10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021

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

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 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. ☑ 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). ☑ 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	☑
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   ☑ No

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, 2021
Common Stock, par value $1.00 per share	15,553,329

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	45
Item 3. Quantitative and Qualitative Disclosures About Market Risk	66
Item 4. Controls and Procedures	66
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	67
Item 1.A. Risk Factors	67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3. Defaults Upon Senior Securities	67
Item 4. Mine Safety Disclosures	68
Item 5. Other Information	68
Item 6. Exhibits	68
SIGNATURES	69

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, 2021		December 31, 2020		March 31, 2020
ASSETS
Cash and Due From Banks	$	45,602	$	42,116	$	32,525
Interest-Bearing Deposits at Banks	406,605		338,875		106,004
Investment Securities:
Available-for-Sale at Fair Value	464,089		365,287		378,186
Held-to-Maturity (Approximate Fair Value of $221,360 at March 31, 2021; $226,576 at December 31, 2020; and $242,804 at March 31, 2020)	214,561		218,405		238,520
Equity Securities	1,796		1,636		1,689
FHLB and Federal Reserve Bank Stock	5,360		5,349		5,379
Loans	2,639,243		2,595,030		2,414,193
Allowance for Credit Losses	(26,840)		(29,232)		(23,637)
Net Loans	2,612,403		2,565,798		2,390,556
Premises and Equipment, Net	43,057		42,612		40,987
Goodwill	21,873		21,873		21,873
Other Intangible Assets, Net	2,049		1,950		1,640
Other Assets	86,316		84,735		73,973
Total Assets	$	3,903,711	$	3,688,636	$	3,291,332
LIABILITIES
Noninterest-Bearing Deposits	$	751,884	$	701,341	$	489,151
Interest-Bearing Checking Accounts	992,486		832,434		793,425
Savings Deposits	1,463,229		1,423,358		1,146,683
Time Deposits over $250,000	100,212		123,622		135,854
Other Time Deposits	145,777		153,971		245,892
Total Deposits	3,453,588		3,234,726		2,811,005
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	6,795		17,486		57,909
Federal Home Loan Bank Term Advances	45,000		45,000		50,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		20,000
Finance Leases	5,205		5,217		5,249
Other Liabilities	30,710		31,815		37,771
Total Liabilities	3,561,298		3,354,244		2,981,934
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at March 31, 2021, December 31, 2020 and March 31, 2020	—		—		—
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,194,474 Shares Issued at March 31, 2021 and December 31, 2020 and 19,606,449 at March 31, 2020)	20,194		20,194		19,606
Additional Paid-in Capital	354,358		353,662		336,021
Retained Earnings	51,263		41,899		37,441
Accumulated Other Comprehensive Loss	(3,096)		(816)		(2,412)
Treasury Stock, at Cost (4,651,719 Shares at March 31, 2021; 4,678,736 Shares at December 31, 2020 and 4,624,348 Shares at March 31, 2020)	(80,306)		(80,547)		(81,258)
Total Stockholders’ Equity	342,413		334,392		309,398
Total Liabilities and Stockholders’ Equity	$	3,903,711	$	3,688,636	$	3,291,332

    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
	2021		2020
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans	$	25,183	$	24,874
Interest on Deposits at Banks	85		124
Interest and Dividends on Investment Securities:
Fully Taxable	1,506		2,193
Exempt from Federal Taxes	920		1,035
Total Interest and Dividend Income	27,694		28,226
INTEREST EXPENSE
Interest-Bearing Checking Accounts	219		487
Savings Deposits	565		2,471
Time Deposits over $250,000	120		533
Other Time Deposits	222		1,000
Federal Funds Purchased and   Securities Sold Under Agreements to Repurchase	2		22
Federal Home Loan Bank Advances	193		429
Junior Subordinated Obligations Issued to   Unconsolidated Subsidiary Trusts	169		228
Interest on Financing Leases	49		50
Total Interest Expense	1,539		5,220
NET INTEREST INCOME	26,155		23,006
Provision for Credit Losses	(648)		2,772
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	26,803		20,234
NONINTEREST INCOME
Income From Fiduciary Activities	2,378		2,213
Fees for Other Services to Customers	2,609		2,451
Insurance Commissions	1,640		1,632
Net Gain (Loss) on Securities	160		(374)
Net Gain on Sales of Loans	1,415		213
Other Operating Income	406		1,559
Total Noninterest Income	8,608		7,694
NONINTEREST EXPENSE
Salaries and Employee Benefits	11,138		10,383
Occupancy Expenses, Net	1,593		1,449
Technology and Equipment Expense	3,459		3,352
FDIC Assessments	270		219
Other Operating Expense	2,218		2,351
Total Noninterest Expense	18,678		17,754
INCOME BEFORE PROVISION FOR INCOME TAXES	16,733		10,174
Provision for Income Taxes	3,453		2,047
NET INCOME	$	13,280	$	8,127
Average Shares Outstanding 1:
Basic	15,528		15,446
Diluted	15,563		15,476
Per Common Share:
Basic Earnings	$	0.86	$	0.53
Diluted Earnings	0.85		0.53

    1 2020 Share and Per Share Amounts have been restated for the September 25, 2020 3% 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
	2021		2020
Net Income	$	13,280	$	8,127
Other Comprehensive (Loss) Income, Net of Tax:
Net Unrealized Securities Holding (Loss) Gain   Arising During the Period	(3,812)		4,098
Net Unrealized Gain (Loss) on Cash Flow Hedge   Agreements	1,475		(219)
Reclassification of Net Unrealized Gain on Cash   Flow Hedge Agreements to Interest Expense	(20)		—
Amortization of Net Retirement Plan Actuarial Loss	34		27
Amortization of Net Retirement Plan Prior Service Cost	43		39
Other Comprehensive (Loss) Income	(2,280)		3,945
Comprehensive Income	$	11,000	$	12,072

    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)

	Three Month Period Ended March 31, 2021
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at December 31, 2020	$	20,194	$	353,662	$	41,899	$	(816)	$	(80,547)	$	334,392
Cumulative impact of adoption of ASU 2016-13					120						120
Balance at January 1, 2021 as adjusted for impact of adoption of ASU 2016-13	20,194		353,662		42,019		(816)		(80,547)		334,512
Net Income	—		—		13,280		—		—		13,280
Other Comprehensive Income	—		—		—		(2,280)		—		(2,280)
Cash Dividends Paid, $.260 per Share	—		—		(4,036)		—		—		(4,036)
Stock Options Exercised, Net  (6,927 Shares)	—		94		—		—		62		156
Shares Issued Under the Directors’ Stock   Plan  (3,172 Shares)	—		70		—		—		28		98
Shares Issued Under the Employee Stock   Purchase Plan  (4,269 Shares)	—		86		—		—		38		124
Shares Issued for Dividend   Reinvestment Plans (12,649 Shares)	—		342		—		—		113		455
Stock-Based Compensation Expense	—		104		—		—		—		104
Balance at March 31, 2021	$	20,194	$	354,358	$	51,263	$	(3,096)	$	(80,306)	$	342,413

	Three Month Period Ended March 31, 2020
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at December 31, 2019	$	19,606	$	335,355	$	33,218	$	(6,357)	$	(80,094)	$	301,728
Net Income	—		—		8,127		—		—		8,127
Other Comprehensive Income	—		—		—		3,945		—		3,945
Cash Dividends Paid, $.252 per Share 1	—		—		(3,904)		—		—		(3,904)
Stock Options Exercised, Net (14,282 Shares)	—		199		—		—		144		343
Shares Issued Under the Employee Stock   Purchase Plan  (3,648 Shares)	—		84		—		—		37		121
Shares Issued for Dividend   Reinvestment Plans (16,001 Shares)	—		280		—		—		162		442
Stock-Based Compensation Expense	—		103		—		—		—		103
Purchase of Treasury Stock  (50,021 Shares)	—		—		—		—		(1,507)		(1,507)
Balance at March 31, 2020	$	19,606	$	336,021	$	37,441	$	(2,412)	$	(81,258)	$	309,398

1 Cash dividends paid per share have been adjusted for the September 25, 2020 3% 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:	2021		2020
Net Income	$	13,280	$	8,127
Provision for Credit Losses	(648)		2,772
Depreciation and Amortization	1,951		1,597
Net (Gain) Loss on Securities Transactions	(160)		374
Loans Originated and Held-for-Sale	(24,037)		(9,322)
Proceeds from the Sale of Loans Held-for-Sale	32,093		7,975
Net Gain on the Sale of Loans	(1,415)		(213)
Net Loss (Gain) on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	90		(91)
Contributions to Retirement Benefit Plans	(146)		(195)
Deferred Income Tax Expense (Benefit)	349		(873)
Shares Issued Under the Directors’ Stock Plan	98		—
Stock-Based Compensation Expense	104		103
Tax Benefit from Exercise of Stock Options	13		28
Net Increase in Other Assets	(3,077)		(5,719)
Net Increase in Other Liabilities	1,624		8,563
Net Cash Provided By Operating Activities	20,119		13,126
Cash Flows from Investing Activities:
Proceeds from the Maturities and Calls of Securities Available-for-Sale	25,977		17,444
Purchases of Securities Available-for-Sale	(130,481)		(33,201)
Proceeds from the Maturities and Calls of Securities Held-to-Maturity	4,291		7,075
Purchases of Securities Held-to-Maturity	(619)		(717)
Net Increase in Loans	(51,866)		(27,317)
Proceeds from the Sales of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	259		781
Purchase of Premises and Equipment	(1,311)		(1,072)
Net (Increase) Decrease in FHLB and Federal Reserve Bank Stock	(11)		4,938
Net Cash Used By Investing Activities	(153,761)		(32,069)
Cash Flows from Financing Activities:
Net Increase in Deposits	218,862		194,951
Net Decrease in Short-Term Federal Home Loan Bank Borrowings	—		(130,000)
Net (Decrease) Increase in Short-Term Borrowings	(10,691)		6,810
Finance Lease Payments	(12)		(5)
Federal Home Loan Bank Advances	—		40,000
Repayments of Federal Home Loan Bank Term Advances	—		(20,000)
Purchase of Treasury Stock	—		(1,507)
Stock Options Exercised, Net	156		343
Shares Issued Under the Employee Stock Purchase Plan	124		121
Shares Issued for Dividend Reinvestment Plans	455		442
Cash Dividends Paid	(4,036)		(3,904)
Net Cash Provided By Financing Activities	204,858		87,251
Net Increase in Cash and Cash Equivalents	71,216		68,308
Cash and Cash Equivalents at Beginning of Period	380,991		70,221
Cash and Cash Equivalents at End of Period	$	452,207	$	138,529
Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings	$	1,626	$	5,264
Income Taxes	—		344
Non-cash Investing and Financing Activity:
Transfer of Loans to Other Real Estate Owned and Repossessed Assets	349		371

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, 2021, December 31, 2020 and March 31, 2020; the results of operations for the three month periods ended March 31, 2021 and 2020; the consolidated statements of comprehensive income for the three month periods ended March 31, 2021 and 2020; the changes in stockholders' equity for the three month periods ended March 31, 2021 and 2020; and the cash flows for the three month periods ended March 31, 2021 and 2020. All such adjustments are of a normal recurring nature. 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, 2020 included in Arrow's Annual Report on Form 10-K for the year ended December 31, 2020.

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 (US GAAP) 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.  Due to the uncertainty regarding the impact of the COVID-19 pandemic, management utilized estimates and assumptions in its evaluation of potential impairment of Arrow's right-of-use lease assets, goodwill and intangible assets. Our most significant estimate is the allowance for credit losses. Other estimates include the fair value of financial statements, evaluation of pension and other post-retirement liabilities, an analysis of a need for a valuation allowance for deferred tax assets and a reserve for unfunded loan commitments recorded as an other liability. 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 credit losses.  In connection with the determination of the allowance for credit losses management obtains economic forecasts from reliable sources and appraisals for properties.  The allowance for credit losses is management’s best estimate of the life of loan losses as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for credit losses may be necessary based on changes in economic conditions.

Allowance for Credit Losses – Loans

Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”) approach requires an estimate of the credit losses expected over the life of a loan (or pool of loans). It replaces the incurred loss approach’s threshold that required the recognition of a credit loss when it was probable a loss event was incurred. The allowance for credit losses is a valuation account that is deducted from, or added to, the loans’ amortized cost basis to present the net, lifetime amount expected to be collected on the loans. Loan losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.

Management estimates the allowance balance using relevant available information from internal and external sources related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for the estimation of expected credit losses. Company historical loss experience was supplemented with peer information when there was insufficient loss data for the Company. Peer selection was based on a review of institutions with comparable loss experience as well as loan yield, bank size, portfolio concentration and geography. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in credit concentrations, delinquency level, collateral values and underwriting standards as well as changes in economic conditions or other relevant factors. Management judgment is required at each point in the measurement process.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Upon adoption of CECL, management revised the manner in which loans were pooled for similar risk characteristics. Management developed portfolio segments for estimating loss based on type of borrower and collateral as follows:

Commercial Loans

Commercial Real Estate Loans

Consumer Loans

Residential Loans

Further details related to loan portfolio segments is included in Note 4 Loans.

Historical credit loss experience for both the Company and segment-specific peers provides the basis for the estimation of expected credit losses. The Company utilized regression analyses of peer data, of which the Company is included, where observed credit losses and selected economic factors were utilized to determine suitable loss drivers for modeling lifetime probability of default ("PD") rates. Arrow uses the discounted cash flow ("DCF") method to estimate expected credit losses for the commercial, commercial real estate, and residential segments. For each of these loan segments, Arrow generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, PD, and segment-specific loss given default ("LGD") risk factors. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data and adjusted, if necessary, based on the reasonable and supportable forecast of economic conditions.

8

For the loan segments utilizing the DCF method, (commercial, commercial real estate, and residential) management utilizes externally developed economic forecasts of the following economic factors as loss drivers: national unemployment, gross domestic product and home price index ("HPI"). The economic forecast is applied over a reasonable and supportable forecast period. Arrow utilizes a six quarter reasonable and supportable forecast period with a four quarter reversion to the historic mean on a straight-line basis.

The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring (“TDR”) will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by Arrow.

Arrow uses the vintage analysis method to estimate expected credit losses for the consumer loan segment. The vintage method was selected since the loans within the consumer loan segment are homogeneous, not just by risk characteristic, but loan structure. The loss rate is applied to the loan origination amounts. Arrow maintains, over the life of the loan, the loss curve by vintage year. If estimated losses computed by the vintage method need to be adjusted based on current conditions and the reasonable and supportable economic forecast, these adjustments may be incorporated over a six quarter reasonable and supportable forecast period, reverting to historical losses using a straight-line method over a two year period.

The vintage and DCF models also consider the need to qualitatively adjust expected loss estimates for information not already captured in the quantitative loss estimation process. Qualitative considerations include limitations inherent in the quantitative model; trends experienced in nonperforming and delinquent loans; changes in value of underlying collateral; changes in lending policies and procedures; nature and composition of loans; portfolio concentrations that may affect loss experience across one or more components or the portfolio; the experience, ability and depth of lending management and staff; the Company’s credit review system; and the effect of external factors; such as competition, legal and regulatory requirements. These qualitative factor adjustments may increase or decrease the Company's estimate of expected credit losses so that the allowance for credit loss is reflective of the estimate of lifetime losses that exist in the loan portfolio at the balance sheet date.

All loans not included in the vintage analysis method that exceed $250,000 which are on nonaccrual, are evaluated on an individual basis. For collateral dependent financial assets where Arrow has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and Arrow expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, Arrow has elected a practical expedient to measure the allowance for credit loss as the difference between the fair value of the collateral less cost to sell, and the amortized cost basis of the asset as of the measurement date. In the event where the repayment of a collateral dependent financial asset is expected to be provided substantially through the operating of the collateral, Arrow will use fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

Except as set forth below, a loan that has been modified or renewed is considered a TDR when two conditions are met:

•The borrower is experiencing financial difficulty, and

•Concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics.

Arrow's allowance for credit losses reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point it is determined that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required allowance for credit losses. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in Arrow's existing pools based on the underlying risk characteristics of the loan to measure the allowance for credit losses. In accordance with the Coronavirus Aid, Relief, and Economic Security (CARES) Act and ASC Subtopic 310-40, as extended by the Consolidated Appropriations Act, 2021, if a qualifying loan modification was made for a borrower as the result of the COVID-19 pandemic, this modification was not considered a TDR.

Estimated Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities

The Company estimates expected credit losses over the contractual period in which the Company has exposure to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures recognized in other liabilities, is adjusted as an expense in other noninterest expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. Estimating credit losses on unfunded commitments requires the Bank to consider the following categories of off-balance sheet credit exposure: unfunded commitments to extend credit, unfunded lines of credit, and standby letters of credit. Each of these unfunded commitments is then analyzed for a probability of funding to calculate a probable funding amount. The life of loan loss factor by related portfolio segment from the loan allowance for credit loss calculation is then applied to the probable funding amount to calculate the estimated credit losses on off-balance sheet credit exposures recognized as other liabilities.

Allowance for Credit Losses – Held to Maturity ("HTM") Debt Securities

Arrow's HTM debt securities are also required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on HTM debt securities on a collective basis by major security types that share similar risk characteristics, such as financial asset type and collateral type adjusted for current conditions and reasonable and supportable

9

forecasts. Management classifies the HTM portfolio into the following major security types: U.S. government agency or U.S. government sponsored mortgage-backed and collateralized mortgage obligations securities, and state and municipal debt securities.

The mortgage-backed and collateralized mortgage obligations HTM securities are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government as to timely repayment of principal and interest, are highly rated by major rating agencies, and have a long history of no credit losses. Therefore, the Company did not record a credit loss for these securities.

State and municipal bonds carry an investment grade from an accredited ratings agency, primarily with an investment grade rating. In addition, the Company has a limited amount of New York state local municipal bonds that are not rated. The estimate of expected credit losses on the HTM portfolio is based on the expected cash flows of each individual CUSIP over its contractual life and utilized a municipal loss forecast model for determining PD and LGD rates. Management may exercise discretion to make adjustments based on environmental factors. A calculated expected credit loss for individual securities was determined using the PD and LGD rates. Arrow determined that the expected credit loss on its municipal bond portfolio was de minimis, and therefore, an allowance for credit losses was not recorded.

Allowance for Credit Losses – Available for Sale ("AFS") Debt Securities

The impairment model for AFS debt securities differs from the CECL approach utilized by HTM debt securities since AFS debt securities are measured at fair value rather than amortized cost. For AFS debt securities in an unrealized loss position, the Bank first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, in making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, failure of the issuer of the debt security to make scheduled interest or principal payments, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. The cash flows are estimated using information relevant to the collectability of the security, including information about past events, current conditions and reasonable and supportable forecasts. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Accrued Interest Receivable

Upon adoption of CECL on January 1, 2021, the Company made the following elections regarding accrued interest receivable: (1) presented accrued interest receivable balances separately within the other assets balance sheet line item; (2) excluded interest receivable that is included in amortized cost of financing receivables from related disclosures requirements and (3) continued the Company's policy to write off accrued interest receivable by reversing interest income. For loans, write off typically occurs upon becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, the Company has not experienced uncollectible accrued interest receivable on investment securities.

The following accounting standards have been adopted in the first three months of 2021:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all related subsequent amendments thereto. ASU 2016-13 introduces new guidance that make substantive changes to the accounting for credit losses. ASU 2016-13 introduces the CECL model, which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities. The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses. ASU 2016-13 also modifies certain provisions of the current other-than-temporary impairment model for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security’s amortized cost basis and its fair value and will be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. ASU 2016-13 also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. ASU 2016-13 requires expanded disclosures including, but not limited to, (1) information about the methods and assumptions used to estimate expected credit losses, including changes in the factors that influenced management’s estimate and the reasons for those changes, (2) financing receivables and net investment in leases measured at amortized cost, further disaggregation of information about the credit quality of those assets and (3) a rollforward of the allowance for credit losses for HTM and AFS securities. The standard also changes the accounting for purchased credit-impaired debt securities and loans. ASU 2016-13 was effective for the Company on January 1, 2020. As permitted by the CARES Act, Arrow deferred the adoption of the CECL methodology in determining credit losses until January 1, 2021. Management expects that the CECL model may create more volatility in the level of our allowance for loan losses from quarter to quarter as changes in the level of allowance for loan losses will be dependent upon, among other things, macroeconomic forecasts and conditions, loan portfolio volumes and credit quality.

Arrow adopted CECL on January 1, 2021 (“Day 1”) using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures recognized as other liabilities. Results for reporting periods beginning after January 1, 2021 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net increase to retained earnings of $120,000 as of January 1, 2021 for the cumulative effect of adopting ASC 326. The transition adjustment includes a $1.3 million decrease to the allowance for credit losses on loans, a $1.1 million increase to the estimated credit losses on off-balance sheet credit exposures recorded as other liabilities, and a $41,000 impact to the deferred tax liability. The Company did not record an allowance for HTM debt securities on January 1, 2021 as the amount of credit risk was deemed immaterial. The Company did not record an allowance for credit losses on its AFS debt securities under the

10

newly codified AFS debt security impairment model, as the majority of these securities are government agency-backed securities for which the risk of loss is minimal. Refer to Note 3 Investment Securities and Note 4 Loans (under the captions "Allowance for Credit Losses" and "Loan Credit Quality Indicators") to the Company’s unaudited interim consolidated financial statements included in this Form 10-Q for more information.

In December 2019, the FASB issued ASU 2019-12 "Simplifying the Accounting for Income Taxes" (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. Arrow adopted this standard on January 1, 2021. The Company does not expect that the adoption of this standard will have a material impact on its financial position or the results of operations in periods subsequent to its adoption.

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Note 2. CASH AND CASH EQUIVALENTS (In Thousands)

The following table is the schedule of Cash and Cash Equivalents at March 31, 2021, December 31, 2020 and March 31, 2020.
		March 31, 2021		December 31, 2020		March 31, 2020
Cash and Due From Banks		$	45,602	$	42,116	$	32,525
Interest-Bearing Deposits at Banks		406,605		338,875		106,004
Total Cash and Cash Equivalents		$	452,207	380,991		138,529
Supplemental Information:
Total required reserves, including vault cash and Federal Reserve Bank deposits 1		$	—	$	—	$	—
Restricted cash pledged as collateral related to swap agreements and included in Cash and Due From Banks		$	—	$	500	$	—
1.	Until March 2020, Arrow was required to maintain reserve balances with the Federal Reserve Bank of New York. In March 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent to free up liquidity in the banking industry to support lending to households and businesses.

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Note 3.    INVESTMENT SECURITIES (In Thousands)

The following table is the schedule of Available-For-Sale Securities at March 31, 2021, December 31, 2020 and March 31, 2020:

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, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,001	$	508	$	349,911	$	1,000	$	461,420
Gross Unrealized Gains	138		—		6,276		—		6,414
Gross Unrealized Losses	(1,769)		—		(1,776)		(200)		(3,745)
Available-For-Sale Securities,   at Fair Value	108,370		508		354,411		800		464,089
Available-For-Sale Securities,   Pledged as Collateral, at Fair Value									352,214
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	—	$	68	$	58	$	—	$	126
From 1 - 5 Years	65,001		40		289,741		—		354,782
From 5 - 10 Years	45,000		400		60,112		1,000		106,512
Over 10 Years	—		—		—		—		—
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	—	$	68	$	64	$	—	$	132
From 1 - 5 Years	63,774		40		295,370		—		359,184
From 5 - 10 Years	44,596		400		58,977		800		104,773
Over 10 Years	—		—		—		—		—
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	103,231	$	—	$	120,780	$	—	$	224,011
12 Months or Longer	—		—		—		800		800
Total	$	103,231	$	—	$	120,780	$	800	$	224,811
Number of Securities in a   Continuous Loss Position	14		—		16		1		31
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,769	$	—	$	1,776	$	—	$	3,545
12 Months or Longer	—		—		—		200		200
Total	$	1,769	$	—	$	1,776	$	200	$	3,745
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,001
US Agency Obligations,   at Fair Value	108,370
US Government Agency   Securities, at Amortized Cost					$	11,582
US Government Agency   Securities, at Fair Value					11,658
Government Sponsored Entity   Securities, at Amortized Cost					338,329
Government Sponsored Entity   Securities, at Fair Value					342,753

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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, 2020
Available-For-Sale Securities,   at Amortized Cost	$	65,002	$	528	$	290,967	$	1,000	$	357,497
Gross Unrealized Gains	184		—		7,934		—		8,118
Gross Unrealized Losses	(74)		—		(54)		(200)		(328)
Available-For-Sale Securities,   at Fair Value	65,112		528		298,847		800		365,287
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									244,411
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	29,926	$	—	$	—	$	—	$	29,926
12 Months or Longer	—		—		4,882		800		5,682
Total	$	29,926	$	—	$	4,882	$	800	$	35,608
Number of Securities in a   Continuous Loss Position	4		—		1		1		6
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	74	$	—	$	—	$	—	$	74
12 Months or Longer	—		—		54		200		254
Total	$	74	$	—	$	54	$	200	$	328
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	65,002
US Agency Obligations,   at Fair Value	65,112
US Government Agency   Securities, at Amortized Cost					$	12,696
US Government Agency   Securities, at Fair Value					12,683
Government Sponsored Entity   Securities, at Amortized Cost					278,271
Government Sponsored Entity   Securities, at Fair Value					286,164

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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, 2020
Available-For-Sale Securities,   at Amortized Cost	$	5,002	$	723	$	365,333	$	1,000	$	372,058
Gross Unrealized Gains	179		—		7,484		—		7,663
Gross Unrealized Losses	—		—		(1,335)		(200)		(1,535)
Available-For-Sale Securities,   at Fair Value	5,181		723		371,482		800		378,186
Available-For-Sale Securities,   Pledged as Collateral, at Fair Value									273,124
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	18,846	$	—	$	18,846
12 Months or Longer	—		—		59,262		800		60,062
Total	$	—	$	—	$	78,108	$	800	$	78,908
Number of Securities in a   Continuous Loss Position	—		—		27		1		28
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	316	$	—	$	316
12 Months or Longer	—		—		1,019		200		1,219
Total	$	—	$	—	$	1,335	$	200	$	1,535
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	5,002
US Agency Obligations,   at Fair Value	5,181
US Government Agency   Securities, at Amortized Cost					$	58,089
US Government Agency   Securities, at Fair Value					57,091
Government Sponsored Entity   Securities, at Amortized Cost					307,244
Government Sponsored Entity   Securities, at Fair Value					314,391

At March 31, 2021, there was no allowance for credit losses for the available for sale securities portfolio.

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The following table is the schedule of Held-To-Maturity Securities at March 31, 2021, December 31, 2020 and March 31, 2020:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	191,202	$	23,359	$	214,561
Gross Unrealized Gains	5,843		956		6,799
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	197,045		24,315		221,360
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					207,595
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	16,513	$	1,586	$	18,099
From 1 - 5 Years	139,576		21,773		161,349
From 5 - 10 Years	34,110		—		34,110
Over 10 Years	1,003		—		1,003
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	16,580	$	1,639	$	18,219
From 1 - 5 Years	143,850		22,676		166,526
From 5 - 10 Years	35,599		—		35,599
Over 10 Years	1,016		—		1,016
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	8,310
US Government Agency   Securities, at Fair Value			8,597
Government Sponsored Entity   Securities, at Amortized Cost			15,049
Government Sponsored Entity   Securities, at Fair Value			15,718

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Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2020
Held-To-Maturity Securities,   at Amortized Cost	$	192,352	$	26,053	$	218,405
Gross Unrealized Gains	7,080		1,094		8,174
Gross Unrealized Losses	(3)		—		(3)
Held-To-Maturity Securities,   at Fair Value	199,429		27,147		226,576
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					211,176
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	1,513	$	—	$	1,513
12 Months or Longer	—		—		—
Total	$	1,513	$	—	$	1,513
Number of Securities in a   Continuous Loss Position	4		—		4
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	3	$	—	$	3
12 Months or Longer	—		—		—
Total	$	3	$	—	$	3
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	9,440
US Government Agency   Securities, at Fair Value			9,762
Government Sponsored Entity   Securities, at Amortized Cost			16,613
Government Sponsored Entity   Securities, at Fair Value			17,385
March 31, 2020
Held-To-Maturity Securities,   at Amortized Cost	$	204,148	$	34,372	$	238,520
Gross Unrealized Gains	3,104		1,329		4,433
Gross Unrealized Losses	(149)		—		(149)
Held-To-Maturity Securities,   at Fair Value	207,103		35,701		242,804
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					231,539
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	5,625	$	—	$	5,625
12 Months or Longer	1,867		—		1,867
Total	$	7,492	$	—	$	7,492
Number of Securities in a   Continuous Loss Position	16		—		16

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Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	16	$	—	$	16
12 Months or Longer	133		—		133
Total	$	149	$	—	$	149
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	1,594
US Government Agency   Securities, at Fair Value			1,655
Government Sponsored Entity   Securities, at Amortized Cost			32,778
Government Sponsored Entity   Securities, at Fair Value			34,046

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, 2021, December 31, 2020 and March 31, 2020, do not reflect any deterioration of the credit worthiness of the issuing entities.

Arrow evaluates available-for-sale debt securities in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized within the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. Arrow determined that at March 31, 2021, gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. Arrow does not intend to sell, nor is it more likely than not that Arrow will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. Therefore, Arrow carried no allowance for credit loss at March 31, 2021 and there was no credit loss expense recognized by Arrow with respect to the securities portfolio during the three months ended March 31, 2021.  

Arrow's held to maturity debt securities are comprised of U.S. government agencies, U.S. government-sponsored enterprises or state and municipal obligations. U.S. government agencies and U.S. government-sponsored enterprise securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Arrow determined that the expected credit loss on its held to maturity debt portfolio was immaterial and therefore no allowance for credit loss was recorded as of March 31, 2021.

The following table is the schedule of Equity Securities at March 31, 2021, December 31, 2020 and March 31, 2020:

Equity Securities
	March 31, 2021	December 31, 2020	March 31, 2020
Equity Securities, at Fair Value	$1,796	$1,636	$1,689

The following is a summary of realized and unrealized gains and losses recognized in net income on equity securities during the three month period ended March 31, 2021 and 2020:

	Quarterly Period Ended:
	March 31, 2021		March 31, 2020
Net Gain (Loss) on Equity Securities	$	160	$	(374)
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	—		—
Unrealized net gain (loss) recognized during the reporting period on equity securities still held at the reporting date	$	160	$	(374)

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Note 4.    LOANS (In Thousands)

Loan Categories and Past Due Loans

The following two tables present loan balances outstanding as of March 31, 2021, 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. Loans held-for-sale of $4,443, $11,085 and $1,905 as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively, are included in the residential real estate balances for current loans.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2021
Loans Past Due 30-59 Days	$	63	$	143	$	2,233	$	2,097	$	4,536
Loans Past Due 60-89 Days	34		2,723		822		156		3,735
Loans Past Due 90 or more Days	38		1,474		592		1,700		3,804
Total Loans Past Due	135		4,340		3,647		3,953		12,075
Current Loans	288,416		577,167		857,524		904,061		2,627,168
Total Loans	$	288,551	$	581,507	$	861,171	$	908,014	$	2,639,243
December 31, 2020
Loans Past Due 30-59 Days	$	102	$	—	$	4,976	$	261	$	5,339
Loans Past Due 60-89 Days	113		—		2,713		1,279		4,105
Loans Past Due 90 or more Days	78		1,658		1,379		1,224		4,339
Total Loans Past Due	293		1,658		9,068		2,764		13,783
Current Loans	240,261		570,129		850,700		920,157		2,581,247
Total Loans	$	240,554	$	571,787	$	859,768	$	922,921	$	2,595,030
March 31, 2020
Loans Past Due 30-59 Days	$	173	$	461	$	5,636	$	1,630	$	7,900
Loans Past Due 60-89 Days	70		110		1,451		212		1,843
Loans Past Due 90 or more Days	8		911		549		1,525		2,993
Total Loans Past Due	251		1,482		7,636		3,367		12,736
Current Loans	146,849		524,648		817,073		912,887		2,401,457
Total Loans	$	147,100	$	526,130	$	824,709	$	916,254	$	2,414,193

Schedule of Non Accrual Loans by Category
			Commercial
March 31, 2021	Commercial		Real Estate		Consumer		Residential		Total
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	242	$	242
Nonaccrual Loans	64		4,364		746		2,913		8,087
Nonaccrual With No Allowance for Credit Loss	64		1,641		746		2,913		5,364
Interest Income on Nonaccrual Loans	—		14		—		—		—
December 31, 2020
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	184	$	—	$	44	$	228
Nonaccrual Loans	78		1,475		1,470		3,010		6,033
March 31, 2020
Loans 90 or More Days Past Due   and Still Accruing Interest	$	5	$	238	$	93	$	101	$	437
Nonaccrual Loans	63		1,445		715		2,720		4,943

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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 our 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. Generally, 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 to support the borrowing, as permitted by applicable law.

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 typically 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. Many projects will ultimately be used by the borrowers' businesses, while others are developed for resale. These real estate loans are also typically secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, 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 - This category is primarily comprised of automobile loans. Arrow primarily finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont. Most automobile loans carry a fixed rate of interest with principal repayment terms typically ranging from three to seven years. Automobile loans are underwritten on a secured basis using the underlying collateral being financed. Arrow also 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, Arrow also offers personal lines of credit and overdraft protection. Several of these consumer loans are unsecured, which carry a higher risk of loss.

Residential - Residential real estate loans consist primarily of loans secured by first or second mortgages on primary residences. Arrow originates fixed-rate and adjustable-rate and fixed-rate one-to-four-family residential real estate loans for the construction, purchase real estate or refinancing of an existing mortgage. These loans are collateralized primarily by owner-occupied properties generally located in Arrow'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. Arrow’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 Arrow's general practice to underwrite our 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.  Arrow's policy allows for a maximum loan to value ratio of 80%, although periodically higher advances are allowed.  Arrow 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.

The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2021:

March 31, 2021	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		3,851		3,851
Consumer	—		—		—
Residential	1,156		—		1,156
Total	$	1,156	$	3,851	$	5,007

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Allowance for Credit Losses

As previously mentioned in Note 1 Accounting Policies, Arrow's January 1, 2021 adoption of CECL resulted in a significant change to the methodology for estimating the allowance for credit losses as compared to December 31, 2020.

The Day 1 decrease in the allowance for credit loss on loans relating to adoption of ASU 2016-13 was $1.3 million. The Company made a policy election to report accrued interest receivable in the other assets line item on the balance sheet. Accrued interest receivable on loans totaled $6.1 million at March 31, 2021 and was excluded from the estimate of credit losses.

Loan segments were selected by class code and application code to ensure each segment is comprised of loans with homogenous loan characteristics and similar risk profiles. The resulting loan segments are commercial, commercial real estate, consumer and residential real estate loans. The consumer segment is mainly comprised of automobile loans, and since they are relatively short-term in nature, with similar dollar amounts and collateral, the vintage analysis method was selected to determine the credit loss reserve. The vintage method utilizes Arrow loan data exclusively as the method calculates a loss rate based on the total origination balance of the loans by year and the charge-off and recovery rate of the same origination year. Arrow maintains, over the life of the loan, the loss curve by vintage year. The discounted cash flow method (DCF) is used to calculate the reserve for credit losses for the commercial, commercial real estate and residential real estate segments. Please see Note 1 for a full explanation.

The Day 1 and March 31, 2021 allowance for credit losses calculation incorporated a reasonable and supportable forecast period to account for economic conditions utilized in the measurement. The quantitative model utilized an economic forecast sourced from reputable third-parties that reflected economic improvement with a reduction of approximately 1% in the national unemployment rate during the six quarter forecast period, while forecasted gross domestic product peaked in the second quarter of 2021 and remained more favorable for the remainder of the forecast period as compared to the economic forecast used for the Day 1 adoption. The home price index forecast improved significantly in the second and third quarters of 2021 and remained more favorable as compared to the economic forecast used for the Day 1 adoption. The improved economic forecast at March 31, 2021, resulted in a net decrease in the allowance for credit losses of $1.1 million, including the increases due to the increase in loan volume. Management evaluated the results of the quantitative model and determined that qualitative factor adjustments were necessary to reflect the expected life of loss for Arrow's loan portfolio. Management's evaluation considers the allowance for credit losses for loans to be appropriate as of March 31, 2021.

The following table details activity in the allowance for credit losses on loans for the three months ended March 31, 2021 and March 31, 2020. Arrow adopted ASU 2016-13 on January 1, 2021. Results for the periods beginning after January 1, 2021 are presented under ASC 326 and prior periods continue to be reported in accordance with previously applicable US GAAP.

Allowance for Credit Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Credit Losses for the Quarterly Period:
December 31, 2020	$	2,173	$	9,990	$	11,562	$	5,507	$	29,232
Impact of ASU 2016-13	2,084		2,064		(9,383)		3,935		(1,300)
Balance as of January 1, 2021 as adjusted for ASU 2016-13	4,257		12,054		2,179		9,442		27,932
Charge-offs	(3)		—		(627)		(3)		(633)
Recoveries	—		—		189		—		189
Provision	43		(110)		688		(1,269)		(648)
March 31, 2021	$	4,297	$	11,944	$	2,429	$	8,170	$	26,840

Allowance for Loan Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Loan Losses for the Quarterly Period:
December 31, 2019	$	1,386	$	5,830	$	9,408	$	4,563	$	21,187
Charge-offs	(14)		—		(467)		—		$	(481)
Recoveries	—		—		159		—		$	159
Provision	267		1,235		904		366		$	2,772
March 31, 2020	$	1,639	$	7,065	$	10,004	$	4,929	$	23,637

Estimated Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities

Financial instrument credit losses apply to off-balance sheet credit exposures such as unfunded loan commitments and standby letters of credit. A liability for expected credit losses for off-balance sheet exposures is recognized if the entity has a present contractual obligation to extend the credit and the obligation is not unconditionally cancellable by the entity. The Day 1 adoption of ASU 2016-13, created an allowance for credit loss on off-balance sheet exposures recognized as other liabilities of $1.1 million. Subsequent changes in this allowance are reflected in other operating expenses within the non interest expense category. As of March 31, 2021, the total unfunded commitment off-balance sheet credit exposure was $993 thousand.

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Individually Evaluated Loans

All loans not included in the vintage analysis method that exceed $250,000, which are on nonaccrual status, are evaluated on an individual basis. Arrow made the policy election to apply practical expedient for collateral dependent financial assets when the borrower is experiencing financial difficulty and the repayment is expected through the sale of the collateral. This allows Arrow to use fair value of the collateral at the reporting date adjusted for estimated cost to sell when recording the net carrying amount of the asset and determining the allowance for credit losses for a financial asset. In the event where the repayment of a collateral dependent financial asset is expected to be provided substantially through the operating of the collateral, Arrow will use fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses. As of March 31, 2021, there were six total relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $5.0 million and only one loan had an allowance for credit loss of $556 thousand.

Allowance for Credit Losses - Collectively and Individually Evaluated
	Commercial		Commercial Real Estate		Consumer		Residential		Total
March 31, 2021
Ending Loan Balance - Collectively Evaluated	$	288,551	$	577,656	$	861,171	$	906,858	$	2,634,236
Allowance for Credit Losses - Loans Collectively Evaluated	4,297		11,388		2,429		8,170		26,284
Ending Loan Balance - Individually Evaluated	—		3,851		—		1,156		5,007
Allowance for Credit Losses - Loans Individually Evaluated	—		556		—		—		556

The following table presents information pertaining to the allowance for loan losses as of December 31, 2020 and March 31, 2020, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Allowance for Loan Losses - Collectively and Individually Evaluated for Impairment
	Commercial		Commercial Real Estate		Consumer		Residential		Total
December 31, 2020
Ending Loan Balance - Collectively Evaluated for Impairment	$	240,507	$	570,659	$	859,657	$	921,504	$	2,592,327
Allowance for Loan Losses - Loans Collectively Evaluated for Impairment	2,154		9,990		11,562		5,485		$	29,191
Ending Loan Balance - Individually Evaluated for Impairment	47		1,128		111		1,417		2,703
Allowance for Loan Losses - Loans Individually Evaluated for Impairment	19		—		—		22		41
March 31, 2020
Ending Loan Balance - Collectively Evaluated for Impairment	$	147,066	$	524,993	$	824,598	$	915,301	$	2,411,958
Allowance for Loan Losses - Loans Collectively Evaluated for Impairment	1,635		7,065		10,004		4,892		23,596
Ending Loan Balance - Individually Evaluated for Impairment	34		1,137		111		953		2,235
Allowance for Loan Losses - Loans Individually Evaluated for Impairment	4		—		—		37		41

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

Arrow's 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, the independent internal loan review department performs periodic reviews of the credit quality indicators on individual loans in the commercial loan portfolio.

Management considers the need to qualitatively adjust expected credit loss estimates for information not already captured in the loss estimation process. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses. Adjustments are not made for information that has already been considered and included in the loss estimation process.

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Management considers the qualitative factors that are relevant to Arrow as of the reporting date, which may include, but are not limited to the following factors:

•The nature and volume of Arrow's financial assets;

•The existence, growth, and effect of any concentrations of credit;

•The volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

•The value of the underlying collateral for loans that are not collateral-dependent;

•Arrow's lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries;

•The quality of Arrow's loan review function;

•The experience, ability, and depth of Arrow's lending, investment, collection, and other relevant management/staff;

•The effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters;

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the institution operates that affect the collectability of financial assets; and

•Other qualitative factors not reflected in quantitative loss rate calculations.

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Loan Credit Quality Indicators

The following table presents credit quality indicators by total loans amortized cost basis by origination year as of March 31, 2021.

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
March 31, 2021	2021		2020		2019		2018		2017		Prior
Commercial:
Risk rating
Satisfactory	$	78,184	$	126,061	$	18,202	$	15,693	$	10,004	$	12,234	$	14,006	$	—	$	274,384
Special mention	—		5,031		66		—		—		2		—		—		5,099
Substandard	—		5,507		—		—		—		3,514		47		—		9,068
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	78,184	$	136,599	$	18,268	$	15,693	$	10,004	$	15,750	$	14,053	$	—	$	288,551
Commercial Real Estate:
Risk rating
Satisfactory	$	24,511	$	298,907	$	49,957	$	44,902	$	24,558	$	83,690	$	3,161	$	—	$	529,686
Special mention	—		17,825		2,010		—		142		2,115		—		—		22,092
Substandard	2,021		10,853		4,006		163		—		12,661		25		—		29,729
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	26,532	$	327,585	$	55,973	$	45,065	$	24,700	$	98,466	$	3,186	$	—	$	581,507
Consumer:
Risk rating
Performing	$	95,223	$	321,575	$	225,191	$	135,646	$	56,508	$	25,834	$	448	$	—	$	860,425
Nonperforming	—		141		181		189		167		68		—		—		746
Total Consumer Loans	$	95,223	$	321,716	$	225,372	$	135,835	$	56,675	$	25,902	$	448	$	—	$	861,171
Residential:
Risk rating
Performing	$	34,833	$	156,500	$	114,523	$	107,176	$	110,308	$	266,377	$	115,142	$	—	$	904,859
Nonperforming	—		203		—		27		149		2,544		232		—		3,155
Total Residential Loans	$	34,833	$	156,703	$	114,523	$	107,203	$	110,457	$	268,921	$	115,374	$	—	$	908,014

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

The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $1.4 million.

For the allowance calculation, an internally developed system of five credit quality indicators is used 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 Company 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;

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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 (e.g. 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.

The following table presents information pertaining to loan credit quality indicators as of December 31, 2020 and March 31, 2020, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Loan Credit Quality Indicators
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
December 31, 2020
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	229,351	$	525,609					$	754,960
Special Mention	1,574		16,213						17,787
Substandard	9,629		29,965						39,594
Doubtful	—		—						—
Performing					$	858,298	$	919,867	$	1,778,165
Nonperforming					1,470		3,054		4,524
March 31, 2020
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	140,218	$	497,243					$	637,461
Special Mention	28		255						283
Substandard	6,854		28,632						35,486
Doubtful	—		—						—
Credit Risk Profile Based on Payment Activity:
Performing					$	823,901	$	913,433	$	1,737,334
Nonperforming					808		2,821		3,629

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Impaired Loans

The following table presents information on impaired loans as of December 31, 2020 and March 31, 2020 based on whether the impaired loan has a recorded related allowance or has no recorded related allowance, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Impaired Loans
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
December 31, 2020
Recorded Investment:
With No Related Allowance	$	—	$	1,124	$	112	$	1,174	$	2,410
With a Related Allowance	46		—		—		244		290
Unpaid Principal Balance:
With No Related Allowance	—		1,128		111		1,174		2,413
With a Related Allowance	47		—		—		244		291
March 31, 2020
Recorded Investment:
With No Related Allowance	$	—	$	1,137	$	112	$	697	$	1,946
With a Related Allowance	33		—		—		256		289
Unpaid Principal Balance:
With No Related Allowance	—		1,137		111		697		$	1,945
With a Related Allowance	34		—		—		256		290
March 31, 2020
Average Recorded Balance:
With No Related Allowance	$	—	$	569	$	110	$	698	$	1,377
With a Related Allowance	34		—		—		258		292
Interest Income Recognized:
With No Related Allowance	—		10		—		—		10
With a Related Allowance	—		—		—		—		—
Cash Basis Income:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—

At December 31, 2020 and March 31, 2020, 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 loan became impaired and includes restructured loans in compliance with their modified terms and nonaccrual loans where interest income was recognized on a cash basis.

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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, 2021
Number of Loans	—		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment	—		—		—		—		—
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2020
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	16	$	—	$	16
Post-Modification Outstanding Recorded Investment	—		—		16		—		16
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

In general, prior to the novel coronavirus (COVID-19) pandemic, 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, 2021. The Consolidated Appropriations Act, 2021 extended certain provisions of the CARES Act including, if a short-term loan modification (e.g. six months) is made for a borrower as the result of the COVID-19 pandemic, and who was current on contractual payments as of December 31, 2019, this modification is not considered a TDR.

Note 5.    COMMITMENTS AND CONTINGENCIES (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, 2021, December 31, 2020 and March 31, 2020:

Commitments to Extend Credit and Letters of Credit
	March 31, 2021		December 31, 2020		March 31, 2020
Notional Amount:
Commitments to Extend Credit	$	437,920	$	399,882	$	376,519
Standby Letters of Credit	3,775		3,703		3,301
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	12		28		29

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.

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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, 2021, December 31, 2020 and March 31, 2020 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, 2021, December 31, 2020 and March 31, 2020, 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.

Except as noted below, Arrow, 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, Arrow is often the subject of, or a party to, various legal claims by other parties against Arrow, by Arrow against other parties, or involving Arrow, which arise in the normal course of business. Except as noted below, the various pending legal claims against Arrow will not, in the opinion of management based upon consultation with counsel, result in any material liability.

On July 1, 2020, Daphne Richard, a customer of GFNB filed a putative class action complaint against GFNB in the United States District Court for the Northern District of New York. The complaint alleges that GFNB assessed overdraft fees on certain transactions drawn on her checking account without having sufficiently disclosed its overdraft-fee practices in its account agreement. Ms. Richard, on behalf of two purported classes, seeks compensatory damages, disgorgement of profits, statutory damages, treble damages, enjoinment of the conduct complained of, and costs and fees. The complaint is similar to complaints filed against other financial institutions pertaining to overdraft fees. Arrow denies any wrongdoing and the case is being vigorously defended.

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Note 6.    COMPREHENSIVE INCOME (In Thousands)

The following table presents the components of other comprehensive income for the three month periods ended March 31, 2021 and 2020:

Schedule of Comprehensive Income
	Three Months Ended March 31
			Tax
	Before-Tax		(Expense)		Net-of-Tax
	Amount		Benefit		Amount
2021
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(5,121)	$	1,309	$	(3,812)
Net Unrealized Gain on Cash Flow Swap	1,982		(507)		1,475
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(28)		8		(20)
Amortization of Net Retirement Plan Actuarial Loss	46		(12)		34
Amortization of Net Retirement Plan Prior Service Cost	59		(16)		43
Other Comprehensive Loss	$	(3,062)	$	782	$	(2,280)
2020
Net Unrealized Securities Holding Gain on Securities Available-for-Sale Arising During the Period	$	5,504	$	(1,406)	$	4,098
Net Unrealized Loss on Cash Flow Swap	(294)		75		(219)
Amortization of Net Retirement Plan Actuarial Loss	36		(9)		27
Amortization of Net Retirement Plan Prior Service Cost	54		(15)		39
Other Comprehensive Income	$	5,300	$	(1,355)	$	3,945

29

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

Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)
	Unrealized (Loss) and Gain on Available-for-Sale Securities		Unrealized Gain (Loss) on Cash Flow Swap		Defined Benefit Plan Items				Total
					Net Actuarial Loss		Net Prior Service Cost
For the Quarter-To-Date periods ended:
December 31, 2020	$	5,799	$	485	$	(5,929)	$	(1,171)	$	(816)
Other comprehensive income or loss before reclassifications	(3,812)		1,475		—		—		(2,337)
Amounts reclassified from accumulated other comprehensive income	—		(20)		34		43		57
Net current-period other comprehensive income	(3,812)		1,455		34		43		(2,280)
March 31, 2021	$	1,987	$	1,940	$	(5,895)	$	(1,128)	$	(3,096)
December 31, 2019	$	465	$	—	$	(5,847)	$	(975)	$	(6,357)
Other comprehensive income or loss before reclassifications	4,098		(219)		—		—		3,879
Amounts reclassified from accumulated other comprehensive income	—		—		27		39		66
Net current-period other comprehensive income	4,098		(219)		27		39		3,945
March 31, 2020	$	4,563	$	(219)	$	(5,820)	$	(936)	$	(2,412)

(1) All amounts are net of tax.

30

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

Reclassifications Out of Accumulated Other Comprehensive Income
Details about Accumulated Other Comprehensive Income (Loss) Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2021
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	28		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	(59)		(1)	Salaries and Employee Benefits
Actuarial loss	(46)		(1)	Salaries and Employee Benefits
	(77)			Total before Tax
	20			Provision for Income Taxes
Total reclassifications for the period	$	(57)		Net of Tax
March 31, 2020
Amortization of defined benefit pension items:
Prior-service costs	$	(54)	(1)	Salaries and Employee Benefits
Actuarial loss	(36)		(1)	Salaries and Employee Benefits
	(90)			Total before Tax
	24			Provision for Income Taxes
Total reclassifications for the period	$	(66)		Net of Tax
(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

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Note 7.    STOCK-BASED COMPENSATION (Dollars In Thousands, Except Share and Per Share Amounts)

Arrow has established three stock-based compensation plans: a 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 25, 2020 3% 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, 2021.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2021	264,090			$	28.84
Granted	55,500			29.55
Exercised	(6,927)			22.52
Forfeited	(1,034)			19.70
Outstanding at March 31, 2021	311,629			29.14
Vested at Period-End	179,681			27.73
Expected to Vest	131,948			31.05
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	4.85
Fair Value Assumptions:
Dividend Yield	3.41		%
Expected Volatility	26.53		%
Risk Free Interest Rate	0.49		%
Expected Lives (in years)	8.75

The following table presents information on the amounts expensed related to stock options for the three month periods ended March 31, 2021 and 2020:

	For the Three Months Ended March 31,
	2021		2020
Amount expensed	$	72	$	76

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 and are no longer forfeitable. 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.

32

The following table summarizes information about restricted stock unit activity for the periods ended March 31, 2021 and 2020.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2021	11,663	$	31.62
Granted	4,738	29.40
Vested	(3,582)	30.71
Non-vested at March 31, 2021	12,819	31.05
Non-vested at January 1, 2020	7,721	30.27
Granted	3,942	34.25
Non-vested at March 31, 2020	11,663	31.62

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2021 and 2020:

	For the Three Months Ended March 31,
	2021		2020
Amount expensed	$	32	$	27

Employee Stock Purchase Plan

Arrow sponsors an ESPP under which employees may purchase Arrow's common stock at a discount below market price. The current amount of the discount is 5% . 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 ESOP, pursuant to which substantially all employees of Arrow and its subsidiaries are eligible to participate upon satisfaction of applicable service requirements. The Company makes cash contributions to the ESOP each year.

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Note 8.    RETIREMENT BENEFIT PLANS (Dollars in Thousands)

Arrow sponsors qualified and non-qualified 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 first 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 with a minimum interest credit of 3%.  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 The Employee Retirement Income Security Act (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 allows for grandfathered participants to receive automatic increases of Company contributions each year based on the increase in inflation, limited to a maximum of 5%.  

As of December 31, 2020, Arrow used the sex-distinct amount-weighted Pri-2012 mortality tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements with the Scale MP-2020 mortality improvement scale on a generational basis for the Pension Plan and the sex-distinct amount-weighted White Collar tables for employees and healthy annuitants, adjusted for mortality improvements with the scale MP-2020 mortality improvement scale on a generational basis for the Select Executive Retirement Plan. As of December 31, 2020, Arrow updated its mortality assumption used for the Postretirement Plan to the sex-distinct Pri.H-2012 headcount-weighted mortality tables for employees and healthy annuitants, adjusted for mortality improvements with the Scale MP-2020 mortality improvement scale on a generational basis. The change in mortality tables resulted in a decrease in liabilities for the Employees' Pension Plan, the Select Executive Retirement Plan and the Postretirement Benefit Plan.

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, 2020 plan year (0.53%, 2.31%, 3.09%) as of December 31, 2020.

Effective January 1, 2021, Glens Falls National Bank and Trust Company amended the Arrow Financial Corporation Employees' Pension Plan. The plan change was adopted January 1, 2021 and the amendment was valued as of December 31, 2020. The plan amendment is the following:

Effective January 1, 2021, the benefit payable to or on behalf of each participant:

• whose employment with the employer (or any predecessor employer, except as noted below) terminated on or before
January 1, 2016;

• who satisfied the requirements for early, normal, or late retirement as of such termination;

• who never participated in the United Vermont Bancorporation Plan and;

• who is, or whose beneficiary is, receiving monthly benefit payments from the Plan as of January 1, 2021 (including a
participant or beneficiary who shall commence receiving benefits from the Plan as of January 1, 2021), shall be increased
by three percent (3%).

The foregoing increase was applied to the monthly benefit actually payable to the Participant, or to the Participant's Beneficiary, as of January 1, 2021, determined after all applicable adjustments, regardless of whether such benefit had been determined under the Company's plan or the plan of a predecessor employer that had been merged into the Plan.

The plan amendment caused a $351,638 increase in the projected benefit obligation creating a positive service cost which will be amortized over 9.70 years (the average expected future service of active plan participants.)

Effective January 1, 2021, Glens Falls National Bank and Trust Company amended the Arrow Financial Corporation Employees' Select Executive Retirement Plan. The plan change was adopted January 1, 2021 and the amendment was valued as of December 31, 2020. The plan amendment provides a special adjustment to the monthly benefit payment for certain retirees. The plan amendment caused a $122,797 increase in the projected benefit obligation creating a positive prior service cost which will be amortized over 12.5 years.

The following tables provide the components of net periodic benefit costs for the three month periods ended March 31, 2021 and 2020.

	Employees'		Select Executive		Postretirement
	Pension		Retirement		Benefit
	Plan		Plan		Plans
Net Periodic (Benefit) Cost
For the Three Months Ended March 31, 2021:
Service Cost 1	$	460	$	118	$	31
Interest Cost 2	340		45		67
Expected Return on Plan Assets 2	(950)		—		—
Amortization of Prior Service Cost 2	20		12		27
Amortization of Net Loss 2	—		38		8
Net Periodic (Benefit) Cost	$	(130)	$	213	$	133
Plan Contributions During the Period	$	—	$	118	$	28

34

For the Three Months Ended March 31, 2020:
Service Cost 1	$	430	$	103	$	33
Interest Cost 2	417		54		78
Expected Return on Plan Assets 2	(904)		—		—
Amortization of Prior Service Cost 2	16		11		27
Amortization of Net Loss 2	1		33		2
Net Periodic (Benefit) Cost	$	(40)	$	201	$	140
Plan Contributions During the Period	$	—	$	117	$	78

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

A contribution to the qualified pension plan was not required during the period ended March 31, 2021 and currently, additional contributions in 2021 are not expected. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.

Note 9.    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, 2021 and 2020.  All share and per share amounts have been adjusted for the September 25, 2020, 3% stock dividend.

Earnings Per Share
	Three Months Ended
	March 31, 2021		March 31, 2020
Earnings Per Share - Basic:
Net Income	$	13,280	$	8,127
Weighted Average Shares - Basic	15,528		15,446
Earnings Per Share - Basic	$	0.86	$	0.53
Earnings Per Share - Diluted:
Net Income	$	13,280	$	8,127
Weighted Average Shares - Basic	15,528		15,446
Dilutive Average Shares Attributable to Stock Options	35		30
Weighted Average Shares - Diluted	15,563		15,476
Earnings Per Share - Diluted	$	0.85	$	0.53

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Note 10.    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. There are no 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, 2021, December 31, 2020 and March 31, 2020 were securities available-for-sale, equity securities and derivatives. 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, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,370	$	—	$	108,370	$	—
State and Municipal Obligations	508		—		508		—
Mortgage-Backed Securities	354,411		—		354,411		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	464,089		—		464,089		—
Equity Securities	1,796		—		1,796		—
Total Securities Measured on a Recurring Basis	465,885		—		465,885		—
Derivatives, included in other assets	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	468,183	$	—	$	468,183	$	—
Liabilities:
Derivatives, included in other liabilities	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	2,298	$	—	$	2,298	$	—
December 31, 2020
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	65,112	$	—	$	65,112	$	—
State and Municipal Obligations	528		—		528		—
Mortgage-Backed Securities	298,847		—		298,847		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	365,287		—		365,287		—
Equity Securities	1,636		—		1,636		—

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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)
Total Securities Measured on a Recurring Basis	366,923		—		366,923		—
Derivatives, included in other liabilities	5,080		—		5,080		—
Total Measured on a Recurring Basis	$	372,003	$	—	$	372,003	$	—
Liabilities:
Derivatives, included in other liabilities	5,080		—		5,080		—
Total Measured on a Recurring Basis	$	5,080	$	—	$	5,080	$	—
March 31, 2020
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	5,181	$	—	$	5,181	$	—
State and Municipal Obligations	723		—		723		—
Mortgage-Backed Securities	371,482		—		371,482		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	378,186		—		378,186		—
Equity Securities	1,689		—		1,689		—
Total Securities Measured on a Recurring Basis	$	379,875	$	—	$	379,875	$	—
Derivatives, included in other assets	5,191		$	—	5,191		—
Total Measured on a Recurring Basis	$	385,066	$	—	$	385,066	$	—
Liabilities:
Derivatives, included in other liabilities	5,191		—		5,191		—
Total Measured on a Recurring Basis	$	5,191	$	—	$	5,191	$	—

	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses Recognized in Earnings
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
March 31, 2021
Collateral Dependent Evaluated Loans	$	2,423	$	—	$	—	$	2,423
Other Real Estate Owned and Repossessed Assets, Net	242		—		—		242		—
December 31, 2020
Collateral Dependent Impaired Loans	$	594	$	—	$	—	$	594
Other Real Estate Owned and Repossessed Assets, Net	155		—		—		155		—
March 31, 2020
Collateral Dependent Impaired Loans	$	582	$	—	$	—	$	582
Other Real Estate Owned and Repossessed Assets, Net	942		—		—		942		—

37

The fair value of financial instruments is determined 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).

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.  The fair value of Level 2 derivatives is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes.

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

The fair value of collateral dependent evaluated 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 at least annually, with no impairment recognized for these assets at March 31, 2021, December 31, 2020 and March 31, 2020.

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 each loan type. Then a credit loss component is determined utilizing the credit loss assumptions used in the allowance for credit 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.  

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 calculated by the FHLBNY.

The carrying amount of FHLBNY and FRB stock approximates fair value. If the stock was redeemed, the Company will receive an amount equal to the par value of the stock.

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.

38

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, 2021
Cash and Cash Equivalents	$	452,207	$	452,207	$	452,207	$	—	$	—
Securities Available-for-Sale	464,089		464,089		—		464,089		—
Securities Held-to-Maturity	214,561		221,360		—		221,360		—
Equity Securities	1,796		1,796		—		1,796		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,360		5,360		—		5,360		—
Net Loans	2,612,403		2,603,225		—		—		2,603,225
Accrued Interest Receivable	8,258		8,258		—		8,258		—
Derivatives, included in other assets	2,298		2,298				2,298
Deposits	3,453,588		3,452,595		—		3,452,595		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	6,795		6,795		—		6,795		—
Federal Home Loan Bank Term Advances	45,000		46,176		—		46,176		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	237		237		—		237		—
Derivatives, included in other liabilities	2,298		2,298		—		2,298		—

39

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
December 31, 2020
Cash and Cash Equivalents	$	380,991	$	380,991	$	380,991	$	—	$	—
Securities Available-for-Sale	365,287		365,287		—		365,287		—
Securities Held-to-Maturity	218,405		226,576		—		226,576		—
Equity Securities	1,636		1,636		—		1,636
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,349		5,349		—		5,349		—
Net Loans	2,565,798		2,558,903		—		—		2,558,903
Accrued Interest Receivable	7,495		7,495		—		7,495		—
Derivatives, included in other assets	5,080		5,080		—		5,080		—
Deposits	3,234,726		3,234,387		—		3,234,387		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	17,486		17,486		—		17,486		—
Federal Home Loan Bank Term Advances	45,000		46,474		—		46,474		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	326		326		—		326		—
Derivatives, included in other liabilities	5,080		5,080		—		5,080		—
March 31, 2020
Cash and Cash Equivalents	$	138,529	$	138,529	$	138,529	$	—	$	—
Securities Available-for-Sale	378,186		378,186		—		378,186		—
Securities Held-to-Maturity	238,520		242,804		—		242,804		—
Equity Securities	1,689		1,689		—		1,689
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,379		5,379		—		5,379		—
Net Loans	2,390,556		2,368,033		—		—		2,368,033
Accrued Interest Receivable	7,856		7,856		—		7,856		—
Derivatives, included in other assets	5,191		5,191		—		5,191		—
Deposits	2,811,005		2,811,668		—		2,811,668		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	57,909		57,909		—		57,909		—
Federal Home Loan Bank Term Advances	50,000		51,194		—		51,194		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	1,392		1,392		—		1,392		—
Derivatives, included in other liabilities	5,191		5,191		—		5,191		—

40

Note 11.    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 four of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves as a director on the board of directors of each of Arrow and Saratoga National Bank and Trust Company.

The following includes quantitative data related to the Company's leases as of and for the three months ended March 31, 2021 and March 31, 2020:

		Three Months Ended
Finance Lease Amounts:	Classification	March 31, 2021			March 31, 2020
Right-of-Use Assets	Premises and Equipment, Net	$	4,947		$	5,124
Lease Liabilities	Finance Leases	5,205			5,249
Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	5,435		$	5,529
Lease Liabilities	Other Liabilities	5,522			5,602
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	49		$	50
Operating Outgoing Cash Flows From Operating Leases		261			158
Financing Outgoing Cash Flows From Finance Leases		12			5
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		331			—
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		28.9			29.9
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		12.5			13.7
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		3.13		%	3.36		%

Lease cost information for the Company's leases is as follows:
	Three Months Ended
	March 31, 2021		March 31, 2020
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	44
Interest on Lease Liabilities	49		50
Operating Lease Cost	209		207
Short-term Lease Cost	5		7
Variable Lease Cost	104		55
Total Lease Cost	$	411	$	363

41

Future Lease Payments at March 31, 2021 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2022	$	799	$	243
3/31/2023	766		243
3/31/2024	641		243
3/31/2025	570		254
3/31/2026	526		265
Thereafter	3,516		7,733
Total Undiscounted Cash Flows	$	6,818	$	8,981
Less: Net Present Value Adjustment	1,296		3,776
Lease Liability	$	5,522	$	5,205

42

Note 12.    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (In Thousands)

Arrow is exposed to certain risks arising from both its business operations and economic conditions. Arrow principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Arrow manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative instruments. Specifically, Arrow enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Arrow's derivative financial instruments are used to manage differences in the amount, timing and duration of known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate borrowings. Arrow also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

Derivatives Not Designated as Hedging Instruments

Arrow enters into interest rate swap agreements with its commercial customers to provide them with a long-term fixed rate, while simultaneously entering into offsetting interest rate swap agreements with a counterparty to swap the fixed rate to a variable rate to manage interest rate exposure.

These interest rate swap agreements are not designated as a hedge for accounting purposes. As the interest rate swap agreements have substantially equivalent and offsetting terms, they do not present any material exposure to the Arrow's consolidated statements of income. Arrow records its interest rate swap agreements at fair value and is presented on a gross basis within other assets and other liabilities on the consolidated balance sheets. Changes in the fair value of assets and liabilities arising from these derivatives are included, net, in other income in the consolidated statement of income.

The following table depicts the fair value adjustment recorded related to the notional amount of derivatives outstanding as well as the notional amount of the interest rate swap agreements.

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Agreements
	March 31, 2021		December 31, 2020		March 31, 2020
Fair value adjustment included in other assets	$	2,298	$	5,080	$	5,191
Fair value adjustment included in other liabilities	2,298		5,080		5,191
Notional amount	175,113		176,637		121,559

Derivatives Designated as Hedging Instruments

Arrow has entered into interest rate swaps to synthetically fix the variable rate interest payments associated with $20 million in outstanding subordinated trust securities. These agreements are designated as cash flow hedges.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income ("AOCI") and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on Arrow's Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts borrowings.

The following table indicates the effect of cash flow hedge accounting on AOCI and on the unaudited interim consolidated statement of income.

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
	March 31, 2021		December 31, 2020		March 31, 2020
Amount of gain (loss) recognized in AOCI	$	1,982	$	651	$	(294)
Amount of gain reclassified from AOCI interest expense	28		—		—

Note 13.    COVID-19 PANDEMIC

The spread of COVID-19 and the resulting “shelter in place” and “stay at home” orders, travel restrictions and other precautions have caused significant disruptions in the United States economy, which could in turn disrupt the business, activities, and operations of Arrow’s customers, as well as Arrow's business and operations. The pandemic has also caused significant disruption in the financial markets both globally and in the United States.

Arrow has taken steps to mitigate the risk of harm to its employees and customers and to its operations from the pandemic. In particular, Arrow, when necessary, has limited access to facilities to appointments only and encouraged customers to use contact-free alternatives like digital banking and ATMs. Arrow has also minimized contact for a large portion of its employee base through remote working, minimal travel and in-person meetings and social distancing.

43

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 sheets of Arrow Financial Corporation and subsidiaries (the Company) as of March 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the three-month periods ended March 31, 2021 and 2020 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, 2020, 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 10, 2021, 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, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Change in Accounting Principle

As discussed in Note 1 to the consolidated interim financial information, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2021 due to the adoption of Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses.

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 6, 2021

44

Item 2.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

March 31, 2021

NOTE ON TERMINOLOGY

In this Quarterly Report on Form 10-Q (this Report), 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, Arrow's performance is compared with that of the Company's "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 147 domestic bank holding companies with $3 to $10 billion in total consolidated assets as identified in the Federal Reserve Board’s "Bank Holding Company Performance Report" for December 31, 2020 (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.  The 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 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 Arrow's 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, which issued trust preferred securities (TRUPs), which are still outstanding.

FORWARD LOOKING STATEMENTS

This Report on Form 10-Q contains statements that are not historical in nature but rather are based on Arrow's 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 Arrow's asset quality, the level of allowance for credit 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 Arrow's general perceptions of market conditions and trends in business activity, both Arrow's 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, our 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 the following, which are or may be amplified by the novel coronavirus (COVID-19) pandemic:

•the current and rapidly evolving COVID-19 pandemic and its impact on economic, market and social conditions;

•other 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 provided, such as real estate loans;

•significant changes in banking or other laws and regulations, including both enactment of new legal or regulatory measures 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").

Arrow is 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 incorporated 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 Arrow or any persons acting on our behalf may issue. This Report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 (the 2020 Annual Report) and our other filings with the SEC.

45

USE OF NON-GAAP FINANCIAL MEASURES

The SEC has adopted Regulation G, which applies to certain 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 Arrow'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 Arrow is 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. Arrow follows 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).  Arrow makes 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 include 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, Arrow may also 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 (EPS), return on average assets (ROA), and return on average equity (ROE), to provide as well certain comparative disclosures that adjust these GAAP financial measures, typically by removing them from the impact of certain transactions or other material items of income or expense that are unusual or unlikely to be repeated.  Arrow will do so only if it believes 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.

Arrow believes that the non-GAAP financial measures disclosed 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.  Non-GAAP financial measures may differ from similar measures presented by other companies.

46

Arrow Financial Corporation

Selected Quarterly Information

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

Quarter Ended	3/31/2021			12/31/2020			9/30/2020			6/30/2020			3/31/2020
Net Income	$	13,280		$	12,495		$	11,046		$	9,159		$	8,127
Transactions in Net Income (Net of Tax):
Net Changes in Fair Value of Equity Investments	119			66			(53)			(80)			(279)
Share and Per Share Data:1
Period End Shares Outstanding	15,543			15,516			15,489			15,461			15,432
Basic Average Shares Outstanding	15,528			15,499			15,472			15,441			15,446
Diluted Average Shares Outstanding	15,563			15,515			15,481			15,448			15,476
Basic Earnings Per Share	$	0.86		$	0.81		$	0.71		$	0.59		$	0.53
Diluted Earnings Per Share	0.85			0.81			0.71			0.59			0.53
Cash Dividend Per Share	0.260			0.260			0.252			0.252			0.252
Selected Quarterly Average Balances:
Interest-Bearing Deposits at Banks	$	334,155		$	349,430		$	242,928		$	155,931		$	32,787
Investment Securities	593,822			590,151			592,457			607,094			603,748
Loans	2,618,362			2,610,834			2,582,253			2,518,198			2,394,346
Deposits	3,254,815			3,256,238			3,082,499			2,952,432			2,670,009
Other Borrowed Funds	82,659			95,047			136,117			129,383			170,987
Stockholders’ Equity	340,708			331,899			324,269			316,380			306,527
Total Assets	3,712,020			3,721,954			3,583,322			3,437,155			3,180,857
Return on Average Assets, annualized	1.45		%	1.34		%	1.23		%	1.07		%	1.03		%
Return on Average Equity, annualized	15.81		%	14.98		%	13.55		%	11.64		%	10.66		%
Return on Average Tangible Equity, annualized 2	17.00		%	16.13		%	14.61		%	12.58		%	11.55		%
Average Earning Assets	$	3,546,339		$	3,550,415		$	3,417,638		$	3,281,223		$	3,030,881
Average Paying Liabilities	2,639,240			2,674,795			2,545,435			2,457,690			2,362,515
Interest Income	27,694			28,372			27,296			28,002			28,226
Tax-Equivalent Adjustment 3	235			251			284			281			288
Interest Income, Tax-Equivalent 3	27,929			28,623			27,580			28,283			28,514
Interest Expense	1,539			1,918			2,396			3,160			5,220
Net Interest Income	26,155			26,454			24,900			24,842			23,006
Net Interest Income, Tax-Equivalent 3	26,390			26,705			25,184			25,123			23,294
Net Interest Margin, annualized	2.99		%	2.96		%	2.90		%	3.05		%	3.05		%
Net Interest Margin, Tax Equivalent, annualized 3	3.02		%	2.99		%	2.93		%	3.08		%	3.09		%
Efficiency Ratio Calculation: 4
Noninterest Expense	$	18,678		$	18,192		$	17,487		$	17,245		$	17,754
Less: Intangible Asset Amortization	54			56			56			57			58
Net Noninterest Expense	$	18,624		$	18,136		$	17,431		$	17,188		$	17,696
Net Interest Income, Tax-Equivalent 3	$	26,390		$	26,705		$	25,184		$	25,123		$	23,294
Noninterest Income	8,608			9,103			8,697			7,164			7,694
Less: Net Changes in Fair Value of Equity Invest.	160			88			(72)			(106)			(374)
Net Gross Income	$	34,838		$	35,720		$	33,953		$	32,393		$	31,362
Efficiency Ratio 4	53.46		%	50.77		%	51.34		%	53.06		%	56.42		%
Period-End Capital Information:
Total Stockholders’ Equity (i.e. Book Value)	$	342,413		$	334,392		$	325,660		$	317,687		$	309,398
Book Value per Share 1	22.03			21.55			21.02			20.55			20.05
Goodwill and Other Intangible Assets, net	23,922			23,823			23,662			23,535			23,513
Tangible Book Value per Share 1,2	20.49			20.02			19.50			19.03			18.53
Capital Ratios:5
Tier 1 Leverage Ratio	9.37		%	9.07		%	9.17		%	9.32		%	9.87		%
Common Equity Tier 1 Capital Ratio	13.56		%	13.39		%	13.20		%	13.07		%	12.84		%
Tier 1 Risk-Based Capital Ratio	14.39		%	14.24		%	14.06		%	13.94		%	13.72		%
Total Risk-Based Capital Ratio	15.55		%	15.48		%	15.28		%	15.10		%	14.76		%
Assets Under Trust Admin. & Investment Mgmt.	$	1,725,754		$	1,659,029		$	1,537,128		$	1,502,866		$	1,342,531

47

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 25, 2020, 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 Arrow believes provide investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 46.
		3/31/2021			12/31/2020			9/30/2020			6/30/2020			3/31/2020
	Total Stockholders' Equity (GAAP)	$	342,413		$	334,392		$	325,660		$	317,687		$	309,398
	Less: Goodwill and Other Intangible assets, net	23,922			23,823			23,662			23,535			23,513
	Tangible Equity (Non-GAAP)	$	318,491		$	310,569		$	301,998		$	294,152		$	285,885
	Period End Shares Outstanding	15,543			15,516			15,489			15,461			15,432
	Tangible Book Value per Share      (Non-GAAP)	$	20.49		$	20.02		$	19.50		$	19.03		$	18.53
	Net Income	13,280			12,495			11,046			9,159			8,127
	Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)	17.00		%	16.13		%	14.61		%	12.58		%	11.55		%
3.	Non-GAAP Financial Measures Reconciliation: Net Interest Margin, Tax-Equivalent is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which Arrow believes provides investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 46.
		3/31/2021			12/31/2020			9/30/2020			6/30/2020			3/31/2020
	Interest Income (GAAP)	$	27,694		$	28,372		$	27,296		$	28,002		$	28,226
	Add: Tax-Equivalent adjustment      (Non-GAAP)	235			251			284			281			288
	Interest Income - Tax Equivalent      (Non-GAAP)	$	27,929		$	28,623		$	27,580		$	28,283		$	28,514
	Net Interest Income (GAAP)	$	26,155		$	26,454		$	24,900		$	24,842		$	23,006
	Add: Tax-Equivalent adjustment      (Non-GAAP)	235			251			284			281			288
	Net Interest Income - Tax Equivalent      (Non-GAAP)	$	26,390		$	26,705		$	25,184		$	25,123		$	23,294
	Average Earning Assets	$	3,546,339		$	3,550,415		$	3,417,638		$	3,281,223		$	3,030,881
	Net Interest Margin (Non-GAAP)*	3.02		%	2.99		%	2.93		%	3.08		%	3.09		%
4.	Non-GAAP Financial Measures: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. Arrow believes that the efficiency ratio provides investors with information that is useful in understanding our financial performance. Arrow defines efficiency ratio as the ratio of our noninterest expense to our net gross income (which equals 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 46.
5.	For the current quarter, all of the regulatory capital ratios in the table above, as well as the Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below, are estimates based on, and calculated in accordance with, bank regulatory capital rules. All prior quarters reflect actual results. The CET1 ratio at March 31, 2021 listed in the tables (i.e., 13.56%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
		3/31/2021			12/31/2020			9/30/2020			6/30/2020			3/31/2020
	Total Risk Weighted Assets	$	2,404,456		$	2,357,094		$	2,321,637		$	2,283,430		$	2,275,902
	Common Equity Tier 1 Capital	326,039			315,696			306,356			298,362			292,165
	Common Equity Tier 1 Capital Ratio	13.56		%	13.39		%	13.20		%	13.07		%	12.84		%
* Quarterly ratios have been annualized.

48

Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars In Thousands)
Quarter Ended March 31:	2021						2020
			Interest		Rate				Interest		Rate
	Average		Income/		Earned/		Average		Income/		Earned/
	Balance		Expense		Paid		Balance		Expense		Paid
Interest-Bearing Deposits at Banks	$	334,155	$	85	0.10	%	$	32,787	$	124	1.52	%
Investment Securities:
Fully Taxable	403,340		1,506		1.51		399,307		2,193		2.21
Exempt from Federal Taxes	190,482		920		1.96		204,441		1,035		2.04
Loans	2,618,362		25,183		3.90		2,394,346		24,874		4.18
Total Earning Assets	3,546,339		27,694		3.17		3,030,881		28,226		3.75
Allowance for Credit Losses	(27,811)						(22,186)
Cash and Due From Banks	35,779						34,211
Other Assets	157,713						137,951
Total Assets	$	3,712,020					$	3,180,857
Deposits:
Interest-Bearing Checking Accounts	$	859,972	219		0.10		$	707,747	487		0.28
Savings Deposits	1,435,555		565		0.16		1,092,980		2,471		0.91
Time Deposits of $250,000 or More	109,644		120		0.44		126,046		533		1.70
Other Time Deposits	151,410		222		0.59		264,755		1,000		1.52
Total Interest-Bearing Deposits	2,556,581		1,126		0.18		2,191,528		4,491		0.82
Short-Term Borrowings	12,458		2		0.07		92,444		208		0.90
FHLBNY Term Advances & Other Long-Term Debt	65,000		362		2.26		73,297		471		2.58
Finance Leases	5,201		49		3.82		5,246		50		3.83
Total Interest-Bearing Liabilities	2,639,240		1,539		0.24		2,362,515		5,220		0.89
Noninterest-bearing deposits	698,234						478,481
Other Liabilities	33,838						33,334
Total Liabilities	3,371,312						2,874,330
Stockholders’ Equity	340,708						306,527
Total Liabilities and Stockholders’ Equity	$	3,712,020					$	3,180,857
Net Interest Income			$	26,155					$	23,006
Net Interest Spread					2.93	%					2.86	%
Net Interest Margin					2.99	%					3.05	%

49

OVERVIEW

The following discussion and analysis focuses on and reviews the results of operations for the three month period ended March 31, 2021 and the financial condition as of March 31, 2021 and 2020.  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.

COVID-19 Pandemic:

In March 2020, the World Health Organization recognized COVID-19 as a pandemic. In response, the United States federal government and various state and local governments have, among other actions, imposed travel and business restrictions and required or advised communities in which we do business to adopt stay-at-home orders and social distancing guidelines, causing some businesses to adjust, reduce or suspend operating activities. Like many businesses, Arrow expects operations and financial results to continue to be adversely impacted by the COVID-19 pandemic. The severity, magnitude and duration of the current pandemic are still uncertain, rapidly changing and hard to predict.

In the first quarter of 2021, Arrow's banking and insurance locations temporarily paused walk-in access to lobbies in response to a rise in community COVID-19 rates. Full access was restored in mid-March and continues to be managed with safety measures such as required face coverings, social distancing and personal protective equipment including shields and hand sanitizing stations, along with frequent cleanings.

Also in the first quarter of 2021, Arrow reopened its Paycheck Protection Program ("PPP") online portal for a new round of funding and saw continued demand from our customers. As of March 31, 2021, Arrow originated more than $212.8 million in PPP loans for more than 1,600 small businesses, $70.1 million of which occurred in the first quarter of 2021.

Arrow continues to monitor the impact of the pandemic on our business and closely watch local COVID-19 levels. Currently, remote work is encouraged whenever feasible for our employees, work-related travel remains paused and in-person meetings have been minimized.

As Arrow cannot predict the duration or scope of the pandemic or its impact on economic and financial markets or its impact on the business, Arrow is currently unable to reasonably estimate the overall impact on Arrow.

Summary of Q1 2021 Financial Results: Net income for the first quarter of 2021 was $13.3 million, compared to $8.1 million in the first quarter of 2020. Net interest income increased to $26.2 million in the first quarter of 2021, compared to $23.0 million for the comparable quarter of 2020.

Diluted earnings per share (EPS) for the quarter was $0.85, an increase of 60.4% from the EPS of $0.53 reported for the first quarter of 2020. Return on average equity (ROE) for the first quarter of 2021 increased to 15.81%, as compared to a ROE of 10.66% for the quarter ended March 31, 2020. Return on average assets (ROA) for the first quarter of 2021 was 1.45%, an increase from an ROA of 1.03% for the quarter ended March 31, 2020.

Total loans reached $2.6 billion as of March 31, 2021. Loan growth for the first quarter of 2021 was $44.2 million and increased $225.1 million, or 9.3%, from March 31, 2020. Total outstanding commercial loans increased $196.8 million, or 29.2%, as compared to March 31, 2020. The increase in commercial loans includes $162.8 million in remaining PPP loans. The consumer loan portfolio grew by $36.5 million, or 4.4%, as compared to March 31, 2020, primarily within the indirect automobile lending program. Total outstanding residential real estate loans, net of approximately $28.8 million of loans sold, decreased $14.9 million for the first quarter of 2021. Residential real estate loans decreased $8.2 million, or 0.9%, as compared to March 31, 2020.

At March 31, 2021, deposit balances reached $3.5 billion. Deposit growth for the first quarter of 2021 was $218.9 million and increased $642.6 million, or 22.9%, from the prior-year level. Noninterest-bearing deposits represented 21.8% of total deposits at March 31, 2021, compared to 17.4% of total deposits on March 31, 2020. At March 31, 2021, other time deposits were $145.8 million, a decrease of $100.1 million compared to the prior year. Municipal deposits increased $119.5 million, or 15.0% from March 31, 2020.

Net interest income for the first quarter increased to $26.2 million, up 13.7% from $23.0 million in the comparable quarter of 2020. Loan growth generated $25.2 million in interest and fees on loans for the first quarter of 2021, an increase of 1.3% from the $24.9 million from the quarter ending March 31, 2020. Interest and fees related to PPP loans produced $1.3 million in revenue in the first quarter of 2021. Interest expense for the first quarter of 2021 was $1.5 million. This is a decrease of $3.7 million, or 70.5%, from the $5.2 million in expense for the quarter ending March 31, 2020. The net interest margin was 2.99% for the quarter, compared to 3.05% for the first quarter of 2020. The decrease in net interest margin from the prior year was due to a variety of factors, including lower interest rates and increased cash balances.

Noninterest income for the three months ended March 31, 2021 was $8.6 million, compared to $7.7 million in the comparable 2020 quarter. Favorable market conditions contributed to the net gain on the sale of loans of $1.4 million for the first quarter of 2021, an increase from $213 thousand for the comparable prior year quarter. In addition, income from fiduciary activities as well as fees for other services for the three months ended March 31, 2021 increased over the comparable quarter of 2020. Other operating income decreased in the first quarter of 2021 as compared to the first quarter of 2020 as a result of several factors, including the reduction of income related to interest rate swap agreements and the net difference of gains and losses from the sale of other real estate owned and fixed assets; offset by an increase in income related to bank-owned life insurance.

Noninterest expense for the first quarter of 2021 increased 5.2% to $18.7 million, from $17.8 million for the first quarter of 2020. The largest component of noninterest expense is salaries and benefits paid to our employees, which totaled $11.1 million for the first quarter of 2021.

Asset quality remained solid at March 31, 2021, as evidenced by low levels of nonperforming assets and charge-offs. Net loan losses, expressed as an annualized percentage of average loans outstanding, were 0.07% for the three-month period ended March 31, 2021, an increase from 0.05% for the three-month period ended March 31, 2020. Nonperforming loans at March 31, 2021 were $8.4

50

million, up $2.9 million from the level at March 31, 2020. Nonperforming assets of $8.7 million at March 31, 2021, represented 0.22% of period-end assets, an increase from 0.20% at March 31, 2020.

Arrow adopted CECL effective January 1, 2021. Arrow recorded a net increase to retained earnings of $120 thousand upon adoption of the new accounting standard. The transition adjustment at January 1, 2021 included a $1.30 million decrease in the allowance for credit losses on loans, and a $1.14 million establishment of an allowance for estimated credit losses on off-balance sheet credit exposures, net of the corresponding $41 thousand increase in deferred tax liabilities. For the first quarter of 2021, the provision for credit losses was ($648) thousand reflecting improving economic forecasts. The allowance for loan losses was $26.8 million on March 31, 2021, which represented 1.02% of loans outstanding, as compared to 0.98% on March 31, 2020.

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 64.

Regulatory Capital and Increase in Stockholders' Equity: At March 31, 2021, Arrow continued to exceed all required minimum capital ratios under the current bank regulatory capital rules as implemented under Dodd-Frank (the "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 Capital Rules.  Because of continued profitability and strong asset quality, the 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.

The federal bank regulators have issued a final rule to implement the “community bank leverage ratio”, introducing an optional simplified measure of capital adequacy for qualifying community banking organizations ("CBLR").  To qualify for the CBLR framework, a community banking organization must satisfy certain requirements, including having a leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities.  A qualifying community banking organization that opts into the CBLR framework and meets all the requirements under the CBLR framework will be considered to have met the well-capitalized ratio requirements under the “prompt corrective action” regulations and will not be required to report or calculate risk-based capital ratios. Subsequently, Section 4012 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act required the federal banking agencies to temporarily lower the threshold for election of the CBLR framework, issuing two interim final rules to set the CBLR at 8% as of the second quarter of 2020 and then gradually re-establish the CBLR at 9%.

Under the final rule, the CBLR remained at 8% through the end of 2020. Community banks that have a leverage ratio of 8% or greater and meet certain other criteria may elect to use the CBLR framework. Beginning in 2021, the CBLR increased to 8.5% for the calendar year. Community banks will have until January 1, 2022, before the leverage ratio requirement to use the CBLR framework will return to 9%. The final rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than one percentage point below the applicable CBLR requirement.

The CBLR final rule became effective as of January 1, 2020, and Arrow and both subsidiary banks have opted out of utilizing the CBLR framework. Therefore, the Capital Rules promulgated under Dodd-Frank will remain applicable to Arrow.

Stockholders’ equity was $342.4 million at March 31, 2021, an increase of $8.0 million, or 2.4%, from the December 31, 2020 level of $334.4 million, and an increase of $33.0 million, or 10.7%, from the prior-year level. The increase in stockholders' equity over the first three months of 2021 principally reflected the following factors: (i) $13.3 million of net income for the period, plus (ii) issuance of $937 thousand of common stock through employee benefit and dividend reinvestment plans, plus (iii) cumulative impact of adoption of ASU 2016-13 of $120 thousand; reduced by (iv) other comprehensive income of $2.3 million, and (v) cash dividends of $4.0 million. The components of the change in stockholders’ equity since year-end 2020 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, 2021, book value per share was $22.03, up by 9.9% over the prior-year level. Tangible book value per share (a non-GAAP measure that deducts intangible assets from stockholders' equity) was $20.49, an increase of $1.96,or 10.6%, over the level as of March 31, 2020. See the disclosure on page 46 related to the use of non-GAAP financial measures including tangible book value.

On March 31, 2021, Arrow's closing stock price was $33.31, representing a trading multiple of 1.63 to tangible book value. In the first quarter of 2021, Arrow paid a quarterly cash dividend of $0.26. Further discussion of dividends is included in the Capital Components; Stock Repurchases; Dividends section located on page 62.

Loan Quality: Net charge-offs for the first quarter of 2021 were $444 thousand as compared to $322 thousand for the comparable 2020 quarter. The ratio of net charge-offs to average loans (annualized) was 0.07% for the three month period ended March 31, 2021, consistent with the three month period ended December 31, 2020 and an increase from 0.05% for the three month period ended March 31, 2020. Arrow adopted CECL effective January 1, 2021. Arrow recorded a net decrease of $1.30 million in the allowance for credit losses on loans. For the first quarter of 2021, the provision for credit losses was ($648) thousand reflecting improving economic forecasts. At March 31, 2021, the allowance for credit losses was $26.8 million representing 1.02% of total loans, which is an increase from the March 31, 2020 ratio of 0.98%.

Nonperforming loans were $8.4 million at March 31, 2021, representing 0.32% of period-end loans, an increase from the March 31, 2020 ratio of 0.23%. The ratio continues to compare favorably with the weighted average ratio of the peer group of 0.67% at December 31, 2020.

Loan Segments: As of March 31, 2021, total loans grew by $44.2 million, or 1.7%, as compared to the balance at December 31, 2020. The largest increase was in commercial and commercial real estate loans, which increased by $57.7 million, or 7.1%, from December 31, 2020. The majority of the increase in commercial loans resulted from the origination of approximately $70.1 million of additional PPP loans. In addition, consumer loans expanded $1.4 million, or 0.2%. The decrease in the real estate loan portfolio is net of approximately $28.8 million of loans sold in the first quarter of 2021. The economic factors resulting from the COVID-19 pandemic, including but not limited to restrictions on non-essential businesses, may adversely impact loan growth for all or a portion of 2021.

51

•Commercial and Commercial Real Estate Loans: Combined, these loans comprise 33.0% of the total loan portfolio at period-end. Commercial property values in Arrow's service area have largely remained stable, however, there remains uncertainty surrounding market conditions due to the pandemic. 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. The temporary closure of nonessential business in New York impacted, and may continue to impact, Arrow's customer base. Government intervention, with programs such as the PPP, may mitigate the economic risk to both Arrow and its customers, however the full impact cannot be determined at this time.

•Consumer Loans: These loans (primarily automobile loans) comprised 32.6% of the total loan portfolio at period-end. Consumer automobile loans at March 31, 2021, were $857 million, or 99.5% of this portfolio segment. In the first three months of 2021, Arrow did not experience any significant increase in the delinquency rate or in the percentage of nonperforming loans in this segment. The vast majority of automobile loans are initiated through the purchase of vehicles by consumers with automobile dealers. As of March 31, 2021, the physical sale of vehicles through dealerships is occurring, however, it had been curtailed for a portion of 2020 as part of the response to the COVID-19 pandemic in New York and Vermont, our primary dealer network.

•Residential Real Estate Loans: These loans, including home equity loans, made up 34.5% of the total loan portfolio at period-end. The residential real estate market in Arrow's service area has been stable in recent periods. Arrow originated nearly all of the residential real estate loans currently held in the loan portfolio and applies conservative underwriting standards to loan originations. Arrow 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 based on market conditions and other factors. Sales increased in 2020 and in the first quarter of 2021, due to a variety of factors, including strong demand for residential mortgages in our operating markets, favorable market conditions for mortgage sales and strategic balance sheet and interest-rate risk management decisions. The rate at which mortgage loan originations are sold in future periods will depend on various circumstances, including prevailing mortgage rates, other lending opportunities, capital and liquidity needs, and the availability of a market for such transactions. Due to the COVID-19 pandemic, it is not yet possible to determine the long term economic impact on our residential real estate loan portfolio.

Liquidity and Access to Credit Markets: Arrow has not experienced any liquidity events or special concerns in recent years or thus far in 2021. Arrow’s liquidity position provides the necessary flexibility to address any unexpected near-term disruptions that may develop as a result of the COVID-19 pandemic such as: reduced cash-flows from the investment and loan portfolios and aggressive funding of programs associated with response efforts.  Interest-bearing cash balances at March 31, 2021 were $406.6 million compared to $106.0 million at March 31, 2020.  Deposit growth provided an abundance of liquidity to fund Arrow's asset growth. However, contingent lines of credit are also available. Operating collateralized lines of credit are established and available through the FHLBNY and FRB, totaling $1.4 billion. The terms of Arrow's lines of credit have not changed significantly in recent periods (see the general liquidity discussion on page 63). Historically, Arrow 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 correspondent banks, 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.

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 its litigation escrow account. On December 13, 2019 the Court granted final approval to a settlement in this class action lawsuit. But, on January 3, 2020 an appeal of the final-approved order was filed with the court. It is unknown how long the appeals process will take. When the appeals process is resolved and assuming 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, 2021, 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 has not recognized any economic value for these shares.

52

CHANGE IN FINANCIAL CONDITION

Summary of Selected Consolidated Balance Sheet Data

(Dollars in Thousands)

	March 31, 2021		At Period-End December 31, 2020		March 31, 2020		$ Change From December		$ Change From March		% Change From December (not annualized)		% Change From March
Interest-Bearing Bank Balances	$	406,605	$	338,875	$	106,004	$	67,730	$	300,601	20.0	%	283.6	%
Securities Available-for-Sale	464,089		365,287		378,186		98,802		85,903		27.0	%	22.7	%
Securities Held-to-Maturity	214,561		218,405		238,520		(3,844)		(23,959)		(1.8)	%	(10.0)	%
Equity Securities	1,796		1,636		1,689		160		107		9.8	%	6.3	%
Loans (1)	2,639,243		2,595,030		2,414,193		44,213		225,050		1.7	%	9.3	%
Allowance for loan losses	26,840		29,232		23,637		(2,392)		3,203		(8.2)	%	13.6	%
Earning Assets (1)	3,731,654		3,524,582		3,143,971		207,072		587,683		5.9	%	18.7	%
Total Assets	$	3,903,711	$	3,688,636	$	3,291,332	$	215,075	$	612,379	5.8	%	18.6	%
Noninterest-Bearing Deposits	$	751,884	$	701,341	$	489,151	$	50,543	$	262,733	7.2	%	53.7	%
Interest-Bearing Checking   Accounts	992,486		832,434		793,425		160,052		199,061		19.2	%	25.1	%
Savings Deposits	1,463,229		1,423,358		1,146,683		39,871		316,546		2.8	%	27.6	%
Time Deposits over $250,000	100,212		123,622		135,854		(23,410)		(35,642)		(18.9)	%	(26.2)	%
Other Time Deposits	145,777		153,971		245,892		(8,194)		(100,115)		(5.3)	%	(40.7)	%
Total Deposits	$	3,453,588	$	3,234,726	$	2,811,005	$	218,862	$	642,583	6.8	%	22.9	%
Federal Funds Purchased and   Securities Sold Under   Agreements to Repurchase	$	6,795	$	17,486	$	57,909	$	(10,691)	$	(51,114)	(61.1)	%	(88.3)	%
FHLBNY Advances - Overnight	—		—		—		—		—		—	%	—	%
FHLBNY Advances - Term	45,000		45,000		50,000		—		(5,000)		—	%	(10.0)	%
Junior Subordinated Obligations Issued to Unconsolidated   Subsidiary Trusts	20,000		20,000		20,000		—		—		—	%	—	%
Stockholders' Equity	342,413		334,392		309,398		8,021		33,015		2.4	%	10.7	%

(1) Includes Nonaccrual Loans.

Changes in Earning Assets: The loan portfolio at March 31, 2021, was $2.6 billion, an increase of $44.2 million, or 1.7%, from the December 31, 2020 level and up by $225.1 million, or 9.3%, from the March 31, 2020 level. The following trends were experienced in our largest segments:

•Commercial and commercial real estate loans: This segment of the loan portfolio increased by $57.7 million, or 7.1%, during the first three months of 2021. The majority of the increase resulted from the origination of approximately of $70.1 million of additional PPP loans.

•Consumer loans (primarily automobile loans through indirect lending): As of March 31, 2021, these loans, primarily auto loans, increased by $1.4 million, or 0.2%, from the December 31, 2020 balance. The physical sale of vehicles through dealerships in New York State and Vermont has resumed after a pause in early 2020 as a result of the COVID-19 pandemic. However, while certain restrictions and guidelines have been lifted or relaxed, they may be reinstituted in response to the continuing effects of the pandemic.

•Residential real estate loans: This segment decreased during the first three months of 2021 by $14.9 million, or 1.6%. In the first three months of 2021, Arrow sold $28.8 million, or 50.9%, of originations. Arrow expects to continue to sell a portion of mortgage loan originations in upcoming periods if market conditions and strategic balance sheet and interest-rate risk management decisions warrant. It is not currently possible to determine the long term economic impact of the COVID-19 pandemic. Historic low interest rates have, however, increased near-term demand for refinancing and new purchase loans, both with existing and new customers.

Changes in Sources of Funds: Deposit balances reached $3.5 billion, up $642.6 million, or 22.9%, from the prior-year level. Deposit growth for the first quarter of 2021 was $218.9 million. Noninterest-bearing deposits represented 21.8% of total deposits at March 31, 2021, compared to 17.4% of total deposits on March 31, 2020. At March 31, 2021, other time deposits were $145.8 million, a decrease of $100.1 million compared to the prior year. Municipal deposits increased $119.5 million, or 15.0% from March 31, 2020.

53

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 25% of total deposits, although slightly higher at March 31, 2021. Municipal deposits are typically placed in interest-bearing checking, savings and various time deposit accounts.

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 seasonal behavior, 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. Municipal deposits may also be impacted by increased stimulus payments in response to the COVID-19 pandemic.

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, 2020 to March 31, 2021 (in thousands).

	(Dollars in Thousands)
	Fair Value at Period-End						Net Unrealized Gains (Losses) For Period Ended
	3/31/2021		12/31/2020		Change		3/31/2021		12/31/2020		Change
Securities Available-for-Sale:
U.S. Agency Securities	$	108,370	$	65,112	$	43,258	$	(1,631)	$	110	$	(1,741)
State and Municipal Obligations	508		528		(20)		—		—		—
Mortgage-Backed Securities	354,411		298,847		55,564		4,500		7,880		(3,380)
Corporate and Other Debt Securities	800		800		—		(200)		(200)		—
Total	$	464,089	$	365,287	$	98,802	$	2,669	$	7,790	$	(5,121)
Securities Held-to-Maturity:
State and Municipal Obligations	$	197,045	$	199,429	$	(2,384)	$	5,843	$	7,077	$	(1,234)
Mortgage-Backed Securities	24,315		27,147		(2,832)		956		1,094		(138)
Total	$	221,360	$	226,576	$	(5,216)	$	6,799	$	8,171	$	(1,372)
Equity Securities	$	1,796	$	1,636	$	160	$	—	$	—	$	—

At March 31, 2021, Arrow 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.  Arrow'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. Lower market interest rates and/or payment deferrals on underlying loans that make up mortgage-backed security collateral may impact cashflows.

Arrow evaluates available-for-sale debt securities in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized within the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. Arrow determined that at March 31, 2021, gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. Arrow does not intend to sell, nor is it more likely than not that Arrow will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. Therefore, Arrow carried no allowance for credit loss at March 31, 2021 and there was no credit loss expense recognized by Arrow with respect to the securities portfolio during the three months ended March 31, 2021.

Arrow's held to maturity debt securities are comprised of U.S. government agencies, U.S. government-sponsored enterprises and state and municipal obligations. U.S. government agencies and U.S. government-sponsored enterprise securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Arrow determined that the expected credit loss on its held to maturity debt portfolio was immaterial and therefore no allowance for credit loss was recorded as of March 31, 2021.

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

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Investment Sales, Purchases and Maturities

There were no sales of investment securities within the three month periods ended March 31, 2021 or 2020.

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, 2021 and 2020, 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:	3/31/2021		3/31/2020
Available-for-Sale Portfolio
U.S. Agency Securities	$	45,000	$	—
Mortgage-Backed Securities	85,481		33,201
Total Purchases	$	130,481	$	33,201
Maturities & Calls	$	25,976	$	17,444

(In Thousands)	Three Months Ended
Purchases:	3/31/2021		3/31/2020
Held-to-Maturity Portfolio
State and Municipal Obligations	$	619	$	717
Maturities & Calls	$	4,291	$	7,075

Loan Trends

The following three tables present, for each of the last five quarters, the quarterly average balances by loan type, the percentage of total loans represented by each loan type and the annualized yield of each loan category.

Quarterly Average Loan Balances

(Dollars in Thousands)

	Quarter Ended
	3/31/2021		12/31/2020		9/30/2020		6/30/2020		3/31/2020
Commercial	$	267,758	$	260,527	$	276,296	$	234,732	$	140,486
Commercial Real Estate	579,506		569,309		538,914		530,808		518,931
Consumer	860,954		856,903		841,009		840,734		818,892
Residential Real Estate	910,144		924,095		926,034		911,924		916,037
Total Loans	$	2,618,362	$	2,610,834	$	2,582,253	$	2,518,198	$	2,394,346

Percentage of Total Quarterly Average Loans

	Quarter Ended
	3/31/2021		12/31/2020		9/30/2020		6/30/2020		3/31/2020
Commercial	10.2	%	10.0	%	9.3	%	9.3	%	5.9	%
Commercial Real Estate	22.1	%	21.8	%	21.1	%	21.1	%	21.6	%
Consumer	32.9	%	32.8	%	33.4	%	33.4	%	34.2	%
Residential Real Estate	34.8	%	35.4	%	36.2	%	36.2	%	38.3	%
Total Loans	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

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Quarterly Yield on Loans

	Quarter Ended
	3/31/2021		12/31/2020		9/30/2020		6/30/2020		3/31/2020
Commercial	4.17	%	4.50	%	3.63	%	3.84	%	4.52	%
Commercial excluding PPP loans	3.91	%	3.99	%	4.02	%	4.04	%	4.52	%
Commercial Real Estate	3.81	%	3.84	%	3.91	%	4.05	%	4.34	%
Consumer	3.94	%	3.95	%	3.95	%	3.90	%	3.97	%
Residential Real Estate	3.79	%	3.83	%	3.86	%	4.08	%	4.20	%
Total Loans	3.90	%	3.94	%	3.81	%	4.01	%	4.18	%

The average yield on the loan portfolio decreased to 3.90% for the first quarter of 2021 from 4.18% for the first quarter of 2020. Market rates declined in 2020, which impacted the new loan yields for fixed rate loans, and variable loan yields as these loans reached their repricing dates. Commercial loan yields were affected by PPP loans originated in 2020 and the first quarter of 2021. Commercial loan yields began to rise in the fourth quarter of 2020 due to fees from forgiven PPP loans being recognized in full. Residential real estate yields declined each quarter of 2020 consistent with overall market behavior as well as the effect of variable home equity loans.

Maintenance of High Quality in the Loan Portfolio: There has been 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 Arrow has not engaged in subprime mortgage lending as a business line. Similarly, high underwriting standards have generally been applied to commercial and commercial real estate lending operations and generally in the indirect lending program as well. The economic events related to the COVID-19 pandemic, specifically elevated unemployment and the temporary mandated closure of nonessential business, may impact the ability of our borrowers to satisfy their obligations.

Commercial Loans and Commercial Real Estate Loans: Substantially all commercial and commercial real estate loans in the loan portfolio were extended to businesses or borrowers located in Arrow's regional markets. A portion of the loans in the commercial portfolio have variable rates tied to Prime, LIBOR or FHLBNY rates.

Many of the commercial and commercial real estate loans are in industries that have been heavily impacted by the COVID-19 pandemic. As of March 31, 2021, Arrow originated an additional round of over 600 PPP loans totaling approximately $70.1 million. The PPP loans have an interest rate of 1% and Arrow expects to earn approximately $2.3 million in fees related this additional round of loans. Arrow is recognizing the fees earned over the life of the loan and will accelerate recognition of the fees if the loan is forgiven by the Small Business Administration. Additional government intervention, if any, may mitigate the economic risk to both Arrow and its customers, however, the extent of such intervention and its impact cannot be determined at this time.

Consumer Loans: At March 31, 2021, consumer loans (primarily automobile loans originated through dealerships located in upstate New York and Vermont) continue to be a significant component of Arrow's business, comprising approximately one third of the total loan portfolio. The physical sale of vehicles through dealerships in New York State and Vermont resumed in 2020 and continued into 2021 as certain restrictions have been lifted. Arrow believes, the volume of originations of consumer loans have been impacted, in part, by the COVID-19 pandemic, however, the magnitude of the impact cannot be determined.

New consumer loan volume for the first three months of 2021 was $99.8 million, up from the $95.9 million originated in the first three months of 2020.

For credit quality purposes, Arrow assigns potential automobile loan customers into one of four tiers, ranging from lower to higher quality in terms of anticipated credit risk. Arrow'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. Arrow believes that this disciplined approach to evaluating risk has contributed to maintaining the strong credit quality in this portfolio. The COVID-19 pandemic has created elevated unemployment, which may impact borrowers' ability to satisfy their obligations to Arrow. Government intervention may mitigate a significant portion of the credit risk, however, the extent of such intervention and its impact cannot be determined at this time.

Residential Real Estate Loans: In recent years, residential real estate loans, including home equity loans, have represented the 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 2021 were $56.6 million, as compared to $32.4 million for the first three months of 2020 as a result of historically low interest rates and strong demand for residential real estate. Arrow has also sold portions of these originations in the secondary market. In the first three months of 2021, Arrow sold $28.8 million, or 50.9%, of originations while retaining the mortgage servicing rights. In the first three months of 2020, $8.2 million, or 25.5%, of originations were sold. Sales of loans increased from the previous year, due to a variety of factors, including strong demand for residential mortgages in our operating markets, favorable market conditions for mortgage sales and strategic balance sheet and interest-rate risk management decisions. Due to the COVID-19 pandemic, it is not yet possible to determine the long term economic impact on our residential real estate loan portfolio.

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Deposit Trends

The following tables provide information on trends in the balance and mix of the 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. The quarterly average balances of both noninterest-bearing deposits and interest-bearing checking and savings accounts have increased significantly from prior year levels. Time deposits, over $250,000 as well as other time deposits, have decreased over the same period short-term. Market rates have remained at historic lows in the first quarter of 2021.

Quarterly Average Deposit Balances

(Dollars in Thousands)

	Quarter Ended
	3/31/2021		12/31/2020		9/30/2020		6/30/2020		3/31/2020
Noninterest-Bearing Deposits	$	698,234	$	676,490	$	673,181	$	624,125	$	478,481
Interest-Bearing Checking Accounts	859,972		874,314		764,614		740,284		707,747
Savings Deposits	1,435,555		1,407,837		1,314,241		1,215,296		1,092,980
Time Deposits over $250,000	109,644		115,492		121,027		135,978		126,046
Other Time Deposits	151,410		182,105		209,436		236,749		264,755
Total Deposits	$	3,254,815	$	3,256,238	$	3,082,499	$	2,952,432	$	2,670,009

Percentage of Total Quarterly Average Deposits

	Quarter Ended
	3/31/2021		12/31/2020		9/30/2020		6/30/2020		3/31/2020
Noninterest-Bearing Deposits	21.5	%	20.8	%	21.8	%	21.1	%	17.9	%
Interest-Bearing Checking Accounts	26.4		27.0		24.8		25.1		26.5
Savings Deposits	44.2		43.1		42.7		41.2		41.0
Time Deposits over $250,000	3.4		3.5		3.9		4.6		4.7
Other Time Deposits	4.7		5.6		6.8		8.0		9.9
Total Deposits	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Quarterly Cost of Deposits

	Quarter Ended
	3/31/2021		12/31/2020		9/30/2020		6/30/2020		3/31/2020
Demand Deposits	—	%	—	%	—	%	—	%	—	%
Interest-Bearing Checking Accounts	0.10	%	0.11	%	0.14	%	0.17	%	0.28	%
Savings Deposits	0.16	%	0.18	%	0.24	%	0.39	%	0.91	%
Time Deposits over $250,000	0.44	%	0.70	%	0.96	%	1.30	%	1.70	%
Other Time Deposits	0.59	%	0.92	%	1.09	%	1.33	%	1.52	%
Total Deposits	0.14	%	0.18	%	0.25	%	0.37	%	0.68	%

During the quarter ended March 31, 2021, the total cost of deposits continued to decrease. In March 2020, the Federal Reserve lowered the target overnight borrowing rate, the "Fed Funds" rate, to a range of 0.00%-0.25% in response to the economic uncertainty related to the COVID-19 pandemic. Although the Fed Funds rate is widely expected to remain unchanged for the foreseeable future, Arrow is well positioned for a variety of rate environments, see Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," for further discussion.

Non-Deposit Sources of Funds

Arrow'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.

The $20 million principal amount of Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts listed on the consolidated balance sheet as of March 31, 2021 (i.e., 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 60 of this Report. In the first quarter of 2020, Arrow entered into an interest rate swap agreement to synthetically fix the variable rate interest payments associated with $20 million in outstanding subordinated trust securities.

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ASSET QUALITY

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

Summary of the Allowance and Provision for Credit Losses

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

	3/31/2021			12/31/2020			9/30/2020			6/30/2020			3/31/2020
Loan Balances:
Period-End Loans	$	2,639,243		$	2,595,030		$	2,592,455		$	2,561,915		$	2,414,193
Average Loans, Year-to-Date	2,618,362			2,526,791			2,498,573			2,456,272			2,394,346
Average Loans, Quarter-to-Date	2,618,362			2,610,834			2,582,253			2,518,198			2,394,346
Period-End Assets	3,903,711			3,688,636			3,777,684			3,547,177			3,291,332
Allowance for credit losses, Year-to-Date:
Allowance for credit losses, Beginning of Period	$	29,232		$	21,187		$	21,187		$	21,187		21,187
Impact of the Adoption of ASU 2016-13	(1,300)			—			—			—			—
Provision for Credit Losses, YTD	(648)			9,319			8,083			5,812			2,772
Loans Charged-off, YTD	(633)			(1,989)			(1,360)			(968)			(481)
Recoveries of Loans Previously Charged-off	189			715			536			269			159
Net Charge-offs, YTD	(444)			(1,274)			(824)			(699)			$	(322)
Allowance for credit losses, End of Period	$	26,840		$	29,232		$	28,446		$	26,300		$	23,637
Allowance for credit losses, Quarter-to-Date:
Allowance for credit losses, Beginning of Period	$	29,232		$	28,446		$	26,300		$	23,637		$	21,187
Impact of the Adoption of ASU 2016-13	(1,300)			—			—			—			—
Provision for Credit Losses, QTD	(648)			1,237			2,271			3,040			2,772
Loans Charged-off, QTD	(633)			(630)			(392)			(487)			(481)
Recoveries of Loans Previously Charged-off	189			179			267			110			159
Net Charge-offs, QTD	(444)			(451)			(125)			(377)			(322)
Allowance for credit losses, End of Period	$	26,840		$	29,232		$	28,446		$	26,300		$	23,637
Nonperforming Assets, at Period-End:
Nonaccrual Loans	$	8,087		$	6,033		$	6,004		$	5,461		$	4,943
Loans Past Due 90 or More Days   and Still Accruing Interest	242			228			121			901			437
Restructured and in Compliance with   Modified Terms	97			145			157			150			136
Total Nonperforming Loans	8,426			6,406			6,282			6,512			5,516
Repossessed Assets	242			155			126			116			160
Other Real Estate Owned	—			—			—			595			782
Total Nonperforming Assets	$	8,668		$	6,561		$	6,408		$	7,223		$	6,458
Asset Quality Ratios:
Allowance to Nonperforming Loans	318.54		%	456.32		%	452.82		%	403.87		%	428.52		%
Allowance to Period-End Loans	1.02		%	1.13		%	1.10		%	1.03		%	0.98		%
Provision to Average Loans (Quarter) (1)	(0.10)		%	0.19		%	0.35		%	0.49		%	0.47		%
Provision to Average Loans (YTD) (1)	(0.10)		%	0.37		%	0.43		%	0.48		%	0.47		%
Net Charge-offs to Average Loans (Quarter) (1)	0.07		%	0.07		%	0.02		%	0.06		%	0.05		%
Net Charge-offs to Average Loans (YTD) (1)	0.07		%	0.05		%	0.04		%	0.06		%	0.05		%
Nonperforming Loans to Total Loans	0.32		%	0.25		%	0.24		%	0.25		%	0.23		%
Nonperforming Assets to Total Assets	0.22		%	0.18		%	0.17		%	0.20		%	0.20		%
(1) Annualized

Provision for Credit Losses

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

Arrow's 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, the independent internal loan review department performs periodic reviews of the credit quality indicators on individual loans in the commercial loan portfolio.

Arrow adopted CECL on January 1, 2021. The transition adjustment includes a $1.3 million decrease to the allowance for credit losses on loans.

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In the first quarter of 2021, Arrow recorded a $(648) thousand provision for loan losses. For the the first quarter of 2020, a provision of $2.8 million was recorded.

See Notes 1 and 4 to the unaudited interim consolidated financial statements for additional discuss related to the adoption of CECL.

The ratio of the allowance for credit losses to total loans was 1.02% at March 31, 2021, a decrease from 1.13% at December 31, 2020 and an increase of 4 basis points from 0.98% at March 31, 2020.

The accounting policy relating to the allowance for credit 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 in the loan portfolio, and the material effect that such judgments may have on the results of operations. The process for determining the provision for credit losses is described in Note 4 to the unaudited interim consolidated financial statements.

Risk Elements

Nonperforming assets at March 31, 2021 amounted to $8.7 million, up from the $6.6 million total at December 31, 2020 and an increase of $2.2 million, from $6.5 million at March 31, 2020. For the three month periods ended March 31, 2021 and 2020, ratios of nonperforming assets to total assets have remained below the average ratios for the peer group. (See page 45 for a discussion of the peer group.) At December 31, 2020, the ratio of loans past due 90 or more days plus nonaccrual loans plus other real estate owned to total assets was 0.18%, below the 0.52% ratio of the peer group at such date (the latest date for which peer group information is available). At March 31, 2021 the ratio was 0.22%, 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)
	3/31/2021		12/31/2020		3/31/2020
Commercial Loans	$	98	$	215	$	244
Commercial Real Estate Loans	143		—		—
Residential Real Estate Loans	2,034		1,337		1,632
Consumer Loans - Primarily Indirect Automobile	3,020		7,651		7,015
Total Loans Past Due 30-89 Days    and Accruing Interest	$	5,295	$	9,203	$	8,891

At March 31, 2021, the loans in the above-referenced category totaled $5.3 million, a decrease of $3.9 million, or 42.5%, from the $9.2 million of such loans at December 31, 2020. The March 31, 2021 total of non-current loans equaled 0.20% of loans then outstanding, compared to 0.35% at December 31, 2020 and 0.37% at March 31, 2020. The decrease from December 31, 2020 is primarily attributable to a decrease in delinquent automobile loans loans.

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 4 to the unaudited interim consolidated financial statements. Arrow considers all performing commercial and commercial real estate loans classified as substandard or lower (as reported in Note 4) to be potential problem loans. These loans will continue to be closely monitored and Arrow expects to collect all payments of contractual principal and interest in full on these classified loans. Total nonperforming assets at period-end increased by $2.1 million from December 31, 2020 and $2.2 million from March 31, 2020. The majority of the increase is due to a $2.7 million commercial real estate loan being classified as nonaccrual during the first quarter of 2021.

The economic impact of the COVID-19 pandemic, specifically unemployment levels and the temporary mandated closure of nonessential businesses, may impact the borrowers' ability to satisfy their obligations, and may therefore result in increased delinquencies. Government interventions, on both the federal and state level, have been deployed to mitigate a significant portion of the credit risk. Arrow cannot make a determination as to the overall impact on its business of the COVID-19 pandemic at this time.

As of March 31, 2021, Arrow held no property in other real estate owned. At this time, Arrow 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.

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Loan Deferrals Related to COVID-19 Pandemic

The COVID-19 pandemic has created economic uncertainty resulting in elevated unemployment as well as the temporary closure of nonessential businesses. In the table below, loans deferred by industry sector as the result of the COVID-19 pandemic are presented and compared to total loans by sector as of March 31, 2021. In accordance with the CARES Act, the deferrals listed below are not considered troubled debt restructurings. As of March 31, 2021, Arrow originated an additional $70.1 million of PPP loans in 2021. These loans are included in the loan balances by sector as listed below, however, these loans are not considered deferred as of March 31, 2021.

COVID-19 Deferrals by Loan Category at March 31, 2021 (Dollars in Thousands)
	Balances by Sector					Deferrals
		Total		% of Total Loans		Balance		% of Loan Segment		% of Total Loans
Commercial and Commercial Real Estate Loans:
Lessors of Non-Residential Real Estate		$	162,269	6.1	%	$	—	—	%	—	%
Lessors of Residential Real Estate		136,086		5.2	%	—		—	%	—	%
Health Care and Social Assistance		119,373		4.5	%	515		0.1	%	—	%
Hotels and Motels		115,249		4.4	%	2,722		0.3	%	0.1	%
Arts/Recreation/Restaurants/Vacation Camps		58,551		2.2	%	—		—	%	—	%
Retail		40,233		1.5	%	—		—	%	—	%
Construction & Related		35,588		1.3	%	—		—	%	—	%
Other		202,709		7.7	%	7,029		0.7	%	0.3	%
Total Commercial and Commercial Real Estate Loans		870,058		33.0	%	10,266		1.2	%	0.4	%
Consumer Loans		861,171		32.6	%	1,126		0.1	%	—	%
Residential Real Estate Loans		908,014		34.4	%	3,519		0.4	%	0.1	%
Total Loans		$	2,639,243			$	14,911			0.6	%

Outstanding PPP Loans as of March 31, 2021 (Dollars In Thousands)
PPP Funding to Date	$	212,751
Loans Fully Forgiven to Date	(46,701)
Loans Partial Forgiven to Date	(3,287)
Outstanding PPP Loans	$	162,763

Income Earned on PPP Loans for the Quarter Ended March 31, 2021 (Dollars In Thousands)
Interest Earned at Rate of 1%	$	338
Fees Recognized for the Quarter Ended March 31, 2021	1,003
Income Earned on PPP Loans	$	1,341

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, the federal bank regulators have issued a final rule to implement the Community Bank Leverage Ratio ("CBLR"), introducing an optional simplified measure of capital adequacy for qualifying community banks that satisfy certain requirements, including having a leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities.  A qualifying community bank that opts into the CBLR framework and meets all requirements under the CBLR framework will be considered to have met the well-capitalized ratio requirements under the “prompt corrective action” regulations and will not be required to report or calculate risk-based capital ratios.  The CBLR is calculated as the ratio of “tier 1 capital” divided by “average total consolidated assets.”  This final rule was effective as of January 1, 2020, and qualifying community banks can utilize the CBLR framework for purposes of filing their call reports or Form FR Y-9C, as applicable, for the first quarter of 2020 (i.e., as of March 31, 2020). Arrow elected to opt out of utilizing the CBLR framework. The Capital Rules promulgated under Dodd-Frank will remain applicable to Arrow.

60

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 (the Company 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 the holding company and banks under the current Capital Rules:

Capital Ratio	2021
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, 2021, 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 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, 2021:

	Common Equity Tier 1 Capital Ratio		Tier 1 Risk-Based Capital Ratio		Total Risk-Based Capital Ratio		Tier 1 Leverage Ratio
Arrow Financial Corporation	13.56	%	14.39	%	15.55	%	9.37	%
Glens Falls National Bank & Trust Co.	14.08	%	14.08	%	15.18	%	9.02	%
Saratoga National Bank & Trust Co.	13.14	%	13.14	%	14.39	%	9.00	%
FDICIA's Prompt Corrective Action - "Well-Capitalized" Standard (2019)	6.50	%	8.00	%	10.00	%	5.00	%
Regulatory Minimum	7.00%(1)		8.50%(1)		10.50%(1)		4.00	%
(1) Including the fully phased-in 2.50% capital conservation buffer

At March 31, 2021, Arrow and its subsidiary banks exceeded the minimum regulatory capital ratios established under the current Capital Rules 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.

61

Capital Components; Stock Repurchases; Dividends

Stockholders' Equity: Stockholders’ equity was $342.4 million at March 31, 2021, an increase of $8.0 million, or 2.4%, from the December 31, 2020 level of $334.4 million, and an increase of $33.0 million, or 10.7%, from the prior-year level. The increase in stockholders' equity over the first three months of 2021 principally reflected the following factors: (i) $13.3 million of net income for the period, plus (ii) issuance of $937 thousand of common stock through employee benefit and dividend reinvestment plans, plus (iii) cumulative impact of adoption of ASU 2016-13 of $120 thousand; reduced by (iv) other comprehensive income of $2.3 million, and (v) cash dividends of $4.0 million.

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.

In the first quarter of 2020, Arrow entered into an interest rate swap agreement to synthetically fix the variable rate interest payments associated with $20 million in outstanding subordinated trust securities. The effective fixed rate is 3.43% until maturity. These agreements are designated as cash flow hedges.

Stock Repurchase Program: In January 2021, the Board of Directors approved a $5.0 million stock repurchase program, effective for the period January 27, 2021 through December 31, 2021 (the 2021 Repurchase Program), under which management is authorized, in its discretion, to permit Arrow to repurchase up to $5 million of shares of Arrow's common stock, in the open market or in privately negotiated transactions, to the extent management believes Arrow's stock is reasonably priced and such repurchases appear to be an attractive use of available capital and in the best interests of shareholders. As of March 31, 2021, no purchases have occurred under the 2021 Repurchase Program to repurchase Arrow shares. This does not include repurchases of Arrow's Common Stock other than through its 2021 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.

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 28, 2021, the Board of Directors declared a 2021 second quarter cash dividend of $0.26 payable on June 15, 2021. Per share amounts and share counts in the following tables have been restated for the September 25, 2020 3% stock dividend.

					Cash
	Market Price				Dividends
	Low		High		Declared
2020
First Quarter	$	20.18	$	36.93	$	0.252
Second Quarter	22.87		30.76		0.252
Third Quarter	24.58		29.13		0.252
Fourth Quarter	24.51		32.00		0.260
2021
First Quarter	$	28.65	$	36.48	$	0.260
Second Quarter (dividend payable June 15, 2021)	TBD		TBD		0.260

	Quarter Ended March 31
	2021			2020
Cash Dividends Per Share	$	0.260		$	0.252
Diluted Earnings Per Share	0.85			0.53
Dividend Payout Ratio	30.59		%	47.55		%
Total Equity (in thousands)	342,413			$	309,398
Shares Issued and Outstanding (in thousands)	15,543			15,432
Book Value Per Share	$	22.03		$	20.05
Intangible Assets (in thousands)	23,922			23,513
Tangible Book Value Per Share	$	20.49		$	18.53

62

LIQUIDITY

The objective of effective liquidity management is to ensure that Arrow has the ability to raise cash when needed at a reasonable cost.  This includes the capability of meeting expected and unexpected obligations to Arrow's customers at any time. Given the uncertain nature of customer demands and the need to maximize earnings, Arrow must have available reasonably priced sources of funds, both on- and off-balance sheet, that can be accessed quickly in time of need. Arrow’s liquidity position provides the necessary flexibility to address any unexpected near-term disruptions such as reduced cash flows from the investment and loan portfolio, unexpected deposit runoff, or increased loan originations.

Arrow's 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 categorized as available-for-sale at time of purchase based on their marketability and collateral value, as well as their yield and maturity. The securities available-for-sale portfolio was $464.1 million at March 31, 2021, an increase of $98.8 million, from the year-end 2020 level. Due to the potential for volatility in market values, Arrow may not always be able to sell securities on short notice at their carrying value, even to provide needed liquidity. Arrow also held interest-bearing cash balances at March 31, 2021 of $406.6 million compared to $338.9 million at December 31, 2020.

In addition to liquidity from cash, 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 two correspondent banks totaling $52 million which were not drawn on during the three months ended March 31, 2021.

To support the borrowing relationship with the FHLBNY, Arrow has pledged collateral, including residential mortgage, home equity and commercial real estate loans. At March 31, 2021, Arrow had outstanding collateralized obligations with the FHLBNY of $45 million; as of that date, the unused borrowing capacity at the FHLBNY was approximately $838 million. Brokered deposits have also been identified as an available source of funding accessible in a relatively short time period. At March 31, 2021, there were no outstanding brokered deposits. Arrow paid down $45 million in brokered deposits in the first quarter of 2021. Also, Arrow'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, 2021, the amount available under this facility was approximately $615 million in the aggregate, and there were no advances then outstanding.

Arrow performs regular liquidity stress tests and tests of the contingent liquidity plan to ensure that an adequate amount of available funds can be generated to meet a wide variety of potential liquidity events.

Arrow 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 reasonably likely events or occurrences. At March 31, 2021, Arrow's basic liquidity ratio, including FHLBNY collateralized borrowing capacity, was 33.0% of total assets, or $1.13 billion in excess of Arrow's internally-set minimum target ratio of 4%.

Arrow did not experience any significant liquidity constraints in the three month period ended March 31, 2021 and did not experience any such constraints in recent prior years. Arrow 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.

RECENTLY ISSUED ACCOUNTING STANDARDS

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

Arrow has evaluated the accounting standards that have been issued and effective at a future date and determined that these standards will not have a material impact on its financial position or the results of operations.

63

RESULTS OF OPERATIONS

Three Months Ended March 31, 2021 Compared With

Three Months Ended March 31, 2020

Summary of Earnings Performance

(Dollars in Thousands, Except Per Share Amounts)

	Three Months Ended
	March 31, 2021			March 31, 2020			Change			% Change
Net Income	$	13,280		$	8,127		$	5,153		63.4	%
Diluted Earnings Per Share	0.85			0.53			0.32			60.4	%
Return on Average Assets	1.45		%	1.03		%	0.42		%	40.8	%
Return on Average Equity	15.81		%	10.66		%	5.15		%	48.3	%

Net income was $13.3 million and diluted earnings per share (EPS) of $.85 for the first quarter of 2021, compared to net income of $8.1 million and diluted EPS of $.53 for the first quarter of 2020. Return on average assets (ROA) for the first quarter of 2021 was 1.45%, up from 1.03% in the first quarter of 2020. In addition, return on average equity (ROE) increased to 15.81% for the first quarter of 2021, from 10.66% in the first quarter of 2020.

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)

	Three Months Ended
	March 31, 2021			March 31, 2020			Change		% Change
Interest and Dividend Income	$	27,694		$	28,226		$	(532)	(1.9)	%
Interest Expense	1,539			5,220			(3,681)		(70.5)	%
Net Interest Income	26,155			23,006			3,149		13.7	%
Average Earning Assets(1)	3,546,339			3,030,881			515,458		17.0	%
Average Interest-Bearing Liabilities	2,639,240			2,362,515			276,725		11.7	%
Yield on Earning Assets(1)	3.17		%	3.75		%	(0.58)		(15.5)	%
Cost of Interest-Bearing Liabilities	0.24			0.89			(0.65)		(73.0)
Net Interest Spread	2.93			2.86			0.07		2.4
Net Interest Margin	2.99			3.05			(0.06)		(2.0)
Net Interest Income excluding PPP loans	$	24,814		$	23,006		$	1,808	7.9	%
Net Interest Margin excluding PPP loans	2.84		%	3.05		%	(0.21)		(6.9)	%
(1) Includes Nonaccrual Loans.

Net interest income for the recently completed quarter increased by $3.1 million, or 13.7%, from the first quarter of 2020, due to a variety of factors including; balance sheet growth, lower market rates, and a more favorable funding mix with higher deposit balances. Total loans increased $44.2 million in the first quarter of 2021. At March 31, 2021, deposit balances reached $3.5 billion. Deposit growth for the first quarter of 2021 was $218.9 million and increased $642.6 million, or 22.9%, from the prior-year level. Noninterest-bearing deposits represented 21.8% of total deposits at March 31, 2021, compared to 17.4% of total deposits on March 31, 2020. Net interest margin decreased 6 basis points in the first quarter of 2021 to 2.99%, from 3.05% during the first quarter of 2020. Average earning asset yields were 58 basis points lower as compared to the first quarter of 2020 due primarily to the increased cash balances and lower market rates. The cost of interest-bearing liabilities decreased 65 basis points from the quarter ended March 31, 2020. Arrow defines net interest margin as net interest income divided by average earning assets, annualized. 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 58, the provision for loan losses for the first quarter of 2021 was $(648) thousand, compared to a provision of $2.8 million for the first quarter of 2020.

64

Noninterest Income

Summary of Noninterest Income

(Dollars in Thousands)

	Three Months Ended
	March 31, 2021		March 31, 2020		Change		% Change
Income From Fiduciary Activities	$	2,378	$	2,213	$	165	7.5	%
Fees for Other Services to Customers	2,609		2,451		158		6.4	%
Insurance Commissions	1,640		1,632		8		0.5	%
Net Gain (Loss) on Securities Transactions	160		(374)		534		142.8	%
Net Gain on the Sale of Loans	1,415		213		1,202		564.3	%
Other Operating Income	406		1,559		(1,153)		(74.0)	%
Total Noninterest Income	$	8,608	$	7,694	$	914	11.9	%

Total noninterest income in the current quarter was $8.6 million, an increase of $0.9 million from the comparable quarter of 2020. Income from fiduciary activities for the first quarter of 2021 increased by 7.5% from the first quarter of 2020. Fees for other services to customers were $2.6 million for the first quarter of 2021. Insurance commissions were $1.6 million for the first quarter of 2021 consistent with the first quarter of 2020. Net gain on security transactions of $160 thousand for the first quarter of 2021 was the result in the increase in the fair value of equity securities. Net gain on the sale of loans in the first quarter of 2021 increased by $1.2 million from the first quarter of 2020. See page 52 for the discussion of loan sales. Other operating income decreased $1.2 million from the comparable quarter in 2020, due to a variety of factors. In the first quarter of 2020, Arrow had a gain on the sale of OREO properties of $110 thousand. In the first quarter of 2021, Arrow had a loss on the disposal of fixed assets of $87 thousand. Fees received as part of interest rate swap agreements decreased $866 thousand. Arrow purchased additional bank owned life insurance during 2020 which generated an increase in income of $91 thousand as compared to the prior year comparable quarter.

Noninterest Expense

Summary of Noninterest Expense

(Dollars in Thousands)

	Three Months Ended
	March 31, 2021			March 31, 2020			Change		% Change
Salaries and Employee Benefits	$	11,138		10,383			$	755	7.3	%
Occupancy Expense of Premises, Net	1,593			1,449			144		9.9	%
Technology and Equipment Expense	3,459			3,352			107		3.2	%
FDIC and FICO Assessments	270			219			51		23.3	%
Amortization	54			58			(4)		(6.9)	%
Other Operating Expense	2,164			2,293			(129)		(5.6)	%
Total Noninterest Expense	$	18,678		$	17,754		$	924	5.2	%
Efficiency Ratio	53.46		%	56.42		%	(2.96)		(5.2)	%

Noninterest expense for the first quarter of 2021 was $18.7 million, an increase of $0.9 million, or 5.2%, from the first quarter of 2020. Salaries and benefit expenses increased $0.8 million, or 7.3%, from the comparable quarter in 2020.

FDIC assessment increased $51 thousand or 23.3%, from the first quarter of 2020 as the result of the increased assets of Arrow's subsidiaries.

Other operating expense decreased $126 thousand, or 5.5%, from the first quarter of 2020. The majority of the decrease, $147 thousand, related to the decrease in the allowance for credit losses on off-balance sheet credit exposures.

Income Taxes

Summary of Income Taxes

(Dollars in Thousands)

	Three Months Ended
	March 31, 2021			March 31, 2020			Change		% Change
Provision for Income Taxes	$	3,453		$	2,047		$	1,406	68.7	%
Effective Tax Rate	20.6		%	20.1		%	0.5		2.5	%

The increase in the effective tax rate in the first three months ended March 31, 2021 compared to the three-months ended March 31, 2020 was primarily due to the reduction of tax exempt investments held and the related investment income

65

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, 2021:

	Change in Interest Rate
	+ 200 basis points	- 100 basis points
Calculated change in Net Interest Income - Year 1	(0.73)%	(1.49)%
Calculated change in Net Interest Income - Year 2	(0.69)%	(14.24)%

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). Additionally, short-term interest rates are at historic lows, at or near zero. Accordingly, the results in the -100 basis points scenario effectively represents a flattening of the yield curve, with all rate terms dropping to zero, rather than a parallel shift in interest rates across the entire yield curve.

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. The COVID-19 pandemic may impact markets, rates, behavior and other estimates used in the above scenarios.

Item 4.

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, 2021. Based upon that evaluation, senior management, including the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were effective. Arrow adopted ASU No. 2016-13, "Financial Instruments: Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" on January 1, 2021. Arrow implemented new controls and modified existing controls as part of the adoption. The new controls were implemented to account for the additional complexity of the expected credit loss model, review of economic forecasts, and other assumptions used in the estimation of the model. There were no other changes in Arrow's internal control over financial reporting that occurred during the quarter ended March 31, 2021, that materially affected, or are reasonably likely to materially affect, Arrow's internal control over financial reporting.

66

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

Except as noted below, Arrow, 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, Arrow is often the subject of, or a party to, various legal claims by other parties against Arrow, by Arrow against other parties, or involving Arrow, which arise in the normal course of business. Except as noted below, the various pending legal claims against Arrow will not, in the opinion of management based upon consultation with counsel, result in any material liability.

On July 1, 2020, Daphne Richard, a customer of GFNB filed a putative class action complaint against GFNB in the United States District Court for the Northern District of New York. The complaint alleges that GFNB assessed overdraft fees on certain transactions drawn on her checking account without having sufficiently disclosed its overdraft-fee practices in its account agreement. Ms. Richard, on behalf of two purported classes, seeks compensatory damages, disgorgement of profits, statutory damages, treble damages, enjoinment of the conduct complained of, and costs and fees. The complaint is similar to complaints filed against other financial institutions pertaining to overdraft fees. Arrow denies any wrongdoing and the case is being vigorously defended.

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, 2020 continue to represent the most significant risks to the Company's future results of operations and financial conditions, without further modification or amendment.

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, 2021 of common stock (our only class of equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934):

First Quarter 2021 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	1,282	$	30.79	—	$	5,000,000
February	1,500	31.87		—	5,000,000
March	13,774	35.84		—	5,000,000
Total	16,556	35.09		—

1 The 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 in connection with their stock-for-stock exercise of such options and (iii) shares purchased under the publicly-announced 2021 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 (1,282 shares); February - DRIP purchases (1,500 shares); and March - DRIP purchases (13,774 shares).

2 Includes only those shares acquired by Arrow pursuant to its publicly-announced stock repurchase programs. Arrow's only publicly-announced stock repurchase program in effect for the first quarter of 2021 was the 2021 Repurchase Program approved by the Board of Directors and announced in January 2021, under which the Board authorized management, in its discretion, to repurchase from time to time from the period January 27, 2021 through December 31, 2021, 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

67

Item 4.

Mine Safety Disclosures - None

Item 5.

Other Information - None

Item 6.

Exhibits

Exhibit Number	Exhibit
3.(i)	Certificate of Incorporation of the Registrant as Amended through June 3, 2019, incorporated by reference from the Registrant's Current Report on Form 8-K filed June 5, 2019, Exhibit 3.1
3.(ii)	By-laws of the Registrant, as amended, incorporated herein by reference from the Registrant’s Current Report on Form 8-K filed on November 24, 2009, Exhibit 3.(ii)
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
10.1	Employment Agreement between the Company and Thomas J. Murphy effective February 1, 2021, incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 1, 2021, Exhibit 10.1*
10.2	Employment Agreement between the Company and Edward J. Campanella effective February 1, 2021, incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 1, 2021, Exhibit 10.2*
10.3	Employment Agreement between the Company and David S. DeMarco effective February 1, 2021, incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 1, 2021, Exhibit 10.3*
10.4	Employment Agreement between the Company and David D. Kaiser effective February 1, 2021, incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 1, 2021, Exhibit 10.4*
10.5	Employment Agreement between the Company and Andrew J. Wise effective February 1, 2021, incorporated herein by reference from the Registrant's Current Report on Form 8-K, filed February 1, 2021, Exhibit 10.5*
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
* Management contracts or compensation plans required to be filed as an exhibit.

68

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 6, 2021	/s/Thomas J. Murphy
Date	Thomas J. Murphy
	President and Chief Executive Officer
May 6, 2021	/s/Edward J. Campanella
Date	Edward J. Campanella
	Senior Vice President, Treasurer and
	Chief Financial Officer
	(Principal Financial Officer and
	Principal Accounting Officer)

69

EX-15

Exhibit 15

Report of Independent Registered Public Accounting Firm

May 6, 2021

The Stockholders and Board of Directors

Arrow Financial Corporation

Glens Falls, New York

Re: Registration Statement Forms S-3 (No. 333-230360 and 333-243662) and Forms S-8 (No. 333-151550, No. 333-188479, No. 333-188480, and No. 333-238096)

With respect to the subject registration statement, we acknowledge our awareness of the use therein of our report dated May 6, 2021 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 6, 2021

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 6, 2021

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, 2021, 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 6, 2021

/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.

XML

Cover Page - shares	3 Months Ended
	Mar. 31, 2021	Apr. 30, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	0-12507
Entity Registrant Name	ARROW FINANCIAL CORPORATION
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	22-2448962
Entity Address, Address Line One	250 Glen Street
Entity Address, City or Town	Glens Falls
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	12801
City Area Code	518
Local Phone Number	745-1000
Title of 12(b) Security	Common Stock, Par Value $1.00 per share
Trading Symbol	AROW
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		15,553,329
Entity Central Index Key	0000717538
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
ASSETS
Cash and Due From Banks	$ 45,602	$ 42,116	$ 32,525
Interest-Bearing Deposits at Banks	406,605	338,875	106,004
Investments, Debt and Equity Securities [Abstract]
Available-for-Sale at Fair Value	464,089	365,287	378,186
Held-to-Maturity (Approximate Fair Value of $221,360 at March 31, 2021; $226,576 at December 31, 2020; and $242,804 at March 31, 2020)	214,561	218,405	238,520
Equity Securities	1,796	1,636	1,689
FHLB and Federal Reserve Bank Stock	5,360	5,349	5,379
Total	2,639,243	2,595,030	2,414,193
Allowance for Credit Losses	(26,840)	(29,232)	(23,637)
Net Loans	2,612,403	2,565,798	2,390,556
Premises and Equipment, Net	43,057	42,612	40,987
Goodwill	21,873	21,873	21,873
Other Intangible Assets, Net	2,049	1,950	1,640
Other Assets	86,316	84,735	73,973
Total Assets	3,903,711	3,688,636	3,291,332
LIABILITIES
Noninterest-Bearing Deposits	751,884	701,341	489,151
Interest-Bearing Checking Accounts	992,486	832,434	793,425
Savings Deposits	1,463,229	1,423,358	1,146,683
Time Deposits over $250,000	100,212	123,622	135,854
Other Time Deposits	145,777	153,971	245,892
Total Deposits	3,453,588	3,234,726	2,811,005
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	6,795	17,486	57,909
Federal Home Loan Bank Term Advances	45,000	45,000	50,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Finance Leases	5,205	5,217	5,249
Other Liabilities	30,710	31,815	37,771
Total Liabilities	3,561,298	3,354,244	2,981,934
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at March 31, 2021, December 31, 2020 and March 31, 2020	0	0	0
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,194,474 Shares Issued at March 31, 2021 and December 31, 2020 and 19,606,449 at March 31, 2020)	20,194	20,194	19,606
Additional Paid-in Capital	354,358	353,662	336,021
Retained Earnings	51,263	41,899	37,441
Accumulated Other Comprehensive Loss	(3,096)	(816)	(2,412)
Treasury Stock, at Cost (4,651,719 Shares at March 31, 2021; 4,678,736 Shares at December 31, 2020 and 4,624,348 Shares at March 31, 2020)	(80,306)	(80,547)	(81,258)
Total Stockholders’ Equity	342,413	334,392	309,398
Total Liabilities and Stockholders’ Equity	$ 3,903,711	$ 3,688,636	$ 3,291,332

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Statement of Financial Position [Abstract]
Held-to-maturity securities, at fair value	$ 221,360	$ 226,576	$ 242,804
Preferred Stock, par value (in dollars per share)	$ 1	$ 1	$ 1
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)	30,000,000	30,000,000	30,000,000
Common Stock, shares issued (in shares)	20,194,474	20,194,474	19,606,449
Treasury Stock (in shares)	4,651,719	4,678,736	4,624,348

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans		$ 25,183	$ 24,874
Interest on Deposits at Banks		85	124
Interest and Dividends on Investment Securities:
Fully Taxable		1,506	2,193
Exempt from Federal Taxes		920	1,035
Total Interest and Dividend Income		27,694	28,226
INTEREST EXPENSE
Interest-Bearing Checking Accounts		219	487
Savings Deposits		565	2,471
Time Deposits over $250,000		120	533
Other Time Deposits		222	1,000
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase		2	22
Federal Home Loan Bank Advances		193	429
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts		169	228
Interest on Financing Leases		49	50
Total Interest Expense		1,539	5,220
NET INTEREST INCOME		26,155	23,006
Provision for Credit Losses		(648)	2,772
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		26,803	20,234
NONINTEREST INCOME
Insurance Commissions		1,640	1,632
Net Gain (Loss) on Securities		160	(374)
Net Gain on Sales of Loans		1,415	213
Other Operating Income		406	1,559
Total Noninterest Income		8,608	7,694
NONINTEREST EXPENSE
Salaries and Employee Benefits		11,138	10,383
Occupancy Expenses, Net		1,593	1,449
Technology and Equipment Expense		3,459	3,352
FDIC Assessments		270	219
Other Operating Expense		2,218	2,351
Total Noninterest Expense		18,678	17,754
INCOME BEFORE PROVISION FOR INCOME TAXES		16,733	10,174
Provision for Income Taxes		3,453	2,047
NET INCOME		$ 13,280	$ 8,127
Average Shares Outstanding:
Basic (in shares)	[1]	15,528	15,446
Diluted (in shares)	[1]	15,563	15,476
Per Common Share:
Basic Earnings (in dollars per share)		$ 0.86	$ 0.53
Diluted Earnings (in dollars per share)		$ 0.85	$ 0.53
Income From Fiduciary Activities
NONINTEREST INCOME
Revenue from contract with customer		$ 2,378	$ 2,213
Fees for Other Services to Customers
NONINTEREST INCOME
Revenue from contract with customer		$ 2,609	$ 2,451

[1] 2020 Share and Per Share Amounts have been restated for the September 25, 2020 3% stock dividend.

XML

Consolidated Statements of Income (Parenthetical)	Sep. 25, 2020
Income Statement [Abstract]
Stock dividend, percent	3.00%

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Statement of Comprehensive Income [Abstract]
Net Income	$ 13,280	$ 8,127
Other Comprehensive (Loss) Income, Net of Tax:
Net Unrealized Securities Holding (Loss) Gain Arising During the Period	(3,812)	4,098
Net Unrealized Gain (Loss) on Cash Flow Hedge Agreements	1,475	(219)
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(20)	0
Amortization of Net Retirement Plan Actuarial Loss	34	27
Amortization of Net Retirement Plan Prior Service Cost	43	39
Other Comprehensive (Loss) Income	(2,280)	3,945
Comprehensive Income	$ 11,000	$ 12,072

XML

Consolidated Statements of Changes In Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Cumulative Effect, Period of Adoption, Adjusted Balance	Common Stock	Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Additional Paid-In Capital	Additional Paid-In Capital Cumulative Effect, Period of Adoption, Adjusted Balance	Retained Earnings	Retained Earnings Cumulative Effect, Period of Adoption, Adjustment	Retained Earnings Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss Cumulative Effect, Period of Adoption, Adjusted Balance	Treasury Stock	Treasury Stock Cumulative Effect, Period of Adoption, Adjusted Balance
Stockholders' equity, beginning balance at Dec. 31, 2019	$ 301,728			$ 19,606		$ 335,355		$ 33,218			$ (6,357)		$ (80,094)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	8,127							8,127
Other Comprehensive Income	3,945										3,945
Cash Dividends Paid	(3,904)							(3,904)
Stock Options Exercised, Net	343					199							144
Shares Issued Under the Employee Stock Purchase Plan	121					84							37
Shares Issued for Dividend Reinvestment Plans	442					280							162
Stock-Based Compensation Expense	103					103
Purchases of Treasury Stock	(1,507)												(1,507)
Stockholders' equity, ending balance at Mar. 31, 2020	309,398			19,606		336,021		37,441			(2,412)		(81,258)
Stockholders' equity, beginning balance at Dec. 31, 2020	334,392	$ 120	$ 334,512	20,194	$ 20,194	353,662	$ 353,662	41,899	$ 120	$ 42,019	(816)	$ (816)	(80,547)	$ (80,547)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	13,280							13,280
Other Comprehensive Income	(2,280)										(2,280)
Cash Dividends Paid	(4,036)							(4,036)
Stock Options Exercised, Net	156					94							62
Shares Issued Under the Directors' Stock	98					70							28
Shares Issued Under the Employee Stock Purchase Plan	124					86							38
Shares Issued for Dividend Reinvestment Plans	455					342							113
Stock-Based Compensation Expense	104					104
Stockholders' equity, ending balance at Mar. 31, 2021	$ 342,413			$ 20,194		$ 354,358		$ 51,263			$ (3,096)		$ (80,306)

XML

Consolidated Statements of Changes In Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Statement of Stockholders' Equity [Abstract]
Cash Dividends Paid, per Share (in dollars per share)	$ 0.260	$ 0.252
Stock Options Exercised (in shares)	6,927	14,282
Shares Issued Under the Directors' Stock Plan (in shares)	3,172
Shares Issued Under Employee Stock Purchase Plan (in shares)	4,269	3,648
Shares Issued for Dividend Reinvestment Plans (in shares)	12,649	16,001
Purchase of Treasury Stock (in shares)		50,021

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash Flows from Operating Activities:
Net Income	$ 13,280	$ 8,127
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses	(648)	2,772
Depreciation and Amortization	1,951	1,597
Net (Gain) Loss on Securities Transactions	(160)	374
Loans Originated and Held-for-Sale	(24,037)	(9,322)
Proceeds from the Sale of Loans Held-for-Sale	32,093	7,975
Net Gain on the Sale of Loans	(1,415)	(213)
Net Loss (Gain) on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	90	(91)
Contributions to Retirement Benefit Plans	(146)	(195)
Deferred Income Tax Expense (Benefit)	349	(873)
Shares Issued Under the Directors’ Stock Plan	98	0
Stock-Based Compensation Expense	104	103
Tax Benefit from Exercise of Stock Options	13	28
Net Increase in Other Assets	(3,077)	(5,719)
Net Increase in Other Liabilities	1,624	8,563
Net Cash Provided By Operating Activities	20,119	13,126
Cash Flows from Investing Activities:
Proceeds from the Maturities and Calls of Securities Available-for-Sale	25,977	17,444
Purchases of Securities Available-for-Sale	(130,481)	(33,201)
Proceeds from the Maturities and Calls of Securities Held-to-Maturity	4,291	7,075
Purchases of Securities Held-to-Maturity	(619)	(717)
Net Increase in Loans	(51,866)	(27,317)
Proceeds from the Sales of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	259	781
Purchase of Premises and Equipment	(1,311)	(1,072)
Net (Increase) Decrease in FHLB and Federal Reserve Bank Stock	(11)	4,938
Net Cash Used By Investing Activities	(153,761)	(32,069)
Cash Flows from Financing Activities:
Net Increase in Deposits	218,862	194,951
Net Decrease in Short-Term Federal Home Loan Bank Borrowings	0	(130,000)
Net (Decrease) Increase in Short-Term Borrowings	(10,691)	6,810
Finance Lease Payments	(12)	(5)
Federal Home Loan Bank Advances	0	40,000
Repayments of Federal Home Loan Bank Term Advances	0	(20,000)
Purchase of Treasury Stock	0	(1,507)
Stock Options Exercised, Net	156	343
Shares Issued Under the Employee Stock Purchase Plan	124	121
Shares Issued for Dividend Reinvestment Plans	455	442
Cash Dividends Paid	(4,036)	(3,904)
Net Cash Provided By Financing Activities	204,858	87,251
Net Increase in Cash and Cash Equivalents	71,216	68,308
Cash and Cash Equivalents at Beginning of Period	380,991	70,221
Cash and Cash Equivalents at End of Period	452,207	138,529
Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings	1,626	5,264
Income Taxes	0	344
Non-cash Investing and Financing Activity:
Transfer of Loans to Other Real Estate Owned and Repossessed Assets	$ 349	$ 371

XML

Accounting Policies

3 Months Ended

Mar. 31, 2021

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, 2021, December 31, 2020 and March 31, 2020; the results of operations for the three month periods ended March 31, 2021 and 2020; the consolidated statements of comprehensive income for the three month periods ended March 31, 2021 and 2020; the changes in stockholders' equity for the three month periods ended March 31, 2021 and 2020; and the cash flows for the three month periods ended March 31, 2021 and 2020. All such adjustments are of a normal recurring nature. 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, 2020 included in Arrow's Annual Report on Form 10-K for the year ended December 31, 2020.

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 (US GAAP) 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.  Due to the uncertainty regarding the impact of the COVID-19 pandemic, management utilized estimates and assumptions in its evaluation of potential impairment of Arrow's right-of-use lease assets, goodwill and intangible assets. Our most significant estimate is the allowance for credit losses. Other estimates include the fair value of financial statements, evaluation of pension and other post-retirement liabilities, an analysis of a need for a valuation allowance for deferred tax assets and a reserve for unfunded loan commitments recorded as an other liability. 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 credit losses.  In connection with the determination of the allowance for credit losses management obtains economic forecasts from reliable sources and appraisals for properties.  The allowance for credit losses is management’s best estimate of the life of loan losses as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for credit losses may be necessary based on changes in economic conditions.

Allowance for Credit Losses – Loans

Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”) approach requires an estimate of the credit losses expected over the life of a loan (or pool of loans). It replaces the incurred loss approach’s threshold that required the recognition of a credit loss when it was probable a loss event was incurred. The allowance for credit losses is a valuation account that is deducted from, or added to, the loans’ amortized cost basis to present the net, lifetime amount expected to be collected on the loans. Loan losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.

Management estimates the allowance balance using relevant available information from internal and external sources related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for the estimation of expected credit losses. Company historical loss experience was supplemented with peer information when there was insufficient loss data for the Company. Peer selection was based on a review of institutions with comparable loss experience as well as loan yield, bank size, portfolio concentration and geography. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in credit concentrations, delinquency level, collateral values and underwriting standards as well as changes in economic conditions or other relevant factors. Management judgment is required at each point in the measurement process.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Upon adoption of CECL, management revised the manner in which loans were pooled for similar risk characteristics. Management developed portfolio segments for estimating loss based on type of borrower and collateral as follows:

Commercial Loans

Commercial Real Estate Loans

Consumer Loans

Residential Loans

Further details related to loan portfolio segments is included in Note 4 Loans.

Historical credit loss experience for both the Company and segment-specific peers provides the basis for the estimation of expected credit losses. The Company utilized regression analyses of peer data, of which the Company is included, where observed credit losses and selected economic factors were utilized to determine suitable loss drivers for modeling lifetime probability of default ("PD") rates. Arrow uses the discounted cash flow ("DCF") method to estimate expected credit losses for the commercial, commercial real estate, and residential segments. For each of these loan segments, Arrow generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, PD, and segment-specific loss given default ("LGD") risk factors. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data and adjusted, if necessary, based on the reasonable and supportable forecast of economic conditions.

For the loan segments utilizing the DCF method, (commercial, commercial real estate, and residential) management utilizes externally developed economic forecasts of the following economic factors as loss drivers: national unemployment, gross domestic product and home price index ("HPI"). The economic forecast is applied over a reasonable and supportable forecast period. Arrow utilizes a six quarter reasonable and supportable forecast period with a four quarter reversion to the historic mean on a straight-line basis.

The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring (“TDR”) will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by Arrow.

Arrow uses the vintage analysis method to estimate expected credit losses for the consumer loan segment. The vintage method was selected since the loans within the consumer loan segment are homogeneous, not just by risk characteristic, but loan structure. The loss rate is applied to the loan origination amounts. Arrow maintains, over the life of the loan, the loss curve by vintage year. If estimated losses computed by the vintage method need to be adjusted based on current conditions and the reasonable and supportable economic forecast, these adjustments may be incorporated over a six quarter reasonable and supportable forecast period, reverting to historical losses using a straight-line method over a two year period.

The vintage and DCF models also consider the need to qualitatively adjust expected loss estimates for information not already captured in the quantitative loss estimation process. Qualitative considerations include limitations inherent in the quantitative model; trends experienced in nonperforming and delinquent loans; changes in value of underlying collateral; changes in lending policies and procedures; nature and composition of loans; portfolio concentrations that may affect loss experience across one or more components or the portfolio; the experience, ability and depth of lending management and staff; the Company’s credit review system; and the effect of external factors; such as competition, legal and regulatory requirements. These qualitative factor adjustments may increase or decrease the Company's estimate of expected credit losses so that the allowance for credit loss is reflective of the estimate of lifetime losses that exist in the loan portfolio at the balance sheet date.

All loans not included in the vintage analysis method that exceed $250,000 which are on nonaccrual, are evaluated on an individual basis. For collateral dependent financial assets where Arrow has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and Arrow expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, Arrow has elected a practical expedient to measure the allowance for credit loss as the difference between the fair value of the collateral less cost to sell, and the amortized cost basis of the asset as of the measurement date. In the event where the repayment of a collateral dependent financial asset is expected to be provided substantially through the operating of the collateral, Arrow will use fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

Except as set forth below, a loan that has been modified or renewed is considered a TDR when two conditions are met:

•The borrower is experiencing financial difficulty, and

•Concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics.

Arrow's allowance for credit losses reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point it is determined that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required allowance for credit losses. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in Arrow's existing pools based on the underlying risk characteristics of the loan to measure the allowance for credit losses. In accordance with the Coronavirus Aid, Relief, and Economic Security (CARES) Act and ASC Subtopic 310-40, as extended by the Consolidated Appropriations Act, 2021, if a qualifying loan modification was made for a borrower as the result of the COVID-19 pandemic, this modification was not considered a TDR.

Estimated Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities

The Company estimates expected credit losses over the contractual period in which the Company has exposure to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures recognized in other liabilities, is adjusted as an expense in other noninterest expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. Estimating credit losses on unfunded commitments requires the Bank to consider the following categories of off-balance sheet credit exposure: unfunded commitments to extend credit, unfunded lines of credit, and standby letters of credit. Each of these unfunded commitments is then analyzed for a probability of funding to calculate a probable funding amount. The life of loan loss factor by related portfolio segment from the loan allowance for credit loss calculation is then applied to the probable funding amount to calculate the estimated credit losses on off-balance sheet credit exposures recognized as other liabilities.

Allowance for Credit Losses – Held to Maturity ("HTM") Debt Securities

Arrow's HTM debt securities are also required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on HTM debt securities on a collective basis by major security types that share similar risk characteristics, such as financial asset type and collateral type adjusted for current conditions and reasonable and supportable

forecasts. Management classifies the HTM portfolio into the following major security types: U.S. government agency or U.S. government sponsored mortgage-backed and collateralized mortgage obligations securities, and state and municipal debt securities.

The mortgage-backed and collateralized mortgage obligations HTM securities are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government as to timely repayment of principal and interest, are highly rated by major rating agencies, and have a long history of no credit losses. Therefore, the Company did not record a credit loss for these securities.

State and municipal bonds carry an investment grade from an accredited ratings agency, primarily with an investment grade rating. In addition, the Company has a limited amount of New York state local municipal bonds that are not rated. The estimate of expected credit losses on the HTM portfolio is based on the expected cash flows of each individual CUSIP over its contractual life and utilized a municipal loss forecast model for determining PD and LGD rates. Management may exercise discretion to make adjustments based on environmental factors. A calculated expected credit loss for individual securities was determined using the PD and LGD rates. Arrow determined that the expected credit loss on its municipal bond portfolio was de minimis, and therefore, an allowance for credit losses was not recorded.

Allowance for Credit Losses – Available for Sale ("AFS") Debt Securities

The impairment model for AFS debt securities differs from the CECL approach utilized by HTM debt securities since AFS debt securities are measured at fair value rather than amortized cost. For AFS debt securities in an unrealized loss position, the Bank first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, in making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, failure of the issuer of the debt security to make scheduled interest or principal payments, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. The cash flows are estimated using information relevant to the collectability of the security, including information about past events, current conditions and reasonable and supportable forecasts. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Accrued Interest Receivable

Upon adoption of CECL on January 1, 2021, the Company made the following elections regarding accrued interest receivable: (1) presented accrued interest receivable balances separately within the other assets balance sheet line item; (2) excluded interest receivable that is included in amortized cost of financing receivables from related disclosures requirements and (3) continued the Company's policy to write off accrued interest receivable by reversing interest income. For loans, write off typically occurs upon becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, the Company has not experienced uncollectible accrued interest receivable on investment securities.

The following accounting standards have been adopted in the first three months of 2021:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all related subsequent amendments thereto. ASU 2016-13 introduces new guidance that make substantive changes to the accounting for credit losses. ASU 2016-13 introduces the CECL model, which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities. The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses. ASU 2016-13 also modifies certain provisions of the current other-than-temporary impairment model for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security’s amortized cost basis and its fair value and will be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. ASU 2016-13 also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. ASU 2016-13 requires expanded disclosures including, but not limited to, (1) information about the methods and assumptions used to estimate expected credit losses, including changes in the factors that influenced management’s estimate and the reasons for those changes, (2) financing receivables and net investment in leases measured at amortized cost, further disaggregation of information about the credit quality of those assets and (3) a rollforward of the allowance for credit losses for HTM and AFS securities. The standard also changes the accounting for purchased credit-impaired debt securities and loans. ASU 2016-13 was effective for the Company on January 1, 2020. As permitted by the CARES Act, Arrow deferred the adoption of the CECL methodology in determining credit losses until January 1, 2021. Management expects that the CECL model may create more volatility in the level of our allowance for loan losses from quarter to quarter as changes in the level of allowance for loan losses will be dependent upon, among other things, macroeconomic forecasts and conditions, loan portfolio volumes and credit quality.

Arrow adopted CECL on January 1, 2021 (“Day 1”) using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures recognized as other liabilities. Results for reporting periods beginning after January 1, 2021 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net increase to retained earnings of $120,000 as of January 1, 2021 for the cumulative effect of adopting ASC 326. The transition adjustment includes a $1.3 million decrease to the allowance for credit losses on loans, a $1.1 million increase to the estimated credit losses on off-balance sheet credit exposures recorded as other liabilities, and a $41,000 impact to the deferred tax liability. The Company did not record an allowance for HTM debt securities on January 1, 2021 as the amount of credit risk was deemed immaterial. The Company did not record an allowance for credit losses on its AFS debt securities under the

newly codified AFS debt security impairment model, as the majority of these securities are government agency-backed securities for which the risk of loss is minimal. Refer to Note 3 Investment Securities and Note 4 Loans (under the captions "Allowance for Credit Losses" and "Loan Credit Quality Indicators") to the Company’s unaudited interim consolidated financial statements included in this Form 10-Q for more information.

In December 2019, the FASB issued ASU 2019-12 "Simplifying the Accounting for Income Taxes" (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. Arrow adopted this standard on January 1, 2021. The Company does not expect that the adoption of this standard will have a material impact on its financial position or the results of operations in periods subsequent to its adoption.

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Cash and Cash Equivalents

3 Months Ended

Mar. 31, 2021

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

CASH AND CASH EQUIVALENTS (In Thousands)

The following table is the schedule of Cash and Cash Equivalents at March 31, 2021, December 31, 2020 and March 31, 2020.
		March 31, 2021		December 31, 2020		March 31, 2020
Cash and Due From Banks		$	45,602	$	42,116	$	32,525
Interest-Bearing Deposits at Banks		406,605		338,875		106,004
Total Cash and Cash Equivalents		$	452,207	380,991		138,529
Supplemental Information:
Total required reserves, including vault cash and Federal Reserve Bank deposits 1		$	—	$	—	$	—
Restricted cash pledged as collateral related to swap agreements and included in Cash and Due From Banks		$	—	$	500	$	—
1.	Until March 2020, Arrow was required to maintain reserve balances with the Federal Reserve Bank of New York. In March 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent to free up liquidity in the banking industry to support lending to households and businesses.

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Investment Securities

3 Months Ended

Mar. 31, 2021

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, 2021, December 31, 2020 and March 31, 2020:

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, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,001	$	508	$	349,911	$	1,000	$	461,420
Gross Unrealized Gains	138		—		6,276		—		6,414
Gross Unrealized Losses	(1,769)		—		(1,776)		(200)		(3,745)
Available-For-Sale Securities,   at Fair Value	108,370		508		354,411		800		464,089
Available-For-Sale Securities,   Pledged as Collateral, at Fair Value									352,214
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	—	$	68	$	58	$	—	$	126
From 1 - 5 Years	65,001		40		289,741		—		354,782
From 5 - 10 Years	45,000		400		60,112		1,000		106,512
Over 10 Years	—		—		—		—		—
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	—	$	68	$	64	$	—	$	132
From 1 - 5 Years	63,774		40		295,370		—		359,184
From 5 - 10 Years	44,596		400		58,977		800		104,773
Over 10 Years	—		—		—		—		—
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	103,231	$	—	$	120,780	$	—	$	224,011
12 Months or Longer	—		—		—		800		800
Total	$	103,231	$	—	$	120,780	$	800	$	224,811
Number of Securities in a   Continuous Loss Position	14		—		16		1		31
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,769	$	—	$	1,776	$	—	$	3,545
12 Months or Longer	—		—		—		200		200
Total	$	1,769	$	—	$	1,776	$	200	$	3,745
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,001
US Agency Obligations,   at Fair Value	108,370
US Government Agency   Securities, at Amortized Cost					$	11,582
US Government Agency   Securities, at Fair Value					11,658
Government Sponsored Entity   Securities, at Amortized Cost					338,329
Government Sponsored Entity   Securities, at Fair Value					342,753

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, 2020
Available-For-Sale Securities,   at Amortized Cost	$	65,002	$	528	$	290,967	$	1,000	$	357,497
Gross Unrealized Gains	184		—		7,934		—		8,118
Gross Unrealized Losses	(74)		—		(54)		(200)		(328)
Available-For-Sale Securities,   at Fair Value	65,112		528		298,847		800		365,287
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									244,411
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	29,926	$	—	$	—	$	—	$	29,926
12 Months or Longer	—		—		4,882		800		5,682
Total	$	29,926	$	—	$	4,882	$	800	$	35,608
Number of Securities in a   Continuous Loss Position	4		—		1		1		6
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	74	$	—	$	—	$	—	$	74
12 Months or Longer	—		—		54		200		254
Total	$	74	$	—	$	54	$	200	$	328
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	65,002
US Agency Obligations,   at Fair Value	65,112
US Government Agency   Securities, at Amortized Cost					$	12,696
US Government Agency   Securities, at Fair Value					12,683
Government Sponsored Entity   Securities, at Amortized Cost					278,271
Government Sponsored Entity   Securities, at Fair Value					286,164

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, 2020
Available-For-Sale Securities,   at Amortized Cost	$	5,002	$	723	$	365,333	$	1,000	$	372,058
Gross Unrealized Gains	179		—		7,484		—		7,663
Gross Unrealized Losses	—		—		(1,335)		(200)		(1,535)
Available-For-Sale Securities,   at Fair Value	5,181		723		371,482		800		378,186
Available-For-Sale Securities,   Pledged as Collateral, at Fair Value									273,124
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	18,846	$	—	$	18,846
12 Months or Longer	—		—		59,262		800		60,062
Total	$	—	$	—	$	78,108	$	800	$	78,908
Number of Securities in a   Continuous Loss Position	—		—		27		1		28
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	316	$	—	$	316
12 Months or Longer	—		—		1,019		200		1,219
Total	$	—	$	—	$	1,335	$	200	$	1,535
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	5,002
US Agency Obligations,   at Fair Value	5,181
US Government Agency   Securities, at Amortized Cost					$	58,089
US Government Agency   Securities, at Fair Value					57,091
Government Sponsored Entity   Securities, at Amortized Cost					307,244
Government Sponsored Entity   Securities, at Fair Value					314,391

At March 31, 2021, there was no allowance for credit losses for the available for sale securities portfolio.

The following table is the schedule of Held-To-Maturity Securities at March 31, 2021, December 31, 2020 and March 31, 2020:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	191,202	$	23,359	$	214,561
Gross Unrealized Gains	5,843		956		6,799
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	197,045		24,315		221,360
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					207,595
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	16,513	$	1,586	$	18,099
From 1 - 5 Years	139,576		21,773		161,349
From 5 - 10 Years	34,110		—		34,110
Over 10 Years	1,003		—		1,003
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	16,580	$	1,639	$	18,219
From 1 - 5 Years	143,850		22,676		166,526
From 5 - 10 Years	35,599		—		35,599
Over 10 Years	1,016		—		1,016
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	8,310
US Government Agency   Securities, at Fair Value			8,597
Government Sponsored Entity   Securities, at Amortized Cost			15,049
Government Sponsored Entity   Securities, at Fair Value			15,718

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2020
Held-To-Maturity Securities,   at Amortized Cost	$	192,352	$	26,053	$	218,405
Gross Unrealized Gains	7,080		1,094		8,174
Gross Unrealized Losses	(3)		—		(3)
Held-To-Maturity Securities,   at Fair Value	199,429		27,147		226,576
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					211,176
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	1,513	$	—	$	1,513
12 Months or Longer	—		—		—
Total	$	1,513	$	—	$	1,513
Number of Securities in a   Continuous Loss Position	4		—		4
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	3	$	—	$	3
12 Months or Longer	—		—		—
Total	$	3	$	—	$	3
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	9,440
US Government Agency   Securities, at Fair Value			9,762
Government Sponsored Entity   Securities, at Amortized Cost			16,613
Government Sponsored Entity   Securities, at Fair Value			17,385
March 31, 2020
Held-To-Maturity Securities,   at Amortized Cost	$	204,148	$	34,372	$	238,520
Gross Unrealized Gains	3,104		1,329		4,433
Gross Unrealized Losses	(149)		—		(149)
Held-To-Maturity Securities,   at Fair Value	207,103		35,701		242,804
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					231,539
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	5,625	$	—	$	5,625
12 Months or Longer	1,867		—		1,867
Total	$	7,492	$	—	$	7,492
Number of Securities in a   Continuous Loss Position	16		—		16

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	16	$	—	$	16
12 Months or Longer	133		—		133
Total	$	149	$	—	$	149
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	1,594
US Government Agency   Securities, at Fair Value			1,655
Government Sponsored Entity   Securities, at Amortized Cost			32,778
Government Sponsored Entity   Securities, at Fair Value			34,046

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, 2021, December 31, 2020 and March 31, 2020, do not reflect any deterioration of the credit worthiness of the issuing entities.

Arrow evaluates available-for-sale debt securities in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized within the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. Arrow determined that at March 31, 2021, gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. Arrow does not intend to sell, nor is it more likely than not that Arrow will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. Therefore, Arrow carried no allowance for credit loss at March 31, 2021 and there was no credit loss expense recognized by Arrow with respect to the securities portfolio during the three months ended March 31, 2021.  

Arrow's held to maturity debt securities are comprised of U.S. government agencies, U.S. government-sponsored enterprises or state and municipal obligations. U.S. government agencies and U.S. government-sponsored enterprise securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Arrow determined that the expected credit loss on its held to maturity debt portfolio was immaterial and therefore no allowance for credit loss was recorded as of March 31, 2021.

The following table is the schedule of Equity Securities at March 31, 2021, December 31, 2020 and March 31, 2020:

Equity Securities
	March 31, 2021	December 31, 2020	March 31, 2020
Equity Securities, at Fair Value	$1,796	$1,636	$1,689

The following is a summary of realized and unrealized gains and losses recognized in net income on equity securities during the three month period ended March 31, 2021 and 2020:

	Quarterly Period Ended:
	March 31, 2021		March 31, 2020
Net Gain (Loss) on Equity Securities	$	160	$	(374)
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	—		—
Unrealized net gain (loss) recognized during the reporting period on equity securities still held at the reporting date	$	160	$	(374)

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Loans

3 Months Ended

Mar. 31, 2021

Receivables [Abstract]

Loans

LOANS (In Thousands)

Loan Categories and Past Due Loans

The following two tables present loan balances outstanding as of March 31, 2021, 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. Loans held-for-sale of $4,443, $11,085 and $1,905 as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively, are included in the residential real estate balances for current loans.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2021
Loans Past Due 30-59 Days	$	63	$	143	$	2,233	$	2,097	$	4,536
Loans Past Due 60-89 Days	34		2,723		822		156		3,735
Loans Past Due 90 or more Days	38		1,474		592		1,700		3,804
Total Loans Past Due	135		4,340		3,647		3,953		12,075
Current Loans	288,416		577,167		857,524		904,061		2,627,168
Total Loans	$	288,551	$	581,507	$	861,171	$	908,014	$	2,639,243
December 31, 2020
Loans Past Due 30-59 Days	$	102	$	—	$	4,976	$	261	$	5,339
Loans Past Due 60-89 Days	113		—		2,713		1,279		4,105
Loans Past Due 90 or more Days	78		1,658		1,379		1,224		4,339
Total Loans Past Due	293		1,658		9,068		2,764		13,783
Current Loans	240,261		570,129		850,700		920,157		2,581,247
Total Loans	$	240,554	$	571,787	$	859,768	$	922,921	$	2,595,030
March 31, 2020
Loans Past Due 30-59 Days	$	173	$	461	$	5,636	$	1,630	$	7,900
Loans Past Due 60-89 Days	70		110		1,451		212		1,843
Loans Past Due 90 or more Days	8		911		549		1,525		2,993
Total Loans Past Due	251		1,482		7,636		3,367		12,736
Current Loans	146,849		524,648		817,073		912,887		2,401,457
Total Loans	$	147,100	$	526,130	$	824,709	$	916,254	$	2,414,193

Schedule of Non Accrual Loans by Category
			Commercial
March 31, 2021	Commercial		Real Estate		Consumer		Residential		Total
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	242	$	242
Nonaccrual Loans	64		4,364		746		2,913		8,087
Nonaccrual With No Allowance for Credit Loss	64		1,641		746		2,913		5,364
Interest Income on Nonaccrual Loans	—		14		—		—		—
December 31, 2020
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	184	$	—	$	44	$	228
Nonaccrual Loans	78		1,475		1,470		3,010		6,033
March 31, 2020
Loans 90 or More Days Past Due   and Still Accruing Interest	$	5	$	238	$	93	$	101	$	437
Nonaccrual Loans	63		1,445		715		2,720		4,943

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 our 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. Generally, 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 to support the borrowing, as permitted by applicable law.

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 typically 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. Many projects will ultimately be used by the borrowers' businesses, while others are developed for resale. These real estate loans are also typically secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, 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 - This category is primarily comprised of automobile loans. Arrow primarily finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont. Most automobile loans carry a fixed rate of interest with principal repayment terms typically ranging from three to seven years. Automobile loans are underwritten on a secured basis using the underlying collateral being financed. Arrow also 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, Arrow also offers personal lines of credit and overdraft protection. Several of these consumer loans are unsecured, which carry a higher risk of loss.

Residential - Residential real estate loans consist primarily of loans secured by first or second mortgages on primary residences. Arrow originates fixed-rate and adjustable-rate and fixed-rate one-to-four-family residential real estate loans for the construction, purchase real estate or refinancing of an existing mortgage. These loans are collateralized primarily by owner-occupied properties generally located in Arrow'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. Arrow’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 Arrow's general practice to underwrite our 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.  Arrow's policy allows for a maximum loan to value ratio of 80%, although periodically higher advances are allowed.  Arrow 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.

The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2021:

March 31, 2021	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		3,851		3,851
Consumer	—		—		—
Residential	1,156		—		1,156
Total	$	1,156	$	3,851	$	5,007

Allowance for Credit Losses

As previously mentioned in Note 1 Accounting Policies, Arrow's January 1, 2021 adoption of CECL resulted in a significant change to the methodology for estimating the allowance for credit losses as compared to December 31, 2020.

The Day 1 decrease in the allowance for credit loss on loans relating to adoption of ASU 2016-13 was $1.3 million. The Company made a policy election to report accrued interest receivable in the other assets line item on the balance sheet. Accrued interest receivable on loans totaled $6.1 million at March 31, 2021 and was excluded from the estimate of credit losses.

Loan segments were selected by class code and application code to ensure each segment is comprised of loans with homogenous loan characteristics and similar risk profiles. The resulting loan segments are commercial, commercial real estate, consumer and residential real estate loans. The consumer segment is mainly comprised of automobile loans, and since they are relatively short-term in nature, with similar dollar amounts and collateral, the vintage analysis method was selected to determine the credit loss reserve. The vintage method utilizes Arrow loan data exclusively as the method calculates a loss rate based on the total origination balance of the loans by year and the charge-off and recovery rate of the same origination year. Arrow maintains, over the life of the loan, the loss curve by vintage year. The discounted cash flow method (DCF) is used to calculate the reserve for credit losses for the commercial, commercial real estate and residential real estate segments. Please see Note 1 for a full explanation.

The Day 1 and March 31, 2021 allowance for credit losses calculation incorporated a reasonable and supportable forecast period to account for economic conditions utilized in the measurement. The quantitative model utilized an economic forecast sourced from reputable third-parties that reflected economic improvement with a reduction of approximately 1% in the national unemployment rate during the six quarter forecast period, while forecasted gross domestic product peaked in the second quarter of 2021 and remained more favorable for the remainder of the forecast period as compared to the economic forecast used for the Day 1 adoption. The home price index forecast improved significantly in the second and third quarters of 2021 and remained more favorable as compared to the economic forecast used for the Day 1 adoption. The improved economic forecast at March 31, 2021, resulted in a net decrease in the allowance for credit losses of $1.1 million, including the increases due to the increase in loan volume. Management evaluated the results of the quantitative model and determined that qualitative factor adjustments were necessary to reflect the expected life of loss for Arrow's loan portfolio. Management's evaluation considers the allowance for credit losses for loans to be appropriate as of March 31, 2021.

The following table details activity in the allowance for credit losses on loans for the three months ended March 31, 2021 and March 31, 2020. Arrow adopted ASU 2016-13 on January 1, 2021. Results for the periods beginning after January 1, 2021 are presented under ASC 326 and prior periods continue to be reported in accordance with previously applicable US GAAP.

Allowance for Credit Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Credit Losses for the Quarterly Period:
December 31, 2020	$	2,173	$	9,990	$	11,562	$	5,507	$	29,232
Impact of ASU 2016-13	2,084		2,064		(9,383)		3,935		(1,300)
Balance as of January 1, 2021 as adjusted for ASU 2016-13	4,257		12,054		2,179		9,442		27,932
Charge-offs	(3)		—		(627)		(3)		(633)
Recoveries	—		—		189		—		189
Provision	43		(110)		688		(1,269)		(648)
March 31, 2021	$	4,297	$	11,944	$	2,429	$	8,170	$	26,840

Allowance for Loan Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Loan Losses for the Quarterly Period:
December 31, 2019	$	1,386	$	5,830	$	9,408	$	4,563	$	21,187
Charge-offs	(14)		—		(467)		—		$	(481)
Recoveries	—		—		159		—		$	159
Provision	267		1,235		904		366		$	2,772
March 31, 2020	$	1,639	$	7,065	$	10,004	$	4,929	$	23,637

Estimated Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities

Financial instrument credit losses apply to off-balance sheet credit exposures such as unfunded loan commitments and standby letters of credit. A liability for expected credit losses for off-balance sheet exposures is recognized if the entity has a present contractual obligation to extend the credit and the obligation is not unconditionally cancellable by the entity. The Day 1 adoption of ASU 2016-13, created an allowance for credit loss on off-balance sheet exposures recognized as other liabilities of $1.1 million. Subsequent changes in this allowance are reflected in other operating expenses within the non interest expense category. As of March 31, 2021, the total unfunded commitment off-balance sheet credit exposure was $993 thousand.

Individually Evaluated Loans

All loans not included in the vintage analysis method that exceed $250,000, which are on nonaccrual status, are evaluated on an individual basis. Arrow made the policy election to apply practical expedient for collateral dependent financial assets when the borrower is experiencing financial difficulty and the repayment is expected through the sale of the collateral. This allows Arrow to use fair value of the collateral at the reporting date adjusted for estimated cost to sell when recording the net carrying amount of the asset and determining the allowance for credit losses for a financial asset. In the event where the repayment of a collateral dependent financial asset is expected to be provided substantially through the operating of the collateral, Arrow will use fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses. As of March 31, 2021, there were six total relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $5.0 million and only one loan had an allowance for credit loss of $556 thousand.

Allowance for Credit Losses - Collectively and Individually Evaluated
	Commercial		Commercial Real Estate		Consumer		Residential		Total
March 31, 2021
Ending Loan Balance - Collectively Evaluated	$	288,551	$	577,656	$	861,171	$	906,858	$	2,634,236
Allowance for Credit Losses - Loans Collectively Evaluated	4,297		11,388		2,429		8,170		26,284
Ending Loan Balance - Individually Evaluated	—		3,851		—		1,156		5,007
Allowance for Credit Losses - Loans Individually Evaluated	—		556		—		—		556

The following table presents information pertaining to the allowance for loan losses as of December 31, 2020 and March 31, 2020, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Allowance for Loan Losses - Collectively and Individually Evaluated for Impairment
	Commercial		Commercial Real Estate		Consumer		Residential		Total
December 31, 2020
Ending Loan Balance - Collectively Evaluated for Impairment	$	240,507	$	570,659	$	859,657	$	921,504	$	2,592,327
Allowance for Loan Losses - Loans Collectively Evaluated for Impairment	2,154		9,990		11,562		5,485		$	29,191
Ending Loan Balance - Individually Evaluated for Impairment	47		1,128		111		1,417		2,703
Allowance for Loan Losses - Loans Individually Evaluated for Impairment	19		—		—		22		41
March 31, 2020
Ending Loan Balance - Collectively Evaluated for Impairment	$	147,066	$	524,993	$	824,598	$	915,301	$	2,411,958
Allowance for Loan Losses - Loans Collectively Evaluated for Impairment	1,635		7,065		10,004		4,892		23,596
Ending Loan Balance - Individually Evaluated for Impairment	34		1,137		111		953		2,235
Allowance for Loan Losses - Loans Individually Evaluated for Impairment	4		—		—		37		41

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

Arrow's 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, the independent internal loan review department performs periodic reviews of the credit quality indicators on individual loans in the commercial loan portfolio.

Management considers the need to qualitatively adjust expected credit loss estimates for information not already captured in the loss estimation process. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses. Adjustments are not made for information that has already been considered and included in the loss estimation process.

Management considers the qualitative factors that are relevant to Arrow as of the reporting date, which may include, but are not limited to the following factors:

•The nature and volume of Arrow's financial assets;

•The existence, growth, and effect of any concentrations of credit;

•The volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

•The value of the underlying collateral for loans that are not collateral-dependent;

•Arrow's lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries;

•The quality of Arrow's loan review function;

•The experience, ability, and depth of Arrow's lending, investment, collection, and other relevant management/staff;

•The effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters;

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the institution operates that affect the collectability of financial assets; and

•Other qualitative factors not reflected in quantitative loss rate calculations.

Loan Credit Quality Indicators

The following table presents credit quality indicators by total loans amortized cost basis by origination year as of March 31, 2021.

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
March 31, 2021	2021		2020		2019		2018		2017		Prior
Commercial:
Risk rating
Satisfactory	$	78,184	$	126,061	$	18,202	$	15,693	$	10,004	$	12,234	$	14,006	$	—	$	274,384
Special mention	—		5,031		66		—		—		2		—		—		5,099
Substandard	—		5,507		—		—		—		3,514		47		—		9,068
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	78,184	$	136,599	$	18,268	$	15,693	$	10,004	$	15,750	$	14,053	$	—	$	288,551
Commercial Real Estate:
Risk rating
Satisfactory	$	24,511	$	298,907	$	49,957	$	44,902	$	24,558	$	83,690	$	3,161	$	—	$	529,686
Special mention	—		17,825		2,010		—		142		2,115		—		—		22,092
Substandard	2,021		10,853		4,006		163		—		12,661		25		—		29,729
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	26,532	$	327,585	$	55,973	$	45,065	$	24,700	$	98,466	$	3,186	$	—	$	581,507
Consumer:
Risk rating
Performing	$	95,223	$	321,575	$	225,191	$	135,646	$	56,508	$	25,834	$	448	$	—	$	860,425
Nonperforming	—		141		181		189		167		68		—		—		746
Total Consumer Loans	$	95,223	$	321,716	$	225,372	$	135,835	$	56,675	$	25,902	$	448	$	—	$	861,171
Residential:
Risk rating
Performing	$	34,833	$	156,500	$	114,523	$	107,176	$	110,308	$	266,377	$	115,142	$	—	$	904,859
Nonperforming	—		203		—		27		149		2,544		232		—		3,155
Total Residential Loans	$	34,833	$	156,703	$	114,523	$	107,203	$	110,457	$	268,921	$	115,374	$	—	$	908,014

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

The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $1.4 million.

For the allowance calculation, an internally developed system of five credit quality indicators is used 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 Company 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 (e.g. 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.

The following table presents information pertaining to loan credit quality indicators as of December 31, 2020 and March 31, 2020, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Loan Credit Quality Indicators
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
December 31, 2020
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	229,351	$	525,609					$	754,960
Special Mention	1,574		16,213						17,787
Substandard	9,629		29,965						39,594
Doubtful	—		—						—
Performing					$	858,298	$	919,867	$	1,778,165
Nonperforming					1,470		3,054		4,524
March 31, 2020
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	140,218	$	497,243					$	637,461
Special Mention	28		255						283
Substandard	6,854		28,632						35,486
Doubtful	—		—						—
Credit Risk Profile Based on Payment Activity:
Performing					$	823,901	$	913,433	$	1,737,334
Nonperforming					808		2,821		3,629

Impaired Loans

The following table presents information on impaired loans as of December 31, 2020 and March 31, 2020 based on whether the impaired loan has a recorded related allowance or has no recorded related allowance, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Impaired Loans
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
December 31, 2020
Recorded Investment:
With No Related Allowance	$	—	$	1,124	$	112	$	1,174	$	2,410
With a Related Allowance	46		—		—		244		290
Unpaid Principal Balance:
With No Related Allowance	—		1,128		111		1,174		2,413
With a Related Allowance	47		—		—		244		291
March 31, 2020
Recorded Investment:
With No Related Allowance	$	—	$	1,137	$	112	$	697	$	1,946
With a Related Allowance	33		—		—		256		289
Unpaid Principal Balance:
With No Related Allowance	—		1,137		111		697		$	1,945
With a Related Allowance	34		—		—		256		290
March 31, 2020
Average Recorded Balance:
With No Related Allowance	$	—	$	569	$	110	$	698	$	1,377
With a Related Allowance	34		—		—		258		292
Interest Income Recognized:
With No Related Allowance	—		10		—		—		10
With a Related Allowance	—		—		—		—		—
Cash Basis Income:
With No Related Allowance	—		—		—		—		—
With a Related Allowance	—		—		—		—		—

At December 31, 2020 and March 31, 2020, 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 loan became impaired and includes restructured loans in compliance with their modified terms and nonaccrual loans where interest income was recognized 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, 2021
Number of Loans	—		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment	—		—		—		—		—
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2020
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	16	$	—	$	16
Post-Modification Outstanding Recorded Investment	—		—		16		—		16
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

In general, prior to the novel coronavirus (COVID-19) pandemic, 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, 2021. The Consolidated Appropriations Act, 2021 extended certain provisions of the CARES Act including, if a short-term loan modification (e.g. six months) is made for a borrower as the result of the COVID-19 pandemic, and who was current on contractual payments as of December 31, 2019, this modification is not considered a TDR.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES (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, 2021, December 31, 2020 and March 31, 2020:

Commitments to Extend Credit and Letters of Credit
	March 31, 2021		December 31, 2020		March 31, 2020
Notional Amount:
Commitments to Extend Credit	$	437,920	$	399,882	$	376,519
Standby Letters of Credit	3,775		3,703		3,301
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	12		28		29

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, 2021, December 31, 2020 and March 31, 2020 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, 2021, December 31, 2020 and March 31, 2020, 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.

Except as noted below, Arrow, 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, Arrow is often the subject of, or a party to, various legal claims by other parties against Arrow, by Arrow against other parties, or involving Arrow, which arise in the normal course of business. Except as noted below, the various pending legal claims against Arrow will not, in the opinion of management based upon consultation with counsel, result in any material liability.

On July 1, 2020, Daphne Richard, a customer of GFNB filed a putative class action complaint against GFNB in the United States District Court for the Northern District of New York. The complaint alleges that GFNB assessed overdraft fees on certain transactions drawn on her checking account without having sufficiently disclosed its overdraft-fee practices in its account agreement. Ms. Richard, on behalf of two purported classes, seeks compensatory damages, disgorgement of profits, statutory damages, treble damages, enjoinment of the conduct complained of, and costs and fees. The complaint is similar to complaints filed against other financial institutions pertaining to overdraft fees. Arrow denies any wrongdoing and the case is being vigorously defended.

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Comprehensive Income

3 Months Ended

Mar. 31, 2021

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 ended March 31, 2021 and 2020:

Schedule of Comprehensive Income
	Three Months Ended March 31
			Tax
	Before-Tax		(Expense)		Net-of-Tax
	Amount		Benefit		Amount
2021
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(5,121)	$	1,309	$	(3,812)
Net Unrealized Gain on Cash Flow Swap	1,982		(507)		1,475
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(28)		8		(20)
Amortization of Net Retirement Plan Actuarial Loss	46		(12)		34
Amortization of Net Retirement Plan Prior Service Cost	59		(16)		43
Other Comprehensive Loss	$	(3,062)	$	782	$	(2,280)
2020
Net Unrealized Securities Holding Gain on Securities Available-for-Sale Arising During the Period	$	5,504	$	(1,406)	$	4,098
Net Unrealized Loss on Cash Flow Swap	(294)		75		(219)
Amortization of Net Retirement Plan Actuarial Loss	36		(9)		27
Amortization of Net Retirement Plan Prior Service Cost	54		(15)		39
Other Comprehensive Income	$	5,300	$	(1,355)	$	3,945

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

Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)
	Unrealized (Loss) and Gain on Available-for-Sale Securities		Unrealized Gain (Loss) on Cash Flow Swap		Defined Benefit Plan Items				Total
					Net Actuarial Loss		Net Prior Service Cost
For the Quarter-To-Date periods ended:
December 31, 2020	$	5,799	$	485	$	(5,929)	$	(1,171)	$	(816)
Other comprehensive income or loss before reclassifications	(3,812)		1,475		—		—		(2,337)
Amounts reclassified from accumulated other comprehensive income	—		(20)		34		43		57
Net current-period other comprehensive income	(3,812)		1,455		34		43		(2,280)
March 31, 2021	$	1,987	$	1,940	$	(5,895)	$	(1,128)	$	(3,096)
December 31, 2019	$	465	$	—	$	(5,847)	$	(975)	$	(6,357)
Other comprehensive income or loss before reclassifications	4,098		(219)		—		—		3,879
Amounts reclassified from accumulated other comprehensive income	—		—		27		39		66
Net current-period other comprehensive income	4,098		(219)		27		39		3,945
March 31, 2020	$	4,563	$	(219)	$	(5,820)	$	(936)	$	(2,412)

(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
Details about Accumulated Other Comprehensive Income (Loss) Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2021
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	28		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	(59)		(1)	Salaries and Employee Benefits
Actuarial loss	(46)		(1)	Salaries and Employee Benefits
	(77)			Total before Tax
	20			Provision for Income Taxes
Total reclassifications for the period	$	(57)		Net of Tax
March 31, 2020
Amortization of defined benefit pension items:
Prior-service costs	$	(54)	(1)	Salaries and Employee Benefits
Actuarial loss	(36)		(1)	Salaries and Employee Benefits
	(90)			Total before Tax
	24			Provision for Income Taxes
Total reclassifications for the period	$	(66)		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, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

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

Arrow has established three stock-based compensation plans: a 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 25, 2020 3% 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, 2021.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2021	264,090			$	28.84
Granted	55,500			29.55
Exercised	(6,927)			22.52
Forfeited	(1,034)			19.70
Outstanding at March 31, 2021	311,629			29.14
Vested at Period-End	179,681			27.73
Expected to Vest	131,948			31.05
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	4.85
Fair Value Assumptions:
Dividend Yield	3.41		%
Expected Volatility	26.53		%
Risk Free Interest Rate	0.49		%
Expected Lives (in years)	8.75

The following table presents information on the amounts expensed related to stock options for the three month periods ended March 31, 2021 and 2020:

	For the Three Months Ended March 31,
	2021		2020
Amount expensed	$	72	$	76

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 and are no longer forfeitable. 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 periods ended March 31, 2021 and 2020.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2021	11,663	$	31.62
Granted	4,738	29.40
Vested	(3,582)	30.71
Non-vested at March 31, 2021	12,819	31.05
Non-vested at January 1, 2020	7,721	30.27
Granted	3,942	34.25
Non-vested at March 31, 2020	11,663	31.62

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2021 and 2020:

	For the Three Months Ended March 31,
	2021		2020
Amount expensed	$	32	$	27

Employee Stock Purchase Plan

Arrow sponsors an ESPP under which employees may purchase Arrow's common stock at a discount below market price. The current amount of the discount is 5% . 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 ESOP, pursuant to which substantially all employees of Arrow and its subsidiaries are eligible to participate upon satisfaction of applicable service requirements. The Company makes cash contributions to the ESOP each year.

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Retirement Benefit Plans

3 Months Ended

Mar. 31, 2021

Retirement Benefits [Abstract]

Retirement Benefit Plans

RETIREMENT BENEFIT PLANS (Dollars in Thousands)

Arrow sponsors qualified and non-qualified 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 first 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 with a minimum interest credit of 3%.  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 The Employee Retirement Income Security Act (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 allows for grandfathered participants to receive automatic increases of Company contributions each year based on the increase in inflation, limited to a maximum of 5%.  

As of December 31, 2020, Arrow used the sex-distinct amount-weighted Pri-2012 mortality tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements with the Scale MP-2020 mortality improvement scale on a generational basis for the Pension Plan and the sex-distinct amount-weighted White Collar tables for employees and healthy annuitants, adjusted for mortality improvements with the scale MP-2020 mortality improvement scale on a generational basis for the Select Executive Retirement Plan. As of December 31, 2020, Arrow updated its mortality assumption used for the Postretirement Plan to the sex-distinct Pri.H-2012 headcount-weighted mortality tables for employees and healthy annuitants, adjusted for mortality improvements with the Scale MP-2020 mortality improvement scale on a generational basis. The change in mortality tables resulted in a decrease in liabilities for the Employees' Pension Plan, the Select Executive Retirement Plan and the Postretirement Benefit Plan.

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, 2020 plan year (0.53%, 2.31%, 3.09%) as of December 31, 2020.

Effective January 1, 2021, Glens Falls National Bank and Trust Company amended the Arrow Financial Corporation Employees' Pension Plan. The plan change was adopted January 1, 2021 and the amendment was valued as of December 31, 2020. The plan amendment is the following:

Effective January 1, 2021, the benefit payable to or on behalf of each participant:

• whose employment with the employer (or any predecessor employer, except as noted below) terminated on or before
January 1, 2016;

• who satisfied the requirements for early, normal, or late retirement as of such termination;

• who never participated in the United Vermont Bancorporation Plan and;

• who is, or whose beneficiary is, receiving monthly benefit payments from the Plan as of January 1, 2021 (including a
participant or beneficiary who shall commence receiving benefits from the Plan as of January 1, 2021), shall be increased
by three percent (3%).

The foregoing increase was applied to the monthly benefit actually payable to the Participant, or to the Participant's Beneficiary, as of January 1, 2021, determined after all applicable adjustments, regardless of whether such benefit had been determined under the Company's plan or the plan of a predecessor employer that had been merged into the Plan.

The plan amendment caused a $351,638 increase in the projected benefit obligation creating a positive service cost which will be amortized over 9.70 years (the average expected future service of active plan participants.)

Effective January 1, 2021, Glens Falls National Bank and Trust Company amended the Arrow Financial Corporation Employees' Select Executive Retirement Plan. The plan change was adopted January 1, 2021 and the amendment was valued as of December 31, 2020. The plan amendment provides a special adjustment to the monthly benefit payment for certain retirees. The plan amendment caused a $122,797 increase in the projected benefit obligation creating a positive prior service cost which will be amortized over 12.5 years.

The following tables provide the components of net periodic benefit costs for the three month periods ended March 31, 2021 and 2020.

	Employees'		Select Executive		Postretirement
	Pension		Retirement		Benefit
	Plan		Plan		Plans
Net Periodic (Benefit) Cost
For the Three Months Ended March 31, 2021:
Service Cost 1	$	460	$	118	$	31
Interest Cost 2	340		45		67
Expected Return on Plan Assets 2	(950)		—		—
Amortization of Prior Service Cost 2	20		12		27
Amortization of Net Loss 2	—		38		8
Net Periodic (Benefit) Cost	$	(130)	$	213	$	133
Plan Contributions During the Period	$	—	$	118	$	28

For the Three Months Ended March 31, 2020:
Service Cost 1	$	430	$	103	$	33
Interest Cost 2	417		54		78
Expected Return on Plan Assets 2	(904)		—		—
Amortization of Prior Service Cost 2	16		11		27
Amortization of Net Loss 2	1		33		2
Net Periodic (Benefit) Cost	$	(40)	$	201	$	140
Plan Contributions During the Period	$	—	$	117	$	78

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

A contribution to the qualified pension plan was not required during the period ended March 31, 2021 and currently, additional contributions in 2021 are not expected. 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, 2021

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, 2021 and 2020.  All share and per share amounts have been adjusted for the September 25, 2020, 3% stock dividend.

Earnings Per Share
	Three Months Ended
	March 31, 2021		March 31, 2020
Earnings Per Share - Basic:
Net Income	$	13,280	$	8,127
Weighted Average Shares - Basic	15,528		15,446
Earnings Per Share - Basic	$	0.86	$	0.53
Earnings Per Share - Diluted:
Net Income	$	13,280	$	8,127
Weighted Average Shares - Basic	15,528		15,446
Dilutive Average Shares Attributable to Stock Options	35		30
Weighted Average Shares - Diluted	15,563		15,476
Earnings Per Share - Diluted	$	0.85	$	0.53

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Fair Values

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Values

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. There are no 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, 2021, December 31, 2020 and March 31, 2020 were securities available-for-sale, equity securities and derivatives. 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, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,370	$	—	$	108,370	$	—
State and Municipal Obligations	508		—		508		—
Mortgage-Backed Securities	354,411		—		354,411		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	464,089		—		464,089		—
Equity Securities	1,796		—		1,796		—
Total Securities Measured on a Recurring Basis	465,885		—		465,885		—
Derivatives, included in other assets	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	468,183	$	—	$	468,183	$	—
Liabilities:
Derivatives, included in other liabilities	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	2,298	$	—	$	2,298	$	—
December 31, 2020
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	65,112	$	—	$	65,112	$	—
State and Municipal Obligations	528		—		528		—
Mortgage-Backed Securities	298,847		—		298,847		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	365,287		—		365,287		—
Equity Securities	1,636		—		1,636		—

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)
Total Securities Measured on a Recurring Basis	366,923		—		366,923		—
Derivatives, included in other liabilities	5,080		—		5,080		—
Total Measured on a Recurring Basis	$	372,003	$	—	$	372,003	$	—
Liabilities:
Derivatives, included in other liabilities	5,080		—		5,080		—
Total Measured on a Recurring Basis	$	5,080	$	—	$	5,080	$	—
March 31, 2020
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	5,181	$	—	$	5,181	$	—
State and Municipal Obligations	723		—		723		—
Mortgage-Backed Securities	371,482		—		371,482		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	378,186		—		378,186		—
Equity Securities	1,689		—		1,689		—
Total Securities Measured on a Recurring Basis	$	379,875	$	—	$	379,875	$	—
Derivatives, included in other assets	5,191		$	—	5,191		—
Total Measured on a Recurring Basis	$	385,066	$	—	$	385,066	$	—
Liabilities:
Derivatives, included in other liabilities	5,191		—		5,191		—
Total Measured on a Recurring Basis	$	5,191	$	—	$	5,191	$	—

	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses Recognized in Earnings
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
March 31, 2021
Collateral Dependent Evaluated Loans	$	2,423	$	—	$	—	$	2,423
Other Real Estate Owned and Repossessed Assets, Net	242		—		—		242		—
December 31, 2020
Collateral Dependent Impaired Loans	$	594	$	—	$	—	$	594
Other Real Estate Owned and Repossessed Assets, Net	155		—		—		155		—
March 31, 2020
Collateral Dependent Impaired Loans	$	582	$	—	$	—	$	582
Other Real Estate Owned and Repossessed Assets, Net	942		—		—		942		—

The fair value of financial instruments is determined 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).

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.  The fair value of Level 2 derivatives is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes.

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

The fair value of collateral dependent evaluated 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 at least annually, with no impairment recognized for these assets at March 31, 2021, December 31, 2020 and March 31, 2020.

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 each loan type. Then a credit loss component is determined utilizing the credit loss assumptions used in the allowance for credit 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.  

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 calculated by the FHLBNY.

The carrying amount of FHLBNY and FRB stock approximates fair value. If the stock was redeemed, the Company will receive an amount equal to the par value of the stock.

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, 2021
Cash and Cash Equivalents	$	452,207	$	452,207	$	452,207	$	—	$	—
Securities Available-for-Sale	464,089		464,089		—		464,089		—
Securities Held-to-Maturity	214,561		221,360		—		221,360		—
Equity Securities	1,796		1,796		—		1,796		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,360		5,360		—		5,360		—
Net Loans	2,612,403		2,603,225		—		—		2,603,225
Accrued Interest Receivable	8,258		8,258		—		8,258		—
Derivatives, included in other assets	2,298		2,298				2,298
Deposits	3,453,588		3,452,595		—		3,452,595		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	6,795		6,795		—		6,795		—
Federal Home Loan Bank Term Advances	45,000		46,176		—		46,176		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	237		237		—		237		—
Derivatives, included in other liabilities	2,298		2,298		—		2,298		—

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
December 31, 2020
Cash and Cash Equivalents	$	380,991	$	380,991	$	380,991	$	—	$	—
Securities Available-for-Sale	365,287		365,287		—		365,287		—
Securities Held-to-Maturity	218,405		226,576		—		226,576		—
Equity Securities	1,636		1,636		—		1,636
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,349		5,349		—		5,349		—
Net Loans	2,565,798		2,558,903		—		—		2,558,903
Accrued Interest Receivable	7,495		7,495		—		7,495		—
Derivatives, included in other assets	5,080		5,080		—		5,080		—
Deposits	3,234,726		3,234,387		—		3,234,387		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	17,486		17,486		—		17,486		—
Federal Home Loan Bank Term Advances	45,000		46,474		—		46,474		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	326		326		—		326		—
Derivatives, included in other liabilities	5,080		5,080		—		5,080		—
March 31, 2020
Cash and Cash Equivalents	$	138,529	$	138,529	$	138,529	$	—	$	—
Securities Available-for-Sale	378,186		378,186		—		378,186		—
Securities Held-to-Maturity	238,520		242,804		—		242,804		—
Equity Securities	1,689		1,689		—		1,689
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,379		5,379		—		5,379		—
Net Loans	2,390,556		2,368,033		—		—		2,368,033
Accrued Interest Receivable	7,856		7,856		—		7,856		—
Derivatives, included in other assets	5,191		5,191		—		5,191		—
Deposits	2,811,005		2,811,668		—		2,811,668		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	57,909		57,909		—		57,909		—
Federal Home Loan Bank Term Advances	50,000		51,194		—		51,194		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	1,392		1,392		—		1,392		—
Derivatives, included in other liabilities	5,191		5,191		—		5,191		—

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Leases

3 Months Ended

Mar. 31, 2021

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 four of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves as a director on the board of directors of each of Arrow and Saratoga National Bank and Trust Company.

The following includes quantitative data related to the Company's leases as of and for the three months ended March 31, 2021 and March 31, 2020:

		Three Months Ended
Finance Lease Amounts:	Classification	March 31, 2021			March 31, 2020
Right-of-Use Assets	Premises and Equipment, Net	$	4,947		$	5,124
Lease Liabilities	Finance Leases	5,205			5,249
Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	5,435		$	5,529
Lease Liabilities	Other Liabilities	5,522			5,602
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	49		$	50
Operating Outgoing Cash Flows From Operating Leases		261			158
Financing Outgoing Cash Flows From Finance Leases		12			5
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		331			—
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		28.9			29.9
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		12.5			13.7
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		3.13		%	3.36		%

Lease cost information for the Company's leases is as follows:
	Three Months Ended
	March 31, 2021		March 31, 2020
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	44
Interest on Lease Liabilities	49		50
Operating Lease Cost	209		207
Short-term Lease Cost	5		7
Variable Lease Cost	104		55
Total Lease Cost	$	411	$	363

Future Lease Payments at March 31, 2021 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2022	$	799	$	243
3/31/2023	766		243
3/31/2024	641		243
3/31/2025	570		254
3/31/2026	526		265
Thereafter	3,516		7,733
Total Undiscounted Cash Flows	$	6,818	$	8,981
Less: Net Present Value Adjustment	1,296		3,776
Lease Liability	$	5,522	$	5,205

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 four of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves as a director on the board of directors of each of Arrow and Saratoga National Bank and Trust Company.

The following includes quantitative data related to the Company's leases as of and for the three months ended March 31, 2021 and March 31, 2020:

		Three Months Ended
Finance Lease Amounts:	Classification	March 31, 2021			March 31, 2020
Right-of-Use Assets	Premises and Equipment, Net	$	4,947		$	5,124
Lease Liabilities	Finance Leases	5,205			5,249
Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	5,435		$	5,529
Lease Liabilities	Other Liabilities	5,522			5,602
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	49		$	50
Operating Outgoing Cash Flows From Operating Leases		261			158
Financing Outgoing Cash Flows From Finance Leases		12			5
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		331			—
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		28.9			29.9
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		12.5			13.7
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		3.13		%	3.36		%

Lease cost information for the Company's leases is as follows:
	Three Months Ended
	March 31, 2021		March 31, 2020
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	44
Interest on Lease Liabilities	49		50
Operating Lease Cost	209		207
Short-term Lease Cost	5		7
Variable Lease Cost	104		55
Total Lease Cost	$	411	$	363

Future Lease Payments at March 31, 2021 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2022	$	799	$	243
3/31/2023	766		243
3/31/2024	641		243
3/31/2025	570		254
3/31/2026	526		265
Thereafter	3,516		7,733
Total Undiscounted Cash Flows	$	6,818	$	8,981
Less: Net Present Value Adjustment	1,296		3,776
Lease Liability	$	5,522	$	5,205

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Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (In Thousands)

Arrow is exposed to certain risks arising from both its business operations and economic conditions. Arrow principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Arrow manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative instruments. Specifically, Arrow enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Arrow's derivative financial instruments are used to manage differences in the amount, timing and duration of known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate borrowings. Arrow also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

Derivatives Not Designated as Hedging Instruments

Arrow enters into interest rate swap agreements with its commercial customers to provide them with a long-term fixed rate, while simultaneously entering into offsetting interest rate swap agreements with a counterparty to swap the fixed rate to a variable rate to manage interest rate exposure.

These interest rate swap agreements are not designated as a hedge for accounting purposes. As the interest rate swap agreements have substantially equivalent and offsetting terms, they do not present any material exposure to the Arrow's consolidated statements of income. Arrow records its interest rate swap agreements at fair value and is presented on a gross basis within other assets and other liabilities on the consolidated balance sheets. Changes in the fair value of assets and liabilities arising from these derivatives are included, net, in other income in the consolidated statement of income.

The following table depicts the fair value adjustment recorded related to the notional amount of derivatives outstanding as well as the notional amount of the interest rate swap agreements.

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Agreements
	March 31, 2021		December 31, 2020		March 31, 2020
Fair value adjustment included in other assets	$	2,298	$	5,080	$	5,191
Fair value adjustment included in other liabilities	2,298		5,080		5,191
Notional amount	175,113		176,637		121,559

Derivatives Designated as Hedging Instruments

Arrow has entered into interest rate swaps to synthetically fix the variable rate interest payments associated with $20 million in outstanding subordinated trust securities. These agreements are designated as cash flow hedges.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income ("AOCI") and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on Arrow's Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts borrowings.

The following table indicates the effect of cash flow hedge accounting on AOCI and on the unaudited interim consolidated statement of income.

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
	March 31, 2021		December 31, 2020		March 31, 2020
Amount of gain (loss) recognized in AOCI	$	1,982	$	651	$	(294)
Amount of gain reclassified from AOCI interest expense	28		—		—

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COVID-19 Pandemic	3 Months Ended
	Mar. 31, 2021
Unusual or Infrequent Items, or Both [Abstract]
COVID-19 Pandemic	COVID-19 PANDEMICThe spread of COVID-19 and the resulting “shelter in place” and “stay at home” orders, travel restrictions and other precautions have caused significant disruptions in the United States economy, which could in turn disrupt the business, activities, and operations of Arrow’s customers, as well as Arrow's business and operations. The pandemic has also caused significant disruption in the financial markets both globally and in the United States. Arrow has taken steps to mitigate the risk of harm to its employees and customers and to its operations from the pandemic. In particular, Arrow, when necessary, has limited access to facilities to appointments only and encouraged customers to use contact-free alternatives like digital banking and ATMs. Arrow has also minimized contact for a large portion of its employee base through remote working, minimal travel and in-person meetings and social distancing.

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2021

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 (US GAAP) 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.  Due to the uncertainty regarding the impact of the COVID-19 pandemic, management utilized estimates and assumptions in its evaluation of potential impairment of Arrow's right-of-use lease assets, goodwill and intangible assets. Our most significant estimate is the allowance for credit losses. Other estimates include the fair value of financial statements, evaluation of pension and other post-retirement liabilities, an analysis of a need for a valuation allowance for deferred tax assets and a reserve for unfunded loan commitments recorded as an other liability. 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 credit losses.  In connection with the determination of the allowance for credit losses management obtains economic forecasts from reliable sources and appraisals for properties.  The allowance for credit losses is management’s best estimate of the life of loan losses as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for credit losses may be necessary based on changes in economic conditions.

Allowance for Credit Losses

Allowance for Credit Losses – Loans

Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”) approach requires an estimate of the credit losses expected over the life of a loan (or pool of loans). It replaces the incurred loss approach’s threshold that required the recognition of a credit loss when it was probable a loss event was incurred. The allowance for credit losses is a valuation account that is deducted from, or added to, the loans’ amortized cost basis to present the net, lifetime amount expected to be collected on the loans. Loan losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.

Management estimates the allowance balance using relevant available information from internal and external sources related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for the estimation of expected credit losses. Company historical loss experience was supplemented with peer information when there was insufficient loss data for the Company. Peer selection was based on a review of institutions with comparable loss experience as well as loan yield, bank size, portfolio concentration and geography. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in credit concentrations, delinquency level, collateral values and underwriting standards as well as changes in economic conditions or other relevant factors. Management judgment is required at each point in the measurement process.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Upon adoption of CECL, management revised the manner in which loans were pooled for similar risk characteristics. Management developed portfolio segments for estimating loss based on type of borrower and collateral as follows:

Commercial Loans

Commercial Real Estate Loans

Consumer Loans

Residential Loans

Further details related to loan portfolio segments is included in Note 4 Loans.

Historical credit loss experience for both the Company and segment-specific peers provides the basis for the estimation of expected credit losses. The Company utilized regression analyses of peer data, of which the Company is included, where observed credit losses and selected economic factors were utilized to determine suitable loss drivers for modeling lifetime probability of default ("PD") rates. Arrow uses the discounted cash flow ("DCF") method to estimate expected credit losses for the commercial, commercial real estate, and residential segments. For each of these loan segments, Arrow generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, PD, and segment-specific loss given default ("LGD") risk factors. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data and adjusted, if necessary, based on the reasonable and supportable forecast of economic conditions.

For the loan segments utilizing the DCF method, (commercial, commercial real estate, and residential) management utilizes externally developed economic forecasts of the following economic factors as loss drivers: national unemployment, gross domestic product and home price index ("HPI"). The economic forecast is applied over a reasonable and supportable forecast period. Arrow utilizes a six quarter reasonable and supportable forecast period with a four quarter reversion to the historic mean on a straight-line basis.

The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring (“TDR”) will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by Arrow.

Arrow uses the vintage analysis method to estimate expected credit losses for the consumer loan segment. The vintage method was selected since the loans within the consumer loan segment are homogeneous, not just by risk characteristic, but loan structure. The loss rate is applied to the loan origination amounts. Arrow maintains, over the life of the loan, the loss curve by vintage year. If estimated losses computed by the vintage method need to be adjusted based on current conditions and the reasonable and supportable economic forecast, these adjustments may be incorporated over a six quarter reasonable and supportable forecast period, reverting to historical losses using a straight-line method over a two year period.

The vintage and DCF models also consider the need to qualitatively adjust expected loss estimates for information not already captured in the quantitative loss estimation process. Qualitative considerations include limitations inherent in the quantitative model; trends experienced in nonperforming and delinquent loans; changes in value of underlying collateral; changes in lending policies and procedures; nature and composition of loans; portfolio concentrations that may affect loss experience across one or more components or the portfolio; the experience, ability and depth of lending management and staff; the Company’s credit review system; and the effect of external factors; such as competition, legal and regulatory requirements. These qualitative factor adjustments may increase or decrease the Company's estimate of expected credit losses so that the allowance for credit loss is reflective of the estimate of lifetime losses that exist in the loan portfolio at the balance sheet date.

All loans not included in the vintage analysis method that exceed $250,000 which are on nonaccrual, are evaluated on an individual basis. For collateral dependent financial assets where Arrow has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and Arrow expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, Arrow has elected a practical expedient to measure the allowance for credit loss as the difference between the fair value of the collateral less cost to sell, and the amortized cost basis of the asset as of the measurement date. In the event where the repayment of a collateral dependent financial asset is expected to be provided substantially through the operating of the collateral, Arrow will use fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

Except as set forth below, a loan that has been modified or renewed is considered a TDR when two conditions are met:

•The borrower is experiencing financial difficulty, and

•Concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics.

Arrow's allowance for credit losses reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point it is determined that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required allowance for credit losses. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in Arrow's existing pools based on the underlying risk characteristics of the loan to measure the allowance for credit losses. In accordance with the Coronavirus Aid, Relief, and Economic Security (CARES) Act and ASC Subtopic 310-40, as extended by the Consolidated Appropriations Act, 2021, if a qualifying loan modification was made for a borrower as the result of the COVID-19 pandemic, this modification was not considered a TDR.

Estimated Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities

The Company estimates expected credit losses over the contractual period in which the Company has exposure to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures recognized in other liabilities, is adjusted as an expense in other noninterest expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. Estimating credit losses on unfunded commitments requires the Bank to consider the following categories of off-balance sheet credit exposure: unfunded commitments to extend credit, unfunded lines of credit, and standby letters of credit. Each of these unfunded commitments is then analyzed for a probability of funding to calculate a probable funding amount. The life of loan loss factor by related portfolio segment from the loan allowance for credit loss calculation is then applied to the probable funding amount to calculate the estimated credit losses on off-balance sheet credit exposures recognized as other liabilities.

Allowance for Credit Losses – Held to Maturity ("HTM") Debt Securities

Arrow's HTM debt securities are also required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on HTM debt securities on a collective basis by major security types that share similar risk characteristics, such as financial asset type and collateral type adjusted for current conditions and reasonable and supportable

forecasts. Management classifies the HTM portfolio into the following major security types: U.S. government agency or U.S. government sponsored mortgage-backed and collateralized mortgage obligations securities, and state and municipal debt securities.

The mortgage-backed and collateralized mortgage obligations HTM securities are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government as to timely repayment of principal and interest, are highly rated by major rating agencies, and have a long history of no credit losses. Therefore, the Company did not record a credit loss for these securities.

State and municipal bonds carry an investment grade from an accredited ratings agency, primarily with an investment grade rating. In addition, the Company has a limited amount of New York state local municipal bonds that are not rated. The estimate of expected credit losses on the HTM portfolio is based on the expected cash flows of each individual CUSIP over its contractual life and utilized a municipal loss forecast model for determining PD and LGD rates. Management may exercise discretion to make adjustments based on environmental factors. A calculated expected credit loss for individual securities was determined using the PD and LGD rates. Arrow determined that the expected credit loss on its municipal bond portfolio was de minimis, and therefore, an allowance for credit losses was not recorded.

Allowance for Credit Losses – Available for Sale ("AFS") Debt Securities

The impairment model for AFS debt securities differs from the CECL approach utilized by HTM debt securities since AFS debt securities are measured at fair value rather than amortized cost. For AFS debt securities in an unrealized loss position, the Bank first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, in making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, failure of the issuer of the debt security to make scheduled interest or principal payments, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. The cash flows are estimated using information relevant to the collectability of the security, including information about past events, current conditions and reasonable and supportable forecasts. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Accrued Interest Receivable

Upon adoption of CECL on January 1, 2021, the Company made the following elections regarding accrued interest receivable: (1) presented accrued interest receivable balances separately within the other assets balance sheet line item; (2) excluded interest receivable that is included in amortized cost of financing receivables from related disclosures requirements and (3) continued the Company's policy to write off accrued interest receivable by reversing interest income. For loans, write off typically occurs upon becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, the Company has not experienced uncollectible accrued interest receivable on investment securities.

New Accounting Pronouncements

The following accounting standards have been adopted in the first three months of 2021:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all related subsequent amendments thereto. ASU 2016-13 introduces new guidance that make substantive changes to the accounting for credit losses. ASU 2016-13 introduces the CECL model, which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities. The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses. ASU 2016-13 also modifies certain provisions of the current other-than-temporary impairment model for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security’s amortized cost basis and its fair value and will be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. ASU 2016-13 also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. ASU 2016-13 requires expanded disclosures including, but not limited to, (1) information about the methods and assumptions used to estimate expected credit losses, including changes in the factors that influenced management’s estimate and the reasons for those changes, (2) financing receivables and net investment in leases measured at amortized cost, further disaggregation of information about the credit quality of those assets and (3) a rollforward of the allowance for credit losses for HTM and AFS securities. The standard also changes the accounting for purchased credit-impaired debt securities and loans. ASU 2016-13 was effective for the Company on January 1, 2020. As permitted by the CARES Act, Arrow deferred the adoption of the CECL methodology in determining credit losses until January 1, 2021. Management expects that the CECL model may create more volatility in the level of our allowance for loan losses from quarter to quarter as changes in the level of allowance for loan losses will be dependent upon, among other things, macroeconomic forecasts and conditions, loan portfolio volumes and credit quality.

Arrow adopted CECL on January 1, 2021 (“Day 1”) using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures recognized as other liabilities. Results for reporting periods beginning after January 1, 2021 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net increase to retained earnings of $120,000 as of January 1, 2021 for the cumulative effect of adopting ASC 326. The transition adjustment includes a $1.3 million decrease to the allowance for credit losses on loans, a $1.1 million increase to the estimated credit losses on off-balance sheet credit exposures recorded as other liabilities, and a $41,000 impact to the deferred tax liability. The Company did not record an allowance for HTM debt securities on January 1, 2021 as the amount of credit risk was deemed immaterial. The Company did not record an allowance for credit losses on its AFS debt securities under the

newly codified AFS debt security impairment model, as the majority of these securities are government agency-backed securities for which the risk of loss is minimal. Refer to Note 3 Investment Securities and Note 4 Loans (under the captions "Allowance for Credit Losses" and "Loan Credit Quality Indicators") to the Company’s unaudited interim consolidated financial statements included in this Form 10-Q for more information.

In December 2019, the FASB issued ASU 2019-12 "Simplifying the Accounting for Income Taxes" (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. Arrow adopted this standard on January 1, 2021. The Company does not expect that the adoption of this standard will have a material impact on its financial position or the results of operations in periods subsequent to its adoption.

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Cash and Cash Equivalents (Tables)

3 Months Ended

Mar. 31, 2021

Cash and Cash Equivalents [Abstract]

Schedule of Cash and Cash Equivalents

The following table is the schedule of Cash and Cash Equivalents at March 31, 2021, December 31, 2020 and March 31, 2020.
		March 31, 2021		December 31, 2020		March 31, 2020
Cash and Due From Banks		$	45,602	$	42,116	$	32,525
Interest-Bearing Deposits at Banks		406,605		338,875		106,004
Total Cash and Cash Equivalents		$	452,207	380,991		138,529
Supplemental Information:
Total required reserves, including vault cash and Federal Reserve Bank deposits 1		$	—	$	—	$	—
Restricted cash pledged as collateral related to swap agreements and included in Cash and Due From Banks		$	—	$	500	$	—
1.	Until March 2020, Arrow was required to maintain reserve balances with the Federal Reserve Bank of New York. In March 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent to free up liquidity in the banking industry to support lending to households and businesses.

Restrictions on Cash and Cash Equivalents

The following table is the schedule of Cash and Cash Equivalents at March 31, 2021, December 31, 2020 and March 31, 2020.
		March 31, 2021		December 31, 2020		March 31, 2020
Cash and Due From Banks		$	45,602	$	42,116	$	32,525
Interest-Bearing Deposits at Banks		406,605		338,875		106,004
Total Cash and Cash Equivalents		$	452,207	380,991		138,529
Supplemental Information:
Total required reserves, including vault cash and Federal Reserve Bank deposits 1		$	—	$	—	$	—
Restricted cash pledged as collateral related to swap agreements and included in Cash and Due From Banks		$	—	$	500	$	—
1.	Until March 2020, Arrow was required to maintain reserve balances with the Federal Reserve Bank of New York. In March 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent to free up liquidity in the banking industry to support lending to households and businesses.

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2021

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, 2021, December 31, 2020 and March 31, 2020:

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, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,001	$	508	$	349,911	$	1,000	$	461,420
Gross Unrealized Gains	138		—		6,276		—		6,414
Gross Unrealized Losses	(1,769)		—		(1,776)		(200)		(3,745)
Available-For-Sale Securities,   at Fair Value	108,370		508		354,411		800		464,089
Available-For-Sale Securities,   Pledged as Collateral, at Fair Value									352,214
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	—	$	68	$	58	$	—	$	126
From 1 - 5 Years	65,001		40		289,741		—		354,782
From 5 - 10 Years	45,000		400		60,112		1,000		106,512
Over 10 Years	—		—		—		—		—
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	—	$	68	$	64	$	—	$	132
From 1 - 5 Years	63,774		40		295,370		—		359,184
From 5 - 10 Years	44,596		400		58,977		800		104,773
Over 10 Years	—		—		—		—		—
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	103,231	$	—	$	120,780	$	—	$	224,011
12 Months or Longer	—		—		—		800		800
Total	$	103,231	$	—	$	120,780	$	800	$	224,811
Number of Securities in a   Continuous Loss Position	14		—		16		1		31
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,769	$	—	$	1,776	$	—	$	3,545
12 Months or Longer	—		—		—		200		200
Total	$	1,769	$	—	$	1,776	$	200	$	3,745
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,001
US Agency Obligations,   at Fair Value	108,370
US Government Agency   Securities, at Amortized Cost					$	11,582
US Government Agency   Securities, at Fair Value					11,658
Government Sponsored Entity   Securities, at Amortized Cost					338,329
Government Sponsored Entity   Securities, at Fair Value					342,753

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, 2020
Available-For-Sale Securities,   at Amortized Cost	$	65,002	$	528	$	290,967	$	1,000	$	357,497
Gross Unrealized Gains	184		—		7,934		—		8,118
Gross Unrealized Losses	(74)		—		(54)		(200)		(328)
Available-For-Sale Securities,   at Fair Value	65,112		528		298,847		800		365,287
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									244,411
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	29,926	$	—	$	—	$	—	$	29,926
12 Months or Longer	—		—		4,882		800		5,682
Total	$	29,926	$	—	$	4,882	$	800	$	35,608
Number of Securities in a   Continuous Loss Position	4		—		1		1		6
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	74	$	—	$	—	$	—	$	74
12 Months or Longer	—		—		54		200		254
Total	$	74	$	—	$	54	$	200	$	328
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	65,002
US Agency Obligations,   at Fair Value	65,112
US Government Agency   Securities, at Amortized Cost					$	12,696
US Government Agency   Securities, at Fair Value					12,683
Government Sponsored Entity   Securities, at Amortized Cost					278,271
Government Sponsored Entity   Securities, at Fair Value					286,164

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, 2020
Available-For-Sale Securities,   at Amortized Cost	$	5,002	$	723	$	365,333	$	1,000	$	372,058
Gross Unrealized Gains	179		—		7,484		—		7,663
Gross Unrealized Losses	—		—		(1,335)		(200)		(1,535)
Available-For-Sale Securities,   at Fair Value	5,181		723		371,482		800		378,186
Available-For-Sale Securities,   Pledged as Collateral, at Fair Value									273,124
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	18,846	$	—	$	18,846
12 Months or Longer	—		—		59,262		800		60,062
Total	$	—	$	—	$	78,108	$	800	$	78,908
Number of Securities in a   Continuous Loss Position	—		—		27		1		28
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	316	$	—	$	316
12 Months or Longer	—		—		1,019		200		1,219
Total	$	—	$	—	$	1,335	$	200	$	1,535
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	5,002
US Agency Obligations,   at Fair Value	5,181
US Government Agency   Securities, at Amortized Cost					$	58,089
US Government Agency   Securities, at Fair Value					57,091
Government Sponsored Entity   Securities, at Amortized Cost					307,244
Government Sponsored Entity   Securities, at Fair Value					314,391

Held-To-Maturity Securities

The following table is the schedule of Held-To-Maturity Securities at March 31, 2021, December 31, 2020 and March 31, 2020:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	191,202	$	23,359	$	214,561
Gross Unrealized Gains	5,843		956		6,799
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	197,045		24,315		221,360
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					207,595
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	16,513	$	1,586	$	18,099
From 1 - 5 Years	139,576		21,773		161,349
From 5 - 10 Years	34,110		—		34,110
Over 10 Years	1,003		—		1,003
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	16,580	$	1,639	$	18,219
From 1 - 5 Years	143,850		22,676		166,526
From 5 - 10 Years	35,599		—		35,599
Over 10 Years	1,016		—		1,016
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	8,310
US Government Agency   Securities, at Fair Value			8,597
Government Sponsored Entity   Securities, at Amortized Cost			15,049
Government Sponsored Entity   Securities, at Fair Value			15,718

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2020
Held-To-Maturity Securities,   at Amortized Cost	$	192,352	$	26,053	$	218,405
Gross Unrealized Gains	7,080		1,094		8,174
Gross Unrealized Losses	(3)		—		(3)
Held-To-Maturity Securities,   at Fair Value	199,429		27,147		226,576
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					211,176
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	1,513	$	—	$	1,513
12 Months or Longer	—		—		—
Total	$	1,513	$	—	$	1,513
Number of Securities in a   Continuous Loss Position	4		—		4
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	3	$	—	$	3
12 Months or Longer	—		—		—
Total	$	3	$	—	$	3
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	9,440
US Government Agency   Securities, at Fair Value			9,762
Government Sponsored Entity   Securities, at Amortized Cost			16,613
Government Sponsored Entity   Securities, at Fair Value			17,385
March 31, 2020
Held-To-Maturity Securities,   at Amortized Cost	$	204,148	$	34,372	$	238,520
Gross Unrealized Gains	3,104		1,329		4,433
Gross Unrealized Losses	(149)		—		(149)
Held-To-Maturity Securities,   at Fair Value	207,103		35,701		242,804
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					231,539
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	5,625	$	—	$	5,625
12 Months or Longer	1,867		—		1,867
Total	$	7,492	$	—	$	7,492
Number of Securities in a   Continuous Loss Position	16		—		16

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	16	$	—	$	16
12 Months or Longer	133		—		133
Total	$	149	$	—	$	149
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	1,594
US Government Agency   Securities, at Fair Value			1,655
Government Sponsored Entity   Securities, at Amortized Cost			32,778
Government Sponsored Entity   Securities, at Fair Value			34,046

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

The following table is the schedule of Equity Securities at March 31, 2021, December 31, 2020 and March 31, 2020:

Equity Securities
	March 31, 2021	December 31, 2020	March 31, 2020
Equity Securities, at Fair Value	$1,796	$1,636	$1,689

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 ended March 31, 2021 and 2020:

	Quarterly Period Ended:
	March 31, 2021		March 31, 2020
Net Gain (Loss) on Equity Securities	$	160	$	(374)
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	—		—
Unrealized net gain (loss) recognized during the reporting period on equity securities still held at the reporting date	$	160	$	(374)

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Loans (Tables)

3 Months Ended

Mar. 31, 2021

Receivables [Abstract]

Past Due Financing Receivables

The following two tables present loan balances outstanding as of March 31, 2021, 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. Loans held-for-sale of $4,443, $11,085 and $1,905 as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively, are included in the residential real estate balances for current loans.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2021
Loans Past Due 30-59 Days	$	63	$	143	$	2,233	$	2,097	$	4,536
Loans Past Due 60-89 Days	34		2,723		822		156		3,735
Loans Past Due 90 or more Days	38		1,474		592		1,700		3,804
Total Loans Past Due	135		4,340		3,647		3,953		12,075
Current Loans	288,416		577,167		857,524		904,061		2,627,168
Total Loans	$	288,551	$	581,507	$	861,171	$	908,014	$	2,639,243
December 31, 2020
Loans Past Due 30-59 Days	$	102	$	—	$	4,976	$	261	$	5,339
Loans Past Due 60-89 Days	113		—		2,713		1,279		4,105
Loans Past Due 90 or more Days	78		1,658		1,379		1,224		4,339
Total Loans Past Due	293		1,658		9,068		2,764		13,783
Current Loans	240,261		570,129		850,700		920,157		2,581,247
Total Loans	$	240,554	$	571,787	$	859,768	$	922,921	$	2,595,030
March 31, 2020
Loans Past Due 30-59 Days	$	173	$	461	$	5,636	$	1,630	$	7,900
Loans Past Due 60-89 Days	70		110		1,451		212		1,843
Loans Past Due 90 or more Days	8		911		549		1,525		2,993
Total Loans Past Due	251		1,482		7,636		3,367		12,736
Current Loans	146,849		524,648		817,073		912,887		2,401,457
Total Loans	$	147,100	$	526,130	$	824,709	$	916,254	$	2,414,193

Schedule of Non Accrual Loans by Category
			Commercial
March 31, 2021	Commercial		Real Estate		Consumer		Residential		Total
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	242	$	242
Nonaccrual Loans	64		4,364		746		2,913		8,087
Nonaccrual With No Allowance for Credit Loss	64		1,641		746		2,913		5,364
Interest Income on Nonaccrual Loans	—		14		—		—		—
December 31, 2020
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	184	$	—	$	44	$	228
Nonaccrual Loans	78		1,475		1,470		3,010		6,033
March 31, 2020
Loans 90 or More Days Past Due   and Still Accruing Interest	$	5	$	238	$	93	$	101	$	437
Nonaccrual Loans	63		1,445		715		2,720		4,943

Allowance for Credit Losses on Financing Receivables

The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2021:

March 31, 2021	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		3,851		3,851
Consumer	—		—		—
Residential	1,156		—		1,156
Total	$	1,156	$	3,851	$	5,007

The following table details activity in the allowance for credit losses on loans for the three months ended March 31, 2021 and March 31, 2020. Arrow adopted ASU 2016-13 on January 1, 2021. Results for the periods beginning after January 1, 2021 are presented under ASC 326 and prior periods continue to be reported in accordance with previously applicable US GAAP.

Allowance for Credit Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Credit Losses for the Quarterly Period:
December 31, 2020	$	2,173	$	9,990	$	11,562	$	5,507	$	29,232
Impact of ASU 2016-13	2,084		2,064		(9,383)		3,935		(1,300)
Balance as of January 1, 2021 as adjusted for ASU 2016-13	4,257		12,054		2,179		9,442		27,932
Charge-offs	(3)		—		(627)		(3)		(633)
Recoveries	—		—		189		—		189
Provision	43		(110)		688		(1,269)		(648)
March 31, 2021	$	4,297	$	11,944	$	2,429	$	8,170	$	26,840

Allowance for Loan Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Loan Losses for the Quarterly Period:
December 31, 2019	$	1,386	$	5,830	$	9,408	$	4,563	$	21,187
Charge-offs	(14)		—		(467)		—		$	(481)
Recoveries	—		—		159		—		$	159
Provision	267		1,235		904		366		$	2,772
March 31, 2020	$	1,639	$	7,065	$	10,004	$	4,929	$	23,637

Allowance for Credit Losses - Collectively and Individually Evaluated
	Commercial		Commercial Real Estate		Consumer		Residential		Total
March 31, 2021
Ending Loan Balance - Collectively Evaluated	$	288,551	$	577,656	$	861,171	$	906,858	$	2,634,236
Allowance for Credit Losses - Loans Collectively Evaluated	4,297		11,388		2,429		8,170		26,284
Ending Loan Balance - Individually Evaluated	—		3,851		—		1,156		5,007
Allowance for Credit Losses - Loans Individually Evaluated	—		556		—		—		556

The following table presents information pertaining to the allowance for loan losses as of December 31, 2020 and March 31, 2020, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Allowance for Loan Losses - Collectively and Individually Evaluated for Impairment
	Commercial		Commercial Real Estate		Consumer		Residential		Total
December 31, 2020
Ending Loan Balance - Collectively Evaluated for Impairment	$	240,507	$	570,659	$	859,657	$	921,504	$	2,592,327
Allowance for Loan Losses - Loans Collectively Evaluated for Impairment	2,154		9,990		11,562		5,485		$	29,191
Ending Loan Balance - Individually Evaluated for Impairment	47		1,128		111		1,417		2,703
Allowance for Loan Losses - Loans Individually Evaluated for Impairment	19		—		—		22		41
March 31, 2020
Ending Loan Balance - Collectively Evaluated for Impairment	$	147,066	$	524,993	$	824,598	$	915,301	$	2,411,958
Allowance for Loan Losses - Loans Collectively Evaluated for Impairment	1,635		7,065		10,004		4,892		23,596
Ending Loan Balance - Individually Evaluated for Impairment	34		1,137		111		953		2,235
Allowance for Loan Losses - Loans Individually Evaluated for Impairment	4		—		—		37		41

Financing Receivable Credit Quality Indicators

The following table presents credit quality indicators by total loans amortized cost basis by origination year as of March 31, 2021.

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
March 31, 2021	2021		2020		2019		2018		2017		Prior
Commercial:
Risk rating
Satisfactory	$	78,184	$	126,061	$	18,202	$	15,693	$	10,004	$	12,234	$	14,006	$	—	$	274,384
Special mention	—		5,031		66		—		—		2		—		—		5,099
Substandard	—		5,507		—		—		—		3,514		47		—		9,068
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	78,184	$	136,599	$	18,268	$	15,693	$	10,004	$	15,750	$	14,053	$	—	$	288,551
Commercial Real Estate:
Risk rating
Satisfactory	$	24,511	$	298,907	$	49,957	$	44,902	$	24,558	$	83,690	$	3,161	$	—	$	529,686
Special mention	—		17,825		2,010		—		142		2,115		—		—		22,092
Substandard	2,021		10,853		4,006		163		—		12,661		25		—		29,729
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	26,532	$	327,585	$	55,973	$	45,065	$	24,700	$	98,466	$	3,186	$	—	$	581,507
Consumer:
Risk rating
Performing	$	95,223	$	321,575	$	225,191	$	135,646	$	56,508	$	25,834	$	448	$	—	$	860,425
Nonperforming	—		141		181		189		167		68		—		—		746
Total Consumer Loans	$	95,223	$	321,716	$	225,372	$	135,835	$	56,675	$	25,902	$	448	$	—	$	861,171
Residential:
Risk rating
Performing	$	34,833	$	156,500	$	114,523	$	107,176	$	110,308	$	266,377	$	115,142	$	—	$	904,859
Nonperforming	—		203		—		27		149		2,544		232		—		3,155
Total Residential Loans	$	34,833	$	156,703	$	114,523	$	107,203	$	110,457	$	268,921	$	115,374	$	—	$	908,014

The following table presents information pertaining to loan credit quality indicators as of December 31, 2020 and March 31, 2020, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Loan Credit Quality Indicators
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
December 31, 2020
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	229,351	$	525,609					$	754,960
Special Mention	1,574		16,213						17,787
Substandard	9,629		29,965						39,594
Doubtful	—		—						—
Performing					$	858,298	$	919,867	$	1,778,165
Nonperforming					1,470		3,054		4,524
March 31, 2020
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	140,218	$	497,243					$	637,461
Special Mention	28		255						283
Substandard	6,854		28,632						35,486
Doubtful	—		—						—
Credit Risk Profile Based on Payment Activity:
Performing					$	823,901	$	913,433	$	1,737,334
Nonperforming					808		2,821		3,629

Impaired Financing Receivables

The following table presents information on impaired loans as of December 31, 2020 and March 31, 2020 based on whether the impaired loan has a recorded related allowance or has no recorded related allowance, as determined in accordance with ASC 310, prior to the adoption of ASU 2016-13:

Impaired Loans
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
December 31, 2020
Recorded Investment:
With No Related Allowance	$	—	$	1,124	$	112	$	1,174	$	2,410
With a Related Allowance	46		—		—		244		290
Unpaid Principal Balance:
With No Related Allowance	—		1,128		111		1,174		2,413
With a Related Allowance	47		—		—		244		291
March 31, 2020
Recorded Investment:
With No Related Allowance	$	—	$	1,137	$	112	$	697	$	1,946
With a Related Allowance	33		—		—		256		289
Unpaid Principal Balance:
With No Related Allowance	—		1,137		111		697		$	1,945
With a Related Allowance	34		—		—		256		290
March 31, 2020
Average Recorded Balance:
With No Related Allowance	$	—	$	569	$	110	$	698	$	1,377
With a Related Allowance	34		—		—		258		292
Interest Income Recognized:
With No Related Allowance	—		10		—		—		10
With a Related Allowance	—		—		—		—		—
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, 2021
Number of Loans	—		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment	—		—		—		—		—
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2020
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	16	$	—	$	16
Post-Modification Outstanding Recorded Investment	—		—		16		—		16
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [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, 2021, December 31, 2020 and March 31, 2020:

Commitments to Extend Credit and Letters of Credit
	March 31, 2021		December 31, 2020		March 31, 2020
Notional Amount:
Commitments to Extend Credit	$	437,920	$	399,882	$	376,519
Standby Letters of Credit	3,775		3,703		3,301
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	12		28		29

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Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2021

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 ended March 31, 2021 and 2020:

Schedule of Comprehensive Income
	Three Months Ended March 31
			Tax
	Before-Tax		(Expense)		Net-of-Tax
	Amount		Benefit		Amount
2021
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(5,121)	$	1,309	$	(3,812)
Net Unrealized Gain on Cash Flow Swap	1,982		(507)		1,475
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(28)		8		(20)
Amortization of Net Retirement Plan Actuarial Loss	46		(12)		34
Amortization of Net Retirement Plan Prior Service Cost	59		(16)		43
Other Comprehensive Loss	$	(3,062)	$	782	$	(2,280)
2020
Net Unrealized Securities Holding Gain on Securities Available-for-Sale Arising During the Period	$	5,504	$	(1,406)	$	4,098
Net Unrealized Loss on Cash Flow Swap	(294)		75		(219)
Amortization of Net Retirement Plan Actuarial Loss	36		(9)		27
Amortization of Net Retirement Plan Prior Service Cost	54		(15)		39
Other Comprehensive Income	$	5,300	$	(1,355)	$	3,945

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 (Loss) and Gain on Available-for-Sale Securities		Unrealized Gain (Loss) on Cash Flow Swap		Defined Benefit Plan Items				Total
					Net Actuarial Loss		Net Prior Service Cost
For the Quarter-To-Date periods ended:
December 31, 2020	$	5,799	$	485	$	(5,929)	$	(1,171)	$	(816)
Other comprehensive income or loss before reclassifications	(3,812)		1,475		—		—		(2,337)
Amounts reclassified from accumulated other comprehensive income	—		(20)		34		43		57
Net current-period other comprehensive income	(3,812)		1,455		34		43		(2,280)
March 31, 2021	$	1,987	$	1,940	$	(5,895)	$	(1,128)	$	(3,096)
December 31, 2019	$	465	$	—	$	(5,847)	$	(975)	$	(6,357)
Other comprehensive income or loss before reclassifications	4,098		(219)		—		—		3,879
Amounts reclassified from accumulated other comprehensive income	—		—		27		39		66
Net current-period other comprehensive income	4,098		(219)		27		39		3,945
March 31, 2020	$	4,563	$	(219)	$	(5,820)	$	(936)	$	(2,412)

(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
Details about Accumulated Other Comprehensive Income (Loss) Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2021
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	28		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	(59)		(1)	Salaries and Employee Benefits
Actuarial loss	(46)		(1)	Salaries and Employee Benefits
	(77)			Total before Tax
	20			Provision for Income Taxes
Total reclassifications for the period	$	(57)		Net of Tax
March 31, 2020
Amortization of defined benefit pension items:
Prior-service costs	$	(54)	(1)	Salaries and Employee Benefits
Actuarial loss	(36)		(1)	Salaries and Employee Benefits
	(90)			Total before Tax
	24			Provision for Income Taxes
Total reclassifications for the period	$	(66)		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, 2021

Share-based Payment Arrangement [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The following table summarizes information about stock option activity for the year to date period ended March 31, 2021.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2021	264,090			$	28.84
Granted	55,500			29.55
Exercised	(6,927)			22.52
Forfeited	(1,034)			19.70
Outstanding at March 31, 2021	311,629			29.14
Vested at Period-End	179,681			27.73
Expected to Vest	131,948			31.05
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	4.85
Fair Value Assumptions:
Dividend Yield	3.41		%
Expected Volatility	26.53		%
Risk Free Interest Rate	0.49		%
Expected Lives (in years)	8.75

Schedule of Stock Options Roll Forward

The following table summarizes information about stock option activity for the year to date period ended March 31, 2021.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2021	264,090			$	28.84
Granted	55,500			29.55
Exercised	(6,927)			22.52
Forfeited	(1,034)			19.70
Outstanding at March 31, 2021	311,629			29.14
Vested at Period-End	179,681			27.73
Expected to Vest	131,948			31.05
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	4.85
Fair Value Assumptions:
Dividend Yield	3.41		%
Expected Volatility	26.53		%
Risk Free Interest Rate	0.49		%
Expected Lives (in years)	8.75

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 three month periods ended March 31, 2021 and 2020:

	For the Three Months Ended March 31,
	2021		2020
Amount expensed	$	72	$	76

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2021 and 2020:

	For the Three Months Ended March 31,
	2021		2020
Amount expensed	$	32	$	27

Schedule of Nonvested Restricted Stock Units Activity

The following table summarizes information about restricted stock unit activity for the periods ended March 31, 2021 and 2020.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2021	11,663	$	31.62
Granted	4,738	29.40
Vested	(3,582)	30.71
Non-vested at March 31, 2021	12,819	31.05
Non-vested at January 1, 2020	7,721	30.27
Granted	3,942	34.25
Non-vested at March 31, 2020	11,663	31.62

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Retirement Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2021

Retirement Benefits [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, 2021 and 2020.

	Employees'		Select Executive		Postretirement
	Pension		Retirement		Benefit
	Plan		Plan		Plans
Net Periodic (Benefit) Cost
For the Three Months Ended March 31, 2021:
Service Cost 1	$	460	$	118	$	31
Interest Cost 2	340		45		67
Expected Return on Plan Assets 2	(950)		—		—
Amortization of Prior Service Cost 2	20		12		27
Amortization of Net Loss 2	—		38		8
Net Periodic (Benefit) Cost	$	(130)	$	213	$	133
Plan Contributions During the Period	$	—	$	118	$	28

For the Three Months Ended March 31, 2020:
Service Cost 1	$	430	$	103	$	33
Interest Cost 2	417		54		78
Expected Return on Plan Assets 2	(904)		—		—
Amortization of Prior Service Cost 2	16		11		27
Amortization of Net Loss 2	1		33		2
Net Periodic (Benefit) Cost	$	(40)	$	201	$	140
Plan Contributions During the Period	$	—	$	117	$	78

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, 2021

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, 2021 and 2020.  All share and per share amounts have been adjusted for the September 25, 2020, 3% stock dividend.

Earnings Per Share
	Three Months Ended
	March 31, 2021		March 31, 2020
Earnings Per Share - Basic:
Net Income	$	13,280	$	8,127
Weighted Average Shares - Basic	15,528		15,446
Earnings Per Share - Basic	$	0.86	$	0.53
Earnings Per Share - Diluted:
Net Income	$	13,280	$	8,127
Weighted Average Shares - Basic	15,528		15,446
Dilutive Average Shares Attributable to Stock Options	35		30
Weighted Average Shares - Diluted	15,563		15,476
Earnings Per Share - Diluted	$	0.85	$	0.53

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Fair Values (Tables)

3 Months Ended

Mar. 31, 2021

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, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,370	$	—	$	108,370	$	—
State and Municipal Obligations	508		—		508		—
Mortgage-Backed Securities	354,411		—		354,411		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	464,089		—		464,089		—
Equity Securities	1,796		—		1,796		—
Total Securities Measured on a Recurring Basis	465,885		—		465,885		—
Derivatives, included in other assets	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	468,183	$	—	$	468,183	$	—
Liabilities:
Derivatives, included in other liabilities	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	2,298	$	—	$	2,298	$	—
December 31, 2020
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	65,112	$	—	$	65,112	$	—
State and Municipal Obligations	528		—		528		—
Mortgage-Backed Securities	298,847		—		298,847		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	365,287		—		365,287		—
Equity Securities	1,636		—		1,636		—

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)
Total Securities Measured on a Recurring Basis	366,923		—		366,923		—
Derivatives, included in other liabilities	5,080		—		5,080		—
Total Measured on a Recurring Basis	$	372,003	$	—	$	372,003	$	—
Liabilities:
Derivatives, included in other liabilities	5,080		—		5,080		—
Total Measured on a Recurring Basis	$	5,080	$	—	$	5,080	$	—
March 31, 2020
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	5,181	$	—	$	5,181	$	—
State and Municipal Obligations	723		—		723		—
Mortgage-Backed Securities	371,482		—		371,482		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	378,186		—		378,186		—
Equity Securities	1,689		—		1,689		—
Total Securities Measured on a Recurring Basis	$	379,875	$	—	$	379,875	$	—
Derivatives, included in other assets	5,191		$	—	5,191		—
Total Measured on a Recurring Basis	$	385,066	$	—	$	385,066	$	—
Liabilities:
Derivatives, included in other liabilities	5,191		—		5,191		—
Total Measured on a Recurring Basis	$	5,191	$	—	$	5,191	$	—

	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses Recognized in Earnings
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
March 31, 2021
Collateral Dependent Evaluated Loans	$	2,423	$	—	$	—	$	2,423
Other Real Estate Owned and Repossessed Assets, Net	242		—		—		242		—
December 31, 2020
Collateral Dependent Impaired Loans	$	594	$	—	$	—	$	594
Other Real Estate Owned and Repossessed Assets, Net	155		—		—		155		—
March 31, 2020
Collateral Dependent Impaired Loans	$	582	$	—	$	—	$	582
Other Real Estate Owned and Repossessed Assets, Net	942		—		—		942		—

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, 2021
Cash and Cash Equivalents	$	452,207	$	452,207	$	452,207	$	—	$	—
Securities Available-for-Sale	464,089		464,089		—		464,089		—
Securities Held-to-Maturity	214,561		221,360		—		221,360		—
Equity Securities	1,796		1,796		—		1,796		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,360		5,360		—		5,360		—
Net Loans	2,612,403		2,603,225		—		—		2,603,225
Accrued Interest Receivable	8,258		8,258		—		8,258		—
Derivatives, included in other assets	2,298		2,298				2,298
Deposits	3,453,588		3,452,595		—		3,452,595		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	6,795		6,795		—		6,795		—
Federal Home Loan Bank Term Advances	45,000		46,176		—		46,176		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	237		237		—		237		—
Derivatives, included in other liabilities	2,298		2,298		—		2,298		—

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
December 31, 2020
Cash and Cash Equivalents	$	380,991	$	380,991	$	380,991	$	—	$	—
Securities Available-for-Sale	365,287		365,287		—		365,287		—
Securities Held-to-Maturity	218,405		226,576		—		226,576		—
Equity Securities	1,636		1,636		—		1,636
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,349		5,349		—		5,349		—
Net Loans	2,565,798		2,558,903		—		—		2,558,903
Accrued Interest Receivable	7,495		7,495		—		7,495		—
Derivatives, included in other assets	5,080		5,080		—		5,080		—
Deposits	3,234,726		3,234,387		—		3,234,387		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	17,486		17,486		—		17,486		—
Federal Home Loan Bank Term Advances	45,000		46,474		—		46,474		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	326		326		—		326		—
Derivatives, included in other liabilities	5,080		5,080		—		5,080		—
March 31, 2020
Cash and Cash Equivalents	$	138,529	$	138,529	$	138,529	$	—	$	—
Securities Available-for-Sale	378,186		378,186		—		378,186		—
Securities Held-to-Maturity	238,520		242,804		—		242,804		—
Equity Securities	1,689		1,689		—		1,689
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,379		5,379		—		5,379		—
Net Loans	2,390,556		2,368,033		—		—		2,368,033
Accrued Interest Receivable	7,856		7,856		—		7,856		—
Derivatives, included in other assets	5,191		5,191		—		5,191		—
Deposits	2,811,005		2,811,668		—		2,811,668		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	57,909		57,909		—		57,909		—
Federal Home Loan Bank Term Advances	50,000		51,194		—		51,194		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	1,392		1,392		—		1,392		—
Derivatives, included in other liabilities	5,191		5,191		—		5,191		—

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Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Lease, Cost

The following includes quantitative data related to the Company's leases as of and for the three months ended March 31, 2021 and March 31, 2020:

		Three Months Ended
Finance Lease Amounts:	Classification	March 31, 2021			March 31, 2020
Right-of-Use Assets	Premises and Equipment, Net	$	4,947		$	5,124
Lease Liabilities	Finance Leases	5,205			5,249
Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	5,435		$	5,529
Lease Liabilities	Other Liabilities	5,522			5,602
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	49		$	50
Operating Outgoing Cash Flows From Operating Leases		261			158
Financing Outgoing Cash Flows From Finance Leases		12			5
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		331			—
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		28.9			29.9
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		12.5			13.7
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		3.13		%	3.36		%

Lease cost information for the Company's leases is as follows:
	Three Months Ended
	March 31, 2021		March 31, 2020
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	44
Interest on Lease Liabilities	49		50
Operating Lease Cost	209		207
Short-term Lease Cost	5		7
Variable Lease Cost	104		55
Total Lease Cost	$	411	$	363

Lessee, Operating Lease, Liability, Maturity

Future Lease Payments at March 31, 2021 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2022	$	799	$	243
3/31/2023	766		243
3/31/2024	641		243
3/31/2025	570		254
3/31/2026	526		265
Thereafter	3,516		7,733
Total Undiscounted Cash Flows	$	6,818	$	8,981
Less: Net Present Value Adjustment	1,296		3,776
Lease Liability	$	5,522	$	5,205

Finance Lease, Liability, Maturity

Future Lease Payments at March 31, 2021 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2022	$	799	$	243
3/31/2023	766		243
3/31/2024	641		243
3/31/2025	570		254
3/31/2026	526		265
Thereafter	3,516		7,733
Total Undiscounted Cash Flows	$	6,818	$	8,981
Less: Net Present Value Adjustment	1,296		3,776
Lease Liability	$	5,522	$	5,205

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

The following table depicts the fair value adjustment recorded related to the notional amount of derivatives outstanding as well as the notional amount of the interest rate swap agreements.

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Agreements
	March 31, 2021		December 31, 2020		March 31, 2020
Fair value adjustment included in other assets	$	2,298	$	5,080	$	5,191
Fair value adjustment included in other liabilities	2,298		5,080		5,191
Notional amount	175,113		176,637		121,559

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)

The following table indicates the effect of cash flow hedge accounting on AOCI and on the unaudited interim consolidated statement of income.

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
	March 31, 2021		December 31, 2020		March 31, 2020
Amount of gain (loss) recognized in AOCI	$	1,982	$	651	$	(294)
Amount of gain reclassified from AOCI interest expense	28		—		—

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Accounting Policies (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Jan. 01, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of adoption	$ 342,413		$ 334,392	$ 309,398	$ 301,728
Finance receivable, allowance for credit losses	26,840		29,232	23,637	21,187
Off-balance sheet, credit loss, liability	993
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of adoption	$ 51,263		41,899	$ 37,441	$ 33,218
Accounting Standards Update 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Finance receivable, allowance for credit losses		$ (1,300)
Off-balance sheet, credit loss, liability		1,100
Deferred tax liabilities, net		41
Cumulative Effect, Period of Adoption, Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of adoption			120
Finance receivable, allowance for credit losses			(1,300)
Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of adoption			$ 120
Cumulative Effect, Period of Adoption, Adjustment | Accounting Standards Update 2016-13 | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of adoption		$ 120

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Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Cash and Cash Equivalents [Abstract]
Cash and Due From Banks	$ 45,602	$ 42,116	$ 32,525
Interest-Bearing Deposits at Banks	406,605	338,875	106,004
Total Cash and Cash Equivalents	452,207	380,991	138,529	$ 70,221
Total required reserves, including vault cash and Federal Reserve Bank deposits	0	0	0
Restricted cash pledged as collateral related to swap agreements and included in Cash and Due From Banks	$ 0	$ 500	$ 0

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Investment Securities - Available for Sale (Details) $ in Thousands	Mar. 31, 2021 USD ($) security	Dec. 31, 2020 USD ($) security	Mar. 31, 2020 USD ($) security
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	$ 461,420	$ 357,497	$ 372,058
Gross Unrealized Gains	6,414	8,118	7,663
Gross Unrealized Losses	(3,745)	(328)	(1,535)
Available-for-Sale at Fair Value	464,089	365,287	378,186
Maturities of Debt Securities, at Amortized Cost:
Within One Year	126
From 1 - 5 Years	354,782
From 5 - 10 Years	106,512
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	132
From 1 - 5 Years	359,184
From 5 - 10 Years	104,773
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	224,011	29,926	18,846
12 Months or Longer	800	5,682	60,062
Total	$ 224,811	$ 35,608	$ 78,908
Number of Securities in a Continuous Loss Position | security	31	6	28
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 3,545	$ 74	$ 316
12 Months or Longer	200	254	1,219
Total	3,745	328	1,535
Collateral Pledged
Available-For-Sale Securities
Available-For-Sale Securities, Pledged as Collateral, at Fair Value	352,214	244,411	273,124
U.S. Government & Agency Obligations
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	110,001	65,002	5,002
Gross Unrealized Gains	138	184	179
Gross Unrealized Losses	(1,769)	(74)	0
Available-for-Sale at Fair Value	108,370	65,112	5,181
Maturities of Debt Securities, at Amortized Cost:
Within One Year	0
From 1 - 5 Years	65,001
From 5 - 10 Years	45,000
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	0
From 1 - 5 Years	63,774
From 5 - 10 Years	44,596
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	103,231	29,926	0
12 Months or Longer	0	0	0
Total	$ 103,231	$ 29,926	$ 0
Number of Securities in a Continuous Loss Position | security	14	4	0
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 1,769	$ 74	$ 0
12 Months or Longer	0	0	0
Total	1,769	74	0
U.S. Government & Agency Obligations | Agency Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	110,001	65,002	5,002
Available-for-Sale at Fair Value	108,370	65,112	5,181
State and Municipal Obligations
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	508	528	723
Gross Unrealized Gains	0	0	0
Gross Unrealized Losses	0	0	0
Available-for-Sale at Fair Value	508	528	723
Maturities of Debt Securities, at Amortized Cost:
Within One Year	68
From 1 - 5 Years	40
From 5 - 10 Years	400
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	68
From 1 - 5 Years	40
From 5 - 10 Years	400
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	0	0
12 Months or Longer	0	0	0
Total	$ 0	$ 0	$ 0
Number of Securities in a Continuous Loss Position | security	0	0	0
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 0	$ 0
12 Months or Longer	0	0	0
Total	0	0	0
Mortgage- Backed Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	349,911	290,967	365,333
Gross Unrealized Gains	6,276	7,934	7,484
Gross Unrealized Losses	(1,776)	(54)	(1,335)
Available-for-Sale at Fair Value	354,411	298,847	371,482
Maturities of Debt Securities, at Amortized Cost:
Within One Year	58
From 1 - 5 Years	289,741
From 5 - 10 Years	60,112
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	64
From 1 - 5 Years	295,370
From 5 - 10 Years	58,977
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	120,780	0	18,846
12 Months or Longer	0	4,882	59,262
Total	$ 120,780	$ 4,882	$ 78,108
Number of Securities in a Continuous Loss Position | security	16	1	27
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 1,776	$ 0	$ 316
12 Months or Longer	0	54	1,019
Total	1,776	54	1,335
Mortgage- Backed Securities | US Government Agencies Debt Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	11,582	12,696	58,089
Available-for-Sale at Fair Value	11,658	12,683	57,091
Mortgage- Backed Securities | US Government-sponsored Enterprises Debt Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	338,329	278,271	307,244
Available-for-Sale at Fair Value	342,753	286,164	314,391
Corporate and Other Debt Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	1,000	1,000	1,000
Gross Unrealized Gains	0	0	0
Gross Unrealized Losses	(200)	(200)	(200)
Available-for-Sale at Fair Value	800	800	800
Maturities of Debt Securities, at Amortized Cost:
Within One Year	0
From 1 - 5 Years	0
From 5 - 10 Years	1,000
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	0
From 1 - 5 Years	0
From 5 - 10 Years	800
Over 10 Years	0
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 | security	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

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Investment Securities - Held to Maturity (Details)	3 Months Ended
	Mar. 31, 2021 USD ($) security	Dec. 31, 2020 USD ($) security	Mar. 31, 2020 USD ($) security
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	$ 214,561,000	$ 218,405,000	$ 238,520,000
Gross Unrealized Gains	6,799,000	8,174,000	4,433,000
Gross Unrealized Losses	0	(3,000)	(149,000)
Held-To-Maturity Securities, at Fair Value	221,360,000	226,576,000	242,804,000
Maturities of Debt Securities, at Amortized Cost:
Within One Year	18,099,000
From 1 - 5 Years	161,349,000
From 5 - 10 Years	34,110,000
Over 10 Years	1,003,000
Maturities of Debt Securities, at Fair Value:
Within One Year	18,219,000
From 1 - 5 Years	166,526,000
From 5 - 10 Years	35,599,000
Over 10 Years	1,016,000
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	1,513,000	5,625,000
12 Months or Longer	0	0	1,867,000
Total	$ 0	$ 1,513,000	$ 7,492,000
Number of Securities in a Continuous Loss Position | security	0	4	16
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 3,000	$ 16,000
12 Months or Longer	0	0	133,000
Total	0	3,000	149,000
Debt securities, available-for-sale, allowance for credit loss	0
Debt securities, available-for-sale, allowance for credit loss, not to sell before recovery, credit loss, previously recorded, expense (reversal)	0
Debt securities, held-to-maturity, allowance for credit loss	0
Equity Securities	1,796,000	1,636,000	1,689,000
State and Municipal Obligations
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	191,202,000	192,352,000	204,148,000
Gross Unrealized Gains	5,843,000	7,080,000	3,104,000
Gross Unrealized Losses	0	(3,000)	(149,000)
Held-To-Maturity Securities, at Fair Value	197,045,000	199,429,000	207,103,000
Maturities of Debt Securities, at Amortized Cost:
Within One Year	16,513,000
From 1 - 5 Years	139,576,000
From 5 - 10 Years	34,110,000
Over 10 Years	1,003,000
Maturities of Debt Securities, at Fair Value:
Within One Year	16,580,000
From 1 - 5 Years	143,850,000
From 5 - 10 Years	35,599,000
Over 10 Years	1,016,000
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	1,513,000	5,625,000
12 Months or Longer	0	0	1,867,000
Total	$ 0	$ 1,513,000	$ 7,492,000
Number of Securities in a Continuous Loss Position | security	0	4	16
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 3,000	$ 16,000
12 Months or Longer	0	0	133,000
Total	0	3,000	149,000
Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	23,359,000	26,053,000	34,372,000
Gross Unrealized Gains	956,000	1,094,000	1,329,000
Gross Unrealized Losses	0	0	0
Held-To-Maturity Securities, at Fair Value	24,315,000	27,147,000	35,701,000
Maturities of Debt Securities, at Amortized Cost:
Within One Year	1,586,000
From 1 - 5 Years	21,773,000
From 5 - 10 Years	0
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	1,639,000
From 1 - 5 Years	22,676,000
From 5 - 10 Years	0
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	0	0
12 Months or Longer	0	0	0
Total	$ 0	$ 0	$ 0
Number of Securities in a Continuous Loss Position | security	0	0	0
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 0	$ 0
12 Months or Longer	0	0	0
Total	0	0	0
Fair Value, Measurements, Recurring
Unrealized Losses on Securities in a Continuous Loss Position:
Equity Securities	1,796,000	1,636,000	1,689,000
Collateral Pledged
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, Pledged as Collateral, at Fair Value	207,595,000	211,176,000	231,539,000
US Government Agencies Debt Securities | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	8,310,000	9,440,000	1,594,000
US Government Agencies Debt Securities | Fair Value, Measurements, Recurring | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Fair Value	8,597,000	9,762,000	1,655,000
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	15,049,000	16,613,000	32,778,000
US Government-sponsored Enterprises Debt Securities | Fair Value, Measurements, Recurring | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Fair Value	$ 15,718,000	$ 17,385,000	$ 34,046,000

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Investment Securities - Unrealized Gains (Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]
Net Gain (Loss) on Equity Securities	$ 160	$ (374)
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	0	0
Unrealized net gain (loss) recognized during the reporting period on equity securities still held at the reporting date	$ 160	$ (374)

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Loans - Loan Categories and Past Due Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Financing Receivable, Recorded Investment, Aging [Abstract]
Loans receivable held-for-sale, net, not part of disposal group	$ 4,443	$ 11,085	$ 1,905
Recorded investment, past due	12,075	13,783	12,736
Current Loans	2,627,168	2,581,247	2,401,457
Total	2,639,243	2,595,030	2,414,193
Loans 90 or More Days Past Due and Still Accruing Interest	242	228	437
Nonaccrual Loans	8,087	6,033	4,943
Nonaccrual With No Allowance for Credit Loss	5,364
Interest Income on Nonaccrual Loans	0
Commercial
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	135	293	251
Current Loans	288,416	240,261	146,849
Total	288,551	240,554	147,100
Loans 90 or More Days Past Due and Still Accruing Interest	0	0	5
Nonaccrual Loans	64	78	63
Nonaccrual With No Allowance for Credit Loss	64
Interest Income on Nonaccrual Loans	0
Commercial Real Estate
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	4,340	1,658	1,482
Current Loans	577,167	570,129	524,648
Total	581,507	571,787	526,130
Loans 90 or More Days Past Due and Still Accruing Interest	0	184	238
Nonaccrual Loans	4,364	1,475	1,445
Nonaccrual With No Allowance for Credit Loss	1,641
Interest Income on Nonaccrual Loans	14
Consumer
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	3,647	9,068	7,636
Current Loans	857,524	850,700	817,073
Total	861,171	859,768	824,709
Loans 90 or More Days Past Due and Still Accruing Interest	0	0	93
Nonaccrual Loans	746	1,470	715
Nonaccrual With No Allowance for Credit Loss	746
Interest Income on Nonaccrual Loans	0
Residential
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	3,953	2,764	3,367
Current Loans	904,061	920,157	912,887
Total	908,014	922,921	916,254
Loans 90 or More Days Past Due and Still Accruing Interest	242	44	101
Nonaccrual Loans	2,913	3,010	2,720
Nonaccrual With No Allowance for Credit Loss	2,913
Interest Income on Nonaccrual Loans	0
Financing Receivables, 30 to 59 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	4,536	5,339	7,900
Financing Receivables, 30 to 59 Days Past Due | Commercial
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	63	102	173
Financing Receivables, 30 to 59 Days Past Due | Commercial Real Estate
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	143	0	461
Financing Receivables, 30 to 59 Days Past Due | Consumer
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	2,233	4,976	5,636
Financing Receivables, 30 to 59 Days Past Due | Residential
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	2,097	261	1,630
Financing Receivables, 60 to 89 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	3,735	4,105	1,843
Financing Receivables, 60 to 89 Days Past Due | Commercial
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	34	113	70
Financing Receivables, 60 to 89 Days Past Due | Commercial Real Estate
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	2,723	0	110
Financing Receivables, 60 to 89 Days Past Due | Consumer
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	822	2,713	1,451
Financing Receivables, 60 to 89 Days Past Due | Residential
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	156	1,279	212
Financing Receivables, Equal to Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	3,804	4,339	2,993
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	38	78	8
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial Real Estate
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	1,474	1,658	911
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	592	1,379	549
Financing Receivables, Equal to Greater than 90 Days Past Due | Residential
Financing Receivable, Recorded Investment, Aging [Abstract]
Recorded investment, past due	$ 1,700	$ 1,224	$ 1,525

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Loans - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) loan_portfolio	Dec. 31, 2020 USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]
Number of loan portfolios | loan_portfolio	4
Off-balance sheet, credit loss, liability	$ 993
Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Off-balance sheet, credit loss, liability		$ 1,100
Consumer | Minimum | Automobile Loan
Financing Receivable, Allowance for Credit Loss [Line Items]
Principal repayment terms, period	3 years
Consumer | Minimum | Credit Card Receivable
Financing Receivable, Allowance for Credit Loss [Line Items]
Principal repayment terms, period	1 year
Consumer | Maximum | Automobile Loan
Financing Receivable, Allowance for Credit Loss [Line Items]
Principal repayment terms, period	7 years
Consumer | Maximum | Credit Card Receivable
Financing Receivable, Allowance for Credit Loss [Line Items]
Principal repayment terms, period	5 years

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Loans - Amortized Cost Basis of Collateral Dependent Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	$ 2,612,403	$ 2,565,798	$ 2,390,556
Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	5,007
Real Estate | Commercial
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0
Real Estate | Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	3,851
Real Estate | Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0
Real Estate | Residential
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	1,156
Residential Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	1,156
Residential Real Estate | Commercial
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0
Residential Real Estate | Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0
Residential Real Estate | Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0
Residential Real Estate | Residential
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	1,156
Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	3,851
Commercial Real Estate | Commercial
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0
Commercial Real Estate | Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	3,851
Commercial Real Estate | Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0
Commercial Real Estate | Residential
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	$ 0

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Loans - Allowance for Loan Losses (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2021 USD ($) loan	Jan. 01, 2021 USD ($)	Dec. 31, 2020 USD ($)	Mar. 31, 2020 USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	$ 29,232	$ 21,187	$ 26,840		$ 29,232	$ 23,637
Financing receivable, accrued interest, after allowance for credit loss			$ 6,100
Financing receivable, allowance for credit loss, period increase (decrease)	1,100
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	29,232	21,187
Charge-offs	(633)	(481)
Recoveries	189	159
Provision	(648)	2,772
Allowance for Loan Losses, Ending Balance	26,840	23,637
Number of loans individually evaluated for impairment | loan			6
Number of loans with an allowance for credit loss on loans individually evaluated for impairment | loan			1
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated			$ 556		41	41
Allowance for loan losses - Loans Collectively Evaluated			26,284		29,191	23,596
Ending Loan Balance - Individually Evaluated			5,007		2,703	2,235
Ending Loan Balance - Collectively Evaluated			2,634,236		2,592,327	2,411,958
Accounting Standards Update 2016-13
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses				$ (1,300)
Cumulative Effect, Period of Adoption, Adjustment
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	(1,300)				(1,300)
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	(1,300)
Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	27,932				27,932
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	27,932
Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	2,429	10,004	2,429		11,562	10,004
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	11,562	9,408
Charge-offs	(627)	(467)
Recoveries	189	159
Provision	688	904
Allowance for Loan Losses, Ending Balance	2,429	10,004
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated			0		0	0
Allowance for loan losses - Loans Collectively Evaluated			2,429		11,562	10,004
Ending Loan Balance - Individually Evaluated			0		111	111
Ending Loan Balance - Collectively Evaluated			861,171		859,657	824,598
Consumer | Cumulative Effect, Period of Adoption, Adjustment
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	(9,383)				(9,383)
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	(9,383)
Consumer | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	2,179				2,179
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	2,179
Residential
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	8,170	4,929	8,170		5,507	4,929
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	5,507	4,563
Charge-offs	(3)	0
Recoveries	0	0
Provision	(1,269)	366
Allowance for Loan Losses, Ending Balance	8,170	4,929
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated			0		22	37
Allowance for loan losses - Loans Collectively Evaluated			8,170		5,485	4,892
Ending Loan Balance - Individually Evaluated			1,156		1,417	953
Ending Loan Balance - Collectively Evaluated			906,858		921,504	915,301
Residential | Cumulative Effect, Period of Adoption, Adjustment
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	3,935				3,935
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	3,935
Residential | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	9,442				9,442
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	9,442
Commercial
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	4,297	1,639	4,297		2,173	1,639
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	2,173	1,386
Charge-offs	(3)	(14)
Recoveries	0	0
Provision	43	267
Allowance for Loan Losses, Ending Balance	4,297	1,639
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated			0		19	4
Allowance for loan losses - Loans Collectively Evaluated			4,297		2,154	1,635
Ending Loan Balance - Individually Evaluated			0		47	34
Ending Loan Balance - Collectively Evaluated			288,551		240,507	147,066
Commercial | Cumulative Effect, Period of Adoption, Adjustment
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	2,084				2,084
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	2,084
Commercial | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	4,257				4,257
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	4,257
Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	11,944	7,065	11,944		9,990	7,065
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	9,990	5,830
Charge-offs	0	0
Recoveries	0	0
Provision	(110)	1,235
Allowance for Loan Losses, Ending Balance	11,944	$ 7,065
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Allowance for loan losses - Loans Individually Evaluated			556		0	0
Allowance for loan losses - Loans Collectively Evaluated			11,388		9,990	7,065
Ending Loan Balance - Individually Evaluated			3,851		1,128	1,137
Ending Loan Balance - Collectively Evaluated			$ 577,656		570,659	$ 524,993
Commercial Real Estate | Cumulative Effect, Period of Adoption, Adjustment
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	2,064				2,064
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	2,064
Commercial Real Estate | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Finance receivable, allowance for credit losses	12,054				$ 12,054
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning Balance	$ 12,054

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Loans - Credit Quality Indicators (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Financing Receivable, Credit Quality Indicator [Line Items]
Total	$ 2,639,243	$ 2,595,030	$ 2,414,193
Total Loans	2,612,403	2,565,798	2,390,556
Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
2021	78,184
2020	136,599
2019	18,268
2018	15,693
2017	10,004
Prior	15,750
Revolving Loans Amortized Cost Basis	14,053
Revolving Loan Converted to Term	0
Total	288,551
Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
2021	26,532
2020	327,585
2019	55,973
2018	45,065
2017	24,700
Prior	98,466
Revolving Loans Amortized Cost Basis	3,186
Revolving Loan Converted to Term	0
Total	581,507
Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
2021	95,223
2020	321,716
2019	225,372
2018	135,835
2017	56,675
Prior	25,902
Revolving Loans Amortized Cost Basis	448
Revolving Loan Converted to Term	0
Total	861,171	859,768	824,709
Mortgage loans in process of foreclosure, amount	1,400
Residential
Financing Receivable, Credit Quality Indicator [Line Items]
2021	34,833
2020	156,703
2019	114,523
2018	107,203
2017	110,457
Prior	268,921
Revolving Loans Amortized Cost Basis	115,374
Revolving Loan Converted to Term	0
Total	908,014	922,921	916,254
Satisfactory
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans		754,960	637,461
Satisfactory | Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
2021	78,184
2020	126,061
2019	18,202
2018	15,693
2017	10,004
Prior	12,234
Revolving Loans Amortized Cost Basis	14,006
Revolving Loan Converted to Term	0
Total	274,384
Total Loans		229,351	140,218
Satisfactory | Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
2021	24,511
2020	298,907
2019	49,957
2018	44,902
2017	24,558
Prior	83,690
Revolving Loans Amortized Cost Basis	3,161
Revolving Loan Converted to Term	0
Total	529,686
Total Loans		525,609	497,243
Special Mention
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans		17,787	283
Special Mention | Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
2021	0
2020	5,031
2019	66
2018	0
2017	0
Prior	2
Revolving Loans Amortized Cost Basis	0
Revolving Loan Converted to Term	0
Total	5,099
Total Loans		1,574	28
Special Mention | Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
2021	0
2020	17,825
2019	2,010
2018	0
2017	142
Prior	2,115
Revolving Loans Amortized Cost Basis	0
Revolving Loan Converted to Term	0
Total	22,092
Total Loans		16,213	255
Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans		39,594	35,486
Substandard | Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
2021	0
2020	5,507
2019	0
2018	0
2017	0
Prior	3,514
Revolving Loans Amortized Cost Basis	47
Revolving Loan Converted to Term	0
Total	9,068
Total Loans		9,629	6,854
Substandard | Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
2021	2,021
2020	10,853
2019	4,006
2018	163
2017	0
Prior	12,661
Revolving Loans Amortized Cost Basis	25
Revolving Loan Converted to Term	0
Total	29,729
Total Loans		29,965	28,632
Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans		0	0
Doubtful | Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
2021	0
2020	0
2019	0
2018	0
2017	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Revolving Loan Converted to Term	0
Total	0
Total Loans		0	0
Doubtful | Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
2021	0
2020	0
2019	0
2018	0
2017	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Revolving Loan Converted to Term	0
Total	0
Total Loans		0	0
Performing
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans		1,778,165	1,737,334
Performing | Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
2021	95,223
2020	321,575
2019	225,191
2018	135,646
2017	56,508
Prior	25,834
Revolving Loans Amortized Cost Basis	448
Revolving Loan Converted to Term	0
Total	860,425
Total Loans		858,298	823,901
Performing | Residential
Financing Receivable, Credit Quality Indicator [Line Items]
2021	34,833
2020	156,500
2019	114,523
2018	107,176
2017	110,308
Prior	266,377
Revolving Loans Amortized Cost Basis	115,142
Revolving Loan Converted to Term	0
Total	904,859
Total Loans		919,867	913,433
Nonperforming
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans		4,524	3,629
Nonperforming | Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
2021	0
2020	141
2019	181
2018	189
2017	167
Prior	68
Revolving Loans Amortized Cost Basis	0
Revolving Loan Converted to Term	0
Total	746
Total Loans		1,470	808
Nonperforming | Residential
Financing Receivable, Credit Quality Indicator [Line Items]
2021	0
2020	203
2019	0
2018	27
2017	149
Prior	2,544
Revolving Loans Amortized Cost Basis	232
Revolving Loan Converted to Term	0
Total	$ 3,155
Total Loans		$ 3,054	$ 2,821

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Loans - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2020
Recorded Investment:
With No Related Allowance	$ 1,946	$ 2,410
With a Related Allowance	289	290
Unpaid Principal Balance:
With No Related Allowance	1,945	2,413
With a Related Allowance	290	291
Average Recorded Balance:
With No Related Allowance	1,377
With a Related Allowance	292
Interest Income Recognized:
With No Related Allowance	10
With a Related Allowance	0
Cash Basis Income:
With No Related Allowance	0
With a Related Allowance	0
Commercial
Recorded Investment:
With No Related Allowance	0	0
With a Related Allowance	33	46
Unpaid Principal Balance:
With No Related Allowance	0	0
With a Related Allowance	34	47
Average Recorded Balance:
With No Related Allowance	0
With a Related Allowance	34
Interest Income Recognized:
With No Related Allowance	0
With a Related Allowance	0
Cash Basis Income:
With No Related Allowance	0
With a Related Allowance	0
Commercial Real Estate
Recorded Investment:
With No Related Allowance	1,137	1,124
With a Related Allowance	0	0
Unpaid Principal Balance:
With No Related Allowance	1,137	1,128
With a Related Allowance	0	0
Average Recorded Balance:
With No Related Allowance	569
With a Related Allowance	0
Interest Income Recognized:
With No Related Allowance	10
With a Related Allowance	0
Cash Basis Income:
With No Related Allowance	0
With a Related Allowance	0
Consumer
Recorded Investment:
With No Related Allowance	112	112
With a Related Allowance	0	0
Unpaid Principal Balance:
With No Related Allowance	111	111
With a Related Allowance	0	0
Average Recorded Balance:
With No Related Allowance	110
With a Related Allowance	0
Interest Income Recognized:
With No Related Allowance	0
With a Related Allowance	0
Cash Basis Income:
With No Related Allowance	0
With a Related Allowance	0
Residential
Recorded Investment:
With No Related Allowance	697	1,174
With a Related Allowance	256	244
Unpaid Principal Balance:
With No Related Allowance	697	1,174
With a Related Allowance	256	$ 244
Average Recorded Balance:
With No Related Allowance	698
With a Related Allowance	258
Interest Income Recognized:
With No Related Allowance	0
With a Related Allowance	0
Cash Basis Income:
With No Related Allowance	0
With a Related Allowance	$ 0

XML

Loans - Modified in Trouble Debt Restructurings (Details) - Entity Loan Modification Program - Payment Deferral $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) loan contract	Mar. 31, 2020 USD ($) loan contract
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	0	1
Pre-Modification Outstanding Recorded Investment	$ 0	$ 16
Post-Modification Outstanding Recorded Investment	$ 0	$ 16
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Commercial
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	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
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	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
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	0	1
Pre-Modification Outstanding Recorded Investment	$ 0	$ 16
Post-Modification Outstanding Recorded Investment	$ 0	$ 16
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Residential
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	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

XML

Commitments and Contingencies - Commitments to Extend Credit and Letters of Credit (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Commitments to Extend Credit
Loan Commitments and Letters of Credit [Line Items]
Notional Amount	$ 437,920	$ 399,882	$ 376,519
Fair Value	0	0	0
Standby Letters of Credit
Loan Commitments and Letters of Credit [Line Items]
Notional Amount	3,775	3,703	3,301
Fair Value	$ 12	$ 28	$ 29
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%

XML

Comprehensive Income - Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Before-Tax Amount
Other comprehensive income (loss), before tax	$ (3,062)	$ 5,300
Tax (Expense) Benefit
Other comprehensive income (loss), tax	782	(1,355)
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	(2,337)	3,879
Reclassification from AOCI, current period	57	66
Other Comprehensive (Loss) Income	(2,280)	3,945
Unrealized Gains and Losses on Available for Sale Securities
Before-Tax Amount
OCI, before reclassifications	(5,121)	5,504
Tax (Expense) Benefit
Other comprehensive income (loss) before reclassifications, tax	1,309	(1,406)
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	(3,812)	4,098
Reclassification from AOCI, current period	0	0
Other Comprehensive (Loss) Income	(3,812)	4,098
Unrealized Loss on Cash Flow Swap
Before-Tax Amount
OCI, before reclassifications	1,982	(294)
Reclassification from AOCI, current period	(28)
Tax (Expense) Benefit
Other comprehensive income (loss) before reclassifications, tax	(507)	75
Reclassification from AOCI, current period	8
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	1,475	(219)
Reclassification from AOCI, current period	(20)	0
Other Comprehensive (Loss) Income	1,455	(219)
Amortization of Net Retirement Plan Actuarial Gain (Loss)
Before-Tax Amount
Reclassification from AOCI, current period	46	36
Tax (Expense) Benefit
Reclassification from AOCI, current period	(12)	(9)
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	0	0
Reclassification from AOCI, current period	34	27
Other Comprehensive (Loss) Income	34	27
Amortization of Defined Benefit Pension, Prior-Service Costs
Before-Tax Amount
Reclassification from AOCI, current period	59	54
Tax (Expense) Benefit
Reclassification from AOCI, current period	(16)	(15)
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	0	0
Reclassification from AOCI, current period	43	39
Other Comprehensive (Loss) Income	$ 43	$ 39

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Comprehensive Income - Changes in Accumulated Other Comprehensive Income By Component (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	$ 334,392	$ 301,728
Other comprehensive income or loss before reclassifications	(2,337)	3,879
Amounts reclassified from accumulated other comprehensive income	57	66
Other Comprehensive (Loss) Income	(2,280)	3,945
Stockholders' equity, ending balance	342,413	309,398
AOCI Attributable to Parent
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(816)	(6,357)
Stockholders' equity, ending balance	(3,096)	(2,412)
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	5,799	465
Other comprehensive income or loss before reclassifications	(3,812)	4,098
Amounts reclassified from accumulated other comprehensive income	0	0
Other Comprehensive (Loss) Income	(3,812)	4,098
Stockholders' equity, ending balance	1,987	4,563
Unrealized Loss on Cash Flow Swap
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	485	0
Other comprehensive income or loss before reclassifications	1,475	(219)
Amounts reclassified from accumulated other comprehensive income	(20)	0
Other Comprehensive (Loss) Income	1,455	(219)
Stockholders' equity, ending balance	1,940	(219)
Net Actuarial Gain (Loss)
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(5,929)	(5,847)
Other comprehensive income or loss before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	34	27
Other Comprehensive (Loss) Income	34	27
Stockholders' equity, ending balance	(5,895)	(5,820)
Net Prior Service (Cost) Credit
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(1,171)	(975)
Other comprehensive income or loss before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	43	39
Other Comprehensive (Loss) Income	43	39
Stockholders' equity, ending balance	$ (1,128)	$ (936)

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Comprehensive Income - Reclassification out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	$ 1,539	$ 5,220
Salaries and Employee Benefits	11,138	10,383
Total before Tax	16,733	10,174
Provision for income taxes	(3,453)	(2,047)
Net Income	13,280	8,127
Amounts Reclassified from Accumulated Other Comprehensive Income | Unrealized Loss on Cash Flow Swap
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	28
Amounts Reclassified from Accumulated Other Comprehensive Income | Amortization of Defined Benefit Pension, Prior-Service Costs
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Salaries and Employee Benefits	(59)	(54)
Amounts Reclassified from Accumulated Other Comprehensive Income | Amortization of Defined Benefit Pension, Actuarial Loss
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Salaries and Employee Benefits	(46)	(36)
Amounts Reclassified from Accumulated Other Comprehensive Income | Accumulated Defined Benefit Plans Adjustment
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Total before Tax	(77)	(90)
Provision for income taxes	20	24
Net Income	$ (57)	$ (66)

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Stock-Based Compensation (Details)	3 Months Ended
	Mar. 31, 2021 plan $ / shares shares	Sep. 25, 2020
Share-based Payment Arrangement [Abstract]
Number of plans | plan	3
Stock dividend, percent		3.00%
Shares
Outstanding, beginning of period (in shares) | shares	264,090
Granted (in shares) | shares	55,500
Exercised (in shares) | shares	(6,927)
Forfeited (in shares) | shares	(1,034)
Outstanding, end of period (in shares) | shares	311,629
Vested at period end (in shares) | shares	179,681
Expected to vest (in shares) | shares	131,948
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 28.84
Granted (in dollars per share)	29.55
Exercised (in dollars per share)	22.52
Forfeited (in dollars per share)	19.70
Outstanding, end of period (in dollars per share)	29.14
Vested at period end (in dollars per share)	27.73
Expected to vest (in dollars per share)	31.05
Fair Value of Options Granted (in dollars per share)	$ 4.85
Dividend Yield	3.41%
Expected Volatility	26.53%
Risk Free Interest Rate	0.49%
Expected Lives (in years)	8 years 9 months
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
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 - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Amount expensed	$ 72	$ 76
Discount from market price, percent	5.00%
Restricted Stock Units (RSU)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Amount expensed	$ 32	$ 27

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Stock-Based Compensation - Restricted Stock Units (Details) - Restricted Stock Units (RSU) - $ / shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Restricted Stock Units
Balance at Beginning of Period (in shares)	11,663	7,721
Granted (in shares)	4,738	3,942
Vested (in shares)	(3,582)
Balance at End of Period (in shares)	12,819	11,663
Weighted Average Grant Date Fair Value
Outstanding at Beginning of period (in dollars per share)	$ 31.62	$ 30.27
Granted (in dollars per share)	29.40	34.25
Vested (in dollars per share)	30.71
Outstanding at End of period (in dollars per share)	$ 31.05	$ 31.62

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Retirement Benefit Plans (Details)	3 Months Ended
	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)
Net Periodic Benefit Cost [Line Items]
Interest credit under cash balance plan	0.03
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	0.53%
Defined benefit plan, increase in benefit payable, percent	3.00%
Defined benefit plan, benefit obligation, increase (decrease) for plan amendment	$ 351,638
Defined benefit plan, amortization of service cost	9 years 8 months 12 days
Service Cost	$ 460,000	$ 430,000
Interest Cost	340,000	417,000
Expected Return on Plan Assets	(950,000)	(904,000)
Amortization of Prior Service (Credit) Cost	20,000	16,000
Amortization of Net Loss	0	1,000
Net Periodic (Benefit) Cost	(130,000)	(40,000)
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	2.31%
Defined benefit plan, amortization of service cost	12 years 6 months
Defined benefit plan, benefit obligation, period increase (decrease)	$ 122,797
Service Cost	118,000	103,000
Interest Cost	45,000	54,000
Expected Return on Plan Assets	0	0
Amortization of Prior Service (Credit) Cost	12,000	11,000
Amortization of Net Loss	38,000	33,000
Net Periodic (Benefit) Cost	213,000	201,000
Plan Contributions During the Period	$ 118,000	117,000
Post-Retirement Benefit Plans
Net Periodic Benefit Cost [Line Items]
Assumptions used calculating benefit obligation, interest rate to annuitize cash balance account	3.09%
Service Cost	$ 31,000	33,000
Interest Cost	67,000	78,000
Expected Return on Plan Assets	0	0
Amortization of Prior Service (Credit) Cost	27,000	27,000
Amortization of Net Loss	8,000	2,000
Net Periodic (Benefit) Cost	133,000	140,000
Plan Contributions During the Period	$ 28,000	$ 78,000
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%

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020	Sep. 25, 2020
Earnings Per Share [Abstract]
Stock dividend, percent				3.00%
Net Income		$ 13,280	$ 8,127
Weighted Average Shares - Basic (in shares)	[1]	15,528	15,446
Earnings Per Share - Basic (in dollars per share)		$ 0.86	$ 0.53
Dilutive Average Shares Attributable to Stock Options (in shares)		35	30
Weighted Average Shares - Diluted (in shares)	[1]	15,563	15,476
Earnings Per Share - Diluted (in dollars per share)		$ 0.85	$ 0.53

[1] 2020 Share and Per Share Amounts have been restated for the September 25, 2020 3% stock dividend.

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Fair Values - Recurring and Nonrecurring (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	$ 464,089	$ 365,287	$ 378,186
Equity Securities	1,796	1,636	1,689
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	464,089	365,287	378,186
Equity Securities	1,796	1,636	1,689
Total Securities Measured on a Recurring Basis	465,885	366,923	379,875
Derivatives, included in other assets	2,298	5,080	5,191
Total Measured on a Recurring Basis	468,183	372,003	385,066
Derivatives, included in other liabilities	2,298	5,080	5,191
Total Measured on a Recurring Basis	2,298	5,080	5,191
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 at Fair Value	0	0	0
Equity Securities	0	0	0
Total Securities Measured on a Recurring Basis	0	0	0
Derivatives, included in other assets	0	0	0
Total Measured on a Recurring Basis	0	0	0
Derivatives, included in other liabilities	0	0	0
Total 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 at Fair Value	464,089	365,287	378,186
Equity Securities	1,796	1,636	1,689
Total Securities Measured on a Recurring Basis	465,885	366,923	379,875
Derivatives, included in other assets	2,298	5,080	5,191
Total Measured on a Recurring Basis	468,183	372,003	385,066
Derivatives, included in other liabilities	2,298	5,080	5,191
Total Measured on a Recurring Basis	2,298	5,080	5,191
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 at Fair Value	0	0	0
Equity Securities	0	0	0
Total Securities Measured on a Recurring Basis	0	0	0
Derivatives, included in other assets	0	0	0
Total Measured on a Recurring Basis	0	0	0
Derivatives, included in other liabilities	0	0	0
Total 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 Evaluated Loans	2,423	594	582
Collateral Dependent Impaired Loans, Losses Recognized in Earnings
Other Real Estate Owned and Repossessed Assets, Net	242	155	942
Other Real Estate owned and Repossessed Assets, Net, Losses Recognized in Earnings	0	0	0
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 Evaluated 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 Evaluated 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 Evaluated Loans	2,423	594	582
Other Real Estate Owned and Repossessed Assets, Net	242	155	942
U.S. Government & Agency Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	108,370	65,112	5,181
U.S. Government & Agency Obligations | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	108,370	65,112	5,181
U.S. Government & 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 at Fair Value	0	0	0
U.S. Government & 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 at Fair Value	108,370	65,112	5,181
U.S. Government & 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 at Fair Value	0	0	0
State and Municipal Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	508	528	723
State and Municipal Obligations | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	508	528	723
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 at Fair Value	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 at Fair Value	508	528	723
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 at Fair Value	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 at Fair Value	354,411	298,847	371,482
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 at Fair Value	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 at Fair Value	354,411	298,847	371,482
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 at Fair Value	0	0	0
Corporate and Other Debt Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	800	800	800
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 at Fair Value	800	800	800
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 at Fair Value	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 at Fair Value	800	800	800
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 at Fair Value	$ 0	$ 0	$ 0

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Fair Values - Fair Value by Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Carrying Value
Cash and Cash Equivalents	$ 452,207	$ 380,991	$ 138,529	$ 70,221
Available-for-Sale at Fair Value	464,089	365,287	378,186
Securities Held-to-Maturity	214,561	218,405	238,520
Equity Securities	1,796	1,636	1,689
Total Loans	2,612,403	2,565,798	2,390,556
Deposits	3,453,588	3,234,726	2,811,005
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	6,795	17,486	57,909
Federal Home Loan Bank Term Advances	45,000	45,000	50,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Fair Value
Available-for-Sale	464,089	365,287	378,186
Securities Held-to-Maturity	221,360	226,576	242,804
Equity Securities	1,796	1,636	1,689
Carrying Amount
Carrying Value
Cash and Cash Equivalents	452,207	380,991	138,529
Available-for-Sale at Fair Value	464,089	365,287	378,186
Securities Held-to-Maturity	214,561	218,405	238,520
Equity Securities	1,796	1,636	1,689
Federal Home Loan Bank and Federal Reserve Bank Stock	5,360	5,349	5,379
Total Loans	2,612,403	2,565,798	2,390,556
Accrued Interest Receivable	8,258	7,495	7,856
Derivatives, included in other assets	2,298	5,080	5,191
Deposits	3,453,588	3,234,726	2,811,005
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	6,795	17,486	57,909
Federal Home Loan Bank Overnight Advances		45,000
Federal Home Loan Bank Term Advances	45,000		50,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Accrued Interest Payable	237	326	1,392
Derivatives, included in other liabilities	2,298	5,080	5,191
Fair Value
Available-for-Sale	464,089	365,287	378,186
Equity Securities	1,796	1,636	1,689
Derivatives, included in other assets	2,298	5,080	5,191
Derivatives, included in other liabilities	2,298	5,080	5,191
Fair Value
Carrying Value
Available-for-Sale at Fair Value	464,089	365,287	378,186
Equity Securities	1,796	1,636	1,689
Derivatives, included in other assets	2,298	5,080	5,191
Derivatives, included in other liabilities	2,298	5,080	5,191
Fair Value
Cash and Cash Equivalents	452,207	380,991	138,529
Available-for-Sale	464,089	365,287	378,186
Securities Held-to-Maturity	221,360	226,576	242,804
Equity Securities	1,796	1,636	1,689
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	5,360	5,349	5,379
Net Loans, at Fair Value	2,603,225	2,558,903	2,368,033
Accrued Interest Receivable	8,258	7,495	7,856
Derivatives, included in other assets	2,298	5,080	5,191
Deposits	3,452,595	3,234,387	2,811,668
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	6,795	17,486	57,909
Federal Home Loan Bank Overnight Advances		46,474
Federal Home Loan Bank Term Advances	46,176		51,194
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Accrued Interest Payable	237	326	1,392
Derivatives, included in other liabilities	2,298	5,080	5,191
Quoted Prices In Active Markets for Indentical Assets (Level 1) | Fair Value
Carrying Value
Available-for-Sale at Fair Value	0	0	0
Equity Securities	0	0	0
Derivatives, included in other assets		0	0
Derivatives, included in other liabilities	0	0	0
Fair Value
Cash and Cash Equivalents	452,207	380,991	138,529
Available-for-Sale	0	0	0
Securities Held-to-Maturity	0	0	0
Equity Securities	0	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	0	0	0
Derivatives, included in other assets		0	0
Deposits	0	0	0
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	0	0	0
Federal Home Loan Bank Overnight Advances		0
Federal Home Loan Bank Term Advances	0		0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	0	0	0
Accrued Interest Payable	0	0	0
Derivatives, included in other liabilities	0	0	0
Significant Other Observable Inputs (Level 2) | Fair Value
Carrying Value
Available-for-Sale at Fair Value	464,089	365,287	378,186
Equity Securities	1,796	1,636	1,689
Derivatives, included in other assets	2,298	5,080	5,191
Derivatives, included in other liabilities	2,298	5,080	5,191
Fair Value
Cash and Cash Equivalents	0	0	0
Available-for-Sale	464,089	365,287	378,186
Securities Held-to-Maturity	221,360	226,576	242,804
Equity Securities	1,796	1,636	1,689
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	5,360	5,349	5,379
Net Loans, at Fair Value	0	0	0
Accrued Interest Receivable	8,258	7,495	7,856
Derivatives, included in other assets	2,298	5,080	5,191
Deposits	3,452,595	3,234,387	2,811,668
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	6,795	17,486	57,909
Federal Home Loan Bank Overnight Advances		46,474
Federal Home Loan Bank Term Advances	46,176		51,194
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Accrued Interest Payable	237	326	1,392
Derivatives, included in other liabilities	2,298	5,080	5,191
Significant Unobservable Inputs (Level 3) | Fair Value
Carrying Value
Available-for-Sale at Fair Value	0	0	0
Equity Securities	0
Derivatives, included in other assets		0	0
Derivatives, included in other liabilities	0	0	0
Fair Value
Cash and Cash Equivalents	0	0	0
Available-for-Sale	0	0	0
Securities Held-to-Maturity	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	2,603,225	2,558,903	2,368,033
Accrued Interest Receivable	0	0	0
Derivatives, included in other assets		0	0
Deposits	0	0	0
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	0	0	0
Federal Home Loan Bank Overnight Advances		0
Federal Home Loan Bank Term Advances	0		0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	0	0	0
Accrued Interest Payable	0	0	0
Derivatives, included in other liabilities	$ 0	$ 0	$ 0

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Leases - Narrative (Details)	3 Months Ended
	Mar. 31, 2021 branch_office
Leases [Abstract]
Number of branch offices	4

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Leases - Quantitative Lease Data (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Finance Lease Amounts:
Right-of-Use Assets	$ 4,947	$ 5,124
Lease Liabilities	5,205	5,249	$ 5,217
Operating Lease Amounts:
Right-of-Use Assets	5,435	5,529
Lease Liabilities	5,522	5,602
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases	49	50
Operating Outgoing Cash Flows From Operating Leases	261	158
Financing Outgoing Cash Flows From Finance Leases	12	5
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities	0	0
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities	$ 331	$ 0
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)	28 years 10 months 24 days	29 years 10 months 24 days
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)	12 years 6 months	13 years 8 months 12 days
Weighted-average Discount Rate—Finance Leases	3.75%	3.75%
Weighted-average Discount Rate—Operating Leases	3.13%	3.36%
Finance Lease Cost:
Reduction of Right-of-Use Assets	$ 44	$ 44
Interest on Lease Liabilities	49	50
Operating Lease Cost	209	207
Short-term Lease Cost	5	7
Variable Lease Cost	104	55
Total Lease Cost	$ 411	$ 363

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Leases - Future Lease Payments on Finance and Operating Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Operating Leases
2021	$ 799
2022	766
2023	641
2024	570
2025	526
Thereafter	3,516
Total Undiscounted Cash Flows	6,818
Less: Net Present Value Adjustment	1,296
Lease Liabilities	5,522		$ 5,602
Financing Leases
2021	243
2022	243
2023	243
2024	254
2025	265
Thereafter	7,733
Total Undiscounted Cash Flows	8,981
Less: Net Present Value Adjustment	3,776
Lease Liabilities	$ 5,205	$ 5,217	$ 5,249

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Derivative Instruments and Hedging Activities - Interest Rate Swap Agreements (Details) - Not Designated as Hedging Instrument - Interest Rate Swap - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Derivative [Line Items]
Notional amount	$ 175,113	$ 176,637	$ 121,559
Other Assets
Derivative [Line Items]
Derivative asset	2,298	5,080	5,191
Other Liabilities
Derivative [Line Items]
Derivative liability	$ 2,298	$ 5,080	$ 5,191

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Derivative Instruments and Hedging Activities - Cash Flow Hedge Agreements (Details) - Interest Rate Swap - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Derivative [Line Items]
Amount of hedged item	$ 20,000
Amount of gain (loss) recognized in AOCI	1,982	$ (294)	$ 651
Amount of gain reclassified from AOCI interest expense	$ 28	$ 0	$ 0