EX-99 2 ex99-earningsq22022.htm EX-99 Document

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

Media Contact: Blake Jones
Tel: (518) 415-4274

Arrow Reports $12.0 million in Q2 Net Income, Loan Growth of $108 Million

GLENS FALLS, N.Y. (July 27, 2022) – Arrow Financial Corporation (NasdaqGS® – AROW) announced financial results for the three-month period ended June 30, 2022. Net income for the second quarter of 2022 was $12.0 million and diluted earnings per share was $0.75.

Loan growth was strong in the second quarter of 2022, with gross loans increasing by $108 million. Excluding Paycheck Protection Program (PPP) loans, which decreased by $17 million, loans grew by $125 million in the quarter.

“Arrow had a strong second quarter with total loan balances at June 30, 2022 reaching a record high," said Arrow President and CEO Thomas J. Murphy. "I commend the Arrow Team for their outstanding efforts and strong work ethic. While economic challenges are expected this year, I am confident in our direction as a Company and our ability to deliver strong results for our shareholders, our customers and our communities.”

For the second quarter of 2022, net income was $12.0 million compared to $13.3 million for the second quarter of 2021. The year-over-year decline in second quarter net income was primarily due to:

•An increase in the provision expense for credit losses to $905 thousand for the second quarter of 2022, as compared to $263 thousand in the second quarter of 2021.
•Net gain on sale of loans was lower by $615 thousand when comparing year-over-year quarters.
•A decrease of $2.6 million in income earned on PPP loans included as part of net interest income in the second quarter of 2022 compared to the second quarter of 2021.


Second Quarter Highlights

Earnings:
•Net income was $12.0 million.
•Net interest margin was 3.02%.
•Return on average assets (ROA) was 1.20%.
•Return on average equity (ROE) was 13.44%.
•Diluted earnings per share (EPS) was $0.75 for the second quarter.
•Second-quarter revenue was consistent to the prior-year comparative quarter.
•Net charge-offs for the second quarter of 2022 were $476 thousand as compared to $93 thousand for the comparable 2021 quarter.

Balance Sheet:
•Total assets were $4.0 billion as of June 30, 2022.
•Total loans were $2.8 billion as of June 30, 2022, a record high for Arrow.
•Total deposits were $3.5 billion as of June 30, 2022.
•Loans to deposits ratio as of June 30, 2022 was 80.2%

Additional Items:
•$17 million of PPP loans were forgiven in the second quarter of 2022.
•$1.5 million of PPP loans remained outstanding as of June 30, 2022.
•Book value per share was $22.25, up by 1.1% over the prior-year level.
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•Nonperforming assets of $10.0 million at June 30, 2022 represented 0.25% of period-end assets, up from 0.20% at June 30, 2021.
•A core system upgrade is scheduled for the third quarter of 2022, with the first customer communications expected in early August.

Income Statement

•Net Interest Income: Net interest income for the second quarter was $29.0 million, up 2.4% from $28.4 million in the comparable quarter of 2021. Interest and fees on loans were $26.9 million for the second quarter of 2022, a decrease of 0.4% from $27.0 million for the quarter ending June 30, 2021. Interest and fees related to PPP loans, included in the $26.9 million total, were $439 thousand in the second quarter of 2022, a decrease from $3.1 million for the second quarter of 2021. Interest expense for the second quarter of 2022 was $1.6 million, an increase of $0.2 million, or 16.5%, from $1.3 million in expense for the comparable quarter ending June 30, 2021.

•Net Interest Margin: Net interest margin was 3.02% for the quarter, compared to 3.08% for the second quarter of 2021. The decrease in net interest margin from the prior year was primarily due to the decrease in the amount of PPP loan interest and related fees recognized in the second quarter of 2022 as compared to the comparable quarter of 2021. Net interest margin, excluding PPP income, increased from the comparable prior year quarter from 2.86% to 2.98% The cost of interest-bearing liabilities increased slightly primarily due to the repricing of municipal deposits.

Three Months Ended
June 30, 2022June 30, 2021
Interest and Dividend Income$30,593 $29,695 
Interest Expense1,555 1,335 
Net Interest Income29,038 28,360 
Average Earning Assets(1)
3,858,837 3,688,572 
Average Interest-Bearing Liabilities2,808,287 2,721,961 
Yield on Earning Assets(1)
3.18 %3.23 %
Cost of Interest-Bearing Liabilities0.22 0.20 
Net Interest Spread2.96 3.03 
Net Interest Margin3.02 3.08 
Income Earned on PPP Loans included in Net Interest Income$438 $3,086 
Net Interest Income excluding PPP loans28,600 25,274 
Net Interest Margin excluding PPP loans2.98 %2.86 %
(1) Includes Nonaccrual Loans.

•Provision for Credit Losses: For the second quarter of 2022, the provision for credit losses was $905 thousand compared to $263 thousand in provision expense in the second quarter of 2021. The key drivers for the increase were strong loan growth and a slight deterioration in forecasted economic conditions in the second quarter of 2022.

•Noninterest Income: Noninterest income for the three months ended June 30, 2022 was $7.7 million, compared to $8.5 million in the comparable 2021 quarter. Income from fiduciary activities for the three months ended June 30, 2022, decreased by $72 thousand over the comparable quarter of 2021. Fees and other services to customers increased $131 thousand over the comparable quarter of 2021. Gain on sales of loans decreased $615 thousand from the second quarter of 2021 as a result of a strategic decision to retain more newly originated real estate loans. Other operating income decreased $132 thousand from the comparable quarter of 2021 due to a variety of factors, including, among others, a $99 thousand loss on the disposal of a building.
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•Noninterest Expense: Noninterest expense for the second quarter of 2022 was $20.3 million, an increase from $19.1 million for the second quarter of 2021. The largest component of noninterest expense was salaries and benefits paid to our employees, which totaled $11.7 million for the second quarter of 2022. The expense for estimated credit losses on off-balance sheet credit exposures included in other expenses was $110 thousand.

•Provision for Income Taxes: The provision for income taxes was $3.6 million for the second quarter of 2022, compared to $4.2 million for the same quarter of 2021.

Balance Sheet

•Total Assets: Total assets were $4.0 billion at June 30, 2022 an increase of $95.0 million, or 2.4%, compared to June 30, 2021 and a decrease of $165.2 million, or 4.0%, compared to March 31, 2022.

•Investments: Total investments were $766.9 million as of June 30, 2022 an increase of $122.5 million, or 19.0%, compared to June 30, 2021 and a decrease of $14.1 million, or 1.8%, compared to March 31, 2022.

•Loans: Total loans were $2.8 billion as of June 30, 2022. Loan growth for the second quarter of 2022 was $107.5 million and increased $200.7 million, or 7.6%, from June 30, 2021. In the second quarter, total outstanding commercial loans increased $8.0 million, or 1.0%. PPP loans, which are included in the commercial portfolio, decreased $17.2 million in the second quarter as a result of the continued loan forgiveness processed by the Small Business Administration. The consumer loan portfolio grew by $54.5 million, or 5.6% in the second quarter, primarily within the indirect automobile lending program. Total outstanding residential real estate loans increased $45.1 million, or 4.7%, for the second quarter of 2022.

•Allowance for Credit Losses: The allowance for credit losses was $28.1 million on June 30, 2022, which represented 0.99% of loans outstanding, as compared to 1.02% at June 30, 2021. Asset quality remained solid at June 30, 2022. Net loan losses, expressed as an annualized percentage of average loans outstanding, were 0.07% for the three-month period ended June 30, 2022, as compared to 0.01% for the three-month period ended June 30, 2021. Nonperforming assets of $10.0 million at June 30, 2022 represented 0.25% of period-end assets, compared to 0.20% at June 30, 2021.

•Deposits: At June 30, 2022, deposit balances were $3.5 billion. Deposits decreased in the second quarter of 2022 by $169.7 million and increased by $107.6 million, or 3.1%, from the prior-year level. Municipal deposits decreased $112.1 million in the second quarter and increased $4.8 million, or 0.6% from June 30, 2021. Non-municipal deposits decreased $57.6 million for the quarter and increased $102.8 million, or 4.0%, from June 30, 2021. Noninterest-bearing deposits represented 23.3% of total deposits at June 30, 2022, compared to 22.2% of total deposits at June 30, 2021. At June 30, 2022, total time deposits were $169.5 million, a decrease of $57.0 million, or 25.2%, compared to the prior year.

•Capital: Total stockholders’ equity was $356.5 million on June 30, 2022, up $3.5 million, or 1.0%, from June 30, 2021. Arrow's regulatory capital ratios remained strong in the second quarter of 2022. As of June 30, 2022, Arrow's Common Equity Tier 1 Capital Ratio was 13.14% and Total Risk-Based Capital Ratio was 14.93%. The capital ratios of Arrow and both its subsidiary banks, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company, continued to exceed the “well capitalized” regulatory standards.

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Additional Commentary

•Cash and Stock Dividends: On June 15, 2022, Arrow distributed a cash dividend of $0.27 per share. The cash dividend was 7% higher than the cash dividend paid by Arrow in the second quarter of 2021 due to a one cent increase in the cash dividend rate and after adjusting for the 3% stock dividend distributed on September 24, 2021.

•Industry Recognition: In the second quarter of 2022, both of Arrow's banking subsidiaries once again earned BauerFinancial, Inc. 5-Star Exceptional Performance Bank ratings.

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). Some 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. These 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 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."

Safe Harbor Statement

The information in this document may contain statements based on management’s beliefs, assumptions, expectations, estimates and projections about the future. Such "forward-looking statements," as defined in Section 21E of the Securities Exchange Act of 1934, as amended, involve a degree of uncertainty and attendant risk. Actual outcomes and results may differ, explicitly or by implication. We are not obliged to revise or update these statements to reflect unanticipated events. This document should be read in conjunction with Arrow’s Annual Report on Form 10-K for the year ended December 31, 2021 and other filings with the SEC.
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ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts - Unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
INTEREST AND DIVIDEND INCOME    
Interest and Fees on Loans$26,906 $27,014 $52,645 $52,197 
Interest on Deposits at Banks427 103 625 188 
Interest and Dividends on Investment Securities: 
Fully Taxable2,444 1,671 4,633 3,177 
Exempt from Federal Taxes816 907 1,637 1,827 
Total Interest and Dividend Income30,593 29,695 59,540 57,389 
INTEREST EXPENSE   
Interest-Bearing Checking Accounts199 192 362 411 
Savings Deposits892 501 1,309 1,066 
Time Deposits over $250,00026 69 54 189 
Other Time Deposits111 156 220 378 
Federal Funds Purchased and
  Securities Sold Under Agreements to Repurchase		— 1 — 3 
Federal Home Loan Bank Advances108 196 295 389 
Junior Subordinated Obligations Issued to
  Unconsolidated Subsidiary Trusts		171 171 340 340 
Interest on Financing Leases48 49 97 98 
Total Interest Expense1,555 1,335 2,677 2,874 
NET INTEREST INCOME29,038 28,360 56,863 54,515 
Provision for Credit Losses905 263 1,674 (385)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES28,133 28,097 55,189 54,900 
NONINTEREST INCOME   
Income From Fiduciary Activities2,517 2,589 5,113 4,967 
Fees for Other Services to Customers3,050 2,919 5,845 5,528 
Insurance Commissions1,622 1,626 3,133 3,266 
Net Gain on Securities 154 196 284 356 
Net Gain on Sales of Loans10 625 62 2,040 
Other Operating Income391 523 1,469 929 
Total Noninterest Income7,744 8,478 15,906 17,086 
NONINTEREST EXPENSE   
Salaries and Employee Benefits11,687 10,845 22,973 21,983 
Occupancy Expenses, Net1,602 1,484 3,200 3,077 
Technology and Equipment Expense3,974 3,710 7,753 7,169 
FDIC Assessments291 245 598 515 
Other Operating Expense2,791 2,803 4,766 5,021 
Total Noninterest Expense20,345 19,087 39,290 37,765 
INCOME BEFORE PROVISION FOR INCOME TAXES15,532 17,488 31,805 34,221 
Provision for Income Taxes3,558 4,209 7,256 7,662 
NET INCOME$11,974 $13,279 $24,549 $26,559 
Average Shares Outstanding 1:
    
Basic16,014 16,024 16,022 16,009 
Diluted16,054 16,085 16,069 16,056 
Per Common Share:    
Basic Earnings$0.75 $0.83 $1.53 $1.66 
Diluted Earnings0.75 0.83 1.53 1.65 
1 2021 Share and Per Share Amounts have been restated for the September 24, 2021, 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,
2022		December 31, 2021June 30,
2021
ASSETS  
Cash and Due From Banks$51,549 $26,978 $44,760 
Interest-Bearing Deposits at Banks165,705 430,718 433,468 
Investment Securities:
Available-for-Sale at Fair Value582,741 559,316 437,868 
Held-to-Maturity (Fair Value of $180,511 at June 30, 2022; $201,292 at December 31, 2021; and $210,916 at June 30, 2021)
182,096 196,566 204,490 
Equity Securities2,031 1,747 1,992 
FHLB and Federal Reserve Bank Stock4,718 5,380 5,380 
Loans2,844,802 2,667,941 2,644,082 
Allowance for Credit Losses(28,090)(27,281)(27,010)
Net Loans2,816,712 2,640,660 2,617,072 
Premises and Equipment, Net50,141 46,217 43,268 
Goodwill21,873 21,873 21,873 
Other Intangible Assets, Net1,710 1,918 2,082 
Other Assets111,929 96,579 83,938 
Total Assets$3,991,205 $4,027,952 $3,896,191 
LIABILITIES  
Noninterest-Bearing Deposits824,842 810,274 761,991 
Interest-Bearing Checking Accounts1,046,570 994,391 977,955 
Savings Deposits1,504,791 1,531,287 1,471,591 
Time Deposits over $250,00040,021 82,811 84,357 
Other Time Deposits129,436 131,734 142,139 
Total Deposits3,545,660 3,550,497 3,438,033 
Federal Funds Purchased and
  Securities Sold Under Agreements to Repurchase		— — 3,092 
Federal Home Loan Bank Term Advances25,000 45,000 45,000 
Junior Subordinated Obligations Issued to Unconsolidated
  Subsidiary Trusts		20,000 20,000 20,000 
Finance Leases5,144 5,169 5,193 
Other Liabilities38,903 36,100 31,840 
Total Liabilities3,634,707 3,656,766 3,543,158 
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at June 30, 2022, December 31, 2021 and June 30, 2021
— — — 
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,800,144 Shares Issued at June 30, 2022 and December 31, 2021 and 20,194,474 at June 30, 2021)
20,800 20,800 20,194 
Additional Paid-in Capital379,423 377,996 355,195 
Retained Earnings69,980 54,078 60,494 
Accumulated Other Comprehensive (Loss) Income(29,564)347 (2,658)
Treasury Stock, at Cost (4,777,605 Shares at June 30, 2022; 4,759,414 Shares at December 31, 2021 and 4,622,797 Shares at June 30, 2021)
(84,141)(82,035)(80,192)
Total Stockholders’ Equity356,498 371,186 353,033 
Total Liabilities and Stockholders’ Equity$3,991,205 $4,027,952 $3,896,191 
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Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended6/30/20223/31/202212/31/20219/30/20216/30/2021
Net Income$11,974 $12,575 $10,309 $12,989 $13,279 
Transactions in Net Income (Net of Tax):     
Net Changes in Fair Value of Equity Investments114 96 (104)(79)145 
Share and Per Share Data:1
    
Period End Shares Outstanding16,023 16,013 16,041 16,020 16,039 
Basic Average Shares Outstanding16,014 16,030 16,028 16,027 16,024 
Diluted Average Shares Outstanding16,054 16,083 16,091 16,085 16,085 
Basic Earnings Per Share$0.75 $0.78 $0.64 $0.81 $0.83 
Diluted Earnings Per Share0.75 0.78 0.63 0.81 0.83 
Cash Dividend Per Share0.270 0.270 0.260 0.252 0.252 
Selected Quarterly Average Balances:    
  Interest-Bearing Deposits at Banks$232,545 $410,644 $551,890 $416,500 $369,034 
  Investment Securities822,112 797,347 681,732 675,980 668,089 
  Loans2,804,180 2,678,796 2,660,665 2,641,726 2,651,449 
  Deposits3,569,754 3,582,256 3,590,766 3,435,933 3,395,271 
  Other Borrowed Funds50,140 68,596 70,162 72,187 74,957 
  Shareholders' Equity357,228 370,264 364,409 359,384 350,203 
  Total Assets4,012,999 4,054,943 4,060,540 3,902,041 3,851,921 
Return on Average Assets, annualized1.20 %1.26 %1.01 %1.32 %1.38 %
Return on Average Equity, annualized13.44 %13.77 %11.22 %14.34 %15.21 %
Return on Average Tangible Equity, annualized 2
14.40 %14.72 %12.01 %15.36 %16.32 %
Average Earning Assets$3,858,837 $3,886,787 $3,894,287 $3,734,206 $3,688,572 
Average Paying Liabilities2,808,287 2,855,884 2,841,304 2,705,283 2,721,961 
Interest Income30,593 28,947 28,354 29,807 29,695 
Tax-Equivalent Adjustment 3
269 270 285 292 293 
Interest Income, Tax-Equivalent 3
30,862 29,217 28,639 30,099 29,988 
Interest Expense1,555 1,122 1,152 1,169 1,335 
Net Interest Income29,038 27,825 27,202 28,638 28,360 
Net Interest Income, Tax-Equivalent 3
29,307 28,095 27,487 28,930 28,653 
Net Interest Margin, annualized3.02 %2.90 %2.77 %3.04 %3.08 %
Net Interest Margin, Tax-Equivalent, annualized 3
3.05 %2.93 %2.80 %3.07 %3.12 %
Efficiency Ratio Calculation: 4
    
Noninterest Expense$20,345 $18,945 $20,860 $19,423 $19,087 
Less: Intangible Asset Amortization48 49 52 51 53 
Net Noninterest Expense$20,297 $18,896 $20,808 $19,372 $19,034 
Net Interest Income, Tax-Equivalent$29,307 $28,095 $27,487 $28,930 $28,653 
Noninterest Income7,744 8,162 7,589 7,694 8,478 
Less: Net (Loss) Gain on Securities154 130 (139)(106)196 
Net Gross Income$36,897 $36,127 $35,215 $36,730 $36,935 
Efficiency Ratio55.01 %52.30 %59.09 %52.74 %51.53 %
Period-End Capital Information:     
Total Stockholders' Equity (i.e. Book Value)$356,498 $357,243 $371,186 $360,171 $353,033 
Book Value per Share 1
22.25 22.31 23.14 22.48 22.01 
Goodwill and Other Intangible Assets, net23,583 23,691 23,791 23,879 23,955 
Tangible Book Value per Share 1,2
20.78 20.83 21.66 20.99 20.52 
Capital Ratios:5
  
Tier 1 Leverage Ratio9.60 %9.37 %9.20 %9.39 %9.29 %
Common Equity Tier 1 Capital Ratio
13.14 %13.48 %13.77 %13.71 %13.79 %
Tier 1 Risk-Based Capital Ratio13.86 %14.23 %14.55 %14.51 %14.61 %
Total Risk-Based Capital Ratio14.93 %15.33 %15.69 %15.66 %15.78 %
Assets Under Trust Admin. & Investment Mgmt.$1,589,178 $1,793,747 $1,851,101 $1,778,659 $1,804,854 

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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 24, 2021, 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.
6/30/20223/31/202212/31/20219/30/20216/30/2021
Total Stockholders' Equity (GAAP)$356,498 $357,243 $371,186 $360,171 $353,033 
Less: Goodwill and Other Intangible assets, net23,583 23,691 23,791 23,879 23,955 
Tangible Equity (Non-GAAP)$332,915 $333,552 $347,395 $336,292 $329,078 
Period End Shares Outstanding16,023 16,013 16,041 16,020 16,039 
Tangible Book Value per Share (Non-GAAP)$20.78 $20.83 $21.66 $20.99 $20.52 
Net Income11,974 12,575 10,309 12,989 13,279 
Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)14.40 %14.72 %12.01 %15.36 %16.32 %
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.
6/30/20223/31/202212/31/20219/30/20216/30/2021
Interest Income (GAAP)$30,593 $28,947 $28,354 $29,807 $29,695 
Add: Tax-Equivalent adjustment
     (Non-GAAP)		269 270 285 292 293 
Interest Income - Tax Equivalent
     (Non-GAAP)		$30,862 $29,217 $28,639 $30,099 $29,988 
Net Interest Income (GAAP)$29,038 $27,825 $27,202 $28,638 $28,360 
Add: Tax-Equivalent adjustment
     (Non-GAAP)		269 270 285 292 293 
Net Interest Income - Tax Equivalent
     (Non-GAAP)		$29,307 $28,095 $27,487 $28,930 $28,653 
Average Earning Assets$3,858,837 $3,886,787 $3,894,287 $3,734,206 $3,688,572 
Net Interest Margin (Non-GAAP)*3.05 %2.93 %2.80 %3.07 %3.12 %
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, 2022 listed in the tables (i.e., 13.14%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
6/30/20223/31/202212/31/20219/30/20216/30/2021
Total Risk Weighted Assets$2,790,520 $2,661,952 $2,552,812 $2,511,910 $2,438,445 
Common Equity Tier 1 Capital366,798 358,738 351,497 344,507 336,265 
Common Equity Tier 1 Ratio13.14 %13.48 %13.77 %13.71 %13.79 %
* Quarterly ratios have been annualized.

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Arrow Financial Corporation
Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars in Thousands - Unaudited)

Quarter Ended June 30:20222021
InterestRateInterestRate
AverageIncome/Earned/AverageIncome/Earned/
BalanceExpensePaidBalanceExpensePaid
Interest-Bearing Deposits at Banks$232,545 $427 0.74 %$369,034 $103 0.11 %
Investment Securities:
Fully Taxable644,443 2,444 1.52 479,365 1,671 1.40 
Exempt from Federal Taxes177,669 816 1.84 188,724 907 1.93 
Loans2,804,180 26,906 3.85 2,651,449 27,014 4.09 
Total Earning Assets3,858,837 30,593 3.18 3,688,572 29,695 3.23 
Allowance for Credit Losses(27,558)(26,862)
Cash and Due From Banks40,105 34,976 
Other Assets141,615 155,235 
Total Assets$4,012,999 $3,851,921 
Deposits:
Interest-Bearing Checking Accounts$1,048,752 199 0.08 $924,651 192 0.08 
Savings Deposits1,541,616 892 0.23 1,481,232 501 0.14 
Time Deposits of $250,000 or More37,418 26 0.28 95,673 69 0.29 
Other Time Deposits130,361 111 0.34 145,448 156 0.43 
Total Interest-Bearing Deposits2,758,147 1,228 0.18 2,647,004 918 0.14 
Short-Term Borrowings— — 4,770 1 0.08 
FHLBNY Term Advances & Other Long-Term Debt45,000 279 2.49 65,000 367 2.26 
Finance Leases5,140 48 3.75 5,187 49 3.79 
Total Interest-Bearing Liabilities2,808,287 1,555 0.22 2,721,961 1,335 0.20 
Noninterest-bearing deposits811,607 748,267 
Other Liabilities35,877 31,490 
Total Liabilities3,655,771 3,501,718 
Stockholders’ Equity357,228 350,203 
Total Liabilities and Stockholders’ Equity$4,012,999 $3,851,921 
Net Interest Income$29,038 $28,360 
Net Interest Spread2.96 %3.03 %
Net Interest Margin3.02 %3.08 %

9


Arrow Financial Corporation
Consolidated Financial Information
(Dollars in Thousands - Unaudited)
Quarter Ended:6/30/202212/31/20216/30/2021
Loan Portfolio  
Commercial Loans$138,675 $172,518 $242,790 
Commercial Real Estate Loans663,234 628,929 598,241 
  Subtotal Commercial Loan Portfolio801,909 801,447 841,031 
Consumer Loans1,031,111 920,556 892,549 
Residential Real Estate Loans1,011,782 945,938 910,502 
Total Loans$2,844,802 $2,667,941 $2,644,082 
Allowance for Credit Losses   
Allowance for Credit Losses, Beginning of Quarter$27,661 $26,956 $26,840 
Loans Charged-off(907)(719)(443)
Less Recoveries of Loans Previously Charged-off431 486 350 
Net Loans Charged-off(476)(233)(93)
Provision for Credit Losses905 558 263 
Allowance for Credit Losses, End of Quarter$28,090 $27,281 $27,010 
Nonperforming Assets   
Nonaccrual Loans$7,999 $10,764 $7,102 
Loans Past Due 90 or More Days and Accruing1,641 823 595 
Loans Restructured and in Compliance with Modified Terms77 77 78 
Total Nonperforming Loans9,717 11,664 7,775 
Repossessed Assets297 126 99 
Other Real Estate Owned— — 99 
Total Nonperforming Assets$10,014 $11,790 $7,973 
Key Asset Quality Ratios   
Net Loans Charged-off to Average Loans,
   Quarter-to-date Annualized		0.07 %0.03 %0.01 %
Provision for Credit Losses to Average Loans,
  Quarter-to-date Annualized		0.13 %0.08 %0.04 %
Allowance for Credit Losses to Period-End Loans0.99 %1.02 %1.02 %
Allowance for Credit Losses to Period-End Nonperforming Loans289.08 %233.89 %347.40 %
Nonperforming Loans to Period-End Loans0.34 %0.44 %0.29 %
Nonperforming Assets to Period-End Assets0.25 %0.29 %0.20 %
Six Month Period Ended:
Allowance for Loan Losses  
Allowance for Loan Losses, Beginning of Year$27,281 $29,232 
Impact of the Adoption of ASU 2016-13— (1,300)
Loans Charged-off(1,736)(1,076)
Less Recoveries of Loans Previously Charged-off871 539 
Net Loans Charged-off(865)(537)
Provision for Loan Losses1,674 (385)
Allowance for Loan Losses, End of Period$28,090 $27,010 
Key Asset Quality Ratios  
Net Loans Charged-off to Average Loans, Annualized0.06 %0.04 %
Provision for Loan Losses to Average Loans, Annualized0.12 %(0.03)%
10