EX-99 2 ex99-earningsq22021.htm EX-99 Document

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250 Glen Street
Glens Falls, NY 12801
NASDAQ® Symbol: "AROW"
Website: arrowfinancial.com

Media Contact: Dori McDannold
Tel: (518) 415-4313

Arrow Reports $13.3 million in Q2 Net Income as COVID-19 Recovery Continues

•Key profitability ratios were strong in the second quarter with return on average assets (ROA) of 1.38% and return on average equity (ROE) of 15.21%.
•Second-quarter revenue increased $4.8 million, or 15.1%, over the prior year comparative quarter.
•Over $67 million of Small Business Administration Paycheck Protection Program (PPP) loans were forgiven in the second quarter of 2021.
•Net income was $13.3 million and diluted earnings per share (EPS) were $0.85 for the second quarter.
•As pandemic restrictions lift, Arrow is focused on continued optimization of digital and physical delivery channels to meet changing customer needs.

GLENS FALLS, N.Y. (July 27, 2021) – Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three and six-month periods ended June 30, 2021. Net income for the second quarter of 2021 was $13.3 million, compared to $9.2 million in the second quarter of 2020. Net interest income increased to $28.4 million in the second quarter of 2021, compared to $24.8 million for the comparable quarter of 2020. For the six-months ended June 30, 2021, net income and net interest income were $26.6 million and $54.5 million, respectively as compared to $17.3 million and $47.8 million for the six-months ended June 30, 2020.

Annualized key profitability ratios remained strong, as measured by a return on average equity (ROE) of 15.21% and a return on average assets (ROA) of 1.38% for the second quarter, compared to 11.64% and 1.07%, respectively, for the prior year quarter.

“Arrow delivered another solid quarter marked by both strong core earnings and profitability ratios," said Arrow President and CEO Thomas J. Murphy. “As the economy improves and pandemic-related restrictions are lifted, Arrow is well-positioned to provide both traditional banking for those eager to return to it, as well as digital banking for the growing group of customers who embraced our digital platform over the past year. We continue to make strategic investments in our digital customer experience and branch network to support changing customer needs."

Arrow announced plans to renovate a large portion of its Glens Falls headquarters, including workspace for support teams and the Main Office branch. Additionally, Saratoga National Bank announced plans to consolidate its Jones Road and Ballard Road Wilton branches this fall into a nearby office in a high-traffic commercial district. The new location and design will provide efficiencies and enhance our ability to develop relationships, even as routine transactions continue to migrate online.

Finally, Arrow's two banks rolled out digital enhancements in the second quarter, including a mobile app for business customers and SecureLOCKTM Equip, an addition to our consumer mobile apps that allows users to freeze their debit cards.

The following expands on our second-quarter financial results:

COVID-19 Response: In the second quarter, as restrictions were lifted by the state and CDC, Arrow likewise lifted the face covering requirement at its banking and insurance offices. Vaccination was and continues to be strongly encouraged for team members, and Arrow is monitoring vaccination rates of its employees. Personal protective equipment, including shields and hand sanitizing stations remain in place
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and our Business Continuity Task Force continues to meet regularly to address the latest guidance and to monitor the impact of the Delta variant of COVID-19.

In the second quarter, the Arrow lending team accelerated the forgiveness process for PPP borrowers, with about half of loans forgiven as of quarter-end.

Loan Growth: Total loans were $2.6 billion as of June 30, 2021. Loan growth for the second quarter of 2021 was $4.8 million and increased $82.2 million, or 3.2%, from June 30, 2020. Total outstanding commercial loans decreased $29.0 million, or 3.3%, in the second quarter. PPP loans, included in the commercial portfolio, decreased $46.0 million in the second quarter. The consumer loan portfolio grew by $31.4 million, or 3.6%, in the second quarter, primarily within the indirect automobile lending program. Total outstanding residential real estate loans, net of approximately $15.9 million of loans sold, increased $2.5 million for the second quarter of 2021.

Deposit Growth: At June 30, 2021, deposit balances were $3.4 billion. Deposits decreased in the second quarter of 2021 by $15.6 million and increased by $369.3 million, or 12.0%, from the prior-year level. Municipal deposits decreased $49.0 million in the second quarter consistent with seasonal municipal behavior. Non-municipal deposits increased $33.4 million for the quarter. Noninterest-bearing deposits represented 22.2% of total deposits at June 30, 2021, compared to 21.8% of total deposits at June 30, 2020. At June 30, 2021, other time deposits were $142.1 million, a decrease of $74.5 million compared to the prior year. Municipal deposits increased $138.9 million, or 19.1% from June 30, 2020.

Net Interest Income: Net interest income for the second quarter was $28.4 million, up 14.2% from $24.8 million in the comparable quarter of 2020. Interest and fees on loans were $27.0 million for the second quarter of 2021, an increase of 7.6% from $25.1 million for the quarter ending June 30, 2020. Interest and fees related to PPP loans, included in the $27.0 million, produced $3.1 million in revenue in the second quarter of 2021. Interest expense for the second quarter of 2021 was $1.3 million, a decrease of $1.8 million, or 57.8%, from the $3.2 million in expense for the comparable quarter ending June 30, 2020. The net interest margin was 3.08% for the quarter, compared to 3.05% for the second quarter of 2020. The increase in net interest margin from the prior year was due to a variety of factors, including the timing of the forgiveness of PPP loans offset by lower interest rates and increased cash balances.

Noninterest Income: Noninterest income for the three months ended June 30, 2021 was $8.5 million, compared to $7.2 million in the comparable 2020 quarter. Income from fiduciary activities for the three months ended June 30, 2021, increased by $454 thousand over the comparable quarter of 2020. Fees and other services to customers increased $641 thousand over the comparable quarter of 2020. Interchange fees related to increased customer activity of debit card usage was the largest driver of the increase.

Noninterest Expense: Noninterest expense for the second quarter of 2021 was $19.1 million, an increase from $17.2 million for the second quarter of 2020. The largest component of noninterest expense was salaries and benefits paid to our employees, which totaled $10.8 million for the second quarter of 2021. Technology expenses increased from the prior year in part due to variable costs related to increased utilization of consumer banking technology. Other non-interest expense included the expense for estimated credit losses on off-balance sheet credit exposures of $501 thousand in the second quarter.

Provision for Income Taxes: The provision for income taxes was $4.2 million for the second quarter of 2021, compared to $2.6 million for the same quarter of 2020. The effective income tax rates for the three- month periods ended June 30, 2021 and 2020, were 24.1% and 21.9%, respectively.

Asset Quality: Asset quality remained strong at June 30, 2021, as evidenced by low levels of nonperforming assets and charge-offs. Net loan losses, expressed as an annualized percentage of
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average loans outstanding, were 0.01% for the three-month period ended June 30, 2021, a decrease from 0.06% for the three-month period ended June 30, 2020. Nonperforming loans at June 30, 2021, were $7.8 million, up $1.3 million from June 30, 2020. Nonperforming assets of $8.0 million at June 30, 2021 represented 0.20% of period-end assets consistent with June 30, 2020.

For the second quarter of 2021, the provision for credit losses was $263 thousand and the expense for estimated credit losses on off-balance sheet credit exposures included in other liabilities was $501 thousand. The allowance for credit losses was $27.0 million on June 30, 2021, which represented 1.02% of loans outstanding, as compared to 1.03% on June 30, 2020.

Liquidity: As of June 30, 2021, Arrow’s liquidity position was strong with interest-bearing cash balances at June 30, 2021 of $433.5 million. Arrow continues to be positioned to address any unexpected volatility, which may affect cash flow and deposit balances. At June 30, 2021, contingent collateralized lines of credit were in place and available through the Federal Home Loan Bank of New York and the Federal Reserve Bank, totaling $1.4 billion. Arrow has additional liquidity options currently available, including access to unsecured lines of credit such as Fed funds and brokered markets.

Capital: Total stockholders’ equity was $353.0 million on June 30, 2021, up $35.3 million, or 11.1%, from June 30, 2020. Arrow's regulatory capital ratios remained strong in the second quarter of 2021. As of June 30, 2021, Arrow's Common Equity Tier 1 Capital Ratio was 13.79% and Total Risk-Based Capital Ratio was 15.78%. The capital ratios of Arrow and both its subsidiary banks continued to exceed the “well capitalized” regulatory standards.

Cash and Stock Dividends: On June 15, 2021, Arrow distributed a cash dividend of $0.26 per share. The cash dividend was 3% higher than the cash dividend paid by Arrow in the second quarter of 2020 when adjusted for the 3% stock dividend distributed on September 25, 2020.

Industry Recognition: Both of Arrow's banking subsidiaries, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, continue to hold BauerFinancial, Inc. 5-Star Superior Bank ratings. Additionally, in the second quarter of 2021, Arrow was named a Raymond James Community Bankers Cup winner, which recognizes the top 10% of community banks using various profitability, efficiency and balance sheet metrics.
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About Arrow: Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls, New York, serving the financial needs of northeastern New York. Arrow is the parent of Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company. Other subsidiaries include Upstate Agency, LLC and North Country Investment Advisers, Inc.

Non-GAAP Financial Measures Reconciliation: In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). The following measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission (SEC) and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules. Certain non-GAAP financial measures include: tangible equity, return on tangible equity, tax-equivalent adjustment and related net interest income, tax-equivalent, and the efficiency ratio. Management believes that the non-GAAP financial measures disclosed by Arrow from time to time are useful in evaluating Arrow's performance and that such information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP.  Non-GAAP financial measures may differ from similar measures presented by other companies. See the reconciliation of GAAP to non-GAAP measures in the section "Selected Quarterly Information."

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Safe Harbor Statement: The information contained in this news release may contain statements that are not historical in nature but rather are based on management’s beliefs, assumptions, expectations, estimates and projections about the future, including, in particular, statements regarding the uncertainty surrounding the COVID-19 pandemic. These statements may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, involving a degree of uncertainty and attendant risk. In the case of all forward-looking statements, actual outcomes and results may differ materially from what the statements predict or forecast, explicitly or by implication. Arrow undertakes no obligation to revise or update these forward-looking statements to reflect the occurrence of unanticipated events. This News Release should be read in conjunction with Arrow's Annual Report on Form 10-K for the year ended December 31, 2020, and other filings with the Securities and Exchange Commission.
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ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)
 Three Months Ended June 30Six Months Ended June 30
 2021202020212020
INTEREST AND DIVIDEND INCOME    
Interest and Fees on Loans$27,014 $25,077 $52,197 $49,951 
Interest on Deposits at Banks103 41 188 165 
Interest and Dividends on Investment Securities: 
Fully Taxable1,671 1,871 3,177 4,064 
Exempt from Federal Taxes907 1,013 1,827 2,048 
Total Interest and Dividend Income29,695 28,002 57,389 56,228 
INTEREST EXPENSE   
Interest-Bearing Checking Accounts192 310 411 797 
Savings Deposits501 1,173 1,066 3,644 
Time Deposits over $250,00069 438 189 971 
Other Time Deposits156 784 378 1,784 
Federal Funds Purchased and
  Securities Sold Under Agreements to Repurchase		1 16 3 38 
Federal Home Loan Bank Advances196 217 389 646 
Junior Subordinated Obligations Issued to
  Unconsolidated Subsidiary Trusts		171 173 340 401 
Interest on Financing Leases49 49 98 99 
Total Interest Expense1,335 3,160 2,874 8,380 
NET INTEREST INCOME28,360 24,842 54,515 47,848 
Provision for Credit Losses263 3,040 (385)5,812 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES28,097 21,802 54,900 42,036 
NONINTEREST INCOME   
Income From Fiduciary Activities2,589 2,135 4,967 4,348 
Fees for Other Services to Customers2,919 2,278 5,528 4,729 
Insurance Commissions1,626 1,732 3,266 3,364 
Net Gain (Loss) on Securities 196 (106)356 (480)
Net Gain on Sales of Loans625 547 2,040 760 
Other Operating Income523 578 929 2,137 
Total Noninterest Income8,478 7,164 17,086 14,858 
NONINTEREST EXPENSE   
Salaries and Employee Benefits10,845 10,212 21,983 20,595 
Occupancy Expenses, Net1,484 1,345 3,077 2,794 
Technology and Equipment Expense3,710 3,227 7,169 6,579 
FDIC Assessments245 242 515 461 
Other Operating Expense2,803 2,219 5,021 4,570 
Total Noninterest Expense19,087 17,245 37,765 34,999 
INCOME BEFORE PROVISION FOR INCOME TAXES17,488 11,721 34,221 21,895 
Provision for Income Taxes4,209 2,562 7,662 4,609 
NET INCOME$13,279 $9,159 $26,559 $17,286 
Average Shares Outstanding 1:
    
Basic15,557 15,441 15,543 15,444 
Diluted15,616 15,448 15,589 15,460 
Per Common Share:    
Basic Earnings$0.85 $0.59 $1.71 $1.12 
Diluted Earnings0.85 0.59 1.70 1.12 
1 2020 Share and Per Share Amounts have been restated for the September 25, 2020, 3% stock dividend.

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ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts - Unaudited)
 June 30,
2021		December 31, 2020June 30,
2020
ASSETS  
Cash and Due From Banks$44,760 $42,116 $38,267 
Interest-Bearing Deposits at Banks433,468 338,875 215,003 
Investment Securities:
Available-for-Sale at Fair Value437,868 365,287 378,778 
Held-to-Maturity (Approximate Fair Value of $210,916 at June 30, 2021; $226,576 at December 31, 2020; and $241,875 at June 30, 2020)
204,490 218,405 233,517 
Equity Securities1,992 1,636 1,583 
FHLB and Federal Reserve Bank Stock5,380 5,349 5,574 
Loans2,644,082 2,595,030 2,561,915 
Allowance for Credit Losses(27,010)(29,232)(26,300)
Net Loans2,617,072 2,565,798 2,535,615 
Premises and Equipment, Net43,268 42,612 41,231 
Goodwill21,873 21,873 21,873 
Other Intangible Assets, Net2,082 1,950 1,662 
Other Assets83,938 84,735 74,074 
Total Assets$3,896,191 $3,688,636 $3,547,177 
LIABILITIES  
Noninterest-Bearing Deposits761,991 701,341 667,585 
Interest-Bearing Checking Accounts977,955 832,434 791,521 
Savings Deposits1,471,591 1,423,358 1,262,102 
Time Deposits over $250,00084,357 123,622 130,935 
Other Time Deposits142,139 153,971 216,630 
Total Deposits3,438,033 3,234,726 3,068,773 
Federal Funds Purchased and
  Securities Sold Under Agreements to Repurchase		3,092 17,486 47,599 
Federal Home Loan Bank Term Advances45,000 45,000 50,000 
Junior Subordinated Obligations Issued to Unconsolidated
  Subsidiary Trusts		20,000 20,000 20,000 
Finance Leases5,193 5,217 5,239 
Other Liabilities31,840 31,815 37,879 
Total Liabilities3,543,158 3,354,244 3,229,490 
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at June 30, 2021, December 31, 2020 and March 31, 2020
— — — 
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,194,474 Shares Issued at June 30, 2021 and December 31, 2020 and 19,606,449 at June 30, 2020)
20,194 20,194 19,606 
Additional Paid-in Capital355,195 353,662 336,643 
Retained Earnings60,494 41,899 42,704 
Accumulated Other Comprehensive Loss(2,658)(816)(276)
Treasury Stock, at Cost (4,622,797 Shares at June 30, 2021; 4,678,736 Shares at December 31, 2020 and 4,595,891 Shares at March 31, 2020)
(80,192)(80,547)(80,990)
Total Stockholders’ Equity353,033 334,392 317,687 
Total Liabilities and Stockholders’ Equity$3,896,191 $3,688,636 $3,547,177 
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Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended6/30/20213/31/202112/31/20209/30/20206/30/2020
Net Income$13,279 $13,280 $12,495 $11,046 $9,159 
Transactions in Net Income (Net of Tax):     
Net Changes in Fair Value of Equity Investments145 119 66 (53)(80)
Share and Per Share Data:1
    
Period End Shares Outstanding15,572 15,543 15,516 15,489 15,461 
Basic Average Shares Outstanding15,557 15,528 15,499 15,472 15,441 
Diluted Average Shares Outstanding15,616 15,563 15,515 15,481 15,448 
Basic Earnings Per Share$0.85 $0.86 $0.81 $0.71 $0.59 
Diluted Earnings Per Share0.85 0.85 0.81 0.71 0.59 
Cash Dividend Per Share0.260 0.260 0.260 0.252 0.252 
Selected Quarterly Average Balances:    
  Interest-Bearing Deposits at Banks$369,034 $334,155 $349,430 $242,928 $155,931 
  Investment Securities668,089 593,822 590,151 592,457 607,094 
  Loans2,651,449 2,618,362 2,610,834 2,582,253 2,518,198 
  Deposits3,395,271 3,254,815 3,256,238 3,082,499 2,952,432 
  Other Borrowed Funds74,957 82,659 95,047 136,117 129,383 
  Shareholders' Equity350,203 340,708 331,899 324,269 316,380 
  Total Assets3,851,921 3,712,020 3,721,954 3,583,322 3,437,155 
Return on Average Assets, annualized1.38 %1.45 %1.34 %1.23 %1.07 %
Return on Average Equity, annualized15.21 %15.81 %14.98 %13.55 %11.64 %
Return on Average Tangible Equity, annualized 2
16.32 %17.00 %16.13 %14.61 %12.58 %
Average Earning Assets$3,688,572 $3,546,339 $3,550,415 $3,417,638 $3,281,223 
Average Paying Liabilities2,721,961 2,639,240 2,674,795 2,545,435 2,457,690 
Interest Income29,695 27,694 28,372 27,296 28,002 
Tax-Equivalent Adjustment 3
293 235 251 284 281 
Interest Income, Tax-Equivalent 3
29,988 27,929 28,623 27,580 28,283 
Interest Expense1,335 1,539 1,918 2,396 3,160 
Net Interest Income28,360 26,155 26,454 24,900 24,842 
Net Interest Income, Tax-Equivalent 3
28,653 26,390 26,705 25,184 25,123 
Net Interest Margin, annualized3.08 %2.99 %2.96 %2.90 %3.05 %
Net Interest Margin, Tax-Equivalent, annualized 3
3.12 %3.02 %2.99 %2.93 %3.08 %
Efficiency Ratio Calculation: 4
    
Noninterest Expense$19,087 $18,678 $18,192 $17,487 $17,245 
Less: Intangible Asset Amortization53 54 56 56 57 
Net Noninterest Expense$19,034 $18,624 $18,136 $17,431 $17,188 
Net Interest Income, Tax-Equivalent$28,653 $26,390 $26,705 $25,184 $25,123 
Noninterest Income8,478 8,608 9,103 8,697 7,164 
Less: Net Gain (Loss) on Securities196 160 88 (72)(106)
Net Gross Income$36,935 $34,838 $35,720 $33,953 $32,394 
Efficiency Ratio51.53 %53.46 %50.77 %51.34 %53.06 %
Period-End Capital Information:     
Total Stockholders' Equity (i.e. Book Value)$353,033 $342,413 $334,392 $325,660 $317,687 
Book Value per Share 1
22.67 22.03 21.55 21.02 20.55 
Goodwill and Other Intangible Assets, net23,955 23,922 23,823 23,662 23,535 
Tangible Book Value per Share 1,2
21.13 20.49 20.02 19.50 19.03 
Capital Ratios:5
  
Tier 1 Leverage Ratio9.29 %9.37 %9.07 %9.17 %9.32 %
Common Equity Tier 1 Capital Ratio
13.79 %13.56 %13.39 %13.20 %13.07 %
Tier 1 Risk-Based Capital Ratio14.61 %14.39 %14.24 %14.06 %13.94 %
Total Risk-Based Capital Ratio15.78 %15.55 %15.48 %15.28 %15.10 %
Assets Under Trust Admin. & Investment Mgmt.$1,804,854 $1,725,754 $1,659,029 $1,537,128 $1,502,866 

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Arrow Financial Corporation
Selected Quarterly Information - Continued
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Footnotes:
1.
Share and Per Share Data have been restated for the September 25, 2020, 3% stock dividend.
2.Non-GAAP Financial Measures Reconciliation: Tangible Book Value and Tangible Equity exclude goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures which Arrow believes provides investors with information that is useful in understanding its financial performance.
6/30/20213/31/202112/31/20209/30/20206/30/2020
Total Stockholders' Equity (GAAP)$353,033 $342,413 $334,392 $325,660 $317,687 
Less: Goodwill and Other Intangible assets, net23,955 23,922 23,823 23,662 23,535 
Tangible Equity (Non-GAAP)$329,078 $318,491 $310,569 $301,998 $294,152 
Period End Shares Outstanding15,572 15,543 15,516 15,489 15,461 
Tangible Book Value per Share (Non-GAAP)$21.13 $20.49 $20.02 $19.50 $19.03 
Net Income13,279 13,280 12,495 11,046 9,159 
Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)16.32 %17.00 %16.13 %14.61 %12.58 %
3.Non-GAAP Financial Measures Reconciliation: Net Interest Margin, Tax-Equivalent is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which Arrow believes provides investors with information that is useful in understanding its financial performance.
6/30/20213/31/202112/31/20209/30/20206/30/2020
Interest Income (GAAP)$29,695 $27,694 $28,372 $27,296 $28,002 
Add: Tax-Equivalent adjustment
     (Non-GAAP)		293 235 251 284 281 
Interest Income - Tax Equivalent
     (Non-GAAP)		$29,988 $27,929 $28,623 $27,580 $28,283 
Net Interest Income (GAAP)$28,360 $26,155 $26,454 $24,900 $24,842 
Add: Tax-Equivalent adjustment
     (Non-GAAP)		293 235 251 284 281 
Net Interest Income - Tax Equivalent
     (Non-GAAP)		$28,653 $26,390 $26,705 $25,184 $25,123 
Average Earning Assets$3,688,572 $3,546,339 $3,550,415 $3,417,638 $3,281,223 
Net Interest Margin (Non-GAAP)*3.12 %3.02 %2.99 %2.93 %3.08 %
4.Non-GAAP Financial Measures: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. Arrow believes the efficiency ratio provides investors with information that is useful in understanding its financial performance. Arrow defines efficiency ratio as the ratio of noninterest expense to net gross income (which equals tax-equivalent net interest income plus noninterest income, as adjusted).
5.
For the current quarter, all of the regulatory capital ratios in the table above, as well as the Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below, are estimates based on, and calculated in accordance with, bank regulatory capital rules. All prior quarters reflect actual results. The CET1 ratio at June 30, 2021 listed in the tables (i.e., 13.79%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
6/30/20213/31/202112/31/20209/30/20206/30/2020
Total Risk Weighted Assets$2,438,445 $2,404,456 $2,357,094 $2,321,637 $2,283,430 
Common Equity Tier 1 Capital336,265 326,039 315,696 306,356 298,362 
Common Equity Tier 1 Ratio13.79 %13.56 %13.39 %13.20 %13.07 %
* Quarterly ratios have been annualized.

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Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
Quarter Ended:6/30/202112/31/20206/30/2020
Loan Portfolio  
Commercial Loans$242,790 $240,554 $276,671 
Commercial Real Estate Loans598,241 571,787 533,032 
  Subtotal Commercial Loan Portfolio841,031 812,341 809,703 
Consumer Loans892,549 859,768 828,493 
Residential Real Estate Loans910,502 922,921 923,719 
Total Loans$2,644,082 $2,595,030 $2,561,915 
Allowance for Credit Losses   
Allowance for Credit Losses, Beginning of Quarter$26,840 $28,446 $23,637 
Loans Charged-off(443)(630)(487)
Less Recoveries of Loans Previously Charged-off350 179 110 
Net Loans Charged-off(93)(451)(377)
Provision for Credit Losses263 1,237 3,040 
Allowance for Credit Losses, End of Quarter$27,010 $29,232 $26,300 
Nonperforming Assets   
Nonaccrual Loans$7,102 $6,033 $5,461 
Loans Past Due 90 or More Days and Accruing595 228 901 
Loans Restructured and in Compliance with Modified Terms78 145 150 
Total Nonperforming Loans7,775 6,406 6,512 
Repossessed Assets99 155 116 
Other Real Estate Owned99 — 595 
Total Nonperforming Assets$7,973 $6,561 $7,223 
Key Asset Quality Ratios   
Net Loans Charged-off to Average Loans,
   Quarter-to-date Annualized		0.01 %0.07 %0.06 %
Provision for Credit Losses to Average Loans,
  Quarter-to-date Annualized		0.04 %0.19 %0.49 %
Allowance for Credit Losses to Period-End Loans1.02 %1.13 %1.03 %
Allowance for Credit Losses to Period-End Nonperforming Loans347.40 %456.32 %403.87 %
Nonperforming Loans to Period-End Loans0.29 %0.25 %0.25 %
Nonperforming Assets to Period-End Assets0.20 %0.18 %0.20 %
Six Month Period Ended:
Allowance for Loan Losses  
Allowance for Loan Losses, Beginning of Year$29,232 $21,187 
Impact of the Adoption of ASU 2016-13(1,300)— 
Loans Charged-off(1,076)(968)
Less Recoveries of Loans Previously Charged-off539 269 
Net Loans Charged-off(537)(699)
Provision for Loan Losses(385)5,812 
Allowance for Loan Losses, End of Period$27,010 $26,300 
Key Asset Quality Ratios  
Net Loans Charged-off to Average Loans, Annualized0.04 %0.06 %
Provision for Loan Losses to Average Loans, Annualized(0.03)%0.48 %
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