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Loans
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Loans LOANS (In Thousands)
Loan Categories and Past Due Loans

The following two tables present loan balances outstanding as of September 30, 2023 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 $165, $656 and $483 as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively, are included in the residential real estate balances for current loans.

Schedule of Past Due Loans by Loan Category
Commercial
CommercialReal EstateConsumerResidentialTotal
September 30, 2023
Loans Past Due 30-59 Days$247 $13,787 $11,864 $1,692 $27,590 
Loans Past Due 60-89 Days59 1,977 4,953 18 7,007 
Loans Past Due 90 or more Days3 — 1,504 3,271 4,778 
Total Loans Past Due309 15,764 18,321 4,981 39,375 
Current Loans147,757 718,840 1,089,316 1,143,329 3,099,242 
Total Loans$148,066 $734,604 $1,107,637 $1,148,310 $3,138,617 
December 31, 2022
Loans Past Due 30-59 Days$48 $370 $13,657 $1,833 $15,908 
Loans Past Due 60-89 Days33 — 4,517 112 4,662 
Loans Past Due 90 or more Days44 — 3,503 4,790 8,337 
Total Loans Past Due125 370 21,677 6,735 28,907 
Current Loans140,168 706,652 1,043,458 1,064,022 2,954,300 
Total Loans$140,293 $707,022 $1,065,135 $1,070,757 $2,983,207 
September 30, 2022
Loans Past Due 30-59 Days$86 $— $8,870 $393 $9,349 
Loans Past Due 60-89 Days80 — 4,397 1,266 5,743 
Loans Past Due 90 or more Days— 235 1,708 3,487 5,430 
Total Loans Past Due166 235 14,975 5,146 20,522 
Current Loans138,807 678,982 1,040,610 1,045,873 2,904,272 
Total Loans$138,973 $679,217 $1,055,585 $1,051,019 $2,924,794 
The increase in loans past due 30-59 days within Commercial Real Estate is primarily attributable to one commercial loan relationship. The Company is actively working with the borrower to allow the borrower to stabilize the property’s cash flow. The property's collateral value exceeds the loan exposure.

Schedule of Non Accrual Loans by Category
Commercial
September 30, 2023CommercialReal EstateConsumerResidentialTotal
Loans 90 or More Days Past Due
  and Still Accruing Interest		$— $— $— $251 $251 
Nonaccrual Loans3 — 1,572 4,448 6,023 
Nonaccrual With No Allowance for Credit Loss3 — 1,572 4,448 6,023 
Interest Income on Nonaccrual Loans— — — — — 
December 31, 2022
Loans 90 or More Days Past Due
  and Still Accruing Interest		$44 $— $— $1,113 $1,157 
Nonaccrual Loans8 3,110 3,503 4,136 10,757 
September 30, 2022
Loans 90 or More Days Past Due
  and Still Accruing Interest		$— $— $— $514 $514 
Nonaccrual Loans9 3,401 1,708 3,694 8,812 
Arrow disaggregates its loan portfolio into the following four categories:

Commercial - Arrow 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, Arrow 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 - Arrow 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, Arrow 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 one-to-four-family residential real estate loans for the construction, purchase of 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 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, Arrow 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.

Allowance for 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.
The September 30, 2023 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 reflects the economic conditions with an improvement in the national unemployment rate of approximately 0.33% during the six-quarter forecast period, while forecasted gross domestic product projected an improvement of approximately 0.42%. The home price index (HPI) forecast declined approximately 1.6% from the previous quarter level. Key assumptions utilized in the CECL calculation include loan segmentation, loan loss regression analysis, reasonable and supportable forecast period, reversion period, discounted cash flow inputs including economic forecast data and prepayment and curtailment speeds and qualitative factors. Key assumptions are reviewed and approved on a quarterly basis. There were no assumption changes for the third quarter calculation. Driven by current economic forecasts, loan growth and net charge offs during the quarter, the third quarter provision for credit losses
was $354 thousand. The provision is directionally consistent with both the latest economic forecasts as well as third quarter activity. Management's evaluation considers the allowance for credit losses for loans to be appropriate as of September 30, 2023.

The following table details activity in the allowance for credit losses on loans for the three and nine months ended September 30, 2023 and September 30, 2022:

Allowance for Credit Losses
Rollforward of the Allowance for Credit Losses for the Quarterly Period:CommercialCommercial Real EstateConsumerResidentialTotal
Rollforward of the Allowance for Credit Losses for the Quarterly Period:
June 30, 2023$1,972 $15,697 $2,646 $10,855 $31,170 
Charge-offs— — (1,204)— (1,204)
Recoveries— — 792 — 792 
Provision(139)(114)301 306 354 
September 30, 2023$1,833 $15,583 $2,535 $11,161 $31,112 
December 31, 2022$1,961 $15,213 $2,585 $10,193 $29,952 
Charge-offs$— $— $(3,806)$(6)$(3,812)
Recoveries$— $— $2,116 $— $2,116 
Provision$(128)$370 $1,640 $974 $2,856 
September 30, 2023$1,833 $15,583 $2,535 $11,161 $31,112 
June 30, 2022$2,465 $13,936 $2,358 $9,331 $28,090 
Charge-offs(44)— (1,103)— (1,147)
Recoveries— — 574 — 574 
Provision(416)930 692 509 1,715 
September 30, 2022$2,005 $14,866 $2,521 $9,840 $29,232 
December 31, 2021$2,298 $13,136 $2,402 $9,445 $27,281 
Charge-offs$(48)$— $(2,805)$(30)$(2,883)
Recoveries$26 $— $1,419 $— $1,445 
Provision$(271)$1,730 $1,505 $425 $3,389 
September 30, 2022$2,005 $14,866 $2,521 $9,840 $29,232 


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. Changes in this allowance are reflected in other operating expenses within the non-interest expense category. As of September 30, 2023, the total unfunded commitment off-balance sheet credit exposure was $1.7 million.

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 a 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 September 30, 2023, there were four total relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $1.9 million and none had an allowance for credit loss.
The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2023, December 31, 2022 and September 30, 2022:
September 30, 2023Collateral Type -Residential Real EstateCollateral Type - Commercial Real EstateTotal Loans
Commercial$— $— $— 
Commercial Real Estate— — — 
Consumer— — — 
Residential1,949 — 1,949 
Total$1,949 $— $1,949 

December 31, 2022Collateral Type -Residential Real EstateCollateral Type - Commercial Real EstateTotal Loans
Commercial$— $— $— 
Commercial Real Estate— 3,110 3,110 
Consumer— — — 
Residential1,963 — 1,963 
Total$1,963 $3,110 $5,073 

September 30, 2022Collateral Type -Residential Real EstateCollateral Type - Commercial Real EstateTotal Loans
Commercial$— $— $— 
Commercial Real Estate— 3,166 3,166 
Consumer— — — 
Residential1,494 — 1,494 
Total$1,494 $3,166 $4,660 



Allowance for Credit Losses - Collectively and Individually Evaluated
CommercialCommercial Real EstateConsumerResidentialTotal
September 30, 2023
Ending Loan Balance - Collectively Evaluated$148,066 $734,604 $1,107,637 $1,146,361 $3,136,668 
Allowance for Credit Losses - Loans Collectively Evaluated1,833 15,583 2,535 11,161 31,112 
Ending Loan Balance - Individually Evaluated— — — 1,949 1,949 
Allowance for Credit Losses - Loans Individually Evaluated— — — — — 
December 31, 2022
Ending Loan Balance - Collectively Evaluated$140,293 $703,912 $1,065,135 $1,068,794 $2,978,134 
Allowance for Credit Losses - Loans Collectively Evaluated1,961 15,213 2,585 10,193 $29,952 
Ending Loan Balance - Individually Evaluated— 3,110 — 1,963 5,073 
Allowance for Credit Losses - Loans Individually Evaluated— — — — — 
September 30, 2022
Ending Loan Balance - Collectively Evaluated$138,973 $676,051 $1,055,585 $1,049,525 $2,920,134 
Allowance for Credit Losses - Loans Collectively Evaluated2,005 14,866 2,521 9,840 29,232 
Ending Loan Balance - Individually Evaluated— 3,166 — 1,494 4,660 
Allowance for Credit Losses - Loans Individually Evaluated— — — — — 

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 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.
Arrow considers the qualitative factors that are relevant 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 and Modification
The Company adopted ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326)" ("ASU 2022-02") effective January 1, 2023. ASU 2022-02 requires that entities disclose current-period gross charge-offs by year of origination for loans and leases, which has been incorporated in the credit quality table below. There was only one new immaterial TDR in the first quarter of 2022.
In the first nine months of 2023, approximately $1.5 million of residential real estate loans were modified The modifications were in the form of short-term forbearance of interest payments. The financial impact of the forbearance is less than ten thousand dollars per month of forgone interest income
The following tables present credit quality indicators by total loans amortized cost basis by origination year as of September 30, 2023, December 31, 2022 and September 30, 2022:

Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving Loan Converted to TermTotal
September 30, 202320232022202120202019Prior
Commercial:
Risk rating
Satisfactory$37,300 $36,456 $23,602 $10,622 $4,799 $21,459 $10,328 $— $144,566 
Special mention— — — 128 — — — — 128 
Substandard— — — — 26 3,245 101 — 3,372 
Doubtful— — — — — — — — — 
Total Commercial Loans$37,300 $36,456 $23,602 $10,750 $4,825 $24,704 $10,429 $— $148,066 
Current-period gross charge-offs$— $— $— $— $— $— $— 
Commercial Real Estate:
Risk rating
Satisfactory$57,761 $157,741 $106,128 $121,968 $41,827 $184,590 $2,035 $— $672,050 
Special mention— 3,123 — — — 4,150 — — 7,273 
Substandard— 9,299 1,685 2,590 797 40,411 499 — 55,281 
Doubtful— — — — — — — — — 
Total Commercial Real Estate Loans$57,761 $170,163 $107,813 $124,558 $42,624 $229,151 $2,534 $— $734,604 
Current-period gross charge-offs$— $— $— $— $— $— $— 
Consumer:
Risk rating
Performing$322,084 $384,607 $216,234 $107,743 $53,646 $21,276 $— $— $1,105,590 
Nonperforming109 625 562 192 68 33 458 — 2,047 
Total Consumer Loans$322,193 $385,232 $216,796 $107,935 $53,714 $21,309 $458 $— $1,107,637 
Current-period gross charge-offs$192 $915 $1,689 $477 $299 $234 $3,806 
Residential:
Risk rating
Performing$106,267 $235,027 $191,780 $118,517 $76,518 $305,076 $108,098 $— $1,141,283 
Nonperforming— — 2,770 1,006 598 2,152 501 — 7,027 
Total Residential Loans$106,267 $235,027 $194,550 $119,523 $77,116 $307,228 $108,599 $— $1,148,310 
Current-period gross charge-offs$— $— $— $— $— $6 $6 
Total Loans$523,521 $826,878 $542,761 $362,766 $178,279 $582,392 $122,020 $— $3,138,617 
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving Loan Converted to TermTotal
December 31, 202220222021202020192018Prior
Commercial:
Risk rating
Satisfactory$42,038 $28,718 $16,870 $7,857 $8,129 $20,379 $8,909 $— $132,900 
Special mention— — — — — 30 30 — 60 
Substandard— — 255 478 — 3,464 3,136 — 7,333 
Doubtful— — — — — — — — — 
Total Commercial Loans$42,038 $28,718 $17,125 $8,335 $8,129 $23,873 $12,075 $— $140,293 
Commercial Real Estate:
Risk rating
Satisfactory$152,858 $115,111 $121,811 $43,647 $63,913 $159,876 $1,603 $— $658,819 
Special mention9,678 — — — 789 241 — — 10,708 
Substandard607 — 5,807 812 4,371 25,677 221 — 37,495 
Doubtful— — — — — — — — — 
Total Commercial Real Estate Loans$163,143 $115,111 $127,618 $44,459 $69,073 $185,794 $1,824 $— $707,022 
Consumer:
Risk rating
Performing$482,530 $284,831 $154,819 $88,165 $38,852 $12,032 $504 $— $1,061,733 
Nonperforming758 1,468 607 325 157 87 — — 3,402 
Total Consumer Loans$483,288 $286,299 $155,426 $88,490 $39,009 $12,119 $504 $— $1,065,135 
Residential:
Risk rating
Performing$210,565 $198,195 $128,372 $82,965 $74,281 $259,787 $111,563 $— $1,065,728 
Nonperforming— 255 939 597 520 2,311 407 — 5,029 
Total Residential Loans$210,565 $198,450 $129,311 $83,562 $74,801 $262,098 $111,970 $— $1,070,757 
Total Loans$899,034 $628,578 $429,480 $224,846 $191,012 $483,884 $126,373 $— $2,983,207 
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving Loan Converted to TermTotal
September 30, 202220222021202020192018Prior
Commercial:
Risk rating
Satisfactory$34,589 $31,762 $26,654 $7,554 $9,605 $11,194 $8,008 $— $129,366 
Special mention— — — — — 35 35 — 70 
Substandard— 3,318 479 445 — 37 5,258 — 9,537 
Doubtful— — — — — — — — — 
Total Commercial Loans$34,589 $35,080 $27,133 $7,999 $9,605 $11,266 $13,301 $— $138,973 
Commercial Real Estate:
Risk rating
Satisfactory$106,549 $136,306 $247,780 $40,959 $30,667 $64,934 $3,052 $— $630,247 
Special mention9,801 — 2,973 — 4,315 1,425 — — 18,514 
Substandard9,531 4,723 11,352 1,133 93 3,403 221 — 30,456 
Doubtful— — — — — — — — — 
Total Commercial Real Estate Loans$125,881 $141,029 $262,105 $42,092 $35,075 $69,762 $3,273 $— $679,217 
Consumer:
Risk rating
Performing$406,206 $309,006 $172,974 $101,458 $47,874 $15,933 $483 $— $1,053,934 
Nonperforming268 583 351 304 58 87 — — 1,651 
Total Consumer Loans$406,474 $309,589 $173,325 $101,762 $47,932 $16,020 $483 $— $1,055,585 
Residential:
Risk rating
Performing$163,702 $209,408 $173,435 $84,370 $61,907 $232,021 $122,191 $— $1,047,034 
Nonperforming— 257 939 28 318 2,268 175 — 3,985 
Total Residential Loans$163,702 $209,665 $174,374 $84,398 $62,225 $234,289 $122,366 $— $1,051,019 
Total Loans$730,646 $695,363 $636,937 $236,251 $154,837 $331,337 $139,423 $— $2,924,794 

For the purposes of the table above, nonperforming consumer and residential loans were those loans on nonaccrual status or were 90 days or more past due and still accruing interest.
As of September 30, 2023, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $2.8 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 Arrow 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.