Fair Values

3 Months Ended

Mar. 31, 2024

FAIR VALUES (Dollars In Thousands)

Financial Accounting Standards Board (FASB) Accounting Standards Codification (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, 2024, December 31, 2023 and March 31, 2023 were AFS securities, 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, 2024
Assets:
Securities Available-for Sale:
U.S. Treasuries	$	74,152	$	—	$	74,152	$	—
U.S. Government & Agency Obligations	152,749		—		152,749		$	—
State and Municipal Obligations	280		—		280		—
Mortgage-Backed Securities	257,717		—		257,717		—
Corporate and Other Debt Securities	935		—		935		—
Total Securities Available-for-Sale	485,833		—		485,833		—
Equity Securities	1,942		—		1,942		—
Total Securities Measured on a Recurring Basis	487,775		—		487,775		—
Derivative Assets	12,747		—		12,747		—
Total Measured on a Recurring Basis	$	500,522	$	—	$	500,522	$	—
Liabilities:
Derivative Liabilities	7,317		—		7,317		—
Total Measured on a Recurring Basis	$	7,317	$	—	$	7,317	$	—
December 31, 2023
Assets:
Securities Available-for Sale:
U.S. Treasuries	$	74,004	$	—	$	74,004	$	—
U.S. Government & Agency Obligations	$	152,925	$	—	$	152,925	$	—
State and Municipal Obligations	280		—		280		—
Mortgage-Backed Securities	269,760		—		269,760		—
Corporate and Other Debt Securities	800		—		800		—


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 Available-for-Sale	497,769		—		497,769		—
Equity Securities	1,925		—		1,925		—
Total Securities Measured on a Recurring Basis	499,694		—		499,694		—
Derivative Assets	12,057		—		12,057		—
Total Measured on a Recurring Basis	$	511,751	$	—	$	511,751	$	—
Liabilities:
Derivative Liabilities	$	9,598	—		$	9,598	—
Total Measured on a Recurring Basis	$	9,598	$	—	$	9,598	$	—
March 31, 2023
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	177,585	$	—	$	177,585	$	—
State and Municipal Obligations	320		—		320		—
Mortgage-Backed Securities	386,988		—		386,988		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	565,693		—		565,693		—
Equity Securities	2,070		—		2,070		—
Total Securities Measured on a Recurring Basis	567,763		—		567,763		—
Derivative Assets	6,206		—		6,206		—
Total Measured on a Recurring Basis	$	573,969	$	—	$	573,969	$	—
Liabilities:
Derivative Liabilities	6,206		—		6,206		—
Total Measured on a Recurring Basis	$	6,206	$	—	$	6,206	$	—


	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Gains (Losses) Recognized in Earnings
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
March 31, 2024
Collateral Dependent Evaluated Loans	$	—	$	—	$	—	$	—
Other Real Estate Owned and Repossessed Assets, Net	312		—		—		312		—
December 31, 2023
Collateral Dependent Impaired Loans	$	—	$	—	$	—	$	—
Other Real Estate Owned and Repossessed Assets, Net	312		—		—		312		—
March 31, 2023
Collateral Dependent Impaired Loans	$	—	$	—	$	—	$	—
Other Real Estate Owned and Repossessed Assets, Net	144		—		—		144		—

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; and,

•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 AFS securities are based on unadjusted, quoted market prices from exchanges in active markets. The fair value of Level 2 AFS securities 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 equities are based on the last observable price in open markets. The fair value of Level 2 equities are based on the last observable price in open markets. 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, 2024, December 31, 2023 and March 31, 2023.

Fair Value by Balance Sheet Grouping

The following table presents a summary of the carrying amount, the fair value (exit price) 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, 2024
Cash and Cash Equivalents	$	282,465	$	282,465	$	282,465	$	—	$	—
Securities Available-for-Sale	485,833		485,833		—		485,833		—
Securities Held-to-Maturity	128,051		124,861		—		124,861		—
Equity Securities	1,942		1,942		—		1,942		—
Federal Home Loan Bank and Federal Reserve Bank Stock	4,208		4,208		—		4,208		—
Net Loans	3,227,197		2,978,789		—		—		2,978,789
Accrued Interest Receivable	12,754		12,754		—		12,754		—
Derivative Assets	12,747		12,747				12,747
Deposits	3,779,021		3,774,378		—		3,774,378		—


Borrowings	106,500		105,941		—		105,941		—
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	7,996		7,996		—		7,996		—
Derivative Liabilities	7,317		7,317		—		7,317		—


Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3

December 31, 2023
Cash and Cash Equivalents	$	142,536	$	142,536	$	142,536	$	—	$	—
Securities Available-for-Sale	497,769		497,769		—		497,769		—
Securities Held-to-Maturity	131,395		128,837		—		128,837		—
Equity Securities	1,925		1,925				1,925
Federal Home Loan Bank and Federal Reserve Bank Stock	5,049		5,049		—		5,049		—
Net Loans	3,181,643		2,940,318		—		—		2,940,318
Accrued Interest Receivable	11,076		11,076		—		11,076		—
Derivative Assets	12,057		12,057		—		12,057		—
Deposits	3,687,566		3,683,122		—		3,683,122		—

Borrowings	26,500		26,189		—		26,189		—

Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	6,289		6,289		—		6,289		—
Derivative Liabilities	9,598		9,598		—		9,598		—

March 31, 2023
Cash and Cash Equivalents	$	203,472	$	203,472	$	203,472	$	—	$	—
Securities Available-for-Sale	565,693		565,693		—		565,693		—
Securities Held-to-Maturity	167,347		164,439		—		164,439		—
Equity Securities	2,070		2,070		—		2,070
Federal Home Loan Bank and Federal Reserve Bank Stock	10,027		10,027		—		10,027		—
Net Loans	2,974,568		2,705,312		—		—		2,705,312
Accrued Interest Receivable	9,857		9,857		—		9,857		—
Derivative Assets	6,206		6,206		—		6,206		—
Deposits	3,546,349		3,540,854		—		3,540,854		—


Borrowings	107,800		107,830		—		107,830		—
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	1,170		1,170		—		1,170		—
Derivative Liabilities	6,206		6,206		—		6,206		—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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