:
Right-of-use Assets	Other Assets	$	5,587
Lease Liabilities	Other Liabilities	5,639
Lease Cost:
Finance Lease Cost:
Amortization of Right-of-use assets		$	17
Interest on Lease Liabilities		15
Operating Lease Cost		173
Short-term Lease Cost		33
Variable Lease Cost		56
Total Lease Cost		$	294
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	15
Operating Outgoing Cash Flows From Operating Leases		173
Financing Outgoing Cash Flows From Finance Leases		4
Right-of-use Assets Obtained In Exchange For New Finance Lease Liabilities		2,939
Right-of-use Assets Obtained In Exchange For New Operating Lease Liabilities		5,725
Weighted-average Remaining Lease Term—Finance Leases (Yrs.)		26.91
Weighted-average Remaining Lease Term—Operating Leases (Yrs.)		14.63
Weighted-average Discount Rate—Finance Leases %		3.82		%
Weighted-average Discount Rate—Operating Leases %		3.50		%

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Future Lease Payments at March 31, 2019 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2020	$	769	$	143
3/31/2021	695		146
3/31/2022	557		149
3/31/2023	479		149
3/31/2024	462		149
Thereafter	4,346		4,200
Total Undiscounted Cash Flows	$	7,308	$	4,936
Less: Net Present Value Adjustment	1,669		1,990
Lease Liability	$	5,639	$	2,946

Arrow adopted ASU 2016-02 using a modified retrospective adoption at January 1. 2019 as discussed in Note 1. The following disclosure is provided for the period prior to the adoption.

Future minimum lease payments on operating leases at December 31, 2018 were as follows:

	Operating Leases
2019	$	857
2020	626
2021	497
2022	357
2023	286
2024 and beyond	2,776
Total Minimum Lease Payments	$	5,399

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Arrow Financial Corporation:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheet of Arrow Financial Corporation and subsidiaries (the Company) as of March 31, 2019 and 2018, the related consolidated statements of income and comprehensive income, consolidated statements of changes in stockholders’ equity and cash flows for the three-month periods ended March 31, 2019 and 2018, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2018, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 8, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP

Albany, New York

May 9, 2019

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Item 2.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

March 31, 2019

NOTE ON TERMINOLOGY

In this Quarterly Report on Form 10-Q, the terms "Arrow," "the registrant," "the Company," "we," "us," and "our" generally refer to Arrow Financial Corporation and its subsidiaries as a group, except where the context indicates otherwise. At certain points in this Form 10-Q, our performance is compared with that of our "peer group" of financial institutions. Unless otherwise specifically stated, the peer group for the purposes of this Form 10-Q is comprised of the group of 66 domestic bank holding companies with $1 to $3 billion in total consolidated assets as identified in the Federal Reserve Board’s "Bank Holding Company Performance Report" for December 31, 2018 (the most recent such Report currently available), and peer group data contained herein has been derived from such Report.

THE COMPANY AND ITS SUBSIDIARIES

Arrow is a two-bank holding company headquartered in Glens Falls, New York.  Our banking subsidiaries are Glens Falls National Bank and Trust Company (Glens Falls National) whose main office is located in Glens Falls, New York, and Saratoga National Bank and Trust Company (Saratoga National) whose main office is located in Saratoga Springs, New York.  Active subsidiaries of Glens Falls National include Upstate Agency, LLC (an insurance agency that sells property and casualty insurance policies and also specializes in selling and servicing group health care policies and life insurance), North Country Investment Advisers, Inc. (a registered investment adviser that provides investment advice to our proprietary mutual funds) and Arrow Properties, Inc. (a real estate investment trust, or REIT). Arrow also owns directly two subsidiary business trusts, organized in 2003 and 2004 to issue trust preferred securities (TRUPs), which are still outstanding.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are not historical in nature but rather are based on our beliefs, assumptions, expectations, estimates and projections about the future. These statements are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and involve a degree of uncertainty and attendant risk. Words such as "may," "will," "expect," "believe," "anticipate," "estimate," "continue," and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include statements regarding the Company's asset quality, the level of allowance for loan losses, the sufficiency of liquidity sources, interest rate change exposure, changes in accounting standards, and the Company's tax plans and strategies. Some of these statements, such as those included in the interest rate sensitivity analysis in Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," are merely presentations of what future performance or changes in future performance would look like based on hypothetical assumptions and on simulation models. Other forward-looking statements are based on our general perceptions of market conditions and trends in business activity, both our own and in the banking industry generally, as well as current management strategies for future operations and development.

These forward-looking statements may not be exhaustive, are not guarantees of future performance and involve certain risks and uncertainties that are difficult to quantify or, in some cases, to identify.  You should not place undue reliance on any such forward-looking statements. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast.  Factors that could cause or contribute to such differences include, but are not limited to:  

• rapid and dramatic changes in economic and market conditions;

• sharp fluctuations in interest rates, economic activity, or consumer spending patterns;

• sudden changes in the market for products we provide, such as real estate loans;

• significant changes in banking or other laws and regulations, including both enactment of new legal or regulatory measures (e.g., the Economic Growth, Regulatory Relief and Consumer Protection Act ("Economic Growth Act") and the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank")) or the modification or elimination of pre-existing measures;

• significant changes in U.S. monetary or fiscal policy, including new or revised monetary programs or targets adopted or announced by the Federal Reserve ("monetary tightening or easing") or significant new federal legislation materially affecting the federal budget ("fiscal tightening or expansion");

• competition from other sources (e.g., non-bank entities);

• similar uncertainties inherent in banking operations or business generally, including technological developments and changes; and

• other risks detailed from time to time within our filings with the Securities and Exchange Commission ("SEC").

We are under no duty to update any of the forward-looking statements after the date of this Report to conform such statements to actual results. All forward-looking statements, express or implied, included in this Report and the documents we incorporate by reference and that are attributable to the Company are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or any persons acting on our behalf may issue. This Quarterly Report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018 (the 2018 Annual Report) and our other filings with the SEC.

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USE OF NON-GAAP FINANCIAL MEASURES

The SEC has adopted Regulation G, which applies to all public disclosures, including earnings releases, made by registered companies that contain "non-GAAP financial measures."  GAAP is generally accepted accounting principles in the United States of America.  Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure and a statement of the Company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures.  The SEC has exempted from the definition of "non-GAAP financial measures" certain commonly used financial measures that are not based on GAAP.  When these exempted measures are included in public disclosures, supplemental information is not required.  The following measures used in this Report, which are commonly utilized by financial institutions, have not been specifically exempted by the SEC and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules, although we are unable to state with certainty that the SEC would so regard them.

Tax-Equivalent Net Interest Income and Net Interest Margin: Net interest income, as a component of the tabular presentation by financial institutions of Selected Financial Information regarding their recently completed operations, as well as disclosures based on that tabular presentation, is commonly presented on a tax-equivalent basis.  That is, to the extent that some component of the institution's net interest income, which is presented on a before-tax basis, is exempt from taxation (e.g., is received by the institution as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added to the actual before-tax net interest income total.  This adjustment is considered helpful in comparing one financial institution's net interest income to that of another institution or in analyzing any institution’s net interest income trend line over time, to correct any analytical distortion that might otherwise arise from the fact that financial institutions vary widely in the proportions of their portfolios that are invested in tax-exempt securities, and from the fact that even a single institution may significantly alter over time the proportion of its own portfolio that is invested in tax-exempt obligations.  Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average earning assets.  For purposes of this measure as well, tax-equivalent net interest income is generally used by financial institutions, again to provide a better basis of comparison from institution to institution and to better demonstrate a single institution’s performance over time. We follow these practices.

The Efficiency Ratio: Financial institutions often use an "efficiency ratio" as a measure of expense control.  The efficiency ratio typically is defined as the ratio of noninterest expense to net interest income and noninterest income.  Net interest income as utilized in calculating the efficiency ratio is typically the same as the net interest income presented in Selected Financial Information table discussed in the preceding paragraph, i.e., it is expressed on a tax-equivalent basis.  Moreover, many financial institutions, in calculating the efficiency ratio, also adjust both noninterest expense and noninterest income to exclude from these items (as calculated under GAAP) certain recurring component elements of income and expense, such as intangible asset amortization (which is included in noninterest expense under GAAP but may be excluded therefrom for purposes of calculating the efficiency ratio) and securities gains or losses (which are reflected in the calculation of noninterest income under GAAP but may be excluded therefrom for purposes of calculating the efficiency ratio).  We make these adjustments.

Tangible Book Value per Share:  Tangible equity is total stockholders’ equity less intangible assets.  Tangible book value per share is tangible equity divided by total shares issued and outstanding.  Tangible book value per share is often regarded as a more meaningful comparative ratio than book value per share as calculated under GAAP, that is, total stockholders’ equity including intangible assets divided by total shares issued and outstanding.  Intangible assets includes many items, but in our case, essentially represents goodwill.

Adjustments for Certain Items of Income or Expense:  In addition to our regular utilization in our public filings and disclosures of the various non-GAAP measures commonly utilized by financial institutions discussed above, we also may elect from time to time, in connection with our presentation of various financial measures prepared in accordance with GAAP, such as net income, earnings per share (i.e. EPS), return on average assets (i.e. ROA), and return on average equity (i.e. ROE), to provide as well certain comparative disclosures that adjust these GAAP financial measures, typically by removing therefrom the impact of certain transactions or other material items of income or expense that are unusual or unlikely to be repeated.  We do so only if we believe that provision of the resulting non-GAAP financial measures may improve the average investor's understanding of our results of operations by separating out items that have a disproportional positive or negative impact on the particular period in question or by otherwise permitting a better comparison from period-to-period in our results of operations with respect to our fundamental lines of business, including the commercial banking business.

We believe that the non-GAAP financial measures disclosed by us from time-to-time are useful in evaluating our 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.  Our non-GAAP financial measures may differ from similar measures presented by other companies.

# 39

Arrow Financial Corporation Selected Quarterly Information (Dollars In Thousands, Except Per Share Amounts- Unaudited)
Quarter Ended	3/31/2019			12/31/2018			9/30/2018			6/30/2018			3/31/2018
Net Income	$	8,734		$	8,758		$	9,260		$	9,730		$	8,531
Transactions in Net Income (Net of Tax):
Net Changes in Fair Value of Equity Investments	57			(106		)	85			166			13
Share and Per Share Data:(1)
Period End Shares Outstanding	14,474			14,472			14,441			14,424			14,368
Basic Average Shares Outstanding	14,469			14,451			14,431			14,394			14,354
Diluted Average Shares Outstanding	14,520			14,514			14,520			14,480			14,436
Basic Earnings Per Share	$	0.60		$	0.61		$	0.64		$	0.68		$	0.59
Diluted Earnings Per Share	0.60			0.60			0.64			0.67			0.59
Cash Dividend Per Share	0.260			0.260			0.252			0.243			0.243
Selected Quarterly Average Balances:
Interest-Bearing Deposits at Banks	$	26,163		$	34,782		$	30,522		$	28,543		$	27,978
Investment Securities	611,161			637,341			636,847			647,913			642,442
Loans	2,210,642			2,160,435			2,089,651			2,026,598			1,971,240
Deposits	2,347,985			2,347,231			2,279,709			2,325,202			2,305,736
Other Borrowed Funds	327,138			315,172			314,304			219,737			184,613
Stockholders’ Equity	272,864			268,503			263,139			256,358			251,109
Total Assets	2,977,056			2,954,029			2,879,854			2,823,061			2,763,706
Return on Average Assets, annualized	1.19		%	1.18		%	1.28		%	1.38		%	1.25		%
Return on Average Equity, annualized	12.98		%	12.94		%	13.96		%	15.22		%	13.78		%
Return on Average Tangible Equity, annualized (2)	14.22		%	14.20		%	15.36		%	16.80		%	15.24		%
Average Earning Assets	$	2,847,966		$	2,832,558		$	2,757,020		$	2,703,054		$	2,641,660
Average Paying Liabilities	2,224,403			2,189,233			2,110,924			2,100,085			2,050,661
Interest Income	26,213			26,000			24,495			23,590			22,418
Tax-Equivalent Adjustment  (3)	373			376			376			468			491
Interest Income, Tax-Equivalent (3)	26,586			26,376			24,871			24,058			22,909
Interest Expense	5,092			4,343			3,498			2,628			2,016
Net Interest Income	21,121			21,657			20,997			20,962			20,402
Net Interest Income, Tax-Equivalent (3)	21,494			22,033			21,373			21,430			20,893
Net Interest Margin, annualized	3.01		%	3.03		%	3.02		%	3.11		%	3.13		%
Net Interest Margin, Tax Equivalent, annualized (3)	3.06		%	3.09		%	3.08		%	3.18		%	3.21		%
Efficiency Ratio Calculation: (4)
Noninterest Expense	$	16,652		$	16,881		$	16,026		$	16,192		$	15,956
Less: Intangible Asset Amortization	79			65			65			66			67
Net Noninterest Expense	$	16,573		$	16,816		$	15,961		$	16,126		$	15,889
Net Interest Income, Tax-Equivalent (3)	$	21,494		$	22,033		$	21,373		$	21,430		$	20,893
Noninterest Income	6,887			6,799			7,350			7,911			6,888
Less: Net Changes in Fair Value of Equity Invest.	76			(142		)	114			223			18
Net Gross Income	$	28,305		$	28,974		$	28,611		$	29,118		$	27,763
Efficiency Ratio (4)	58.55		%	58.04		%	55.79		%	55.38		%	57.23		%
Period-End Capital Information:
Total Stockholders’ Equity (i.e. Book Value)	$	276,609		$	269,584		$	264,810		$	259,488		$	252,734
Book Value per Share (1)	19.11			18.63			18.34			17.99			17.59
Goodwill and Other Intangible Assets, net	23,650			23,725			23,827			23,933			24,045
Tangible Book Value per Share (1,2)	17.48			16.99			16.69			16.33			15.92
Capital Ratios:(5)
Tier 1 Leverage Ratio	9.73		%	9.61		%	9.67		%	9.65		%	9.62		%
Common Equity Tier 1 Capital Ratio	12.98		%	12.89		%	12.89		%	13.01		%	12.97		%
Tier 1 Risk-Based Capital Ratio	13.95		%	13.87		%	13.90		%	14.04		%	14.03		%
Total Risk-Based Capital Ratio	14.93		%	14.86		%	14.90		%	15.06		%	15.04		%
Assets Under Trust Admin. & Investment Mgmt.	$	1,483,259		$	1,385,752		$	1,551,289		$	1,479,753		$	1,470,191

# 40

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 27, 2018, 3% stock dividend.
2.	Non-GAAP Financial Measures Reconciliation: Tangible Book Value, Tangible Equity and Return on Tangible Equity exclude goodwill and other intangible 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. See "Use of Non-GAAP Financial Measures" on page 39.
		3/31/2019			12/31/2018			9/30/2018			6/30/2018			3/31/2018
	Total Stockholders' Equity (GAAP)	$	276,609		$	269,584		$	264,810		$	259,488		$	252,734
	Less: Goodwill and Other Intangible assets, net	23,650			23,725			23,827			23,933			24,045
	Tangible Equity (Non-GAAP)	$	252,959		$	245,859		$	240,983		$	235,555		$	228,689
	Period End Shares Outstanding	14,474			14,472			14,441			14,424			14,368
	Tangible Book Value per Share      (Non-GAAP)	$	17.48		$	16.99		$	16.69		$	16.33		$	15.92
	Net Income	8,734			8,758			9,260			9,730			8,531
	Return on Tangible Equity (Net Income/Tangible Equity - Annualized)	14.22		%	14.20		%	15.36		%	16.80		%	15.24		%
3.	Non-GAAP Financial Measures Reconciliation: Net Interest Margin is the ratio of 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. See "Use of Non-GAAP Financial Measures" on page 39.
		3/31/2019			12/31/2018			9/30/2018			6/30/2018			3/31/2018
	Interest Income (GAAP)	$	26,213		$	26,000		$	24,495		$	23,590		$	22,418
	Add: Tax-Equivalent adjustment (Non-GAAP)	373			376			376			468			491
	Interest Income - Tax Equivalent (Non-GAAP)	$	26,586		$	26,376		$	24,871		$	24,058		$	22,909
	Net Interest Income (GAAP)	$	21,121		$	21,657		$	20,997		$	20,962		$	20,402
	Add: Tax-Equivalent adjustment (Non-GAAP)	373			376			376			468			491
	Net Interest Income - Tax Equivalent (Non-GAAP)	$	21,494		$	22,033		$	21,373		$	21,430		$	20,893
	Average Earning Assets	$	2,847,966		$	2,832,558		$	2,757,020		$	2,703,054		$	2,641,660
	Net Interest Margin (Non-GAAP)*	3.06		%	3.09		%	3.08		%	3.18		%	3.21		%
4.	Non-GAAP Financial Measures: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. We 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). There is no GAAP financial measure that is closely comparable to the efficiency ratio. See "Use of Non-GAAP Financial Measures" on page 39.
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 March 31, 2019 CET1 ratio listed in the tables (i.e., 12.98%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
		3/31/2019			12/31/2018			9/30/2018			6/30/2018			3/31/2018
	Total Risk Weighted Assets	$	2,075,115		$	2,046,495		$	1,999,849		$	1,934,890		$	1,889,719
	Common Equity Tier 1 Capital	269,363			263,863			257,852			251,666			245,015
	Common Equity Tier 1 Capital Ratio	12.98		%	12.89		%	12.89		%	13.01		%	12.97		%

     * Quarterly ratios have been annualized.

# 41

Average Consolidated Balance Sheets and Net Interest Income Analysis
(GAAP Basis)
(Dollars In Thousands)
Quarter Ended March 31:	2019							2018
				Interest		Rate					Interest		Rate
	Average			Income/		Earned/		Average			Income/		Earned/
	Balance			Expense		Paid		Balance			Expense		Paid
Interest-Bearing Deposits at Banks	$	26,163		$	195	3.02	%	$	27,978		$	134	1.94	%
Investment Securities:
Fully Taxable	378,120			2,369		2.54		359,908			1,893		2.13
Exempt from Federal Taxes (2)	233,041			1,246		2.17		282,534			1,533		2.20
Loans (2)	2,210,642			22,403		4.11		1,971,240			18,858		3.88
Total Earning Assets	2,847,966			26,213		3.73		2,641,660			22,418		3.44
Allowance for Loan Losses	(20,108		)					(18,523		)
Cash and Due From Banks	35,125							35,608
Other Assets	114,073							104,961
Total Assets	$	2,977,056						$	2,763,706
Deposits:
Interest-Bearing Checking Accounts	$	768,354		482		0.25		$	914,116		387		0.17
Savings Deposits	833,832			1,601		0.78		723,660			522		0.29
Time Deposits of $250,000 or More	79,346			396		2.02		63,406			204		1.30
Other Time Deposits	212,785			713		1.36		164,866			259		0.64
Total Interest-Bearing Deposits	1,894,317			3,192		0.68		1,866,048			1,372		0.30
Short-Term Borrowings	264,471			1,421		2.18		111,835			197		0.71
FHLBNY Term Advances & Other Long-Term Debt	62,667			464		3.00		72,778			447		2.49
Finance Leases	2,948			15		2.06		—			—		—
Total Interest-Bearing Liabilities	2,224,403			5,092		0.93		2,050,661			2,016		0.40
Noninterest-bearing deposits	453,668							439,688
Other Liabilities	26,121							22,248
Total Liabilities	2,704,192							2,512,597
Stockholders’ Equity	272,864							251,109
Total Liabilities and Stockholders’ Equity	$	2,977,056						$	2,763,706
Net Interest Income				$	21,121						$	20,402
Net Interest Spread						2.80	%						3.04	%
Net Interest Margin						3.01	%						3.13	%

# 42

OVERVIEW

The following discussion and analysis focuses on and reviews our results of operations for the three month period ended March 31, 2019 and our financial condition as of March 31, 2019 and 2018.  The discussion below should be read in conjunction with the selected quarterly and annual information set forth above and the Consolidated Financial Statements and other financial data presented elsewhere in this Report.  When necessary, prior-year financial information has been reclassified to conform to the current-year presentation.

Summary of Q1 2019 Financial Results: Net income was $8.7 million for the first quarter of 2019, an increase of $203 thousand, or 2.4%, over net income for the first quarter of 2018. Diluted earnings per share (EPS) for the quarter was $0.60, an increase of 1.7% from the EPS of $0.59 reported for the first quarter of 2018. Return on average equity (ROE) for the first quarter of 2019 decreased to 12.98%, as compared to a ROE of 13.78% for the first quarter ended March 31, 2018. Return on average assets (ROA) for the 2019first quarter was 1.19%, a decrease from an ROA of 1.25% for the first quarter ended March 31, 2018.

Factors contributing to the solid results for the current quarter compared to the comparable prior year quarter are as follows:

Net interest income on a GAAP basis increased3.5% to $21.1 million primarily due to the increase in total interest and dividend income of $3.8 million as a result of strong loan growth. The net interest margin was3.01%for the quarter, compared to3.13%for thefirst quarter of 2018. The decrease in net interest margin was primarily due to the$3.1 million increase in interest expense. This increase was the result of a 3.3% growth in deposits and higher rates paid on money market savings, time deposits and other borrowings due to higher short-term market interest rates. Noninterest income for the three-month period ended March 31, 2019, was $6.9 million, compared to $6.9 million in the comparable 2018 quarter. Revenue generated from the wealth management and insurance segments, remains consistent, and total noninterest income represented 24.6% of total revenues in the first quarter of 2019 compared to 25.2% for the same period of 2018.

Noninterest expense for the first quarter of 2019increased4.4% to $16.7 million, from $16.0 million for the first quarter of 2018. Technology and equipment expense increased $443 thousand and other operating expense increased $228 thousand from the comparable quarter in 2018.

The provision for income taxes was $2.2 million in the first quarter of 2019 versus $2.1 million in the same quarter of 2018. The effective income tax rates for the three-month periods ended March 31, 2019 and 2018 were 19.8% and 19.4%, respectively.

The changes in net income, net interest income and net interest margin between the three month periods are discussed in detail under the heading "RESULTS OF OPERATIONS," beginning on page 55.

2018 Regulatory Reform: The Economic Growth Act, was signed into law May 24, 2018. Some of its provisions were written to take effect immediately; others have later specified effective dates and still others are open-ended, to be implemented by rule-making. See the discussion of this item under C. SUPERVISION AND REGULATION, "2018 Regulatory Reform" within the 2018 Annual Report for further details.

Regulatory Capital and Increase in Stockholders' Equity: At March 31, 2019, we continued to exceed by a substantial amount all required minimum capital ratios under the current bank regulatory capital rules at both the holding company and bank levels. At that date, both subsidiary banks, as well as the holding company, continued to qualify as "well-capitalized" under the capital classification guidelines as defined by the current bank regulatory capital rules as implemented under Dodd-Frank (the Capital Rules). Because of continued profitability and strong asset quality, our regulatory capital levels throughout recent years have consistently remained well in excess of the various required regulatory minimums in effect from time to time, as they do at present. Pursuant to the Capital Rules under Dodd-Frank, required minimum regulatory capital levels for insured banks and their parent holding companies increased in 2019. Pursuant to Economic Growth Act, the federal bank regulators are required to implement a simplified community bank leverage ratio capital standard that may be applicable to Arrow and its subsidiary banks to allow them to satisfy all applicable capital and leverage requirements, including the currently applicable risk-based capital ratio requirements.  The implementation of the new community bank leverage ratio standards will be subject to the notice and comment procedures of rulemaking.  The Economic Growth Act does not impose a deadline for this rulemaking.  The federal bank regulators have issued a proposed rule to implement the "community bank leverage ratio", but that rule is not yet effective or final, and is subject to change. Upon effectiveness, the final rule may impact Arrow's capital options and requirements, although the potential impact of the final rule on Arrow will remain uncertain until the final rule is issued. Until the rule becomes final and effective, the enhanced Capital Rules promulgated under Dodd-Frank will remain applicable to Arrow.

Stockholders’ equity was $276.6 million at March 31, 2019, an increase of $7.0 million, or 2.6%, from the December 31, 2018 level of $269.6 million, and an increase of $23.9 million, or 9.4%, from the prior-year level. The components of the change in stockholders’ equity since year-end 2018 are presented in the Consolidated Statement of Changes in Stockholders’ Equity on page 6, and are discussed in more detail in the next section.

At March 31, 2019, book value per share was $19.11, up by 8.6% over the prior-year level. Tangible book value per share (a non-GAAP measure that deducts intangible assets from stockholders' equity) was $17.48, an increase of $1.56, or 9.8%, over the level as of March 31, 2018. See the disclosure on page 39 related to the use of non-GAAP financial measures including tangible book value. In the first three months of 2019, total stockholders' equity increased by 2.6% and total book value per share increased by 2.6%. The increase in stockholders' equity over the first three months of 2019 principally reflected the following factors: (i) $8.73 million of net income for the period, plus (ii) other comprehensive income of $2.24 million, plus (iii) issuance of $1.20 million of common stock through employee benefit and dividend reinvestment plans; reduced by (iv) cash dividends of $3.76 million; and (v) repurchases of common

# 43

stock of $1.39 million. On March 31, 2019, the Company's closing stock price was $32.89, representing a trading multiple of 1.88 to tangible book value. In the first quarter of 2019, a quarterly cash dividend of $0.260 was paid. Further discussion of dividends is included in the Capital Components; Stock Repurchases; Dividends section located on page 53.

Loan Quality: Net charge-offs for the first quarter of 2019 were $295 thousand as compared to $275 thousand for the comparable 2018 quarter. The ratio of net charge-offs to average loans (annualized) was 0.05% for the first quarter of 2019 compared to 0.06% for the first quarter of 2018. At March 31, 2019, the allowance for loan losses was $20.4 million representing 0.91% of total loans, which is a decrease from the December 31, 2018 ratio of 0.92%. The allowance was determined to be appropriate and reflects the continuing strong credit quality in the loan portfolio.

Nonperforming loans were $5.3 million at March 31, 2019, representing 0.24% of period-end loans, a decrease from the December 31, 2018 ratio of 0.25%, which compares favorably with the weighted average ratio of the peer group of 0.56% at December 31, 2018.

Loan Segments: During the quarter ended March 31, 2019, total loans grew by $39.0 million, or 1.8% as compared to the balance at December 31, 2018. The largest increase was in consumer loans, which increased during the quarter by $27.3 million, or 3.8%. In addition, residential real estate loans expanded by $6.5 million, or 0.8% and the total commercial loan portfolio increased by $5.2 million, or 0.8%.

• Commercial Loans: These loans comprised 6.0% of the total loan portfolio at period-end. The business sector in the Company's service area, including small- and mid-sized businesses with headquarters in the area, continued to be in reasonably good financial condition at period-end.

• Commercial Real Estate Loans: These loans comprised 22.1% of the total loan portfolio at period-end. Commercial property values in the Company's region have remained stable in recent periods. Appraisals on nonperforming and watched CRE loan properties are updated as deemed necessary, usually when the loan is downgraded or when there has been significant market deterioration since the last appraisal.

• Consumer Loans: These loans (primarily automobile loans) comprised 33.4% of the total loan portfolio at period-end. Consumer automobile loans at March 31, 2019, were $739 million, or 99.0% of this portfolio segment. In the first three months of 2019, the Company did not experience any significant increase in the delinquency rate or in the percentage of nonperforming loans in this segment.

• Residential Real Estate Loans: These loans, including home equity loans, made up 38.5% of the total loan portfolio at period-end. The residential real estate market in the Company's service area has been stable in recent periods. The Company originated nearly all of the residential real estate loans currently held in the loan portfolio and applies conservative underwriting standards to loan originations. The Company typically sells a portion of residential real estate mortgage originations into the secondary market. The ratio of the sales of originations to total originations tends to fluctuate from period to period, although this ratio has generally declined somewhat in recent periods.

Liquidity and Access to Credit Markets: The Company has not experienced any liquidity problems or special concerns thus far in 2019, or in any prior years back to and during the financial crisis. The terms of the Company's lines of credit with a correspondent bank, the FHLBNY and the Federal Reserve Bank of New York have not changed significantly in recent periods (see the general liquidity discussion on page 54). Historically, the Company has principally relied on asset-based liquidity (i.e., funds in overnight investments and cash flow from maturing investments and loans) with liability-based liquidity as a secondary source of funds (the main liability-based sources are an overnight borrowing arrangement with a correspondent bank, an arrangement for overnight borrowing and term credit advances from the FHLBNY, and an additional arrangement for short-term advances at the Federal Reserve Bank discount window). Regular liquidity stress tests and tests of the contingent liquidity plan are performed to ensure that an adequate amount of available funds can be generated to meet a wide variety of potential liquidity crises, including a severe crisis.

Visa Class B Common Stock: Arrow's subsidiary bank, Glens Falls National, like other Visa member banks, bears some indirect contingent liability for Visa's direct liability arising out of certain antitrust claims involving merchant discounts to the extent that Visa's liability might exceed the amount funded in their litigation escrow account. On September 18, 2018, Visa issued a press release announcing that they and other defendants entered into a settlement agreement with class plaintiffs in the related litigation case, and they expect the damage class plaintiffs to file a motion for preliminary approval of the settlement with the court. If the settlement is approved and the balance in the litigation escrow account is sufficient to cover the litigation claims and related expenses, Arrow could potentially realize a gain on the receipt of Visa Class A common stock. At March 31, 2019, Glens Falls National held 27,771 shares of Visa Class B common stock, and utilizing the conversion ratio to Class A common stock at that time, these Class B shares would convert to 45,000 shares of Visa Class A common stock. Since the litigation settlement is not certain, the Company does not recognize any economic value for these shares.

# 44

CHANGE IN FINANCIAL CONDITION

Summary of Selected Consolidated Balance Sheet Data

(Dollars in Thousands)

	March 31, 2019		At Period-End December 31, 2018		March 31, 2018		$ Change From December			$ Change From March			% Change From December (not annualized)		% Change From March
Interest-Bearing Bank Balances	$	25,031	$	27,710	$	70,747	$	(2,679	)	$	(45,716	)	(9.7	)%	(64.6	)%
Securities Available-for-Sale	298,812		317,535		305,589		(18,723		)	(6,777		)	(5.9	)%	(2.2	)%
Securities Held-to-Maturity	279,400		283,476		330,124		(4,076		)	(50,724		)	(1.4	)%	(15.4	)%
Equity Securities	1,850		1,774		1,579		76			271
Loans (1)	2,235,208		2,196,215		1,993,037		38,993			242,171			1.8	%	12.2	%
Allowance for Loan Losses	20,373		20,196		19,057		177			1,316			0.9	%	6.9	%
Earning Assets (1)	2,848,179		2,842,216		2,705,856		5,963			142,323			0.2	%	5.3	%
Total Assets	$	2,984,883	$	2,988,334	$	2,826,687	$	(3,451	)	$	158,196		(0.1	)%	5.6	%
Noninterest-Bearing Deposits	$	453,089	$	472,768	$	452,347	$	(19,679	)	$	742		(4.2	)%	0.2	%
Interest-Bearing Checking Accounts	823,301		790,781		944,161		32,520			(120,860		)	4.1	%	(12.8	)%
Savings Deposits	866,861		818,048		762,220		48,813			104,641			6.0	%	13.7	%
Time Deposits over $250,000	83,834		73,583		85,403		10,251			(1,569		)	13.9	%	(1.8	)%
Other Time Deposits	263,012		190,404		167,142		72,608			95,870			38.1	%	57.4	%
Total Deposits	$	2,490,097	$	2,345,584	$	2,411,273	$	144,513		$	78,824		6.2	%	3.3	%
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	$	58,407	$	54,659	$	74,957	$	3,748		$	(16,550	)	6.9	%	(22.1	)%
FHLBNY Advances - Overnight	74,500		234,000		—		(159,500		)	74,500			(68.2	)%	—	%
FHLBNY Advances - Term	35,000		45,000		45,000		(10,000		)	(10,000		)	(22.2	)%	(22.2	)%
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		20,000		—			—			—	%	—	%
Stockholders' Equity	276,609		269,584		252,734		7,025			23,875			2.6	%	9.4	%

(1) Includes Nonaccrual Loans.

Changes in Earning Assets: The loan portfolio at March 31, 2019, was $2.2 billion, an increase of $39.0 million, or 1.8%, from the December 31, 2018 level and up by $242.2 million, or 12.2%, from the March 31, 2018 level. The following trends were experienced in our largest segments:

• Commercial and commercial real estate loans. This segment of the loan portfolio increased by $5.2 million, or 0.8%, during the first three months of 2019, representing the continued solid demand for such loans.

• Consumer loans (primarily automobile loans through indirect lending). As of March 31, 2019, these loans, primarily auto loans, increased by $27.3 million, or 3.8%, from the December 31, 2018 balance, reflecting a continuation of strong demand for new and used vehicles throughout our region-wide dealer network.

• Residential real estate loans. This segment increased during the first three months of 2019 by $6.5 million, or 0.8%. Factors contributing to the segment growth include solid originations in the quarter and a reduction of prepayments.

Municipal Deposits:Fluctuations in balances of interest-bearing checking accounts are largely the result of timing and behavior of municipal deposits.  Municipal deposits on average represent 20% to 30% of total deposits. Municipal deposits are typically placed in interest-bearing checking and savings accounts, as well as various time deposits.

In general, there is a seasonal pattern to municipal deposits which dip to a low point in August each year.  Account balances tend to increase throughout the fall and into early winter from tax deposits, flatten out after the beginning of the ensuing calendar year, and increase again at the end of March from the electronic deposit of NYS Aid payments to school districts.  In addition to these seasonal fluctuations within types of accounts, the overall level of municipal deposit balances fluctuates from year-to-year as a result of local economic factors as well as competition from other banks and non-bank entities.

# 45

Changes in Sources of Funds: Total deposits increased$144.5 million, or 6.2%, from December 31, 2018 to March 31, 2019 mainly due to the following: Other time deposits increased $72.6 million in the first quarter of 2019 mostly due to the acquisition of $66.5 million in brokered deposits as Arrow's subsidiary banks diversified funding at favorable rates relative to FHLBNY overnight advances in order to support the continued loan growth. Interest bearing checking accounts increased $32.5 million. Time deposits over $250,000 increased $10.3 million. These increasing balances were offset by a $19.7 million decrease in Non-Interest Bearing Deposits. The migration within our deposit offerings is due to certain municipal and non-municipal customers seeking a higher return on their deposit balances as a result of the rise in short-term interest rates. The addition of the brokered deposits allowed the banks to decrease overnight FHLBNY advances by $159.5 million. At March 31, 2019, term advances from the FHLBNY were $35 million, reflecting the non-renewal of a $10 million advance that matured during the first quarter of 2019.

FINANCIAL CONDITION

Investment Portfolio Trends

The table below presents the changes in the period-end balances for available-for-sale, held-to-maturity and equity securities from December 31, 2018 to March 31, 2019 (in thousands).

The slight reduction in the portfolios on a combined basis during the period reflected the Company's continued strategy in recent years to reallocate earning assets from investment securities to higher yielding loans to maximize earning asset yields.

	(Dollars in Thousands)
	Fair Value at Period-End							Net Unrealized Gains (Losses) For Period Ended
	3/31/2019		12/31/2018		Change			3/31/2019			12/31/2018			Change
Securities Available-for-Sale:
U.S. Agency Securities	$	35,383	$	46,765	$	(11,382	)	$	(136	)	$	(306	)	$	170
State and Municipal Obligations	1,116		1,195		(79		)	2			2			—
Mortgage-Backed Securities	261,513		268,775		(7,262		)	(1,834		)	(4,452		)	2,618
Corporate and Other Debt Securities	800		800		—			(200		)	(200		)	—
Total	$	298,812	$	317,535	$	(18,723	)	$	(2,168	)	$	(4,956	)	$	2,788
Securities Held-to-Maturity:
State and Municipal Obligations	$	235,576	$	233,359	$	2,217		$	1,122		$	(2,423	)	$	3,545
Mortgage-Backed Securities	44,838		46,979		(2,141		)	(108		)	(715		)	607
Total	$	280,414	$	280,338	$	76		$	1,014		$	(3,138	)	$	4,152
Equity Securities	$	1,850	$	1,774	$	76		$	—		$	—		$	—

At March 31, 2019, the Company held no investment securities in the securities portfolios that consisted of or included, directly or indirectly, obligations of foreign governments or governmental agencies of foreign issuers.

In the periods referenced above, Mortgage-Backed Securities consisted solely of mortgage pass-through securities and Collateralized Mortgage Obligations ("CMOs") issued or guaranteed by U.S. federal agencies.  Mortgage pass-through securities provide to the investor monthly portions of principal and interest pursuant to the contractual obligations of the underlying mortgages. CMOs are pools of mortgage-backed securities, the repayments on which have generally been separated into two or more components (tranches), where each tranche has a separate estimated life and yield.  The Company's practice has been to purchase pass-through securities and CMOs that are issued or guaranteed by U.S. federal agencies, and the tranches of CMOs purchased are generally those having shorter average lives and/or durations.

Other-Than-Temporary Impairment

Each quarter all investment securities with a fair value less than amortized cost are evaluated in the available-for-sale portfolio, the held-to-maturity portfolio and the equity securities portfolio, to determine if there exists other-than-temporary impairment for any such security as defined under generally accepted accounting principles. There were no other-than-temporary impairment losses in the first three months of 2019.

Change in Net Unrealized Securities Gains (Losses): Nearly all of the change in our net unrealized gains or losses during recent periods has been attributable to changes in the market yields during the periods in question, with no change in the credit-worthiness of the issuers.

# 46

Investment Sales, Purchases and Maturities

We had no sales of investment securities within the three-month periods ended March 31, 2019 or 2018.

Investment yields in the debt markets experienced some volatility in 2018 and the first three months of 2019. The Company regularly reviews its interest rate risk position along with security holdings to evaluate if market opportunities have arisen that may present an opportunity to reposition certain securities available-for-sale to enhance portfolio performance.

The following table summarizes purchases of investment securities within the available-for-sale and held-to-maturity portfolios for the three-month periods ended March 31, 2019 and 2018, as well as proceeds from the maturity and calls of investment securities within each portfolio for the respective periods presented:

(In Thousands)	Three Months Ended
Purchases:	3/31/2019		3/31/2018
Available-for-Sale Portfolio
State and Municipal Obligations	$	—	$	19,979
Maturities & Calls	$	21,261	$	9,380

	Three Months Ended
Purchases:	3/31/2019		3/31/2018
Held-to-Maturity Portfolio
State and Municipal Obligations	$	1,457	$	921
Maturities & Calls	$	5,319	$	6,459

Loan Trends

The following two tables present, for each of the last five quarters, the quarterly average balances by loan type and the percentage of total loans represented by each loan type. For purposes of the following tables only, Home Equity loans have been separately disclosed from Residential Real Estate loans (they are otherwise included in a single category in this Report). Commercial Loans and Commercial Real Estate Loans have been combined into a single category (they are treated as separate categories in other sections of this Report). Over the last five quarters, the average balances for Commercial and Commercial Real Estate, Residential Real Estate and Consumer Loans have steadily increased, although at different rates. Average balances for Home Equity Loans have shown a slight contraction in recent quarters.

Quarterly Average Loan Balances

(Dollars in Thousands)

	Quarter Ended
	3/31/2019		12/31/2018		9/30/2018		6/30/2018		3/31/2018
Commercial and Commercial Real Estate	$	609,785	$	595,359	$	577,793	$	576,311	$	569,126
Consumer Loans	799,174		771,684		736,937		696,586		662,929
Residential Real Estate	673,527		661,423		640,277		616,519		600,076
Home Equity	128,156		131,969		134,644		137,182		139,109
Total Loans	$	2,210,642	$	2,160,435	$	2,089,651	$	2,026,598	$	1,971,240

Percentage of Total Quarterly Average Loans

	Quarter Ended
	3/31/2019		12/31/2018		9/30/2018		6/30/2018		3/31/2018
Commercial and Commercial Real Estate	27.6	%	27.6	%	27.7	%	28.4	%	28.9	%
Consumer Loans	36.1		35.7		35.2		34.3		33.5
Residential Real Estate	30.5		30.6		30.7		30.5		30.5
Home Equity	5.8		6.1		6.4		6.8		7.1
Total Loans	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

# 47

Maintenance of High Quality in the Loan Portfolio: In the first three months of 2019, there were no significant fluctuations in the quality of the loan portfolio or any segment thereof. In general, residential real estate loans have historically been underwritten to secondary market standards for prime loans and the Company has not engaged in subprime mortgage lending as a business line. Similarly, high underwriting standards have been applied to commercial and commercial real estate lending operations and generally in the indirect lending program as well. The Company occasionally makes loans, including indirect loans, to borrowers having FICO scores below the highest credit quality classifications. The Company has also made extensions of credit to existing borrowers who have developed credit problems after origination resulting in deterioration of their FICO scores.

Commercial Loans and Commercial Real Estate Loans: For the first three months of 2019, combined commercial and commercial real estate loan originations continued to increase.

Substantially all commercial and commercial real estate loans in the loan portfolio were extended to businesses or borrowers located in the Company's regional markets. A portion of the loans in the commercial portfolio have variable rates tied to prime or FHLBNY rates.

Although demand has been steady, it is possible that demand for commercial and commercial real estate loans may generally weaken in upcoming periods and/or that the quality of this segment of the portfolio may experience stress in upcoming periods. Generally, the business sector in the Company's service area, appeared to be in reasonably good financial condition at period-end.

Consumer Loans: At March 31, 2019, consumer loans (primarily automobile loans originated through dealerships located primarily in upstate New York and Vermont) represented the largest category of loans in the loan portfolio, and continued to be a significant component of business comprising more than a third of the total loan portfolio.

New consumer loan volume for the first three months of 2019 remained strong, at $100.4 million, up from the $88.9 million originated in the first three months of 2018. As a result of these originations, the quarterly average balance of our consumer loan portfolio at March 31, 2019 grew by $27 million, or 3.6% from our quarterly average balance at December 31, 2018.

For credit quality purposes, the Company assigns potential automobile loan customers into one of four tiers, ranging from lower to higher quality in terms of anticipated credit risk. The Company's experienced lending staff not only utilizes credit evaluation software tools but also reviews and evaluates each loan individually prior to the loan being funded. The Company believes that this disciplined approach to evaluating risk has contributed to maintaining the strong loan quality in this portfolio. However, if weakness in auto demand returns, the portfolio is likely to experience limited, if any, overall growth regardless of whether the auto company affiliates are offering highly-subsidized loans. If demand levels off, so will the financial performance in this important loan category. Additionally, if the local economy in our consumer lending areas were to experience a significant downturn, the quality of our consumer loan portfolio may also be negatively impacted.

Residential Real Estate Loans: In recent years, residential real estate loans have represented the second-largest category of the total loan portfolio. Gross originations for residential real estate loans (including refinancings of mortgage loans) for the first three months of 2019 were $23.3 million. Origination totals exceeded the sum of cash flows received from borrowers in the first quarter and the Company has also sold portions of these originations in the secondary market. In the first three months of 2019, the Company sold $3.6 million, or 15.5%, of originations. In the first three months of 2018, $1.2 million, or 3.9%, of our originations were sold. The Company expects to continue to sell a portion of mortgage loan originations in upcoming periods, although perhaps a decreasing percentage of overall originations if rates continue their slow rise across longer maturities. At the same time, if prevailing rates rise substantially, there may be a slowdown in loan growth and perhaps decreasing total originations, particularly if the general economy also falters. At some point, it is possible that the Company may experience a decrease in outstanding loan balances in this segment of the loan portfolio. Additionally, if the local economy or real estate market should suffer a major downturn, the quality of the real estate portfolio may also be negatively impacted.

The following table indicates the annualized tax-equivalent yield of each loan category for the past five quarters.

Quarterly Taxable Equivalent Yield on Loans

	Quarter Ended
	3/31/2019		12/31/2018		9/30/2018		6/30/2018		3/31/2018
Commercial and Commercial Real Estate	4.51	%	4.50	%	4.42	%	4.47	%	4.38	%
Consumer Loans	3.72		3.64		3.52		3.44		3.34
Residential Real Estate	4.14		4.09		4.05		4.06		4.09
Home Equity	4.75		4.43		4.13		3.93		3.70
Total Loans	4.13		4.05		3.97		3.96		3.90

The average yield in the total loan portfolio during the first quarter of 2019 increased compared to the average yield during the first quarter of 2018. For the quarter, yields on all loan types increased in comparison to the comparable quarter of 2018 with the largest increase being in the home equity portfolio mainly because many of these loans have a variable rate tied to the prime rate.

# 48

Deposit Trends

The following tables provide information on trends in the balance and mix of our deposit portfolio by presenting, for each of the last five quarters, the quarterly average balances by deposit type and the percentage of total deposits represented by each deposit type. Noninterest-bearing deposit balances have decreased and savings deposits have increased from the quarter ended September 30, 2018 through March 31, 2019, as a result of the migration to higher yielding deposit accounts due to the rise in short-term market rates. The volatility in interest-bearing checking account balances was mainly the result of the decline in municipal deposits. The increase in Other Time Deposits in the first quarter of 2019 was due to $66.5 million in brokered deposits the Company acquired to diversify its source of funds at more favorable rates as compared to FHLBNY overnight advances.

Quarterly Average Deposit Balances

(Dollars in Thousands)

	Quarter Ended
	3/31/2019		12/31/2018		9/30/2018		6/30/2018		3/31/2018
Noninterest-bearing deposits	$	453,668	$	473,170	$	483,089	$	444,854	$	439,688
Interest-Bearing Checking Accounts	768,354		817,788		801,193		866,996		914,116
Savings Deposits	833,832		793,299		744,808		750,352		723,660
Time Deposits over $250,000	79,346		76,640		75,888		96,580		63,406
Other Time Deposits	212,785		186,334		174,731		166,420		164,866
Total Deposits	$	2,347,985	$	2,347,231	$	2,279,709	$	2,325,202	$	2,305,736

Percentage of Total Quarterly Average Deposits

	Quarter Ended
	3/31/2019		12/31/2018		9/30/2018		6/30/2018		3/31/2018
Noninterest-bearing deposits	19.3	%	20.2	%	21.2	%	19.1	%	19.1	%
Interest-Bearing Checking Accounts	32.7		34.8		35.1		37.3		39.6
Savings Deposits	35.5		33.8		32.7		32.2		31.4
Time Deposits over $250,000	3.4		3.3		3.3		4.2		2.7
Other Time Deposits	9.1		7.9		7.7		7.2		7.2
Total Deposits	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Quarterly Cost of Deposits

	Quarter Ended
	3/31/2019		12/31/2018		9/30/2018		6/30/2018		3/31/2018
Demand Deposits	—	%	—	%	—	%	—	%	—	%
Interest-Bearing Checking Accounts	0.25		0.22		0.19		0.18		0.17
Savings Deposits	0.78		0.66		0.48		0.38		0.29
Time Deposits over $250,000	2.02		1.81		1.57		1.36		1.30
Other Time Deposits	1.36		1.08		0.84		0.68		0.64
Total Deposits	0.55		0.45		0.34		0.29		0.24

During the quarter ended March 31, 2019, the total cost of deposits continued to increase consistent with market rates, including the cost of Savings Deposits and both categories of Time Deposits. In the current rate environment, savings and time deposit customers continue to seek a higher rate of return. Given the uncertainty surrounding the future of interest rates, the Company is unable to predict at this time what the short- or long-term effect of the Federal Reserve’s interest rate policy may be.

Non-Deposit Sources of Funds

The Company's other sources of funds include securities sold under agreements to repurchase, overnight advances and term advances from the FHLBNY. The securities sold under agreements to repurchase are short-term in nature and are collateralized by investment securities. The term advances from the FHLBNY are fixed rate non-callable advances with original maturities of three to five years.

Arrow no longer relies on TRUPs as a source of new funds. As a result of the passage of the Dodd-Frank Act in 2010 and its removal of Tier 1 regulatory capital treatment for TRUPs issued after Dodd-Frank's grandfathering date, the Company, like other banking organizations of Arrow's size or larger, have not issued any TRUPs since that date and are not likely to issue any TRUPs in the future. However, consistent with the grandfathering provision in Dodd-Frank, the $20 million principal amount of Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts listed on the consolidated balance sheet as of March 31, 2019 (i.e., our previously issued TRUPs) will, subject to certain limits, continue to qualify as Tier 1 regulatory capital for Arrow until such TRUPs mature or are redeemed. This is further discussed under "Capital Resources" beginning on page 52 of this Report. These trust preferred securities are subject to early redemption by the Company if the proceeds cease to qualify as Tier 1 capital of Arrow for any reason, or if certain other unanticipated but negative events should occur. An example is any adverse change in tax laws that might deny the Company the ability to deduct interest paid on these obligations for federal income tax purposes.

# 49

ASSET QUALITY

The following table presents information related to our allowance and provision for loan losses for the past five quarters.

Summary of the Allowance and Provision for Loan Losses

(Dollars in Thousands, Loans Stated Net of Unearned Income)

	3/31/2019			12/31/2018			9/30/2018			6/30/2018			3/31/2018
Loan Balances:
Period-End Loans	$	2,235,208		$	2,196,215		$	2,126,100		$	2,057,862		$	1,993,037
Average Loans, Year-to-Date	2,210,642			2,062,575			2,029,597			1,999,072			1,971,240
Average Loans, Quarter-to-Date	2,210,642			2,160,435			2,089,651			2,026,598			1,971,240
Period-End Assets	2,984,883			2,988,334			2,953,220			2,845,171			2,826,687
Allowance for Loan Losses, Year-to-Date:
Allowance for Loan Losses, Beginning of Period	$	20,196		$	18,586		$	18,586		$	18,586		$	18,586
Provision for Loan Losses, YTD	472			2,607			1,961			1,375			746
Loans Charged-off, YTD	(462		)	(1,532		)	(960		)	(634		)	(370		)
Recoveries of Loans Previously Charged-off	167			535			416			313			95
Net Charge-offs, YTD	(295		)	(997		)	(544		)	(321		)	(275		)
Allowance for Loan Losses, End of Period	$	20,373		$	20,196		$	20,003		$	19,640		$	19,057
Allowance for Loan Losses, Quarter-to-Date:
Allowance for Loan Losses, Beginning of Period	$	20,196		$	20,003		$	19,640		$	19,057		$	18,586
Provision for Loan Losses, QTD	472			646			586			629			746
Loans Charged-off, QTD	(462		)	(573		)	(325		)	(264		)	(370		)
Recoveries of Loans Previously Charged-off	167			120			102			218			95
Net Charge-offs, QTD	(295		)	(453		)	(223		)	(46		)	(275		)
Allowance for Loan Losses, End of Period	$	20,373		$	20,196		$	20,003		$	19,640		$	19,057
Nonperforming Assets, at Period-End:
Nonaccrual Loans	$	5,143		$	4,159		$	4,468		$	3,880		$	4,470
Loans Past Due 90 or More Days and Still Accruing Interest	64			1,225			1,172			170			—
Restructured and in Compliance with   Modified Terms	141			138			115			106			100
Total Nonperforming Loans	5,348			5,522			5,755			4,156			4,570
Repossessed Assets	123			130			47			76			120
Other Real Estate Owned	1,322			1,130			1,173			1,412			1,525
Total Nonperforming Assets	$	6,793		$	6,782		$	6,975		$	5,644		$	6,215
Asset Quality Ratios:
Allowance to Nonperforming Loans	380.95		%	365.74		%	347.58		%	472.57		%	417.00		%
Allowance to Period-End Loans	0.91		%	0.92		%	0.94		%	0.95		%	0.96		%
Provision to Average Loans (Quarter) (1)	0.09		%	0.12		%	0.11		%	0.12		%	0.15		%
Provision to Average Loans (YTD) (1)	0.09		%	0.13		%	0.13		%	0.14		%	0.15		%
Net Charge-offs to Average Loans (Quarter) (1)	0.05		%	0.08		%	0.04		%	0.01		%	0.06		%
Net Charge-offs to Average Loans (YTD) (1)	0.05		%	0.05		%	0.04		%	0.03		%	0.06		%
Nonperforming Loans to Total Loans	0.24		%	0.25		%	0.27		%	0.20		%	0.23		%
Nonperforming Assets to Total Assets	0.23		%	0.23		%	0.24		%	0.20		%	0.22		%
(1) Annualized

Provision for Loan Losses

Through the provision for loan losses, an allowance is maintained that reflects the Company's best estimate of probable incurred loan losses related to specifically identified impaired loans as well as the inherent risk of loss related to the remaining portfolio. Loan charge-offs are recorded to this allowance when loans are deemed uncollectible, in whole or in part. As loans become past due, consideration is given to the status of those loans and whether or not to classify them as nonaccrual loans. Any loans listed as "past due 90 or more days and still accruing interest" have been evaluated and the borrowers have been deemed to have the capacity to repay all principal and interest and, therefore, have not been classified as nonaccrual.

# 50

In the first quarter of 2019, the Company made a $472 thousand provision for loan losses, compared to a provision of $746 thousand for the first quarter of 2018 and a provision of $646 thousand for the fourth quarter of 2018. The provision expense was largely driven by growth in outstanding loan balances. Additional items impacting the provision included changes to qualitative factors that reflect management’s view on current economic and market risks, and net charge-offs of $295 thousand. See Note 3 to the unaudited interim consolidated financial statements for a discussion on how the Company classifies credit quality indicators as well as the balance in each category.

The ratio of the allowance for loan losses to total loans was 0.91% at March 31, 2019, a decrease from 0.92% at December 31, 2018 and a decrease of 5 basis points from 0.96% at March 31, 2018.

The accounting policy relating to the allowance for loan losses is considered to be a critical accounting policy, given the uncertainty involved in evaluating the level of the allowance required to cover credit losses inherent in the loan portfolio, and the material effect that such judgments may have on our results of operations. The process for determining the provision for loan losses is described in Note 3 to the unaudited interim consolidated financial statements.

Risk Elements

Nonperforming assets at March 31, 2019 amounted to $6.8 million, consistent with the December 31, 2018 total and an increase of $578 thousand, from the year earlier total. For the three-month periods ended March 31, 2019 and 2018, ratios of nonperforming assets to total assets have remained below the average ratios for the peer group, although the average peer group ratios have improved dramatically in recent years. (See page 38 for a discussion of the peer group.) At December 31, 2018, the ratio of loans past due 90 or more days plus nonaccrual loans plus other real estate owned to total assets was 0.25%, well below the 0.56% ratio of the peer group at such date (the latest date for which peer group information is available). At March 31, 2019 the ratio is 0.23%, which is below the most recent ratio for the peer group.

The following table presents the balance of other non-current loans at period-end as to which interest income was being accrued (i.e. loans 30 to 89 days past due, as defined in bank regulatory guidelines). These non-current loans are not included in nonperforming assets, but entail heightened risk.

Loans Past Due 30-89 Days and Accruing Interest ($ in 000's)
	3/31/2019		12/31/2018		3/31/2018
Commercial Loans	$	157	$	170	$	90
Commercial Real Estate Loans	208		108		156
Residential Real Estate Loans	1,552		2,190		1,706
Consumer Loans - Primarily Indirect Automobile	6,113		7,414		4,306
Total Loans Past Due 30-89 Days    and Accruing Interest	$	8,030	$	9,882	$	6,258

At March 31, 2019, the loans in the above-referenced category totaled $8.0 million, a decrease of $1.9 million, or 18.7%, from the $9.9 million of such loans at December 31, 2018. The March 31, 2019 total of non-current loans equaled 0.36% of loans then outstanding, compared to 0.45% at December 31, 2018 and 0.31% at March 31, 2018. The decrease from December 31, 2018 is primarily attributable to a decrease in delinquent automobile loans, which tend to reflect seasonally elevated levels in the second half of the year.

The number and dollar amount of performing loans that demonstrate characteristics of potential weakness from time-to-time (potential problem loans) typically is a very small percentage of the loan portfolio. See the table of Credit Quality Indicators in Note 3 to the unaudited interim consolidated financial statements. The Company considers all performing commercial and commercial real estate loans classified as substandard or lower (as reported in Note 3) to be potential problem loans. The dollar amount of such loans at March 31, 2019 was $33.1 million, down slightly from the dollar amount of such loans at December 31, 2018, when the amount was $35.0 million. These loans will continue to be closely monitored and the Company expects to collect all payments of contractual interest and principal in full on these classified loans. Total nonperforming assets at period-end increased by $0.6 million, or 9.3% from March 31, 2018.

The economy in the Company's market area has been relatively strong in recent years, but any general weakening of the U.S. economy in upcoming periods would likely have an adverse effect on the economy in this market area as well, and ultimately on the loan portfolio, particularly the commercial and commercial real estate portfolio.

As of March 31, 2019, the Company held for sale three commercial properties in other real estate owned. The Company does not expect to acquire a significant number of other real estate properties in the near term as a result of payment defaults or the foreclosure process.

The Company does not currently anticipate significant increases in nonperforming assets, other non-current loans as to which interest income is still being accrued or potential problem loans, but can give no assurances in this regard.

# 51

CAPITAL RESOURCES

Regulatory Capital Standards

Capital Adequacy Requirements.An important area of banking regulation is the federal banking system's promulgation and enforcement of minimum capitalization standards for banks and bank holding companies.  

As reported in the Regulatory Reform section above, on May 24, 2018 the Economic Growth Act financial reform bill was signed into law.  This new law includes provisions requiring the federal bank regulatory agencies to establish a Community Bank Leverage Ratio (CBLR) of between 8% and 10%, calculated by dividing tangible equity capital by average total consolidated assets of "qualifying community banks" that meet certain requirements to be set by those regulatory agencies.  A qualifying community bank is a depository institution or bank holding company with less than $10 billion in total assets, such as Arrow, that meets other requirements to be established by the regulators.  If a qualifying community bank exceeds the CBLR, it will be deemed to have met all applicable capital and leverage requirements, including the generally applicable leverage capital requirements and risk-based capital requirements and (if the community bank is a depository institution) the "well capitalized" requirement under the federal "prompt corrective action" capital standards.  Upon its implementation, this new CBLR standard is intended to reduce the burden of compliance with regard to regulatory capital adequacy for community banks.  However, the implementation of this standard will be subject to the notice and comment procedures of rulemaking, and the Economic Growth Act does not impose a deadline for this rulemaking. 

On November 21, 2018, federal banking regulators issued a notice of proposed rulemaking under the Economic Growth Act that would set the threshold for the CBLR at greater than 9 percent, calculated as the ratio of “CBLR tangible equity” divided by “average total consolidated assets.” Based on the parameters of this proposed rulemaking, the CBLR for Arrow and both subsidiary banks is estimated to exceed the 9 percent threshold. However, the proposed rule is not yet final, and the terms of the rule may change before becoming final. Upon effectiveness, the final rule may impact Arrow’s capital options and requirements, although the potential impact of the final rule on Arrow will remain uncertain until the final rule is issued.  Until the rules becomes effective and final, the Capital Rules promulgated under Dodd-Frank will remain applicable to Arrow.

The following is a summary of certain definitions of capital under the various capital measures in the Dodd-Frank Capital Rules:

Common Equity Tier 1 Capital (CET1): Equals the sum of common stock instruments and related surplus (net of treasury stock), retained earnings, accumulated other comprehensive income (AOCI), and qualifying minority interests, minus applicable regulatory adjustments and deductions. Such deductions will include AOCI, if the organization has exercised its irrevocable option not to include AOCI in capital (we made such an election). Mortgage-servicing assets, deferred tax assets, and investments in financial institutions are limited to 15 percent of CET1 in the aggregate and 10 percent of CET1 for each such item individually.

Additional Tier 1 Capital: Equals the sum of noncumulative perpetual preferred stock, tier 1 minority interests, grandfathered TRUPs, and Troubled Asset Relief Program instruments, minus applicable regulatory adjustments and deductions.

Tier 2 Capital: Equals the sum of subordinated debt and preferred stock, total capital minority interests not included in Tier 1, and allowance for loan and lease losses (not exceeding 1.25% of risk-weighted assets) minus applicable regulatory adjustments and deductions.

The following table presents the minimum regulatory capital ratios applicable to our holding company and banks under the current Capital Rules:

Capital Ratio
	2019
Minimum CET1 Ratio	4.500	%
Capital Conservation Buffer ("Buffer")	2.500	%
Minimum CET1 Ratio Plus Buffer	7.000	%
Minimum Tier 1 Risk-Based Capital Ratio	6.000	%
Minimum Tier 1 Risk-Based Capital Ratio Plus Buffer	8.500	%
Minimum Total Risk-Based Capital Ratio	8.000	%
Minimum Total Risk-Based Capital Ratio Plus Buffer	10.500	%
Minimum Leverage Ratio	4.000	%

These minimum capital ratios, especially the CET1 ratio (4.5%) and the enhanced Tier 1 risk-based capital ratio (6.0%), represent a heightened and more restrictive capital regime than institutions like Arrow previously had to meet under the prior capital rules.

At March 31, 2019, Arrow's holding company and both of its subsidiary banks exceeded by a substantial amount each of the applicable minimum capital ratios established under the Capital Rules, including the minimum CET1 Ratio, the minimum Tier 1 Risk-Based Capital Ratio, the minimum Total Risk-Based Capital Ratio, and the minimum Leverage Ratio, including in the case of each risk-based ratio, the capital buffer.

Prompt Corrective Action Capital Classifications. Under applicable banking law, federal banking regulators are required to take prompt corrective action with respect to depository institutions that do not meet certain minimum capital requirements.  For these purposes, the regulators have established five capital classifications for banking institutions, ranging from the highest category of "well-capitalized" to

# 52

the lowest category of "critically under-capitalized". Under the current capital classifications, a banking institution is considered "well-capitalized" if it meets the following capitalization standards on the date of measurement: a CET1 risk-based capital ratio of 6.50% or greater, a Tier 1 risk-based capital ratio of 8.00% or greater, a total risk-based capital ratio of 10.00% or greater, and a Tier 1 leverage ratio of 5.00% or greater, provided the institution is not subject to any regulatory order or written directive regarding capital maintenance. Federal banking law also ties the ability of banking organizations to engage in certain types of activities and to utilize certain procedures to such organizations' continuing to qualify for inclusion in one of the two highest rankings of these capitalization categories, i.e., as "well-capitalized" or "adequately capitalized."

Current Capital Ratios:The table below sets forth the regulatory capital ratios of Arrow's holding company and two subsidiary banks, Glens Falls National and Saratoga National, under the current Capital Rules, as of March 31, 2019:

	Common		Tier 1		Total
	Equity		Risk-Based		Risk-Based		Tier 1
	Tier 1 Capital		Capital		Capital		Leverage
	Ratio		Ratio		Ratio		Ratio
Arrow Financial Corporation	12.98	%	13.95	%	14.93	%	9.73	%
Glens Falls National Bank & Trust Co.	13.56	%	13.56	%	14.55	%	9.31	%
Saratoga National Bank & Trust Co.	13.23	%	13.23	%	14.17	%	9.88	%
FDICIA's Prompt Corrective Action - "Well-Capitalized" Standard (2019)	6.500	%	8.000	%	10.000	%	5.000	%
Regulatory Minimum effective 1/1/2019	7.000%(1)		8.500%(1)		10.500%(1)		4.000	%
(1) Including the fully phased-in 2.50% capital conservation buffer

At March 31, 2019, Arrow and its subsidiary banks exceeded the minimum regulatory capital ratios established under the current Capital Cules and each also qualified as "well-capitalized", the highest category in the new capital classification scheme established by federal bank regulatory agencies under the "prompt corrective action" standards, as described above.

Capital Components; Stock Repurchases; Dividends

Stockholders' Equity:Stockholders' equity was $276.6 million at March 31, 2019, an increase of $7.0 million, or 2.6%, from December 31, 2018.  This increase was the result of net income for the period of $8.73 million; increases in book equity from various stock-based compensation and dividend reinvestment plans of $1.20 million; and other comprehensive income of $2.24 million. These increases to equity during the quarter were offset by a decrease related to cash dividends of $3.76 million and purchases of the Company's own common stock in the aggregate amount of $1.39 million under the Board-approved stock repurchase program described below.

Trust Preferred Securities: In each of 2003 and 2004, the Company issued $10 million of trust preferred securities (TRUPs) in a private placement. Under the Federal Reserve Board's regulatory capital rules then in effect, TRUPs proceeds typically qualified as Tier 1 capital for bank holding companies such as Arrow, but only in amounts up to 25% of Tier 1 capital, net of goodwill less any associated deferred tax liability. Under the Dodd-Frank Act, any trust preferred securities that Arrow might issue on or after the grandfathering date set forth in Dodd-Frank (May 19, 2010) would not qualify as Tier 1 capital under bank regulatory capital guidelines. For Arrow, TRUPs outstanding prior to the grandfathering cutoff date set forth in Dodd-Frank (May 19, 2010) would continue to qualify as Tier 1 capital until maturity or redemption, subject to limitations. Thus, Arrow's outstanding TRUPs continue to qualify as Tier 1 regulatory capital, subject to such limitations.

Stock Repurchase Program: In January 2019, the Board of Directors approved a $5.0 million stock repurchase program (the 2019 Repurchase Program), under which management is authorized, in its discretion, to cause the Company to repurchase up to $5 million of shares of Arrow's common stock over the period from January 30, 2019 through December 31, 2019, in the open market or in privately negotiated transactions, to the extent management believes the Company's stock is reasonably priced and such repurchases appear to be an attractive use of available capital and in the best interests of shareholders. This 2019 Repurchase Program replaced a similar repurchase program which was in effect during 2018 (the 2018 program), which also authorized the repurchase of up to $5.0 million of shares of Arrow's common stock. As of March 31, 2019 approximately $806 thousand had been used under the 2019 stock repurchase program to repurchase Arrow shares. This total does not include repurchases of Arrow's Common Stock other than through its repurchase program, i.e., repurchases of Arrow shares on the market utilizing funds accumulated under Arrow's Dividend Reinvestment Plan and the surrender or deemed surrender of Arrow stock to the Company in connection with employees' stock-for-stock exercises of compensatory stock options to buy Arrow stock.

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Dividends:The Company's common stock is traded on NasdaqGS^® under the symbol AROW. The high and low stock prices for the past five quarters listed below represent actual sales transactions, as reported by NASDAQ. On April 24, 2019, the Board of Directors declared a 2019 second quarter cash dividend of $0.26 payable on June 14, 2019. Per share amounts in the following table have been restated for our September 27, 20183% stock dividend.

					Cash
	Market Price				Dividends
	Low		High		Declared
2018
First Quarter	$	29.91	$	34.53	$	0.243
Second Quarter	31.89		37.23		0.243
Third Quarter	35.19		38.98		0.252
Fourth Quarter	30.45		37.55		0.260
2019
First Quarter	$	30.46	$	36.25	$	0.260
Second Quarter (dividend payable June 14, 2019)	TBD		TBD		0.260

	Quarter Ended March 31,
	2019			2018
Cash Dividends Per Share	$	0.260		$	0.243
Diluted Earnings Per Share	0.60			0.59
Dividend Payout Ratio	43.33		%	41.19		%
Total Equity (in thousands)	276,609			$	252,734
Shares Issued and Outstanding (in thousands)	14,474			14,368
Book Value Per Share	$	19.11		$	17.59
Intangible Assets (in thousands)	23,650			24,045
Tangible Book Value Per Share	$	17.48		$	15.92

LIQUIDITY

The objective of effective liquidity management is to ensure that the Company has the ability to raise cash when needed at a reasonable cost.  This includes the capability of meeting expected and unexpected obligations to the Company's customers at any time.  Given the uncertain nature of customer demands and the need to maximize earnings, the Company must have available reasonably priced sources of funds, both on- and off-balance sheet, that can be accessed quickly in time of need.

The primary sources of available liquidity are overnight investments in federal funds sold, interest bearing bank balances at the Federal Reserve Bank of New York, and cash flow from investment securities and loans.  Certain investment securities are selected at purchase as available-for-sale based on their marketability and collateral value, as well as their yield and maturity.  The securities available-for-sale portfolio was $298.8 million at March 31, 2019, a decrease of $18.7 million, from the year-end 2018 level. Due to the potential for volatility in market values, the Company may not always be able to sell securities on short notice at their carrying value, even to provide needed liquidity.

In addition to liquidity from short-term investments, investment securities and loans, the Company has supplemented available operating liquidity with additional off-balance sheet sources such as a federal funds lines of credit with correspondent banks and credit lines with the FHLBNY. The federal funds lines of credit are with three correspondent banks totaling $57 million which were not drawn on during the three months ended March 31, 2019.

To support the borrowing relationship with the FHLBNY, the Company has pledged collateral, including residential mortgage and home equity loans. At March 31, 2019, the Company had outstanding collateral obligations with the FHLBNY of $169 million; as of that date, the unused borrowing capacity at the FHLBNY was approximately $391 million. Brokered deposits have also been identified as an available source of funding accessible in a relatively short time period. At March 31, 2019, the balance of outstanding brokered deposits totaled $111.6 million. Also, the Company's two bank subsidiaries have each established a borrowing facility with the Federal Reserve Bank of New York, pledging certain consumer loans as collateral for potential "discount window" advances, which are maintained for contingency liquidity purposes. At March 31, 2019, the amount available under this facility was approximately $520 million, and there were no advances then outstanding.

The Company measures and monitors basic liquidity as a ratio of liquid assets to total short-term liabilities, both with and without the availability of borrowing arrangements. Based on the level of overnight funds investments, available liquidity from the investment securities portfolio, cash flows from the loan portfolio, the stable core deposit base and the significant borrowing capacity, the Company believes that the available liquidity is sufficient to meet all funding needs that may arise in connection with any reasonably likely events or occurrences. At March 31, 2019, the basic liquidity ratio, including the FHLBNY collateralized borrowing capacity, was 12.1% of total assets, or $242 million in excess of the internally-set minimum target ratio of 4%.

Because of its consistently favorable credit quality and strong balance sheet, the Company did not experience any significant liquidity constraints in the three-month period ended March 31, 2019 and did not experience any such constraints in recent prior years, back to and including the financial crisis years. The Company has not at any time during such period been forced to pay above-market rates to obtain retail deposits or other funds from any source.

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2019 Compared With

Three Months Ended March 31, 2018

Summary of Earnings Performance

(Dollars in Thousands, Except Per Share Amounts)

	Quarter Ended
	3/31/2019			3/31/2018			Change			% Change
Net Income	$	8,734		$	8,531		$	203		2.4	%
Diluted Earnings Per Share	0.60			0.59			0.01			1.7	%
Return on Average Assets	1.19		%	1.25		%	(0.06		)%	(4.8	)%
Return on Average Equity	12.98		%	13.78		%	(0.80		)%	(5.8	)%

Net income was $8.7 million and diluted earnings per share (EPS) of $.60 for the first quarter of 2019, compared to net income of $8.5 million and diluted EPS of $.59 for the first quarter of 2018. Return on average assets (ROA) for the first quarter of 2019 was 1.19%, down 6 basis points from 1.25% in the first quarter of 2018. In addition, return on average equity (ROE) decreased to 12.98% for the first quarter of 2019, down 80 basis points from 13.78% in the first quarter of 2018.

The following narrative discusses the quarter-to-quarter changes in net interest income, noninterest income, noninterest expense and income taxes.

Net Interest Income

Summary of Net Interest Income

(Dollars in Thousands)

	Quarter Ended
	3/31/2019			3/31/2018			Change			% Change
Interest and Dividend Income (GAAP Basis)	$	26,213		$	22,418		$	3,795		16.9	%
Tax-Equivalent Adjustment	373			491			(118		)	(24.0	)%
Interest and Dividend Income (Tax-equivalent Basis) (2)	26,586			22,909			3,677			16.1	%
Interest Expense	5,092			2,016			3,076			152.6	%
Net Interest Income (GAAP Basis)	21,121			20,402			719			3.5	%
Net Interest Income (Tax-equivalent Basis) (2)	21,494			20,893			601			2.9	%
Average Earning Assets (1)	2,847,966			2,641,660			206,306			7.8	%
Average Interest-Bearing Liabilities	2,224,403			2,050,661			173,742			8.5	%
Yield on Earning Assets (GAAP Basis) (1)	3.73		%	3.44		%	0.29			8.4	%
Yield on Earning Assets (Tax-equivalent Basis) (1) (2)	3.79			3.52			0.27			7.7
Cost of Interest-Bearing Liabilities	0.93			0.40			0.53			132.5
Net Interest Spread (GAAP Basis)	2.80			3.04			(0.24		)	(7.9	)
Net Interest Spread (Tax-equivalent Basis) (2)	2.86			3.12			(0.26		)	(8.3	)
Net Interest Margin (GAAP Basis)	3.01			3.13			(0.12		)	(3.8	)
Net Interest Margin (Tax-equivalent Basis) (2)	3.06			3.21			(0.15		)	(4.7	)

⁽¹⁾ Includes Nonaccrual Loans.

⁽²⁾ See "Use of Non-GAAP Financial Measures" on page 39; reported on a fully taxable basis using a marginal federal tax rate of 21%.

Net interest income for the recently completed quarter, on a GAAP basis, increased by $0.7 million, or 3.5%, from the first quarter of 2018, due primarily to continued loan growth. Total loans increased $39.0 million in the first quarter of 2019 and overall average earning assets increased 7.8%. In order to fund the consistent loan growth, total average-interest-bearing liabilities increased 8.5% in the first quarter of 2019. The current rate environment has compressed net interest margin. Net interest margin on a GAAP basis decreased 12 basis points in the first quarter of 2019 to 3.01%, from 3.13% during the first quarter of 2018. Average earning asset yields were 29 basis points higher as compared to the first quarter of 2018 due to the continued increase in market yields and the higher composition of loans as a percentage of earning assets. Yield on loans specifically increased 23 basis points from the first quarter of 2018. Cost of funds continues to be impacted by the recent rise in short-term rates. The cost of interest-bearing liabilities increased 53 basis points due to the higher rates paid on money market savings, time deposits and other borrowings, due to higher short-term market interest rates. The Company defines net interest margin as net interest income divided by average earning assets, annualized. The Company defines tax-equivalent net interest margin as net interest income on a tax-equivalent basis divided by average earning assets, annualized. Tax-equivalent net interest margin, as well as tax-equivalent net interest income, from which the margin is derived, are non-GAAP financial

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measures. (See the discussion under "Use of Non-GAAP Financial Measures," on page 39, and the tabular information and notes on pages 40 and 41, regarding the Company's reasons for using these and other non-GAAP measures and the reconciliation thereof to comparable GAAP measures.) Further detailed information is presented above under the section entitled "Average Consolidated Balance Sheets and Net Interest Income Analysis." The impact of recent interest rate changes on Arrow's deposit and loan portfolios are discussed above in this Report under the sections entitled "Deposit Trends" and "Loan Trends."

As discussed previously under the heading "Asset Quality" beginning on page 50, the provision for loan losses for the first quarter of 2019 was $472 thousand, compared to a provision of $746 thousand for the 2018 quarter.

Noninterest Income

Summary of Noninterest Income

(Dollars in Thousands)

	Quarter Ended
	3/31/2019		3/31/2018		Change			% Change
Income From Fiduciary Activities	$	2,107	$	2,197	$	(90	)	(4.1	)%
Fees for Other Services to Customers	2,402		2,380		22			0.9	%
Insurance Commissions	1,719		1,903		(184		)	(9.7	)%
Net Gain on Securities	76		18		58			322.2	%
Net Gain on the Sale of Loans	104		38		66			173.7	%
Other Operating Income	479		353		126			35.7	%
Total Noninterest Income	$	6,887	$	6,889	$	(2	)	—	%

Total noninterest income in the current quarter was $6.9 million, consistent with total noninterest income for the first quarter of 2018. Income from fiduciary activities for the first quarter of 2019decreased by $90 thousand, or 4.1% over the first quarter of 2018 due to market performance as well as other competitive factors.

Fees for other services to customers increased to $2.4 million for the first quarter of 2019. In addition to service charge income on deposits, this category also includes debit card interchange income, revenue related to the sale of mutual funds to customers by third party providers, and servicing income on sold loans. Debit card usage by customers continues to grow, which has had (and if such growth persists, will continue to have) a positive impact on debit card fee income.

The $58 thousand increase in net gain on securities between the periods was primarily due to the change in the fair value of marketable equity securities as compared to the first quarter of 2018.

Net gain on the sale of loans in the first quarter of 2019increased by $66 thousand from the first quarter of 2018. The change was a result of an increase in loan sale volume. See page 48 for the discussion of loan sales.

Insurance commissions decreased to $1.7 million for the first quarter of 2019 compared to $1.9 million for the first quarter of 2018 due to increased competition for commercial insurance clients in the Company's markets.

Noninterest Expense

Summary of Noninterest Expense

(Dollars in Thousands)

	Quarter Ended
	3/31/2019			3/31/2018			Change			% Change
Salaries and Employee Benefits	$	9,319		9,369			$	(50	)	(0.5	)%
Occupancy Expense of Premises, Net	1,420			1,340			80			6.0	%
Technology and Equipment Expense	3,141			2,698			443			16.4	%
FDIC and FICO Assessments	212			217			(5		)	(2.3	)%
Amortization	79			67			12			17.9	%
Other Operating Expense	2,481			2,265			216			9.5	%
Total Noninterest Expense	$	16,652		$	15,956		$	696		4.4	%
Efficiency Ratio	58.55		%	57.23		%	1.32			2.3	%

Noninterest expense for the first quarter of 2019 was $16.7 million, an increase of $696 thousand, or 4.4%, from the first quarter of 2018. Salaries and benefit expenses remain consistent from the comparable quarter in 2018. Technology and equipment expenses have increased from the previous year as a result of the implementation of certain ongoing projects to achieve operational efficiencies while delivering improved customer experiences.

The efficiency ratio continues to be solid at 58.55% for the first quarter of 2019 and 57.23% for the comparable 2018 quarter. The efficiency ratio (a ratio where lower is better), is a commonly used non-GAAP financial measure in the banking industry that purports to reflect an institution's operating efficiency. The Company calculates the efficiency ratio as the ratio of noninterest expense (excluding, under the Company's definition, intangible asset amortization) to (i) net interest income (on a tax-equivalent basis) plus (ii) noninterest income (excluding net securities gains or losses). See the discussion on this non-GAAP measure on page 39 of this Report under the heading "Use of Non-GAAP Financial Measures" and the related tabular information and notes on pages 40 and 41 of this Report. The efficiency ratio included by the Federal Reserve Board in its "Bank Holding Company Performance Reports" excludes net securities gains or losses from the denominator (as does the Company's calculation), but unlike the Company's ratio does not exclude intangible asset

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amortization from the numerator. The Company's efficiency ratios in recent periods have generally compared favorably to the ratios of the peer group as disclosed in the Federal Reserve Performance Reports (see page 38 for a discussion of the peer group). For the three-month period ended December 31, 2018 (the most recent reporting period for which peer group information is available), the peer group's efficiency ratio was 65.27% compared to the Company's ratio of 58.04% (not adjusted for the definitional difference).

Income Taxes

Summary of Income Taxes

(Dollars in Thousands)

	Quarter Ended
	3/31/2019			3/31/2018			Change		% Change
Provision for Income Taxes	$	2,150		$	2,058		$	92	4.5	%
Effective Tax Rate	19.8		%	19.4		%	0.4		2.1	%

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Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to credit risk in the loan portfolio and liquidity risk, discussed earlier, the Company's business activities also generate market risk.  Market risk is the possibility that changes in future market rates (interest rates) or prices (market value of financial instruments) will make the Company's position (i.e., assets and operations) less valuable.  The Company's primary market risk is interest rate volatility. The ongoing monitoring and management of interest rate risk is an important component of the asset/liability management process, which is governed by policies that are reviewed and approved annually by the Board of Directors.  The Board of Directors delegates responsibility for carrying out asset/liability oversight and control to management's Asset/Liability Committee ("ALCO").  In this capacity ALCO develops guidelines and strategies impacting the asset/liability profile based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends.  

Changes in market interest rates, whether increases or decreases, can trigger repricing and changes in the pace of payments for both assets and liabilities (prepayment risk). This may individually or in combination affect net interest income, net interest margin, and ultimately net income, either positively or negatively. ALCO utilizes the results of a detailed and dynamic simulation model to quantify this interest rate risk by projecting net interest income in various interest rate scenarios.  

The Company's standard simulation model applies a parallel shift in interest rates, ramped over a 12-month period, to capture the impact of changing interest rates on net interest income.  The results are compared to ALCO policy limits which specify a maximum tolerance level for net interest income exposure over a one-year horizon, assuming no balance sheet growth and a 200 basis point upward and a 100 basis point downward shift in interest rates. Additional tools to monitor potential longer-term interest rate risk, including periodic stress testing involving hypothetical sudden and significant interest rate spikes, are also evaluated.

The following table summarizes the percentage change in net interest income as compared to the base scenario, which assumes no change in market interest rates as generated from the standard simulation model. The results are presented for each of the first two years of the simulation period for the 200 basis point increase in interest rate scenario and the 100 basis point decrease in interest rate scenario.

As of March 31, 2019:

	Change in Interest Rate
	+ 200 basis points	- 100 basis points
Calculated change in Net Interest Income - Year 1	(2.90)%	0.70%
Calculated change in Net Interest Income - Year 2	0.90%	(1.80)%

Historically, there has existed an inverse relationship between changes in prevailing rates and the Company's net interest income, suggesting that liabilities and sources of funds generally reprice more quickly than earning assets (near-term liability sensitivity). However, when net interest income is simulated over a longer time frame, this exposure is limited, and actually reverses, as asset yields continue to reprice while the cost of funding reaches assumed ceilings or floors (long-term asset sensitivity).

The hypothetical estimates underlying the sensitivity analysis are based upon numerous assumptions including: the nature and timing of changes in interest rates including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others.  While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurance as to the predictive nature of these assumptions including how customer preferences or competitor influences might change.

Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate changes on caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes, unanticipated shifts in the yield curve and other internal/external variables.  Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates.

Item4.

CONTROLS AND PROCEDURES

Senior management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of Arrow's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2019. Based upon that evaluation, senior management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective. Further, there were no changes made in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that had materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

The Company, including its subsidiary banks, is not currently the subject of any material pending legal proceedings, other than ordinary routine litigation occurring in the normal course of their business. On an ongoing basis, the Company is often the subject of, or a party to, various legal claims by other parties against the Company, by the Company against other parties, or involving the Company, which arise in the normal course of business. The various pending legal claims against the Company will not, in the opinion of management based upon consultation with counsel, result in any material liability.

Item 1.A.

Risk Factors

The Risk Factors identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, continue to represent the most significant risks to the Company's future results of operations and financial conditions, without modification or amendment. Please refer to such Risk Factors as listed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

The following table presents information about purchases by Arrow during the three months ended March 31, 2019 of common stock (our only class of equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934):

First Quarter 2019 Calendar Month	(A) Total Number of Shares Purchased 1	(B) Average Price Paid Per Share 1		(C) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 2	(D) Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs 2
January	9,619	$	32.14	4,474	$	4,859,024
February	32,985	34.70		17,700	4,261,092
March	17,681	34.21		2,100	4,194,019
Total	60,285	34.15		24,274

¹The total number of shares purchased by the Company and the average price paid per share listed in columns (A) and (B) consist of (i) any shares purchased in such periods in open market or private transactions under the Arrow Financial Corporation Automatic Dividend Reinvestment Plan (the "DRIP") by the administrator of the DRIP, (ii) shares surrendered or deemed surrendered to Arrow in such periods by holders of options to acquire Arrow common stock received by them under Arrow's long-term incentive plans ("LTIPs") in connection with their stock-for-stock exercise of such options and (iii) shares purchased under the publicly-announced 2019 Repurchase Program. In the months indicated, the listed number of shares purchased included the following number of shares purchased by Arrow through such methods: January - DRIP purchases (2,782 shares), stock-for-stock exercises (2,363 shares) and repurchased under the 2019 Repurchase Program (4,474 shares.); February - DRIP purchases (1,070 shares), stock-for-stock exercises (14,215 shares) and repurchased under the 2019 Repurchase Program (17,700 shares); and March - DRIP purchases (15,581 shares)and repurchased under the 2019 Repurchase Program (2,100 shares.)

²Includes only those shares acquired by Arrow pursuant to its publicly-announced stock repurchase programs. Our only publicly-announced stock repurchase program in effect for the first quarter of 2019 was the 2019 Repurchase Program approved by the Board of Directors and announced in January 2019, under which the Board authorized management, in its discretion, to repurchase from time to time from January 30, 2019 through December 31, 2019, in the open market or in privately negotiated transactions, up to $5 million of Arrow common stock subject to certain exceptions.

Item 3.

Defaults Upon Senior Securities - None

Item 4.

Mine Safety Disclosures - None

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Item 5.

Other Information - None

Item 6.

Exhibits

Exhibit Number	Exhibit
10.1	Employment Agreement between the Company and Thomas J. Murphy effective February 1, 2019 incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 4, 2019, Exhibit 10.1*
10.2	Employment Agreement between the Company and Edward J. Campanella effective February 1, 2019 incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 4, 2019, Exhibit 10.2*
10.3	Employment Agreement between the Company and David S. DeMarco effective February 1, 2019 incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 4, 2019, Exhibit 10.3*
10.4	Employment Agreement between the Company and David D. Kaiser effective February 1, 2019 incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 4, 2019, Exhibit 10.4*
10.5	Employment Agreement between the Registrant and Andrew J. Wise, Chief Operating Officer and Senior Vice President, effective February 1, 2019 incorporated herein by reference from the Registrant's Annual Report on Form 10-K, filed March 8, 2019, Exhibit 10.23*
10.6	Restricted Share Unit Grant Agreement between the Registrant and Thomas J. Murphy, effective February 1, 2019 incorporated herein by reference from the Registrant's Annual Report on Form 10-K, filed March 8, 2019, Exhibit 10.24*
15	Awareness Letter
31.1	Certification of Chief Executive Officer under SEC Rule 13a-14(a)/15d-14(a)
31.2	Certification of Chief Financial Officer under SEC Rule 13a-14(a)/15d-14(a)
32	Certification of Chief Executive Officer under 18 U.S.C. Section 1350 and Certification of Chief Financial Officer under 18 U.S.C. Section 1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

ARROW FINANCIAL CORPORATION

Registrant

May 9, 2019	/s/Thomas J. Murphy
Date	Thomas J. Murphy, President and
	Chief Executive Officer
May 9, 2019	/s/Edward J. Campanella
Date	Edward J. Campanella, Senior Vice President,
	Treasurer and Chief Financial Officer
	(Principal Financial Officer and
	Principal Accounting Officer)

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EX-15

Exhibit 15

Report of Independent Registered Public Accounting Firm

May 9, 2019

The Stockholders and Board of Directors

Arrow Financial Corporation

Glens Falls, New York

Re: Registration Statement Forms S-3 (No. 333-219822 and 333-230360) and Forms S-8 (No. 333-62719, No. 333-151550, No. 333-188479, and No. 333-188480)

With respect to the subject registration statement, we acknowledge our awareness of the use therein of our report dated May 9, 2019 related to our review of interim financial information.

Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.

/s/ KPMG LLP

Albany, New York

EX-31.1

Certification of the Chief Executive Officer Pursuant to

Securities Exchange Act Rules 13a-14 and 15d-14

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas J. Murphy, certify that:

1.    I have reviewed the quarterly report on Form 10-Q of Arrow Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    May 9, 2019

By:    /s/Thomas J. Murphy

Thomas J. Murphy

Chief Executive Officer

EX-31.2

Certification of the Chief Financial Officer Pursuant to

Securities Exchange Act Rules 13a-14 and 15d-14

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Edward J. Campanella, certify that:

1.I have reviewed the quarterly report on Form 10-Q of Arrow Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:May 9, 2019

By:    /s/Edward J. Campanella

Edward J. Campanella

Chief Financial Officer

EX-32

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant To

Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Arrow Financial Corporation (the "Company") on Form 10-Q for the period ended March 31, 2019, filed with the Securities and Exchange Commission (the "Report"), we, Thomas J. Murphy, Chief Executive Officer of the Company, and Edward J. Campanella, Chief Financial Officer of the Company, hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:

(a)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(b)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 9, 2019

/s/ Thomas J. Murphy

Thomas J. Murphy

Chief Executive Officer

/s/ Edward J. Campanella

Edward J. Campanella

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Arrow Financial Corporation and will be retained by Arrow Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Apr. 30, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	Arrow Financial Corporation
Entity Central Index Key	0000717538
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding (in shares)		14,484,215
Entity Current Reporting Status	Yes

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
ASSETS
Cash and Due From Banks	$ 36,198	$ 56,529	$ 29,525
Interest-Bearing Deposits at Banks	25,031	27,710	70,747
Investment Securities:
Available-for-Sale	298,812	317,535	305,589
Held-to-Maturity (Approximate Fair Value of $280,414 at March 31, 2019; $280,338 at December 31, 2018; and $324,937 at March 31, 2018)	279,400	283,476	330,124
Equity Securities	1,850	1,774	1,579
Other Investments	7,878	15,506	4,780
Loans	2,235,208	2,196,215	1,993,037
Allowance for Loan Losses	(20,373)	(20,196)	(19,057)
Net Loans	2,214,835	2,176,019	1,973,980
Premises and Equipment, Net	34,949	30,446	27,815
Goodwill	21,873	21,873	21,873
Other Intangible Assets, Net	1,777	1,852	2,172
Other Assets	62,280	55,614	58,503
Total Assets	2,984,883	2,988,334	2,826,687
LIABILITIES
Noninterest-Bearing Deposits	453,089	472,768	452,347
Interest-Bearing Checking Accounts	823,301	790,781	944,161
Savings Deposits	866,861	818,048	762,220
Time Deposits over $250,000	83,834	73,583	85,403
Other Time Deposits	263,012	190,404	167,142
Total Deposits	2,490,097	2,345,584	2,411,273
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	58,407	54,659	74,957
Federal Home Loan Bank Overnight Advances	74,500	234,000	0
Federal Home Loan Bank Term Advances	35,000	45,000	45,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Finance Leases	2,946
Other Liabilities	27,324	19,507	22,723
Total Liabilities	2,708,274	2,718,750	2,573,953
STOCKHOLDERS’ EQUITY
Preferred Stock, $5 Par Value; 1,000,000 Shares Authorized	0	0	0
Common Stock, $1 Par Value; 20,000,000 Shares Authorized (19,035,565 Shares Issued at March 31, 2019; 19,035,565 at December 31, 2018 and 18,481,301 at March 31, 2018)	19,035	19,035	18,481
Additional Paid-in Capital	315,262	314,533	290,980
Retained Earnings	34,231	29,257	34,093
Unallocated ESOP Shares (5,001 Shares at March 31, 2019; 5,001 Shares at December 31, 2018 and 9,643 Shares at March 31, 2018)	(100)	(100)	(200)
Accumulated Other Comprehensive Loss	(11,567)	(13,810)	(11,285)
Treasury Stock, at Cost (4,556,083 Shares at March 31, 2019; 4,558,207 Shares at December 31, 2018 and 4,516,444 Shares at March 31, 2018)	(80,252)	(79,331)	(79,335)
Total Stockholders’ Equity	276,609	269,584	252,734
Total Liabilities and Stockholders’ Equity	$ 2,984,883	$ 2,988,334	$ 2,826,687

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Consolidated Balance Sheet (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Statement of Financial Position [Abstract]
Held-to-maturity securities, at fair value	$ 280,414	$ 280,338	$ 324,937
Preferred Stock, par value (in dollars per share)	$ 5	$ 5	$ 5
Preferred Stock, shares authorized (in shares)	1,000,000	1,000,000	1,000,000
Common Stock, par value (in dollars per share)	$ 1	$ 1	$ 1
Common Stock, shares authorized (in shares)	20,000,000	20,000,000	20,000,000
Common Stock, shares issued (in shares)	19,035,565	19,035,565	18,481,301
Unallocated ESOP Shares (in shares)	5,001	5,001	9,643
Treasury Stock (in shares)	4,556,083	4,558,207	4,516,444

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Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2019		Mar. 31, 2018
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans		$ 22,403		$ 18,858
Interest on Deposits at Banks		195		134
Interest and Dividends on Investment Securities:
Fully Taxable		2,369		1,893
Exempt from Federal Taxes		1,246		1,533
Total Interest and Dividend Income		26,213		22,418
INTEREST EXPENSE
Interest-Bearing Checking Accounts		482		387
Savings Deposits		1,601		522
Time Deposits over $250,000		396		204
Other Time Deposits		713		259
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase		22		16
Federal Home Loan Bank Advances		1,594		414
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts		269		214
Interest on Financing Leases		15		0
Total Interest Expense		5,092		2,016
NET INTEREST INCOME		21,121		20,402
Provision for Loan Losses		472		746
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		20,649		19,656
NONINTEREST INCOME
Insurance Commissions		1,719		1,903
Net Gain on Securities Transactions		76		18
Net Gain on Sales of Loans		104		38
Other Operating Income		479		353
Total Noninterest Income		6,887		6,889
NONINTEREST EXPENSE
Salaries and Employee Benefits		9,319		9,369
Occupancy Expenses, Net		1,420		1,340
Technology and Equipment Expense		3,141		2,698
FDIC Assessments		212		217
Other Operating Expense		2,560		2,332
Total Noninterest Expense		16,652		15,956
INCOME BEFORE PROVISION FOR INCOME TAXES		10,884		10,589
Provision for Income Taxes		2,150		2,058
NET INCOME		$ 8,734		$ 8,531
Average Shares Outstanding:
Basic (in shares)		14,469	[1]	14,354	[2]
Diluted (in shares)	[2]	14,520		14,436
Per Common Share:
Basic Earnings (in dollars per share)		$ 0.60	[1]	$ 0.59	[2]
Diluted Earnings (in dollars per share)		$ 0.60	[1]	$ 0.59	[2]
Fiduciary and Trust
NONINTEREST INCOME
Revenue from Contract with Customer		$ 2,107		$ 2,197
Deposit Account
NONINTEREST INCOME
Revenue from Contract with Customer		$ 2,402		$ 2,380

[1] Cash dividends paid per share have been adjusted for the September 27, 2018 3% stock dividend.

[2] 2018 Share and Per Share Amounts have been restated for the September 27, 2018 3% stock dividend.

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Consolidated Statements of Income Consolidated Statements of Income (Parenthetical)	Sep. 27, 2018
Income Statement [Abstract]
Stock dividend, percent	3.00%

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net Income	$ 8,734	$ 8,531
Other Comprehensive Income (Loss), Net of Tax:
Net Unrealized Securities Holding Gains (Losses) Arising During the Period	2,080	(2,485)
Amortization of Net Retirement Plan Actuarial Loss	121	46
Amortization (Accretion) of Net Retirement Plan Prior Service Cost (Credit)	42	(1)
Other Comprehensive Income (Loss)	2,243	(2,440)
Comprehensive Income	$ 10,977	$ 6,091

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Consolidated Statements of Changes In Stockholders' Equity - USD ($) $ in Thousands		Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Unallocated ESOP Shares	Accumulated Other Comprehensive Loss	Treasury Stock
Stockholders' equity, beginning balance at Dec. 31, 2017		$ 249,603	$ 18,481	$ 290,219	$ 28,818	$ (200)	$ (8,514)	$ (79,201)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income		8,531			8,531
Other Comprehensive Income (Loss)		(2,440)					(2,440)
Cash Dividends Paid	[1]	(3,485)			(3,485)
Stock Options Exercised, Net		610		307				303
Shares Issued Under the Employee Stock Purchase Plan		116		76				40
Shares Issued for Dividend Reinvestment Plans		431		289				142
Stock-Based Compensation Expense		89		89
Purchases of Treasury Stock		(619)						(619)
Stockholders' equity, ending balance at Mar. 31, 2018		252,734	18,481	290,980	34,093	(200)	(11,285)	(79,335)
Stockholders' equity, beginning balance at Dec. 31, 2018		269,584	19,035	314,533	29,257	(100)	(13,810)	(79,331)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income		8,734			8,734
Other Comprehensive Income (Loss)		2,243					2,243
Cash Dividends Paid		(3,760)			(3,760)
Stock Options Exercised, Net		535		249				286
Shares Issued Under the Employee Stock Purchase Plan		117		76				41
Shares Issued for Dividend Reinvestment Plans		453		309				144
Stock-Based Compensation Expense		95		95
Purchases of Treasury Stock		(1,392)						(1,392)
Stockholders' equity, ending balance at Mar. 31, 2019		$ 276,609	$ 19,035	$ 315,262	$ 34,231	$ (100)	$ (11,567)	$ (80,252)

[1] Cash dividends paid per share have been adjusted for the September 27, 2018 3% stock dividend.

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Consolidated Statements of Changes In Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Common Stock Dividends (in shares)	0	0
Cash Dividends Paid, per Share (in dollars per share)	$ 0.26	$ 0.243
Exercised (in shares)	26,135	27,662
Shares Issued Under Directors Stock Plan (in shares)	0	0
Shares Issued Under Employee Stock Purchase Plan (in shares)	3,709	3,674
Shares Issued for Dividend Reinvestment Plans (in shares)	13,132	12,459
Purchase of Treasury Stock (in shares)	40,852	18,715

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash Flows from Operating Activities:
Net Income	$ 8,734	$ 8,531
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Loan Losses	472	746
Depreciation and Amortization	1,309	1,199
Net Gain on Securities Transactions	(76)	(18)
Loans Originated and Held-for-Sale	(4,223)	(12,326)
Proceeds from the Sale of Loans Held-for-Sale	3,718	12,520
Net Gain on the Sale of Loans	(104)	(38)
Net Loss on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	130	32
Contributions to Retirement Benefit Plans	(153)	(134)
Deferred Income Tax Benefit	(297)	(220)
Stock-Based Compensation Expense	95	89
Tax Benefit from Exercise of Stock Options	78	112
Net Increase in Other Assets	(1,565)	(395)
Net Increase in Other Liabilities	2,613	2,185
Net Cash Provided By Operating Activities	10,731	12,283
Cash Flows from Investing Activities:
Proceeds from the Maturities and Calls of Securities Available-for-Sale	21,261	9,380
Purchases of Securities Available-for-Sale	0	19,979
Proceeds from the Maturities and Calls of Securities Held-to-Maturity	5,319	6,459
Purchases of Securities Held-to-Maturity	(1,457)	(921)
Net Increase in Loans	(39,545)	(42,968)
Proceeds from the Sales of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	442	437
Purchase of Premises and Equipment	(2,099)	(627)
Net Decrease in Other Investments	7,628	5,169
Net Cash Used By Investing Activities	(8,451)	(43,050)
Cash Flows from Financing Activities:
Net Increase in Deposits	144,513	166,157
Net Decrease in Short-Term Federal Home Loan Bank Borrowings	(159,500)	(105,000)
Net Increase in Short-Term Borrowings	3,748	9,991
Finance Lease Payments	(4)	0
Repayments of Federal Home Loan Bank Term Advances	(10,000)	(10,000)
Purchase of Treasury Stock	(1,392)	(619)
Stock Options Exercised, Net	535	610
Shares Issued Under the Employee Stock Purchase Plan	117	116
Shares Issued for Dividend Reinvestment Plans	453	431
Cash Dividends Paid	(3,760)	(3,485)
Net Cash (Used) Provided By Financing Activities	(25,290)	58,201
Net (Decrease) Increase in Cash and Cash Equivalents	(23,010)	27,434
Cash and Cash Equivalents at Beginning of Period	84,239	72,838
Cash and Cash Equivalents at End of Period	61,229	100,272
Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings	4,924	1,949
Income Taxes	311	390
Non-cash Investing and Financing Activity:
Transfer of Loans to Other Real Estate Owned and Repossessed Assets	$ 728	$ 270

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Accounting Policies

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Accounting Policies

ACCOUNTING POLICIES

In the opinion of the management of Arrow Financial Corporation (Arrow, the Company, we, or us), the accompanying unaudited interim consolidated financial statements contain all of the adjustments necessary to present fairly the financial position as of March 31, 2019, December 31, 2018 and March 31, 2018; the results of operations for the three-month periods endedMarch 31, 2019 and 2018; the consolidated statements of comprehensive income for the three-month periods endedMarch 31, 2019 and 2018; the changes in stockholders' equity for the three-month periods ended March 31, 2019 and 2018; and the cash flows for the three-month periods ended March 31, 2019 and 2018. All such adjustments are of a normal recurring nature.

Management’s Use of Estimates -The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.  Our most significant estimate is the allowance for loan losses. Other estimates include the evaluation of other-than-temporary impairment of investment securities, goodwill impairment, pension and other postretirement liabilities and an analysis of a need for a valuation allowance for deferred tax assets. Actual results could differ from those estimates.

A material estimate that is particularly susceptible to significant change in the near term is the allowance for loan losses.  In connection with the determination of the allowance for loan losses, management obtains appraisals for properties.  The allowance for loan losses is management’s best estimate of probable loan losses incurred as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for loan losses may be necessary based on changes in economic conditions.  

The unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements of Arrow for the year ended December 31, 2018 included in Arrow's Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Adopted and Recently Issued Accounting Standards

The following accounting standards have been adopted in the first three months of 2019:

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-08 "Receivables-Nonrefundable Fees and Other Costs" which amends the amortization period for certain purchased callable debt securities held at a premium. This shortens the amortization period for the premium to the earliest call date. Under United States generally accepted accounting principles (GAAP), entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. For Arrow, the standard was effective in the first quarter of 2019 and did not have a material impact on its financial position or the results of operations in the current quarter or in future periods.

In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842) which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): "Land Easement Practical Expedient for Transition to Topic 842". In July 2018, the FASB issued ASU 2018-10 "Codification Improvements to Topic 842, Leases" which provided clarification on certain components of the original guidance, including that the rate implicit in the lease cannot be less than zero. Also in July 2018, the FASB issued ASU 2018-11 "Targeted Improvements" to Leases (Topic 842) which amends the original guidance to allow for the adoption of this standard to be applied retrospectively at the beginning of the period of adoption, which was January 1, 2019 for Arrow, without revising prior comparative periods.

The Company adopted this standard as of January 1, 2019 using the effective date method, also known as the modified retrospective method, with the cumulative-effect adjustment recorded at the beginning of the period of adoption. As a result of this adoption, the Company's assets increased $7.9 million and the Company's liabilities increased $8.0 million with no adjustment required to retained earnings and no material impact to the Consolidated Statements of Income.

Practical Expedients Elected At Adoption: The package of practical expedients were elected that did not require the Company to reassess whether an existing contract contains a lease, to reassess existing leases between operating leases and finance leases and to not reassess initial direct costs for any existing leases. These practical expedients were applied together. In addition, the Company also elected a practical expedient, which was required to be applied consistently to all of its leases, to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and in assessing impairment in the right-of-use asset.

Accounting Policy Elections: The Company also made two accounting policy elections related to the adoption of this standard. The first is a determination not to separate lease and non-lease components and account for the resulting combined component as a single lease component. The second election is to account for short-term leases, those leases with a "lease term" of twelve months or less, like an operating lease under current GAAP.

Determination of the Discount Rate to Calculate the Lease Liability: Since the Company was unable to determine the rate implicit in its leases, the secured borrowing rate from the Federal Home Loan Bank of New York as of the January 1, 2019 adoption date was utilized for existing leases for the effective lease term beginning with the effective date of each existing lease. The expected expiration date of each lease was determined on a lease-by-lease basis based on the availability of renewal options in the lease contracts, the amount of leasehold improvements at each location, total branch deposits at each location in addition to the feasibility of growth potential at each location. A similar process is followed to determine the expected lease expiration date for all leases executed subsequent to the January 1, 2019 adoption date.

The following accounting standards have been issued and will become effective for the Company at a future date:

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses" (Topic 326) which will change the way financial entities measure expected credit losses for financial assets, primarily loans. Under this ASU, the "incurred loss" model will be replaced with an "expected loss" model which will recognize losses over the life of the instrument and requires consideration of a broader range of reasonable and supportable information. Currently, credit losses on available-for-sale securities reduce the carrying value of the instrument and cannot be reversed. Under this ASU, the amount of the credit loss is carried as a valuation allowance and can be reversed. The standard also requires expanded credit quality disclosures. For Arrow, the standard is effective for the first quarter of 2020 and early adoption is allowed in 2019. The Company plans on adopting the standard in the first quarter of 2020, in order to maximize the accumulation of data needed to calculate the new current expected credit loss (CECL) methodologies. The ASU describes several acceptable methodologies for calculating expected losses on a loan or a pool of loans and requires additional disclosures. The initial adjustment will not be reported in earnings, but as the cumulative effect of a change in accounting principle. The FASB’s Transition Research Group for credit losses still has several outstanding unresolved questions, some of which may have a significant impact on CECL calculations. The Company has continued its implementation efforts with the development and testing of various methods within its core model, and has tentatively identified the discounted cash flow method for determining losses for the commercial loan portfolios and the residential real estate portfolios, and the vintage method for the consumer indirect loan portfolio. Based on further testing, these methods may change prior to adoption. As a result of analyses performed, including the availability of future economic data, the Company plans to utilize a two-year reasonable and supportable forecast period and is in the process of identifying which economic data best correlates with expected loan losses. The Company continues to monitor new regulatory guidance and is updating relevant internal controls and processes. The adoption of this standard will likely have the effect of increasing the allowance for loan and lease losses and reducing shareholders' equity, the extent of which will depend upon the nature and characteristics of the Company's loan portfolio and economic conditions and forecasts at the adoption date. The Company expects to remain a well-capitalized financial institution under current regulatory calculations.     

In August 2018, the FASB issued ASU 2018-13 "Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement" which as part of its disclosure framework, the FASB has eliminated, amended and added disclosure requirements for fair value measurements. The following disclosure requirements were eliminated: Amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy of the timing of transfers between levels of the fair value hierarchy; the valuation processes for Level 3 fair value measurements. For public companies such as Arrow, the following new disclosures will be required: Changes in unrealized gains and losses for the period included in other comprehensive income (OCI); the range and weighted average of significant unobservable inputs used; alternatively, a company may choose to disclose other quantitative information if it determines that it is a more reasonable and rational method that reflects the distribution of unobservable inputs used. For Arrow, the standard becomes effective in the first quarter of 2020. The Company does not expect that the adoption of this change in fair value disclosure will have a material impact on its financial position or the results of operations in periods subsequent to its adoption.

In August 2018, the FASB issued ASU 2018-14 "Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans" which applies to all companies that provide defined benefit pension or other postretirement benefit plans for their employees. Certain disclosure requirements have been eliminated such as reporting the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next year, and reporting the effects of a one-percentage-point change in the assumed healthcare cost trend rate on the aggregate of the service cost and interest cost components of net periodic benefit cost and on the benefit obligation for postretirement healthcare benefits. New required disclosures for reporting the weighted-average interest rate used to credit cash balance and similar plans that have a promised interest credit, the reasons for significant gains and losses affecting benefit obligations and other requirements for reporting aggregate information related to pension plans. For Arrow, the standard becomes effective at December 31, 2020. The Company does not expect that the adoption of this change affecting defined benefit plan disclosures will have a material impact on its financial position or the results of operations.

In August 2018, the FASB issued ASU 2018-15 "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" which will require companies to defer potentially significant, specified implementation costs incurred in a cloud computing arrangement that are often expensed under current US GAAP. For Arrow, the standard becomes effective at January 1, 2020. The Company is in the process of assessing the impact of this new accounting standard on its financial position and the results of operations in periods subsequent to its adoption.

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Investment Securities

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Investment Securities

INVESTMENT SECURITIES (In Thousands)

The following table is the schedule of Available-For-Sale Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2019
Available-For-Sale Securities,   at Amortized Cost	$	35,519	$	1,114	$	263,347	$	1,000	$	300,980
Available-For-Sale Securities,   at Fair Value	35,383		1,116		261,513		800		298,812
Gross Unrealized Gains	—		2		657		—		659
Gross Unrealized Losses	136		—		2,491		200		2,827
Available-For-Sale Securities,   Pledged as Collateral									255,028
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	30,516	$	201	$	494	$	—	$	31,211
From 1 - 5 Years	5,003		433		125,267		—		130,703
From 5 - 10 Years	—		—		117,616		—		117,616
Over 10 Years	—		480		19,970		1,000		21,450
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	30,432	$	203	$	498	$	—	$	31,133
From 1 - 5 Years	4,951		433		124,175		—		129,559
From 5 - 10 Years	—		—		117,008		—		117,008
Over 10 Years	—		480		19,832		800		21,112
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	53,131	$	—	$	53,131
12 Months or Longer	35,383		—		155,108		800		191,291
Total	$	35,383	$	—	$	208,239	$	800	$	244,422
Number of Securities in a   Continuous Loss Position	7		—		80		1		88
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	258	$	—	$	258
12 Months or Longer	136		—		2,233		200		2,569
Total	$	136	$	—	$	2,491	$	200	$	2,827
Disaggregated Details:
US Treasury Obligations,   at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	35,519
US Agency Obligations, at Fair Value	35,383
US Government Agency   Securities, at Amortized Cost					$	70,358
US Government Agency   Securities, at Fair Value					70,034
Government Sponsored Entity   Securities, at Amortized Cost					192,989
Government Sponsored Entity Securities, at Fair Value					191,479

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
December 31, 2018
Available-For-Sale Securities,   at Amortized Cost	$	47,071	$	1,193	$	273,227	$	1,000	$	322,491
Available-For-Sale Securities,   at Fair Value	46,765		1,195		268,775		800		317,535
Gross Unrealized Gains	—		2		288		—		290
Gross Unrealized Losses	306		—		4,740		200		5,246
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									236,163
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	107,550	$	—	$	107,550
12 Months or Longer	46,765		—		124,627		800		172,192
Total	$	46,765	$	—	$	232,177	$	800	$	279,742
Number of Securities in a   Continuous Loss Position	10		—		86		1		97
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	841	$	—	$	841
12 Months or Longer	306		—		3,899		200		4,405
Total	$	306	$	—	$	4,740	$	200	$	5,246
Disaggregated Details:
US Treasury Obligations,   at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	47,071
US Agency Obligations, at Fair Value	46,765
US Government Agency   Securities, at Amortized Cost					$	72,095
US Government Agency   Securities, at Fair Value					71,800
Government Sponsored Entity   Securities, at Amortized Cost					201,132
Government Sponsored Entity Securities, at Fair Value					196,975

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2018
Available-For-Sale Securities,   at Amortized Cost	$	60,264	$	9,741	$	240,033	$	1,000	$	311,038
Available-For-Sale Securities,   at Fair Value	59,657		9,743		235,389		800		305,589
Gross Unrealized Gains	—		7		347		—		354
Gross Unrealized Losses	607		5		4,991		200		5,803
Available-For-Sale Securities,   Pledged as Collateral									229,857
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	17,128	$	7,421	$	112,078	$	—	$	136,627
12 Months or Longer	42,529		—		80,759		800		124,088
Total	$	59,657	$	7,421	$	192,837	$	800	$	260,715
Number of Securities in a   Continuous Loss Position	14		29		69		1		113
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	266	$	6	$	1,940	$	—	$	2,212
12 Months or Longer	341		—		3,050		200		3,591
Total	$	607	$	6	$	4,990	$	200	$	5,803
Disaggregated Details:
US Treasury Obligations, at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	60,264
US Agency Obligations, at Fair Value	59,657
US Government Agency   Securities, at Amortized Cost					$	59,446
US Government Agency   Securities, at Fair Value					59,469
Government Sponsored Entity   Securities, at Amortized Cost					180,587
Government Sponsored Entity Securities, at Fair Value					175,920

The following table is the schedule of Held-To-Maturity Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2019
Held-To-Maturity Securities,   at Amortized Cost	$	234,454	$	44,946	$	279,400
Held-To-Maturity Securities,   at Fair Value	235,576		44,838		280,414
Gross Unrealized Gains	1,695		97		1,792
Gross Unrealized Losses	573		205		778
Held-To-Maturity Securities,   Pledged as Collateral					265,465
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	25,205	$	—	$	25,205
From 1 - 5 Years	94,100		44,946		139,046
From 5 - 10 Years	112,788		—		112,788
Over 10 Years	2,361		—		2,361
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	25,244	$	—	$	25,244
From 1 - 5 Years	94,590		44,838		139,428
From 5 - 10 Years	113,343		—		113,343
Over 10 Years	2,399		—		2,399
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	71,450		26,021		97,471
Total	$	71,450	$	26,021	$	97,471
Number of Securities in a   Continuous Loss Position	193		29		222
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	573		205		778
Total	$	573	$	205	$	778
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	2,069
US Government Agency   Securities, at Fair Value			2,012
Government Sponsored Entity   Securities, at Amortized Cost			42,877
Government Sponsored Entity Securities, at Fair Value			42,826

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2018
Held-To-Maturity Securities,   at Amortized Cost	$	235,782	$	47,694	$	283,476
Held-To-Maturity Securities,   at Fair Value	233,359		46,979		280,338
Gross Unrealized Gains	486		—		486
Gross Unrealized Losses	2,909		715		3,624
Held-To-Maturity Securities,   Pledged as Collateral					266,341
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	32,093	$	33,309	$	65,402
12 Months or Longer	110,947		13,670		124,617
Total	$	143,040	$	46,979	$	190,019
Number of Securities in a   Continuous Loss Position	411		47		458
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	162	$	456	$	618
12 Months or Longer	2,747		259		3,006
Total	$	2,909	$	715	$	3,624
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	2,180
US Government Agency   Securities, at Fair Value			2,143
Government Sponsored Entity   Securities, at Amortized Cost			45,514
Government Sponsored Entity Securities, at Fair Value			44,836
March 31, 2018
Held-To-Maturity Securities,   at Amortized Cost	$	272,938	$	57,186	$	330,124
Held-To-Maturity Securities,   at Fair Value	268,604		56,333		324,937
Gross Unrealized Gains	646		—		646
Gross Unrealized Losses	4,979		853		5,832
Held-To-Maturity Securities,   Pledged as Collateral					307,273
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	101,695	$	53,076	$	154,771
12 Months or Longer	65,012		3,257		68,269
Total	$	166,707	$	56,333	$	223,040
Number of Securities in a   Continuous Loss Position	495		47		542
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,981	$	767	$	2,748
12 Months or Longer	2,998		86		3,084
Total	$	4,979	$	853	$	5,832

Held-To-Maturity Securities
	State and Municipal Obligations	Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2018
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost		$	2,530
US Government Agency   Securities, at Fair Value		2,483
Government Sponsored Entity   Securities, at Amortized Cost		54,656
Government Sponsored Entity Securities, at Fair Value		53,850

In the tables above, maturities of mortgage-backed securities are included based on their expected average lives. Actual maturities will differ because issuers may have the right to call or prepay obligations with or without prepayment penalties.

Securities in a continuous loss position, in the tables above for March 31, 2019, December 31, 2018 and March 31, 2018, do not reflect any deterioration of the credit worthiness of the issuing entities.  U.S. government agency securities, including mortgage-backed securities, are all rated AAA by Moody's and AA+ by Standard and Poor's.  The state and municipal obligations are general obligations supported by the general taxing authority of the issuer, and in some cases are insured.  Obligations issued by school districts are supported by state aid.  For any non-rated municipal securities, credit analysis is performed in-house based upon data that has been submitted by the issuers to the New York State Comptroller. That analysis shows no deterioration in the credit worthiness of the municipalities.  Subsequent to March 31, 2019, there were no securities downgraded below investment grade.  

The unrealized losses on these temporarily impaired securities are primarily the result of changes in interest rates for fixed rate securities where the interest rate received is less than the current rate available for new offerings of similar securities, changes in market spreads as a result of shifts in supply and demand, and/or changes in the level of prepayments for mortgage related securities. Because we do not currently intend to sell any of our temporarily impaired securities, and because it is not more likely-than-not we would be required to sell the securities prior to recovery, the impairment is considered temporary.

Pledged securities, in the tables above, are primarily used to collateralize state and municipal deposits, as required under New York State law. A small portion of the pledged securities are used to collateralize repurchase agreements and pooled deposits of our trust customers.

The following table is the schedule of Equity Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Equity Securities
	March 31, 2019	December 31, 2018	March 31, 2018
Equity Securities, at Fair Value	$1,850	$1,774	$1,579

The following is a summary of realized and unrealized gains and losses recognized in net income on equity securities during the three-month period endedMarch 31, 2019:

	Three months ended March 31, 2019
Net Gain on Equity Securities	$	76
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	—
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$	76

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Loans

3 Months Ended

Mar. 31, 2019

Loans and Leases Receivable Disclosure [Abstract]

Loans

LOANS (In Thousands)

Loan Categories and Past Due Loans

The following table presents loan balances outstanding as of March 31, 2019, December 31, 2018 and March 31, 2018 and an analysis of the recorded investment in loans that are past due at these dates.  Generally, Arrow considers a loan past due 30 or more days when the borrower is two payments past due.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Loans Past Due 30-59 Days	$	168	$	208	$	4,758	$	1,345	$	6,479
Loans Past Due 60-89 Days	—		—		1,387		207		1,594
Loans Past Due 90 or more Days	17		108		369		1,610		2,104
Total Loans Past Due	185		316		6,514		3,162		10,177
Current Loans	133,091		493,071		740,285		858,584		2,225,031
Total Loans	$	133,276	$	493,387	$	746,799	$	861,746	$	2,235,208
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	64	$	64
Nonaccrual Loans	415		248		588		3,892		5,143
December 31, 2018
Loans Past Due 30-59 Days	$	121	$	108	$	5,369	$	281	$	5,879
Loans Past Due 60-89 Days	49		—		2,136		1,908		4,093
Loans Past Due 90 or more Days	—		789		572		1,844		3,205
Total Loans Past Due	170		897		8,077		4,033		13,177
Current Loans	136,720		483,665		711,433		851,220		2,183,038
Total Loans	$	136,890	$	484,562	$	719,510	$	855,253	$	2,196,215
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	144	$	1,081	$	1,225
Nonaccrual Loans	403		789		658		2,309		4,159
March 31, 2018
Loans Past Due 30-59 Days	$	45	$	156	$	3,673	$	1,711	$	5,585
Loans Past Due 60-89 Days	60		—		751		481		1,292
Loans Past Due 90 or more Days	41		807		252		321		1,421
Total Loans Past Due	146		963		4,676		2,513		8,298
Current Loans	127,528		454,095		621,964		781,152		1,984,739
Total Loans	$	127,674	$	455,058	$	626,640	$	783,665	$	1,993,037
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	—	$	—
Nonaccrual Loans	652		807		441		2,570		4,470

The Company disaggregates its loan portfolio into the following four categories:

Commercial - The Company offers a variety of loan options to meet the specific needs of commercial customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower. These loans carry a higher risk than commercial real estate loans due to the nature of the underlying collateral, which can be business assets such as equipment and accounts receivable and generally have a lower liquidation value than real estate. In the event of default by the borrower, the Company may be required to liquidate collateral at deeply discounted values. To reduce the risk, management usually obtains personal guarantees of the borrowers.

Commercial Real Estate - The Company offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. Commercial real estate loans are made to finance the purchases of real property which generally consists of real estate with completed structures. These commercial real estate loans are secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and both owner- and non-owner-occupied facilities. These loans are typically less risky than commercial loans, since they are secured by real estate and buildings, and are generally originated in amounts of no more than 80% of the appraised value of the property. However, the Company also offers commercial construction and land development loans to finance projects, primarily within the communities that we serve. Many projects will ultimately be used by the borrowers' businesses, while others are developed for resale. These real estate loans are also secured by first liens on the real estate, which may include apartments, commercial structures, housing business, healthcare facilities and both owner-occupied and non-owner-occupied facilities. There is enhanced risk during the construction period, since the loan is secured by an incomplete project.

Consumer Loans - The Company offers a variety of consumer installment loans to finance personal expenditures. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to five years, based upon the nature of the collateral and the size of the loan. In addition to installment loans, the Company also offers personal lines of credit and overdraft protection. Several loans are unsecured, which carry a higher risk of loss. Also included in this category are automobile loans. The Company primarily finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to seven years. Indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed.

Residential - Residential real estate loans consist primarily of loans secured by first or second mortgages on primary residences. The Company originates adjustable-rate and fixed-rate one-to-four-family residential real estate loans for the construction, purchase or refinancing of an existing mortgage. These loans are collateralized primarily by owner-occupied properties generally located in the Company’s market area. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 80% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance. The Company’s underwriting analysis for residential mortgage loans typically includes credit verification, independent appraisals, and a review of the borrower’s financial condition. Mortgage title insurance and hazard insurance are normally required. It is the Company's general practice to underwrite residential real estate loans to secondary market standards. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period. In addition, the Company offers fixed home equity loans as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses.  The Company's policy allows for a maximum loan to value ratio of 80%, although periodically higher advances are allowed.  The Company originates home equity lines of credit and second mortgage loans (loans secured by a second junior lien position on one-to-four-family residential real estate).  Risk is generally reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows.  A security interest, with title insurance when necessary, is taken in the underlying real estate.

Allowance for Loan Losses

The following table presents a roll-forward of the allowance for loan losses and other information pertaining to the allowance for loan losses:

Allowance for Loan Losses
				Commercial
	Commercial			Real Estate			Consumer			Residential			Total
Roll-forward of the Allowance for Loan Losses for the Quarterly Periods:
December 31, 2018	$	1,218		$	5,644		$	8,882		$	4,452		$	20,196
Charge-offs	(1		)	(29		)	(418		)	(14		)	(462		)
Recoveries	—			—			167			—			167
Provision	33			(26		)	778			(313		)	472
March 31, 2019	$	1,250		$	5,589		$	9,409		$	4,125		$	20,373
December 31, 2017	$	1,873		$	4,504		$	7,604		$	4,605		$	18,586
Charge-offs	(16		)	1			(347		)	(8		)	(370		)
Recoveries	—			9			86			—			95
Provision	311			(151		)	676			(90		)	746
March 31, 2018	$	2,168		$	4,363		$	8,019		$	4,507		$	19,057

Allowance for Loan Losses
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	—	$	—	$	—	$	—	$	—
Allowance for loan losses - Loans Collectively Evaluated for Impairment	1,250		5,589		9,409		4,125		20,373
Ending Loan Balance - Individually Evaluated for Impairment	40		387		101		2,417		2,945
Ending Loan Balance - Collectively Evaluated for Impairment	$	133,236	$	493,000	$	746,698	$	859,329	$	2,232,263
December 31, 2018
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	—	$	—	$	—	$	4	$	4
Allowance for loan losses - Loans Collectively Evaluated for Impairment	1,218		5,644		8,882		4,448		20,192
Ending Loan Balance - Individually Evaluated for Impairment	430		793		101		1,899		3,223
Ending Loan Balance - Collectively Evaluated for Impairment	$	136,460	$	483,769	$	719,409	$	853,354	$	2,192,992
March 31, 2018
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	92	$	42	$	—	$	58	$	192
Allowance for loan losses - Loans Collectively Evaluated for Impairment	2,076		4,321		8,019		4,449		18,865
Ending Loan Balance - Individually Evaluated for Impairment	489		815		91		1,564		2,959
Ending Loan Balance - Collectively Evaluated for Impairment	$	127,185	$	454,243	$	626,549	$	782,101	$	1,990,078

Through the provision for loan losses, an allowance for loan losses is maintained that reflects the best estimate of the incurred risk of loss in the Company’s loan portfolio as of the balance sheet date. Additions are made to the allowance for loan losses through a periodic provision for loan losses. Actual loan losses are charged against the allowance for loan losses when loans are deemed uncollectible and recoveries of amounts previously charged off are recorded as credits to the allowance for loan losses.

Our loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with certain criticized and classified commercial-related relationships. In addition, our independent internal loan review department performs periodic reviews of the credit quality indicators on individual loans in the commercial loan portfolio.

We use a two-step process to determine the provision for loan losses and the amount of the allowance for loan losses. We perform an evaluation of impaired loans on a quarterly basis. Impaired loans are generally nonaccrual loans over $250 thousand and all troubled debt restructured loans. Our impaired loans are generally considered to be collateral dependent with the charge-off, if any, determined based on the value of the collateral less estimated costs to sell.

The remainder of the portfolio is evaluated on a pooled basis, as described below. For each homogeneous loan pool, we estimate a total loss factor based on the historical net loss rates adjusted for applicable qualitative factors. We update the total loss factors assigned to each loan category on a quarterly basis. For the commercial, commercial construction and commercial real estate categories, we further segregate the loan categories by credit risk profile (pools of loans graded pass, special mention and accruing substandard). Additional description of the credit risk classifications is detailed in the Credit Quality Indicators section of this note.

We determine the historical net loss rate for each loan category using a trailing three-year net charge-off average. While historical net loss experience provides a reasonable starting point for analysis, historical net losses, or even recent trends in net losses, do not by themselves form a sufficient basis to determine the appropriate level of the allowance for loan losses. Therefore, we also consider and adjust historical net loss factors for qualitative factors that impact the incurred risk of loss associated with the loan categories within the total loan portfolio. These include:

• Changes in the volume and severity of past due, nonaccrual and adversely classified loans

• Changes in the nature and volume of the portfolio and in the terms of loans

• Changes in the value of the underlying collateral for collateral dependent loans

• Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses

• Changes in the quality of the loan review system

• Changes in the experience, ability, and depth of lending management and other relevant staff

• Changes in international, national, regional, and local economic and business conditions and developments that affect the collectibility of the portfolio

• The existence and effect of any concentrations of credit, and changes in the level of such concentrations

• The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the  existing portfolio or pool

Loan Credit Quality Indicators

The following table presents the credit quality indicators by loan category at March 31, 2019, December 31, 2018 and March 31, 2018:

Loan Credit Quality Indicators
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	125,918	$	465,216					$	591,134
Special Mention	133		2,268						2,401
Substandard	7,225		25,903						33,128
Doubtful	—		—						—
Credit Risk Profile Based on Payment Activity:
Performing					$	746,211	$	857,790	$	1,604,001
Nonperforming					588		3,956		4,544
December 31, 2018
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	129,584	$	456,868					$	586,452
Special Mention	—		—						—
Substandard	7,306		26,905						34,211
Doubtful	—		789						789
Credit Risk Profile Based on Payment Activity:
Performing					$	718,708	$	851,863	$	1,570,571
Nonperforming					802		3,390		4,192
March 31, 2018
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	107,838	$	430,121					$	537,959
Special Mention	17,220		611						17,831
Substandard	2,615		23,521						26,136
Doubtful	—		807						807
Credit Risk Profile Based on Payment Activity:
Performing					$	626,198	$	781,095	$	1,407,293
Nonperforming					441		2,570		3,011

For the purposes of the table above, nonperforming consumer and residential loans are those loans on nonaccrual status or are 90 days or more past due and still accruing interest.

For the allowance calculation, we use an internally developed system of five credit quality indicators to rate the credit worthiness of each commercial loan defined as follows:

1) Satisfactory - "Satisfactory" borrowers have acceptable financial condition with satisfactory record of earnings and sufficient historical and projected cash flow to service the debt.  Borrowers have satisfactory repayment histories and primary and secondary sources of repayment can be clearly identified;

2) Special Mention - Loans in this category have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date.  "Special mention" assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.  Loans which might be assigned this credit quality indicator include loans to borrowers with deteriorating financial strength and/or earnings record and loans with potential for problems due to weakening economic or market conditions;

3) Substandard - Loans classified as “substandard” are inadequately protected by the current sound net worth or paying capacity of the borrower or the collateral pledged, if any.  Loans in this category have well defined weaknesses that jeopardize the repayment.  They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.  “Substandard” loans may include loans which are likely to require liquidation of collateral to effect repayment, and other loans where character or ability to repay has become suspect. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard;

4) Doubtful - Loans classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values highly questionable and improbable.  Although possibility of loss is extremely high, classification of these loans as “loss” has been deferred due to specific pending factors or events which may strengthen the value (i.e. possibility of additional collateral, injection of capital, collateral liquidation, debt restructure, economic recovery, etc).  Loans classified as “doubtful” need to be placed on non-accrual; and

5) Loss - Loans classified as “loss” are considered uncollectible with collateral of such little value that their continuance as bankable assets is not warranted.  As of the date of the balance sheet, all loans in this category have been charged-off to the allowance for loan losses.  

Commercial loans are generally evaluated on an annual basis depending on the size and complexity of the loan relationship, unless the credit related quality indicator falls to a level of "special mention" or below, when the loan is evaluated quarterly.  The credit quality indicator is one of the factors used in assessing the level of incurred risk of loss in our commercial related loan portfolios.

Impaired Loans

The following table presents information on impaired loans based on whether the impaired loan has a recorded related allowance or has no recorded related allowance:

Impaired Loans
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Recorded Investment:
With No Related Allowance	$	38	$	389	$	101	$	2,417	$	2,945
With a Related Allowance	—		—		—		—		—
Unpaid Principal Balance:
With No Related Allowance	424		2		101		2,416		2,943
With a Related Allowance	—		—		—		—		—
December 31, 2018
Recorded Investment:
With No Related Allowance	$	430	$	793	$	101	$	1,605	$	2,929
With a Related Allowance	—		—		—		294		294
Unpaid Principal Balance:
With No Related Allowance	429		793		100		1,606		2,928
With a Related Allowance	—		—		—		293		293
March 31, 2018
Recorded Investment:
With No Related Allowance	$	—	$	8	$	90	$	1,276	$	1,374
With a Related Allowance	483		783		—		356		1,622
Unpaid Principal Balance:
With No Related Allowance	—		8		90		1,279		$	1,377
With a Related Allowance	489		807		—		286		1,582
For the Quarter Ended:
March 31, 2019
Average Recorded Balance:
With No Related Allowance	$	234	$	591	$	101	$	2,011	$	2,937
With a Related Allowance	—		—		—		147		147
Interest Income Recognized:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—
Cash Basis Income:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—
March 31, 2018
Average Recorded Balance:
With No Related Allowance	$	—	$	395	$	92	$	1,273	$	1,760
With a Related Allowance	484		754		—		345		1,583
Interest Income Recognized:
With No Related Allowance	—		—		—		16		16
With a Related Allowance	—		—		—		24		24
Cash Basis Income:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—

At March 31, 2019, December 31, 2018 and March 31, 2018, all impaired loans were considered to be collateral dependent and were therefore evaluated for impairment based on the fair value of collateral less estimated cost to sell. Interest income recognized in the table above, represents income earned after the loans became impaired and includes restructured loans in compliance with their modified terms and nonaccrual loans where we have recognized interest income on a cash basis.

Loans Modified in Trouble Debt Restructurings

The following table presents information on loans modified in trouble debt restructurings during the periods indicated.

Loans Modified in Trouble Debt Restructurings During the Period
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
For the Quarter Ended:
March 31, 2019
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	13	$	—	$	13
Post-Modification Outstanding Recorded Investment	—		—		13		—		13
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2018
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	3	$	—	$	3
Post-Modification Outstanding Recorded Investment	—		—		3		—		3
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

In general, loans requiring modification are restructured to accommodate the projected cash-flows of the borrower. Such modifications may involve a reduction of the interest rate, a significant deferral of payments or forgiveness of a portion of the outstanding principal balance. As indicated in the table above, no loans modified during the preceding twelve months subsequently defaulted as of March 31, 2019.

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Guarantees

3 Months Ended

Mar. 31, 2019

Guarantees [Abstract]

Guarantees

GUARANTEES (In Thousands)

The following table presents the notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit as of March 31, 2019, December 31, 2018 and March 31, 2018:

Commitments to Extend Credit and Letters of Credit
	March 31, 2019		December 31, 2018		March 31, 2018
Notional Amount:
Commitments to Extend Credit	$	310,749	$	321,143	$	328,774
Standby Letters of Credit	4,431		4,466		3,584
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	20		12		24

Arrow is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Commitments to extend credit include home equity lines of credit, commitments for residential and commercial construction loans and other personal and commercial lines of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  The contract or notional amounts of those instruments reflect the extent of the involvement Arrow has in particular classes of financial instruments.

Arrow's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments.  Arrow uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are not expected to be fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Arrow evaluates each customer's creditworthiness on a case-by-case basis.  Home equity lines of credit are secured by residential real estate.  Construction lines of credit are secured by underlying real estate.  For other lines of credit, the amount of collateral obtained, if deemed necessary by Arrow upon extension of credit, is based on management's credit evaluation of the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.  Most of the commitments are variable rate instruments.

Arrow does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.

Arrow has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party.  Standby letters of credit generally arise in connection with commercial lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit at March 31, 2019, December 31, 2018 and March 31, 2018 represent the maximum potential future payments Arrow could be required to make.  Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements.  Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Company policies governing loan collateral apply to standby letters of credit at the time of credit extension.  Loan-to-value ratios will generally range from 50% for movable assets, such as inventory, to 100% for liquid assets, such as bank CD's.  Fees for standby letters of credit range from 1% to 3% of the notional amount.  Fees are collected upfront and amortized over the life of the commitment. The carrying amount and fair value of Arrow's standby letters of credit at March 31, 2019, December 31, 2018 and March 31, 2018, were insignificant.  The fair value of standby letters of credit is based on the fees currently charged for similar agreements or the cost to terminate the arrangement with the counterparties.

The fair value of commitments to extend credit is determined by estimating the fees to enter into similar agreements, taking into account the remaining terms and present creditworthiness of the counterparties, and for fixed rate loan commitments, the difference between the current and committed interest rates.  Arrow provides several types of commercial lines of credit and standby letters of credit to its commercial customers.  The pricing of these services is not isolated as Arrow considers the customer's complete deposit and borrowing relationship in pricing individual products and services.  The commitments to extend credit also include commitments under home equity lines of credit, for which Arrow charges no fee.  The carrying value and fair value of commitments to extend credit are not material and Arrow does not expect to incur any material loss as a result of these commitments.

In the normal course of business, Arrow and its subsidiary banks become involved in a variety of routine legal proceedings.  At present, there are no legal proceedings pending or threatened, which in the opinion of management and counsel, would result in a material loss to Arrow.

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Comprehensive Income

3 Months Ended

Mar. 31, 2019

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Comprehensive Income

COMPREHENSIVE INCOME (In Thousands)

The following table presents the components of other comprehensive income for the three-month periods endedMarch 31, 2019 and 2018:

Schedule of Comprehensive Income
	Three Months Ended March 31,
				Tax
	Before-Tax			(Expense)			Net-of-Tax
	Amount			Benefit			Amount
2019
Net Unrealized Securities Holding Gains on Securities Available-for-Sale Arising During the Period	2,788			$	(708	)	2,080
Amortization of Net Retirement Plan Actuarial Loss	163			(42		)	121
Amortization of Net Retirement Plan Prior Service Cost	56			(14		)	42
Other Comprehensive Income	$	3,007		$	(764	)	$	2,243
2018
Net Unrealized Securities Holding Losses on Securities Available-for-Sale Arising During the Period	(3,332		)	$	847		(2,485		)
Amortization of Net Retirement Plan Actuarial Loss	60			(14		)	46
Accretion of Net Retirement Plan Prior Service Credit	(1		)	—			(1		)
Other Comprehensive Loss	$	(3,273	)	$	833		$	(2,440	)

The following table presents the changes in accumulated other comprehensive income by component:

Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)
	Unrealized			Defined Benefit Plan Items
	Gains and
	Losses on						Net Prior
	Available-for-			Net Gain			Service
	Sale Securities			(Loss)			(Cost) Credit			Total
For the Quarter-To-Date periods ended:
December 31, 2018	$	(3,697	)	$	(8,971	)	$	(1,142	)	$	(13,810	)
Other comprehensive income before reclassifications	2,080			—			—			2,080
Amounts reclassified from accumulated other comprehensive income				121			42			163
Net current-period other comprehensive income	2,080			121			42			2,243
March 31, 2019	$	(1,617	)	$	(8,850	)	$	(1,100	)	$	(11,567	)
December 31, 2017	$	(1,250	)	$	(6,380	)	$	(884	)	$	(8,514	)
Other comprehensive loss before reclassifications	(2,485		)	—			—			(2,485		)
Amounts reclassified from accumulated other comprehensive loss	—			46			(1		)	45
Net current-period other comprehensive income (loss)	(2,485		)	46			(1		)	(2,440		)
Reclassification due to the adoption of ASU 2016-01	(331		)							(331		)
March 31, 2018	$	(4,066	)	$	(6,334	)	$	(885	)	$	(11,285	)

(1) All amounts are net of tax.

The following table presents the reclassifications out of accumulated other comprehensive income:

Reclassifications Out of Accumulated Other Comprehensive Income
	Amounts Reclassified
Details about Accumulated Other	from Accumulated Other				Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income				Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2019
Amortization of defined benefit pension items:
Prior-service costs	$	(56	)	(1)	Salaries and Employee Benefits
Actuarial gains/(losses)	(163		)	(1)	Salaries and Employee Benefits
	(219		)		Total before Tax
	56				Provision for Income Taxes
	$	(163	)		Net of Tax
Total reclassifications for the period	$	(163	)		Net of Tax
March 31, 2018
Amortization of defined benefit pension items:
Prior-service costs	$	(1	)	(1)	Salaries and Employee Benefits
Actuarial gains/(losses)	60			(1)	Salaries and Employee Benefits
	59				Total before Tax
	(14		)		Provision for Income Taxes
	$	45			Net of Tax
Total reclassifications for the period	$	45			Net of Tax

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION (Dollars In Thousands, Except Share and Per Share Amounts)

Arrow has established three stock-based compensation plans: an Incentive and Non-qualified Stock Option Plan (Long Term Incentive Plan), an Employee Stock Purchase Plan (ESPP) and an Employee Stock Ownership Plan (ESOP). All share and per share data have been adjusted for the September 27, 20183% stock dividend.

Long Term Incentive Plan

The Long Term Incentive Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, performance units and performance shares. The Compensation Committee of the Board of Directors administers the Long Term Incentive Plan.

Stock Options - Options may be granted at a price no less than the greater of the par value or fair market value of such shares on the date on which such option is granted, and generally expire ten years from the date of grant.  The options usually vest over a four-year period.

The following table summarizes information about stock option activity for the year to date period ended March 31, 2019.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2019	284,522			$	25.67
Granted	52,000			31.71
Exercised	(26,135		)	20.46
Forfeited	(5,797		)	21.12
Outstanding at March 31, 2019	304,590			27.24
Vested at Period-End	183,685			24.34
Expected to Vest	120,905			31.63
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	5.75
Fair Value Assumptions:
Dividend Yield	3.26		%
Expected Volatility	22.58		%
Risk Free Interest Rate	2.63		%
Expected Lives (in years)	8.68

The following table presents information on the amounts expensed related to stock options for the periods ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019		2018
Amount expensed	$	79	$	83

Restricted Stock Units - The Company grants restricted stock units which gives the recipient the right to receive shares of Company stock upon vesting. The fair value of each restricted stock unit is the market value of Company stock on the date of grant. 100% of the restricted stock unit awards vest three years from the grant date. Once vested, the restricted stock units become vested units. Vested units settle upon retirement of the recipient. Unvested restricted stock unit awards will generally be forfeited if the recipient ceases to be employed by the Company, with limited exceptions.

The following table summarizes information about restricted stock unit activity for the period ended March 31, 2019.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2019	3,377	$	32.57
Granted	3,901	31.71
Non-vested at March 31, 2019	7,278	32.11

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019		2018
Amount expensed	$	16	$	6

Employee Stock Purchase Plan

Arrow sponsors an ESPP under which employees purchase Arrow's common stock at a 5% discount below market price. Under current accounting guidance, a stock purchase plan with a discount of 5% or less is not considered a compensatory plan.

Employee Stock Ownership Plan

Arrow maintains an employee stock ownership plan ("ESOP").  Substantially all employees of Arrow and its subsidiaries are eligible to participate upon satisfaction of applicable service requirements.  The ESOP borrowed funds from one of Arrow’s subsidiary banks to purchase outstanding shares of Arrow’s common stock.  The notes require annual payments of principal and interest through 2019.  As the debt is repaid, shares are released from collateral based on the proportion of debt paid to total debt outstanding for the year and allocated to active employees.  In addition, the Company makes additional cash contributions to the Plan each year.

Shares pledged as collateral are reported as unallocated ESOP shares in stockholders' equity. As shares are released from collateral, Arrow reports compensation expense equal to the current average market price of the shares, and the shares become outstanding for earnings per share computations.

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Retirement Benefit Plans

3 Months Ended

Mar. 31, 2019

Defined Benefit Plan [Abstract]

Retirement Benefit Plans

RETIREMENT BENEFIT PLANS (Dollars in Thousands)

Arrow sponsors qualified and nonqualified defined benefit pension plans and other postretirement benefit plans for its employees. Arrow maintains a non-contributory pension plan, which covers substantially all employees.  Effective December 1, 2002, all active participants in the qualified defined benefit pension plan were given a one-time irrevocable election to continue participating in the traditional plan design, for which benefits were based on years of service and the participant’s final compensation (as defined), or to begin participating in the new cash balance plan design.  All employees who participate in the plan after December 1, 2002 automatically participate in the cash balance plan design.  The interest credits under the cash balance plan are based on the 30-year U.S. Treasury rate in effect for November of the prior year.  The service credits under the cash balance plan are equal to 6.0% of eligible salaries for employees who become participants on or after January 1, 2003.  For employees in the plan prior to January 1, 2003, the service credits are scaled based on the age of the participant, and range from 6.0% to 12.0%.  The funding policy is to contribute up to the maximum amount that can be deducted for federal income tax purposes and to make all payments required under ERISA.  Arrow also maintains a supplemental non-qualified unfunded retirement plan to provide eligible employees of Arrow and its subsidiaries with benefits in excess of qualified plan limits imposed by federal tax law.

Arrow has multiple non-pension postretirement benefit plans.  The health care, dental and life insurance plans are contributory, with participants’ contributions adjusted annually.  Arrow’s policy is to fund the cost of postretirement benefits based on the current cost of the underlying policies.  However, the health care plan provision for automatic increases of Company contributions each year is based on the increase in inflation and is limited to a maximum of 5%.  

As of December 31, 2018, Arrow updated its mortality assumption to the RP-2014 Mortality Table for annuitants and non-annuitants with projected generational mortality improvements using Scale MP-2018 for the pension plans and the RPH-2014 Mortality Table for annuitants and non-annuitants with projected generational mortality improvements using Scale MP-2018 for the retiree health plan. The revised assumptions resulted in a decrease in postretirement liabilities. As of December 31, 2018, Arrow also updated its mortality assumption for annuity/lump sum conversions for the pension plans to the 2019 IRC Section 417(e)(3)B) applicable mortality table. The revised assumption results in an increase in postretirement liabilities for the pension plans.

The interest rates used in determining the present value of a lump sum payment/annuitizing cash balance accounts were changed to the segment rates in effect for the January 1, 2019 plan year (3.43%, 4.46%, 4.88%) as of December 31, 2018. This change was made to more accurately reflect current expected long-term interest rates and resulted in an increase in liability for the Arrow Financial Corporation Employees' Pension Plan and Trust and the Arrow Financial Corporation Select Executive Retirement Plan.

The following tables provide the components of net periodic benefit costs for the three-month periods ended March 31, 2019 and 2018.

				Select
	Employees'			Executive		Postretirement
	Pension			Retirement		Benefit
	Plan			Plan		Plans
Net Periodic Benefit Cost
For the Three Months Ended March 31, 2019:
Service Cost 1	$	399		$	97	$	30
Interest Cost 2	397			52		89
Expected Return on Plan Assets 2	(770		)	—		—
Amortization of Prior Service (Credit) Cost 2	17			14		25
Amortization of Net Loss 2	153			27		(17		)
Net Periodic (Benefit) Cost	$	196		$	190	$	127
Plan Contributions During the Period	$	—		$	116	$	37
For the Three Months Ended March 31, 2018:
Service Cost 1	$	348		$	11	$	33
Interest Cost 2	525			50		99
Expected Return on Plan Assets 2	(785		)	—		—
Amortization of Prior Service (Credit) Cost 2	(12		)	14		(3		)
Amortization of Net Loss 2	33			33		(6		)
Net Periodic (Benefit) Cost	$	109		$	108	$	123
Plan Contributions During the Period	$	—		$	116	$	17

Footnotes:

1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income

2. Included in Other Operating Expense on the Consolidated Statements of Income

We are not required to make a contribution to the qualified pension plan in 2019, and currently, we do not expect to make additional contributions in 2019. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Common Share

EARNINGS PER COMMON SHARE (In Thousands, Except Per Share Amounts)

The following table presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per common share (“EPS”) for periods ended March 31, 2019 and 2018.  All share and per share amounts have been adjusted for the September 27, 2018, 3% stock dividend.

Earnings Per Share
	Quarterly Period Ended:
	March 31, 2019		March 31, 2018
Earnings Per Share - Basic:
Net Income	$	8,734	$	8,531
Weighted Average Shares - Basic	14,469		14,354
Earnings Per Share - Basic	$	0.60	$	0.59
Earnings Per Share - Diluted:
Net Income	$	8,734	$	8,531
Weighted Average Shares - Basic	14,469		14,354
Dilutive Average Shares Attributable to Stock Options	51		82
Weighted Average Shares - Diluted	14,520		14,436
Earnings Per Share - Diluted	$	0.60	$	0.59

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Fair Values

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

FAIR VALUES (Dollars In Thousands)

FASB ASC Subtopic 820-10 defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. We do not have any nonfinancial assets or liabilities measured at fair value on a recurring basis. The only assets or liabilities that Arrow measured at fair value on a recurring basis at March 31, 2019, December 31, 2018 and March 31, 2018 were securities available-for-sale and equity securities . Arrow held no securities or liabilities for trading on such dates.

The table below presents the financial instrument's fair value and the amounts within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement:

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value of Assets and Liabilities Measured on a Recurring Basis:
March 31, 2019
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	35,383	$	—	$	35,383	$	—
State and Municipal Obligations	1,116		—		1,116		—
Mortgage-Backed Securities	261,513		—		261,513		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	298,812		—		298,812		—
Equity Securities	1,850		—		1,850		—
Total Securities Measured on a Recurring Basis	$	300,662	$	—	$	300,662	$	—
December 31, 2018
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	46,765	$	—	$	46,765	$	—
State and Municipal Obligations	1,195		—		1,195		—
Mortgage-Backed Securities	268,775		—		268,775		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	317,535				317,535
Equity Securities	1,774		—		1,774		—
Total Securities Measured on a Recurring Basis	$	319,309	$	—	$	319,309	$	—
March 31, 2018
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	59,657	$	—	$	59,657	$	—
State and Municipal Obligations	9,743		—		9,743		—
Mortgage-Backed Securities	235,389		—		235,389		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	305,589				305,589
Equity Securities	1,579		—		1,579		—
Total Securities Measured on a Recurring Basis	$	307,168	$	—	$	307,168	$	—

	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Life-to-Date Gains (Losses)
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
March 31, 2019
Collateral Dependent Impaired Loans	$	684	$	—	$	—	$	684	$	—
Other Real Estate Owned and Repossessed Assets, Net	1,445		—		—		1,445		(826		)
December 31, 2018
Collateral Dependent Impaired Loans	$	—	$	—	$	—	$	—	$	—
Other Real Estate Owned and Repossessed Assets, Net	1,260		—		—		1,260		(669		)
March 31, 2018
Collateral Dependent Impaired Loans	$	1,295	$	—	$	—	$	1,295	$	(58	)
Other Real Estate Owned and Repossessed Assets, Net	1,647		—		—		1,647		(582		)

We determine the fair value of financial instruments under the following hierarchy:

• Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

• Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

• Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The Company determined that the previously reported U.S. Government & Agency Obligations of $59.7 million were incorrectly classified as Level 1 securities, instead of the correct classification as Level 2 securities. The Company corrected the fair value leveling disclosure to reflect the correction of this classification in the quarter ended March 31, 2018. This error had no impact on the fair value of U.S. Government & Agency Obligations or the total securities available-for-sale.

There were no transfers between Levels 1, 2 and 3 for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018.

Fair Value Methodology for Assets and Liabilities Measured on a Recurring Basis

The fair value of Level 1 securities available-for-sale are based on unadjusted, quoted market prices from exchanges in active markets. The fair value of Level 2 securities available-for-sale are based on an independent bond and equity pricing service for identical assets or significantly similar securities and an independent equity pricing service for equity securities not actively traded.  The pricing services use a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.  

Fair Value Methodology for Assets and Liabilities Measured on a Nonrecurring Basis

The fair value of collateral dependent impaired loans and other real estate owned was based on third-party appraisals less estimated cost to sell. The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. Other assets which might have been included in this table include mortgage servicing rights, goodwill and other intangible assets. Arrow evaluates each of these assets for impairment on an annual basis, with no impairment recognized for these assets at March 31, 2019, December 31, 2018 and March 31, 2018.

Fair Value Methodology for Financial Instruments Not Measured on a Recurring or Nonrecurring Basis

The fair value for securities held-to-maturity is determined utilizing an independent bond pricing service for identical assets or significantly similar securities.  The pricing service uses a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.

ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities" requires that the fair value for loans must be disclosed using the "exit price" notion which is a reasonable estimate of what another party might pay in an orderly transaction. Fair values for loans are calculated for portfolios of loans with similar financial characteristics.  Loans are segregated by type such as commercial, commercial real estate, residential mortgage, indirect auto and other consumer loans.  Each loan category is further segmented into fixed and adjustable interest rate terms and by performing and nonperforming categories.  The fair value of performing loans is calculated by determining the estimated future cash flow, which is the contractual cash flow adjusted for estimated prepayments. The discount rate is determined by starting with current market yields, and first adjusting for a liquidity premium. This premium is separately determined for residential real estate loans vs. other loans. Then a credit loss component is determined utilizing the credit loss assumptions used in the allowance for loan and lease loss model. Finally, a discount spread is applied separately for consumer loans vs. commercial loans based on market information and utilization of the Swap Curve.  Fair value for nonperforming loans is generally based on recent external appraisals.  If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows.  Assumptions regarding credit risk, cash flows and discount rates are judgmentally determined using available market information and specific borrower information.

The fair value of time deposits is based on the discounted value of contractual cash flows, except that the fair value is limited to the extent that the customer could redeem the certificate after imposition of a premature withdrawal penalty.  The discount rates are estimated using the Federal Home Loan Bank of New York ("FHLBNY") yield curve, which is considered representative of Arrow’s time deposit rates. The fair value of all other deposits is equal to the carrying value.

The fair value of FHLBNY advances is estimated based on the discounted value of contractual cash flows.  The discount rate is estimated using current rates on FHLBNY advances with similar maturities and call features.

The book value of the outstanding trust preferred securities (Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts) are considered to approximate fair value since the interest rates are variable (indexed to LIBOR) and Arrow is well-capitalized.

Fair Value by Balance Sheet Grouping

The following table presents a summary of the carrying amount, the fair value or an amount approximating fair value and the fair value hierarchy of Arrow’s financial instruments:

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2019
Cash and Cash Equivalents	$	61,229	$	61,229	$	61,229	$	—	$	—
Securities Available-for-Sale	298,812		298,812		—		298,812		—
Securities Held-to-Maturity	279,400		280,414		—		280,414		—
Equity Securities	1,850		1,850		—		1,850		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	7,878		7,878		—		7,878		—
Net Loans	2,214,835		2,164,298		—		—		2,164,298
Accrued Interest Receivable	8,180		8,180		—		8,180		—
Deposits	2,490,097		2,484,479		—		2,484,479		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	58,407		58,407		—		58,407		—
Federal Home Loan Bank Overnight Advances	74,500		74,500		—		74,500		—
Federal Home Loan Bank Term Advances	35,000		34,805		—		34,805		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	737		737		—		737		—
December 31, 2018
Cash and Cash Equivalents	$	84,239	$	84,239	$	84,239	$	—	$	—
Securities Available-for-Sale	317,535		317,535		—		317,535		—
Securities Held-to-Maturity	283,476		280,338		—		280,338		—
Equity Securities	1,774		1,774				1,774
Federal Home Loan Bank and Federal   Reserve Bank Stock	15,506		15,506		—		15,506		—
Net Loans	2,176,019		2,114,372		—		—		2,114,372
Accrued Interest Receivable	7,035		7,035		—		7,035		—
Deposits	2,345,584		2,338,410		—		2,338,410		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	54,659		54,659		—		54,659		—
Federal Home Loan Bank Overnight Advances	234,000		234,000		—		234,000		—
Federal Home Loan Bank Term Advances	45,000		44,652		—		44,652		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	570		570		—		570		—
March 31, 2018
Cash and Cash Equivalents	$	100,272	$	100,272	$	100,272	$	—	$	—
Securities Available-for-Sale	305,589		305,589		—		305,589		—
Securities Held-to-Maturity	330,124		324,937		—		324,937		—
Equity Securities	1,579		1,579		—		1,579
Federal Home Loan Bank and Federal   Reserve Bank Stock	4,780		4,780		—		4,780		—
Net Loans	1,973,980		1,915,978		—		—		1,915,978
Accrued Interest Receivable	7,662		7,692		—		7,692		—
Deposits	2,411,273		2,402,122		—		2,402,122		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	74,957		74,957		—		74,957		—
Federal Home Loan Bank Term Advances	45,000		44,484		—		44,484		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	361		361		—		361		—

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Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

LEASES (Dollars In Thousands)

The Company is a lessee in its leases, which are mainly for financial services locations in addition to leases for corporate vehicles. These leases generally require the Company to pay third-party expenses on behalf of the Lessor, which are referred to as variable payments. Under some leases, the Company pays the variable payments to the lessor, and in other leases, the Company pays the variable payments directly to the applicable third party. None of the Company's current leases include any residual value guarantees or any subleases, and there are no significant rights and obligations of the Company for leases that have not commenced as of the reporting date.

Arrow leases five of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves on both the boards of Arrow and Saratoga National Bank and Trust Company.

The following includes quantitative data related to the Company's leases as of March 31, 2019:

Finance Lease Amounts:	Classification
Right-of-use Assets	Premises and Equipment, Net	$	2,922
Lease Liabilities	Finance Leases	2,946
Operating Lease Amounts:
Right-of-use Assets	Other Assets	$	5,587
Lease Liabilities	Other Liabilities	5,639
Lease Cost:
Finance Lease Cost:
Amortization of Right-of-use assets		$	17
Interest on Lease Liabilities		15
Operating Lease Cost		173
Short-term Lease Cost		33
Variable Lease Cost		56
Total Lease Cost		$	294
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	15
Operating Outgoing Cash Flows From Operating Leases		173
Financing Outgoing Cash Flows From Finance Leases		4
Right-of-use Assets Obtained In Exchange For New Finance Lease Liabilities		2,939
Right-of-use Assets Obtained In Exchange For New Operating Lease Liabilities		5,725
Weighted-average Remaining Lease Term—Finance Leases (Yrs.)		26.91
Weighted-average Remaining Lease Term—Operating Leases (Yrs.)		14.63
Weighted-average Discount Rate—Finance Leases %		3.82		%
Weighted-average Discount Rate—Operating Leases %		3.50		%

Future Lease Payments at March 31, 2019 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2020	$	769	$	143
3/31/2021	695		146
3/31/2022	557		149
3/31/2023	479		149
3/31/2024	462		149
Thereafter	4,346		4,200
Total Undiscounted Cash Flows	$	7,308	$	4,936
Less: Net Present Value Adjustment	1,669		1,990
Lease Liability	$	5,639	$	2,946

Arrow adopted ASU 2016-02 using a modified retrospective adoption at January 1. 2019 as discussed in Note 1. The following disclosure is provided for the period prior to the adoption.

Future minimum lease payments on operating leases at December 31, 2018 were as follows:

	Operating Leases
2019	$	857
2020	626
2021	497
2022	357
2023	286
2024 and beyond	2,776
Total Minimum Lease Payments	$	5,399

Leases

LEASES (Dollars In Thousands)

The Company is a lessee in its leases, which are mainly for financial services locations in addition to leases for corporate vehicles. These leases generally require the Company to pay third-party expenses on behalf of the Lessor, which are referred to as variable payments. Under some leases, the Company pays the variable payments to the lessor, and in other leases, the Company pays the variable payments directly to the applicable third party. None of the Company's current leases include any residual value guarantees or any subleases, and there are no significant rights and obligations of the Company for leases that have not commenced as of the reporting date.

Arrow leases five of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves on both the boards of Arrow and Saratoga National Bank and Trust Company.

The following includes quantitative data related to the Company's leases as of March 31, 2019:

Finance Lease Amounts:	Classification
Right-of-use Assets	Premises and Equipment, Net	$	2,922
Lease Liabilities	Finance Leases	2,946
Operating Lease Amounts:
Right-of-use Assets	Other Assets	$	5,587
Lease Liabilities	Other Liabilities	5,639
Lease Cost:
Finance Lease Cost:
Amortization of Right-of-use assets		$	17
Interest on Lease Liabilities		15
Operating Lease Cost		173
Short-term Lease Cost		33
Variable Lease Cost		56
Total Lease Cost		$	294
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	15
Operating Outgoing Cash Flows From Operating Leases		173
Financing Outgoing Cash Flows From Finance Leases		4
Right-of-use Assets Obtained In Exchange For New Finance Lease Liabilities		2,939
Right-of-use Assets Obtained In Exchange For New Operating Lease Liabilities		5,725
Weighted-average Remaining Lease Term—Finance Leases (Yrs.)		26.91
Weighted-average Remaining Lease Term—Operating Leases (Yrs.)		14.63
Weighted-average Discount Rate—Finance Leases %		3.82		%
Weighted-average Discount Rate—Operating Leases %		3.50		%

Future Lease Payments at March 31, 2019 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2020	$	769	$	143
3/31/2021	695		146
3/31/2022	557		149
3/31/2023	479		149
3/31/2024	462		149
Thereafter	4,346		4,200
Total Undiscounted Cash Flows	$	7,308	$	4,936
Less: Net Present Value Adjustment	1,669		1,990
Lease Liability	$	5,639	$	2,946

Arrow adopted ASU 2016-02 using a modified retrospective adoption at January 1. 2019 as discussed in Note 1. The following disclosure is provided for the period prior to the adoption.

Future minimum lease payments on operating leases at December 31, 2018 were as follows:

	Operating Leases
2019	$	857
2020	626
2021	497
2022	357
2023	286
2024 and beyond	2,776
Total Minimum Lease Payments	$	5,399

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Accounting Policies Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Management's Use of Estimates

Management’s Use of Estimates -The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.  Our most significant estimate is the allowance for loan losses. Other estimates include the evaluation of other-than-temporary impairment of investment securities, goodwill impairment, pension and other postretirement liabilities and an analysis of a need for a valuation allowance for deferred tax assets. Actual results could differ from those estimates.

A material estimate that is particularly susceptible to significant change in the near term is the allowance for loan losses.  In connection with the determination of the allowance for loan losses, management obtains appraisals for properties.  The allowance for loan losses is management’s best estimate of probable loan losses incurred as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for loan losses may be necessary based on changes in economic conditions.  

Recently Adopted and Recently Issued Accounting Standards

Recently Adopted and Recently Issued Accounting Standards

The following accounting standards have been adopted in the first three months of 2019:

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-08 "Receivables-Nonrefundable Fees and Other Costs" which amends the amortization period for certain purchased callable debt securities held at a premium. This shortens the amortization period for the premium to the earliest call date. Under United States generally accepted accounting principles (GAAP), entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. For Arrow, the standard was effective in the first quarter of 2019 and did not have a material impact on its financial position or the results of operations in the current quarter or in future periods.

In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842) which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): "Land Easement Practical Expedient for Transition to Topic 842". In July 2018, the FASB issued ASU 2018-10 "Codification Improvements to Topic 842, Leases" which provided clarification on certain components of the original guidance, including that the rate implicit in the lease cannot be less than zero. Also in July 2018, the FASB issued ASU 2018-11 "Targeted Improvements" to Leases (Topic 842) which amends the original guidance to allow for the adoption of this standard to be applied retrospectively at the beginning of the period of adoption, which was January 1, 2019 for Arrow, without revising prior comparative periods.

The Company adopted this standard as of January 1, 2019 using the effective date method, also known as the modified retrospective method, with the cumulative-effect adjustment recorded at the beginning of the period of adoption. As a result of this adoption, the Company's assets increased $7.9 million and the Company's liabilities increased $8.0 million with no adjustment required to retained earnings and no material impact to the Consolidated Statements of Income.

Practical Expedients Elected At Adoption: The package of practical expedients were elected that did not require the Company to reassess whether an existing contract contains a lease, to reassess existing leases between operating leases and finance leases and to not reassess initial direct costs for any existing leases. These practical expedients were applied together. In addition, the Company also elected a practical expedient, which was required to be applied consistently to all of its leases, to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and in assessing impairment in the right-of-use asset.

Accounting Policy Elections: The Company also made two accounting policy elections related to the adoption of this standard. The first is a determination not to separate lease and non-lease components and account for the resulting combined component as a single lease component. The second election is to account for short-term leases, those leases with a "lease term" of twelve months or less, like an operating lease under current GAAP.

Determination of the Discount Rate to Calculate the Lease Liability: Since the Company was unable to determine the rate implicit in its leases, the secured borrowing rate from the Federal Home Loan Bank of New York as of the January 1, 2019 adoption date was utilized for existing leases for the effective lease term beginning with the effective date of each existing lease. The expected expiration date of each lease was determined on a lease-by-lease basis based on the availability of renewal options in the lease contracts, the amount of leasehold improvements at each location, total branch deposits at each location in addition to the feasibility of growth potential at each location. A similar process is followed to determine the expected lease expiration date for all leases executed subsequent to the January 1, 2019 adoption date.

The following accounting standards have been issued and will become effective for the Company at a future date:

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses" (Topic 326) which will change the way financial entities measure expected credit losses for financial assets, primarily loans. Under this ASU, the "incurred loss" model will be replaced with an "expected loss" model which will recognize losses over the life of the instrument and requires consideration of a broader range of reasonable and supportable information. Currently, credit losses on available-for-sale securities reduce the carrying value of the instrument and cannot be reversed. Under this ASU, the amount of the credit loss is carried as a valuation allowance and can be reversed. The standard also requires expanded credit quality disclosures. For Arrow, the standard is effective for the first quarter of 2020 and early adoption is allowed in 2019. The Company plans on adopting the standard in the first quarter of 2020, in order to maximize the accumulation of data needed to calculate the new current expected credit loss (CECL) methodologies. The ASU describes several acceptable methodologies for calculating expected losses on a loan or a pool of loans and requires additional disclosures. The initial adjustment will not be reported in earnings, but as the cumulative effect of a change in accounting principle. The FASB’s Transition Research Group for credit losses still has several outstanding unresolved questions, some of which may have a significant impact on CECL calculations. The Company has continued its implementation efforts with the development and testing of various methods within its core model, and has tentatively identified the discounted cash flow method for determining losses for the commercial loan portfolios and the residential real estate portfolios, and the vintage method for the consumer indirect loan portfolio. Based on further testing, these methods may change prior to adoption. As a result of analyses performed, including the availability of future economic data, the Company plans to utilize a two-year reasonable and supportable forecast period and is in the process of identifying which economic data best correlates with expected loan losses. The Company continues to monitor new regulatory guidance and is updating relevant internal controls and processes. The adoption of this standard will likely have the effect of increasing the allowance for loan and lease losses and reducing shareholders' equity, the extent of which will depend upon the nature and characteristics of the Company's loan portfolio and economic conditions and forecasts at the adoption date. The Company expects to remain a well-capitalized financial institution under current regulatory calculations.     

In August 2018, the FASB issued ASU 2018-13 "Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement" which as part of its disclosure framework, the FASB has eliminated, amended and added disclosure requirements for fair value measurements. The following disclosure requirements were eliminated: Amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy of the timing of transfers between levels of the fair value hierarchy; the valuation processes for Level 3 fair value measurements. For public companies such as Arrow, the following new disclosures will be required: Changes in unrealized gains and losses for the period included in other comprehensive income (OCI); the range and weighted average of significant unobservable inputs used; alternatively, a company may choose to disclose other quantitative information if it determines that it is a more reasonable and rational method that reflects the distribution of unobservable inputs used. For Arrow, the standard becomes effective in the first quarter of 2020. The Company does not expect that the adoption of this change in fair value disclosure will have a material impact on its financial position or the results of operations in periods subsequent to its adoption.

In August 2018, the FASB issued ASU 2018-14 "Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans" which applies to all companies that provide defined benefit pension or other postretirement benefit plans for their employees. Certain disclosure requirements have been eliminated such as reporting the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next year, and reporting the effects of a one-percentage-point change in the assumed healthcare cost trend rate on the aggregate of the service cost and interest cost components of net periodic benefit cost and on the benefit obligation for postretirement healthcare benefits. New required disclosures for reporting the weighted-average interest rate used to credit cash balance and similar plans that have a promised interest credit, the reasons for significant gains and losses affecting benefit obligations and other requirements for reporting aggregate information related to pension plans. For Arrow, the standard becomes effective at December 31, 2020. The Company does not expect that the adoption of this change affecting defined benefit plan disclosures will have a material impact on its financial position or the results of operations.

In August 2018, the FASB issued ASU 2018-15 "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" which will require companies to defer potentially significant, specified implementation costs incurred in a cloud computing arrangement that are often expensed under current US GAAP. For Arrow, the standard becomes effective at January 1, 2020. The Company is in the process of assessing the impact of this new accounting standard on its financial position and the results of operations in periods subsequent to its adoption.

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Debt Securities, Available-For-Sale

The following table is the schedule of Available-For-Sale Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2019
Available-For-Sale Securities,   at Amortized Cost	$	35,519	$	1,114	$	263,347	$	1,000	$	300,980
Available-For-Sale Securities,   at Fair Value	35,383		1,116		261,513		800		298,812
Gross Unrealized Gains	—		2		657		—		659
Gross Unrealized Losses	136		—		2,491		200		2,827
Available-For-Sale Securities,   Pledged as Collateral									255,028
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	30,516	$	201	$	494	$	—	$	31,211
From 1 - 5 Years	5,003		433		125,267		—		130,703
From 5 - 10 Years	—		—		117,616		—		117,616
Over 10 Years	—		480		19,970		1,000		21,450
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	30,432	$	203	$	498	$	—	$	31,133
From 1 - 5 Years	4,951		433		124,175		—		129,559
From 5 - 10 Years	—		—		117,008		—		117,008
Over 10 Years	—		480		19,832		800		21,112
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	53,131	$	—	$	53,131
12 Months or Longer	35,383		—		155,108		800		191,291
Total	$	35,383	$	—	$	208,239	$	800	$	244,422
Number of Securities in a   Continuous Loss Position	7		—		80		1		88
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	258	$	—	$	258
12 Months or Longer	136		—		2,233		200		2,569
Total	$	136	$	—	$	2,491	$	200	$	2,827
Disaggregated Details:
US Treasury Obligations,   at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	35,519
US Agency Obligations, at Fair Value	35,383
US Government Agency   Securities, at Amortized Cost					$	70,358
US Government Agency   Securities, at Fair Value					70,034
Government Sponsored Entity   Securities, at Amortized Cost					192,989
Government Sponsored Entity Securities, at Fair Value					191,479

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
December 31, 2018
Available-For-Sale Securities,   at Amortized Cost	$	47,071	$	1,193	$	273,227	$	1,000	$	322,491
Available-For-Sale Securities,   at Fair Value	46,765		1,195		268,775		800		317,535
Gross Unrealized Gains	—		2		288		—		290
Gross Unrealized Losses	306		—		4,740		200		5,246
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									236,163
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	107,550	$	—	$	107,550
12 Months or Longer	46,765		—		124,627		800		172,192
Total	$	46,765	$	—	$	232,177	$	800	$	279,742
Number of Securities in a   Continuous Loss Position	10		—		86		1		97
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	841	$	—	$	841
12 Months or Longer	306		—		3,899		200		4,405
Total	$	306	$	—	$	4,740	$	200	$	5,246
Disaggregated Details:
US Treasury Obligations,   at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	47,071
US Agency Obligations, at Fair Value	46,765
US Government Agency   Securities, at Amortized Cost					$	72,095
US Government Agency   Securities, at Fair Value					71,800
Government Sponsored Entity   Securities, at Amortized Cost					201,132
Government Sponsored Entity Securities, at Fair Value					196,975

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2018
Available-For-Sale Securities,   at Amortized Cost	$	60,264	$	9,741	$	240,033	$	1,000	$	311,038
Available-For-Sale Securities,   at Fair Value	59,657		9,743		235,389		800		305,589
Gross Unrealized Gains	—		7		347		—		354
Gross Unrealized Losses	607		5		4,991		200		5,803
Available-For-Sale Securities,   Pledged as Collateral									229,857
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	17,128	$	7,421	$	112,078	$	—	$	136,627
12 Months or Longer	42,529		—		80,759		800		124,088
Total	$	59,657	$	7,421	$	192,837	$	800	$	260,715
Number of Securities in a   Continuous Loss Position	14		29		69		1		113
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	266	$	6	$	1,940	$	—	$	2,212
12 Months or Longer	341		—		3,050		200		3,591
Total	$	607	$	6	$	4,990	$	200	$	5,803
Disaggregated Details:
US Treasury Obligations, at Amortized Cost	$	—
US Treasury Obligations, at Fair Value	—
US Agency Obligations, at Amortized Cost	60,264
US Agency Obligations, at Fair Value	59,657
US Government Agency   Securities, at Amortized Cost					$	59,446
US Government Agency   Securities, at Fair Value					59,469
Government Sponsored Entity   Securities, at Amortized Cost					180,587
Government Sponsored Entity Securities, at Fair Value					175,920

Held-To-Maturity Securities

The following table is the schedule of Held-To-Maturity Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2019
Held-To-Maturity Securities,   at Amortized Cost	$	234,454	$	44,946	$	279,400
Held-To-Maturity Securities,   at Fair Value	235,576		44,838		280,414
Gross Unrealized Gains	1,695		97		1,792
Gross Unrealized Losses	573		205		778
Held-To-Maturity Securities,   Pledged as Collateral					265,465
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	25,205	$	—	$	25,205
From 1 - 5 Years	94,100		44,946		139,046
From 5 - 10 Years	112,788		—		112,788
Over 10 Years	2,361		—		2,361
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	25,244	$	—	$	25,244
From 1 - 5 Years	94,590		44,838		139,428
From 5 - 10 Years	113,343		—		113,343
Over 10 Years	2,399		—		2,399
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	71,450		26,021		97,471
Total	$	71,450	$	26,021	$	97,471
Number of Securities in a   Continuous Loss Position	193		29		222
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	573		205		778
Total	$	573	$	205	$	778
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	2,069
US Government Agency   Securities, at Fair Value			2,012
Government Sponsored Entity   Securities, at Amortized Cost			42,877
Government Sponsored Entity Securities, at Fair Value			42,826

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2018
Held-To-Maturity Securities,   at Amortized Cost	$	235,782	$	47,694	$	283,476
Held-To-Maturity Securities,   at Fair Value	233,359		46,979		280,338
Gross Unrealized Gains	486		—		486
Gross Unrealized Losses	2,909		715		3,624
Held-To-Maturity Securities,   Pledged as Collateral					266,341
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	32,093	$	33,309	$	65,402
12 Months or Longer	110,947		13,670		124,617
Total	$	143,040	$	46,979	$	190,019
Number of Securities in a   Continuous Loss Position	411		47		458
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	162	$	456	$	618
12 Months or Longer	2,747		259		3,006
Total	$	2,909	$	715	$	3,624
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	2,180
US Government Agency   Securities, at Fair Value			2,143
Government Sponsored Entity   Securities, at Amortized Cost			45,514
Government Sponsored Entity Securities, at Fair Value			44,836
March 31, 2018
Held-To-Maturity Securities,   at Amortized Cost	$	272,938	$	57,186	$	330,124
Held-To-Maturity Securities,   at Fair Value	268,604		56,333		324,937
Gross Unrealized Gains	646		—		646
Gross Unrealized Losses	4,979		853		5,832
Held-To-Maturity Securities,   Pledged as Collateral					307,273
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	101,695	$	53,076	$	154,771
12 Months or Longer	65,012		3,257		68,269
Total	$	166,707	$	56,333	$	223,040
Number of Securities in a   Continuous Loss Position	495		47		542
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,981	$	767	$	2,748
12 Months or Longer	2,998		86		3,084
Total	$	4,979	$	853	$	5,832

Held-To-Maturity Securities
	State and Municipal Obligations	Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2018
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost		$	2,530
US Government Agency   Securities, at Fair Value		2,483
Government Sponsored Entity   Securities, at Amortized Cost		54,656
Government Sponsored Entity Securities, at Fair Value		53,850

Debt Securities, Trading, and Equity Securities, FV-NI

The following table is the schedule of Equity Securities at March 31, 2019, December 31, 2018 and March 31, 2018:

Equity Securities
	March 31, 2019	December 31, 2018	March 31, 2018
Equity Securities, at Fair Value	$1,850	$1,774	$1,579

Unrealized Gain (Loss) on Investments

The following is a summary of realized and unrealized gains and losses recognized in net income on equity securities during the three-month period endedMarch 31, 2019:

	Three months ended March 31, 2019
Net Gain on Equity Securities	$	76
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	—
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$	76

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Loans (Tables)

3 Months Ended

Mar. 31, 2019

Loans and Leases Receivable Disclosure [Abstract]

Past Due Financing Receivables

The following table presents loan balances outstanding as of March 31, 2019, December 31, 2018 and March 31, 2018 and an analysis of the recorded investment in loans that are past due at these dates.  Generally, Arrow considers a loan past due 30 or more days when the borrower is two payments past due.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Loans Past Due 30-59 Days	$	168	$	208	$	4,758	$	1,345	$	6,479
Loans Past Due 60-89 Days	—		—		1,387		207		1,594
Loans Past Due 90 or more Days	17		108		369		1,610		2,104
Total Loans Past Due	185		316		6,514		3,162		10,177
Current Loans	133,091		493,071		740,285		858,584		2,225,031
Total Loans	$	133,276	$	493,387	$	746,799	$	861,746	$	2,235,208
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	64	$	64
Nonaccrual Loans	415		248		588		3,892		5,143
December 31, 2018
Loans Past Due 30-59 Days	$	121	$	108	$	5,369	$	281	$	5,879
Loans Past Due 60-89 Days	49		—		2,136		1,908		4,093
Loans Past Due 90 or more Days	—		789		572		1,844		3,205
Total Loans Past Due	170		897		8,077		4,033		13,177
Current Loans	136,720		483,665		711,433		851,220		2,183,038
Total Loans	$	136,890	$	484,562	$	719,510	$	855,253	$	2,196,215
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	144	$	1,081	$	1,225
Nonaccrual Loans	403		789		658		2,309		4,159
March 31, 2018
Loans Past Due 30-59 Days	$	45	$	156	$	3,673	$	1,711	$	5,585
Loans Past Due 60-89 Days	60		—		751		481		1,292
Loans Past Due 90 or more Days	41		807		252		321		1,421
Total Loans Past Due	146		963		4,676		2,513		8,298
Current Loans	127,528		454,095		621,964		781,152		1,984,739
Total Loans	$	127,674	$	455,058	$	626,640	$	783,665	$	1,993,037
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	—	$	—
Nonaccrual Loans	652		807		441		2,570		4,470

Allowance for Credit Losses on Financing Receivables

The following table presents a roll-forward of the allowance for loan losses and other information pertaining to the allowance for loan losses:

Allowance for Loan Losses
				Commercial
	Commercial			Real Estate			Consumer			Residential			Total
Roll-forward of the Allowance for Loan Losses for the Quarterly Periods:
December 31, 2018	$	1,218		$	5,644		$	8,882		$	4,452		$	20,196
Charge-offs	(1		)	(29		)	(418		)	(14		)	(462		)
Recoveries	—			—			167			—			167
Provision	33			(26		)	778			(313		)	472
March 31, 2019	$	1,250		$	5,589		$	9,409		$	4,125		$	20,373
December 31, 2017	$	1,873		$	4,504		$	7,604		$	4,605		$	18,586
Charge-offs	(16		)	1			(347		)	(8		)	(370		)
Recoveries	—			9			86			—			95
Provision	311			(151		)	676			(90		)	746
March 31, 2018	$	2,168		$	4,363		$	8,019		$	4,507		$	19,057

Allowance for Loan Losses
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	—	$	—	$	—	$	—	$	—
Allowance for loan losses - Loans Collectively Evaluated for Impairment	1,250		5,589		9,409		4,125		20,373
Ending Loan Balance - Individually Evaluated for Impairment	40		387		101		2,417		2,945
Ending Loan Balance - Collectively Evaluated for Impairment	$	133,236	$	493,000	$	746,698	$	859,329	$	2,232,263
December 31, 2018
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	—	$	—	$	—	$	4	$	4
Allowance for loan losses - Loans Collectively Evaluated for Impairment	1,218		5,644		8,882		4,448		20,192
Ending Loan Balance - Individually Evaluated for Impairment	430		793		101		1,899		3,223
Ending Loan Balance - Collectively Evaluated for Impairment	$	136,460	$	483,769	$	719,409	$	853,354	$	2,192,992
March 31, 2018
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	92	$	42	$	—	$	58	$	192
Allowance for loan losses - Loans Collectively Evaluated for Impairment	2,076		4,321		8,019		4,449		18,865
Ending Loan Balance - Individually Evaluated for Impairment	489		815		91		1,564		2,959
Ending Loan Balance - Collectively Evaluated for Impairment	$	127,185	$	454,243	$	626,549	$	782,101	$	1,990,078

Financing Receivable Credit Quality Indicators

The following table presents the credit quality indicators by loan category at March 31, 2019, December 31, 2018 and March 31, 2018:

Loan Credit Quality Indicators
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	125,918	$	465,216					$	591,134
Special Mention	133		2,268						2,401
Substandard	7,225		25,903						33,128
Doubtful	—		—						—
Credit Risk Profile Based on Payment Activity:
Performing					$	746,211	$	857,790	$	1,604,001
Nonperforming					588		3,956		4,544
December 31, 2018
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	129,584	$	456,868					$	586,452
Special Mention	—		—						—
Substandard	7,306		26,905						34,211
Doubtful	—		789						789
Credit Risk Profile Based on Payment Activity:
Performing					$	718,708	$	851,863	$	1,570,571
Nonperforming					802		3,390		4,192
March 31, 2018
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	107,838	$	430,121					$	537,959
Special Mention	17,220		611						17,831
Substandard	2,615		23,521						26,136
Doubtful	—		807						807
Credit Risk Profile Based on Payment Activity:
Performing					$	626,198	$	781,095	$	1,407,293
Nonperforming					441		2,570		3,011

Impaired Financing Receivables

The following table presents information on impaired loans based on whether the impaired loan has a recorded related allowance or has no recorded related allowance:

Impaired Loans
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2019
Recorded Investment:
With No Related Allowance	$	38	$	389	$	101	$	2,417	$	2,945
With a Related Allowance	—		—		—		—		—
Unpaid Principal Balance:
With No Related Allowance	424		2		101		2,416		2,943
With a Related Allowance	—		—		—		—		—
December 31, 2018
Recorded Investment:
With No Related Allowance	$	430	$	793	$	101	$	1,605	$	2,929
With a Related Allowance	—		—		—		294		294
Unpaid Principal Balance:
With No Related Allowance	429		793		100		1,606		2,928
With a Related Allowance	—		—		—		293		293
March 31, 2018
Recorded Investment:
With No Related Allowance	$	—	$	8	$	90	$	1,276	$	1,374
With a Related Allowance	483		783		—		356		1,622
Unpaid Principal Balance:
With No Related Allowance	—		8		90		1,279		$	1,377
With a Related Allowance	489		807		—		286		1,582
For the Quarter Ended:
March 31, 2019
Average Recorded Balance:
With No Related Allowance	$	234	$	591	$	101	$	2,011	$	2,937
With a Related Allowance	—		—		—		147		147
Interest Income Recognized:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—
Cash Basis Income:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—
March 31, 2018
Average Recorded Balance:
With No Related Allowance	$	—	$	395	$	92	$	1,273	$	1,760
With a Related Allowance	484		754		—		345		1,583
Interest Income Recognized:
With No Related Allowance	—		—		—		16		16
With a Related Allowance	—		—		—		24		24
Cash Basis Income:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—

Troubled Debt Restructurings on Financing Receivables

The following table presents information on loans modified in trouble debt restructurings during the periods indicated.

Loans Modified in Trouble Debt Restructurings During the Period
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
For the Quarter Ended:
March 31, 2019
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	13	$	—	$	13
Post-Modification Outstanding Recorded Investment	—		—		13		—		13
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2018
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	3	$	—	$	3
Post-Modification Outstanding Recorded Investment	—		—		3		—		3
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

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Guarantees (Tables)

3 Months Ended

Mar. 31, 2019

Guarantees [Abstract]

Schedule of Guarantor Obligations

The following table presents the notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit as of March 31, 2019, December 31, 2018 and March 31, 2018:

Commitments to Extend Credit and Letters of Credit
	March 31, 2019		December 31, 2018		March 31, 2018
Notional Amount:
Commitments to Extend Credit	$	310,749	$	321,143	$	328,774
Standby Letters of Credit	4,431		4,466		3,584
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	20		12		24

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Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2019

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Comprehensive Income

The following table presents the components of other comprehensive income for the three-month periods endedMarch 31, 2019 and 2018:

Schedule of Comprehensive Income
	Three Months Ended March 31,
				Tax
	Before-Tax			(Expense)			Net-of-Tax
	Amount			Benefit			Amount
2019
Net Unrealized Securities Holding Gains on Securities Available-for-Sale Arising During the Period	2,788			$	(708	)	2,080
Amortization of Net Retirement Plan Actuarial Loss	163			(42		)	121
Amortization of Net Retirement Plan Prior Service Cost	56			(14		)	42
Other Comprehensive Income	$	3,007		$	(764	)	$	2,243
2018
Net Unrealized Securities Holding Losses on Securities Available-for-Sale Arising During the Period	(3,332		)	$	847		(2,485		)
Amortization of Net Retirement Plan Actuarial Loss	60			(14		)	46
Accretion of Net Retirement Plan Prior Service Credit	(1		)	—			(1		)
Other Comprehensive Loss	$	(3,273	)	$	833		$	(2,440	)

Changes in Accumulated Other Comprehensive Income By Component

The following table presents the changes in accumulated other comprehensive income by component:

Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)
	Unrealized			Defined Benefit Plan Items
	Gains and
	Losses on						Net Prior
	Available-for-			Net Gain			Service
	Sale Securities			(Loss)			(Cost) Credit			Total
For the Quarter-To-Date periods ended:
December 31, 2018	$	(3,697	)	$	(8,971	)	$	(1,142	)	$	(13,810	)
Other comprehensive income before reclassifications	2,080			—			—			2,080
Amounts reclassified from accumulated other comprehensive income				121			42			163
Net current-period other comprehensive income	2,080			121			42			2,243
March 31, 2019	$	(1,617	)	$	(8,850	)	$	(1,100	)	$	(11,567	)
December 31, 2017	$	(1,250	)	$	(6,380	)	$	(884	)	$	(8,514	)
Other comprehensive loss before reclassifications	(2,485		)	—			—			(2,485		)
Amounts reclassified from accumulated other comprehensive loss	—			46			(1		)	45
Net current-period other comprehensive income (loss)	(2,485		)	46			(1		)	(2,440		)
Reclassification due to the adoption of ASU 2016-01	(331		)							(331		)
March 31, 2018	$	(4,066	)	$	(6,334	)	$	(885	)	$	(11,285	)

(1) All amounts are net of tax.

Reclassification out of Accumulated Other Comprehensive Income

The following table presents the reclassifications out of accumulated other comprehensive income:

Reclassifications Out of Accumulated Other Comprehensive Income
	Amounts Reclassified
Details about Accumulated Other	from Accumulated Other				Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income				Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2019
Amortization of defined benefit pension items:
Prior-service costs	$	(56	)	(1)	Salaries and Employee Benefits
Actuarial gains/(losses)	(163		)	(1)	Salaries and Employee Benefits
	(219		)		Total before Tax
	56				Provision for Income Taxes
	$	(163	)		Net of Tax
Total reclassifications for the period	$	(163	)		Net of Tax
March 31, 2018
Amortization of defined benefit pension items:
Prior-service costs	$	(1	)	(1)	Salaries and Employee Benefits
Actuarial gains/(losses)	60			(1)	Salaries and Employee Benefits
	59				Total before Tax
	(14		)		Provision for Income Taxes
	$	45			Net of Tax
Total reclassifications for the period	$	45			Net of Tax

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award

The following table summarizes information about stock option activity for the year to date period ended March 31, 2019.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2019	284,522			$	25.67
Granted	52,000			31.71
Exercised	(26,135		)	20.46
Forfeited	(5,797		)	21.12
Outstanding at March 31, 2019	304,590			27.24
Vested at Period-End	183,685			24.34
Expected to Vest	120,905			31.63
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	5.75
Fair Value Assumptions:
Dividend Yield	3.26		%
Expected Volatility	22.58		%
Risk Free Interest Rate	2.63		%
Expected Lives (in years)	8.68

The following table summarizes information about restricted stock unit activity for the period ended March 31, 2019.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2019	3,377	$	32.57
Granted	3,901	31.71
Non-vested at March 31, 2019	7,278	32.11

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The following table presents information on the amounts expensed related to stock options for the periods ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019		2018
Amount expensed	$	79	$	83

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019		2018
Amount expensed	$	16	$	6

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Retirement Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2019

Defined Benefit Plan [Abstract]

Schedule of Defined Benefit Plans Disclosures

The following tables provide the components of net periodic benefit costs for the three-month periods ended March 31, 2019 and 2018.

				Select
	Employees'			Executive		Postretirement
	Pension			Retirement		Benefit
	Plan			Plan		Plans
Net Periodic Benefit Cost
For the Three Months Ended March 31, 2019:
Service Cost 1	$	399		$	97	$	30
Interest Cost 2	397			52		89
Expected Return on Plan Assets 2	(770		)	—		—
Amortization of Prior Service (Credit) Cost 2	17			14		25
Amortization of Net Loss 2	153			27		(17		)
Net Periodic (Benefit) Cost	$	196		$	190	$	127
Plan Contributions During the Period	$	—		$	116	$	37
For the Three Months Ended March 31, 2018:
Service Cost 1	$	348		$	11	$	33
Interest Cost 2	525			50		99
Expected Return on Plan Assets 2	(785		)	—		—
Amortization of Prior Service (Credit) Cost 2	(12		)	14		(3		)
Amortization of Net Loss 2	33			33		(6		)
Net Periodic (Benefit) Cost	$	109		$	108	$	123
Plan Contributions During the Period	$	—		$	116	$	17

Footnotes:

1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income

2. Included in Other Operating Expense on the Consolidated Statements of Income

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per common share (“EPS”) for periods ended March 31, 2019 and 2018.  All share and per share amounts have been adjusted for the September 27, 2018, 3% stock dividend.

Earnings Per Share
	Quarterly Period Ended:
	March 31, 2019		March 31, 2018
Earnings Per Share - Basic:
Net Income	$	8,734	$	8,531
Weighted Average Shares - Basic	14,469		14,354
Earnings Per Share - Basic	$	0.60	$	0.59
Earnings Per Share - Diluted:
Net Income	$	8,734	$	8,531
Weighted Average Shares - Basic	14,469		14,354
Dilutive Average Shares Attributable to Stock Options	51		82
Weighted Average Shares - Diluted	14,520		14,436
Earnings Per Share - Diluted	$	0.60	$	0.59

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Fair Values (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements, Recurring and Nonrecurring

The table below presents the financial instrument's fair value and the amounts within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement:

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value of Assets and Liabilities Measured on a Recurring Basis:
March 31, 2019
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	35,383	$	—	$	35,383	$	—
State and Municipal Obligations	1,116		—		1,116		—
Mortgage-Backed Securities	261,513		—		261,513		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	298,812		—		298,812		—
Equity Securities	1,850		—		1,850		—
Total Securities Measured on a Recurring Basis	$	300,662	$	—	$	300,662	$	—
December 31, 2018
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	46,765	$	—	$	46,765	$	—
State and Municipal Obligations	1,195		—		1,195		—
Mortgage-Backed Securities	268,775		—		268,775		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	317,535				317,535
Equity Securities	1,774		—		1,774		—
Total Securities Measured on a Recurring Basis	$	319,309	$	—	$	319,309	$	—
March 31, 2018
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	59,657	$	—	$	59,657	$	—
State and Municipal Obligations	9,743		—		9,743		—
Mortgage-Backed Securities	235,389		—		235,389		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	305,589				305,589
Equity Securities	1,579		—		1,579		—
Total Securities Measured on a Recurring Basis	$	307,168	$	—	$	307,168	$	—

	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Life-to-Date Gains (Losses)
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
March 31, 2019
Collateral Dependent Impaired Loans	$	684	$	—	$	—	$	684	$	—
Other Real Estate Owned and Repossessed Assets, Net	1,445		—		—		1,445		(826		)
December 31, 2018
Collateral Dependent Impaired Loans	$	—	$	—	$	—	$	—	$	—
Other Real Estate Owned and Repossessed Assets, Net	1,260		—		—		1,260		(669		)
March 31, 2018
Collateral Dependent Impaired Loans	$	1,295	$	—	$	—	$	1,295	$	(58	)
Other Real Estate Owned and Repossessed Assets, Net	1,647		—		—		1,647		(582		)

Fair Value, by Balance Sheet Grouping

The following table presents a summary of the carrying amount, the fair value or an amount approximating fair value and the fair value hierarchy of Arrow’s financial instruments:

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2019
Cash and Cash Equivalents	$	61,229	$	61,229	$	61,229	$	—	$	—
Securities Available-for-Sale	298,812		298,812		—		298,812		—
Securities Held-to-Maturity	279,400		280,414		—		280,414		—
Equity Securities	1,850		1,850		—		1,850		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	7,878		7,878		—		7,878		—
Net Loans	2,214,835		2,164,298		—		—		2,164,298
Accrued Interest Receivable	8,180		8,180		—		8,180		—
Deposits	2,490,097		2,484,479		—		2,484,479		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	58,407		58,407		—		58,407		—
Federal Home Loan Bank Overnight Advances	74,500		74,500		—		74,500		—
Federal Home Loan Bank Term Advances	35,000		34,805		—		34,805		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	737		737		—		737		—
December 31, 2018
Cash and Cash Equivalents	$	84,239	$	84,239	$	84,239	$	—	$	—
Securities Available-for-Sale	317,535		317,535		—		317,535		—
Securities Held-to-Maturity	283,476		280,338		—		280,338		—
Equity Securities	1,774		1,774				1,774
Federal Home Loan Bank and Federal   Reserve Bank Stock	15,506		15,506		—		15,506		—
Net Loans	2,176,019		2,114,372		—		—		2,114,372
Accrued Interest Receivable	7,035		7,035		—		7,035		—
Deposits	2,345,584		2,338,410		—		2,338,410		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	54,659		54,659		—		54,659		—
Federal Home Loan Bank Overnight Advances	234,000		234,000		—		234,000		—
Federal Home Loan Bank Term Advances	45,000		44,652		—		44,652		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	570		570		—		570		—
March 31, 2018
Cash and Cash Equivalents	$	100,272	$	100,272	$	100,272	$	—	$	—
Securities Available-for-Sale	305,589		305,589		—		305,589		—
Securities Held-to-Maturity	330,124		324,937		—		324,937		—
Equity Securities	1,579		1,579		—		1,579
Federal Home Loan Bank and Federal   Reserve Bank Stock	4,780		4,780		—		4,780		—
Net Loans	1,973,980		1,915,978		—		—		1,915,978
Accrued Interest Receivable	7,662		7,692		—		7,692		—
Deposits	2,411,273		2,402,122		—		2,402,122		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	74,957		74,957		—		74,957		—
Federal Home Loan Bank Term Advances	45,000		44,484		—		44,484		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	361		361		—		361		—

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Leases (Tables)

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Lease, Cost

The following includes quantitative data related to the Company's leases as of March 31, 2019:

Finance Lease Amounts:	Classification
Right-of-use Assets	Premises and Equipment, Net	$	2,922
Lease Liabilities	Finance Leases	2,946
Operating Lease Amounts:
Right-of-use Assets	Other Assets	$	5,587
Lease Liabilities	Other Liabilities	5,639
Lease Cost:
Finance Lease Cost:
Amortization of Right-of-use assets		$	17
Interest on Lease Liabilities		15
Operating Lease Cost		173
Short-term Lease Cost		33
Variable Lease Cost		56
Total Lease Cost		$	294
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	15
Operating Outgoing Cash Flows From Operating Leases		173
Financing Outgoing Cash Flows From Finance Leases		4
Right-of-use Assets Obtained In Exchange For New Finance Lease Liabilities		2,939
Right-of-use Assets Obtained In Exchange For New Operating Lease Liabilities		5,725
Weighted-average Remaining Lease Term—Finance Leases (Yrs.)		26.91
Weighted-average Remaining Lease Term—Operating Leases (Yrs.)		14.63
Weighted-average Discount Rate—Finance Leases %		3.82		%
Weighted-average Discount Rate—Operating Leases %		3.50		%

Lessee, Operating Lease, Liability, Maturity

Future Lease Payments at March 31, 2019 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2020	$	769	$	143
3/31/2021	695		146
3/31/2022	557		149
3/31/2023	479		149
3/31/2024	462		149
Thereafter	4,346		4,200
Total Undiscounted Cash Flows	$	7,308	$	4,936
Less: Net Present Value Adjustment	1,669		1,990
Lease Liability	$	5,639	$	2,946

Finance Lease, Liability, Maturity

Future Lease Payments at March 31, 2019 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2020	$	769	$	143
3/31/2021	695		146
3/31/2022	557		149
3/31/2023	479		149
3/31/2024	462		149
Thereafter	4,346		4,200
Total Undiscounted Cash Flows	$	7,308	$	4,936
Less: Net Present Value Adjustment	1,669		1,990
Lease Liability	$	5,639	$	2,946

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease payments on operating leases at December 31, 2018 were as follows:

	Operating Leases
2019	$	857
2020	626
2021	497
2022	357
2023	286
2024 and beyond	2,776
Total Minimum Lease Payments	$	5,399

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Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, right-of-use assets	$ 5,587
Operating lease, liability	$ 5,639
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, right-of-use assets		$ 7,900
Operating lease, liability		$ 8,000

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Investment Securities Available for Sale (Details) $ in Thousands	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Mar. 31, 2018 USD ($)
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	$ 300,980	$ 322,491	$ 311,038
Available-for-Sale	298,812	317,535	305,589
Gross Unrealized Gains	659	290	354
Gross Unrealized Losses	2,827	5,246	5,803
Maturities of Debt Securities, at Amortized Cost:
Within One Year	31,211
From 1 - 5 Years	130,703
From 5 - 10 Years	117,616
Over 10 Years	21,450
Maturities of Debt Securities, at Fair Value:
Within One Year	31,133
From 1 - 5 Years	129,559
From 5 - 10 Years	117,008
Over 10 Years	21,112
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	53,131	107,550	136,627
12 Months or Longer	191,291	172,192	124,088
Total	$ 244,422	$ 279,742	$ 260,715
Number of Securities in a Continuous Loss Position	88	97	113
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 258	$ 841	$ 2,212
12 Months or Longer	2,569	4,405	3,591
Total	2,827	5,246	5,803
U.S. Agency Obligations
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	35,519	47,071	60,264
Available-for-Sale	35,383	46,765	59,657
Gross Unrealized Gains	0	0	0
Gross Unrealized Losses	136	306	607
Maturities of Debt Securities, at Amortized Cost:
Within One Year	30,516
From 1 - 5 Years	5,003
From 5 - 10 Years	0
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	30,432
From 1 - 5 Years	4,951
From 5 - 10 Years	0
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	0	17,128
12 Months or Longer	35,383	46,765	42,529
Total	$ 35,383	$ 46,765	$ 59,657
Number of Securities in a Continuous Loss Position	7	10	14
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 0	$ 266
12 Months or Longer	136	306	341
Total	136	306	607
State and Municipal Obligations
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	1,114	1,193	9,741
Available-for-Sale	1,116	1,195	9,743
Gross Unrealized Gains	2	2	7
Gross Unrealized Losses	0	0	5
Maturities of Debt Securities, at Amortized Cost:
Within One Year	201
From 1 - 5 Years	433
From 5 - 10 Years	0
Over 10 Years	480
Maturities of Debt Securities, at Fair Value:
Within One Year	203
From 1 - 5 Years	433
From 5 - 10 Years	0
Over 10 Years	480
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	0	7,421
12 Months or Longer	0	0	0
Total	$ 0	$ 0	$ 7,421
Number of Securities in a Continuous Loss Position	0	0	29
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 0	$ 6
12 Months or Longer	0	0	0
Total	0	0	6
Mortgage-Backed Securities - Residential
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	263,347	273,227	240,033
Available-for-Sale	261,513	268,775	235,389
Gross Unrealized Gains	657	288	347
Gross Unrealized Losses	2,491	4,740	4,991
Maturities of Debt Securities, at Amortized Cost:
Within One Year	494
From 1 - 5 Years	125,267
From 5 - 10 Years	117,616
Over 10 Years	19,970
Maturities of Debt Securities, at Fair Value:
Within One Year	498
From 1 - 5 Years	124,175
From 5 - 10 Years	117,008
Over 10 Years	19,832
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	53,131	107,550	112,078
12 Months or Longer	155,108	124,627	80,759
Total	$ 208,239	$ 232,177	$ 192,837
Number of Securities in a Continuous Loss Position	80	86	69
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 258	$ 841	$ 1,940
12 Months or Longer	2,233	3,899	3,050
Total	2,491	4,740	4,990
Corporate and Other Debt Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	1,000	1,000	1,000
Available-for-Sale	800	800	800
Gross Unrealized Gains	0	0	0
Gross Unrealized Losses	200	200	200
Maturities of Debt Securities, at Amortized Cost:
Within One Year	0
From 1 - 5 Years	0
From 5 - 10 Years	0
Over 10 Years	1,000
Maturities of Debt Securities, at Fair Value:
Within One Year	0
From 1 - 5 Years	0
From 5 - 10 Years	0
Over 10 Years	800
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	0	0
12 Months or Longer	800	800	800
Total	$ 800	$ 800	$ 800
Number of Securities in a Continuous Loss Position	1	1	1
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 0	$ 0
12 Months or Longer	200	200	200
Total	200	200	200
Collateral Pledged
Available-For-Sale Securities
Available-For-Sale Securities, Pledged as Collateral	255,028	236,163	229,857
US Treasury Securities | U.S. Agency Obligations
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	0	0	0
Available-for-Sale	0	0	0
Agency Securities | U.S. Agency Obligations
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	35,519	47,071	60,264
Available-for-Sale	35,383	46,765	59,657
US Government Agencies Debt Securities | Mortgage-Backed Securities - Residential
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	70,358	72,095	59,446
Available-for-Sale	70,034	71,800	59,469
US Government-sponsored Enterprises Debt Securities | Mortgage-Backed Securities - Residential
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	192,989	201,132	180,587
Available-for-Sale	$ 191,479	$ 196,975	$ 175,920

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Investment Securities Held to Maturity (Details) $ in Thousands	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Mar. 31, 2018 USD ($)
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	$ 279,400	$ 283,476	$ 330,124
Held-To-Maturity Securities, at Fair Value	280,414	280,338	324,937
Gross Unrealized Gains	1,792	486	646
Gross Unrealized Losses	778	3,624	5,832
Maturities of Debt Securities, at Amortized Cost:
Within One Year	25,205
From 1 - 5 Years	139,046
From 5 - 10 Years	112,788
Over 10 Years	2,361
Maturities of Debt Securities, at Fair Value:
Within One Year	25,244
From 1 - 5 Years	139,428
From 5 - 10 Years	113,343
Over 10 Years	2,399
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	65,402	154,771
12 Months or Longer	97,471	124,617	68,269
Total	$ 97,471	$ 190,019	$ 223,040
Number of Securities in a Continuous Loss Position	222	458	542
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 618	$ 2,748
12 Months or Longer	778	3,006	3,084
Total	778	3,624	5,832
Equity Securities	1,850	1,774	1,579
State and Municipal Obligations
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	234,454	235,782	272,938
Held-To-Maturity Securities, at Fair Value	235,576	233,359	268,604
Gross Unrealized Gains	1,695	486	646
Gross Unrealized Losses	573	2,909	4,979
Maturities of Debt Securities, at Amortized Cost:
Within One Year	25,205
From 1 - 5 Years	94,100
From 5 - 10 Years	112,788
Over 10 Years	2,361
Maturities of Debt Securities, at Fair Value:
Within One Year	25,244
From 1 - 5 Years	94,590
From 5 - 10 Years	113,343
Over 10 Years	2,399
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	32,093	101,695
12 Months or Longer	71,450	110,947	65,012
Total	$ 71,450	$ 143,040	$ 166,707
Number of Securities in a Continuous Loss Position	193	411	495
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 162	$ 1,981
12 Months or Longer	573	2,747	2,998
Total	573	2,909	4,979
Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	44,946	47,694	57,186
Held-To-Maturity Securities, at Fair Value	44,838	46,979	56,333
Gross Unrealized Gains	97	0	0
Gross Unrealized Losses	205	715	853
Maturities of Debt Securities, at Amortized Cost:
Within One Year	0
From 1 - 5 Years	44,946
From 5 - 10 Years	0
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	0
From 1 - 5 Years	44,838
From 5 - 10 Years	0
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	33,309	53,076
12 Months or Longer	26,021	13,670	3,257
Total	$ 26,021	$ 46,979	$ 56,333
Number of Securities in a Continuous Loss Position	29	47	47
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 456	$ 767
12 Months or Longer	205	259	86
Total	205	715	853
US Government Agencies Debt Securities | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	2,069	2,180	2,530
US Government-sponsored Enterprises Debt Securities | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	42,877	45,514	54,656
Collateral Pledged
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, Pledged as Collateral	265,465	266,341	307,273
Fair Value, Measurements, Recurring
Unrealized Losses on Securities in a Continuous Loss Position:
Equity Securities	1,850	1,774	1,579
Fair Value, Measurements, Recurring | US Government Agencies Debt Securities | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Fair Value	2,012	2,143	2,483
Fair Value, Measurements, Recurring | US Government-sponsored Enterprises Debt Securities | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Fair Value	$ 42,826	$ 44,836	$ 53,850

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Investment Securities Unrealized Gains (Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Investments, Debt and Equity Securities [Abstract]
Net Gain on Securities Transactions	$ 76	$ 18
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	0
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$ 76

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Loans Loan Categories and Past Due Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	$ 10,177	$ 13,177	$ 8,298
Current Loans	2,225,031	2,183,038	1,984,739
Total Loans	2,235,208	2,196,215	1,993,037
Loans 90 or More Days Past Due and Still Accruing Interest	64	1,225	0
Nonaccrual Loans	5,143	4,159	4,470
Financing Receivables, 30 to 59 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	6,479	5,879	5,585
Financing Receivables, 60 to 89 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	1,594	4,093	1,292
Financing Receivables, Equal to Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	2,104	3,205	1,421
Commercial
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	185	170	146
Current Loans	133,091	136,720	127,528
Total Loans	133,276	136,890	127,674
Loans 90 or More Days Past Due and Still Accruing Interest	0	0	0
Nonaccrual Loans	415	403	652
Commercial | Financing Receivables, 30 to 59 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	168	121	45
Commercial | Financing Receivables, 60 to 89 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	0	49	60
Commercial | Financing Receivables, Equal to Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	17	0	41
Commercial Real Estate Portfolio Segment
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	316	897	963
Current Loans	493,071	483,665	454,095
Total Loans	493,387	484,562	455,058
Loans 90 or More Days Past Due and Still Accruing Interest	0	0	0
Nonaccrual Loans	248	789	807
Commercial Real Estate Portfolio Segment | Financing Receivables, 30 to 59 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	208	108	156
Commercial Real Estate Portfolio Segment | Financing Receivables, 60 to 89 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	0	0	0
Commercial Real Estate Portfolio Segment | Financing Receivables, Equal to Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	108	789	807
Consumer Loans Financing
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	6,514	8,077	4,676
Current Loans	740,285	711,433	621,964
Total Loans	746,799	719,510	626,640
Loans 90 or More Days Past Due and Still Accruing Interest	0	144	0
Nonaccrual Loans	588	658	441
Consumer Loans Financing | Financing Receivables, 30 to 59 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	4,758	5,369	3,673
Consumer Loans Financing | Financing Receivables, 60 to 89 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	1,387	2,136	751
Consumer Loans Financing | Financing Receivables, Equal to Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	369	572	252
Residential
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	3,162	4,033	2,513
Current Loans	858,584	851,220	781,152
Total Loans	861,746	855,253	783,665
Loans 90 or More Days Past Due and Still Accruing Interest	64	1,081	0
Nonaccrual Loans	3,892	2,309	2,570
Residential | Financing Receivables, 30 to 59 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	1,345	281	1,711
Residential | Financing Receivables, 60 to 89 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	207	1,908	481
Residential | Financing Receivables, Equal to Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	$ 1,610	$ 1,844	$ 321

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Loans Supplemental Loan Information (Details) - Consumer Portfolio Segment	3 Months Ended
	Mar. 31, 2019
Credit Card Receivable | Minimum
Schedule of Financing Receivable Terms [Line Items]
Principal repayment terms, period	1 year
Credit Card Receivable | Maximum
Schedule of Financing Receivable Terms [Line Items]
Principal repayment terms, period	5 years
Automobile Loan | Minimum
Schedule of Financing Receivable Terms [Line Items]
Principal repayment terms, period	3 years
Automobile Loan | Maximum
Schedule of Financing Receivable Terms [Line Items]
Principal repayment terms, period	7 years

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Loans Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for Loan Losses, Beginning Balance	$ 20,196	$ 18,586
Charge-offs	(462)	(370)
Recoveries	167	95
Provision	472	746
Allowance for Loan Losses, Ending Balance	20,373	19,057
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated for Impairment	0	192	$ 4
Allowance for loan losses - Loans Collectively Evaluated for Impairment	20,373	18,865	20,192
Ending Loan Balance - Individually Evaluated for Impairment	2,945	2,959	3,223
Ending Loan Balance - Collectively Evaluated for Impairment	2,232,263	1,990,078	2,192,992
Commercial
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for Loan Losses, Beginning Balance	1,218	1,873
Charge-offs	(1)	(16)
Recoveries	0	0
Provision	33	311
Allowance for Loan Losses, Ending Balance	1,250	2,168
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated for Impairment	0	92	0
Allowance for loan losses - Loans Collectively Evaluated for Impairment	1,250	2,076	1,218
Ending Loan Balance - Individually Evaluated for Impairment	40	489	430
Ending Loan Balance - Collectively Evaluated for Impairment	133,236	127,185	136,460
Commercial Real Estate Portfolio Segment
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for Loan Losses, Beginning Balance	5,644	4,504
Charge-offs	(29)	1
Recoveries	0	9
Provision	(26)	(151)
Allowance for Loan Losses, Ending Balance	5,589	4,363
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated for Impairment	0	42	0
Allowance for loan losses - Loans Collectively Evaluated for Impairment	5,589	4,321	5,644
Ending Loan Balance - Individually Evaluated for Impairment	387	815	793
Ending Loan Balance - Collectively Evaluated for Impairment	493,000	454,243	483,769
Consumer Loans Financing
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for Loan Losses, Beginning Balance	8,882	7,604
Charge-offs	(418)	(347)
Recoveries	167	86
Provision	778	676
Allowance for Loan Losses, Ending Balance	9,409	8,019
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated for Impairment	0	0	0
Allowance for loan losses - Loans Collectively Evaluated for Impairment	9,409	8,019	8,882
Ending Loan Balance - Individually Evaluated for Impairment	101	91	101
Ending Loan Balance - Collectively Evaluated for Impairment	746,698	626,549	719,409
Residential
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for Loan Losses, Beginning Balance	4,452	4,605
Charge-offs	(14)	(8)
Recoveries	0	0
Provision	(313)	(90)
Allowance for Loan Losses, Ending Balance	4,125	4,507
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated for Impairment	0	58	4
Allowance for loan losses - Loans Collectively Evaluated for Impairment	4,125	4,449	4,448
Ending Loan Balance - Individually Evaluated for Impairment	2,417	1,564	1,899
Ending Loan Balance - Collectively Evaluated for Impairment	$ 859,329	$ 782,101	$ 853,354

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Loans Credit Quality Indicators (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	$ 591,134	$ 586,452	$ 537,959
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	2,401	0	17,831
Substandard
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	33,128	34,211	26,136
Doubtful
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	789	807
Performing
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	1,604,001	1,570,571	1,407,293
Nonperforming
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	4,544	4,192	3,011
Commercial | Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	125,918	129,584	107,838
Commercial | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	133	0	17,220
Commercial | Substandard
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	7,225	7,306	2,615
Commercial | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0	0
Commercial Real Estate Portfolio Segment | Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	465,216	456,868	430,121
Commercial Real Estate Portfolio Segment | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	2,268	0	611
Commercial Real Estate Portfolio Segment | Substandard
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	25,903	26,905	23,521
Commercial Real Estate Portfolio Segment | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	789	807
Consumer Loans Financing | Performing
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	746,211	718,708	626,198
Consumer Loans Financing | Nonperforming
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	588	802	441
Residential | Performing
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	857,790	851,863	781,095
Residential | Nonperforming
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	$ 3,956	$ 3,390	$ 2,570

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Loans Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Recorded Investment:
With No Related Allowance	$ 2,945	$ 1,374	$ 2,929
With a Related Allowance	0	1,622	294
Unpaid Principal Balance:
With No Related Allowance	2,943	1,377	2,928
With a Related Allowance	0	1,582	293
Average Recorded Balance:
With No Related Allowance	2,937	1,760
With a Related Allowance	147	1,583
Interest Income Recognized:
With No Related Allowance	0	16
With a Related Allowance	0	24
Cash Basis Income:
With No Related Allowance	0	0
With a Related Allowance	0	0
Commercial
Recorded Investment:
With No Related Allowance	38	0	430
With a Related Allowance	0	483	0
Unpaid Principal Balance:
With No Related Allowance	424	0	429
With a Related Allowance	0	489	0
Average Recorded Balance:
With No Related Allowance	234	0
With a Related Allowance	0	484
Interest Income Recognized:
With No Related Allowance	0	0
With a Related Allowance	0	0
Cash Basis Income:
With No Related Allowance	0	0
With a Related Allowance	0	0
Commercial Real Estate Portfolio Segment
Recorded Investment:
With No Related Allowance	389	8	793
With a Related Allowance	0	783	0
Unpaid Principal Balance:
With No Related Allowance	2	8	793
With a Related Allowance	0	807	0
Average Recorded Balance:
With No Related Allowance	591	395
With a Related Allowance	0	754
Interest Income Recognized:
With No Related Allowance	0	0
With a Related Allowance	0	0
Cash Basis Income:
With No Related Allowance	0	0
With a Related Allowance	0	0
Consumer Portfolio Segment
Recorded Investment:
With No Related Allowance	101	90	101
With a Related Allowance	0	0	0
Unpaid Principal Balance:
With No Related Allowance	101	90	100
With a Related Allowance	0	0	0
Average Recorded Balance:
With No Related Allowance	101	92
With a Related Allowance	0	0
Interest Income Recognized:
With No Related Allowance	0	0
With a Related Allowance	0	0
Cash Basis Income:
With No Related Allowance	0	0
With a Related Allowance	0	0
Residential
Recorded Investment:
With No Related Allowance	2,417	1,276	1,605
With a Related Allowance	0	356	294
Unpaid Principal Balance:
With No Related Allowance	2,416	1,279	1,606
With a Related Allowance	0	286	$ 293
Average Recorded Balance:
With No Related Allowance	2,011	1,273
With a Related Allowance	147	345
Interest Income Recognized:
With No Related Allowance	0	16
With a Related Allowance	0	24
Cash Basis Income:
With No Related Allowance	0	0
With a Related Allowance	$ 0	$ 0

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Loans Loans Modified in Trouble Debt Restructurings (Details) - Entity Loan Modification Program - Payment Deferral $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) contract	Mar. 31, 2018 USD ($) contract
Financing Receivable, Modifications [Line Items]
Number of Loans | contract	1	1
Pre-Modification Outstanding Recorded Investment	$ 13	$ 3
Post-Modification Outstanding Recorded Investment	$ 13	$ 3
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Commercial
Financing Receivable, Modifications [Line Items]
Number of Loans | contract	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Commercial Real Estate Portfolio Segment
Financing Receivable, Modifications [Line Items]
Number of Loans | contract	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Consumer Loans Financing
Financing Receivable, Modifications [Line Items]
Number of Loans | contract	1	1
Pre-Modification Outstanding Recorded Investment	$ 13	$ 3
Post-Modification Outstanding Recorded Investment	$ 13	$ 3
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Residential
Financing Receivable, Modifications [Line Items]
Number of Loans | contract	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0

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Guarantees (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Commitments to Extend Credit
Loan Commitments and Letters of Credit [Line Items]
Notional Amount	$ 310,749	$ 321,143	$ 328,774
Fair Value	0	0	0
Standby Letters of Credit
Loan Commitments and Letters of Credit [Line Items]
Notional Amount	4,431	4,466	3,584
Fair Value	$ 20	$ 12	$ 24
Minimum | Standby Letters of Credit
Loan Commitments and Letters of Credit [Line Items]
Loan commitments, fixed fee percent	1.00%
Maximum | Standby Letters of Credit
Loan Commitments and Letters of Credit [Line Items]
Loan commitments, fixed fee percent	3.00%

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Comprehensive Income Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Schedule of Comprehensive Income [Line Items]
Other comprehensive income or loss before reclassifications	$ 2,080	$ (2,485)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	163	45
Other Comprehensive Income, before Tax	3,007	(3,273)
Other Comprehensive Income, Tax	(764)	833
Net current-period other comprehensive income (loss)	2,243	(2,440)
Unrealized Gains and Losses on Available for Sale Securities
Schedule of Comprehensive Income [Line Items]
Net Unrealized Securities Holding Losses on Securities Available-for-Sale Arising During the Period Before Tax	2,788	(3,332)
Net Unrealized Securities Holding Losses on Securities Available-for-Sale Arising During the Period, Tax	(708)	847
Other comprehensive income or loss before reclassifications	2,080	(2,485)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax		0
Net current-period other comprehensive income (loss)	2,080	(2,485)
Amortization of Net Retirement Plan Actuarial Gain (Loss)
Schedule of Comprehensive Income [Line Items]
Other comprehensive income or loss before reclassifications	0	0
Reclassification From Accumulated Other Comprehensive Income Current Period Before Tax	163	60
Reclassification from Accumulated Other Comprehensive Income Current Period Tax (Expense) Benefit	(42)	(14)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	121	46
Net current-period other comprehensive income (loss)	121	46
Accumulated Defined Benefit Plans Adjustment, Net Prior Service
Schedule of Comprehensive Income [Line Items]
Reclassification From Accumulated Other Comprehensive Income Current Period Before Tax	56	(1)
Reclassification from Accumulated Other Comprehensive Income Current Period Tax (Expense) Benefit	(14)	0
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	$ 42	$ (1)

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Comprehensive Income Changes in Accumulated Other Comprehensive Income By Component (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	$ 269,584	$ 249,603
Other comprehensive income before reclassifications	2,080	(2,485)
Amounts reclassified from accumulated other comprehensive income	163	45
Net current-period other comprehensive income (loss)	2,243	(2,440)
Reclassification due to the adoption of ASU 2016-01		(331)
Stockholders' equity, ending balance	276,609	252,734
Accumulated Other Comprehensive Loss
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(13,810)	(8,514)
Net current-period other comprehensive income (loss)	2,243	(2,440)
Stockholders' equity, ending balance	(11,567)	(11,285)
Unrealized Gains and Losses on Available for Sale Securities
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(3,697)	(1,250)
Other comprehensive income before reclassifications	2,080	(2,485)
Amounts reclassified from accumulated other comprehensive income		0
Net current-period other comprehensive income (loss)	2,080	(2,485)
Reclassification due to the adoption of ASU 2016-01		(331)
Stockholders' equity, ending balance	(1,617)	(4,066)
Amortization of Net Retirement Plan Actuarial Gain (Loss)
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(8,971)	(6,380)
Other comprehensive income before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	121	46
Net current-period other comprehensive income (loss)	121	46
Stockholders' equity, ending balance	(8,850)	(6,334)
Accretion of Net Retirement Plan Prior Service (Cost) Credit
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(1,142)	(884)
Other comprehensive income before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	42	(1)
Net current-period other comprehensive income (loss)	42	(1)
Stockholders' equity, ending balance	$ (1,100)	$ (885)

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Comprehensive Income Reclassification out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Provision for income taxes	$ 2,150	$ 2,058
Net Income	(163)	45
Reclassification out of Accumulated Other Comprehensive Income | Accretion of Net Retirement Plan Prior Service (Cost) Credit
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Other nonoperating income (expense)	(56)	(1)
Reclassification out of Accumulated Other Comprehensive Income | Amortization of Net Retirement Plan Actuarial Gain (Loss)
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Other nonoperating income (expense)	(163)	60
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Defined Benefit Plans Adjustment
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Total before tax	(219)	59
Provision for income taxes	56	(14)
Net Income	$ (163)	$ 45

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Stock-Based Compensation (Details)	3 Months Ended
	Mar. 31, 2019 plan $ / shares shares	Sep. 27, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number of plans | plan	3
Stock dividend, percent		3.00%
Weighted Average Exercise Price
Fair Value (in dollars per share)	$ 5.75
Dividend Yield	3.26%
Expected Volatility	22.58%
Risk Free Interest Rate	2.63%
Expected Lives, in years	8 years 8 months 5 days
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award expiration period (in years)	10 years
Award vesting period (in years)	4 years
Shares
Outstanding, beginning of period (in shares) | shares	284,522
Granted (in shares) | shares	52,000
Exercised (in shares) | shares	(26,135)
Forfeited (in shares) | shares	(5,797)
Outstanding, end of period (in shares) | shares	304,590
Exercisable at period end (in shares) | shares	183,685
Vested and expected to vest (in shares) | shares	120,905
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 25.67
Granted (in dollars per share)	31.71
Exercised (in dollars per share)	20.46
Forfeited (in dollars per share)	21.12
Outstanding, end of period (in dollars per share)	27.24
Exercisable at period end (in dollars per share)	24.34
Vested and expected to vest (in dollars per share)	$ 31.63
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)	3 years

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Stock-Based Compensation - Restricted Stock Units (Details) - Restricted Stock Units (RSU)	3 Months Ended
	Mar. 31, 2019 $ / shares shares
Restricted Stock Units
Balance at Beginning of Period (in units) | shares	3,377
Granted (in units) | shares	3,901
Balance at End of Period (in units) | shares	7,278
Weighted Average Grant Date Fair Value
Outstanding at Beginning of period (in dollars per unit) | $ / shares	$ 32.57
Granted (in dollars per unit) | $ / shares	31.71
Outstanding at End of period (in dollars per unit) | $ / shares	$ 32.11

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Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Amount expensed	$ 79	$ 83
Discount from market price, percent	5.00%
Restricted Stock Units (RSU)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Amount expensed	$ 16	$ 6

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Retirement Benefit Plans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Net Periodic Benefit Cost [Line Items]
Employer matching contribution, percentage	5.00%
Employees' Pension Plan
Net Periodic Benefit Cost [Line Items]
Assumptions used calculating benefit obligation, interest rate to annuitize cash balance account			3.43%
Service Cost	$ 399	$ 348
Interest Cost	397	525
Expected Return on Plan Assets	(770)	(785)
Amortization of Prior Service (Credit) Cost	17	(12)
Amortization of Net Loss	153	33
Net Periodic (Benefit) Cost	196	109
Plan Contributions During the Period	0	0
Select Executive Retirement Plan
Net Periodic Benefit Cost [Line Items]
Assumptions used calculating benefit obligation, interest rate to annuitize cash balance account			4.46%
Service Cost	97	11
Interest Cost	52	50
Expected Return on Plan Assets	0	0
Amortization of Prior Service (Credit) Cost	14	14
Amortization of Net Loss	27	33
Net Periodic (Benefit) Cost	190	108
Plan Contributions During the Period	116	116
Post-Retirement Benefit Plans
Net Periodic Benefit Cost [Line Items]
Assumptions used calculating benefit obligation, interest rate to annuitize cash balance account			4.88%
Service Cost	30	33
Interest Cost	89	99
Expected Return on Plan Assets	0	0
Amortization of Prior Service (Credit) Cost	25	(3)
Amortization of Net Loss	(17)	(6)
Net Periodic (Benefit) Cost	127	123
Plan Contributions During the Period	$ 37	$ 17
On Or Subsequent to January 1, 2003
Net Periodic Benefit Cost [Line Items]
Service credits, percent of eligible salaries	6.00%
Minimum | Prior to January 1, 2003
Net Periodic Benefit Cost [Line Items]
Service credits, percent of eligible salaries	6.00%
Maximum | Prior to January 1, 2003
Net Periodic Benefit Cost [Line Items]
Service credits, percent of eligible salaries	12.00%

XML

Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2019		Mar. 31, 2018		Sep. 27, 2018
Earnings Per Share [Abstract]
Stock dividend, percent						3.00%
Net Income		$ 8,734		$ 8,531
Weighted Average Shares - Basic (in shares)		14,469	[1]	14,354	[2]
Earnings Per Share - Basic (in dollars per share)		$ 0.60	[1]	$ 0.59	[2]
Dilutive Average Shares Attributable to Stock Options (in shares)		51		82
Weighted Average Shares - Diluted (in shares)	[2]	14,520		14,436
Earnings Per Share- Diluted (in dollars per share)		$ 0.60	[1]	$ 0.59	[2]

[1] Cash dividends paid per share have been adjusted for the September 27, 2018 3% stock dividend.

[2] 2018 Share and Per Share Amounts have been restated for the September 27, 2018 3% stock dividend.

XML

Fair Values - Recurring and Nonrecurring (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	$ 298,812,000	$ 317,535,000	$ 305,589,000
Equity Securities	1,850,000	1,774,000	1,579,000
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	298,812,000	317,535,000	305,589,000
Equity Securities	1,850,000	1,774,000	1,579,000
Total Securities Measured on a Recurring Basis	300,662,000	319,309,000	307,168,000
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0
Equity Securities	0	0	0
Total Securities Measured on a Recurring Basis	0	0	0
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	298,812,000	317,535,000	305,589,000
Equity Securities	1,850,000	1,774,000	1,579,000
Total Securities Measured on a Recurring Basis	300,662,000	319,309,000	307,168,000
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0
Equity Securities	0	0	0
Total Securities Measured on a Recurring Basis	0	0	0
Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral Dependent Impaired Loans	684,000	0	1,295,000
Collateral Dependent Impaired Loans, Life-to-Date Gains (Losses)	0	0	(58,000)
Other Real Estate Owned and Repossessed Assets, Net	1,445,000	1,260,000	1,647,000
Other Real Estate owned and Repossessed Assets, Net, Life-to-Date Gains (Losses)	(826,000)	(669,000)	(582,000)
Fair Value, Measurements, Nonrecurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral Dependent Impaired Loans	0	0	0
Other Real Estate Owned and Repossessed Assets, Net	0	0	0
Fair Value, Measurements, Nonrecurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral Dependent Impaired Loans	0	0	0
Other Real Estate Owned and Repossessed Assets, Net	0	0	0
Fair Value, Measurements, Nonrecurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral Dependent Impaired Loans	684,000	0	1,295,000
Other Real Estate Owned and Repossessed Assets, Net	1,445,000	1,260,000	1,647,000
U.S. Agency Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	35,383,000	46,765,000	59,657,000
U.S. Agency Obligations | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	35,383,000	46,765,000	59,657,000
U.S. Agency Obligations | Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0	0	0
U.S. Agency Obligations | Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	35,383,000	46,765,000	59,657,000
U.S. Agency Obligations | Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0	0	0
State and Municipal Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	1,116,000	1,195,000	9,743,000
State and Municipal Obligations | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	1,116,000	1,195,000	9,743,000
State and Municipal Obligations | Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0	0	0
State and Municipal Obligations | Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	1,116,000	1,195,000	9,743,000
State and Municipal Obligations | Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0	0	0
Mortgage-Backed Securities - Residential | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	261,513,000	268,775,000	235,389,000
Mortgage-Backed Securities - Residential | Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0	0	0
Mortgage-Backed Securities - Residential | Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	261,513,000	268,775,000	235,389,000
Mortgage-Backed Securities - Residential | Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0	0	0
Corporate and Other Debt Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	800,000	800,000	800,000
Corporate and Other Debt Securities | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	800,000	800,000	800,000
Corporate and Other Debt Securities | Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	0	0	0
Corporate and Other Debt Securities | Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	800,000	800,000	800,000
Corporate and Other Debt Securities | Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale	$ 0	$ 0	$ 0

XML

Fair Values - Fair Value by Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and Cash Equivalents	$ 61,229	$ 84,239	$ 100,272	$ 72,838
Available-for-Sale	298,812	317,535	305,589
Held-To-Maturity Securities, at Amortized Cost	279,400	283,476	330,124
Held-To-Maturity Securities, at Fair Value	280,414	280,338	324,937
Equity Securities	1,850	1,774	1,579
Net Loans	2,214,835	2,176,019	1,973,980
Deposits	2,490,097	2,345,584	2,411,273
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	58,407	54,659	74,957
Federal Home Loan Bank Overnight Advances	74,500	234,000	0
Federal Home Loan Bank Term Advances	35,000	45,000	45,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and Cash Equivalents	61,229		100,272
Available-for-Sale	298,812	317,535	305,589
Held-To-Maturity Securities, at Amortized Cost	279,400	283,476	330,124
Equity Securities	1,850	1,774	1,579
Federal Home Loan Bank and Federal Reserve Bank Stock	7,878	15,506	4,780
Net Loans	2,214,835	2,176,019	1,973,980
Accrued Interest Receivable	8,180	7,035	7,662
Deposits	2,490,097	2,345,584	2,411,273
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	58,407	54,659	74,957
Federal Home Loan Bank Overnight Advances	74,500	234,000
Federal Home Loan Bank Term Advances	35,000	45,000	45,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Accrued Interest Payable	737	570	361
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	61,229	84,239	100,272
Available-for-Sale	298,812	317,535	305,589
Held-To-Maturity Securities, at Fair Value	280,414	280,338	324,937
Equity Securities	1,850	1,774	1,579
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	7,878	15,506	4,780
Net Loans, at Fair Value	2,164,298	2,114,372	1,915,978
Accrued Interest Receivable, Fair Value Disclosure	8,180	7,035	7,692
Deposits, at Fair Value	2,484,479	2,338,410	2,402,122
Federal Funds Purchased and Securities Sold under Agreements to Repurchase, at Fair Value	58,407	54,659	74,957
Federal Home Loan Bank Overnight Advances, Fair Value Disclosure	74,500	234,000
Federal Home Loan Bank Term Advances, Fair Value Disclosure	34,805	44,652	44,484
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts, Fair Value Disclosure	20,000	20,000	20,000
Accrued Interest Payable, Fair Value Disclosure	737	570	361
Quoted Prices In Active Markets for Indentical Assets (Level 1) | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	61,229	84,239	100,272
Available-for-Sale	0	0	0
Held-To-Maturity Securities, at Fair Value	0	0	0
Equity Securities	0		0
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	0	0	0
Net Loans, at Fair Value	0	0	0
Accrued Interest Receivable, Fair Value Disclosure	0	0	0
Deposits, at Fair Value	0	0	0
Federal Funds Purchased and Securities Sold under Agreements to Repurchase, at Fair Value	0	0	0
Federal Home Loan Bank Overnight Advances, Fair Value Disclosure	0	0
Federal Home Loan Bank Term Advances, Fair Value Disclosure	0	0	0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts, Fair Value Disclosure	0	0	0
Accrued Interest Payable, Fair Value Disclosure	0	0	0
Significant Other Observable Inputs (Level 2) | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	0	0	0
Available-for-Sale	298,812	317,535	305,589
Held-To-Maturity Securities, at Fair Value	280,414	280,338	324,937
Equity Securities	1,850	1,774	1,579
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	7,878	15,506	4,780
Net Loans, at Fair Value	0	0	0
Accrued Interest Receivable, Fair Value Disclosure	8,180	7,035	7,692
Deposits, at Fair Value	2,484,479	2,338,410	2,402,122
Federal Funds Purchased and Securities Sold under Agreements to Repurchase, at Fair Value	58,407	54,659	74,957
Federal Home Loan Bank Overnight Advances, Fair Value Disclosure	74,500	234,000
Federal Home Loan Bank Term Advances, Fair Value Disclosure	34,805	44,652	44,484
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts, Fair Value Disclosure	20,000	20,000	20,000
Accrued Interest Payable, Fair Value Disclosure	737	570	361
Significant Unobservable Inputs (Level 3) | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	0	0	0
Available-for-Sale	0	0	0
Held-To-Maturity Securities, at Fair Value	0	0	0
Equity Securities	0
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	0	0	0
Net Loans, at Fair Value	2,164,298	2,114,372	1,915,978
Accrued Interest Receivable, Fair Value Disclosure	0	0	0
Deposits, at Fair Value	0	0	0
Federal Funds Purchased and Securities Sold under Agreements to Repurchase, at Fair Value	0	0	0
Federal Home Loan Bank Overnight Advances, Fair Value Disclosure	0	0
Federal Home Loan Bank Term Advances, Fair Value Disclosure	0	0	0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts, Fair Value Disclosure	0	0	0
Accrued Interest Payable, Fair Value Disclosure	$ 0	$ 0	$ 0

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Leases - Narrative (Details)	12 Months Ended
	Dec. 31, 2018 branch_office
Leases [Abstract]
Number of branch offices	5

XML

Leases - Quantitative Lease Data (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Finance Lease Amounts:
Right-of-use Assets	$ 2,922
Lease Liabilities	2,946
Operating Lease Amounts:
Right-of-use Assets	5,587
Lease Liabilities	5,639
Finance Lease Cost:
Amortization of Right-of-use assets	17
Interest on Lease Liabilities	15	$ 0
Operating Lease Cost	173
Short-term Lease Cost	33
Variable Lease Cost	56
Total Lease Cost	294
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases	15
Operating Outgoing Cash Flows From Operating Leases	173
Financing Outgoing Cash Flows From Finance Leases	4	$ 0
Right-of-use Assets Obtained In Exchange For New Finance Lease Liabilities	2,939
Right-of-use Assets Obtained In Exchange For New Operating Lease Liabilities	$ 5,725
Weighted-average Remaining Lease Term—Finance Leases (Yrs.)	26 years 10 months 28 days
Weighted-average Remaining Lease Term—Operating Leases (Yrs.)	14 years 7 months 17 days
Weighted-average Discount Rate—Finance Leases %	3.82%
Weighted-average Discount Rate—Operating Leases %	3.50%

XML

Leases - Future Lease Payments on Finance and Operating Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Operating Leases
2019	$ 769
2020	695
2021	557
2022	479
2023	462
Thereafter	4,346
Total	7,308
Less: Net Present Value Adjustment	1,669
Lease Liabilities	5,639
Financing Leases
2019	143
2020	146
2021	149
2022	149
2023	149
Thereafter	4,200
Total	4,936
Less: Net Present Value Adjustment	1,990
Lease Liabilities	$ 2,946
Operating Leases
2019		$ 857
2020		626
2021		497
2022		357
2023		286
2024 and beyond		2,776
Total Minimum Lease Payments		$ 5,399

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Label	Element	Value
Accounting Standards Update 2014-09 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (102,000)
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	(102,000)
Accounting Standards Update 2016-01 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	0
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	331,000
Accounting Standards Update 2016-01 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (331,000)