10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-12507

ARROW FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

New York	22-2448962
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

250 Glen Street	Glens Falls	New York	12801
(Address of principal executive offices)			(Zip Code)
Registrant’s telephone number, including area code:			518	745-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, Par Value $1.00 per share	AROW	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes    ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes     ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. __			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes   ☑ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of April 29, 2022
Common Stock, par value $1.00 per share	16,017,265

ARROW FINANCIAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3. Quantitative and Qualitative Disclosures About Market Risk	65
Item 4. Controls and Procedures	65
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	66
Item 1.A. Risk Factors	66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3. Defaults Upon Senior Securities	66
Item 4. Mine Safety Disclosures	67
Item 5. Other Information	67
Item 6. Exhibits	67
SIGNATURES	68

2

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

	March 31, 2022		December 31, 2021		March 31, 2021
ASSETS
Cash and Due From Banks	$	38,964	$	26,978	$	45,602
Interest-Bearing Deposits at Banks	448,614		430,718		406,605
Investment Securities:
Available-for-Sale at Fair Value	582,428		559,316		464,089
Held-to-Maturity (Approximate Fair Value of $195,862 at March 31, 2022; $201,292 at December 31, 2021; and $221,360 at March 31, 2021)	196,661		196,566		214,561
Equity Securities	1,877		1,747		1,796
FHLB and Federal Reserve Bank Stock	4,491		5,380		5,360
Loans	2,737,267		2,667,941		2,639,243
Allowance for Credit Losses	(27,661)		(27,281)		(26,840)
Net Loans	2,709,606		2,640,660		2,612,403
Premises and Equipment, Net	48,481		46,217		43,057
Goodwill	21,873		21,873		21,873
Other Intangible Assets, Net	1,818		1,918		2,049
Other Assets	101,589		96,579		86,316
Total Assets	$	4,156,402	$	4,027,952	$	3,903,711
LIABILITIES
Noninterest-Bearing Deposits	$	813,066	$	810,274	$	751,884
Interest-Bearing Checking Accounts	1,154,068		994,391		992,486
Savings Deposits	1,571,274		1,531,287		1,463,229
Time Deposits over $250,000	48,288		82,811		100,212
Other Time Deposits	128,677		131,734		145,777
Total Deposits	3,715,373		3,550,497		3,453,588
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	—		—		6,795
Federal Home Loan Bank Term Advances	25,000		45,000		45,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		20,000
Finance Leases	5,156		5,169		5,205
Other Liabilities	33,630		36,100		30,710
Total Liabilities	3,799,159		3,656,766		3,561,298
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at March 31, 2022, December 31, 2021 and March 31, 2021	—		—		—
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,800,144 Shares Issued at March 31, 2022 and December 31, 2021 and 20,194,474 at March 31, 2021)	20,800		20,800		20,194
Additional Paid-in Capital	378,758		377,996		354,358
Retained Earnings	62,328		54,078		51,263
Accumulated Other Comprehensive Loss	(20,797)		347		(3,096)
Treasury Stock, at Cost (4,787,183 Shares at March 31, 2022; 4,759,414 Shares at December 31, 2021 and 4,651,719 Shares at March 31, 2021)	(83,846)		(82,035)		(80,306)
Total Stockholders’ Equity	357,243		371,186		342,413
Total Liabilities and Stockholders’ Equity	$	4,156,402	$	4,027,952	$	3,903,711

    See Notes to Unaudited Interim Consolidated Financial Statements.

3

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended March 31,
	2022		2021
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans	$	25,739	$	25,183
Interest on Deposits at Banks	198		85
Interest and Dividends on Investment Securities:
Fully Taxable	2,189		1,506
Exempt from Federal Taxes	821		920
Total Interest and Dividend Income	28,947		27,694
INTEREST EXPENSE
Interest-Bearing Checking Accounts	163		219
Savings Deposits	417		565
Time Deposits over $250,000	28		120
Other Time Deposits	109		222
Federal Funds Purchased and   Securities Sold Under Agreements to Repurchase	—		2
Federal Home Loan Bank Advances	187		193
Junior Subordinated Obligations Issued to   Unconsolidated Subsidiary Trusts	169		169
Interest on Financing Leases	49		49
Total Interest Expense	1,122		1,539
NET INTEREST INCOME	27,825		26,155
Provision for Credit Losses	769		(648)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	27,056		26,803
NONINTEREST INCOME
Income From Fiduciary Activities	2,596		2,378
Fees for Other Services to Customers	2,795		2,609
Insurance Commissions	1,511		1,640
Net Gain on Securities	130		160
Net Gain on Sales of Loans	52		1,415
Other Operating Income	1,078		406
Total Noninterest Income	8,162		8,608
NONINTEREST EXPENSE
Salaries and Employee Benefits	11,286		11,138
Occupancy Expenses, Net	1,598		1,593
Technology and Equipment Expense	3,779		3,459
FDIC Assessments	307		270
Other Operating Expense	1,975		2,218
Total Noninterest Expense	18,945		18,678
INCOME BEFORE PROVISION FOR INCOME TAXES	16,273		16,733
Provision for Income Taxes	3,698		3,453
NET INCOME	$	12,575	$	13,280
Average Shares Outstanding 1:
Basic	16,030		15,994
Diluted	16,083		16,030
Per Common Share:
Basic Earnings	$	0.78	$	0.83
Diluted Earnings	0.78		0.83

    1 2021 Share and Per Share Amounts have been restated for the September 24, 2021 3% stock dividend.

See Notes to Unaudited Interim Consolidated Financial Statements.

4

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)

	Three Months Ended March 31,
	2022		2021
Net Income	$	12,575	$	13,280
Other Comprehensive (Loss) Income, Net of Tax:
Net Unrealized Securities Holding Loss   Arising During the Period	(22,296)		(3,812)
Net Unrealized Gain on Cash Flow Hedge   Agreements	1,125		1,475
Reclassification of Net Unrealized Gain on Cash   Flow Hedge Agreements to Interest Expense	(21)		(20)
Amortization of Net Retirement Plan Actuarial Loss	42		34
Amortization of Net Retirement Plan Prior Service Cost	6		43
Other Comprehensive Loss	(21,144)		(2,280)
Comprehensive (Loss) Income	$	(8,569)	$	11,000

    See Notes to Unaudited Interim Consolidated Financial Statements.

5

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

	Three Month Period Ended March 31, 2022
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at December 31, 2021	$	20,800	$	377,996	$	54,078	$	347	$	(82,035)	$	371,186
Net Income	—		—		12,575		—		—		12,575
Other Comprehensive Loss	—		—		—		(21,144)		—		(21,144)
Cash Dividends Paid, $.270 per Share	—		—		(4,325)		—		—		(4,325)
Stock Options Exercised, Net  (12,145 Shares)	—		135		—		—		106		241
Shares Issued Under the Directors’ Stock   Plan  (2,784 Shares)	—		75		—		—		24		99
Shares Issued Under the Employee Stock   Purchase Plan  (3,626 Shares)	—		89		—		—		31		120
Shares Issued for Dividend   Reinvestment Plans (13,917 Shares)	—		353		—		—		121		474
Stock-Based Compensation Expense	—		110		—		—		—		110
Purchase of Treasury Stock   (60,241 Shares)	—		—		—		—		(2,093)		(2,093)
Balance at March 31, 2022	$	20,800	$	378,758	$	62,328	$	(20,797)	$	(83,846)	$	357,243
	Three Month Period Ended March 31, 2021
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at December 31, 2020	$	20,194	353,662		41,899		$	(816)	$	(80,547)	$	334,392
Cumulative impact of adoption of ASU 2016-13					120						120
Balance at January 1, 2021 as adjusted for impact of adoption of ASU 2016-13	20,194		353,662		42,019		(816)		(80,547)		334,512
Net Income	—		—		13,280		—		—		13,280
Other Comprehensive Income	—		—		—		(2,280)		—		(2,280)
Cash Dividends Paid, $.252 per Share 1	—		—		(4,036)		—		—		(4,036)
Stock Options Exercised, Net (6,927 Shares)	—		94		—		—		62		156
Shares Issued Under the Directors’ Stock   Plan  (3,172 Shares)	—		70		—		—		28		98
Shares Issued Under the Employee Stock   Purchase Plan  (4,269 Shares)	—		86		—		—		38		124
Shares Issued for Dividend   Reinvestment Plans (12,649 Shares)	—		342		—		—		113		455
Stock-Based Compensation Expense	—		104		—		—		—		104
Balance at March 31, 2021	$	20,194	$	354,358	$	51,263	$	(3,096)	$	(80,306)	$	342,413

1 Cash dividends paid per share have been adjusted for the September 24, 2021 3% stock dividend.

See Notes to Unaudited Interim Consolidated Financial Statements.

6

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Three Months Ended March 31,
Cash Flows from Operating Activities:	2022		2021
Net Income	$	12,575	$	13,280
Provision for Credit Losses	769		(648)
Depreciation and Amortization	1,945		1,951
Net Gain on Securities Transactions	(130)		(160)
Loans Originated and Held-for-Sale	(974)		(24,037)
Proceeds from the Sale of Loans Held-for-Sale	1,349		32,093
Net Gain on the Sale of Loans	(52)		(1,415)
Net Loss on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	15		90
Contributions to Retirement Benefit Plans	(171)		(146)
Deferred Income Tax (Benefit) Expense	(462)		349
Shares Issued Under the Directors’ Stock Plan	99		98
Stock-Based Compensation Expense	110		104
Tax Benefit from Exercise of Stock Options	22		13
Net Decrease (Increase) in Other Assets	4,477		(3,077)
Net (Decrease) Increase in Other Liabilities	(2,803)		1,624
Net Cash Provided By Operating Activities	16,769		20,119
Cash Flows from Investing Activities:
Proceeds from the Maturities and Calls of Securities Available-for-Sale	21,473		25,977
Purchases of Securities Available-for-Sale	(75,049)		(130,481)
Proceeds from the Maturities and Calls of Securities Held-to-Maturity	4,699		4,291
Purchases of Securities Held-to-Maturity	(4,950)		(619)
Net Increase in Loans	(70,441)		(51,866)
Proceeds from the Sales of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	335		259
Purchase of Premises and Equipment	(3,123)		(1,311)
Net Decrease (Increase) in FHLB and Federal Reserve Bank Stock	889		(11)
Net Cash Used By Investing Activities	(126,167)		(153,761)
Cash Flows from Financing Activities:
Net Increase in Deposits	164,876		218,862
Net Decrease in Short-Term Borrowings	—		(10,691)
Finance Lease Payments	(13)		(12)
Repayments of Federal Home Loan Bank Term Advances	(20,000)		—
Purchase of Treasury Stock	(2,093)		—
Stock Options Exercised, Net	241		156
Shares Issued Under the Employee Stock Purchase Plan	120		124
Shares Issued for Dividend Reinvestment Plans	474		455
Cash Dividends Paid	(4,325)		(4,036)
Net Cash Provided By Financing Activities	139,280		204,858
Net Increase in Cash and Cash Equivalents	29,882		71,216
Cash and Cash Equivalents at Beginning of Period	457,696		380,991
Cash and Cash Equivalents at End of Period	$	487,578	$	452,207
Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings	$	1,156	$	1,626
Income Taxes	318		—
Transfer of Loans to Other Real Estate Owned and Repossessed Assets	403		349

See Notes to Unaudited Interim Consolidated Financial Statements.

7

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.     ACCOUNTING POLICIES

In the opinion of the management of Arrow Financial Corporation (Arrow, the Company, we, or us), the accompanying unaudited interim consolidated financial statements contain all of the adjustments necessary to present fairly the financial position as of March 31, 2022, December 31, 2021 and March 31, 2021; the results of operations for the three month periods ended March 31, 2022 and 2021; the consolidated statements of comprehensive income for the three month periods ended March 31, 2022 and 2021; the changes in stockholders' equity for the three month periods ended March 31, 2022 and 2021; and the cash flows for the three month periods ended March 31, 2022 and 2021. All such adjustments are of a normal recurring nature. The unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements of Arrow for the year ended December 31, 2021 included in Arrow's Annual Report on Form 10-K for the year ended December 31, 2021.

Management’s Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (US GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.  Due to the uncertainty regarding the impact of the COVID-19 pandemic, management utilized estimates and assumptions in its evaluation of potential impairment of Arrow's right-of-use lease assets, goodwill and intangible assets. Our most significant estimate is the allowance for credit losses. Other estimates include the fair value of financial statements, evaluation of pension and other post-retirement liabilities, an analysis of a need for a valuation allowance for deferred tax assets and a reserve for unfunded loan commitments recorded as an other liability. Actual results could differ from those estimates.

A material estimate that is particularly susceptible to significant change in the near term is the allowance for credit losses.  In connection with the determination of the allowance for credit losses management obtains economic forecasts from reliable sources and appraisals for properties.  The allowance for credit losses is management’s best estimate of the life of loan losses as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for credit losses may be necessary based on changes in economic conditions.

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

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

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

Commercial Loans

Commercial Real Estate Loans

Consumer Loans

Residential Loans

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

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

For the loan segments utilizing the DCF method, (commercial, commercial real estate, and residential) management utilizes externally developed economic forecast of the following economic factors as loss drivers: national unemployment, gross domestic

8

product and home price index (HPI). The economic forecast is applied over a reasonable and supportable forecast period. Arrow utilizes a six quarter reasonable and supportable forecast period with an eight quarter reversion to the historic mean on a straight-line basis.

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

Arrow uses the vintage analysis method to estimate expected credit losses for the consumer loan segment. The vintage method was selected since the loans within the consumer loan segment are homogeneous, not just by risk characteristic, but by loan structure. Under the vintage analysis method, a loss rate is calculated based on the quarterly net charge-offs to the outstanding loan balance for each vintage year over the lookback period. Once this periodic loss rate is calculated for each quarter in the lookback period, the periodic rates are averaged into the loss rate. The loss rate is then applied to the outstanding loan balances based on the loan's vintage year. Arrow maintains, over the life of the loan, the loss curve by vintage year. If estimated losses computed by the vintage method need to be adjusted based on current conditions and the reasonable and supportable economic forecast, these adjustments would be incorporated over a six quarter reasonable and supportable forecast period, reverting to historical losses using a straight-line method over an eight quarter period. Based on current conditions and the reasonable and supportable economic forecast, no adjustments are currently required.

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

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

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

•The borrower is experiencing financial difficulty, and

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

Arrow's allowance for credit losses reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. Arrow has determined that a TDR is reasonably expected no later than the point it is determined that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required allowance for credit losses. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in Arrow's existing pools based on the underlying risk characteristics of the loan to measure the allowance for credit losses.

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

Accrued Interest Receivable - Upon adoption of CECL on January 1, 2021, Arrow made the following elections regarding accrued interest receivable: (1) presented accrued interest receivable balances separately within the other assets balance sheet line item; (2) excluded interest receivable that is included in amortized cost of financing receivables from related disclosures requirements and (3) continued Arrow's policy to write off accrued interest receivable by reversing interest income. For loans, write off typically occurs upon

9

becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, Arrow has not experienced uncollectible accrued interest receivable on investment securities.

Allowance for Credit Losses – Held to Maturity (HTM) Debt Securities - Arrow's HTM debt securities are also required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on HTM debt securities on a collective basis by major security types that share similar risk characteristics, such as financial asset type and collateral type adjusted for current conditions and reasonable and supportable forecasts. Management classifies the HTM portfolio into the following major security types: U.S. government agency or U.S. government sponsored mortgage-backed and collateralized mortgage obligations securities, and state and municipal debt securities.

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

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

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

Investments in Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock are required for membership in those organizations and are carried at cost since there is no market value available. The FHLB New York continues to pay dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of Federal Reserve Bank and FHLB stock.

There were no additional accounting standards adopted in the first three months of 2022.

Note 2. CASH AND CASH EQUIVALENTS (In Thousands)

The following table is the schedule of Cash and Cash Equivalents at March 31, 2022, December 31, 2021 and March 31, 2021.
	March 31, 2022		December 31, 2021		March 31, 2021
Cash and Due From Banks	$	38,964	$	26,978	$	45,602
Interest-Bearing Deposits at Banks	448,614		430,718		406,605
Total Cash and Cash Equivalents	$	487,578	457,696		452,207

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Note 3.    INVESTMENT SECURITIES (In Thousands)

The following table is the schedule of Available-For-Sale Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2022
Available-For-Sale Securities,   at Amortized Cost	$	140,000	$	380	$	471,829	$	1,000	$	613,209
Gross Unrealized Gains	21		—		211		—		232
Gross Unrealized Losses	(7,277)		—		(23,536)		(200)		(31,013)
Available-For-Sale Securities,   at Fair Value	132,744		380		448,504		800		582,428
Available-For-Sale Securities,   Pledged as Collateral, at Fair   Value									397,138
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	5,000	$	20	$	86	$	—	$	5,106
From 1 - 5 Years	135,000		—		249,495		—		384,495
From 5 - 10 Years	—		360		222,248		1,000		223,608
Over 10 Years	—		—		—		—		—
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	5,021	$	20	$	88	$	—	$	5,129
From 1 - 5 Years	127,723		—		241,614		—		369,337
From 5 - 10 Years	—		360		206,802		800		207,962
Over 10 Years	—		—		—		—		—
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	43,518	$	—	$	358,688	$	—	$	402,206
12 Months or Longer	84,205		—		74,546		800		159,551
Total	$	127,723	$	—	$	433,234	$	800	$	561,757
Number of Securities in a   Continuous Loss Position	18		—		129		1		148
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,482	$	—	$	16,949	$	—	$	18,431
12 Months or Longer	5,795		—		6,587		200		12,582
Total	$	7,277	$	—	$	23,536	$	200	$	31,013
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	140,000
US Agency Obligations,   at Fair Value	132,744
US Government Agency   Securities, at Amortized Cost					$	8,853
US Government Agency   Securities, at Fair Value					8,667
Government Sponsored Entity   Securities, at Amortized Cost					462,976
Government Sponsored Entity   Securities, at Fair Value					439,837

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Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
December 31, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,000	$	400	$	448,742	$	1,000	$	560,142
Gross Unrealized Gains	63		—		3,617		—		3,680
Gross Unrealized Losses	(1,698)		—		(2,608)		(200)		(4,506)
Available-For-Sale Securities,   at Fair Value	108,365		400		449,751		800		559,316
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									298,106
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	74,088	$	—	$	263,292	$	—	$	337,380
12 Months or Longer	29,214		—		—		800		30,014
Total	$	103,302	$	—	$	263,292	$	800	$	367,394
Number of Securities in a   Continuous Loss Position	14		—		39		1		54
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	912	$	—	$	2,608	$	—	$	3,520
12 Months or Longer	786		—		—		200		986
Total	$	1,698	$	—	$	2,608	$	200	$	4,506
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,000
US Agency Obligations,   at Fair Value	108,365
US Government Agency   Securities, at Amortized Cost					$	9,386
US Government Agency   Securities, at Fair Value					9,371
Government Sponsored Entity   Securities, at Amortized Cost					439,356
Government Sponsored Entity   Securities, at Fair Value					440,380

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Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,001	$	508	$	349,911	$	1,000	$	461,420
Gross Unrealized Gains	138		—		6,276		—		6,414
Gross Unrealized Losses	(1,769)		—		(1,776)		(200)		(3,745)
Available-For-Sale Securities,   at Fair Value	108,370		508		354,411		800		464,089
Available-For-Sale Securities,   Pledged as Collateral, at Fair   Value									352,214
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	103,231	$	—	$	120,780	$	—	$	224,011
12 Months or Longer	—		—		—		800		800
Total	$	103,231	$	—	$	120,780	$	800	$	224,811
Number of Securities in a   Continuous Loss Position	14		—		16		1		31
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	1,769	$	—	$	1,776	$	—	$	3,545
12 Months or Longer	—		—		—		200		200
Total	$	1,769	$	—	$	1,776	$	200	$	3,745
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,001
US Agency Obligations,   at Fair Value	108,370
US Government Agency   Securities, at Amortized Cost					$	11,582
US Government Agency   Securities, at Fair Value					11,658
Government Sponsored Entity   Securities, at Amortized Cost					338,329
Government Sponsored Entity   Securities, at Fair Value					342,753

At March 31, 2022, there was no allowance for credit losses for the AFS securities portfolio.

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The following table is the schedule of Held-To-Maturity Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2022
Held-To-Maturity Securities,   at Amortized Cost	$	181,832	$	14,829	$	196,661
Gross Unrealized Gains	180		—		180
Gross Unrealized Losses	(832)		(147)		(979)
Held-To-Maturity Securities,   at Fair Value	181,180		14,682		195,862
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					176,635
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	69,318	$	221	$	69,539
From 1 - 5 Years	109,607		14,608		124,215
From 5 - 10 Years	2,866		—		2,866
Over 10 Years	41		—		41
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	69,315	$	221	$	69,536
From 1 - 5 Years	108,946		14,461		123,407
From 5 - 10 Years	2,878		—		2,878
Over 10 Years	41		—		41
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	96,088	$	14,465	$	110,553
12 Months or Longer	—		—		—
Total	$	96,088	$	14,465	$	110,553
Number of Securities in a   Continuous Loss Position	258		23		281
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	832	$	147	$	979
12 Months or Longer	—		—		—
Total	$	832	$	147	$	979
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	4,954
US Government Agency   Securities, at Fair Value			4,900
Government Sponsored Entity   Securities, at Amortized Cost			9,875
Government Sponsored Entity   Securities, at Fair Value			9,782

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Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	180,195	$	16,371	$	196,566
Gross Unrealized Gains	4,179		547		4,726
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	184,374		16,918		201,292
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					175,218
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	5,518
US Government Agency   Securities, at Fair Value			5,647
Government Sponsored Entity   Securities, at Amortized Cost			10,853
Government Sponsored Entity   Securities, at Fair Value			11,271

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Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	191,202	$	23,359	$	214,561
Gross Unrealized Gains	5,843		956		6,799
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	197,045		24,315		221,360
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					207,595
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	8,310
US Government Agency   Securities, at Fair Value			8,597
Government Sponsored Entity   Securities, at Amortized Cost			15,049
Government Sponsored Entity   Securities, at Fair Value			15,718

In the tables above, maturities of mortgage-backed securities are included based on their expected average lives. Actual maturities will differ because issuers may have the right to call or prepay obligations with or without prepayment penalties.

Arrow evaluates available-for-sale debt securities in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized within the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. Arrow determined that at March 31, 2022, gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. Arrow does not intend to sell, nor is it more likely than not that Arrow will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. Therefore, Arrow carried no allowance for credit loss at March 31, 2022 and there was no credit loss expense recognized by Arrow with respect to the securities portfolio during the three months ended March 31, 2022.  

Arrow's held to maturity debt securities are comprised of U.S. government agencies, U.S. government-sponsored enterprises or state and municipal obligations. U.S. government agencies and U.S. government-sponsored enterprise securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Arrow determined that the expected credit loss on its held to maturity debt portfolio was immaterial and therefore no allowance for credit loss was recorded as of March 31, 2022.

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The following table is the schedule of Equity Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Equity Securities
	March 31, 2022	December 31, 2021	March 31, 2021
Equity Securities, at Fair Value	$1,877	$1,747	$1,796

The following is a summary of realized and unrealized gains recognized in net income on equity securities during the three month periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Net Gain on Equity Securities	$	130	$	160
Less: Net gain recognized during the reporting period on equity securities sold during the period	—		—
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$	130	$	160

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Note 4.    LOANS (In Thousands)

Loan Categories and Past Due Loans

The following two tables present loan balances outstanding as of March 31, 2022, 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 $831, $1,154 and $4,443 as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively, are included in the residential real estate balances for current loans.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2022
Loans Past Due 30-59 Days	$	69	$	—	$	6,631	$	2,565	$	9,265
Loans Past Due 60-89 Days	89		—		2,562		267		2,918
Loans Past Due 90 or more Days	—		346		1,041		1,531		2,918
Total Loans Past Due	158		346		10,234		4,363		15,101
Current Loans	155,309		638,091		966,414		962,352		2,722,166
Total Loans	$	155,467	$	638,437	$	976,648	$	966,715	$	2,737,267
December 31, 2021
Loans Past Due 30-59 Days	$	202	$	—	$	6,713	$	107	$	7,022
Loans Past Due 60-89 Days	3		—		2,709		2,557		5,269
Loans Past Due 90 or more Days	157		1,180		1,564		1,981		4,882
Total Loans Past Due	362		1,180		10,986		4,645		17,173
Current Loans	172,156		627,749		909,570		941,293		2,650,768
Total Loans	$	172,518	$	628,929	$	920,556	$	945,938	$	2,667,941
March 31, 2021
Loans Past Due 30-59 Days	$	63	$	143	$	2,233	$	2,097	$	4,536
Loans Past Due 60-89 Days	34		2,723		822		156		3,735
Loans Past Due 90 or more Days	38		1,474		592		1,700		3,804
Total Loans Past Due	135		4,340		3,647		3,953		12,075
Current Loans	288,416		577,167		857,524		904,061		2,627,168
Total Loans	$	288,551	$	581,507	$	861,171	$	908,014	$	2,639,243

Schedule of Non Accrual Loans by Category
			Commercial
March 31, 2022	Commercial		Real Estate		Consumer		Residential		Total
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	55	$	55
Nonaccrual Loans	70		6,360		1,155		2,165		9,750
Nonaccrual With No Allowance for Credit Loss	70		3,609		1,155		2,165		6,999
Interest Income on Nonaccrual Loans	—		—		—		—		—
December 31, 2021
Loans 90 or More Days Past Due   and Still Accruing Interest	$	157	$	—	$	—	$	666	$	823
Nonaccrual Loans	34		7,243		1,697		1,790		10,764
March 31, 2021
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	242	$	242
Nonaccrual Loans	64		4,364		746		2,913		8,087

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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 - non-Paycheck Protection Program (PPP), commercial PPP, 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 March 31, 2022 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 a reduction of approximately 0.4% in the national unemployment rate during the six-quarter forecast period, while forecasted gross domestic product are projected to decline approximately 4.1%. The home price index (HPI) forecast increased approximately 3.3% from the previous quarter level. The national HPI forecast is projecting growth beyond any recent actual growth when compared to the Albany Metropolitan Statistical Area for the last 10 years and is considered to be a

19

unique circumstance not reflective of current economic conditions in our markets. As a result, an additional qualitative adjustment was utilized to capture additional risk outside of the quantitative model. 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. Driven by current economic forecasts, loan growth and net charge offs during the quarter, the first quarter provision for credit losses was $769 thousand. The provision is directionally consistent with both the latest economic forecasts as well as first quarter activity. Management's evaluation considers the allowance for credit losses for loans to be appropriate as of March 31, 2022.

The following table details activity in the allowance for credit losses on loans for the three months ended March 31, 2022 and March 31, 2021.

Allowance for Credit Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Credit Losses for the Quarterly Period:
December 31, 2021	$	2,298	$	13,136	$	2,402	$	9,445	$	27,281
Charge-offs	—		—		(799)		(30)		(829)
Recoveries	8		—		432		—		440
Provision	209		406		475		(321)		769
March 31, 2022	$	2,515	$	13,542	$	2,510	$	9,094	$	27,661
Balance as of January 1, 2021 as adjusted for ASU 2016-13	$	4,257	$	12,054	$	2,179	$	9,442	$	27,932
Charge-offs	(3)		—		(627)		(3)		$	(633)
Recoveries	—		—		189		—		$	189
Provision	43		(110)		688		(1,269)		$	(648)
March 31, 2021	$	4,297	$	11,944	$	2,429	$	8,170	$	26,840

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 March 31, 2022, the total unfunded commitment off-balance sheet credit exposure was $1.5 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 March 31, 2022, there were three total relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $6.4 million and only one loan had an allowance for credit loss of $582 thousand.

The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2022, December 31, 2021 and March 31, 2021:

March 31, 2022	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		6,014		6,014
Consumer	—		—		—
Residential	415		—		415
Total	$	415	$	6,014	$	6,429

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December 31, 2021	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		6,732		6,732
Consumer	—		—		—
Residential	673		—		673
Total	$	673	$	6,732	$	7,405

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

Allowance for Credit Losses - Collectively and Individually Evaluated
	Commercial		Commercial Real Estate		Consumer		Residential		Total
March 31, 2022
Ending Loan Balance - Collectively Evaluated	$	155,467	$	632,423	$	976,648	$	966,300	$	2,730,838
Allowance for Credit Losses - Loans Collectively Evaluated	2,515		12,960		2,510		9,094		27,079
Ending Loan Balance - Individually Evaluated	—		6,014		—		415		6,429
Allowance for Credit Losses - Loans Individually Evaluated	—		582		—		—		582
December 31, 2021
Ending Loan Balance - Collectively Evaluated	$	172,518	$	622,197	$	920,556	$	945,265	$	2,660,536
Allowance for Credit Losses - Loans Collectively Evaluated	2,298		12,537		2,402		9,445		$	26,682
Ending Loan Balance - Individually Evaluated	—		6,732		—		673		7,405
Allowance for Credit Losses - Loans Individually Evaluated	—		599		—		—		599
March 31, 2021
Ending Loan Balance - Collectively Evaluated	$	288,551	$	577,656	$	861,171	$	906,858	$	2,634,236
Allowance for Credit Losses - Loans Collectively Evaluated	4,297		11,388		2,429		8,170		26,284
Ending Loan Balance - Individually Evaluated	—		3,851		—		1,156		5,007
Allowance for Credit Losses - Loans Individually Evaluated	—		556		—		—		556

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;

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

•The quality of Arrow's loan review function;

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

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

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

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

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Loan Credit Quality Indicators

The following tables presents credit quality indicators by total loans amortized cost basis by origination year as of March 31, 2022, December 31, 2021 and March 31, 2021.

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
March 31, 2022	2022		2021		2020		2019		2018		Prior
Commercial:
Risk rating
Satisfactory	$	8,048	$	49,980	$	31,869	$	10,454	$	11,149	$	22,662	$	7,656	$	—	$	141,818
Special mention	—		—		—		—		—		50		—		—		50
Substandard	—		3,504		3,593		541		—		—		5,961		—		13,599
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	8,048	$	53,484	$	35,462	$	10,995	$	11,149	$	22,712	$	13,617	$	—	$	155,467
Commercial Real Estate:
Risk rating
Satisfactory	$	22,582	$	143,784	$	270,523	$	42,126	$	37,604	$	75,806	$	1,554	$	—	$	593,979
Special mention	627		—		5,825		1,193		—		1,213		—		—		8,858
Substandard	2,241		4,852		16,073		3,877		95		8,462		—		—		35,600
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	25,450	$	148,636	$	292,421	$	47,196	$	37,699	$	85,481	$	1,554	$	—	$	638,437
Consumer:
Risk rating
Performing	$	155,883	$	369,231	$	215,735	$	134,973	$	69,783	$	29,427	$	462	$	—	$	975,494
Nonperforming	—		321		296		293		138		106		—		—		1,154
Total Consumer Loans	$	155,883	$	369,552	$	216,031	$	135,266	$	69,921	$	29,533	$	462	$	—	$	976,648
Residential:
Risk rating
Performing	$	37,795	$	193,693	$	144,671	$	89,415	$	83,582	$	294,391	$	120,949	$	—	$	964,496
Nonperforming	—		—		133		—		27		1,739		320		—		2,219
Total Residential Loans	$	37,795	$	193,693	$	144,804	$	89,415	$	83,609	$	296,130	$	121,269	$	—	$	966,715
Total Loans	$	227,176	$	765,365	$	688,718	$	282,872	$	202,378	$	433,856	$	136,902	$	—	$	2,737,267

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	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
December 31, 2021	2021		2020		2019		2018		2017		Prior
Commercial:
Risk rating
Satisfactory	$	75,615	$	35,522	$	11,591	$	11,661	$	7,792	$	3,442	$	12,783	$	—	$	158,406
Special mention	—		—		3		—		—		5,899		—		—		5,902
Substandard	3,541		3,791		589		—		25		12		252		—		8,210
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	79,156	$	39,313	$	12,183	$	11,661	$	7,817	$	9,353	$	13,035	$	—	$	172,518
Commercial Real Estate:
Risk rating
Satisfactory	$	140,636	$	276,461	$	42,369	$	37,997	$	22,155	$	59,698	$	1,923	$	—	$	581,239
Special mention	—		7,893		1,204		—		137		1,906		—		—		11,140
Substandard	7,248		16,405		3,910		96		—		8,867		24		—		36,550
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	147,884	$	300,759	$	47,483	$	38,093	$	22,292	$	70,471	$	1,947	$	—	$	628,929
Consumer:
Risk rating
Performing	$	402,558	$	239,492	$	154,517	$	82,673	$	29,587	$	9,578	$	455	$	—	$	918,860
Nonperforming	388		399		502		151		160		96		—		—		1,696
Total Consumer Loans	$	402,946	$	239,891	$	155,019	$	82,824	$	29,747	$	9,674	$	455	$	—	$	920,556
Residential:
Risk rating
Performing	$	187,708	$	146,113	$	93,547	$	88,505	$	93,524	$	215,679	$	118,595	$	—	$	943,671
Nonperforming	—		133		—		27		162		1,907		38		—		2,267
Total Residential Loans	$	187,708	$	146,246	$	93,547	$	88,532	$	93,686	$	217,586	$	118,633	$	—	$	945,938
Total Loans	$	817,694	$	726,209	$	308,232	$	221,110	$	153,542	$	307,084	$	134,070	$	—	$	2,667,941

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

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

The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $2.2 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

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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.

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Loans Modified in Trouble Debt Restructurings

The following table presents information on loans modified in trouble debt restructurings during the periods indicated.

Loans Modified in Trouble Debt Restructurings During the Period
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
For the Quarter Ended:
March 31, 2022
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	7	$	—	$	7
Post-Modification Outstanding Recorded Investment	—		—		7		—		7
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2021
Number of Loans	—		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment	—		—		—		—		—
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

In general, prior to the COVID-19 pandemic, loans requiring modification were restructured to accommodate the projected cash-flows of the borrower. Such modifications may involve a reduction of the interest rate, a significant deferral of payments or forgiveness of a portion of the outstanding principal balance. As indicated in the table above, no loans modified during the preceding twelve months subsequently defaulted as of March 31, 2022.

Note 5.    COMMITMENTS AND CONTINGENCIES (In Thousands)

The following table presents the notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit as of March 31, 2022, December 31, 2021 and March 31, 2021:

Commitments to Extend Credit and Letters of Credit
	March 31, 2022		December 31, 2021		March 31, 2021
Notional Amount:
Commitments to Extend Credit	$	438,055	$	402,280	$	437,920
Standby Letters of Credit	3,351		3,223		3,775
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	23		24		12

Arrow is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Commitments to extend credit include home equity lines of credit, commitments for residential and commercial construction loans and other personal and commercial lines of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  The contract or notional amounts of those instruments reflect the extent of the involvement Arrow has in particular classes of financial instruments.

Arrow's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments.  Arrow uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are not expected to be fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Arrow evaluates each customer's creditworthiness on a case-by-case basis.  Home equity lines of credit are secured by residential real estate.  Construction lines of credit are secured by underlying real estate.  For other lines of credit, the amount of collateral obtained, if deemed necessary by Arrow upon extension of credit, is based on management's credit evaluation of

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the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.  Most of the commitments are variable rate instruments.

Arrow does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit. Arrow has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party.  Standby letters of credit generally arise in connection with commercial lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit at March 31, 2022, December 31, 2021 and March 31, 2021 represent the maximum potential future payments Arrow could be required to make.  Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements.  Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Arrow's policies governing loan collateral apply to standby letters of credit at the time of credit extension.  Loan-to-value ratios will generally range from 50% for movable assets, such as inventory, to 100% for liquid assets, such as bank CD's.  Fees for standby letters of credit range from 1% to 3% of the notional amount.  Fees are collected upfront and amortized over the life of the commitment. The carrying amount and fair value of Arrow's standby letters of credit at March 31, 2022, December 31, 2021 and March 31, 2021, were insignificant.  The fair value of standby letters of credit is based on the fees currently charged for similar agreements or the cost to terminate the arrangement with the counterparties.

The fair value of commitments to extend credit is determined by estimating the fees to enter into similar agreements, taking into account the remaining terms and present creditworthiness of the counterparties, and for fixed rate loan commitments, the difference between the current and committed interest rates.  Arrow provides several types of commercial lines of credit and standby letters of credit to its commercial customers.  The pricing of these services is not isolated as Arrow considers the customer's complete deposit and borrowing relationship in pricing individual products and services.  The commitments to extend credit also include commitments under home equity lines of credit, for which Arrow charges no fee.  The carrying value and fair value of commitments to extend credit are not material and Arrow does not expect to incur any material loss as a result of these commitments.

In the normal course of business, Arrow and its subsidiary banks become involved in a variety of routine legal proceedings.  At present, there are no legal proceedings pending or threatened, which in the opinion of management and counsel, would result in a material loss to Arrow, except as noted below.

Except as noted below, Arrow, including its subsidiary banks, is not currently the subject of any material pending legal proceedings, other than ordinary routine litigation occurring in the normal course of their business. On an ongoing basis, Arrow is often the subject of, or a party to, various legal claims by other parties against Arrow, by Arrow against other parties, or involving Arrow, which arise in the normal course of business. Except as noted below, the various pending legal claims against Arrow will not, in the opinion of management based upon consultation with counsel, result in any material liability.

On July 1, 2020, Daphne Richard, a customer of Glens Falls National Bank and Trust Company (Glens Falls National or GFNB) filed a putative class action complaint against GFNB in the United States District Court for the Northern District of New York. The complaint alleges that GFNB assessed overdraft fees on certain transactions drawn on her checking account without having sufficiently disclosed its overdraft-fee practices in its account agreement. Ms. Richard, on behalf of two purported classes, seeks compensatory damages, disgorgement of profits, statutory damages, treble damages, enjoinment of the conduct complained of, and costs and fees. The complaint is similar to complaints filed against other financial institutions pertaining to overdraft fees. On April 13, 2022, the court preliminarily approved a settlement agreement among Arrow, GFNB, Saratoga National Bank and Trust Company (Saratoga National or SNB) and the plaintiffs, pursuant to which, among other things, Arrow established a settlement fund of approximately $1.5 million. Arrow expressly denies any wrongdoing in connection with the matters claimed in the complaint.

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Note 6.    COMPREHENSIVE LOSS (In Thousands)

The following table presents the components of other comprehensive loss for the three month periods ended March 31, 2022 and 2021:

Schedule of Comprehensive Loss Income
	Three Months Ended March 31,
			Tax
	Before-Tax		(Expense)		Net-of-Tax
	Amount		Benefit		Amount
2022
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(29,955)	$	7,659	$	(22,296)
Net Unrealized Gain on Cash Flow Swap	1,512		(387)		1,125
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(29)		8		(21)
Amortization of Net Retirement Plan Actuarial Loss	57		(15)		42
Amortization of Net Retirement Plan Prior Service Cost	7		(1)		6
Other Comprehensive Loss	$	(28,408)	$	7,264	$	(21,144)
2021
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(5,121)	$	1,309	$	(3,812)
Net Unrealized Gain on Cash Flow Swap	1,982		(507)		1,475
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(28)		8		(20)
Amortization of Net Retirement Plan Actuarial Loss	46		(12)		34
Amortization of Net Retirement Plan Prior Service Cost	59		(16)		43
Other Comprehensive Loss	$	(3,062)	$	782	$	(2,280)

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

Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)
	Unrealized (Loss) and Gain on Available-for-Sale Securities		Unrealized Gain (Loss) on Cash Flow Swap		Defined Benefit Plan Items				Total
					Net Actuarial Loss		Net Prior Service Cost
For the Quarter-To-Date periods ended:
December 31, 2021	$	(614)	$	1,320	$	639	$	(998)	$	347
Other comprehensive income or loss before reclassifications	(22,296)		1,125		—		—		(21,171)
Amounts reclassified from accumulated other comprehensive income	—		(21)		42		6		27
Net current-period other comprehensive (loss) income	(22,296)		1,104		42		6		(21,144)
March 31, 2022	$	(22,910)	$	2,424	$	681	$	(992)	$	(20,797)
December 31, 2020	$	5,799	$	485	$	(5,929)	$	(1,171)	$	(816)
Other comprehensive income or loss before reclassifications	(3,812)		1,475		—		—		(2,337)
Amounts reclassified from accumulated other comprehensive income	—		(20)		34		43		57
Net current-period other comprehensive (loss) income	(3,812)		1,455		34		43		(2,280)
March 31, 2021	$	1,987	$	1,940	$	(5,895)	$	(1,128)	$	(3,096)

(1) All amounts are net of tax.

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The following table presents the reclassifications out of accumulated other comprehensive loss.

Reclassifications Out of Accumulated Other Comprehensive Loss
Details about Accumulated Other Comprehensive Loss Components	Amounts Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Statement Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2022
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	29		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	(7)		(1)	Salaries and Employee Benefits
Actuarial loss	(57)		(1)	Salaries and Employee Benefits
	(35)			Total before Tax
	8			Provision for Income Taxes
Total reclassifications for the period	$	(27)		Net of Tax
March 31, 2021
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	28		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	$	(59)	(1)	Salaries and Employee Benefits
Actuarial loss	(46)		(1)	Salaries and Employee Benefits
	(77)			Total before Tax
	20			Provision for Income Taxes
Total reclassifications for the period	$	(57)		Net of Tax
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.

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

Arrow has established three stock-based compensation plans: a Long Term Incentive Plan, an Employee Stock Purchase Plan (ESPP) and an Employee Stock Ownership Plan (ESOP). All share and per share data have been adjusted for the September 24, 2021 3% stock dividend.

Long Term Incentive Plan

The Long Term Incentive Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, performance units and performance shares. The Compensation Committee of the Board of Directors administers the Long Term Incentive Plan.

Stock Options - Options may be granted at a price no less than the greater of the par value or fair market value of such shares on the date on which such option is granted, and generally expire ten years from the date of grant.  The options usually vest over a four-year period.

The following table summarizes information about stock option activity for the year to date period ended March 31, 2022.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2022	270,758			$	28.45
Granted	57,000			35.83
Exercised	(12,145)			19.81
Forfeited	(246)			19.67
Outstanding at March 31, 2022	315,367			30.12
Vested at Period-End	177,611			28.24
Expected to Vest	137,756			32.55
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	7.65
Fair Value Assumptions:
Dividend Yield	2.90		%
Expected Volatility	27.15		%
Risk Free Interest Rate	1.69		%
Expected Lives (in years)	8.56

The following table presents information on the amounts expensed related to stock options for the three month periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Amount expensed	$	75	$	72

Restricted Stock Units - The Company grants restricted stock units which gives the recipient the right to receive shares of Company stock upon vesting. The fair value of each restricted stock unit is the market value of Company stock on the date of grant. 100% of the restricted stock unit awards vest three years from the grant date. Once vested, the restricted stock units become vested units and are no longer forfeitable. Vested units settle upon retirement of the recipient. Unvested restricted stock unit awards will generally be forfeited if the recipient ceases to be employed by the Company, with limited exceptions.

32

The following table summarizes information about restricted stock unit activity for the periods ended March 31, 2022 and 2021.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2022	13,203	$	30.15
Granted	4,186	35.83
Vested	(4,263)	29.02
Non-vested at March 31, 2022	13,126	32.32
Non-vested at January 1, 2021	12,012	30.70
Granted	4,880	28.54
Vested	(3,689)	29.82
Non-vested at March 31, 2021	13,203	30.15

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Amount expensed	$	35	$	32

Employee Stock Purchase Plan

Arrow sponsors an ESPP under which employees may purchase Arrow's common stock at a discount below market price. The current amount of the discount is 5%. Under current accounting guidance, a stock purchase plan with a discount of 5% or less is not considered a compensatory plan.

Employee Stock Ownership Plan

Arrow maintains an ESOP, pursuant to which substantially all employees of Arrow and its subsidiaries are eligible to participate upon satisfaction of applicable service requirements. The Company makes cash contributions to the ESOP each year.

33

Note 8.    RETIREMENT BENEFIT PLANS (Dollars in Thousands)

Arrow sponsors qualified and non-qualified defined benefit pension plans and other postretirement benefit plans for its employees. Arrow maintains a non-contributory pension plan, which covers substantially all employees.  Effective December 1, 2002, all active participants in the qualified defined benefit pension plan were given a one-time irrevocable election to continue participating in the traditional plan design, for which benefits were based on years of service and the participant’s final compensation (as defined), or to begin participating in the new cash balance plan design.  All employees who first participate in the plan after December 1, 2002 automatically participate in the cash balance plan design.  The interest credits under the cash balance plan are based on the 30-year U.S. Treasury rate in effect for November of the prior year with a minimum interest credit of 3%.  The service credits under the cash balance plan are equal to 6.0% of eligible salaries for employees who become participants on or after January 1, 2003.  For employees in the plan prior to January 1, 2003, the service credits are scaled based on the age of the participant, and range from 6.0% to 12.0%. The funding policy is to contribute up to the maximum amount that can be deducted for federal income tax purposes and to make all payments required under The Employee Retirement Income Security Act (ERISA).  Arrow also maintains a supplemental non-qualified unfunded retirement plan to provide eligible employees of Arrow and its subsidiaries with benefits in excess of qualified plan limits imposed by federal tax law.

Arrow has multiple non-pension postretirement benefit plans.  The health care, dental and life insurance plans are contributory, with participants’ contributions adjusted annually.  Arrow’s policy is to fund the cost of postretirement benefits based on the current cost of the underlying policies.  However, the health care plan provision allows for grandfathered participants to receive automatic increases of Company contributions each year based on the increase in inflation, limited to a maximum of 5%.  

As of December 31, 2021, Arrow began using the sex-distinct amount-weighted Pri-2012 mortality tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements with the Scale MP-2021 mortality improvement scale on a generational basis for the Pension Plan and the sex-distinct amount-weighted White Collar tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements with the scale MP-2021 mortality improvement scale on a generational basis for the Select Executive Retirement Plan. As of December 31, 2021, Arrow began using the sex-distinct Pri.H-2012 headcount-weighted mortality tables for employees and healthy annuitants, adjusted for mortality improvements with the Scale MP-2021 mortality improvement scale on a generational basis.

Segment interest rates of 1.02%, 2.72%, 3.08% were used in determining the present value of a lump sum payment/annuitizing cash balance accounts for the 2021 plan year.

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

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

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

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

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

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

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

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

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

The following tables provide the components of net periodic benefit costs for the three-month periods ended March 31, 2022 and 2021.

	Employees'		Select Executive		Postretirement
	Pension		Retirement		Benefit
	Plan		Plan		Plans
Net Periodic (Benefit) Cost
For the Three Months Ended March 31, 2022:
Service Cost 1	$	488	$	147	$	27
Interest Cost 2	367		51		64
Expected Return on Plan Assets 2	(1,099)		—		—
Amortization of Prior Service Cost 2	19		11		27
Amortization of Net Loss (Gain) 2	—		39		(32)
Net Periodic (Benefit) Cost	$	(225)	$	248	$	86
Plan Contributions During the Period	$	—	$	116	$	55

34

For the Three Months Ended March 31, 2021:
Service Cost 1	$	460	$	118	$	31
Interest Cost 2	340		45		67
Expected Return on Plan Assets 2	(950)		—		—
Amortization of Prior Service Cost 2	20		12		27
Amortization of Net Loss 2	—		38		8
Net Periodic (Benefit) Cost	$	(130)	$	213	$	133
Plan Contributions During the Period	$	—	$	118	$	28
Estimated Future Contributions in the Current Fiscal Year	$	—	$	348	$	165

Footnotes:

1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income

2. Included in Other Operating Expense on the Consolidated Statements of Income

A contribution to the qualified pension plan was not required during the period ended March 31, 2022 and currently, additional contributions in 2022 are not expected. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.

Note 9.    EARNINGS PER COMMON SHARE (In Thousands, Except Per Share Amounts)

The following table presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per common share (EPS) for periods ended March 31, 2022 and 2021.  2021 share and per share amounts have been adjusted for the September 24, 2021, 3% stock dividend.

Earnings Per Share
	Three Months Ended
	March 31, 2022		March 31, 2021
Earnings Per Share - Basic:
Net Income	$	12,575	$	13,280
Weighted Average Shares - Basic	16,030		15,994
Earnings Per Share - Basic	$	0.78	$	0.83
Earnings Per Share - Diluted:
Net Income	$	12,575	$	13,280
Weighted Average Shares - Basic	16,030		15,994
Dilutive Average Shares Attributable to Stock Options	53		36
Weighted Average Shares - Diluted	16,083		16,030
Earnings Per Share - Diluted	$	0.78	$	0.83

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Note 10.    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, 2022, December 31, 2021 and March 31, 2021 were securities available-for-sale, equity securities and derivatives. Arrow held no securities or liabilities for trading on such dates.

The table below presents the financial instrument's fair value and the amounts within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement:

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value of Assets and Liabilities Measured on a Recurring Basis:
March 31, 2022
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	132,744	$	—	$	132,744	$	—
State and Municipal Obligations	380		—		380		—
Mortgage-Backed Securities	448,504		—		448,504		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	582,428		—		582,428		—
Equity Securities	1,877		—		1,877		—
Total Securities Measured on a Recurring Basis	584,305		—		584,305		—
Derivatives, included in other assets	4,131		—		4,131		—
Total Measured on a Recurring Basis	$	588,436	$	—	$	588,436	$	—
Liabilities:
Derivatives, included in other liabilities	4,131		—		4,131		—
Total Measured on a Recurring Basis	$	4,131	$	—	$	4,131	$	—
December 31, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,365	$	—	$	108,365	$	—
State and Municipal Obligations	400		—		400		—
Mortgage-Backed Securities	449,751		—		449,751		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	559,316		—		559,316		—
Equity Securities	1,747		—		1,747		—

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Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Total Securities Measured on a Recurring Basis	561,063		—		561,063		—
Derivatives, included in other liabilities	2,083		—		2,083		—
Total Measured on a Recurring Basis	$	563,146	$	—	$	563,146	$	—
Liabilities:
Derivatives, included in other liabilities	2,083		—		2,083		—
Total Measured on a Recurring Basis	$	2,083	$	—	$	2,083	$	—
March 31, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,370	$	—	$	108,370	$	—
State and Municipal Obligations	508		—		508		—
Mortgage-Backed Securities	354,411		—		354,411		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	464,089		—		464,089		—
Equity Securities	1,796		—		1,796		—
Total Securities Measured on a Recurring Basis	$	465,885	$	—	$	465,885	$	—
Derivatives, included in other assets	2,298		$	—	2,298		—
Total Measured on a Recurring Basis	$	468,183	$	—	$	468,183	$	—
Liabilities:
Derivatives, included in other liabilities	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	2,298	$	—	$	2,298	$	—

	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, 2022
Collateral Dependent Evaluated Loans	$	2,168	$	—	$	—	$	2,168
Other Real Estate Owned and Repossessed Assets, Net	180		—		—		180		—
December 31, 2021
Collateral Dependent Impaired Loans	$	2,457	$	—	$	—	$	2,457
Other Real Estate Owned and Repossessed Assets, Net	126		—		—		126		—
March 31, 2021
Collateral Dependent Impaired Loans	$	2,423	$	—	$	—	$	2,423
Other Real Estate Owned and Repossessed Assets, Net	242		—		—		242		—

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The fair value of financial instruments is determined under the following hierarchy:

•Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

•Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

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

The fair value of Level 1 securities available-for-sale are based on unadjusted, quoted market prices from exchanges in active markets. The fair value of Level 2 securities available-for-sale are based on an independent bond and equity pricing service for identical assets or significantly similar securities and an independent equity pricing service for equity securities not actively traded.  The pricing services use a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.  The fair value of Level 2 derivatives is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes.

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

The fair value of collateral dependent evaluated loans and other real estate owned was based on third-party appraisals less estimated cost to sell. The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. Other assets which might have been included in this table include mortgage servicing rights, goodwill and other intangible assets. Arrow evaluates each of these assets for impairment at least annually, with no impairment recognized for these assets at March 31, 2022, December 31, 2021 and March 31, 2021.

Fair Value Methodology for Financial Instruments Not Measured on a Recurring or Nonrecurring Basis

The fair value for securities held-to-maturity is determined utilizing an independent bond pricing service for identical assets or significantly similar securities.  The pricing service uses a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.

ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities" requires that the fair value for loans must be disclosed using the "exit price" notion which is a reasonable estimate of what another party might pay in an orderly transaction. Fair values for loans are calculated for portfolios of loans with similar financial characteristics.  Loans are segregated by type such as commercial, commercial real estate, residential mortgage, indirect auto and other consumer loans.  Each loan category is further segmented into fixed and adjustable interest rate terms and by performing and nonperforming categories.  The fair value of performing loans is calculated by determining the estimated future cash flow, which is the contractual cash flow adjusted for estimated prepayments. The discount rate is determined by starting with current market yields, and first adjusting for a liquidity premium. This premium is separately determined for each loan type. Then a credit loss component is determined utilizing the credit loss assumptions used in the allowance for credit loss model. Finally, a discount spread is applied separately for consumer loans vs. commercial loans based on market information and utilization of the swap curve.  

The fair value of time deposits is based on the discounted value of contractual cash flows, except that the fair value is limited to the extent that the customer could redeem the certificate after imposition of a premature withdrawal penalty.  The discount rates are estimated using the Federal Home Loan Bank of New York (FHLBNY) yield curve, which is considered representative of Arrow’s time deposit rates. The fair value of all other deposits is equal to the carrying value.

The fair value of FHLBNY advances is calculated by the FHLBNY.

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

The book value of the outstanding trust preferred securities (Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts) are considered to approximate fair value since the interest rates are variable (indexed to the London Inter-Bank Offered Rate (LIBOR)) and Arrow is well-capitalized.

38

Fair Value by Balance Sheet Grouping

The following table presents a summary of the carrying amount, the fair value or an amount approximating fair value and the fair value hierarchy of Arrow’s financial instruments:

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2022
Cash and Cash Equivalents	$	487,578	$	487,578	$	487,578	$	—	$	—
Securities Available-for-Sale	582,428		582,428		—		582,428		—
Securities Held-to-Maturity	196,661		195,862		—		195,862		—
Equity Securities	1,877		1,877		—		1,877		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	4,491		4,491		—		4,491		—
Net Loans	2,709,606		2,648,804		—		—		2,648,804
Accrued Interest Receivable	8,099		8,099		—		8,099		—
Derivatives, included in other assets	4,131		4,131				4,131
Deposits	3,715,373		3,711,189		—		3,711,189		—
Federal Home Loan Bank Term Advances	25,000		25,001		—		25,001		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	102		102		—		102		—
Derivatives, included in other liabilities	4,131		4,131		—		4,131		—
December 31, 2021
Cash and Cash Equivalents	$	457,696	$	457,696	$	457,696	$	—	$	—
Securities Available-for-Sale	559,316		559,316		—		559,316		—
Securities Held-to-Maturity	196,566		201,292		—		201,292		—
Equity Securities	1,747		1,747		—		1,747
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,380		5,380		—		5,380		—
Net Loans	2,640,660		2,618,311		—		—		2,618,311
Accrued Interest Receivable	7,384		7,384		—		7,384		—
Derivatives, included in other assets	2,083		2,083		—		2,083		—
Deposits	3,550,497		3,548,554		—		3,548,554		—
Federal Home Loan Bank Term Advances	45,000		45,518		—		45,518		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	138		138		—		138		—
Derivatives, included in other liabilities	2,083		2,083		—		2,083		—
March 31, 2021
Cash and Cash Equivalents	$	452,207	$	452,207	$	452,207	$	—	$	—
Securities Available-for-Sale	464,089		464,089		—		464,089		—
Securities Held-to-Maturity	214,561		221,360		—		221,360		—
Equity Securities	1,796		1,796		—		1,796
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,360		5,360		—		5,360		—
Net Loans	2,612,403		2,603,225		—		—		2,603,225
Accrued Interest Receivable	8,258		8,258		—		8,258		—
Derivatives, included in other assets	2,298		2,298		—		2,298		—
Deposits	3,453,588		3,265,208		—		3,265,208		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	6,795		6,795		—		6,795		—
Federal Home Loan Bank Term Advances	45,000		46,176		—		46,176		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	237		237		—		237		—
Derivatives, included in other liabilities	2,298		2,298		—		2,298		—

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Note 11.    LEASES (Dollars In Thousands)

Arrow is a lessee in its leases, which are mainly for financial services locations in addition to leases for corporate vehicles. These leases generally require Arrow to pay third-party expenses on behalf of the Lessor, which are referred to as variable payments. Under some leases, Arrow pays the variable payments to the lessor, and in other leases, Arrow pays the variable payments directly to the applicable third party. None of Arrow's current leases include any residual value guarantees or any subleases, and there are no significant rights and obligations of Arrow for leases that have not commenced as of the reporting date.

Arrow leases two of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves as a Director on the Board of Directors of each of Arrow and Saratoga National. Arrow also leases one administrative office from an entity controlled by Elizabeth Miller, who serves as a Director on the Board of Directors of each of Arrow and Glens Falls National.

The following includes quantitative data related to Arrow's leases as of and for the three months ended March 31, 2022 and March 31, 2021:

		Three Months Ended
Finance Lease Amounts:	Classification	March 31, 2022			March 31, 2021
Right-of-Use Assets	Premises and Equipment, Net	$	4,770		$	4,947
Lease Liabilities	Finance Leases	5,156			5,205
Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	6,676		$	5,435
Lease Liabilities	Other Liabilities	6,863			5,522
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	49		$	49
Operating Outgoing Cash Flows From Operating Leases		260			261
Financing Outgoing Cash Flows From Finance Leases		13			12
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		—			331
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		28.0			28.9
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		11.2			12.5
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		2.81		%	3.13		%

Lease cost information for the Company's leases is as follows:
	Three Months Ended
	March 31, 2022		March 31, 2021
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	44
Interest on Lease Liabilities	49		49
Operating Lease Cost	312		209
Short-term Lease Cost	10		5
Variable Lease Cost	95		104
Total Lease Cost	$	510	$	411

40

Future Lease Payments at March 31, 2022 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2023	$	1,206	$	243
3/31/2024	904		243
3/31/2025	732		254
3/31/2026	682		265
3/31/2027	618		268
Thereafter	4,053		7,465
Total Undiscounted Cash Flows	$	8,195	$	8,738
Less: Net Present Value Adjustment	1,332		3,582
Lease Liability	$	6,863	$	5,156

41

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

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

Derivatives Not Designated as Hedging Instruments

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

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

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

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Agreements
	March 31, 2022		December 31, 2021		March 31, 2021
Fair value adjustment included in other assets	$	4,131	$	2,083	$	2,298
Fair value adjustment included in other liabilities	4,131		2,083		2,298
Notional amount	171,182		172,668		175,113

Derivatives Designated as Hedging Instruments

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

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

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

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
	Three Months Ended		Twelve Months Ended		Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
Amount of gain recognized in AOCI	$	1,512	$	1,249	$	1,982
Amount of gain reclassified from AOCI to interest expense	29		126		28

Note 13.    COVID-19 PANDEMIC

The COVID-19 pandemic caused significant disruptions in the United States economy, which impacted the activities and operations of Arrow and its customers. The pandemic also caused disruption in the financial markets both globally and in the United States.

Arrow continues to monitor the impact of the pandemic, both during recovery as well as any potential setbacks, including emerging variants, and continues to mitigate the risk of harm to its employees and customers and to its operations from the pandemic. Arrow encourages customers to use contact-free alternatives such as digital banking and ATMs.

42

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Arrow Financial Corporation:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheets of Arrow Financial Corporation and subsidiaries (the Company) as of March 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the three-month periods ended March 31, 2022 and 2021, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 11, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Change in Accounting Principle

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

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP

Albany, New York

May 6, 2022

43

Item 2.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

March 31, 2022

NOTE ON TERMINOLOGY

In this Quarterly Report on Form 10-Q (this Report), the terms "Arrow," "the registrant," "the Company," "we," "us," and "our" generally refer to Arrow Financial Corporation and its subsidiaries as a group, except where the context indicates otherwise. At certain points in this Form 10-Q, Arrow's performance is compared with that of the Company's "peer group" of financial institutions. Unless otherwise specifically stated, the peer group for the purposes of this Form 10-Q is comprised of the group of 152 domestic bank holding companies with $3 to $10 billion in total consolidated assets as identified in the Federal Reserve Board’s "Bank Holding Company Performance Report" for December 31, 2021 (the most recent such report currently available), and peer group data contained herein has been derived from such report.

THE COMPANY AND ITS SUBSIDIARIES

Arrow is a two-bank holding company headquartered in Glens Falls, New York.  The banking subsidiaries are Glens Falls National whose main office is located in Glens Falls, New York, and Saratoga National whose main office is located in Saratoga Springs, New York.  Active subsidiaries of Glens Falls National include Upstate Agency, LLC (an insurance agency that sells property and casualty insurance and also specializes in selling and servicing group health care policies and life insurance), North Country Investment Advisers, Inc. (a registered investment adviser that provides investment advice to Arrow's proprietary mutual funds) and Arrow Properties, Inc. (a real estate investment trust, or REIT). Arrow also owns directly two subsidiary business trusts, organized in 2003 and 2004, which issued trust preferred securities (TRUPs), which are still outstanding.

FORWARD LOOKING STATEMENTS

This Report on Form 10-Q contains statements that are not historical in nature but rather are based on Arrow's beliefs, assumptions, expectations, estimates and projections about the future. These statements are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and involve a degree of uncertainty and attendant risk. Words such as "may," "will," "expect," "believe," "anticipate," "estimate," "continue," and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include statements regarding Arrow's asset quality, the level of allowance for credit losses, the sufficiency of liquidity sources, interest rate change exposure, changes in accounting standards, and Arrow's tax plans and strategies. Some of these statements, such as those included in the interest rate sensitivity analysis in Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," are merely presentations of what future performance or changes in future performance would look like based on hypothetical assumptions and on simulation models. Other forward-looking statements are based on Arrow's general perceptions of market conditions and trends in business activity, both Arrow's and in the banking industry generally, as well as current management strategies for future operations and development.

These forward-looking statements may not be exhaustive, are not guarantees of future performance and involve certain risks and uncertainties that are difficult to quantify or, in some cases, to identify.  You should not place undue reliance on any such forward-looking statements. In the case of all forward-looking statements, our actual outcomes and results may differ materially from what the statements predict or forecast.  Factors that could cause or contribute to such differences include, but are not limited to the following, some of which may be amplified by the COVID-19 pandemic, including emerging variants:

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

•other rapid and dramatic changes in economic and market conditions;

•sharp fluctuations in interest rates, economic activity, or consumer spending patterns;

•sudden changes in the market for products provided, such as real estate loans;

•significant changes in banking or other laws and regulations, including both enactment of new legal or regulatory measures or the modification or elimination of pre-existing measures;

•significant changes in U.S. monetary or fiscal policy, including new or revised stimulus programs or targets adopted or announced by the Federal Reserve ("monetary tightening or easing") or significant new federal legislation materially affecting the federal budget ("fiscal tightening or expansion");

•competition from other sources (e.g., non-bank entities);

•similar uncertainties inherent in banking operations or business generally, including technological developments and changes; and

•other risks detailed from time to time within our filings with the Securities and Exchange Commission (SEC).

Arrow is under no duty to update any of the forward-looking statements after the date of this Report to conform such statements to actual results. All forward-looking statements, express or implied, included in this Report and the documents incorporated by reference and that are attributable to Arrow are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Arrow or any persons acting on our behalf may issue. This Report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (the 2021 Annual Report) and our other filings with the SEC.

44

USE OF NON-GAAP FINANCIAL MEASURES

The SEC has adopted Regulation G, which applies to certain public disclosures, including earnings releases, made by registered companies that contain "non-GAAP financial measures."  GAAP is generally accepted accounting principles in the United States of America.  Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure and a statement of Arrow's reasons for utilizing the non-GAAP financial measure as part of its financial disclosures.  The SEC has exempted from the definition of "non-GAAP financial measures" certain commonly used financial measures that are not based on GAAP.  When these exempted measures are included in public disclosures, supplemental information is not required.  The following measures used in this Report, which are commonly utilized by financial institutions, have not been specifically exempted by the SEC and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules, although Arrow is unable to state with certainty that the SEC would so regard them.

Tax-Equivalent Net Interest Income and Net Interest Margin: Net interest income, as a component of the tabular presentation by financial institutions of Selected Financial Information regarding their recently completed operations, as well as disclosures based on that tabular presentation, is commonly presented on a tax-equivalent basis.  That is, to the extent that some component of the institution's net interest income, which is presented on a before-tax basis, is exempt from taxation (e.g., is received by the institution as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added to the actual before-tax net interest income total.  This adjustment is considered helpful in comparing one financial institution's net interest income to that of another institution or in analyzing any institution’s net interest income trend line over time, to correct any analytical distortion that might otherwise arise from the fact that financial institutions vary widely in the proportions of their portfolios that are invested in tax-exempt securities, and from the fact that even a single institution may significantly alter over time the proportion of its own portfolio that is invested in tax-exempt obligations.  Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average earning assets.  For purposes of this measure as well, tax-equivalent net interest income is generally used by financial institutions, again to provide a better basis of comparison from institution to institution and to better demonstrate a single institution’s performance over time. Arrow follows these practices.

The Efficiency Ratio: Financial institutions often use an "efficiency ratio" as a measure of expense control.  The efficiency ratio typically is defined as the ratio of noninterest expense to net interest income and noninterest income.  Net interest income as utilized in calculating the efficiency ratio is typically the same as the net interest income presented in Selected Financial Information table discussed in the preceding paragraph, i.e., it is expressed on a tax-equivalent basis.  Moreover, many financial institutions, in calculating the efficiency ratio, also adjust both noninterest expense and noninterest income to exclude from these items (as calculated under GAAP) certain recurring component elements of income and expense, such as intangible asset amortization (which is included in noninterest expense under GAAP but may be excluded therefrom for purposes of calculating the efficiency ratio) and securities gains or losses (which are reflected in the calculation of noninterest income under GAAP but may be excluded therefrom for purposes of calculating the efficiency ratio).  Arrow makes these adjustments.

Tangible Book Value per Share:  Tangible equity is total stockholders’ equity less intangible assets.  Tangible book value per share is tangible equity divided by total shares issued and outstanding.  Tangible book value per share is often regarded as a more meaningful comparative ratio than book value per share as calculated under GAAP, that is, total stockholders’ equity including intangible assets divided by total shares issued and outstanding.  Intangible assets include many items, but in Arrow's case, essentially represents goodwill.

Adjustments for Certain Items of Income or Expense:  In addition to our regular utilization in our public filings and disclosures of the various non-GAAP measures commonly utilized by financial institutions discussed above, Arrow may also elect from time to time, in connection with our presentation of various financial measures prepared in accordance with GAAP, such as net income, earnings per share (EPS), return on average assets (ROA), and return on average equity (ROE), to provide as well certain comparative disclosures that adjust these GAAP financial measures, typically by removing them from the impact of certain transactions or other material items of income or expense that are unusual or unlikely to be repeated.  Arrow will do so only if it believes that provision of the resulting non-GAAP financial measures may improve the average investor's understanding of our results of operations by separating out items that have a disproportional positive or negative impact on the particular period in question or by otherwise permitting a better comparison from period-to-period in our results of operations with respect to our fundamental lines of business, including the commercial banking business.

Arrow believes that the non-GAAP financial measures disclosed from time-to-time are useful in evaluating our performance and that such information should be considered as supplemental in nature, and not as a substitute for, or superior to, the related financial information prepared in accordance with GAAP.  Non-GAAP financial measures may differ from similar measures presented by other companies.

45

Arrow Financial Corporation

Selected Quarterly Information

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

Quarter Ended	3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
Net Income	$	12,575		$	10,309		$	12,989		$	13,279		$	13,280
Transactions in Net Income (Net of Tax):
Net Changes in Fair Value of Equity Investments	96			(104)			(79)			145			119
Share and Per Share Data:1
Period End Shares Outstanding	16,013			16,041			16,020			16,039			16,009
Basic Average Shares Outstanding	16,030			16,028			16,027			16,024			15,994
Diluted Average Shares Outstanding	16,083			16,091			16,085			16,085			16,030
Basic Earnings Per Share	$	0.78		$	0.64		$	0.81		$	0.83		$	0.83
Diluted Earnings Per Share	0.78			0.63			0.81			0.83			0.83
Cash Dividend Per Share	0.270			0.260			0.252			0.252			0.252
Selected Quarterly Average Balances:
Interest-Bearing Deposits at Banks	$	410,644		$	551,890		$	416,500		$	369,034		$	334,155
Investment Securities	797,347			681,732			675,980			668,089			593,822
Loans	2,678,796			2,660,665			2,641,726			2,651,449			2,618,362
Deposits	3,582,256			3,590,766			3,435,933			3,395,271			3,254,815
Other Borrowed Funds	68,596			70,162			72,187			74,957			82,659
Stockholders’ Equity	370,264			364,409			359,384			350,203			340,708
Total Assets	4,054,943			4,060,540			3,902,041			3,851,921			3,712,020
Return on Average Assets, annualized	1.26		%	1.01		%	1.32		%	1.38		%	1.45		%
Return on Average Equity, annualized	13.77		%	11.22		%	14.34		%	15.21		%	15.81		%
Return on Average Tangible Equity, annualized 2	14.72		%	12.01		%	15.36		%	16.32		%	17.00		%
Average Earning Assets	$	3,886,787		$	3,894,287		$	3,734,206		$	3,688,572		$	3,546,339
Average Paying Liabilities	2,855,884			2,841,304			2,705,283			2,721,961			2,639,240
Interest Income	28,947			28,354			29,807			29,695			27,694
Tax-Equivalent Adjustment 3	270			285			292			293			235
Interest Income, Tax-Equivalent 3	29,217			28,639			30,099			29,988			27,929
Interest Expense	1,122			1,152			1,169			1,335			1,539
Net Interest Income	27,825			27,202			28,638			28,360			26,155
Net Interest Income, Tax-Equivalent 3	28,095			27,487			28,930			28,653			26,390
Net Interest Margin, annualized	2.90		%	2.77		%	3.04		%	3.08		%	2.99		%
Net Interest Margin, Tax Equivalent, annualized 3	2.93		%	2.80		%	3.07		%	3.12		%	3.02		%
Efficiency Ratio Calculation: 4
Noninterest Expense	$	18,945		$	20,860		$	19,423		$	19,087		$	18,678
Less: Intangible Asset Amortization	49			52			51			53			54
Net Noninterest Expense	$	18,896		$	20,808		$	19,372		$	19,034		$	18,624
Net Interest Income, Tax-Equivalent 3	$	28,095		$	27,487		$	28,930		$	28,653		$	26,390
Noninterest Income	8,162			7,589			7,694			8,478			8,608
Less: Net Changes in Fair Value of Equity Invest.	130			(139)			(106)			196			160
Net Gross Income	$	36,127		$	35,215		$	36,730		$	36,935		$	34,838
Efficiency Ratio 4	52.30		%	59.09		%	52.74		%	51.53		%	53.46		%
Period-End Capital Information:
Total Stockholders’ Equity (i.e. Book Value)	$	357,243		$	371,186		$	360,171		$	353,033		$	342,413
Book Value per Share 1	22.31			23.14			22.48			22.01			21.39
Goodwill and Other Intangible Assets, net	23,691			23,791			23,879			23,955			23,922
Tangible Book Value per Share 1,2	20.83			21.66			20.99			20.52			19.89
Capital Ratios:5
Tier 1 Leverage Ratio	9.37		%	9.20		%	9.39		%	9.29		%	9.37		%
Common Equity Tier 1 Capital Ratio	13.48		%	13.77		%	13.71		%	13.79		%	13.56		%
Tier 1 Risk-Based Capital Ratio	14.23		%	14.55		%	14.51		%	14.61		%	14.39		%
Total Risk-Based Capital Ratio	15.33		%	15.69		%	15.66		%	15.78		%	15.55		%
Assets Under Trust Admin. & Investment Mgmt.	$	1,793,747		$	1,851,101		$	1,778,659		$	1,804,854		$	1,725,754

46

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, Tangible Equity and Return on Tangible Equity exclude goodwill and other intangible assets, net from total equity.  These are non-GAAP financial measures which Arrow believes provide investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 45.
		3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
	Total Stockholders' Equity (GAAP)	$	357,243		$	371,186		$	360,171		$	353,033		$	342,413
	Less: Goodwill and Other Intangible assets, net	23,691			23,791			23,879			23,955			23,922
	Tangible Equity (Non-GAAP)	$	333,552		$	347,395		$	336,292		$	329,078		$	318,491
	Period End Shares Outstanding	16,013			16,041			16,020			16,039			16,009
	Tangible Book Value per Share      (Non-GAAP)	$	20.83		$	21.66		$	20.99		$	20.52		$	19.89
	Net Income	12,575			10,309			12,989			13,279			13,280
	Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)	14.72		%	12.01		%	15.36		%	16.32		%	17.00		%
3.	Non-GAAP Financial Measures Reconciliation: Net Interest Margin, Tax-Equivalent is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which Arrow believes provides investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 45.
		3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
	Interest Income (GAAP)	$	28,947		$	28,354		$	29,807		$	29,695		$	27,694
	Add: Tax-Equivalent adjustment      (Non-GAAP)	270			285			292			293			235
	Interest Income - Tax Equivalent      (Non-GAAP)	$	29,217		$	28,639		$	30,099		$	29,988		$	27,929
	Net Interest Income (GAAP)	$	27,825		$	27,202		$	28,638		$	28,360		$	26,155
	Add: Tax-Equivalent adjustment      (Non-GAAP)	270			285			292			293			235
	Net Interest Income - Tax Equivalent      (Non-GAAP)	$	28,095		$	27,487		$	28,930		$	28,653		$	26,390
	Average Earning Assets	$	3,886,787		$	3,894,287		$	3,734,206		$	3,688,572		$	3,546,339
	Net Interest Margin (Non-GAAP)*	2.93		%	2.80		%	3.07		%	3.12		%	3.02		%
4.	Non-GAAP Financial Measures: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. Arrow believes that the efficiency ratio provides investors with information that is useful in understanding our financial performance. Arrow defines efficiency ratio as the ratio of our noninterest expense to our net gross income (which equals tax-equivalent net interest income plus noninterest income, as adjusted). There is no GAAP financial measure that is closely comparable to the efficiency ratio. See "Use of Non-GAAP Financial Measures" on page 45.
5.	For the current quarter, all of the regulatory capital ratios in the table above, as well as the Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below, are estimates based on, and calculated in accordance with, bank regulatory capital rules. All prior quarters reflect actual results. The CET1 ratio at March 31, 2022 listed in the tables (i.e., 13.48%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
		3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
	Total Risk Weighted Assets	$	2,661,952		$	2,552,812		$	2,511,910		$	2,438,445		$	2,404,456
	Common Equity Tier 1 Capital	358,738			351,497			344,507			336,265			326,039
	Common Equity Tier 1 Capital Ratio	13.48		%	13.77		%	13.71		%	13.79		%	13.56		%
* Quarterly ratios have been annualized.

47

Average Consolidated Balance Sheets and Net Interest Income Analysis
(Dollars In Thousands)
Quarter Ended March 31:	2022						2021
			Interest		Rate				Interest		Rate
	Average		Income/		Earned/		Average		Income/		Earned/
	Balance		Expense		Paid		Balance		Expense		Paid
Interest-Bearing Deposits at Banks	$	410,644	$	198	0.20	%	$	334,155	$	85	0.10	%
Investment Securities:
Fully Taxable	618,806		2,189		1.43		403,340		1,506		1.51
Exempt from Federal Taxes	178,541		821		1.86		190,482		920		1.96
Loans	2,678,796		25,739		3.90		2,618,362		25,183		3.90
Total Earning Assets	3,886,787		28,947		3.02		3,546,339		27,694		3.17
Allowance for Credit Losses	(27,165)						(27,811)
Cash and Due From Banks	37,654						35,779
Other Assets	157,667						157,713
Total Assets	$	4,054,943					$	3,712,020
Deposits:
Interest-Bearing Checking Accounts	$	1,027,740	163		0.06		$	859,972	219		0.10
Savings Deposits	1,557,855		417		0.11		1,435,555		565		0.16
Time Deposits of $250,000 or More	70,101		28		0.16		109,644		120		0.44
Other Time Deposits	131,592		109		0.34		151,410		222		0.59
Total Interest-Bearing Deposits	2,787,288		717		0.10		2,556,581		1,126		0.18
Short-Term Borrowings	—		—				12,458		2		0.07
FHLBNY Term Advances & Other Long-Term Debt	63,444		356		2.28		65,000		362		2.26
Finance Leases	5,152		49		3.86		5,201		49		3.82
Total Interest-Bearing Liabilities	2,855,884		1,122		0.16		2,639,240		1,539		0.24
Noninterest-bearing deposits	794,968						698,234
Other Liabilities	33,827						33,838
Total Liabilities	3,684,679						3,371,312
Stockholders’ Equity	370,264						340,708
Total Liabilities and Stockholders’ Equity	$	4,054,943					$	3,712,020
Net Interest Income			$	27,825					$	26,155
Net Interest Spread					2.86	%					2.93	%
Net Interest Margin					2.90	%					2.99	%

48

OVERVIEW

The following discussion and analysis focuses on and reviews the results of operations for the three-month period ended March 31, 2022 and the financial conditions as of March 31, 2022 and 2021.  The discussion below should be read in conjunction with the selected quarterly and annual information set forth above and the Unaudited Interim Consolidated Financial Statements and other financial data presented elsewhere in this Report.  When necessary, prior-year financial information has been reclassified to conform to the current-year presentation.

COVID-19 Pandemic:

Arrow continues to monitor the pandemic and all the challenges it presents on the business, operations and the health and safety of our employees and customers.

In the first quarter of 2022, the New York State HERO Act safety protocols were lifted. The Arrow Business Continuity Plan Committee continues to meet regularly to evaluate pandemic metrics and our response.

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

Summary of Q1 2022 Financial Results: Net income for the first quarter of 2022 was $12.6 million, compared to $13.3 million in the first quarter of 2021. The year-over-year decrease in net income was primarily due to the following factors: a provision expense of $769 thousand for the first quarter of 2022, as the result of loan growth and current forecasted economic conditions, compared to a credit to the provision of $648 thousand in the first quarter of 2021 and the strategic curtailment of secondary market loan sale transactions in 2021, which reduced gain-on-sale income by $1.4 million when comparing year-over-year quarters.

Diluted earnings per share (EPS) for the quarter was $0.78, a decrease of 6.0% from EPS of $0.83 reported for the first quarter of 2021. Return on average equity (ROE) for the first quarter of 2022 decreased to 13.77%, as compared to a ROE of 15.81% for the quarter ended March 31, 2021. Return on average assets (ROA) for the first quarter of 2022 was 1.26%, a decrease from an ROA of 1.45% for the quarter ended March 31, 2021.

Total loans were $2.7 billion as of March 31, 2022. Loan growth for the first quarter of 2022 was $69.3 million and increased $98.0 million, or 3.7%, from March 31, 2021. Total outstanding commercial loans decreased $7.5 million, or 0.9%, in the first quarter. PPP loans, included in the commercial portfolio, decreased $24.9 million in the first quarter. The consumer loan portfolio grew by $56.1 million, or 6.1% in the first quarter, primarily within the indirect automobile lending program. Total outstanding residential real estate loans increased $20.8 million for the first quarter of 2022.

At March 31, 2022, deposit balances were $3.7 billion. Deposits increased in the first quarter of 2022 by $164.9 million and increased by $261.8 million, or 7.6%, from the prior-year level. Municipal deposits increased $107.0 million in the first quarter and $68.0 million, or 7.4% from March 31, 2021. Non-municipal deposits increased $57.9 million for the quarter and $193.8 million, or 7.6% from March 31, 2021. Noninterest-bearing deposits represented 21.9% of total deposits at March 31, 2022, compared to 21.8% of total deposits at March 31, 2021. At March 31, 2022, total time deposits were $177.0 million, a decrease of $69.0 million, or 28.1%, compared to the prior year. A Federal Home Loan Bank (FHLB) term advance of $20 million was prepaid during Q1 2022.

Net interest income for the first quarter was $27.8 million, up 6.4% from $26.2 million in the comparable quarter of 2021. Interest and fees on loans were $25.7 million for the first quarter of 2022, an increase of 2.2% from $25.2 million for the quarter ending March 31, 2021. Interest and fees related to PPP loans, included in the $25.7 million, were $1.1 million in the first quarter of 2022. Interest expense for the first quarter of 2022 was $1.1 million, a decrease of $0.4 million, or 27.1%, from the $1.5 million in expense for the comparable quarter ending March 31, 2021.

Net interest margin was 2.90% for the quarter, compared to 2.99% for the first quarter of 2021. The decrease in net interest margin from the prior year was due to a variety of factors, including an increase in cash and investments which impacted the yield of earning assets and a decrease in the amount of PPP loan interest and related fees. The cost of interest-bearing liabilities was favorably impacted by the mix of deposits and lower deposit rates.

Noninterest income for the three months ended March 31, 2022 was $8.2 million, compared to $8.6 million in the comparable 2021 quarter. Income from fiduciary activities for the three months ended March 31, 2022, increased by $218 thousand over the comparable quarter of 2021. Fees and other services to customers increased $186 thousand over the comparable quarter of 2021. Gain on sales of loans decreased $1.4 million from the first quarter of 2021 as a result of the strategic decision to retain more newly originated real estate loans. Other operating income increased $672 thousand over the comparable quarter of 2021 due to a variety of factors including bank-owned life insurance proceeds and gains on other assets.

Noninterest expense for the first quarter of 2022 was $18.9 million, an increase from $18.7 million for the first quarter of 2021. The largest component of noninterest expense was salaries and benefits paid to our employees, which totaled $11.3 million for the first quarter of 2022. The expense for estimated credit losses on off-balance sheet credit exposures included in other expenses was a credit of $316 thousand.

For the first quarter of 2022, the provision for credit losses was $769 thousand. The allowance for credit losses was $27.7 million on March 31, 2022, which represented 1.01% of loans outstanding, as compared to 1.02% on March 31, 2021.

The changes in net income, net interest income and net interest margin between the three-month periods are discussed in detail under the heading "RESULTS OF OPERATIONS," beginning on page 63.

Regulatory Capital and Increase in Stockholders' Equity: At March 31, 2022, Arrow continued to exceed all required minimum capital ratios under the current bank regulatory capital rules as implemented under Dodd-Frank (the "Capital Rules") at both the holding company and bank levels.  At that date, both subsidiary banks, as well as the holding company, continued to qualify as "well-capitalized" under the capital classification guidelines as defined by the Capital Rules.  Because of continued profitability and strong

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asset quality, the regulatory capital levels throughout recent years have consistently remained well in excess of the various required regulatory minimums in effect from time to time, as they do at present.

In 2020, federal bank regulators introduced an optional simplified measure of capital adequacy for qualifying community banking organizations (CBLR).  A qualifying community banking organization that opts into the CBLR framework and meets all the requirements under the CBLR framework will be considered to have met the well-capitalized ratio requirements under the “prompt corrective action” regulations and will not be required to report or calculate risk-based capital ratios.

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

Stockholders’ equity was $357.2 million at March 31, 2022, a decrease of $13.9 million, or 3.8%, from the December 31, 2021 level of $371.2 million, and an increase of $14.8 million, or 4.3%, from the prior-year level. The decrease in stockholders' equity over the first three months of 2022 principally reflected the following factors: the addition of (i) $12.6 million of net income for the period plus (ii) issuance of $1.0 million of common stock through employee benefit and dividend reinvestment plans reduced by (iv) other comprehensive loss of $21.1 million, (v) cash dividends of $4.3 million and (vi) repurchases of common stock of $2.1 million. The majority of other comprehensive loss, $22.3 million, relates to net unrealized losses on AFS securities as a result of rising interest rates which occurred during the first quarter of 2022. The components of the change in stockholders’ equity since year-end 2021 are presented in the Consolidated Statement of Changes in Stockholders’ Equity on page 6, and are discussed in more detail in the next section.

At March 31, 2022, book value per share was $22.31, up by 4.3% over the prior-year level. Tangible book value per share (a non-GAAP measure that deducts intangible assets from stockholders' equity) was $20.83, an increase of $0.94,or 4.7%, over the level as of March 31, 2021. See the disclosure on page 45 related to the use of non-GAAP financial measures including tangible book value.

On March 31, 2022, Arrow's closing stock price was $32.42, representing a trading multiple of 1.56 to tangible book value. In the first quarter of 2022, Arrow paid a quarterly cash dividend of $0.27. On September 24, 2021, a 3% stock dividend was distributed. Further discussion of dividends is included in the Capital Components; Stock Repurchases; Dividends section located on page 61.

Loan Quality: Net charge-offs for the first quarter of 2022 were $389 thousand as compared to $444 thousand for the comparable 2021 quarter. The ratio of net charge-offs to average loans (annualized) was 0.06% for the three month period ended March 31, 2022, a decrease from 0.07% for the three month period ended March 31, 2021.

For the first quarter of 2022, the provision for credit losses was $769 thousand and the expense for estimated credit losses on off-balance sheet credit exposures was a credit of $316 thousand. The allowance for credit losses was $27.7 million on March 31, 2022, which represented 1.01% of loans outstanding, as compared to 1.02% on March 31, 2021.

Nonperforming loans were $9.9 million at March 31, 2022, representing 0.36% of period-end loans, an increase from the March 31, 2021 ratio of 0.32%. The ratio continues to compare favorably with the weighted average ratio of the peer group of 0.48% at December 31, 2021. Nonperforming assets of $10.1 million at March 31, 2022 represented 0.24% of period-end assets up from 0.22% at March 31, 2021.

Loan Segments: As of March 31, 2022, total loans grew by $69.3 million, or 2.6%, as compared to the balance at December 31, 2021. The largest increase was in consumer loans which increased $56.1 million, or 6.1%, primarily comprised of automobile loans. Commercial and commercial real estate loans, decreased by $7.5 million, or 0.9%, from December 31, 2021. PPP loans, included in the commercial portfolio, decreased $24.9 million from December 31, 2021. The residential real estate loan portfolio increased $20.8 million from December 31, 2021.

•Commercial and Commercial Real Estate Loans: Combined, these loans comprise 29.0% of the total loan portfolio at period-end. Commercial property values in Arrow's region have largely remained stable, however, there remains uncertainty surrounding market conditions due to the pandemic. Appraisals on nonperforming and watched CRE loan properties are updated as deemed necessary, usually when the loan is downgraded or when there has been significant market deterioration since the last appraisal.

•Consumer Loans: These loans (primarily automobile loans) comprised 35.7% of the total loan portfolio at period-end. Consumer automobile loans at March 31, 2022, were 99.5% of this portfolio segment. In the first three months of 2022, Arrow did not experience any significant increase in the delinquency rate or in the percentage of nonperforming loans in this segment. The vast majority of automobile loans are initiated through the purchase of vehicles by consumers with automobile dealers. As of March 31, 2022, demand is strong. However, supply constraints as well as inflation, with both new and used vehicles, may limit the potential growth in this category.

•Residential Real Estate Loans: These loans, including home equity loans, made up 35.3% of the total loan portfolio at period-end. The residential real estate market in Arrow's service area has been stable in recent periods. Arrow originated nearly all of the residential real estate loans currently held in the loan portfolio and applies conservative underwriting standards to loan originations. Arrow typically sells a portion of residential real estate mortgage originations into the secondary market. The ratio of the sales of originations to total originations tends to fluctuate from period to period based on market conditions and other factors. From the second half 2021, sales decreased primarily as the result of the strategic decision to grow the residential loan portfolio. The rate at which mortgage loan originations are sold in future periods will depend on various circumstances, including prevailing mortgage rates, other lending opportunities, capital and liquidity needs, and the availability of a market for such transactions.

Liquidity and Access to Credit Markets: Arrow has not experienced any liquidity events or special concerns in recent years or thus far in 2022. Arrow’s liquidity position provides the necessary flexibility to address any unexpected near-term disruptions.  Interest-bearing cash balances at March 31, 2022 were $448.6 million compared to $406.6 million at March 31, 2021.  Deposit growth provided an abundance of liquidity to fund Arrow's asset growth as well as prepay a Federal Home Loan Bank (FHLB) term advance of $20

50

million during the first quarter of 2022. Contingent lines of credit are also available. Operating collateralized lines of credit are established and available through the FHLBNY and FRB, totaling over $1.3 billion. The terms of Arrow's lines of credit have not changed significantly in recent periods (see the general liquidity discussion on page 61). Historically, Arrow has principally relied on asset-based liquidity (i.e., funds in overnight investments and cash flow from maturing investments and loans) with liability-based liquidity as a secondary source of funds (the main liability-based sources are an overnight borrowing arrangement with correspondent banks, an arrangement for overnight borrowing and term credit advances from the FHLBNY, and an additional arrangement for short-term advances at the Federal Reserve Bank discount window). Regular liquidity stress tests and tests of the contingent liquidity plan are performed to ensure that an adequate amount of available funds can be generated to meet a wide variety of potential liquidity crises.

Reference Rate Reform: On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR (the "IBA"), and the United Kingdom’s Financial Conduct Authority, the regulatory supervisor for the IBA, announced certain future dates that LIBOR settings will cease to be provided by any administrator. For Arrow, U.S. Dollar LIBOR indices utilized by its existing financial instruments will cease after June 30, 2023. In addition, regulators have issued statements indicating that financial institutions should not issue new LIBOR-based financial instruments after January 1, 2022. To prepare for the upcoming cessation of LIBOR, Arrow established a committee in 2020 comprised of bank management to prepare for the discontinuance of LIBOR, which is widely used to reprice floating rate financial instruments. Based on a review of existing floating rate financial instruments, management has determined that the financial products tied to LIBOR will not be subject to cessation until June 30, 2023. This review also identified that only a few legacy contracts do not include appropriate fallback language. Management anticipates that the appropriate fallback provisions for these contracts will be implemented and allow for an orderly transition prior to the June 30, 2023 cessation of U.S. Dollar LIBOR. Arrow no longer issues new LIBOR-based financial instruments. Furthermore, U.S. Dollar LIBOR indices utilized by Arrow's existing financial instruments shall cease on or before June 30, 2023. On January 1, 2022, Arrow began using the CME Term Secured Overnight Financing Rate (SOFR) as the primary index for financial instruments and the Bloomberg Short Term Bank Yield Index (BSBY) as a secondary index.

Visa Class B Common Stock: Arrow's subsidiary bank, Glens Falls National, like other Visa member banks, bears some indirect contingent liability for Visa's direct liability arising out of certain antitrust claims involving merchant discounts to the extent that Visa's liability might exceed the amount funded in its litigation escrow account. On December 13, 2019, the Court granted final approval to a settlement in this class action lawsuit. On January 3, 2020 an appeal of the final-approved order was filed with the court. On December 16, 2021, the second circuit court of appeals set oral arguments regarding objections to final approval of the settlement for March 16, 2022. On March 16, 2022, the Second Circuit Court of Appeals heard oral arguments regarding objections to final approval of the Settlement. It is currently unknown when the appeals will be decided. When the appeals process is resolved and assuming the balance in the litigation escrow account is sufficient to cover the litigation claims and related expenses, Arrow could potentially realize a gain on the receipt of Visa Class A common stock. At March 31, 2022, Glens Falls National held 27,771 shares of Visa Class B common stock, and utilizing the conversion ratio to Class A common stock at that time, these Class B shares would convert to approximately 45,000 shares of Visa Class A common stock. Since the litigation settlement is not certain, Arrow has not recognized any economic value for these shares.

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CHANGE IN FINANCIAL CONDITION

Summary of Selected Consolidated Balance Sheet Data

(Dollars in Thousands)

	At Period-End
	3/31/2022		12/31/2021		3/31/2021		$ Change From December		$ Change From March		% Change From December (not annualized)		% Change From March
Interest-Bearing Bank Balances	$	448,614	$	430,718	$	406,605	$	17,896	$	42,009	4.2	%	10.3	%
Securities Available-for-Sale	582,428		559,316		464,089		23,112		118,339		4.1	%	25.5	%
Securities Held-to-Maturity	196,661		196,566		214,561		95		(17,900)		—	%	(8.3)	%
Equity Securities	1,877		1,747		1,796		130		81		7.4	%	4.5	%
Loans (1)	2,737,267		2,667,941		2,639,243		69,326		98,024		2.6	%	3.7	%
Allowance for Credit Losses	27,661		27,281		26,840		380		821		1.4	%	3.1	%
Earning Assets (1)	3,971,338		3,861,668		3,731,654		109,670		239,684		2.8	%	6.4	%
Total Assets	$	4,156,402	$	4,027,952	$	3,903,711	$	128,450	$	252,691	3.2	%	6.5	%
Noninterest-Bearing Deposits	$	813,066	$	810,274	$	751,884	$	2,792	$	61,182	0.3	%	8.1	%
Interest-Bearing Checking   Accounts	1,154,068		994,391		992,486		159,677		161,582		16.1	%	16.3	%
Savings Deposits	1,571,274		1,531,287		1,463,229		39,987		108,045		2.6	%	7.4	%
Time Deposits over $250,000	48,288		82,811		100,212		(34,523)		(51,924)		(41.7)	%	(51.8)	%
Other Time Deposits	128,677		131,734		145,777		(3,057)		(17,100)		(2.3)	%	(11.7)	%
Total Deposits	$	3,715,373	$	3,550,497	$	3,453,588	$	164,876	$	261,785	4.6	%	7.6	%
Federal Funds Purchased and   Securities Sold Under   Agreements to Repurchase	$	—	$	—	$	6,795	$	—	$	(6,795)	—	%	(100.0)	%
FHLBNY Advances - Term	25,000		45,000		45,000		(20,000)		(20,000)		(44.4)	%	(44.4)	%
Junior Subordinated Obligations Issued to Unconsolidated   Subsidiary Trusts	20,000		20,000		20,000		—		—		—	%	—	%
Stockholders' Equity	357,243		371,186		342,413		(13,943)		14,830		(3.8)	%	4.3	%

(1) Includes Nonaccrual Loans.

Changes in Earning Assets: The loan portfolio at March 31, 2022, was $2.7 billion, an increase of $69.3 million, or 2.6%, from the December 31, 2021 level and up by $98.0 million, or 3.7%, from the March 31, 2021 level. The following trends were experienced in our largest segments:

•Commercial and commercial real estate loans: This segment of the loan portfolio decreased by $7.5 million, or 0.9%, during the first three months of 2022. The primary reason for the decrease was the forgiveness of $24.9 million of PPP loans during the first three months of 2022.

•Consumer loans (primarily automobile loans through indirect lending): As of March 31, 2022, these loans, primarily auto loans originated through dealerships in New York State and Vermont, increased by $56.1 million, or 6.1%, from the December 31, 2021 balance. Current demand for auto loans is strong, however, the volume of loan originations may be impacted by inflation and supply constraints currently affecting the entire industry.

•Residential real estate loans: This segment increased during the first three months of 2022 by $20.8 million, or 2.2%. In the first three months of 2022, Arrow sold $2.6 million, or 5.5%, of originations. Arrow may continue to sell a portion of mortgage loan originations in upcoming periods if market conditions and strategic balance sheet and interest-rate risk management decisions warrant.

Changes in Sources of Funds: Deposit balances reached $3.7 billion, up $261.8 million, or 7.6%, from the prior-year level. Deposits increased in the first quarter of 2022 by $164.9 million. Noninterest-bearing deposits represented 21.9% of total deposits at March 31, 2022, compared to 21.8% of total deposits on March 31, 2021. At March 31, 2022, total time deposits were $177.0 million, a decrease of $69.0 million, or 28.1%, compared to the prior year. Municipal deposits increased $68.0 million, or 7.4% from March 31, 2021. Federal home loan term advances were $25.0 million, a decrease from $45.0 million at March 31, 2021.

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Municipal Deposits: Fluctuations in balances of interest-bearing checking accounts are often the result of timing and behavior of municipal deposits.  Municipal deposits have historically averaged between 20% to 25% of total deposits. In the most recent quarters, that percentage has increased. Municipal deposits are typically placed in interest-bearing checking, savings and various time deposit accounts.

In general, there is a seasonal pattern to municipal deposits which dip to a low point in August each year.  Account balances tend to increase throughout the fall and into early winter from tax deposits, flatten out after the beginning of the ensuing calendar year, and increase again at the end of March from the electronic deposit of NYS Aid payments to school districts.  In addition to seasonal behavior, the overall level of municipal deposit balances fluctuates from year-to-year as a result of local economic factors as well as competition from other banks and non-bank entities. Municipal deposits have been impacted by increased stimulus payments in response to the COVID-19 pandemic including the American Rescue Plan Act of 2021.

Arrow used reciprocal deposits for a select group of municipalities to reduce the amount of investment securities required to be pledged as collateral for municipal deposits where municipal deposits in excess of the FDIC insurance coverage limits were transferred to other participating banks, divided into portions so as to qualify such transferred deposits for FDIC insurance coverage at each transferee bank. In return, reciprocal amounts are transferred to Arrow in equal amounts of deposits from the participant banks. The balances of reciprocal deposits were $544.9 million and $464.0 million at March 31, 2022 and March 31, 2021, respectively.

FINANCIAL CONDITION

Investment Portfolio Trends

The table below presents the changes in the period-end balances for available-for-sale, held-to-maturity and equity securities from December 31, 2021 to March 31, 2022 (in thousands).

	(Dollars in Thousands)
	Fair Value at Period-End						Net Unrealized Gains (Losses) For Period Ended
	3/31/2022		12/31/2021		Change		3/31/2022		12/31/2021		Change
Securities Available-for-Sale:
U.S. Agency Securities	$	132,744	$	108,365	$	24,379	$	(7,256)	$	(1,635)	$	(5,621)
State and Municipal Obligations	380		400		(20)		—		—		—
Mortgage-Backed Securities	448,504		449,751		(1,247)		(23,325)		1,009		(24,334)
Corporate and Other Debt Securities	800		800		—		(200)		(200)		—
Total	$	582,428	$	559,316	$	23,112	$	(30,781)	$	(826)	$	(29,955)
Securities Held-to-Maturity:
State and Municipal Obligations	$	181,180	$	184,374	$	(3,194)	$	(652)	$	4,179	$	(4,831)
Mortgage-Backed Securities	14,682		16,918		(2,236)		(147)		547		(694)
Total	$	195,862	$	201,292	$	(5,430)	$	(799)	$	4,726	$	(5,525)
Equity Securities	$	1,877	$	1,747	$	130	$	—	$	—	$	—

At March 31, 2022, Arrow held no investment securities in the securities portfolios that consisted of or included, directly or indirectly, obligations of foreign governments or governmental agencies of foreign issuers.

In the periods referenced above, Mortgage-Backed Securities consisted solely of mortgage pass-through securities and Collateralized Mortgage Obligations (CMOs) issued or guaranteed by U.S. federal agencies or by government-sponsored enterprises (GSEs). Mortgage pass-through securities provide to the investor monthly portions of principal and interest pursuant to the contractual obligations of the underlying mortgages. CMOs are pools of mortgage-backed securities, the repayments on which have generally been separated into two or more components (tranches), where each tranche has a separate estimated life and yield. Arrow's practice has been to purchase pass-through securities and CMOs that are issued or guaranteed by U.S. federal agencies or GSEs, and the tranches of CMOs purchased are generally those having shorter average lives and/or durations. Lower market interest rates and/or payment deferrals on underlying loans that make up mortgage-backed security collateral may impact cashflows.

In the periods referenced above, U.S. Government & Agency Obligations consisted solely of agency bonds issued by government-sponsored enterprises (GSEs). These securities generally pay fixed semi-annual coupons with principle payments at maturity. For some, callable options are included that may impact the timing of these principal payments. Arrow's practice has been to purchase Agency securities that are issued or guaranteed by GSEs with limited embedded optionality (call features). Final maturities are generally less than 5 years.

Arrow evaluates available-for-sale debt securities in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or non-credit related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized within the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. Arrow determined that at March 31, 2022, gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. In the first quarter of 2022, the rising interest rate environment resulted in

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an increase of unrealized losses versus the comparable prior period. Arrow does not intend to sell, nor is it more likely than not that Arrow will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. Therefore, Arrow carried no allowance for credit loss at March 31, 2022 and there was no credit loss expense recognized by Arrow with respect to the securities portfolio during the three months ended March 31, 2022.

Arrow's held to maturity debt securities are comprised of U.S. government agencies, GSEs and state and municipal obligations. U.S. government agencies and GSE securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Arrow determined that the expected credit loss on its held to maturity debt portfolio was immaterial and therefore no allowance for credit loss was recorded as of March 31, 2022.

Changes in net unrealized gains or losses during recent periods has been primarily attributable to changes in the market rates during the periods in question, with no change in the credit-worthiness of the issuers.

Investment Sales, Purchases and Maturities

There were no sales of investment securities within the three month periods ended March 31, 2022 or 2021.

The following table summarizes purchases of investment securities within the available-for-sale and held-to-maturity portfolios for the three month periods ended March 31, 2022 and 2021, as well as proceeds from the maturity and calls of investment securities within each portfolio for the respective periods presented:

(In Thousands)	Three Months Ended
Purchases:	3/31/2022		3/31/2021
Available-for-Sale Portfolio
U.S. Agency Securities	$	30,000	$	45,000
Mortgage-Backed Securities	45,049		85,481
Total Purchases	$	75,049	$	130,481
Maturities & Calls	$	21,473	$	25,976

(In Thousands)	Three Months Ended
Purchases:	3/31/2022		3/31/2021
Held-to-Maturity Portfolio
State and Municipal Obligations	$	4,950	$	619
Maturities & Calls	$	4,699	$	4,291

Loan Trends

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

Quarterly Average Loan Balances

(Dollars in Thousands)

	Quarter Ended
	3/31/2022		12/31/2021		9/30/2021		6/30/2021		3/31/2021
Commercial excluding PPP Loans	$	135,472	$	127,346	$	133,448	$	120,297	$	140,735
PPP Loans	26,086		48,778		82,042		145,094		127,023
Commercial Real Estate	631,255		623,273		606,661		591,718		579,506
Consumer	932,401		921,376		903,869		884,986		860,954
Residential Real Estate	953,582		939,892		915,706		909,354		910,144
Total Loans	$	2,678,796	$	2,660,665	$	2,641,726	$	2,651,449	$	2,618,362

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Percentage of Total Quarterly Average Loans

	Quarter Ended
	3/31/2022		12/31/2021		9/30/2021		6/30/2021		3/31/2021
Commercial excluding PPP Loans	5.0	%	4.8	%	5.0	%	4.5	%	5.3	%
PPP Loans	1.0	%	1.8	%	3.1	%	5.5	%	4.9	%
Commercial Real Estate	23.6	%	23.4	%	23.0	%	22.3	%	22.1	%
Consumer	34.8	%	34.6	%	34.2	%	33.4	%	32.9	%
Residential Real Estate	35.6	%	35.4	%	34.7	%	34.3	%	34.8	%
Total Loans	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Quarterly Yield on Loans

	Quarter Ended
	3/31/2022		12/31/2021		9/30/2021		6/30/2021		3/31/2021
Commercial (Total Portfolio)	4.17	%	3.97	%	4.81	%	6.35	%	4.17	%
Commercial excluding PPP loans	3.87	%	3.83	%	3.91	%	3.89	%	3.91	%
Commercial Real Estate	3.80	%	3.78	%	3.80	%	3.80	%	3.81	%
Consumer	3.84	%	3.87	%	3.93	%	3.92	%	3.94	%
Residential Real Estate	3.71	%	3.73	%	3.76	%	3.77	%	3.79	%
Total Loans	3.90	%	3.82	%	4.08	%	4.04	%	3.90	%

The average yield on the loan portfolio was 3.90% for the first quarter of 2022 consistent with the first quarter of 2021. Market rates declined for the majority 2021 and have begun to increase in 2022, which impacts new loan yields for fixed rate loans, and variable loan yields as these loans reach their repricing dates. Commercial loan yields have continued to be affected by PPP loans. In 2021, PPP loans generated $7.8 million in revenue. In the first quarter of 2022, an additional $1.1 million of revenue was recognized. The majority of PPP revenue is the result of fees received. The timing of PPP revenue is not linear but rather based in the timing of the forgiveness of the loan. Residential real estate yields declined in each of the five quarters presented consistent with overall market behavior as well as the effect of variable home equity loans.

Maintenance of High Quality in the Loan Portfolio: There has been no significant fluctuations in the quality of the loan portfolio or any segment thereof. In general, residential real estate loans have historically been underwritten to secondary market standards for prime loans and Arrow has not engaged in subprime mortgage lending as a business line. Similarly, high underwriting standards have generally been applied to commercial and commercial real estate lending operations and generally in the indirect lending program as well.

Commercial Loans and Commercial Real Estate Loans: Substantially all commercial and commercial real estate loans in the loan portfolio were extended to businesses or borrowers located in Arrow's regional markets. A portion of the loans in the commercial portfolio have variable rates tied to market indices, such as Prime, LIBOR or FHLBNY. Included within the commercial loan portfolio are PPP loans. Since the inception of the PPP loan program in 2020, over $234 million loans have been originated. As of March 31, 2022, over 90% of the loans originated have been forgiven with the majority of the remaining outstanding loans to be forgiven this year. Arrow believes the commercial loan portfolio will maintain its strong credit quality.

Consumer Loans: At March 31, 2022, consumer loans (primarily automobile loans originated through dealerships located in upstate New York and Vermont) continue to be a significant component of Arrow's business, comprising approximately one third of the total loan portfolio.

New consumer loan volume for the first three months of 2022 was $160.7 million, up from the $99.8 million originated in the first three months of 2021.

For credit quality purposes, Arrow assigns potential automobile loan customers into one of four tiers, ranging from lower to higher quality in terms of anticipated credit risk. Arrow's experienced lending staff not only utilizes credit evaluation software tools but also reviews and evaluates each loan individually prior to the loan being funded. Arrow believes that this disciplined approach to evaluating risk has contributed to maintaining the strong credit quality in this portfolio.

Residential Real Estate Loans: Gross originations for residential real estate loans (including refinancings of mortgage loans) for the first three months of 2022 were $47.4 million, as compared to $56.6 million for the first three months of 2021. In 2021, historically low interest rates drove strong demand for residential real estate. Arrow has also sold portions of these originations in the secondary market. In the first three months of 2022, Arrow sold $2.6 million, or 5.5%, of originations while retaining the mortgage servicing rights. In the first three months of 2021, $28.8 million, or 50.9%, of originations were sold. Beginning in the second half of 2021, sales decreased as the result of the strategic decision to grow the residential loan portfolio. The rate at which mortgage loan originations are

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sold in future periods will depend on a variety of factors, including demand for residential mortgages in our operating markets, market conditions for mortgage sales and strategic balance sheet and interest-rate risk management decisions.

Deposit Trends

The following tables provide information on trends in the balance and mix of the deposit portfolio by presenting, for each of the last five quarters, the quarterly average balances by deposit type and the percentage of total deposits represented by each deposit type. The quarterly average balances of both noninterest-bearing deposits and interest-bearing checking and savings accounts have increased significantly from prior year levels. Time deposits over $250,000 and other time deposits have decreased throughout the five quarter period.

Quarterly Average Deposit Balances

(Dollars in Thousands)

	Quarter Ended
	3/31/2022		12/31/2021		9/30/2021		6/30/2021		3/31/2021
Noninterest-Bearing Deposits	$	794,968	$	819,624	$	802,837	$	748,267	$	698,234
Interest-Bearing Checking Accounts	1,027,740		998,398		923,002		924,651		859,972
Savings Deposits	1,557,855		1,562,318		1,496,938		1,481,232		1,435,555
Time Deposits over $250,000	70,101		71,965		71,435		95,673		109,644
Other Time Deposits	131,592		138,461		141,721		145,448		151,410
Total Deposits	$	3,582,256	$	3,590,766	$	3,435,933	$	3,395,271	$	3,254,815

	Quarters Ended
	3/31/2022		12/31/2021		9/30/2021		6/30/2021		3/31/2021
Non-Municipal Deposits	$	2,639,258	$	2,629,553	$	2,590,678	$	2,510,021	$	2,445,119
Municipal Deposits	942,998		961,213		845,255		885,250		809,696
Total Deposits	$	3,582,256	$	3,590,766	$	3,435,933	$	3,395,271	$	3,254,815

Percentage of Total Quarterly Average Deposits

	Quarter Ended
	3/31/2022		12/31/2021		9/30/2021		6/30/2021		3/31/2021
Noninterest-Bearing Deposits	22.2	%	22.8	%	23.4	%	22.0	%	21.5	%
Interest-Bearing Checking Accounts	28.7	%	27.8	%	26.9	%	27.2	%	26.4	%
Savings Deposits	43.4	%	43.5	%	43.5	%	43.7	%	44.0	%
Time Deposits over $250,000	2.0	%	2.0	%	2.1	%	2.8	%	3.4	%
Other Time Deposits	3.7	%	3.9	%	4.1	%	4.3	%	4.7	%
Total Deposits	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Quarterly Cost of Deposits

	Quarter Ended
	3/31/2022		12/31/2021		9/30/2021		6/30/2021		3/31/2021
Demand Deposits	—	%	—	%	—	%	—	%	—	%
Interest-Bearing Checking Accounts	0.06	%	0.07	%	0.07	%	0.08	%	0.10	%
Savings Deposits	0.11	%	0.10	%	0.11	%	0.14	%	0.16	%
Time Deposits over $250,000	0.16	%	0.18	%	0.22	%	0.29	%	0.44	%
Other Time Deposits	0.34	%	0.35	%	0.37	%	0.43	%	0.59	%
Total Deposits	0.08	%	0.08	%	0.09	%	0.11	%	0.14	%

For the quarter ended March 31, 2022, the total cost of deposits remained flat with the previous quarter. The Fed Funds rate began to increase and is anticipated to continue to increase for the remainder of 2022. Arrow is well positioned for a variety of rate environments, see Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," for further discussion.

Non-Deposit Sources of Funds

Arrow's other sources of funds have previously included securities sold under agreements to repurchase and term advances from the FHLBNY. The securities sold under agreements to repurchase are offered to existing customers, short-term in nature and are collateralized by investment securities. The term advances from the FHLBNY are fixed rate non-callable advances with original maturities of three to five years.

The $20 million principal amount of Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts listed on the consolidated balance sheet as of March 31, 2022 (i.e., previously issued TRUPs) will, subject to certain limits, continue to qualify as Tier 1 regulatory capital for Arrow until such TRUPs mature or are redeemed. This is further discussed under "Capital Resources" beginning on page 59 of this Report.

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ASSET QUALITY

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

Summary of the Allowance and Provision for Credit Losses

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

	3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
Loan Balances:
Period-End Loans	$	2,737,267		$	2,667,941		$	2,654,751		$	2,644,082		$	2,639,243
Average Loans, Year-to-Date	2,678,796			2,643,163			2,637,265			2,634,997			2,618,362
Average Loans, Quarter-to-Date	2,678,796			2,660,665			2,641,726			2,651,449			2,618,362
Period-End Assets	4,156,402			4,027,952			4,071,104			3,896,191			3,903,711
Allowance for credit losses, Year-to-Date:
Allowance for credit losses, Beginning of Period	$	27,281		$	29,232		$	29,232		$	29,232		$	29,232
Impact of the Adoption of ASU 2016-13	—			(1,300)			(1,300)			(1,300)			(1,300)
Provision for Credit Losses, YTD	769			272			(286)			(385)			(648)
Loans Charged-off, YTD	(829)			(2,239)			(1,520)			(1,076)			(633)
Recoveries of Loans Previously Charged-off	440			1,316			830			539			189
Net Charge-offs, YTD	(389)			(923)			(690)			(537)			(444)
Allowance for credit losses, End of Period	$	27,661		$	27,281		$	26,956		$	27,010		$	26,840
Allowance for credit losses, Quarter-to-Date:
Allowance for credit losses, Beginning of Period	$	27,281		$	26,956		$	27,010		$	26,840		$	29,232
Impact of the Adoption of ASU 2016-13	—			—			—			—			(1,300)
Provision for Credit Losses, QTD	769			558			99			263			(648)
Loans Charged-off, QTD	(829)			(719)			(444)			(443)			(633)
Recoveries of Loans Previously Charged-off	440			486			291			350			189
Net Charge-offs, QTD	(389)			(233)			(153)			(93)			(444)
Allowance for credit losses, End of Period	$	27,661		$	27,281		$	26,956		$	27,010		$	26,840
Nonperforming Assets, at Period-End:
Nonaccrual Loans	$	9,750		$	10,764		$	10,723		$	7,102		$	8,087
Loans Past Due 90 or More Days   and Still Accruing Interest	55			823			555			595			242
Restructured and in Compliance with   Modified Terms	74			77			67			78			97
Total Nonperforming Loans	9,879			11,664			11,345			7,775			8,426
Repossessed Assets	180			126			272			99			242
Other Real Estate Owned	—			—			79			99			—
Total Nonperforming Assets	$	10,059		$	11,790		$	11,696		$	7,973		$	8,668
Asset Quality Ratios:
Allowance to Nonperforming Loans	280.00		%	233.89		%	237.60		%	347.40		%	318.54		%
Allowance to Period-End Loans	1.01		%	1.02		%	1.02		%	1.02		%	1.02		%
Provision to Average Loans (Quarter) (1)	0.12		%	0.08		%	0.01		%	0.04		%	(0.10)		%
Provision to Average Loans (YTD) (1)	0.12		%	0.01		%	(0.01)		%	(0.03)		%	(0.10)		%
Net Charge-offs to Average Loans (Quarter) (1)	0.06		%	0.03		%	0.02		%	0.01		%	0.07		%
Net Charge-offs to Average Loans (YTD) (1)	0.06		%	0.03		%	0.03		%	0.04		%	0.07		%
Nonperforming Loans to Total Loans	0.36		%	0.44		%	0.43		%	0.29		%	0.32		%
Nonperforming Assets to Total Assets	0.24		%	0.29		%	0.29		%	0.20		%	0.22		%
(1) Annualized

Provision for Credit Losses

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

Arrow loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with certain criticized and classified commercial-related relationships. In addition, the independent internal loan review department performs periodic reviews of the credit quality indicators on individual loans in the commercial loan portfolio.

Arrow adopted CECL on January 1, 2021. CECL calculates losses over the life of a loan or financial instrument. Arrow and its subsidiaries utilize a loss projection model updated with data from our core systems, and incorporates various assumptions to produce

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the CECL reserve. A CECL Steering Committee was created to provide a management governance function to review, critically challenge and approve components of the CECL reporting process. One key responsibility of the CECL Steering Committee is to review annually the key assumptions utilized in the CECL calculation including 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.

Driven by current economic forecasts, loan growth and net charge offs, the first quarter provision for credit losses was $769 thousand. The provision is directionally consistent with both the latest economic forecasts as well as first quarter activity. For the the first quarter of 2021, a provision of $(648) thousand was recorded. In addition, Arrow recorded an expense for estimated credit losses on off-balance sheet credit exposures in other liabilities of $316 thousand in the first quarter of 2022.

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

The ratio of the allowance for credit losses to total loans was 1.01% at March 31, 2022, a decrease from 1.02% at December 31, 2021 and March 31, 2021. Net of outstanding PPP loans, the allowance for credit losses was 1.02% of loans outstanding as of March 31, 2022.

The accounting policy relating to the allowance for credit losses is considered to be a critical accounting policy, given the uncertainty involved in evaluating the level of the allowance required to cover credit losses in the loan portfolio, and the material effect that such judgments may have on the results of operations. The process for determining the provision for credit losses is described in Note 4 to the unaudited interim consolidated financial statements.

Risk Elements

Nonperforming assets at March 31, 2022 amounted to $10.1 million, a decrease from the $11.8 million total at December 31, 2021 and an increase of $1.4 million, from $8.7 million at March 31, 2021. The increase from March 31, 2021 is the result of two commercial real estate loans being classified as nonaccrual during the third quarter of 2021. For the three month periods ended March 31, 2022 and 2021, ratios of nonperforming assets to total assets have remained below the average ratios for the peer group. (See page 44 for a discussion of the peer group.) At December 31, 2021, the ratio of loans past due 90 or more days plus nonaccrual loans plus other real estate owned to total assets was 0.29%, below the 0.34% ratio of the peer group at such date (the latest date for which peer group information is available). At March 31, 2022 the ratio was 0.24%.

The following table presents the balance of other non-current loans at period-end as to which interest income was being accrued (i.e. loans 30 to 89 days past due, as defined in bank regulatory guidelines). These non-current loans are not included in nonperforming assets, but entail heightened risk.

Loans Past Due 30-89 Days and Accruing Interest ($ in 000's)
	3/31/2022		12/31/2021		3/31/2021
Commercial Loans	$	92	$	205	$	98
Commercial Real Estate Loans	—		—		143
Residential Real Estate Loans	2,624		2,663		2,034
Consumer Loans - Primarily Indirect Automobile	9,179		9,302		3,020
Total Loans Past Due 30-89 Days    and Accruing Interest	$	11,895	$	12,170	$	5,295

At March 31, 2022, the loans in the above-referenced category totaled $11.9 million, a decrease of $0.3 million, or 2.3%, from the $12.2 million of such loans at December 31, 2021. The March 31, 2022 total of non-current loans equaled 0.43% of loans then outstanding, compared to 0.46% at December 31, 2021 and 0.20% at March 31, 2021. The change from March 31, 2021 is primarily attributable to COVID-19 pandemic stimulus in 2021.

The number and dollar amount of performing loans that demonstrate characteristics of potential weakness from time-to-time (potential problem loans) typically is a very small percentage of the loan portfolio. See the table of Credit Quality Indicators in Note 4 to the unaudited interim consolidated financial statements. Arrow considers all performing commercial and commercial real estate loans classified as substandard or lower (as reported in Note 4) to be potential problem loans. These loans will continue to be closely monitored and Arrow expects to collect all payments of contractual principal and interest in full on these classified loans.

As of March 31, 2022, Arrow held no other real estate owned. At this time, Arrow does not expect to acquire a significant number of other real estate properties in the near term as a result of payment defaults or the foreclosure process.

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PPP Loans

Arrow originated approximately $234.2 million of PPP loans in 2020 and 2021. The PPP loans have an interest rate of 1% and Arrow expects to earn approximately $9.7 million in fees related to the origination of these loans. The original term on the PPP loans is two years, however the borrower has the option to apply for forgiveness. Subsequent to the funding of the loans, additional guidance was provided that the term of the loan may be extended to five years if both parties agree to the revised terms. Arrow will recognize the fees earned over the life of the loan and will accelerate recognition of the fees if the loan is forgiven by the Small Business Administration. Arrow expects the majority of the loans to be forgiven by the end of 2022.

Outstanding PPP Loans as of March 31, 2022 (Dollars In Thousands)
PPP Loans Funded to Date	$	234,196
PPP Loans Forgiven	(215,465)
Outstanding PPP Loans	$	18,731

Income Earned on PPP Loans for the Three Months Ended  March 31, 2022 (Dollars In Thousands)
Interest Earned at Rate of 1%	$	66,911
Fees Recognized	998,919
Income Earned on PPP Loans	$	1,065,830

CAPITAL RESOURCES

Regulatory Capital Standards

Capital Adequacy Requirements. An important area of banking regulation is the federal banking system's promulgation and enforcement of minimum capitalization standards for banks and bank holding companies.

As reported in the Regulatory Reform section above, Arrow elected to opt out of utilizing the CBLR framework. The Capital Rules promulgated under Dodd-Frank will remain applicable to Arrow.

The following is a summary of certain definitions of capital under the various capital measures in the Dodd-Frank Capital Rules:

Common Equity Tier 1 Capital (CET1): Equals the sum of common stock instruments and related surplus (net of treasury stock), retained earnings, accumulated other comprehensive income (AOCI), and qualifying minority interests, minus applicable regulatory adjustments and deductions. Such deductions will include AOCI, if the organization has exercised its irrevocable option not to include AOCI in capital (Arrow made such an election). Mortgage-servicing assets, deferred tax assets, and investments in financial institutions are limited to 15 percent of CET1 in the aggregate and 10 percent of CET1 for each such item individually.

Additional Tier 1 Capital: Equals the sum of noncumulative perpetual preferred stock, tier 1 minority interests, grandfathered TRUPs, and Troubled Asset Relief Program instruments, minus applicable regulatory adjustments and deductions.

Tier 2 Capital: Equals the sum of subordinated debt and preferred stock, total capital minority interests not included in Tier 1, and allowance for loan and lease losses (not exceeding 1.25% of risk-weighted assets) minus applicable regulatory adjustments and deductions.

The following table presents the minimum regulatory capital ratios applicable to the holding company and banks under the current Capital Rules:

Capital Ratio	2022
Minimum CET1 Ratio	4.500	%
Capital Conservation Buffer ("Buffer")	2.500	%
Minimum CET1 Ratio Plus Buffer	7.000	%
Minimum Tier 1 Risk-Based Capital Ratio	6.000	%
Minimum Tier 1 Risk-Based Capital Ratio Plus Buffer	8.500	%
Minimum Total Risk-Based Capital Ratio	8.000	%
Minimum Total Risk-Based Capital Ratio Plus Buffer	10.500	%
Minimum Leverage Ratio	4.000	%

These minimum capital ratios, especially the CET1 ratio (4.5%) and the enhanced Tier 1 risk-based capital ratio (6.0%), represent a heightened and more restrictive capital regime than institutions like Arrow previously had to meet under the prior capital rules.

At March 31, 2022, Arrow's holding company and both of its subsidiary banks exceeded by a substantial amount each of the applicable minimum capital ratios established under the Capital Rules, including the minimum CET1 Ratio, the minimum Tier 1 Risk-Based Capital Ratio, the minimum Total Risk-Based Capital Ratio, and the minimum Leverage Ratio, including in the case of each risk-based ratio, the capital buffer.

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Prompt Corrective Action Capital Classifications. Under applicable banking law, federal banking regulators are required to take prompt corrective action with respect to depository institutions that do not meet certain minimum capital requirements.  For these purposes, the regulators have established five capital classifications for banking institutions, ranging from the highest category of "well-capitalized" to the lowest category of "critically under-capitalized". Under the current capital classifications, a banking institution is considered "well-capitalized" if it meets the following capitalization standards on the date of measurement: a CET1 risk-based capital ratio of 6.50% or greater, a Tier 1 risk-based capital ratio of 8.00% or greater, a total risk-based capital ratio of 10.00% or greater, and a Tier 1 leverage ratio of 5.00% or greater, provided the institution is not subject to any regulatory order or written directive regarding capital maintenance. Federal banking law also ties the ability of banking organizations to engage in certain types of activities and to utilize certain procedures to such organizations' continuing to qualify for inclusion in one of the two highest rankings of these capitalization categories, i.e., as "well-capitalized" or "adequately capitalized."

Current Capital Ratios: The table below sets forth the regulatory capital ratios of Arrow's holding company and two subsidiary banks, Glens Falls National and Saratoga National, under the current Capital Rules, as of March 31, 2022:

	Common Equity Tier 1 Capital Ratio		Tier 1 Risk-Based Capital Ratio		Total Risk-Based Capital Ratio		Tier 1 Leverage Ratio
Arrow Financial Corporation	13.48	%	14.23	%	15.33	%	9.37	%
Glens Falls National Bank & Trust Co.	13.60	%	13.60	%	14.62	%	8.74	%
Saratoga National Bank & Trust Co.	14.14	%	14.14	%	15.39	%	10.00	%
FDICIA's Prompt Corrective Action - "Well-Capitalized" Standard (2019)	6.50	%	8.00	%	10.00	%	5.00	%
Regulatory Minimum	7.00%(1)		8.50%(1)		10.50%(1)		4.00	%
(1) Including the fully phased-in 2.50% capital conservation buffer

At March 31, 2022, Arrow and its subsidiary banks exceeded the minimum regulatory capital ratios established under the current Capital Rules and each also qualified as "well-capitalized", the highest category in the new capital classification scheme established by federal bank regulatory agencies under the "prompt corrective action" standards, as described above.

Capital Components; Stock Repurchases; Dividends

Stockholders' Equity: Stockholders’ equity was $357.2 million at March 31, 2022, a decrease of $13.9 million, or 3.8%, from the December 31, 2021 level of $371.2 million, and an increase of $14.8 million, or 4.3%, from the prior-year level. The decrease in stockholders' equity over the first three months of 2022 principally reflected the following factors: the addition of (i) $12.6 million of net income for the period plus (ii) issuance of $1.0 million of common stock through employee benefit and dividend reinvestment plans reduced by (iv) other comprehensive loss of $21.1 million, (v) cash dividends of $4.3 million and (vi) repurchases of common stock of $2.1 million. The majority of other comprehensive loss, $22.3 million, relates to net unrealized losses on AFS securities as a result of rising interest rates which occurred during the first quarter of 2022.

Trust Preferred Securities: In each of 2003 and 2004, Arrow issued $10 million of trust preferred securities (TRUPs) in a private placement. Under the Federal Reserve Board's regulatory capital rules then in effect, TRUPs proceeds typically qualified as Tier 1 capital for bank holding companies such as Arrow, but only in amounts up to 25% of Tier 1 capital, net of goodwill less any associated deferred tax liability. Under the Dodd-Frank Act, any trust preferred securities that Arrow might issue on or after the grandfathering date set forth in Dodd-Frank (May 19, 2010) would not qualify as Tier 1 capital under bank regulatory capital guidelines. For Arrow, TRUPs outstanding prior to the grandfathering cutoff date set forth in Dodd-Frank (May 19, 2010) would continue to qualify as Tier 1 capital until maturity or redemption, subject to limitations. Thus, Arrow's outstanding TRUPs continue to qualify as Tier 1 regulatory capital, subject to such limitations.

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

Stock Repurchase Program: In October 2021, the Board of Directors approved a $5 million stock repurchase program, effective for the period January 1, 2022 through December 31, 2022 (the 2022 Repurchase Program), under which management is authorized, in its discretion, to permit Arrow to repurchase up to $5 million of shares of Arrow's common stock, in the open market or in privately negotiated transactions, to the extent management believes Arrow's stock is reasonably priced and such repurchases appear to be an attractive use of available capital and in the best interests of shareholders. As of March 31, 2022, Arrow repurchased $1.9 million of common stock under the 2022 Repurchase Program. This does not include repurchases of Arrow's Common Stock other than through its 2022 Repurchase Program, i.e., repurchases of Arrow shares on the market utilizing funds accumulated under Arrow's Dividend Reinvestment Plan and the surrender or deemed surrender of Arrow stock to the Company in connection with employees' stock-for-stock exercises of compensatory stock options to buy Arrow stock.

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Dividends: Arrow's common stock is traded on NasdaqGS® under the symbol AROW. The high and low stock prices for the past seven quarters listed below represent actual sales transactions, as reported by NASDAQ. On April 27, 2022, the Board of Directors declared a 2022 second quarter cash dividend of $0.27 payable on June 15, 2022. Per share amounts and share counts in the following tables have been restated for the September 24, 2021 3% stock dividend.

					Cash
	Market Price				Dividends
	Low		High		Declared
2021
First Quarter	$	27.82	$	35.42	$	0.252
Second Quarter	32.25		37.15		0.252
Third Quarter	32.73		36.49		0.252
Fourth Quarter	33.75		38.25		0.260
2022
First Quarter	$	32.13	$	36.99	$	0.270
Second Quarter (dividend payable June 15, 2022)	TBD		TBD		0.270

	Quarter Ended March 31
	2022			2021
Cash Dividends Per Share	$	0.270		$	0.252
Diluted Earnings Per Share	0.78			0.83
Dividend Payout Ratio	34.62		%	30.36		%
Total Equity (in thousands)	357,243			$	342,413
Shares Issued and Outstanding (in thousands)	16,013			16,009
Book Value Per Share	$	22.31		$	21.39
Intangible Assets (in thousands)	23,691			23,922
Tangible Book Value Per Share	$	20.83		$	19.89

LIQUIDITY

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

Arrow's primary sources of available liquidity are overnight investments in federal funds sold, interest bearing bank balances at the Federal Reserve Bank of New York, and cash flow from investment securities and loans.  Certain investment securities are categorized as available-for-sale at time of purchase based on their marketability and collateral value, as well as their yield and maturity. The securities available-for-sale portfolio was $582.4 million at March 31, 2022, an increase of $23.1 million, from the year-end 2021 level. Due to the potential for volatility in market values, Arrow may not always be able to sell securities on short notice at their carrying value, even to provide needed liquidity. Arrow also held interest-bearing cash balances at March 31, 2022 of $448.6 million compared to $430.7 million at December 31, 2021.

In addition to liquidity from cash, short-term investments, investment securities and loans, Arrow has supplemented available operating liquidity with additional off-balance sheet sources such as a federal funds lines of credit with correspondent banks and credit lines with the FHLBNY. The federal funds lines of credit are with two correspondent banks totaling $52 million which were not drawn on during the three months ended March 31, 2022.

To support the borrowing relationship with the FHLBNY, Arrow has pledged collateral, including residential mortgage, home equity and commercial real estate loans. At March 31, 2022, Arrow had outstanding collateralized obligations with the FHLBNY of $25 million; as of that date, the unused borrowing capacity at the FHLBNY was approximately $725 million. Brokered deposits have also been identified as an available source of funding accessible in a relatively short time period. At March 31, 2022, there were no outstanding brokered deposits. Also, Arrow's two bank subsidiaries have each established a borrowing facility with the Federal Reserve Bank of New York, pledging certain consumer loans as collateral for potential "discount window" advances, which are maintained for contingency liquidity purposes. At March 31, 2022, the amount available under this facility was approximately $592 million in the aggregate, and there were no advances then outstanding.

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

Arrow measures and monitors basic liquidity as a ratio of liquid assets to total short-term liabilities, both with and without the availability of borrowing arrangements. Based on the level of overnight funds investments, available liquidity from the investment securities portfolio, cash flows from the loan portfolio, the stable core deposit base and the significant borrowing capacity, Arrow believes that the available liquidity is sufficient to meet all reasonably likely events or occurrences. At March 31, 2022, Arrow's basic liquidity ratio, including FHLBNY collateralized borrowing capacity, was 30.4% of total assets, or $1.1 billion in excess of Arrow's internally-set minimum target ratio of 4%.

61

Arrow did not experience any significant liquidity constraints in the three month period ended March 31, 2022 and did not experience any such constraints in recent prior years. Arrow has not at any time during such period been forced to pay above-market rates to obtain retail deposits or other funds from any source.

RECENTLY ISSUED ACCOUNTING STANDARDS

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

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. On January 7, 2021, the FASB issued ASU 2021-01, which refines the scope of ASC 848 and clarifies some of its guidance. The ASU and related amendments provide temporary optional expedients and exceptions to the existing guidance for applying GAAP to affected contract modifications and hedge accounting relationships in the transition away from the LIBOR or other interbank offered rate on financial reporting. The guidance also allows a one-time election to sell and/or reclassify to AFS or trading HTM debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective March 12, 2020 through December 31, 2022 and permit relief solely for reference rate reform actions and different elections over the effective date for legacy and new activity. Arrow is evaluating the impact of adopting the new guidance on the consolidated financial statements and does not expect it will have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. For Arrow, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. Arrow does not expect it will have a material impact on the consolidated financial statements.

62

RESULTS OF OPERATIONS

Three Months Ended March 31, 2022 Compared With

Three Months Ended March 31, 2021

Summary of Earnings Performance

(Dollars in Thousands, Except Per Share Amounts)

	Three Months Ended
	March 31, 2022			March 31, 2021			Change			% Change
Net Income	$	12,575		$	13,280		$	(705)		(5.3)	%
Diluted Earnings Per Share	0.78			0.83			(0.05)			(6.0)	%
Return on Average Assets	1.26		%	1.45		%	(0.19)		%	(13.1)	%
Return on Average Equity	13.77		%	15.81		%	(2.04)		%	(12.9)	%

Net income was $12.6 million and diluted earnings per share (EPS) of $.78 for the first quarter of 2022, compared to net income of $13.3 million and diluted EPS of $.83 for the first quarter of 2021. Return on average assets for the first quarter of 2022 was 1.26%, a decrease from 1.45% in the first quarter of 2021. In addition, return on average equity decreased to 13.77% for the first quarter of 2022, from 15.81% in the first quarter of 2021.

The following narrative discusses the quarter-to-quarter changes in net interest income, noninterest income, noninterest expense and income taxes.

Net Interest Income

Summary of Net Interest Income

(Dollars in Thousands)

	Three Months Ended
	March 31, 2022			March 31, 2021			Change			% Change
Interest and Dividend Income	$	28,947		$	27,694		$	1,253		4.5	%
Interest Expense	1,122			1,539			(417)			(27.1)	%
Net Interest Income	27,825			26,155			1,670			6.4	%
Average Earning Assets(1)	3,886,787			3,546,339			340,448			9.6	%
Average Interest-Bearing Liabilities	2,855,884			2,639,240			216,644			8.2	%
Yield on Earning Assets(1)	3.02		%	3.17		%	(0.15)		%	(4.7)	%
Cost of Interest-Bearing Liabilities	0.16			0.24			(0.08)			(33.3)
Net Interest Spread	2.86			2.93			(0.07)			(2.4)
Net Interest Margin	2.90			2.99			(0.09)			(3.0)
Net Interest Income excluding PPP loans	$	26,759		$	24,814		$	1,945		7.8	%
Net Interest Margin excluding PPP loans	2.81		%	2.94		%	(0.13)		%	(4.4)	%
(1) Includes Nonaccrual Loans.

Net interest income for the recently completed quarter increased by $1.7 million, or 6.4%, from the first quarter of 2021, due to a variety of factors including loan growth, the timing of the forgiveness of PPP loans, and a reduction in interest expense. Cost of interest-bearing liabilities was favorably impacted by the mix of deposits and lower deposit rates. Interest and fees on loans generated $25.7 million in income for the first quarter of 2021, an increase of 2.2% from the $25.2 million from the quarter ending March 31, 2021. Interest expense for the first quarter of 2021 was $1.1 million, a decrease of $0.4 million, or 27.1% from the $1.5 million in expense for the comparable quarter ending March 31, 2021. Net interest margin decreased 9 basis points in the first quarter of 2022 to 2.90%, from 2.99% during the first quarter of 2021. Average earning asset yields were 15 basis point lower as compared to the first quarter of 2021. The cost of interest-bearing liabilities decreased 8 basis points from the quarter ended March 31, 2021. Arrow defines net interest margin as net interest income divided by average earning assets, annualized. Further detailed information is presented above under the section entitled "Average Consolidated Balance Sheets and Net Interest Income Analysis." The impact of recent interest rate changes on Arrow's deposit and loan portfolios are discussed above in this Report under the sections entitled "Deposit Trends" and "Loan Trends."

As discussed previously under the heading "Asset Quality" beginning on page 57, the provision for loan losses for the first quarter of 2022 was $769 thousand, compared to a provision of $(648) thousand for the first quarter of 2021.

63

Noninterest Income

Summary of Noninterest Income

(Dollars in Thousands)

	Three Months Ended
	March 31, 2022		March 31, 2021		Change		% Change
Income From Fiduciary Activities	$	2,596	$	2,378	$	218	9.2	%
Fees for Other Services to Customers	2,795		2,609		186		7.1	%
Insurance Commissions	1,511		1,640		(129)		(7.9)	%
Net Gain on Securities	130		160		(30)		18.8	%
Net Gain on the Sale of Loans	52		1,415		(1,363)		(96.3)	%
Other Operating Income	1,078		406		672		165.5	%
Total Noninterest Income	$	8,162	$	8,608	$	(446)	(5.2)	%

Total noninterest income in the current quarter was $8.2 million, a decrease of $0.4 million from the comparable quarter of 2021. Income from fiduciary activities for the first quarter of 2022 increased by 9.2% from the first quarter of 2021. Assets under trust administration and investment management at March 31, 2022 were $1.79 billion.

Fees for other services to customers were $2.8 million for the first quarter of 2022, an increase of $186 thousand or 7.1% from the first quarter of 2021. Interchange fees related to increased customer activity of debit card usage was the largest driver of the increase.

Insurance commissions were $1.5 million for the first quarter of 2022, a decrease of $129 thousand or 7.9% from the first quarter of 2021. The decrease in insurance commissions as compared to the prior year is primarily related to continued competition and the loss of some employee benefit relationships. The continued competition and the ability to retain key personnel may continue to impact revenue for the remainder of 2022. Expense control initiatives, including the reduction of support roles, are ongoing to ensure expenses appropriately align with the decrease in revenue.

Net gain on securities of $130 thousand for the first quarter of 2022 was the result of an increase in the fair value of equity securities from December 31, 2021. Net gain on the sale of loans in the first quarter of 2022 decreased by $1.4 million from the first quarter of 2021. Sales decreased as a result of the strategic decision in the second half of 2021 to retain more newly originated residential real estate loans. See page 50 for the discussion of loan sales.

Other operating income increased $672 thousand from the comparable quarter in 2021, due to proceeds received from bank-owned life insurance and gains received on other assets.

Noninterest Expense

Summary of Noninterest Expense

(Dollars in Thousands)

	Three Months Ended
	March 31, 2022			March 31, 2021			Change			% Change
Salaries and Employee Benefits	$	11,286		$	11,138		$	148		1.3	%
Occupancy Expense of Premises, Net	1,598			1,593			5			0.3	%
Technology and Equipment Expense	3,779			3,459			320			9.3	%
FDIC and FICO Assessments	307			270			37			13.7	%
Amortization	49			54			(5)			(9.3)	%
Other Operating Expense	1,926			2,164			(238)			(11.0)	%
Total Noninterest Expense	$	18,945		$	18,678		$	267		1.4	%
Efficiency Ratio	52.30		%	53.46		%	(1.2)		%	(2.2)	%

Noninterest expense for the first quarter of 2022 was $18.9 million, an increase of $0.3 million, or 1.4%, from the first quarter of 2021. Salaries and benefit expenses increased $148 thousand, or 1.3%, from the comparable quarter in 2021. Technology expenses increased $320 thousand, or 9.3%, from the first quarter of 2021. Other operating expense includes a credit for estimated credit losses on off-balance sheet exposures of $316 thousand in the first quarter.

Income Taxes

Summary of Income Taxes

(Dollars in Thousands)

	Three Months Ended
	March 31, 2022			March 31, 2021			Change			% Change
Provision for Income Taxes	$	3,698		$	3,453		$	245		7.1	%
Effective Tax Rate	22.7		%	20.6		%	2.1		%	10.2	%

The increase in the effective tax rate in the first three months ended March 31, 2022 compared to the three-months ended March 31, 2021 was primarily due to the reduction of tax exempt investments held and the related investment income.

64

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to credit risk in the loan portfolio and liquidity risk, discussed earlier, Arrow's business activities also generate market risk.  Market risk is the possibility that changes in future market rates (interest rates) or prices (market value of financial instruments) will make Arrow's position (i.e. assets and operations) less valuable.  Arrow's primary market risk is interest rate volatility. The ongoing monitoring and management of interest rate risk is an important component of the asset/liability management process, which is governed by policies that are reviewed and approved annually by the Board of Directors.  The Board of Directors delegates responsibility for carrying out asset/liability oversight and control to management's Asset/Liability Committee (ALCO).  In this capacity ALCO develops guidelines and strategies impacting the asset/liability profile based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends.  

Changes in market interest rates, whether increases or decreases, can trigger repricing and changes in the pace of payments for both assets and liabilities (prepayment risk). This may individually or in combination affect net interest income, net interest margin, and ultimately net income, either positively or negatively. ALCO utilizes the results of a detailed and dynamic simulation model to quantify this interest rate risk by projecting net interest income in various interest rate scenarios.  

Arrow's standard simulation model applies a parallel shift in interest rates, ramped over a 12-month period, to capture the impact of changing interest rates on net interest income.  The results are compared to ALCO policy limits which specify a maximum tolerance level for net interest income exposure over a one-year horizon, assuming no balance sheet growth and a 200 basis point upward and a 100 basis point downward shift in interest rates. Additional tools to monitor potential longer-term interest rate risk, including periodic stress testing involving hypothetical sudden and significant interest rate spikes, are also evaluated.

The following table summarizes the percentage change in net interest income as compared to the base scenario, which assumes no change in market interest rates as generated from the standard simulation model. The results are presented for each of the first two years of the simulation period for the 200 basis point increase in interest rate scenario and the 100 basis point decrease in interest rate scenario. These results are well within the ALCO policy limits as shown.

As of March 31, 2022:

	Change in Interest Rate
	+ 200 basis points	- 100 basis points
Calculated change in Net Interest Income - Year 1	(0.89)%	(0.98)%
Calculated change in Net Interest Income - Year 2	5.79%	(3.05)%

Historically, there has existed an inverse relationship between changes in prevailing rates and the Company's net interest income, suggesting that liabilities and sources of funds generally reprice more quickly than earning assets. In recent months, sharply higher cash balances and core deposits has contributed to a pronounced shift toward asset sensitivity. As the economy continues to recover from the COVID-19 pandemic, a reversal of this trend may, or may not, occur. When net interest income is simulated over a longer time frame, the balance sheet shows a relatively neutral profile with a slight bias toward asset sensitivity, as asset yields continue to reprice while the cost of funding reaches assumed ceilings or floors.

The hypothetical estimates underlying the sensitivity analysis are based upon numerous assumptions, including: the nature and timing of changes in interest rates including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others.  While assumptions are developed based upon current economic and local market conditions, Arrow cannot make any assurance as to the predictive nature of these assumptions including how customer preferences or competitor influences might change.

Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate changes on caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes, unanticipated shifts in the yield curve and other internal/external variables.  Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates.

Item 4.

CONTROLS AND PROCEDURES

Senior management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of Arrow's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2022. Based upon that evaluation, senior management, including the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were effective. Further, there were no other changes in Arrow's internal control over financial reporting that occurred during the quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, Arrow's internal control over financial reporting.

65

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

Except as noted below, Arrow, including its subsidiary banks, is not currently the subject of any material pending legal proceedings, other than ordinary routine litigation occurring in the normal course of their business. On an ongoing basis, Arrow is often the subject of, or a party to, various legal claims by other parties against Arrow, by Arrow against other parties, or involving Arrow, which arise in the normal course of business. Except as noted below, the various pending legal claims against Arrow will not, in the opinion of management based upon consultation with counsel, result in any material liability.

On July 1, 2020, Daphne Richard, a customer of GFNB filed a putative class action complaint against GFNB in the United States District Court for the Northern District of New York. The complaint alleges that GFNB assessed overdraft fees on certain transactions drawn on her checking account without having sufficiently disclosed its overdraft-fee practices in its account agreement. Ms. Richard, on behalf of two purported classes, seeks compensatory damages, disgorgement of profits, statutory damages, treble damages, enjoinment of the conduct complained of, and costs and fees. The complaint is similar to complaints filed against other financial institutions pertaining to overdraft fees. On April 13, 2022, the court preliminarily approved a settlement agreement among Arrow, GFNB, SNB and the plaintiffs, pursuant to which, among other things, Arrow established a settlement fund of approximately $1.5 million. Arrow expressly denies any wrongdoing in connection with the matters claimed in the complaint.

Item 1.A.

Risk Factors

The Risk Factors identified in Arrow's Annual Report on Form 10-K for the year ended December 31, 2021 continue to represent the most significant risks to Arrow's future results of operations and financial conditions, without further modification or amendment.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

The following table presents information about purchases by Arrow during the three months ended March 31, 2022 of common stock (our only class of equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934):

First Quarter 2022 Calendar Month	(A) Total Number of Shares Purchased 1	(B) Average Price Paid Per Share 1		(C) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 2	(D) Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs 2
January	5,292	$	35.70	—	$	5,000,000
February	41,508	34.86		39,484	3,625,323
March	31,266	34.21		16,174	3,070,194
Total	78,066	34.65		55,658

1 The total number of shares purchased by Arrow and the average price paid per share listed in columns (A) and (B) consist of (i) any shares purchased in such periods in open market or private transactions under the Arrow Financial Corporation Automatic Dividend Reinvestment Plan (the "DRIP") by the administrator of the DRIP, (ii) shares surrendered or deemed surrendered to Arrow in such periods by holders of options to acquire Arrow common stock received by them under Arrow's long-term incentive plans in connection with their stock-for-stock exercise of such options and (iii) shares purchased under the publicly-announced 2022 Repurchase Program. In the months indicated, the listed number of shares purchased included the following number of shares purchased by Arrow through such methods: January - DRIP purchases (1,753 shares) and stock-for-stock option exercises (3,539 shares); February - DRIP purchases (980 shares), stock-for-stock option exercises (1,044 shares) and repurchased under the 2022 Repurchase Program (39,484 shares); and March - DRIP purchases (15,092 shares) and repurchased under the 2022 Repurchase Program (16,174 shares)

2 Includes only those shares acquired by Arrow pursuant to its publicly-announced stock repurchase programs. Arrow's only publicly-announced stock repurchase program in effect for the first quarter of 2022 was the 2022 Repurchase Program approved by the Board of Directors and announced in October 2021, under which the Board authorized management, in its discretion, to repurchase from time to time over calendar year 2022, in the open market or in privately negotiated transactions, up to $5 million of Arrow common stock subject to certain exceptions.

Item 3.

Defaults Upon Senior Securities - None

66

Item 4.

Mine Safety Disclosures - None

Item 5.

Other Information - None

Item 6.

Exhibits

Exhibit Number	Exhibit
3.(i)	Certificate of Incorporation of the Registrant as Amended through June 3, 2019, incorporated by reference from the Registrant's Current Report on Form 8-K filed June 5, 2019, Exhibit 3.1
3.(ii)	By-laws of the Registrant, as amended, incorporated herein by reference from the Registrant’s Current Report on Form 8-K filed on November 24, 2009, Exhibit 3.(ii)
10.1	Employment Agreement between the Company and Thomas J. Murphy effective February 1, 2022, incorporated herein by reference from the Registrant's Current Report on Form 8-K , filed February 1, 2022, Exhibit 10.1*
10.2	Employment Agreement between the Company and Edward J. Campanella effective February 1, 2022, incorporated herein by reference from the Registrant's Current Report on Form 8-K , filed February 1, 2022, Exhibit 10.2*
10.3	Employment Agreement between the Company and David S. DeMarco effective February 1, 2022, incorporated herein by reference from the Registrant's Current Report on Form 8-K , filed February 1, 2022, Exhibit 10.3*
10.4	Employment Agreement between the Company and David D. Kaiser effective February 1, 2022, incorporated herein by reference from the Registrant's Current Report on Form 8-K , filed February 1, 2022, Exhibit 10.4*
10.5	Employment Agreement between the Company and Andrew J. Wise effective February 1, 2022, incorporated herein by reference from the Registrant's Current Report on Form 8-K , filed February 1, 2022, Exhibit 10.5*
15	Awareness Letter
31.1	Certification of Chief Executive Officer under SEC Rule 13a-14(a)/15d-14(a)
31.2	Certification of Chief Financial Officer under SEC Rule 13a-14(a)/15d-14(a)
32	Certification of Chief Executive Officer under 18 U.S.C. Section 1350 and Certification of Chief Financial Officer under 18 U.S.C. Section 1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
* Management contracts or compensation plans required to be filed as an exhibit.

67

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

ARROW FINANCIAL CORPORATION

Registrant

May 6, 2022	/s/Thomas J. Murphy
Date	Thomas J. Murphy
	President and Chief Executive Officer
May 6, 2022	/s/Edward J. Campanella
Date	Edward J. Campanella
	Senior Executive Vice President, Treasurer and
	Chief Financial Officer
	(Principal Financial Officer and
	Principal Accounting Officer)

68

EX-15

Exhibit 15

Report of Independent Registered Public Accounting Firm

May 6, 2022

Arrow Financial Corporation

Glens Falls, New York

Re: Registration Statement Form S-3 (No. 333-243662, 333-258552 and 333-263812) and Form S-8 (No. 333-151550, No. 333-188479, No. 333-188480, and No. 333-238096)

With respect to the subject registration statement, we acknowledge our awareness of the use therein of our report dated May 6, 2022 related to our review of interim financial information.

Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.

/s/ KPMG LLP

Albany, New York

EX-31.1

Certification of the Chief Executive Officer Pursuant to

Securities Exchange Act Rules 13a-14 and 15d-14

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas J. Murphy, certify that:

1.    I have reviewed the quarterly report on Form 10-Q of Arrow Financial Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    May 6, 2022

By:    /s/Thomas J. Murphy

Thomas J. Murphy

Chief Executive Officer

EX-31.2

Certification of the Chief Financial Officer Pursuant to

Securities Exchange Act Rules 13a-14 and 15d-14

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Edward J. Campanella, certify that:

1.     I have reviewed the quarterly report on Form 10-Q of Arrow Financial Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    May 6, 2022

By:    /s/Edward J. Campanella

Edward J. Campanella

Chief Financial Officer

EX-32

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant To

Section 906 of The Sarbanes-Oxley Act of 2002

    In connection with the quarterly report of Arrow Financial Corporation (the "Company") on Form 10-Q for the period ended March 31, 2022, filed with the Securities and Exchange Commission (the "Report"), we, Thomas J. Murphy, Chief Executive Officer of the Company, and Edward J. Campanella, Chief Financial Officer of the Company, hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:

    (a)    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

    (b)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 6, 2022

/s/ Thomas J. Murphy

                            Thomas J. Murphy

                            Chief Executive Officer

/s/ Edward J. Campanella

         Edward J. Campanella

         Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Arrow Financial Corporation and will be retained by Arrow Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

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Cover Page - shares	3 Months Ended
	Mar. 31, 2022	Apr. 29, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Document Transition Report	false
Entity File Number	0-12507
Entity Registrant Name	ARROW FINANCIAL CORPORATION
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	22-2448962
Entity Address, Address Line One	250 Glen Street
Entity Address, City or Town	Glens Falls
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	12801
City Area Code	518
Local Phone Number	745-1000
Title of 12(b) Security	Common Stock, Par Value $1.00 per share
Trading Symbol	AROW
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		16,017,265
Entity Central Index Key	0000717538
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Amendment Flag	false

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Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
ASSETS
Cash and Due From Banks	$ 38,964	$ 26,978	$ 45,602
Interest-Bearing Deposits at Banks	448,614	430,718	406,605
Investment Securities:
Available-for-Sale at Fair Value	582,428	559,316	464,089
Held-to-Maturity (Approximate Fair Value of $195,862 at March 31, 2022; $201,292 at December 31, 2021; and $221,360 at March 31, 2021)	196,661	196,566	214,561
Equity Securities	1,877	1,747	1,796
FHLB and Federal Reserve Bank Stock	4,491	5,380	5,360
Total	2,737,267	2,667,941	2,639,243
Allowance for Credit Losses	(27,661)	(27,281)	(26,840)
Net Loans	2,709,606	2,640,660	2,612,403
Premises and Equipment, Net	48,481	46,217	43,057
Goodwill	21,873	21,873	21,873
Other Intangible Assets, Net	1,818	1,918	2,049
Other Assets	101,589	96,579	86,316
Total Assets	4,156,402	4,027,952	3,903,711
LIABILITIES
Noninterest-Bearing Deposits	813,066	810,274	751,884
Interest-Bearing Checking Accounts	1,154,068	994,391	992,486
Savings Deposits	1,571,274	1,531,287	1,463,229
Time Deposits over $250,000	48,288	82,811	100,212
Other Time Deposits	128,677	131,734	145,777
Total Deposits	3,715,373	3,550,497	3,453,588
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	0	0	6,795
Federal Home Loan Bank Term Advances	25,000	45,000	45,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Finance Leases	5,156	5,169	5,205
Other Liabilities	33,630	36,100	30,710
Total Liabilities	3,799,159	3,656,766	3,561,298
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at March 31, 2022, December 31, 2021 and March 31, 2021	0	0	0
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,800,144 Shares Issued at March 31, 2022 and December 31, 2021 and 20,194,474 at March 31, 2021)	20,800	20,800	20,194
Additional Paid-in Capital	378,758	377,996	354,358
Retained Earnings	62,328	54,078	51,263
Accumulated Other Comprehensive Loss	(20,797)	347	(3,096)
Treasury Stock, at Cost (4,787,183 Shares at March 31, 2022; 4,759,414 Shares at December 31, 2021 and 4,651,719 Shares at March 31, 2021)	(83,846)	(82,035)	(80,306)
Total Stockholders’ Equity	357,243	371,186	342,413
Total Liabilities and Stockholders’ Equity	$ 4,156,402	$ 4,027,952	$ 3,903,711

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Investments, Debt and Equity Securities [Abstract]
Held-to-maturity securities, at fair value	$ 195,862	$ 201,292	$ 221,360
STOCKHOLDERS’ EQUITY
Preferred Stock, par value (in dollars per share)	$ 1	$ 1	$ 1
Preferred Stock, shares authorized (in shares)	1,000,000	1,000,000	1,000,000
Common Stock, par value (in dollars per share)	$ 1	$ 1	$ 1
Common Stock, shares authorized (in shares)	30,000,000	30,000,000	30,000,000
Common Stock, shares issued (in shares)	20,800,144	20,800,144	20,194,474
Treasury Stock (in shares)	4,787,183	4,759,414	4,651,719

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Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2022	Mar. 31, 2021
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans		$ 25,739	$ 25,183
Interest on Deposits at Banks		198	85
Interest and Dividends on Investment Securities:
Fully Taxable		2,189	1,506
Exempt from Federal Taxes		821	920
Total Interest and Dividend Income		28,947	27,694
INTEREST EXPENSE
Interest-Bearing Checking Accounts		163	219
Savings Deposits		417	565
Time Deposits over $250,000		28	120
Other Time Deposits		109	222
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase		0	2
Federal Home Loan Bank Advances		187	193
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts		169	169
Interest on Financing Leases		49	49
Total Interest Expense		1,122	1,539
NET INTEREST INCOME		27,825	26,155
Provision for Credit Losses		769	(648)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		27,056	26,803
NONINTEREST INCOME
Insurance Commissions		1,511	1,640
Net Gain on Securities		130	160
Net Gain on Sales of Loans		52	1,415
Other Operating Income		1,078	406
Total Noninterest Income		8,162	8,608
NONINTEREST EXPENSE
Salaries and Employee Benefits		11,286	11,138
Occupancy Expenses, Net		1,598	1,593
Technology and Equipment Expense		3,779	3,459
FDIC Assessments		307	270
Other Operating Expense		1,975	2,218
Total Noninterest Expense		18,945	18,678
INCOME BEFORE PROVISION FOR INCOME TAXES		16,273	16,733
Provision for Income Taxes		3,698	3,453
NET INCOME		$ 12,575	$ 13,280
Average Shares Outstanding:
Basic (in shares)	[1]	16,030	15,994
Diluted (in shares)	[1]	16,083	16,030
Per Common Share:
Basic Earnings (in dollars per share)		$ 0.78	$ 0.83
Diluted Earnings (in dollars per share)		$ 0.78	$ 0.83
Income From Fiduciary Activities
NONINTEREST INCOME
Revenue from contract with customer		$ 2,596	$ 2,378
Fees for Other Services to Customers
NONINTEREST INCOME
Revenue from contract with customer		$ 2,795	$ 2,609

[1] 2021 Share and Per Share Amounts have been restated for the September 24, 2021 3% stock dividend.

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Consolidated Statements of Income (Parenthetical)	Sep. 24, 2021
Income Statement [Abstract]
Stock dividend, percent	3.00%

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement of Comprehensive Income [Abstract]
Net Income	$ 12,575	$ 13,280
Other Comprehensive (Loss) Income, Net of Tax:
Net Unrealized Securities Holding Loss Arising During the Period	(22,296)	(3,812)
Net Unrealized Gain on Cash Flow Hedge Agreements	1,125	1,475
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(21)	(20)
Amortization of Net Retirement Plan Actuarial Loss	42	34
Amortization of Net Retirement Plan Prior Service Cost	6	43
Other Comprehensive Loss	(21,144)	(2,280)
Comprehensive (Loss) Income	$ (8,569)	$ 11,000

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Consolidated Statements of Changes In Stockholders' Equity - USD ($) $ in Thousands		Total	Cumulative Effect, Period of Adoption, Adjustment	Cumulative Effect, Period of Adoption, Adjusted Balance	Common Stock	Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Additional Paid-In Capital	Additional Paid-In Capital Cumulative Effect, Period of Adoption, Adjusted Balance	Retained Earnings	Retained Earnings Cumulative Effect, Period of Adoption, Adjustment	Retained Earnings Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss Cumulative Effect, Period of Adoption, Adjusted Balance	Treasury Stock	Treasury Stock Cumulative Effect, Period of Adoption, Adjusted Balance
Stockholders' equity, beginning balance at Dec. 31, 2020		$ 334,392	$ 120	$ 334,512	$ 20,194	$ 20,194	$ 353,662	$ 353,662	$ 41,899	$ 120	$ 42,019	$ (816)	$ (816)	$ (80,547)	$ (80,547)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income		13,280							13,280
Other Comprehensive Income (Loss)		(2,280)										(2,280)
Cash Dividends Paid	[1]	(4,036)							(4,036)
Stock Options Exercised, Net		156					94							62
Shares Issued Under the Directors' Stock Plan		98					70							28
Shares Issued Under the Employee Stock Purchase Plan		124					86							38
Shares Issued for Dividend Reinvestment Plans		455					342							113
Stock-Based Compensation Expense		104					104
Stockholders' equity, ending balance at Mar. 31, 2021		342,413			20,194		354,358		51,263			(3,096)		(80,306)
Stockholders' equity, beginning balance at Dec. 31, 2021		371,186			20,800		377,996		54,078			347		(82,035)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income		12,575							12,575
Other Comprehensive Income (Loss)		(21,144)										(21,144)
Cash Dividends Paid		(4,325)							(4,325)
Stock Options Exercised, Net		241					135							106
Shares Issued Under the Directors' Stock Plan		99					75							24
Shares Issued Under the Employee Stock Purchase Plan		120					89							31
Shares Issued for Dividend Reinvestment Plans		474					353							121
Stock-Based Compensation Expense		110					110
Purchases of Treasury Stock		(2,093)												(2,093)
Stockholders' equity, ending balance at Mar. 31, 2022		$ 357,243			$ 20,800		$ 378,758		$ 62,328			$ (20,797)		$ (83,846)

[1] Cash dividends paid per share have been adjusted for the September 24, 2021 3% stock dividend.

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Consolidated Statements of Changes In Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement of Stockholders' Equity [Abstract]
Cash Dividends Paid, per Share (in dollars per share)	$ 0.270	$ 0.252
Stock Options Exercised (in shares)	12,145	6,927
Shares Issued Under the Directors' Stock Plan (in shares)	2,784	3,172
Shares Issued Under Employee Stock Purchase Plan (in shares)	3,626	4,269
Shares Issued for Dividend Reinvestment Plans (in shares)	13,917	12,649
Purchase of Treasury Stock (in shares)	60,241

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash Flows from Operating Activities:
Net Income	$ 12,575	$ 13,280
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses	769	(648)
Depreciation and Amortization	1,945	1,951
Net Gain on Securities Transactions	(130)	(160)
Loans Originated and Held-for-Sale	(974)	(24,037)
Proceeds from the Sale of Loans Held-for-Sale	1,349	32,093
Net Gain on the Sale of Loans	(52)	(1,415)
Net Loss on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	15	90
Contributions to Retirement Benefit Plans	(171)	(146)
Deferred Income Tax (Benefit) Expense	(462)	349
Shares Issued Under the Directors’ Stock Plan	99	98
Stock-Based Compensation Expense	110	104
Tax Benefit from Exercise of Stock Options	22	13
Net Decrease (Increase) in Other Assets	4,477	(3,077)
Net (Decrease) Increase in Other Liabilities	(2,803)	1,624
Net Cash Provided By Operating Activities	16,769	20,119
Cash Flows from Investing Activities:
Proceeds from the Maturities and Calls of Securities Available-for-Sale	21,473	25,977
Purchases of Securities Available-for-Sale	(75,049)	(130,481)
Proceeds from the Maturities and Calls of Securities Held-to-Maturity	4,699	4,291
Purchases of Securities Held-to-Maturity	(4,950)	(619)
Net Increase in Loans	(70,441)	(51,866)
Proceeds from the Sales of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	335	259
Purchase of Premises and Equipment	(3,123)	(1,311)
Net Decrease (Increase) in FHLB and Federal Reserve Bank Stock	889	(11)
Net Cash Used By Investing Activities	(126,167)	(153,761)
Cash Flows from Financing Activities:
Net Increase in Deposits	164,876	218,862
Net Decrease in Short-Term Borrowings	0	(10,691)
Finance Lease Payments	(13)	(12)
Repayments of Federal Home Loan Bank Term Advances	(20,000)	0
Purchase of Treasury Stock	(2,093)	0
Stock Options Exercised, Net	241	156
Shares Issued Under the Employee Stock Purchase Plan	120	124
Shares Issued for Dividend Reinvestment Plans	474	455
Cash Dividends Paid	(4,325)	(4,036)
Net Cash Provided By Financing Activities	139,280	204,858
Net Increase in Cash and Cash Equivalents	29,882	71,216
Cash and Cash Equivalents at Beginning of Period	457,696	380,991
Cash and Cash Equivalents at End of Period	487,578	452,207
Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings	1,156	1,626
Income Taxes	318	0
Transfer of Loans to Other Real Estate Owned and Repossessed Assets	$ 403	$ 349

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Accounting Policies

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Accounting Policies

ACCOUNTING POLICIES

In the opinion of the management of Arrow Financial Corporation (Arrow, the Company, we, or us), the accompanying unaudited interim consolidated financial statements contain all of the adjustments necessary to present fairly the financial position as of March 31, 2022, December 31, 2021 and March 31, 2021; the results of operations for the three month periods ended March 31, 2022 and 2021; the consolidated statements of comprehensive income for the three month periods ended March 31, 2022 and 2021; the changes in stockholders' equity for the three month periods ended March 31, 2022 and 2021; and the cash flows for the three month periods ended March 31, 2022 and 2021. All such adjustments are of a normal recurring nature. The unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements of Arrow for the year ended December 31, 2021 included in Arrow's Annual Report on Form 10-K for the year ended December 31, 2021.

Management’s Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (US GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.  Due to the uncertainty regarding the impact of the COVID-19 pandemic, management utilized estimates and assumptions in its evaluation of potential impairment of Arrow's right-of-use lease assets, goodwill and intangible assets. Our most significant estimate is the allowance for credit losses. Other estimates include the fair value of financial statements, evaluation of pension and other post-retirement liabilities, an analysis of a need for a valuation allowance for deferred tax assets and a reserve for unfunded loan commitments recorded as an other liability. Actual results could differ from those estimates.

A material estimate that is particularly susceptible to significant change in the near term is the allowance for credit losses.  In connection with the determination of the allowance for credit losses management obtains economic forecasts from reliable sources and appraisals for properties.  The allowance for credit losses is management’s best estimate of the life of loan losses as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for credit losses may be necessary based on changes in economic conditions.

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

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

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

Commercial Loans

Commercial Real Estate Loans

Consumer Loans

Residential Loans

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

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

For the loan segments utilizing the DCF method, (commercial, commercial real estate, and residential) management utilizes externally developed economic forecast of the following economic factors as loss drivers: national unemployment, gross domestic

product and home price index (HPI). The economic forecast is applied over a reasonable and supportable forecast period. Arrow utilizes a six quarter reasonable and supportable forecast period with an eight quarter reversion to the historic mean on a straight-line basis.

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

Arrow uses the vintage analysis method to estimate expected credit losses for the consumer loan segment. The vintage method was selected since the loans within the consumer loan segment are homogeneous, not just by risk characteristic, but by loan structure. Under the vintage analysis method, a loss rate is calculated based on the quarterly net charge-offs to the outstanding loan balance for each vintage year over the lookback period. Once this periodic loss rate is calculated for each quarter in the lookback period, the periodic rates are averaged into the loss rate. The loss rate is then applied to the outstanding loan balances based on the loan's vintage year. Arrow maintains, over the life of the loan, the loss curve by vintage year. If estimated losses computed by the vintage method need to be adjusted based on current conditions and the reasonable and supportable economic forecast, these adjustments would be incorporated over a six quarter reasonable and supportable forecast period, reverting to historical losses using a straight-line method over an eight quarter period. Based on current conditions and the reasonable and supportable economic forecast, no adjustments are currently required.

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

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

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

•The borrower is experiencing financial difficulty, and

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

Arrow's allowance for credit losses reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. Arrow has determined that a TDR is reasonably expected no later than the point it is determined that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required allowance for credit losses. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in Arrow's existing pools based on the underlying risk characteristics of the loan to measure the allowance for credit losses.

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

Accrued Interest Receivable - Upon adoption of CECL on January 1, 2021, Arrow made the following elections regarding accrued interest receivable: (1) presented accrued interest receivable balances separately within the other assets balance sheet line item; (2) excluded interest receivable that is included in amortized cost of financing receivables from related disclosures requirements and (3) continued Arrow's policy to write off accrued interest receivable by reversing interest income. For loans, write off typically occurs upon

becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, Arrow has not experienced uncollectible accrued interest receivable on investment securities.

Allowance for Credit Losses – Held to Maturity (HTM) Debt Securities - Arrow's HTM debt securities are also required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on HTM debt securities on a collective basis by major security types that share similar risk characteristics, such as financial asset type and collateral type adjusted for current conditions and reasonable and supportable forecasts. Management classifies the HTM portfolio into the following major security types: U.S. government agency or U.S. government sponsored mortgage-backed and collateralized mortgage obligations securities, and state and municipal debt securities.

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

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

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

Investments in Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock are required for membership in those organizations and are carried at cost since there is no market value available. The FHLB New York continues to pay dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of Federal Reserve Bank and FHLB stock.

There were no additional accounting standards adopted in the first three months of 2022.

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Cash and Cash Equivalents

3 Months Ended

Mar. 31, 2022

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

CASH AND CASH EQUIVALENTS (In Thousands)

The following table is the schedule of Cash and Cash Equivalents at March 31, 2022, December 31, 2021 and March 31, 2021.
	March 31, 2022		December 31, 2021		March 31, 2021
Cash and Due From Banks	$	38,964	$	26,978	$	45,602
Interest-Bearing Deposits at Banks	448,614		430,718		406,605
Total Cash and Cash Equivalents	$	487,578	457,696		452,207

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Investment Securities

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Investment Securities

INVESTMENT SECURITIES (In Thousands)

The following table is the schedule of Available-For-Sale Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2022
Available-For-Sale Securities,   at Amortized Cost	$	140,000	$	380	$	471,829	$	1,000	$	613,209
Gross Unrealized Gains	21		—		211		—		232
Gross Unrealized Losses	(7,277)		—		(23,536)		(200)		(31,013)
Available-For-Sale Securities,   at Fair Value	132,744		380		448,504		800		582,428
Available-For-Sale Securities,   Pledged as Collateral, at Fair   Value									397,138
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	5,000	$	20	$	86	$	—	$	5,106
From 1 - 5 Years	135,000		—		249,495		—		384,495
From 5 - 10 Years	—		360		222,248		1,000		223,608
Over 10 Years	—		—		—		—		—
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	5,021	$	20	$	88	$	—	$	5,129
From 1 - 5 Years	127,723		—		241,614		—		369,337
From 5 - 10 Years	—		360		206,802		800		207,962
Over 10 Years	—		—		—		—		—
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	43,518	$	—	$	358,688	$	—	$	402,206
12 Months or Longer	84,205		—		74,546		800		159,551
Total	$	127,723	$	—	$	433,234	$	800	$	561,757
Number of Securities in a   Continuous Loss Position	18		—		129		1		148
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,482	$	—	$	16,949	$	—	$	18,431
12 Months or Longer	5,795		—		6,587		200		12,582
Total	$	7,277	$	—	$	23,536	$	200	$	31,013
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	140,000
US Agency Obligations,   at Fair Value	132,744
US Government Agency   Securities, at Amortized Cost					$	8,853
US Government Agency   Securities, at Fair Value					8,667
Government Sponsored Entity   Securities, at Amortized Cost					462,976
Government Sponsored Entity   Securities, at Fair Value					439,837

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
December 31, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,000	$	400	$	448,742	$	1,000	$	560,142
Gross Unrealized Gains	63		—		3,617		—		3,680
Gross Unrealized Losses	(1,698)		—		(2,608)		(200)		(4,506)
Available-For-Sale Securities,   at Fair Value	108,365		400		449,751		800		559,316
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									298,106
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	74,088	$	—	$	263,292	$	—	$	337,380
12 Months or Longer	29,214		—		—		800		30,014
Total	$	103,302	$	—	$	263,292	$	800	$	367,394
Number of Securities in a   Continuous Loss Position	14		—		39		1		54
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	912	$	—	$	2,608	$	—	$	3,520
12 Months or Longer	786		—		—		200		986
Total	$	1,698	$	—	$	2,608	$	200	$	4,506
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,000
US Agency Obligations,   at Fair Value	108,365
US Government Agency   Securities, at Amortized Cost					$	9,386
US Government Agency   Securities, at Fair Value					9,371
Government Sponsored Entity   Securities, at Amortized Cost					439,356
Government Sponsored Entity   Securities, at Fair Value					440,380

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,001	$	508	$	349,911	$	1,000	$	461,420
Gross Unrealized Gains	138		—		6,276		—		6,414
Gross Unrealized Losses	(1,769)		—		(1,776)		(200)		(3,745)
Available-For-Sale Securities,   at Fair Value	108,370		508		354,411		800		464,089
Available-For-Sale Securities,   Pledged as Collateral, at Fair   Value									352,214
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	103,231	$	—	$	120,780	$	—	$	224,011
12 Months or Longer	—		—		—		800		800
Total	$	103,231	$	—	$	120,780	$	800	$	224,811
Number of Securities in a   Continuous Loss Position	14		—		16		1		31
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	1,769	$	—	$	1,776	$	—	$	3,545
12 Months or Longer	—		—		—		200		200
Total	$	1,769	$	—	$	1,776	$	200	$	3,745
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,001
US Agency Obligations,   at Fair Value	108,370
US Government Agency   Securities, at Amortized Cost					$	11,582
US Government Agency   Securities, at Fair Value					11,658
Government Sponsored Entity   Securities, at Amortized Cost					338,329
Government Sponsored Entity   Securities, at Fair Value					342,753

At March 31, 2022, there was no allowance for credit losses for the AFS securities portfolio.

The following table is the schedule of Held-To-Maturity Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2022
Held-To-Maturity Securities,   at Amortized Cost	$	181,832	$	14,829	$	196,661
Gross Unrealized Gains	180		—		180
Gross Unrealized Losses	(832)		(147)		(979)
Held-To-Maturity Securities,   at Fair Value	181,180		14,682		195,862
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					176,635
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	69,318	$	221	$	69,539
From 1 - 5 Years	109,607		14,608		124,215
From 5 - 10 Years	2,866		—		2,866
Over 10 Years	41		—		41
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	69,315	$	221	$	69,536
From 1 - 5 Years	108,946		14,461		123,407
From 5 - 10 Years	2,878		—		2,878
Over 10 Years	41		—		41
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	96,088	$	14,465	$	110,553
12 Months or Longer	—		—		—
Total	$	96,088	$	14,465	$	110,553
Number of Securities in a   Continuous Loss Position	258		23		281
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	832	$	147	$	979
12 Months or Longer	—		—		—
Total	$	832	$	147	$	979
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	4,954
US Government Agency   Securities, at Fair Value			4,900
Government Sponsored Entity   Securities, at Amortized Cost			9,875
Government Sponsored Entity   Securities, at Fair Value			9,782

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	180,195	$	16,371	$	196,566
Gross Unrealized Gains	4,179		547		4,726
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	184,374		16,918		201,292
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					175,218
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	5,518
US Government Agency   Securities, at Fair Value			5,647
Government Sponsored Entity   Securities, at Amortized Cost			10,853
Government Sponsored Entity   Securities, at Fair Value			11,271

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	191,202	$	23,359	$	214,561
Gross Unrealized Gains	5,843		956		6,799
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	197,045		24,315		221,360
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					207,595
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	8,310
US Government Agency   Securities, at Fair Value			8,597
Government Sponsored Entity   Securities, at Amortized Cost			15,049
Government Sponsored Entity   Securities, at Fair Value			15,718

In the tables above, maturities of mortgage-backed securities are included based on their expected average lives. Actual maturities will differ because issuers may have the right to call or prepay obligations with or without prepayment penalties.

Arrow evaluates available-for-sale debt securities in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized within the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. Arrow determined that at March 31, 2022, gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. Arrow does not intend to sell, nor is it more likely than not that Arrow will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. Therefore, Arrow carried no allowance for credit loss at March 31, 2022 and there was no credit loss expense recognized by Arrow with respect to the securities portfolio during the three months ended March 31, 2022.  

Arrow's held to maturity debt securities are comprised of U.S. government agencies, U.S. government-sponsored enterprises or state and municipal obligations. U.S. government agencies and U.S. government-sponsored enterprise securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Arrow determined that the expected credit loss on its held to maturity debt portfolio was immaterial and therefore no allowance for credit loss was recorded as of March 31, 2022.

The following table is the schedule of Equity Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Equity Securities
	March 31, 2022	December 31, 2021	March 31, 2021
Equity Securities, at Fair Value	$1,877	$1,747	$1,796

The following is a summary of realized and unrealized gains recognized in net income on equity securities during the three month periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Net Gain on Equity Securities	$	130	$	160
Less: Net gain recognized during the reporting period on equity securities sold during the period	—		—
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$	130	$	160

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Loans

3 Months Ended

Mar. 31, 2022

Receivables [Abstract]

Loans

LOANS (In Thousands)

Loan Categories and Past Due Loans

The following two tables present loan balances outstanding as of March 31, 2022, 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 $831, $1,154 and $4,443 as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively, are included in the residential real estate balances for current loans.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2022
Loans Past Due 30-59 Days	$	69	$	—	$	6,631	$	2,565	$	9,265
Loans Past Due 60-89 Days	89		—		2,562		267		2,918
Loans Past Due 90 or more Days	—		346		1,041		1,531		2,918
Total Loans Past Due	158		346		10,234		4,363		15,101
Current Loans	155,309		638,091		966,414		962,352		2,722,166
Total Loans	$	155,467	$	638,437	$	976,648	$	966,715	$	2,737,267
December 31, 2021
Loans Past Due 30-59 Days	$	202	$	—	$	6,713	$	107	$	7,022
Loans Past Due 60-89 Days	3		—		2,709		2,557		5,269
Loans Past Due 90 or more Days	157		1,180		1,564		1,981		4,882
Total Loans Past Due	362		1,180		10,986		4,645		17,173
Current Loans	172,156		627,749		909,570		941,293		2,650,768
Total Loans	$	172,518	$	628,929	$	920,556	$	945,938	$	2,667,941
March 31, 2021
Loans Past Due 30-59 Days	$	63	$	143	$	2,233	$	2,097	$	4,536
Loans Past Due 60-89 Days	34		2,723		822		156		3,735
Loans Past Due 90 or more Days	38		1,474		592		1,700		3,804
Total Loans Past Due	135		4,340		3,647		3,953		12,075
Current Loans	288,416		577,167		857,524		904,061		2,627,168
Total Loans	$	288,551	$	581,507	$	861,171	$	908,014	$	2,639,243

Schedule of Non Accrual Loans by Category
			Commercial
March 31, 2022	Commercial		Real Estate		Consumer		Residential		Total
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	55	$	55
Nonaccrual Loans	70		6,360		1,155		2,165		9,750
Nonaccrual With No Allowance for Credit Loss	70		3,609		1,155		2,165		6,999
Interest Income on Nonaccrual Loans	—		—		—		—		—
December 31, 2021
Loans 90 or More Days Past Due   and Still Accruing Interest	$	157	$	—	$	—	$	666	$	823
Nonaccrual Loans	34		7,243		1,697		1,790		10,764
March 31, 2021
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	242	$	242
Nonaccrual Loans	64		4,364		746		2,913		8,087

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 - non-Paycheck Protection Program (PPP), commercial PPP, 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 March 31, 2022 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 a reduction of approximately 0.4% in the national unemployment rate during the six-quarter forecast period, while forecasted gross domestic product are projected to decline approximately 4.1%. The home price index (HPI) forecast increased approximately 3.3% from the previous quarter level. The national HPI forecast is projecting growth beyond any recent actual growth when compared to the Albany Metropolitan Statistical Area for the last 10 years and is considered to be a

unique circumstance not reflective of current economic conditions in our markets. As a result, an additional qualitative adjustment was utilized to capture additional risk outside of the quantitative model. 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. Driven by current economic forecasts, loan growth and net charge offs during the quarter, the first quarter provision for credit losses was $769 thousand. The provision is directionally consistent with both the latest economic forecasts as well as first quarter activity. Management's evaluation considers the allowance for credit losses for loans to be appropriate as of March 31, 2022.

The following table details activity in the allowance for credit losses on loans for the three months ended March 31, 2022 and March 31, 2021.

Allowance for Credit Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Credit Losses for the Quarterly Period:
December 31, 2021	$	2,298	$	13,136	$	2,402	$	9,445	$	27,281
Charge-offs	—		—		(799)		(30)		(829)
Recoveries	8		—		432		—		440
Provision	209		406		475		(321)		769
March 31, 2022	$	2,515	$	13,542	$	2,510	$	9,094	$	27,661
Balance as of January 1, 2021 as adjusted for ASU 2016-13	$	4,257	$	12,054	$	2,179	$	9,442	$	27,932
Charge-offs	(3)		—		(627)		(3)		$	(633)
Recoveries	—		—		189		—		$	189
Provision	43		(110)		688		(1,269)		$	(648)
March 31, 2021	$	4,297	$	11,944	$	2,429	$	8,170	$	26,840

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 March 31, 2022, the total unfunded commitment off-balance sheet credit exposure was $1.5 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 March 31, 2022, there were three total relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $6.4 million and only one loan had an allowance for credit loss of $582 thousand.

The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2022, December 31, 2021 and March 31, 2021:

March 31, 2022	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		6,014		6,014
Consumer	—		—		—
Residential	415		—		415
Total	$	415	$	6,014	$	6,429

December 31, 2021	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		6,732		6,732
Consumer	—		—		—
Residential	673		—		673
Total	$	673	$	6,732	$	7,405

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

Allowance for Credit Losses - Collectively and Individually Evaluated
	Commercial		Commercial Real Estate		Consumer		Residential		Total
March 31, 2022
Ending Loan Balance - Collectively Evaluated	$	155,467	$	632,423	$	976,648	$	966,300	$	2,730,838
Allowance for Credit Losses - Loans Collectively Evaluated	2,515		12,960		2,510		9,094		27,079
Ending Loan Balance - Individually Evaluated	—		6,014		—		415		6,429
Allowance for Credit Losses - Loans Individually Evaluated	—		582		—		—		582
December 31, 2021
Ending Loan Balance - Collectively Evaluated	$	172,518	$	622,197	$	920,556	$	945,265	$	2,660,536
Allowance for Credit Losses - Loans Collectively Evaluated	2,298		12,537		2,402		9,445		$	26,682
Ending Loan Balance - Individually Evaluated	—		6,732		—		673		7,405
Allowance for Credit Losses - Loans Individually Evaluated	—		599		—		—		599
March 31, 2021
Ending Loan Balance - Collectively Evaluated	$	288,551	$	577,656	$	861,171	$	906,858	$	2,634,236
Allowance for Credit Losses - Loans Collectively Evaluated	4,297		11,388		2,429		8,170		26,284
Ending Loan Balance - Individually Evaluated	—		3,851		—		1,156		5,007
Allowance for Credit Losses - Loans Individually Evaluated	—		556		—		—		556

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

The following tables presents credit quality indicators by total loans amortized cost basis by origination year as of March 31, 2022, December 31, 2021 and March 31, 2021.

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
March 31, 2022	2022		2021		2020		2019		2018		Prior
Commercial:
Risk rating
Satisfactory	$	8,048	$	49,980	$	31,869	$	10,454	$	11,149	$	22,662	$	7,656	$	—	$	141,818
Special mention	—		—		—		—		—		50		—		—		50
Substandard	—		3,504		3,593		541		—		—		5,961		—		13,599
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	8,048	$	53,484	$	35,462	$	10,995	$	11,149	$	22,712	$	13,617	$	—	$	155,467
Commercial Real Estate:
Risk rating
Satisfactory	$	22,582	$	143,784	$	270,523	$	42,126	$	37,604	$	75,806	$	1,554	$	—	$	593,979
Special mention	627		—		5,825		1,193		—		1,213		—		—		8,858
Substandard	2,241		4,852		16,073		3,877		95		8,462		—		—		35,600
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	25,450	$	148,636	$	292,421	$	47,196	$	37,699	$	85,481	$	1,554	$	—	$	638,437
Consumer:
Risk rating
Performing	$	155,883	$	369,231	$	215,735	$	134,973	$	69,783	$	29,427	$	462	$	—	$	975,494
Nonperforming	—		321		296		293		138		106		—		—		1,154
Total Consumer Loans	$	155,883	$	369,552	$	216,031	$	135,266	$	69,921	$	29,533	$	462	$	—	$	976,648
Residential:
Risk rating
Performing	$	37,795	$	193,693	$	144,671	$	89,415	$	83,582	$	294,391	$	120,949	$	—	$	964,496
Nonperforming	—		—		133		—		27		1,739		320		—		2,219
Total Residential Loans	$	37,795	$	193,693	$	144,804	$	89,415	$	83,609	$	296,130	$	121,269	$	—	$	966,715
Total Loans	$	227,176	$	765,365	$	688,718	$	282,872	$	202,378	$	433,856	$	136,902	$	—	$	2,737,267

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
December 31, 2021	2021		2020		2019		2018		2017		Prior
Commercial:
Risk rating
Satisfactory	$	75,615	$	35,522	$	11,591	$	11,661	$	7,792	$	3,442	$	12,783	$	—	$	158,406
Special mention	—		—		3		—		—		5,899		—		—		5,902
Substandard	3,541		3,791		589		—		25		12		252		—		8,210
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	79,156	$	39,313	$	12,183	$	11,661	$	7,817	$	9,353	$	13,035	$	—	$	172,518
Commercial Real Estate:
Risk rating
Satisfactory	$	140,636	$	276,461	$	42,369	$	37,997	$	22,155	$	59,698	$	1,923	$	—	$	581,239
Special mention	—		7,893		1,204		—		137		1,906		—		—		11,140
Substandard	7,248		16,405		3,910		96		—		8,867		24		—		36,550
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	147,884	$	300,759	$	47,483	$	38,093	$	22,292	$	70,471	$	1,947	$	—	$	628,929
Consumer:
Risk rating
Performing	$	402,558	$	239,492	$	154,517	$	82,673	$	29,587	$	9,578	$	455	$	—	$	918,860
Nonperforming	388		399		502		151		160		96		—		—		1,696
Total Consumer Loans	$	402,946	$	239,891	$	155,019	$	82,824	$	29,747	$	9,674	$	455	$	—	$	920,556
Residential:
Risk rating
Performing	$	187,708	$	146,113	$	93,547	$	88,505	$	93,524	$	215,679	$	118,595	$	—	$	943,671
Nonperforming	—		133		—		27		162		1,907		38		—		2,267
Total Residential Loans	$	187,708	$	146,246	$	93,547	$	88,532	$	93,686	$	217,586	$	118,633	$	—	$	945,938
Total Loans	$	817,694	$	726,209	$	308,232	$	221,110	$	153,542	$	307,084	$	134,070	$	—	$	2,667,941

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

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

The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $2.2 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.

Loans Modified in Trouble Debt Restructurings

The following table presents information on loans modified in trouble debt restructurings during the periods indicated.

Loans Modified in Trouble Debt Restructurings During the Period
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
For the Quarter Ended:
March 31, 2022
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	7	$	—	$	7
Post-Modification Outstanding Recorded Investment	—		—		7		—		7
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2021
Number of Loans	—		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment	—		—		—		—		—
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

In general, prior to the COVID-19 pandemic, loans requiring modification were restructured to accommodate the projected cash-flows of the borrower. Such modifications may involve a reduction of the interest rate, a significant deferral of payments or forgiveness of a portion of the outstanding principal balance. As indicated in the table above, no loans modified during the preceding twelve months subsequently defaulted as of March 31, 2022.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES (In Thousands)

The following table presents the notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit as of March 31, 2022, December 31, 2021 and March 31, 2021:

Commitments to Extend Credit and Letters of Credit
	March 31, 2022		December 31, 2021		March 31, 2021
Notional Amount:
Commitments to Extend Credit	$	438,055	$	402,280	$	437,920
Standby Letters of Credit	3,351		3,223		3,775
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	23		24		12

Arrow is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Commitments to extend credit include home equity lines of credit, commitments for residential and commercial construction loans and other personal and commercial lines of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  The contract or notional amounts of those instruments reflect the extent of the involvement Arrow has in particular classes of financial instruments.

Arrow's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments.  Arrow uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are not expected to be fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Arrow evaluates each customer's creditworthiness on a case-by-case basis.  Home equity lines of credit are secured by residential real estate.  Construction lines of credit are secured by underlying real estate.  For other lines of credit, the amount of collateral obtained, if deemed necessary by Arrow upon extension of credit, is based on management's credit evaluation of

the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.  Most of the commitments are variable rate instruments.

Arrow does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit. Arrow has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party.  Standby letters of credit generally arise in connection with commercial lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit at March 31, 2022, December 31, 2021 and March 31, 2021 represent the maximum potential future payments Arrow could be required to make.  Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements.  Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Arrow's policies governing loan collateral apply to standby letters of credit at the time of credit extension.  Loan-to-value ratios will generally range from 50% for movable assets, such as inventory, to 100% for liquid assets, such as bank CD's.  Fees for standby letters of credit range from 1% to 3% of the notional amount.  Fees are collected upfront and amortized over the life of the commitment. The carrying amount and fair value of Arrow's standby letters of credit at March 31, 2022, December 31, 2021 and March 31, 2021, were insignificant.  The fair value of standby letters of credit is based on the fees currently charged for similar agreements or the cost to terminate the arrangement with the counterparties.

The fair value of commitments to extend credit is determined by estimating the fees to enter into similar agreements, taking into account the remaining terms and present creditworthiness of the counterparties, and for fixed rate loan commitments, the difference between the current and committed interest rates.  Arrow provides several types of commercial lines of credit and standby letters of credit to its commercial customers.  The pricing of these services is not isolated as Arrow considers the customer's complete deposit and borrowing relationship in pricing individual products and services.  The commitments to extend credit also include commitments under home equity lines of credit, for which Arrow charges no fee.  The carrying value and fair value of commitments to extend credit are not material and Arrow does not expect to incur any material loss as a result of these commitments.

In the normal course of business, Arrow and its subsidiary banks become involved in a variety of routine legal proceedings.  At present, there are no legal proceedings pending or threatened, which in the opinion of management and counsel, would result in a material loss to Arrow, except as noted below.

Except as noted below, Arrow, including its subsidiary banks, is not currently the subject of any material pending legal proceedings, other than ordinary routine litigation occurring in the normal course of their business. On an ongoing basis, Arrow is often the subject of, or a party to, various legal claims by other parties against Arrow, by Arrow against other parties, or involving Arrow, which arise in the normal course of business. Except as noted below, the various pending legal claims against Arrow will not, in the opinion of management based upon consultation with counsel, result in any material liability.

On July 1, 2020, Daphne Richard, a customer of Glens Falls National Bank and Trust Company (Glens Falls National or GFNB) filed a putative class action complaint against GFNB in the United States District Court for the Northern District of New York. The complaint alleges that GFNB assessed overdraft fees on certain transactions drawn on her checking account without having sufficiently disclosed its overdraft-fee practices in its account agreement. Ms. Richard, on behalf of two purported classes, seeks compensatory damages, disgorgement of profits, statutory damages, treble damages, enjoinment of the conduct complained of, and costs and fees. The complaint is similar to complaints filed against other financial institutions pertaining to overdraft fees. On April 13, 2022, the court preliminarily approved a settlement agreement among Arrow, GFNB, Saratoga National Bank and Trust Company (Saratoga National or SNB) and the plaintiffs, pursuant to which, among other things, Arrow established a settlement fund of approximately $1.5 million. Arrow expressly denies any wrongdoing in connection with the matters claimed in the complaint.

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Comprehensive Loss

3 Months Ended

Mar. 31, 2022

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Comprehensive Loss

COMPREHENSIVE LOSS (In Thousands)

The following table presents the components of other comprehensive loss for the three month periods ended March 31, 2022 and 2021:

Schedule of Comprehensive Loss Income
	Three Months Ended March 31,
			Tax
	Before-Tax		(Expense)		Net-of-Tax
	Amount		Benefit		Amount
2022
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(29,955)	$	7,659	$	(22,296)
Net Unrealized Gain on Cash Flow Swap	1,512		(387)		1,125
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(29)		8		(21)
Amortization of Net Retirement Plan Actuarial Loss	57		(15)		42
Amortization of Net Retirement Plan Prior Service Cost	7		(1)		6
Other Comprehensive Loss	$	(28,408)	$	7,264	$	(21,144)
2021
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(5,121)	$	1,309	$	(3,812)
Net Unrealized Gain on Cash Flow Swap	1,982		(507)		1,475
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(28)		8		(20)
Amortization of Net Retirement Plan Actuarial Loss	46		(12)		34
Amortization of Net Retirement Plan Prior Service Cost	59		(16)		43
Other Comprehensive Loss	$	(3,062)	$	782	$	(2,280)

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

Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)
	Unrealized (Loss) and Gain on Available-for-Sale Securities		Unrealized Gain (Loss) on Cash Flow Swap		Defined Benefit Plan Items				Total
					Net Actuarial Loss		Net Prior Service Cost
For the Quarter-To-Date periods ended:
December 31, 2021	$	(614)	$	1,320	$	639	$	(998)	$	347
Other comprehensive income or loss before reclassifications	(22,296)		1,125		—		—		(21,171)
Amounts reclassified from accumulated other comprehensive income	—		(21)		42		6		27
Net current-period other comprehensive (loss) income	(22,296)		1,104		42		6		(21,144)
March 31, 2022	$	(22,910)	$	2,424	$	681	$	(992)	$	(20,797)
December 31, 2020	$	5,799	$	485	$	(5,929)	$	(1,171)	$	(816)
Other comprehensive income or loss before reclassifications	(3,812)		1,475		—		—		(2,337)
Amounts reclassified from accumulated other comprehensive income	—		(20)		34		43		57
Net current-period other comprehensive (loss) income	(3,812)		1,455		34		43		(2,280)
March 31, 2021	$	1,987	$	1,940	$	(5,895)	$	(1,128)	$	(3,096)

(1) All amounts are net of tax.

The following table presents the reclassifications out of accumulated other comprehensive loss.

Reclassifications Out of Accumulated Other Comprehensive Loss
Details about Accumulated Other Comprehensive Loss Components	Amounts Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Statement Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2022
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	29		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	(7)		(1)	Salaries and Employee Benefits
Actuarial loss	(57)		(1)	Salaries and Employee Benefits
	(35)			Total before Tax
	8			Provision for Income Taxes
Total reclassifications for the period	$	(27)		Net of Tax
March 31, 2021
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	28		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	$	(59)	(1)	Salaries and Employee Benefits
Actuarial loss	(46)		(1)	Salaries and Employee Benefits
	(77)			Total before Tax
	20			Provision for Income Taxes
Total reclassifications for the period	$	(57)		Net of Tax
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

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

Arrow has established three stock-based compensation plans: a Long Term Incentive Plan, an Employee Stock Purchase Plan (ESPP) and an Employee Stock Ownership Plan (ESOP). All share and per share data have been adjusted for the September 24, 2021 3% stock dividend.

Long Term Incentive Plan

The Long Term Incentive Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, performance units and performance shares. The Compensation Committee of the Board of Directors administers the Long Term Incentive Plan.

Stock Options - Options may be granted at a price no less than the greater of the par value or fair market value of such shares on the date on which such option is granted, and generally expire ten years from the date of grant.  The options usually vest over a four-year period.

The following table summarizes information about stock option activity for the year to date period ended March 31, 2022.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2022	270,758			$	28.45
Granted	57,000			35.83
Exercised	(12,145)			19.81
Forfeited	(246)			19.67
Outstanding at March 31, 2022	315,367			30.12
Vested at Period-End	177,611			28.24
Expected to Vest	137,756			32.55
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	7.65
Fair Value Assumptions:
Dividend Yield	2.90		%
Expected Volatility	27.15		%
Risk Free Interest Rate	1.69		%
Expected Lives (in years)	8.56

The following table presents information on the amounts expensed related to stock options for the three month periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Amount expensed	$	75	$	72

Restricted Stock Units - The Company grants restricted stock units which gives the recipient the right to receive shares of Company stock upon vesting. The fair value of each restricted stock unit is the market value of Company stock on the date of grant. 100% of the restricted stock unit awards vest three years from the grant date. Once vested, the restricted stock units become vested units and are no longer forfeitable. Vested units settle upon retirement of the recipient. Unvested restricted stock unit awards will generally be forfeited if the recipient ceases to be employed by the Company, with limited exceptions.

The following table summarizes information about restricted stock unit activity for the periods ended March 31, 2022 and 2021.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2022	13,203	$	30.15
Granted	4,186	35.83
Vested	(4,263)	29.02
Non-vested at March 31, 2022	13,126	32.32
Non-vested at January 1, 2021	12,012	30.70
Granted	4,880	28.54
Vested	(3,689)	29.82
Non-vested at March 31, 2021	13,203	30.15

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Amount expensed	$	35	$	32

Employee Stock Purchase Plan

Arrow sponsors an ESPP under which employees may purchase Arrow's common stock at a discount below market price. The current amount of the discount is 5%. Under current accounting guidance, a stock purchase plan with a discount of 5% or less is not considered a compensatory plan.

Employee Stock Ownership Plan

Arrow maintains an ESOP, pursuant to which substantially all employees of Arrow and its subsidiaries are eligible to participate upon satisfaction of applicable service requirements. The Company makes cash contributions to the ESOP each year.

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Retirement Benefit Plans

3 Months Ended

Mar. 31, 2022

Retirement Benefits [Abstract]

Retirement Benefit Plans

RETIREMENT BENEFIT PLANS (Dollars in Thousands)

Arrow sponsors qualified and non-qualified defined benefit pension plans and other postretirement benefit plans for its employees. Arrow maintains a non-contributory pension plan, which covers substantially all employees.  Effective December 1, 2002, all active participants in the qualified defined benefit pension plan were given a one-time irrevocable election to continue participating in the traditional plan design, for which benefits were based on years of service and the participant’s final compensation (as defined), or to begin participating in the new cash balance plan design.  All employees who first participate in the plan after December 1, 2002 automatically participate in the cash balance plan design.  The interest credits under the cash balance plan are based on the 30-year U.S. Treasury rate in effect for November of the prior year with a minimum interest credit of 3%.  The service credits under the cash balance plan are equal to 6.0% of eligible salaries for employees who become participants on or after January 1, 2003.  For employees in the plan prior to January 1, 2003, the service credits are scaled based on the age of the participant, and range from 6.0% to 12.0%. The funding policy is to contribute up to the maximum amount that can be deducted for federal income tax purposes and to make all payments required under The Employee Retirement Income Security Act (ERISA).  Arrow also maintains a supplemental non-qualified unfunded retirement plan to provide eligible employees of Arrow and its subsidiaries with benefits in excess of qualified plan limits imposed by federal tax law.

Arrow has multiple non-pension postretirement benefit plans.  The health care, dental and life insurance plans are contributory, with participants’ contributions adjusted annually.  Arrow’s policy is to fund the cost of postretirement benefits based on the current cost of the underlying policies.  However, the health care plan provision allows for grandfathered participants to receive automatic increases of Company contributions each year based on the increase in inflation, limited to a maximum of 5%.  

As of December 31, 2021, Arrow began using the sex-distinct amount-weighted Pri-2012 mortality tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements with the Scale MP-2021 mortality improvement scale on a generational basis for the Pension Plan and the sex-distinct amount-weighted White Collar tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements with the scale MP-2021 mortality improvement scale on a generational basis for the Select Executive Retirement Plan. As of December 31, 2021, Arrow began using the sex-distinct Pri.H-2012 headcount-weighted mortality tables for employees and healthy annuitants, adjusted for mortality improvements with the Scale MP-2021 mortality improvement scale on a generational basis.

Segment interest rates of 1.02%, 2.72%, 3.08% were used in determining the present value of a lump sum payment/annuitizing cash balance accounts for the 2021 plan year.

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

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

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

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

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

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

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

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

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

The following tables provide the components of net periodic benefit costs for the three-month periods ended March 31, 2022 and 2021.

	Employees'		Select Executive		Postretirement
	Pension		Retirement		Benefit
	Plan		Plan		Plans
Net Periodic (Benefit) Cost
For the Three Months Ended March 31, 2022:
Service Cost 1	$	488	$	147	$	27
Interest Cost 2	367		51		64
Expected Return on Plan Assets 2	(1,099)		—		—
Amortization of Prior Service Cost 2	19		11		27
Amortization of Net Loss (Gain) 2	—		39		(32)
Net Periodic (Benefit) Cost	$	(225)	$	248	$	86
Plan Contributions During the Period	$	—	$	116	$	55

For the Three Months Ended March 31, 2021:
Service Cost 1	$	460	$	118	$	31
Interest Cost 2	340		45		67
Expected Return on Plan Assets 2	(950)		—		—
Amortization of Prior Service Cost 2	20		12		27
Amortization of Net Loss 2	—		38		8
Net Periodic (Benefit) Cost	$	(130)	$	213	$	133
Plan Contributions During the Period	$	—	$	118	$	28
Estimated Future Contributions in the Current Fiscal Year	$	—	$	348	$	165

Footnotes:

1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income

2. Included in Other Operating Expense on the Consolidated Statements of Income

A contribution to the qualified pension plan was not required during the period ended March 31, 2022 and currently, additional contributions in 2022 are not expected. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Earnings Per Common Share

EARNINGS PER COMMON SHARE (In Thousands, Except Per Share Amounts)

The following table presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per common share (EPS) for periods ended March 31, 2022 and 2021.  2021 share and per share amounts have been adjusted for the September 24, 2021, 3% stock dividend.

Earnings Per Share
	Three Months Ended
	March 31, 2022		March 31, 2021
Earnings Per Share - Basic:
Net Income	$	12,575	$	13,280
Weighted Average Shares - Basic	16,030		15,994
Earnings Per Share - Basic	$	0.78	$	0.83
Earnings Per Share - Diluted:
Net Income	$	12,575	$	13,280
Weighted Average Shares - Basic	16,030		15,994
Dilutive Average Shares Attributable to Stock Options	53		36
Weighted Average Shares - Diluted	16,083		16,030
Earnings Per Share - Diluted	$	0.78	$	0.83

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Fair Values

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Values

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, 2022, December 31, 2021 and March 31, 2021 were securities available-for-sale, equity securities and derivatives. Arrow held no securities or liabilities for trading on such dates.

The table below presents the financial instrument's fair value and the amounts within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement:

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value of Assets and Liabilities Measured on a Recurring Basis:
March 31, 2022
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	132,744	$	—	$	132,744	$	—
State and Municipal Obligations	380		—		380		—
Mortgage-Backed Securities	448,504		—		448,504		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	582,428		—		582,428		—
Equity Securities	1,877		—		1,877		—
Total Securities Measured on a Recurring Basis	584,305		—		584,305		—
Derivatives, included in other assets	4,131		—		4,131		—
Total Measured on a Recurring Basis	$	588,436	$	—	$	588,436	$	—
Liabilities:
Derivatives, included in other liabilities	4,131		—		4,131		—
Total Measured on a Recurring Basis	$	4,131	$	—	$	4,131	$	—
December 31, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,365	$	—	$	108,365	$	—
State and Municipal Obligations	400		—		400		—
Mortgage-Backed Securities	449,751		—		449,751		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	559,316		—		559,316		—
Equity Securities	1,747		—		1,747		—

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Total Securities Measured on a Recurring Basis	561,063		—		561,063		—
Derivatives, included in other liabilities	2,083		—		2,083		—
Total Measured on a Recurring Basis	$	563,146	$	—	$	563,146	$	—
Liabilities:
Derivatives, included in other liabilities	2,083		—		2,083		—
Total Measured on a Recurring Basis	$	2,083	$	—	$	2,083	$	—
March 31, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,370	$	—	$	108,370	$	—
State and Municipal Obligations	508		—		508		—
Mortgage-Backed Securities	354,411		—		354,411		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	464,089		—		464,089		—
Equity Securities	1,796		—		1,796		—
Total Securities Measured on a Recurring Basis	$	465,885	$	—	$	465,885	$	—
Derivatives, included in other assets	2,298		$	—	2,298		—
Total Measured on a Recurring Basis	$	468,183	$	—	$	468,183	$	—
Liabilities:
Derivatives, included in other liabilities	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	2,298	$	—	$	2,298	$	—

	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, 2022
Collateral Dependent Evaluated Loans	$	2,168	$	—	$	—	$	2,168
Other Real Estate Owned and Repossessed Assets, Net	180		—		—		180		—
December 31, 2021
Collateral Dependent Impaired Loans	$	2,457	$	—	$	—	$	2,457
Other Real Estate Owned and Repossessed Assets, Net	126		—		—		126		—
March 31, 2021
Collateral Dependent Impaired Loans	$	2,423	$	—	$	—	$	2,423
Other Real Estate Owned and Repossessed Assets, Net	242		—		—		242		—

The fair value of financial instruments is determined under the following hierarchy:

•Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

•Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

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

The fair value of Level 1 securities available-for-sale are based on unadjusted, quoted market prices from exchanges in active markets. The fair value of Level 2 securities available-for-sale are based on an independent bond and equity pricing service for identical assets or significantly similar securities and an independent equity pricing service for equity securities not actively traded.  The pricing services use a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.  The fair value of Level 2 derivatives is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes.

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

The fair value of collateral dependent evaluated loans and other real estate owned was based on third-party appraisals less estimated cost to sell. The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. Other assets which might have been included in this table include mortgage servicing rights, goodwill and other intangible assets. Arrow evaluates each of these assets for impairment at least annually, with no impairment recognized for these assets at March 31, 2022, December 31, 2021 and March 31, 2021.

Fair Value Methodology for Financial Instruments Not Measured on a Recurring or Nonrecurring Basis

The fair value for securities held-to-maturity is determined utilizing an independent bond pricing service for identical assets or significantly similar securities.  The pricing service uses a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models.  Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.

ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities" requires that the fair value for loans must be disclosed using the "exit price" notion which is a reasonable estimate of what another party might pay in an orderly transaction. Fair values for loans are calculated for portfolios of loans with similar financial characteristics.  Loans are segregated by type such as commercial, commercial real estate, residential mortgage, indirect auto and other consumer loans.  Each loan category is further segmented into fixed and adjustable interest rate terms and by performing and nonperforming categories.  The fair value of performing loans is calculated by determining the estimated future cash flow, which is the contractual cash flow adjusted for estimated prepayments. The discount rate is determined by starting with current market yields, and first adjusting for a liquidity premium. This premium is separately determined for each loan type. Then a credit loss component is determined utilizing the credit loss assumptions used in the allowance for credit loss model. Finally, a discount spread is applied separately for consumer loans vs. commercial loans based on market information and utilization of the swap curve.  

The fair value of time deposits is based on the discounted value of contractual cash flows, except that the fair value is limited to the extent that the customer could redeem the certificate after imposition of a premature withdrawal penalty.  The discount rates are estimated using the Federal Home Loan Bank of New York (FHLBNY) yield curve, which is considered representative of Arrow’s time deposit rates. The fair value of all other deposits is equal to the carrying value.

The fair value of FHLBNY advances is calculated by the FHLBNY.

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

The book value of the outstanding trust preferred securities (Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts) are considered to approximate fair value since the interest rates are variable (indexed to the London Inter-Bank Offered Rate (LIBOR)) and Arrow is well-capitalized.

Fair Value by Balance Sheet Grouping

The following table presents a summary of the carrying amount, the fair value or an amount approximating fair value and the fair value hierarchy of Arrow’s financial instruments:

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2022
Cash and Cash Equivalents	$	487,578	$	487,578	$	487,578	$	—	$	—
Securities Available-for-Sale	582,428		582,428		—		582,428		—
Securities Held-to-Maturity	196,661		195,862		—		195,862		—
Equity Securities	1,877		1,877		—		1,877		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	4,491		4,491		—		4,491		—
Net Loans	2,709,606		2,648,804		—		—		2,648,804
Accrued Interest Receivable	8,099		8,099		—		8,099		—
Derivatives, included in other assets	4,131		4,131				4,131
Deposits	3,715,373		3,711,189		—		3,711,189		—
Federal Home Loan Bank Term Advances	25,000		25,001		—		25,001		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	102		102		—		102		—
Derivatives, included in other liabilities	4,131		4,131		—		4,131		—
December 31, 2021
Cash and Cash Equivalents	$	457,696	$	457,696	$	457,696	$	—	$	—
Securities Available-for-Sale	559,316		559,316		—		559,316		—
Securities Held-to-Maturity	196,566		201,292		—		201,292		—
Equity Securities	1,747		1,747		—		1,747
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,380		5,380		—		5,380		—
Net Loans	2,640,660		2,618,311		—		—		2,618,311
Accrued Interest Receivable	7,384		7,384		—		7,384		—
Derivatives, included in other assets	2,083		2,083		—		2,083		—
Deposits	3,550,497		3,548,554		—		3,548,554		—
Federal Home Loan Bank Term Advances	45,000		45,518		—		45,518		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	138		138		—		138		—
Derivatives, included in other liabilities	2,083		2,083		—		2,083		—
March 31, 2021
Cash and Cash Equivalents	$	452,207	$	452,207	$	452,207	$	—	$	—
Securities Available-for-Sale	464,089		464,089		—		464,089		—
Securities Held-to-Maturity	214,561		221,360		—		221,360		—
Equity Securities	1,796		1,796		—		1,796
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,360		5,360		—		5,360		—
Net Loans	2,612,403		2,603,225		—		—		2,603,225
Accrued Interest Receivable	8,258		8,258		—		8,258		—
Derivatives, included in other assets	2,298		2,298		—		2,298		—
Deposits	3,453,588		3,265,208		—		3,265,208		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	6,795		6,795		—		6,795		—
Federal Home Loan Bank Term Advances	45,000		46,176		—		46,176		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	237		237		—		237		—
Derivatives, included in other liabilities	2,298		2,298		—		2,298		—

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Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Leases

LEASES (Dollars In Thousands)

Arrow is a lessee in its leases, which are mainly for financial services locations in addition to leases for corporate vehicles. These leases generally require Arrow to pay third-party expenses on behalf of the Lessor, which are referred to as variable payments. Under some leases, Arrow pays the variable payments to the lessor, and in other leases, Arrow pays the variable payments directly to the applicable third party. None of Arrow's current leases include any residual value guarantees or any subleases, and there are no significant rights and obligations of Arrow for leases that have not commenced as of the reporting date.

Arrow leases two of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves as a Director on the Board of Directors of each of Arrow and Saratoga National. Arrow also leases one administrative office from an entity controlled by Elizabeth Miller, who serves as a Director on the Board of Directors of each of Arrow and Glens Falls National.

The following includes quantitative data related to Arrow's leases as of and for the three months ended March 31, 2022 and March 31, 2021:

		Three Months Ended
Finance Lease Amounts:	Classification	March 31, 2022			March 31, 2021
Right-of-Use Assets	Premises and Equipment, Net	$	4,770		$	4,947
Lease Liabilities	Finance Leases	5,156			5,205
Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	6,676		$	5,435
Lease Liabilities	Other Liabilities	6,863			5,522
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	49		$	49
Operating Outgoing Cash Flows From Operating Leases		260			261
Financing Outgoing Cash Flows From Finance Leases		13			12
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		—			331
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		28.0			28.9
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		11.2			12.5
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		2.81		%	3.13		%

Lease cost information for the Company's leases is as follows:
	Three Months Ended
	March 31, 2022		March 31, 2021
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	44
Interest on Lease Liabilities	49		49
Operating Lease Cost	312		209
Short-term Lease Cost	10		5
Variable Lease Cost	95		104
Total Lease Cost	$	510	$	411

Future Lease Payments at March 31, 2022 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2023	$	1,206	$	243
3/31/2024	904		243
3/31/2025	732		254
3/31/2026	682		265
3/31/2027	618		268
Thereafter	4,053		7,465
Total Undiscounted Cash Flows	$	8,195	$	8,738
Less: Net Present Value Adjustment	1,332		3,582
Lease Liability	$	6,863	$	5,156

Leases

LEASES (Dollars In Thousands)

Arrow is a lessee in its leases, which are mainly for financial services locations in addition to leases for corporate vehicles. These leases generally require Arrow to pay third-party expenses on behalf of the Lessor, which are referred to as variable payments. Under some leases, Arrow pays the variable payments to the lessor, and in other leases, Arrow pays the variable payments directly to the applicable third party. None of Arrow's current leases include any residual value guarantees or any subleases, and there are no significant rights and obligations of Arrow for leases that have not commenced as of the reporting date.

Arrow leases two of its branch offices, at market rates, from Stewart’s Shops Corp.  Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves as a Director on the Board of Directors of each of Arrow and Saratoga National. Arrow also leases one administrative office from an entity controlled by Elizabeth Miller, who serves as a Director on the Board of Directors of each of Arrow and Glens Falls National.

The following includes quantitative data related to Arrow's leases as of and for the three months ended March 31, 2022 and March 31, 2021:

		Three Months Ended
Finance Lease Amounts:	Classification	March 31, 2022			March 31, 2021
Right-of-Use Assets	Premises and Equipment, Net	$	4,770		$	4,947
Lease Liabilities	Finance Leases	5,156			5,205
Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	6,676		$	5,435
Lease Liabilities	Other Liabilities	6,863			5,522
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	49		$	49
Operating Outgoing Cash Flows From Operating Leases		260			261
Financing Outgoing Cash Flows From Finance Leases		13			12
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		—			331
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		28.0			28.9
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		11.2			12.5
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		2.81		%	3.13		%

Lease cost information for the Company's leases is as follows:
	Three Months Ended
	March 31, 2022		March 31, 2021
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	44
Interest on Lease Liabilities	49		49
Operating Lease Cost	312		209
Short-term Lease Cost	10		5
Variable Lease Cost	95		104
Total Lease Cost	$	510	$	411

Future Lease Payments at March 31, 2022 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2023	$	1,206	$	243
3/31/2024	904		243
3/31/2025	732		254
3/31/2026	682		265
3/31/2027	618		268
Thereafter	4,053		7,465
Total Undiscounted Cash Flows	$	8,195	$	8,738
Less: Net Present Value Adjustment	1,332		3,582
Lease Liability	$	6,863	$	5,156

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Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (In Thousands)

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

Derivatives Not Designated as Hedging Instruments

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

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

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

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Agreements
	March 31, 2022		December 31, 2021		March 31, 2021
Fair value adjustment included in other assets	$	4,131	$	2,083	$	2,298
Fair value adjustment included in other liabilities	4,131		2,083		2,298
Notional amount	171,182		172,668		175,113

Derivatives Designated as Hedging Instruments

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

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

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

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
	Three Months Ended		Twelve Months Ended		Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
Amount of gain recognized in AOCI	$	1,512	$	1,249	$	1,982
Amount of gain reclassified from AOCI to interest expense	29		126		28

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COVID-19 Pandemic	3 Months Ended
	Mar. 31, 2022
Unusual or Infrequent Items, or Both [Abstract]
COVID-19 Pandemic	COVID-19 PANDEMICThe COVID-19 pandemic caused significant disruptions in the United States economy, which impacted the activities and operations of Arrow and its customers. The pandemic also caused disruption in the financial markets both globally and in the United States.Arrow continues to monitor the impact of the pandemic, both during recovery as well as any potential setbacks, including emerging variants, and continues to mitigate the risk of harm to its employees and customers and to its operations from the pandemic. Arrow encourages customers to use contact-free alternatives such as digital banking and ATMs.

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Management's Use of Estimates

Management’s Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (US GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.  Due to the uncertainty regarding the impact of the COVID-19 pandemic, management utilized estimates and assumptions in its evaluation of potential impairment of Arrow's right-of-use lease assets, goodwill and intangible assets. Our most significant estimate is the allowance for credit losses. Other estimates include the fair value of financial statements, evaluation of pension and other post-retirement liabilities, an analysis of a need for a valuation allowance for deferred tax assets and a reserve for unfunded loan commitments recorded as an other liability. Actual results could differ from those estimates.

A material estimate that is particularly susceptible to significant change in the near term is the allowance for credit losses.  In connection with the determination of the allowance for credit losses management obtains economic forecasts from reliable sources and appraisals for properties.  The allowance for credit losses is management’s best estimate of the life of loan losses as of the balance sheet date.  While management uses available information to recognize losses on loans, future adjustments to the allowance for credit losses may be necessary based on changes in economic conditions.

Allowance for Credit Losses

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

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

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

Commercial Loans

Commercial Real Estate Loans

Consumer Loans

Residential Loans

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

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

For the loan segments utilizing the DCF method, (commercial, commercial real estate, and residential) management utilizes externally developed economic forecast of the following economic factors as loss drivers: national unemployment, gross domestic

product and home price index (HPI). The economic forecast is applied over a reasonable and supportable forecast period. Arrow utilizes a six quarter reasonable and supportable forecast period with an eight quarter reversion to the historic mean on a straight-line basis.

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

Arrow uses the vintage analysis method to estimate expected credit losses for the consumer loan segment. The vintage method was selected since the loans within the consumer loan segment are homogeneous, not just by risk characteristic, but by loan structure. Under the vintage analysis method, a loss rate is calculated based on the quarterly net charge-offs to the outstanding loan balance for each vintage year over the lookback period. Once this periodic loss rate is calculated for each quarter in the lookback period, the periodic rates are averaged into the loss rate. The loss rate is then applied to the outstanding loan balances based on the loan's vintage year. Arrow maintains, over the life of the loan, the loss curve by vintage year. If estimated losses computed by the vintage method need to be adjusted based on current conditions and the reasonable and supportable economic forecast, these adjustments would be incorporated over a six quarter reasonable and supportable forecast period, reverting to historical losses using a straight-line method over an eight quarter period. Based on current conditions and the reasonable and supportable economic forecast, no adjustments are currently required.

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

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

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

•The borrower is experiencing financial difficulty, and

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

Arrow's allowance for credit losses reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. Arrow has determined that a TDR is reasonably expected no later than the point it is determined that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required allowance for credit losses. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in Arrow's existing pools based on the underlying risk characteristics of the loan to measure the allowance for credit losses.

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

Accrued Interest Receivable - Upon adoption of CECL on January 1, 2021, Arrow made the following elections regarding accrued interest receivable: (1) presented accrued interest receivable balances separately within the other assets balance sheet line item; (2) excluded interest receivable that is included in amortized cost of financing receivables from related disclosures requirements and (3) continued Arrow's policy to write off accrued interest receivable by reversing interest income. For loans, write off typically occurs upon

becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, Arrow has not experienced uncollectible accrued interest receivable on investment securities.

Allowance for Credit Losses – Held to Maturity (HTM) Debt Securities - Arrow's HTM debt securities are also required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on HTM debt securities on a collective basis by major security types that share similar risk characteristics, such as financial asset type and collateral type adjusted for current conditions and reasonable and supportable forecasts. Management classifies the HTM portfolio into the following major security types: U.S. government agency or U.S. government sponsored mortgage-backed and collateralized mortgage obligations securities, and state and municipal debt securities.

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

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

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

Investments in Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock are required for membership in those organizations and are carried at cost since there is no market value available. The FHLB New York continues to pay dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of Federal Reserve Bank and FHLB stock.

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Cash and Cash Equivalents (Tables)

3 Months Ended

Mar. 31, 2022

Cash and Cash Equivalents [Abstract]

Schedule of Cash and Cash Equivalents

The following table is the schedule of Cash and Cash Equivalents at March 31, 2022, December 31, 2021 and March 31, 2021.
	March 31, 2022		December 31, 2021		March 31, 2021
Cash and Due From Banks	$	38,964	$	26,978	$	45,602
Interest-Bearing Deposits at Banks	448,614		430,718		406,605
Total Cash and Cash Equivalents	$	487,578	457,696		452,207

Restrictions on Cash and Cash Equivalents

The following table is the schedule of Cash and Cash Equivalents at March 31, 2022, December 31, 2021 and March 31, 2021.
	March 31, 2022		December 31, 2021		March 31, 2021
Cash and Due From Banks	$	38,964	$	26,978	$	45,602
Interest-Bearing Deposits at Banks	448,614		430,718		406,605
Total Cash and Cash Equivalents	$	487,578	457,696		452,207

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Debt Securities, Available-For-Sale

The following table is the schedule of Available-For-Sale Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2022
Available-For-Sale Securities,   at Amortized Cost	$	140,000	$	380	$	471,829	$	1,000	$	613,209
Gross Unrealized Gains	21		—		211		—		232
Gross Unrealized Losses	(7,277)		—		(23,536)		(200)		(31,013)
Available-For-Sale Securities,   at Fair Value	132,744		380		448,504		800		582,428
Available-For-Sale Securities,   Pledged as Collateral, at Fair   Value									397,138
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	5,000	$	20	$	86	$	—	$	5,106
From 1 - 5 Years	135,000		—		249,495		—		384,495
From 5 - 10 Years	—		360		222,248		1,000		223,608
Over 10 Years	—		—		—		—		—
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	5,021	$	20	$	88	$	—	$	5,129
From 1 - 5 Years	127,723		—		241,614		—		369,337
From 5 - 10 Years	—		360		206,802		800		207,962
Over 10 Years	—		—		—		—		—
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	43,518	$	—	$	358,688	$	—	$	402,206
12 Months or Longer	84,205		—		74,546		800		159,551
Total	$	127,723	$	—	$	433,234	$	800	$	561,757
Number of Securities in a   Continuous Loss Position	18		—		129		1		148
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	1,482	$	—	$	16,949	$	—	$	18,431
12 Months or Longer	5,795		—		6,587		200		12,582
Total	$	7,277	$	—	$	23,536	$	200	$	31,013
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	140,000
US Agency Obligations,   at Fair Value	132,744
US Government Agency   Securities, at Amortized Cost					$	8,853
US Government Agency   Securities, at Fair Value					8,667
Government Sponsored Entity   Securities, at Amortized Cost					462,976
Government Sponsored Entity   Securities, at Fair Value					439,837

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
December 31, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,000	$	400	$	448,742	$	1,000	$	560,142
Gross Unrealized Gains	63		—		3,617		—		3,680
Gross Unrealized Losses	(1,698)		—		(2,608)		(200)		(4,506)
Available-For-Sale Securities,   at Fair Value	108,365		400		449,751		800		559,316
Available-For-Sale Securities,   Pledged as Collateral,   at Fair Value									298,106
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	74,088	$	—	$	263,292	$	—	$	337,380
12 Months or Longer	29,214		—		—		800		30,014
Total	$	103,302	$	—	$	263,292	$	800	$	367,394
Number of Securities in a   Continuous Loss Position	14		—		39		1		54
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	912	$	—	$	2,608	$	—	$	3,520
12 Months or Longer	786		—		—		200		986
Total	$	1,698	$	—	$	2,608	$	200	$	4,506
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,000
US Agency Obligations,   at Fair Value	108,365
US Government Agency   Securities, at Amortized Cost					$	9,386
US Government Agency   Securities, at Fair Value					9,371
Government Sponsored Entity   Securities, at Amortized Cost					439,356
Government Sponsored Entity   Securities, at Fair Value					440,380

Available-For-Sale Securities
	U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
March 31, 2021
Available-For-Sale Securities,   at Amortized Cost	$	110,001	$	508	$	349,911	$	1,000	$	461,420
Gross Unrealized Gains	138		—		6,276		—		6,414
Gross Unrealized Losses	(1,769)		—		(1,776)		(200)		(3,745)
Available-For-Sale Securities,   at Fair Value	108,370		508		354,411		800		464,089
Available-For-Sale Securities,   Pledged as Collateral, at Fair   Value									352,214
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	103,231	$	—	$	120,780	$	—	$	224,011
12 Months or Longer	—		—		—		800		800
Total	$	103,231	$	—	$	120,780	$	800	$	224,811
Number of Securities in a   Continuous Loss Position	14		—		16		1		31
Unrealized Losses on Securities   in a Continuous Loss Position:
Less than 12 Months	$	1,769	$	—	$	1,776	$	—	$	3,545
12 Months or Longer	—		—		—		200		200
Total	$	1,769	$	—	$	1,776	$	200	$	3,745
Disaggregated Details:
US Agency Obligations,   at Amortized Cost	$	110,001
US Agency Obligations,   at Fair Value	108,370
US Government Agency   Securities, at Amortized Cost					$	11,582
US Government Agency   Securities, at Fair Value					11,658
Government Sponsored Entity   Securities, at Amortized Cost					338,329
Government Sponsored Entity   Securities, at Fair Value					342,753

Held-To-Maturity Securities

The following table is the schedule of Held-To-Maturity Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2022
Held-To-Maturity Securities,   at Amortized Cost	$	181,832	$	14,829	$	196,661
Gross Unrealized Gains	180		—		180
Gross Unrealized Losses	(832)		(147)		(979)
Held-To-Maturity Securities,   at Fair Value	181,180		14,682		195,862
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					176,635
Maturities of Debt Securities,   at Amortized Cost:
Within One Year	$	69,318	$	221	$	69,539
From 1 - 5 Years	109,607		14,608		124,215
From 5 - 10 Years	2,866		—		2,866
Over 10 Years	41		—		41
Maturities of Debt Securities,   at Fair Value:
Within One Year	$	69,315	$	221	$	69,536
From 1 - 5 Years	108,946		14,461		123,407
From 5 - 10 Years	2,878		—		2,878
Over 10 Years	41		—		41
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	96,088	$	14,465	$	110,553
12 Months or Longer	—		—		—
Total	$	96,088	$	14,465	$	110,553
Number of Securities in a   Continuous Loss Position	258		23		281
Unrealized Losses on Securities    in a Continuous Loss Position:
Less than 12 Months	$	832	$	147	$	979
12 Months or Longer	—		—		—
Total	$	832	$	147	$	979
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	4,954
US Government Agency   Securities, at Fair Value			4,900
Government Sponsored Entity   Securities, at Amortized Cost			9,875
Government Sponsored Entity   Securities, at Fair Value			9,782

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	180,195	$	16,371	$	196,566
Gross Unrealized Gains	4,179		547		4,726
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	184,374		16,918		201,292
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					175,218
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	5,518
US Government Agency   Securities, at Fair Value			5,647
Government Sponsored Entity   Securities, at Amortized Cost			10,853
Government Sponsored Entity   Securities, at Fair Value			11,271

Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
March 31, 2021
Held-To-Maturity Securities,   at Amortized Cost	$	191,202	$	23,359	$	214,561
Gross Unrealized Gains	5,843		956		6,799
Gross Unrealized Losses	—		—		—
Held-To-Maturity Securities,   at Fair Value	197,045		24,315		221,360
Held-To-Maturity Securities,   Pledged as Collateral, at Fair Value					207,595
Securities in a Continuous   Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Number of Securities in a   Continuous Loss Position	—		—		—
Unrealized Losses on   Securities in a Continuous   Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	—		—		—
Total	$	—	$	—	$	—
Disaggregated Details:
US Government Agency   Securities, at Amortized Cost			$	8,310
US Government Agency   Securities, at Fair Value			8,597
Government Sponsored Entity   Securities, at Amortized Cost			15,049
Government Sponsored Entity   Securities, at Fair Value			15,718

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

The following table is the schedule of Equity Securities at March 31, 2022, December 31, 2021 and March 31, 2021:

Equity Securities
	March 31, 2022	December 31, 2021	March 31, 2021
Equity Securities, at Fair Value	$1,877	$1,747	$1,796

Unrealized Gain (Loss) on Investments

The following is a summary of realized and unrealized gains recognized in net income on equity securities during the three month periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Net Gain on Equity Securities	$	130	$	160
Less: Net gain recognized during the reporting period on equity securities sold during the period	—		—
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$	130	$	160

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Loans (Tables)

3 Months Ended

Mar. 31, 2022

Receivables [Abstract]

Past Due Financing Receivables

The following two tables present loan balances outstanding as of March 31, 2022, 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 $831, $1,154 and $4,443 as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively, are included in the residential real estate balances for current loans.

Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
March 31, 2022
Loans Past Due 30-59 Days	$	69	$	—	$	6,631	$	2,565	$	9,265
Loans Past Due 60-89 Days	89		—		2,562		267		2,918
Loans Past Due 90 or more Days	—		346		1,041		1,531		2,918
Total Loans Past Due	158		346		10,234		4,363		15,101
Current Loans	155,309		638,091		966,414		962,352		2,722,166
Total Loans	$	155,467	$	638,437	$	976,648	$	966,715	$	2,737,267
December 31, 2021
Loans Past Due 30-59 Days	$	202	$	—	$	6,713	$	107	$	7,022
Loans Past Due 60-89 Days	3		—		2,709		2,557		5,269
Loans Past Due 90 or more Days	157		1,180		1,564		1,981		4,882
Total Loans Past Due	362		1,180		10,986		4,645		17,173
Current Loans	172,156		627,749		909,570		941,293		2,650,768
Total Loans	$	172,518	$	628,929	$	920,556	$	945,938	$	2,667,941
March 31, 2021
Loans Past Due 30-59 Days	$	63	$	143	$	2,233	$	2,097	$	4,536
Loans Past Due 60-89 Days	34		2,723		822		156		3,735
Loans Past Due 90 or more Days	38		1,474		592		1,700		3,804
Total Loans Past Due	135		4,340		3,647		3,953		12,075
Current Loans	288,416		577,167		857,524		904,061		2,627,168
Total Loans	$	288,551	$	581,507	$	861,171	$	908,014	$	2,639,243

Schedule of Non Accrual Loans by Category
			Commercial
March 31, 2022	Commercial		Real Estate		Consumer		Residential		Total
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	55	$	55
Nonaccrual Loans	70		6,360		1,155		2,165		9,750
Nonaccrual With No Allowance for Credit Loss	70		3,609		1,155		2,165		6,999
Interest Income on Nonaccrual Loans	—		—		—		—		—
December 31, 2021
Loans 90 or More Days Past Due   and Still Accruing Interest	$	157	$	—	$	—	$	666	$	823
Nonaccrual Loans	34		7,243		1,697		1,790		10,764
March 31, 2021
Loans 90 or More Days Past Due   and Still Accruing Interest	$	—	$	—	$	—	$	242	$	242
Nonaccrual Loans	64		4,364		746		2,913		8,087

Allowance for Credit Losses on Financing Receivables

The following table details activity in the allowance for credit losses on loans for the three months ended March 31, 2022 and March 31, 2021.

Allowance for Credit Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
Rollforward of the Allowance for Credit Losses for the Quarterly Period:
December 31, 2021	$	2,298	$	13,136	$	2,402	$	9,445	$	27,281
Charge-offs	—		—		(799)		(30)		(829)
Recoveries	8		—		432		—		440
Provision	209		406		475		(321)		769
March 31, 2022	$	2,515	$	13,542	$	2,510	$	9,094	$	27,661
Balance as of January 1, 2021 as adjusted for ASU 2016-13	$	4,257	$	12,054	$	2,179	$	9,442	$	27,932
Charge-offs	(3)		—		(627)		(3)		$	(633)
Recoveries	—		—		189		—		$	189
Provision	43		(110)		688		(1,269)		$	(648)
March 31, 2021	$	4,297	$	11,944	$	2,429	$	8,170	$	26,840

The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2022, December 31, 2021 and March 31, 2021:

March 31, 2022	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		6,014		6,014
Consumer	—		—		—
Residential	415		—		415
Total	$	415	$	6,014	$	6,429

December 31, 2021	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		6,732		6,732
Consumer	—		—		—
Residential	673		—		673
Total	$	673	$	6,732	$	7,405

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

Allowance for Credit Losses - Collectively and Individually Evaluated
	Commercial		Commercial Real Estate		Consumer		Residential		Total
March 31, 2022
Ending Loan Balance - Collectively Evaluated	$	155,467	$	632,423	$	976,648	$	966,300	$	2,730,838
Allowance for Credit Losses - Loans Collectively Evaluated	2,515		12,960		2,510		9,094		27,079
Ending Loan Balance - Individually Evaluated	—		6,014		—		415		6,429
Allowance for Credit Losses - Loans Individually Evaluated	—		582		—		—		582
December 31, 2021
Ending Loan Balance - Collectively Evaluated	$	172,518	$	622,197	$	920,556	$	945,265	$	2,660,536
Allowance for Credit Losses - Loans Collectively Evaluated	2,298		12,537		2,402		9,445		$	26,682
Ending Loan Balance - Individually Evaluated	—		6,732		—		673		7,405
Allowance for Credit Losses - Loans Individually Evaluated	—		599		—		—		599
March 31, 2021
Ending Loan Balance - Collectively Evaluated	$	288,551	$	577,656	$	861,171	$	906,858	$	2,634,236
Allowance for Credit Losses - Loans Collectively Evaluated	4,297		11,388		2,429		8,170		26,284
Ending Loan Balance - Individually Evaluated	—		3,851		—		1,156		5,007
Allowance for Credit Losses - Loans Individually Evaluated	—		556		—		—		556

Financing Receivable Credit Quality Indicators

The following tables presents credit quality indicators by total loans amortized cost basis by origination year as of March 31, 2022, December 31, 2021 and March 31, 2021.

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
March 31, 2022	2022		2021		2020		2019		2018		Prior
Commercial:
Risk rating
Satisfactory	$	8,048	$	49,980	$	31,869	$	10,454	$	11,149	$	22,662	$	7,656	$	—	$	141,818
Special mention	—		—		—		—		—		50		—		—		50
Substandard	—		3,504		3,593		541		—		—		5,961		—		13,599
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	8,048	$	53,484	$	35,462	$	10,995	$	11,149	$	22,712	$	13,617	$	—	$	155,467
Commercial Real Estate:
Risk rating
Satisfactory	$	22,582	$	143,784	$	270,523	$	42,126	$	37,604	$	75,806	$	1,554	$	—	$	593,979
Special mention	627		—		5,825		1,193		—		1,213		—		—		8,858
Substandard	2,241		4,852		16,073		3,877		95		8,462		—		—		35,600
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	25,450	$	148,636	$	292,421	$	47,196	$	37,699	$	85,481	$	1,554	$	—	$	638,437
Consumer:
Risk rating
Performing	$	155,883	$	369,231	$	215,735	$	134,973	$	69,783	$	29,427	$	462	$	—	$	975,494
Nonperforming	—		321		296		293		138		106		—		—		1,154
Total Consumer Loans	$	155,883	$	369,552	$	216,031	$	135,266	$	69,921	$	29,533	$	462	$	—	$	976,648
Residential:
Risk rating
Performing	$	37,795	$	193,693	$	144,671	$	89,415	$	83,582	$	294,391	$	120,949	$	—	$	964,496
Nonperforming	—		—		133		—		27		1,739		320		—		2,219
Total Residential Loans	$	37,795	$	193,693	$	144,804	$	89,415	$	83,609	$	296,130	$	121,269	$	—	$	966,715
Total Loans	$	227,176	$	765,365	$	688,718	$	282,872	$	202,378	$	433,856	$	136,902	$	—	$	2,737,267

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
December 31, 2021	2021		2020		2019		2018		2017		Prior
Commercial:
Risk rating
Satisfactory	$	75,615	$	35,522	$	11,591	$	11,661	$	7,792	$	3,442	$	12,783	$	—	$	158,406
Special mention	—		—		3		—		—		5,899		—		—		5,902
Substandard	3,541		3,791		589		—		25		12		252		—		8,210
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	79,156	$	39,313	$	12,183	$	11,661	$	7,817	$	9,353	$	13,035	$	—	$	172,518
Commercial Real Estate:
Risk rating
Satisfactory	$	140,636	$	276,461	$	42,369	$	37,997	$	22,155	$	59,698	$	1,923	$	—	$	581,239
Special mention	—		7,893		1,204		—		137		1,906		—		—		11,140
Substandard	7,248		16,405		3,910		96		—		8,867		24		—		36,550
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	147,884	$	300,759	$	47,483	$	38,093	$	22,292	$	70,471	$	1,947	$	—	$	628,929
Consumer:
Risk rating
Performing	$	402,558	$	239,492	$	154,517	$	82,673	$	29,587	$	9,578	$	455	$	—	$	918,860
Nonperforming	388		399		502		151		160		96		—		—		1,696
Total Consumer Loans	$	402,946	$	239,891	$	155,019	$	82,824	$	29,747	$	9,674	$	455	$	—	$	920,556
Residential:
Risk rating
Performing	$	187,708	$	146,113	$	93,547	$	88,505	$	93,524	$	215,679	$	118,595	$	—	$	943,671
Nonperforming	—		133		—		27		162		1,907		38		—		2,267
Total Residential Loans	$	187,708	$	146,246	$	93,547	$	88,532	$	93,686	$	217,586	$	118,633	$	—	$	945,938
Total Loans	$	817,694	$	726,209	$	308,232	$	221,110	$	153,542	$	307,084	$	134,070	$	—	$	2,667,941

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

Troubled Debt Restructurings on Financing Receivables

The following table presents information on loans modified in trouble debt restructurings during the periods indicated.

Loans Modified in Trouble Debt Restructurings During the Period
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
For the Quarter Ended:
March 31, 2022
Number of Loans	—		—		1		—		1
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	7	$	—	$	7
Post-Modification Outstanding Recorded Investment	—		—		7		—		7
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—
March 31, 2021
Number of Loans	—		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment	—		—		—		—		—
Subsequent Default, Number of Contracts	—		—		—		—		—
Subsequent Default, Recorded Investment	—		—		—		—		—

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of Guarantor Obligations

The following table presents the notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit as of March 31, 2022, December 31, 2021 and March 31, 2021:

Commitments to Extend Credit and Letters of Credit
	March 31, 2022		December 31, 2021		March 31, 2021
Notional Amount:
Commitments to Extend Credit	$	438,055	$	402,280	$	437,920
Standby Letters of Credit	3,351		3,223		3,775
Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—
Standby Letters of Credit	23		24		12

XML

Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2022

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Comprehensive Income

The following table presents the components of other comprehensive loss for the three month periods ended March 31, 2022 and 2021:

Schedule of Comprehensive Loss Income
	Three Months Ended March 31,
			Tax
	Before-Tax		(Expense)		Net-of-Tax
	Amount		Benefit		Amount
2022
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(29,955)	$	7,659	$	(22,296)
Net Unrealized Gain on Cash Flow Swap	1,512		(387)		1,125
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(29)		8		(21)
Amortization of Net Retirement Plan Actuarial Loss	57		(15)		42
Amortization of Net Retirement Plan Prior Service Cost	7		(1)		6
Other Comprehensive Loss	$	(28,408)	$	7,264	$	(21,144)
2021
Net Unrealized Securities Holding Loss on Securities Available-for-Sale Arising During the Period	$	(5,121)	$	1,309	$	(3,812)
Net Unrealized Gain on Cash Flow Swap	1,982		(507)		1,475
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	(28)		8		(20)
Amortization of Net Retirement Plan Actuarial Loss	46		(12)		34
Amortization of Net Retirement Plan Prior Service Cost	59		(16)		43
Other Comprehensive Loss	$	(3,062)	$	782	$	(2,280)

Changes in Accumulated Other Comprehensive Income By Component

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

Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)
	Unrealized (Loss) and Gain on Available-for-Sale Securities		Unrealized Gain (Loss) on Cash Flow Swap		Defined Benefit Plan Items				Total
					Net Actuarial Loss		Net Prior Service Cost
For the Quarter-To-Date periods ended:
December 31, 2021	$	(614)	$	1,320	$	639	$	(998)	$	347
Other comprehensive income or loss before reclassifications	(22,296)		1,125		—		—		(21,171)
Amounts reclassified from accumulated other comprehensive income	—		(21)		42		6		27
Net current-period other comprehensive (loss) income	(22,296)		1,104		42		6		(21,144)
March 31, 2022	$	(22,910)	$	2,424	$	681	$	(992)	$	(20,797)
December 31, 2020	$	5,799	$	485	$	(5,929)	$	(1,171)	$	(816)
Other comprehensive income or loss before reclassifications	(3,812)		1,475		—		—		(2,337)
Amounts reclassified from accumulated other comprehensive income	—		(20)		34		43		57
Net current-period other comprehensive (loss) income	(3,812)		1,455		34		43		(2,280)
March 31, 2021	$	1,987	$	1,940	$	(5,895)	$	(1,128)	$	(3,096)

(1) All amounts are net of tax.

Reclassification out of Accumulated Other Comprehensive Income

The following table presents the reclassifications out of accumulated other comprehensive loss.

Reclassifications Out of Accumulated Other Comprehensive Loss
Details about Accumulated Other Comprehensive Loss Components	Amounts Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Statement Where Net Income Is Presented
For the Quarter-to-date periods ended:
March 31, 2022
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	29		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	(7)		(1)	Salaries and Employee Benefits
Actuarial loss	(57)		(1)	Salaries and Employee Benefits
	(35)			Total before Tax
	8			Provision for Income Taxes
Total reclassifications for the period	$	(27)		Net of Tax
March 31, 2021
Reclassification of Net Unrealized Gain on Cash Flow Hedge Agreements to Interest Expense	$	28		Interest expense
Amortization of defined benefit pension items:
Prior-service costs	$	(59)	(1)	Salaries and Employee Benefits
Actuarial loss	(46)		(1)	Salaries and Employee Benefits
	(77)			Total before Tax
	20			Provision for Income Taxes
Total reclassifications for the period	$	(57)		Net of Tax
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

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

The following table summarizes information about stock option activity for the year to date period ended March 31, 2022.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2022	270,758			$	28.45
Granted	57,000			35.83
Exercised	(12,145)			19.81
Forfeited	(246)			19.67
Outstanding at March 31, 2022	315,367			30.12
Vested at Period-End	177,611			28.24
Expected to Vest	137,756			32.55
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	7.65
Fair Value Assumptions:
Dividend Yield	2.90		%
Expected Volatility	27.15		%
Risk Free Interest Rate	1.69		%
Expected Lives (in years)	8.56

Schedule of Stock Options Roll Forward

The following table summarizes information about stock option activity for the year to date period ended March 31, 2022.

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2022	270,758			$	28.45
Granted	57,000			35.83
Exercised	(12,145)			19.81
Forfeited	(246)			19.67
Outstanding at March 31, 2022	315,367			30.12
Vested at Period-End	177,611			28.24
Expected to Vest	137,756			32.55
Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	7.65
Fair Value Assumptions:
Dividend Yield	2.90		%
Expected Volatility	27.15		%
Risk Free Interest Rate	1.69		%
Expected Lives (in years)	8.56

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The following table presents information on the amounts expensed related to stock options for the three month periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Amount expensed	$	75	$	72

The following table presents information on the amounts expensed related to restricted stock units for the periods ended March 31, 2022 and 2021:

	For the Three Months Ended March 31,
	2022		2021
Amount expensed	$	35	$	32

Schedule of Nonvested Restricted Stock Units Activity

The following table summarizes information about restricted stock unit activity for the periods ended March 31, 2022 and 2021.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2022	13,203	$	30.15
Granted	4,186	35.83
Vested	(4,263)	29.02
Non-vested at March 31, 2022	13,126	32.32
Non-vested at January 1, 2021	12,012	30.70
Granted	4,880	28.54
Vested	(3,689)	29.82
Non-vested at March 31, 2021	13,203	30.15

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Retirement Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2022

Retirement Benefits [Abstract]

Schedule of Defined Benefit Plans Disclosures

The following tables provide the components of net periodic benefit costs for the three-month periods ended March 31, 2022 and 2021.

	Employees'		Select Executive		Postretirement
	Pension		Retirement		Benefit
	Plan		Plan		Plans
Net Periodic (Benefit) Cost
For the Three Months Ended March 31, 2022:
Service Cost 1	$	488	$	147	$	27
Interest Cost 2	367		51		64
Expected Return on Plan Assets 2	(1,099)		—		—
Amortization of Prior Service Cost 2	19		11		27
Amortization of Net Loss (Gain) 2	—		39		(32)
Net Periodic (Benefit) Cost	$	(225)	$	248	$	86
Plan Contributions During the Period	$	—	$	116	$	55

For the Three Months Ended March 31, 2021:
Service Cost 1	$	460	$	118	$	31
Interest Cost 2	340		45		67
Expected Return on Plan Assets 2	(950)		—		—
Amortization of Prior Service Cost 2	20		12		27
Amortization of Net Loss 2	—		38		8
Net Periodic (Benefit) Cost	$	(130)	$	213	$	133
Plan Contributions During the Period	$	—	$	118	$	28
Estimated Future Contributions in the Current Fiscal Year	$	—	$	348	$	165

Footnotes:

1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income

2. Included in Other Operating Expense on the Consolidated Statements of Income

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per common share (EPS) for periods ended March 31, 2022 and 2021.  2021 share and per share amounts have been adjusted for the September 24, 2021, 3% stock dividend.

Earnings Per Share
	Three Months Ended
	March 31, 2022		March 31, 2021
Earnings Per Share - Basic:
Net Income	$	12,575	$	13,280
Weighted Average Shares - Basic	16,030		15,994
Earnings Per Share - Basic	$	0.78	$	0.83
Earnings Per Share - Diluted:
Net Income	$	12,575	$	13,280
Weighted Average Shares - Basic	16,030		15,994
Dilutive Average Shares Attributable to Stock Options	53		36
Weighted Average Shares - Diluted	16,083		16,030
Earnings Per Share - Diluted	$	0.78	$	0.83

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Fair Values (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements, Recurring and Nonrecurring

The table below presents the financial instrument's fair value and the amounts within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement:

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value of Assets and Liabilities Measured on a Recurring Basis:
March 31, 2022
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	132,744	$	—	$	132,744	$	—
State and Municipal Obligations	380		—		380		—
Mortgage-Backed Securities	448,504		—		448,504		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	582,428		—		582,428		—
Equity Securities	1,877		—		1,877		—
Total Securities Measured on a Recurring Basis	584,305		—		584,305		—
Derivatives, included in other assets	4,131		—		4,131		—
Total Measured on a Recurring Basis	$	588,436	$	—	$	588,436	$	—
Liabilities:
Derivatives, included in other liabilities	4,131		—		4,131		—
Total Measured on a Recurring Basis	$	4,131	$	—	$	4,131	$	—
December 31, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,365	$	—	$	108,365	$	—
State and Municipal Obligations	400		—		400		—
Mortgage-Backed Securities	449,751		—		449,751		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	559,316		—		559,316		—
Equity Securities	1,747		—		1,747		—

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis
			Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Total Securities Measured on a Recurring Basis	561,063		—		561,063		—
Derivatives, included in other liabilities	2,083		—		2,083		—
Total Measured on a Recurring Basis	$	563,146	$	—	$	563,146	$	—
Liabilities:
Derivatives, included in other liabilities	2,083		—		2,083		—
Total Measured on a Recurring Basis	$	2,083	$	—	$	2,083	$	—
March 31, 2021
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	108,370	$	—	$	108,370	$	—
State and Municipal Obligations	508		—		508		—
Mortgage-Backed Securities	354,411		—		354,411		—
Corporate and Other Debt Securities	800		—		800		—
Total Securities Available-for-Sale	464,089		—		464,089		—
Equity Securities	1,796		—		1,796		—
Total Securities Measured on a Recurring Basis	$	465,885	$	—	$	465,885	$	—
Derivatives, included in other assets	2,298		$	—	2,298		—
Total Measured on a Recurring Basis	$	468,183	$	—	$	468,183	$	—
Liabilities:
Derivatives, included in other liabilities	2,298		—		2,298		—
Total Measured on a Recurring Basis	$	2,298	$	—	$	2,298	$	—

	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, 2022
Collateral Dependent Evaluated Loans	$	2,168	$	—	$	—	$	2,168
Other Real Estate Owned and Repossessed Assets, Net	180		—		—		180		—
December 31, 2021
Collateral Dependent Impaired Loans	$	2,457	$	—	$	—	$	2,457
Other Real Estate Owned and Repossessed Assets, Net	126		—		—		126		—
March 31, 2021
Collateral Dependent Impaired Loans	$	2,423	$	—	$	—	$	2,423
Other Real Estate Owned and Repossessed Assets, Net	242		—		—		242		—

Fair Value, by Balance Sheet Grouping

The following table presents a summary of the carrying amount, the fair value or an amount approximating fair value and the fair value hierarchy of Arrow’s financial instruments:

Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2022
Cash and Cash Equivalents	$	487,578	$	487,578	$	487,578	$	—	$	—
Securities Available-for-Sale	582,428		582,428		—		582,428		—
Securities Held-to-Maturity	196,661		195,862		—		195,862		—
Equity Securities	1,877		1,877		—		1,877		—
Federal Home Loan Bank and Federal   Reserve Bank Stock	4,491		4,491		—		4,491		—
Net Loans	2,709,606		2,648,804		—		—		2,648,804
Accrued Interest Receivable	8,099		8,099		—		8,099		—
Derivatives, included in other assets	4,131		4,131				4,131
Deposits	3,715,373		3,711,189		—		3,711,189		—
Federal Home Loan Bank Term Advances	25,000		25,001		—		25,001		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	102		102		—		102		—
Derivatives, included in other liabilities	4,131		4,131		—		4,131		—
December 31, 2021
Cash and Cash Equivalents	$	457,696	$	457,696	$	457,696	$	—	$	—
Securities Available-for-Sale	559,316		559,316		—		559,316		—
Securities Held-to-Maturity	196,566		201,292		—		201,292		—
Equity Securities	1,747		1,747		—		1,747
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,380		5,380		—		5,380		—
Net Loans	2,640,660		2,618,311		—		—		2,618,311
Accrued Interest Receivable	7,384		7,384		—		7,384		—
Derivatives, included in other assets	2,083		2,083		—		2,083		—
Deposits	3,550,497		3,548,554		—		3,548,554		—
Federal Home Loan Bank Term Advances	45,000		45,518		—		45,518		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	138		138		—		138		—
Derivatives, included in other liabilities	2,083		2,083		—		2,083		—
March 31, 2021
Cash and Cash Equivalents	$	452,207	$	452,207	$	452,207	$	—	$	—
Securities Available-for-Sale	464,089		464,089		—		464,089		—
Securities Held-to-Maturity	214,561		221,360		—		221,360		—
Equity Securities	1,796		1,796		—		1,796
Federal Home Loan Bank and Federal   Reserve Bank Stock	5,360		5,360		—		5,360		—
Net Loans	2,612,403		2,603,225		—		—		2,603,225
Accrued Interest Receivable	8,258		8,258		—		8,258		—
Derivatives, included in other assets	2,298		2,298		—		2,298		—
Deposits	3,453,588		3,265,208		—		3,265,208		—
Federal Funds Purchased and Securities   Sold Under Agreements to Repurchase	6,795		6,795		—		6,795		—
Federal Home Loan Bank Term Advances	45,000		46,176		—		46,176		—
Junior Subordinated Obligations Issued   to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	237		237		—		237		—
Derivatives, included in other liabilities	2,298		2,298		—		2,298		—

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Leases (Tables)

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Lease, Cost

The following includes quantitative data related to Arrow's leases as of and for the three months ended March 31, 2022 and March 31, 2021:

		Three Months Ended
Finance Lease Amounts:	Classification	March 31, 2022			March 31, 2021
Right-of-Use Assets	Premises and Equipment, Net	$	4,770		$	4,947
Lease Liabilities	Finance Leases	5,156			5,205
Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	6,676		$	5,435
Lease Liabilities	Other Liabilities	6,863			5,522
Other Information:
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	49		$	49
Operating Outgoing Cash Flows From Operating Leases		260			261
Financing Outgoing Cash Flows From Finance Leases		13			12
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		—			331
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		28.0			28.9
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		11.2			12.5
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		2.81		%	3.13		%

Lease cost information for the Company's leases is as follows:
	Three Months Ended
	March 31, 2022		March 31, 2021
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	44
Interest on Lease Liabilities	49		49
Operating Lease Cost	312		209
Short-term Lease Cost	10		5
Variable Lease Cost	95		104
Total Lease Cost	$	510	$	411

Lessee, Operating Lease, Liability, Maturity

Future Lease Payments at March 31, 2022 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2023	$	1,206	$	243
3/31/2024	904		243
3/31/2025	732		254
3/31/2026	682		265
3/31/2027	618		268
Thereafter	4,053		7,465
Total Undiscounted Cash Flows	$	8,195	$	8,738
Less: Net Present Value Adjustment	1,332		3,582
Lease Liability	$	6,863	$	5,156

Finance Lease, Liability, Maturity

Future Lease Payments at March 31, 2022 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
3/31/2023	$	1,206	$	243
3/31/2024	904		243
3/31/2025	732		254
3/31/2026	682		265
3/31/2027	618		268
Thereafter	4,053		7,465
Total Undiscounted Cash Flows	$	8,195	$	8,738
Less: Net Present Value Adjustment	1,332		3,582
Lease Liability	$	6,863	$	5,156

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

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

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Agreements
	March 31, 2022		December 31, 2021		March 31, 2021
Fair value adjustment included in other assets	$	4,131	$	2,083	$	2,298
Fair value adjustment included in other liabilities	4,131		2,083		2,298
Notional amount	171,182		172,668		175,113

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

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

Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
	Three Months Ended		Twelve Months Ended		Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
Amount of gain recognized in AOCI	$	1,512	$	1,249	$	1,982
Amount of gain reclassified from AOCI to interest expense	29		126		28

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Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020
Cash and Cash Equivalents [Abstract]
Cash and Due From Banks	$ 38,964	$ 26,978	$ 45,602
Interest-Bearing Deposits at Banks	448,614	430,718	406,605
Total Cash and Cash Equivalents	$ 487,578	$ 457,696	$ 452,207	$ 380,991

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Investment Securities - Available for Sale (Details) $ in Thousands	Mar. 31, 2022 USD ($) security	Dec. 31, 2021 USD ($) security	Mar. 31, 2021 USD ($) security
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	$ 613,209	$ 560,142	$ 461,420
Gross Unrealized Gains	232	3,680	6,414
Gross Unrealized Losses	(31,013)	(4,506)	(3,745)
Available-for-Sale at Fair Value	582,428	559,316	464,089
Maturities of Debt Securities, at Amortized Cost:
Within One Year	5,106
From 1 - 5 Years	384,495
From 5 - 10 Years	223,608
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	5,129
From 1 - 5 Years	369,337
From 5 - 10 Years	207,962
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	402,206	337,380	224,011
12 Months or Longer	159,551	30,014	800
Total	$ 561,757	$ 367,394	$ 224,811
Number of Securities in a Continuous Loss Position | security	148	54	31
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 18,431	$ 3,520	$ 3,545
12 Months or Longer	12,582	986	200
Total	31,013	4,506	3,745
Collateral Pledged
Available-For-Sale Securities
Available-For-Sale Securities, Pledged as Collateral, at Fair Value	397,138	298,106	352,214
U.S. Government & Agency Obligations
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	140,000	110,000	110,001
Gross Unrealized Gains	21	63	138
Gross Unrealized Losses	(7,277)	(1,698)	(1,769)
Available-for-Sale at Fair Value	132,744	108,365	108,370
Maturities of Debt Securities, at Amortized Cost:
Within One Year	5,000
From 1 - 5 Years	135,000
From 5 - 10 Years	0
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	5,021
From 1 - 5 Years	127,723
From 5 - 10 Years	0
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	43,518	74,088	103,231
12 Months or Longer	84,205	29,214	0
Total	$ 127,723	$ 103,302	$ 103,231
Number of Securities in a Continuous Loss Position | security	18	14	14
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 1,482	$ 912	$ 1,769
12 Months or Longer	5,795	786	0
Total	7,277	1,698	1,769
U.S. Government & Agency Obligations | Agency Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	140,000	110,000	110,001
Available-for-Sale at Fair Value	132,744	108,365	108,370
State and Municipal Obligations
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	380	400	508
Gross Unrealized Gains	0	0	0
Gross Unrealized Losses	0	0	0
Available-for-Sale at Fair Value	380	400	508
Maturities of Debt Securities, at Amortized Cost:
Within One Year	20
From 1 - 5 Years	0
From 5 - 10 Years	360
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	20
From 1 - 5 Years	0
From 5 - 10 Years	360
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	0	0
12 Months or Longer	0	0	0
Total	$ 0	$ 0	$ 0
Number of Securities in a Continuous Loss Position | security	0	0	0
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 0	$ 0
12 Months or Longer	0	0	0
Total	0	0	0
Mortgage- Backed Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	471,829	448,742	349,911
Gross Unrealized Gains	211	3,617	6,276
Gross Unrealized Losses	(23,536)	(2,608)	(1,776)
Available-for-Sale at Fair Value	448,504	449,751	354,411
Maturities of Debt Securities, at Amortized Cost:
Within One Year	86
From 1 - 5 Years	249,495
From 5 - 10 Years	222,248
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	88
From 1 - 5 Years	241,614
From 5 - 10 Years	206,802
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	358,688	263,292	120,780
12 Months or Longer	74,546	0	0
Total	$ 433,234	$ 263,292	$ 120,780
Number of Securities in a Continuous Loss Position | security	129	39	16
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 16,949	$ 2,608	$ 1,776
12 Months or Longer	6,587	0	0
Total	23,536	2,608	1,776
Mortgage- Backed Securities | US Government Agencies Debt Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	8,853	9,386	11,582
Available-for-Sale at Fair Value	8,667	9,371	11,658
Mortgage- Backed Securities | US Government-sponsored Enterprises Debt Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	462,976	439,356	338,329
Available-for-Sale at Fair Value	439,837	440,380	342,753
Corporate and Other Debt Securities
Available-For-Sale Securities
Available-For-Sale Securities, at Amortized Cost	1,000	1,000	1,000
Gross Unrealized Gains	0	0	0
Gross Unrealized Losses	(200)	(200)	(200)
Available-for-Sale at Fair Value	800	800	800
Maturities of Debt Securities, at Amortized Cost:
Within One Year	0
From 1 - 5 Years	0
From 5 - 10 Years	1,000
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	0
From 1 - 5 Years	0
From 5 - 10 Years	800
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	0	0	0
12 Months or Longer	800	800	800
Total	$ 800	$ 800	$ 800
Number of Securities in a Continuous Loss Position | security	1	1	1
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 0	$ 0	$ 0
12 Months or Longer	200	200	200
Total	$ 200	$ 200	$ 200

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Investment Securities - Held to Maturity (Details)	3 Months Ended
	Mar. 31, 2022 USD ($) security	Dec. 31, 2021 USD ($) security	Mar. 31, 2021 USD ($) security
Schedule of Held-to-maturity Securities [Line Items]
Debt securities, available-for-sale, allowance for credit loss	$ 0
Held-To-Maturity Securities, at Amortized Cost	196,661,000	$ 196,566,000	$ 214,561,000
Gross Unrealized Gains	180,000	4,726,000	6,799,000
Gross Unrealized Losses	(979,000)	0	0
Held-To-Maturity Securities, at Fair Value	195,862,000	201,292,000	221,360,000
Maturities of Debt Securities, at Amortized Cost:
Within One Year	69,539,000
From 1 - 5 Years	124,215,000
From 5 - 10 Years	2,866,000
Over 10 Years	41,000
Maturities of Debt Securities, at Fair Value:
Within One Year	69,536,000
From 1 - 5 Years	123,407,000
From 5 - 10 Years	2,878,000
Over 10 Years	41,000
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	110,553,000	0	0
12 Months or Longer	0	0	0
Total	$ 110,553,000	$ 0	$ 0
Number of Securities in a Continuous Loss Position | security	281	0	0
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 979,000	$ 0	$ 0
12 Months or Longer	0	0	0
Total	979,000	0	0
Debt securities, available-for-sale, allowance for credit loss, not to sell before recovery, credit loss, previously recorded, expense (reversal)	0
Debt securities, held-to-maturity, allowance for credit loss	0
Equity Securities	1,877,000	1,747,000	1,796,000
State and Municipal Obligations
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	181,832,000	180,195,000	191,202,000
Gross Unrealized Gains	180,000	4,179,000	5,843,000
Gross Unrealized Losses	(832,000)	0	0
Held-To-Maturity Securities, at Fair Value	181,180,000	184,374,000	197,045,000
Maturities of Debt Securities, at Amortized Cost:
Within One Year	69,318,000
From 1 - 5 Years	109,607,000
From 5 - 10 Years	2,866,000
Over 10 Years	41,000
Maturities of Debt Securities, at Fair Value:
Within One Year	69,315,000
From 1 - 5 Years	108,946,000
From 5 - 10 Years	2,878,000
Over 10 Years	41,000
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	96,088,000	0	0
12 Months or Longer	0	0	0
Total	$ 96,088,000	$ 0	$ 0
Number of Securities in a Continuous Loss Position | security	258	0	0
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 832,000	$ 0	$ 0
12 Months or Longer	0	0	0
Total	832,000	0	0
Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	14,829,000	16,371,000	23,359,000
Gross Unrealized Gains	0	547,000	956,000
Gross Unrealized Losses	(147,000)	0	0
Held-To-Maturity Securities, at Fair Value	14,682,000	16,918,000	24,315,000
Maturities of Debt Securities, at Amortized Cost:
Within One Year	221,000
From 1 - 5 Years	14,608,000
From 5 - 10 Years	0
Over 10 Years	0
Maturities of Debt Securities, at Fair Value:
Within One Year	221,000
From 1 - 5 Years	14,461,000
From 5 - 10 Years	0
Over 10 Years	0
Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	14,465,000	0	0
12 Months or Longer	0	0	0
Total	$ 14,465,000	$ 0	$ 0
Number of Securities in a Continuous Loss Position | security	23	0	0
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$ 147,000	$ 0	$ 0
12 Months or Longer	0	0	0
Total	147,000	0	0
Fair Value, Measurements, Recurring
Unrealized Losses on Securities in a Continuous Loss Position:
Equity Securities	1,877,000	1,747,000	1,796,000
Collateral Pledged
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, Pledged as Collateral, at Fair Value	176,635,000	175,218,000	207,595,000
US Government Agencies Debt Securities | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	4,954,000	5,518,000	8,310,000
US Government Agencies Debt Securities | Fair Value, Measurements, Recurring | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Fair Value	4,900,000	5,647,000	8,597,000
US Government-sponsored Enterprises Debt Securities | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Amortized Cost	9,875,000	10,853,000	15,049,000
US Government-sponsored Enterprises Debt Securities | Fair Value, Measurements, Recurring | Mortgage-Backed Securities - Residential
Schedule of Held-to-maturity Securities [Line Items]
Held-To-Maturity Securities, at Fair Value	$ 9,782,000	$ 11,271,000	$ 15,718,000

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Investment Securities - Unrealized Gains (Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Investments, Debt and Equity Securities [Abstract]
Net Gain on Equity Securities	$ 130	$ 160
Less: Net gain recognized during the reporting period on equity securities sold during the period	0	0
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$ 130	$ 160

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Loans - Loan Categories and Past Due Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Financing Receivable, Past Due [Line Items]
Loans receivable held-for-sale, net, not part of disposal group	$ 831	$ 1,154	$ 4,443
Total	2,737,267	2,667,941	2,639,243
Loans 90 or More Days Past Due and Still Accruing Interest	55	823	242
Nonaccrual Loans	9,750	10,764	8,087
Nonaccrual With No Allowance for Credit Loss	6,999
Interest Income on Nonaccrual Loans	0
Commercial
Financing Receivable, Past Due [Line Items]
Total	155,467	172,518	288,551
Loans 90 or More Days Past Due and Still Accruing Interest	0	157	0
Nonaccrual Loans	70	34	64
Nonaccrual With No Allowance for Credit Loss	70
Interest Income on Nonaccrual Loans	0
Commercial Real Estate
Financing Receivable, Past Due [Line Items]
Total	638,437	628,929	581,507
Loans 90 or More Days Past Due and Still Accruing Interest	0	0	0
Nonaccrual Loans	6,360	7,243	4,364
Nonaccrual With No Allowance for Credit Loss	3,609
Interest Income on Nonaccrual Loans	0
Consumer
Financing Receivable, Past Due [Line Items]
Total	976,648	920,556	861,171
Loans 90 or More Days Past Due and Still Accruing Interest	0	0	0
Nonaccrual Loans	1,155	1,697	746
Nonaccrual With No Allowance for Credit Loss	1,155
Interest Income on Nonaccrual Loans	0
Residential
Financing Receivable, Past Due [Line Items]
Total	966,715	945,938	908,014
Loans 90 or More Days Past Due and Still Accruing Interest	55	666	242
Nonaccrual Loans	2,165	1,790	2,913
Nonaccrual With No Allowance for Credit Loss	2,165
Interest Income on Nonaccrual Loans	0
Financial Asset, Past Due
Financing Receivable, Past Due [Line Items]
Total	15,101	17,173	12,075
Financial Asset, Past Due | Commercial
Financing Receivable, Past Due [Line Items]
Total	158	362	135
Financial Asset, Past Due | Commercial Real Estate
Financing Receivable, Past Due [Line Items]
Total	346	1,180	4,340
Financial Asset, Past Due | Consumer
Financing Receivable, Past Due [Line Items]
Total	10,234	10,986	3,647
Financial Asset, Past Due | Residential
Financing Receivable, Past Due [Line Items]
Total	4,363	4,645	3,953
Financing Receivables, 30 to 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total	9,265	7,022	4,536
Financing Receivables, 30 to 59 Days Past Due | Commercial
Financing Receivable, Past Due [Line Items]
Total	69	202	63
Financing Receivables, 30 to 59 Days Past Due | Commercial Real Estate
Financing Receivable, Past Due [Line Items]
Total	0	0	143
Financing Receivables, 30 to 59 Days Past Due | Consumer
Financing Receivable, Past Due [Line Items]
Total	6,631	6,713	2,233
Financing Receivables, 30 to 59 Days Past Due | Residential
Financing Receivable, Past Due [Line Items]
Total	2,565	107	2,097
Financing Receivables, 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total	2,918	5,269	3,735
Financing Receivables, 60 to 89 Days Past Due | Commercial
Financing Receivable, Past Due [Line Items]
Total	89	3	34
Financing Receivables, 60 to 89 Days Past Due | Commercial Real Estate
Financing Receivable, Past Due [Line Items]
Total	0	0	2,723
Financing Receivables, 60 to 89 Days Past Due | Consumer
Financing Receivable, Past Due [Line Items]
Total	2,562	2,709	822
Financing Receivables, 60 to 89 Days Past Due | Residential
Financing Receivable, Past Due [Line Items]
Total	267	2,557	156
Financing Receivables, Equal to Greater than 90 Days Past Due
Financing Receivable, Past Due [Line Items]
Total	2,918	4,882	3,804
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial
Financing Receivable, Past Due [Line Items]
Total	0	157	38
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial Real Estate
Financing Receivable, Past Due [Line Items]
Total	346	1,180	1,474
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer
Financing Receivable, Past Due [Line Items]
Total	1,041	1,564	592
Financing Receivables, Equal to Greater than 90 Days Past Due | Residential
Financing Receivable, Past Due [Line Items]
Total	1,531	1,981	1,700
Financial Asset, Not Past Due
Financing Receivable, Past Due [Line Items]
Total	2,722,166	2,650,768	2,627,168
Financial Asset, Not Past Due | Commercial
Financing Receivable, Past Due [Line Items]
Total	155,309	172,156	288,416
Financial Asset, Not Past Due | Commercial Real Estate
Financing Receivable, Past Due [Line Items]
Total	638,091	627,749	577,167
Financial Asset, Not Past Due | Consumer
Financing Receivable, Past Due [Line Items]
Total	966,414	909,570	857,524
Financial Asset, Not Past Due | Residential
Financing Receivable, Past Due [Line Items]
Total	$ 962,352	$ 941,293	$ 904,061

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Loans - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) loan_portfolio	Mar. 31, 2021 USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]
Number of loan portfolios | loan_portfolio	4
Provision for Credit Losses	$ 769	$ (648)
Off-balance sheet, credit loss, liability	1,500
Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision for Credit Losses	475	$ 688
Mortgage loans in process of foreclosure, amount	$ 2,200
Consumer | Minimum | Automobile Loan
Financing Receivable, Allowance for Credit Loss [Line Items]
Principal repayment terms, period	3 years
Consumer | Minimum | Credit Card Receivable
Financing Receivable, Allowance for Credit Loss [Line Items]
Principal repayment terms, period	1 year
Consumer | Maximum | Automobile Loan
Financing Receivable, Allowance for Credit Loss [Line Items]
Principal repayment terms, period	7 years
Consumer | Maximum | Credit Card Receivable
Financing Receivable, Allowance for Credit Loss [Line Items]
Principal repayment terms, period	5 years

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Loans - Allowance for Loan Losses (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) loan	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	$ 27,661	$ 26,840	$ 27,281
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance	27,281
Charge-offs	(829)	(633)
Recoveries	440	189
Provision	769	(648)
Allowance for Loan Losses, Ending balance	$ 27,661	26,840
Number of loans individually evaluated for impairment | loan	3
Number of loans with an allowance for credit loss on loans individually evaluated for impairment | loan	1
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Ending Loan Balance - Collectively Evaluated	$ 2,730,838	2,634,236	2,660,536
Allowance for loan losses - Loans Collectively Evaluated	27,079	26,284	26,682
Ending Loan Balance - Individually Evaluated	6,429	5,007	7,405
Allowance for loan losses - Loans Individually Evaluated	582	556	599
Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance		27,932
Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	2,510	2,429	2,402
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance	2,402
Charge-offs	(799)	(627)
Recoveries	432	189
Provision	475	688
Allowance for Loan Losses, Ending balance	2,510	2,429
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Ending Loan Balance - Collectively Evaluated	976,648	861,171	920,556
Allowance for loan losses - Loans Collectively Evaluated	2,510	2,429	2,402
Ending Loan Balance - Individually Evaluated	0	0	0
Allowance for loan losses - Loans Individually Evaluated	0	0	0
Consumer | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance		2,179
Residential
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	9,094	8,170	9,445
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance	9,445
Charge-offs	(30)	(3)
Recoveries	0	0
Provision	(321)	(1,269)
Allowance for Loan Losses, Ending balance	9,094	8,170
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Ending Loan Balance - Collectively Evaluated	966,300	906,858	945,265
Allowance for loan losses - Loans Collectively Evaluated	9,094	8,170	9,445
Ending Loan Balance - Individually Evaluated	415	1,156	673
Allowance for loan losses - Loans Individually Evaluated	0	0	0
Residential | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance		9,442
Commercial
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	2,515	4,297	2,298
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance	2,298
Charge-offs	0	(3)
Recoveries	8	0
Provision	209	43
Allowance for Loan Losses, Ending balance	2,515	4,297
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Ending Loan Balance - Collectively Evaluated	155,467	288,551	172,518
Allowance for loan losses - Loans Collectively Evaluated	2,515	4,297	2,298
Ending Loan Balance - Individually Evaluated	0	0	0
Allowance for loan losses - Loans Individually Evaluated	0	0	0
Commercial | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance		4,257
Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest	13,542	11,944	13,136
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance	13,136
Charge-offs	0	0
Recoveries	0	0
Provision	406	(110)
Allowance for Loan Losses, Ending balance	13,542	11,944
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Ending Loan Balance - Collectively Evaluated	632,423	577,656	622,197
Allowance for loan losses - Loans Collectively Evaluated	12,960	11,388	12,537
Ending Loan Balance - Individually Evaluated	6,014	3,851	6,732
Allowance for loan losses - Loans Individually Evaluated	$ 582	556	$ 599
Commercial Real Estate | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Allowance for Credit Loss [Line Items]
Financing receivable, allowance for credit loss, excluding accrued interest
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Loan Losses, Beginning balance		$ 12,054

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Loans - Amortized Cost Basis of Collateral Dependent Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	$ 2,709,606	$ 2,640,660	$ 2,612,403
Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	6,429	7,405	5,007
Real Estate | Commercial
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0	0	0
Real Estate | Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	6,014	6,732	3,851
Real Estate | Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0	0	0
Real Estate | Residential
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	415	673	1,156
Residential Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	415	673	1,156
Residential Real Estate | Commercial
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0	0	0
Residential Real Estate | Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0	0	0
Residential Real Estate | Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0	0	0
Residential Real Estate | Residential
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	415	673	1,156
Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	6,014	6,732	3,851
Commercial Real Estate | Commercial
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0	0	0
Commercial Real Estate | Commercial Real Estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	6,014	6,732	3,851
Commercial Real Estate | Consumer
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	0	0	0
Commercial Real Estate | Residential
Financing Receivable, Allowance for Credit Loss [Line Items]
Total Loans	$ 0	$ 0	$ 0

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Loans - Credit Quality Indicators (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	$ 227,176	$ 817,694
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	765,365	726,209
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	688,718	308,232
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	282,872	221,110
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	202,378	153,542
Prior	433,856	307,084
Revolving Loans Amortized Cost Basis	136,902	134,070
Revolving Loan Converted to Term	0	0
Total	2,737,267	2,667,941	$ 2,639,243
Total Loans	2,709,606	2,640,660	2,612,403
Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	8,048	79,156	78,184
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	53,484	39,313	136,599
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	35,462	12,183	18,268
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	10,995	11,661	15,693
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	11,149	7,817	10,004
Prior	22,712	9,353	15,750
Revolving Loans Amortized Cost Basis	13,617	13,035	14,053
Revolving Loan Converted to Term	0	0	0
Total	155,467	172,518	288,551
Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	25,450	147,884	26,532
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	148,636	300,759	327,585
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	292,421	47,483	55,973
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	47,196	38,093	45,065
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	37,699	22,292	24,700
Prior	85,481	70,471	98,466
Revolving Loans Amortized Cost Basis	1,554	1,947	3,186
Revolving Loan Converted to Term	0	0	0
Total	638,437	628,929	581,507
Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	155,883	402,946	95,223
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	369,552	239,891	321,716
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	216,031	155,019	225,372
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	135,266	82,824	135,835
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	69,921	29,747	56,675
Prior	29,533	9,674	25,902
Revolving Loans Amortized Cost Basis	462	455	448
Revolving Loan Converted to Term	0	0	0
Total	976,648	920,556	861,171
Residential
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	37,795	187,708	34,833
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	193,693	146,246	156,703
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	144,804	93,547	114,523
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	89,415	88,532	107,203
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	83,609	93,686	110,457
Prior	296,130	217,586	268,921
Revolving Loans Amortized Cost Basis	121,269	118,633	115,374
Revolving Loan Converted to Term	0	0	0
Total	966,715	945,938	908,014
Satisfactory | Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	8,048	75,615	78,184
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	49,980	35,522	126,061
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	31,869	11,591	18,202
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	10,454	11,661	15,693
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	11,149	7,792	10,004
Prior	22,662	3,442	12,234
Revolving Loans Amortized Cost Basis	7,656	12,783	14,006
Revolving Loan Converted to Term	0	0	0
Total	141,818	158,406	274,384
Satisfactory | Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	22,582	140,636	24,511
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	143,784	276,461	298,907
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	270,523	42,369	49,957
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	42,126	37,997	44,902
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	37,604	22,155	24,558
Prior	75,806	59,698	83,690
Revolving Loans Amortized Cost Basis	1,554	1,923	3,161
Revolving Loan Converted to Term	0	0	0
Total	593,979	581,239	529,686
Special Mention | Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	0	0	5,031
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	0	3	66
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	0	0	0
Prior	50	5,899	2
Revolving Loans Amortized Cost Basis	0	0	0
Revolving Loan Converted to Term	0	0	0
Total	50	5,902	5,099
Special Mention | Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	627	0	0
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	0	7,893	17,825
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	5,825	1,204	2,010
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	1,193	0	0
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	0	137	142
Prior	1,213	1,906	2,115
Revolving Loans Amortized Cost Basis	0	0	0
Revolving Loan Converted to Term	0	0	0
Total	8,858	11,140	22,092
Substandard | Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	0	3,541	0
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	3,504	3,791	5,507
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	3,593	589	0
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	541	0	0
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	0	25	0
Prior	0	12	3,514
Revolving Loans Amortized Cost Basis	5,961	252	47
Revolving Loan Converted to Term	0	0	0
Total	13,599	8,210	9,068
Substandard | Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	2,241	7,248	2,021
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	4,852	16,405	10,853
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	16,073	3,910	4,006
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	3,877	96	163
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	95	0	0
Prior	8,462	8,867	12,661
Revolving Loans Amortized Cost Basis	0	24	25
Revolving Loan Converted to Term	0	0	0
Total	35,600	36,550	29,729
Doubtful | Commercial
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	0	0	0
Prior	0	0	0
Revolving Loans Amortized Cost Basis	0	0	0
Revolving Loan Converted to Term	0	0	0
Total	0	0	0
Doubtful | Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	0	0	0
Prior	0	0	0
Revolving Loans Amortized Cost Basis	0	0	0
Revolving Loan Converted to Term	0	0	0
Total	0	0	0
Performing | Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	155,883	402,558	95,223
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	369,231	239,492	321,575
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	215,735	154,517	225,191
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	134,973	82,673	135,646
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	69,783	29,587	56,508
Prior	29,427	9,578	25,834
Revolving Loans Amortized Cost Basis	462	455	448
Revolving Loan Converted to Term	0	0	0
Total	975,494	918,860	860,425
Performing | Residential
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	37,795	187,708	34,833
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	193,693	146,113	156,500
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	144,671	93,547	114,523
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	89,415	88,505	107,176
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	83,582	93,524	110,308
Prior	294,391	215,679	266,377
Revolving Loans Amortized Cost Basis	120,949	118,595	115,142
Revolving Loan Converted to Term	0	0	0
Total	964,496	943,671	904,859
Nonperforming | Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	0	388	0
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	321	399	141
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	296	502	181
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	293	151	189
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	138	160	167
Prior	106	96	68
Revolving Loans Amortized Cost Basis	0	0	0
Revolving Loan Converted to Term	0	0	0
Total	1,154	1,696	746
Nonperforming | Residential
Financing Receivable, Credit Quality Indicator [Line Items]
Financing receivable, excluding accrued interest, year one, originated, current fiscal year	0	0	0
Financing receivable, excluding accrued interest, year two, originated, fiscal year before current fiscal year	0	133	203
Financing receivable, excluding accrued interest, year three, originated, two years before current fiscal year	133	0	0
Financing receivable, excluding accrued interest, year four, originated, three years before current fiscal year	0	27	27
Financing receivable, excluding accrued interest, year five, originated, four years before current fiscal year	27	162	149
Prior	1,739	1,907	2,544
Revolving Loans Amortized Cost Basis	320	38	232
Revolving Loan Converted to Term	0	0	0
Total	$ 2,219	$ 2,267	$ 3,155

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Loans - Modified in Trouble Debt Restructurings (Details) - Entity Loan Modification Program - Payment Deferral $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) contract loan	Mar. 31, 2021 USD ($) contract loan
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	1	0
Pre-Modification Outstanding Recorded Investment	$ 7	$ 0
Post-Modification Outstanding Recorded Investment	$ 7	$ 0
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Commercial
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Commercial Real Estate
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Consumer
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	1	0
Pre-Modification Outstanding Recorded Investment	$ 7	$ 0
Post-Modification Outstanding Recorded Investment	$ 7	$ 0
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0
Residential
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | loan	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0
Subsequent Default, Number of Contracts | contract	0	0
Subsequent Default, Recorded Investment	$ 0	$ 0

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Commitments and Contingencies - Commitments to Extend Credit and Letters of Credit (Details) - USD ($) $ in Thousands	Apr. 13, 2022	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Subsequent Event
Loan Commitments and Letters of Credit [Line Items]
Loss contingency accrual	$ 1,500
Commitments to Extend Credit
Loan Commitments and Letters of Credit [Line Items]
Notional Amount		$ 438,055	$ 402,280	$ 437,920
Fair Value		0	0	0
Standby Letters of Credit
Loan Commitments and Letters of Credit [Line Items]
Notional Amount		3,351	3,223	3,775
Fair Value		$ 23	$ 24	$ 12
Minimum | Standby Letters of Credit
Loan Commitments and Letters of Credit [Line Items]
Loan commitments, fixed fee percent		1.00%
Maximum | Standby Letters of Credit
Loan Commitments and Letters of Credit [Line Items]
Loan commitments, fixed fee percent		3.00%

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Comprehensive Loss - Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Before-Tax Amount
Other comprehensive income (loss), before tax	$ (28,408)	$ (3,062)
Tax (Expense) Benefit
Other comprehensive income (loss), tax	7,264	782
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	(21,171)	(2,337)
Reclassification from AOCI, current period	27	57
Other Comprehensive Loss	(21,144)	(2,280)
Unrealized Gains and Losses on Available for Sale Securities
Before-Tax Amount
OCI, before reclassifications	(29,955)	(5,121)
Tax (Expense) Benefit
Other comprehensive income (loss) before reclassifications, tax	7,659	1,309
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	(22,296)	(3,812)
Reclassification from AOCI, current period	0	0
Other Comprehensive Loss	(22,296)	(3,812)
Unrealized Loss on Cash Flow Swap
Before-Tax Amount
OCI, before reclassifications	1,512	1,982
Reclassification from AOCI, current period	(29)	(28)
Tax (Expense) Benefit
Other comprehensive income (loss) before reclassifications, tax	(387)	(507)
Reclassification from AOCI, current period	8	8
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	1,125	1,475
Reclassification from AOCI, current period	(21)	(20)
Other Comprehensive Loss	1,104	1,455
Amortization of Net Retirement Plan Actuarial Gain (Loss)
Before-Tax Amount
Reclassification from AOCI, current period	57	46
Tax (Expense) Benefit
Reclassification from AOCI, current period	(15)	(12)
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	0	0
Reclassification from AOCI, current period	42	34
Other Comprehensive Loss	42	34
Amortization of Defined Benefit Pension, Prior-Service Costs
Before-Tax Amount
Reclassification from AOCI, current period	7	59
Tax (Expense) Benefit
Reclassification from AOCI, current period	(1)	(16)
Net-of-Tax Amount
Other comprehensive income (loss) before reclassifications	0	0
Reclassification from AOCI, current period	6	43
Other Comprehensive Loss	$ 6	$ 43

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Comprehensive Loss - Changes in Accumulated Other Comprehensive Income By Component (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	$ 371,186	$ 334,392
Other comprehensive income or loss before reclassifications	(21,171)	(2,337)
Amounts reclassified from accumulated other comprehensive income	27	57
Other Comprehensive Loss	(21,144)	(2,280)
Stockholders' equity, ending balance	357,243	342,413
AOCI Attributable to Parent
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	347	(816)
Stockholders' equity, ending balance	(20,797)	(3,096)
Unrealized Gains and Losses on Available for Sale Securities
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(614)	5,799
Other comprehensive income or loss before reclassifications	(22,296)	(3,812)
Amounts reclassified from accumulated other comprehensive income	0	0
Other Comprehensive Loss	(22,296)	(3,812)
Stockholders' equity, ending balance	(22,910)	1,987
Unrealized Loss on Cash Flow Swap
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	1,320	485
Other comprehensive income or loss before reclassifications	1,125	1,475
Amounts reclassified from accumulated other comprehensive income	(21)	(20)
Other Comprehensive Loss	1,104	1,455
Stockholders' equity, ending balance	2,424	1,940
Net Actuarial Gain (Loss)
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	639	(5,929)
Other comprehensive income or loss before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	42	34
Other Comprehensive Loss	42	34
Stockholders' equity, ending balance	681	(5,895)
Net Prior Service (Cost) Credit
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Stockholders' equity, beginning balance	(998)	(1,171)
Other comprehensive income or loss before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	6	43
Other Comprehensive Loss	6	43
Stockholders' equity, ending balance	$ (992)	$ (1,128)

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Comprehensive Loss - Reclassification out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	$ 1,122	$ 1,539
Salaries and Employee Benefits	11,286	11,138
Total before Tax	16,273	16,733
Provision for income taxes	(3,698)	(3,453)
Net Income	12,575	13,280
Amounts Reclassified from Accumulated Other Comprehensive Income | Unrealized Loss on Cash Flow Swap
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	29	28
Amounts Reclassified from Accumulated Other Comprehensive Income | Amortization of Defined Benefit Pension, Prior-Service Costs
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Salaries and Employee Benefits	(7)	(59)
Amounts Reclassified from Accumulated Other Comprehensive Income | Amortization of Defined Benefit Pension, Actuarial Loss
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Salaries and Employee Benefits	(57)	(46)
Amounts Reclassified from Accumulated Other Comprehensive Income | Accumulated Defined Benefit Plans Adjustment
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Total before Tax	(35)	(77)
Provision for income taxes	8	20
Net Income	$ (27)	$ (57)

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Stock-Based Compensation (Details)	3 Months Ended
	Mar. 31, 2022 plan $ / shares shares	Sep. 24, 2021
Share-based Payment Arrangement [Abstract]
Number of plans | plan	3
Stock dividend, percent		3.00%
Shares
Outstanding, beginning of period (in shares) | shares	270,758
Granted (in shares) | shares	57,000
Exercised (in shares) | shares	(12,145)
Forfeited (in shares) | shares	(246)
Outstanding, end of period (in shares) | shares	315,367
Vested at period end (in shares) | shares	177,611
Expected to vest (in shares) | shares	137,756
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 28.45
Granted (in dollars per share)	35.83
Exercised (in dollars per share)	19.81
Forfeited (in dollars per share)	19.67
Outstanding, end of period (in dollars per share)	30.12
Vested at period end (in dollars per share)	28.24
Expected to vest (in dollars per share)	32.55
Fair Value of Options Granted (in dollars per share)	$ 7.65
Dividend Yield	2.90%
Expected Volatility	27.15%
Risk Free Interest Rate	1.69%
Expected Lives (in years)	8 years 6 months 21 days
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award expiration period (in years)	10 years
Award vesting period (in years)	4 years
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)	3 years

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Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Amount expensed	$ 75	$ 72
Discount from market price, percent	5.00%
Restricted Stock Units (RSU)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Amount expensed	$ 35	$ 32

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Stock-Based Compensation - Restricted Stock Units (Details) - Restricted Stock Units (RSU) - $ / shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Restricted Stock Units
Balance at Beginning of Period (in shares)	13,203	12,012
Granted (in shares)	4,186	4,880
Vested (in shares)	(4,263)	(3,689)
Balance at End of Period (in shares)	13,126	13,203
Weighted Average Grant Date Fair Value
Outstanding at Beginning of period (in dollars per share)	$ 30.15	$ 30.70
Granted (in dollars per share)	35.83	28.54
Vested (in dollars per share)	29.02	29.82
Outstanding at End of period (in dollars per share)	$ 32.32	$ 30.15

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Retirement Benefit Plans (Details)	3 Months Ended
	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2021
Net Periodic Benefit Cost [Line Items]
Interest credit under cash balance plan	0.03
Employer matching contribution, percentage	5.00%
Employees' Pension Plan
Net Periodic Benefit Cost [Line Items]
Assumptions used calculating benefit obligation, interest rate to annuitize cash balance account			1.02%
Defined benefit plan, increase in benefit payable, percent	3.00%
Defined benefit plan, benefit obligation, increase (decrease) for plan amendment	$ 351,638
Defined benefit plan, amortization of service cost	9 years 8 months 12 days
Service Cost	$ 488,000	$ 460,000
Interest Cost	367,000	340,000
Expected Return on Plan Assets	(1,099,000)	(950,000)
Amortization of Prior Service (Credit) Cost	19,000	20,000
Amortization of Net Loss (Gain)	0	0
Net Periodic (Benefit) Cost	(225,000)	(130,000)
Plan Contributions During the Period	0	0
Estimated Future Contributions in the Current Fiscal Year	$ 0
Select Executive Retirement Plan
Net Periodic Benefit Cost [Line Items]
Assumptions used calculating benefit obligation, interest rate to annuitize cash balance account			2.72%
Defined benefit plan, amortization of service cost	12 years 6 months
Defined benefit plan, benefit obligation, period increase (decrease)	$ 122,797
Service Cost	147,000	118,000
Interest Cost	51,000	45,000
Expected Return on Plan Assets	0	0
Amortization of Prior Service (Credit) Cost	11,000	12,000
Amortization of Net Loss (Gain)	39,000	38,000
Net Periodic (Benefit) Cost	248,000	213,000
Plan Contributions During the Period	116,000	118,000
Estimated Future Contributions in the Current Fiscal Year	348,000
Post-Retirement Benefit Plans
Net Periodic Benefit Cost [Line Items]
Assumptions used calculating benefit obligation, interest rate to annuitize cash balance account			3.08%
Service Cost	27,000	31,000
Interest Cost	64,000	67,000
Expected Return on Plan Assets	0	0
Amortization of Prior Service (Credit) Cost	27,000	27,000
Amortization of Net Loss (Gain)	(32,000)	8,000
Net Periodic (Benefit) Cost	86,000	133,000
Plan Contributions During the Period	55,000	$ 28,000
Estimated Future Contributions in the Current Fiscal Year	$ 165,000
On or Subsequent to January 1, 2003
Net Periodic Benefit Cost [Line Items]
Service credits, percent of eligible salaries	6.00%
Minimum | Prior to January 1, 2003
Net Periodic Benefit Cost [Line Items]
Service credits, percent of eligible salaries	6.00%
Maximum | Prior to January 1, 2003
Net Periodic Benefit Cost [Line Items]
Service credits, percent of eligible salaries	12.00%

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2022	Mar. 31, 2021	Sep. 24, 2021
Earnings Per Share [Abstract]
Stock dividend, percent				3.00%
Net Income		$ 12,575	$ 13,280
Weighted Average Shares - Basic (in shares)	[1]	16,030	15,994
Earnings Per Share - Basic (in dollars per share)		$ 0.78	$ 0.83
Dilutive Average Shares Attributable to Stock Options (in shares)		53	36
Weighted Average Shares - Diluted (in shares)	[1]	16,083	16,030
Earnings Per Share - Diluted (in dollars per share)		$ 0.78	$ 0.83

[1] 2021 Share and Per Share Amounts have been restated for the September 24, 2021 3% stock dividend.

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Fair Values - Recurring and Nonrecurring (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities	$ 1,877	$ 1,747	$ 1,796
Available-for-Sale at Fair Value	582,428	559,316	464,089
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities	1,877	1,747	1,796
Total Securities Measured on a Recurring Basis	584,305	561,063	465,885
Derivatives, included in other assets	4,131	2,083	2,298
Total Measured on a Recurring Basis	588,436	563,146	468,183
Derivatives, included in other liabilities	4,131	2,083	2,298
Total Measured on a Recurring Basis	4,131	2,083	2,298
Available-for-Sale at Fair Value	582,428	559,316	464,089
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities	0	0	0
Total Securities Measured on a Recurring Basis	0	0	0
Derivatives, included in other assets	0	0	0
Total Measured on a Recurring Basis	0	0	0
Derivatives, included in other liabilities	0	0	0
Total Measured on a Recurring Basis	0	0	0
Available-for-Sale at Fair Value	0	0	0
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities	1,877	1,747	1,796
Total Securities Measured on a Recurring Basis	584,305	561,063	465,885
Derivatives, included in other assets	4,131	2,083	2,298
Total Measured on a Recurring Basis	588,436	563,146	468,183
Derivatives, included in other liabilities	4,131	2,083	2,298
Total Measured on a Recurring Basis	4,131	2,083	2,298
Available-for-Sale at Fair Value	582,428	559,316	464,089
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities	0	0	0
Total Securities Measured on a Recurring Basis	0	0	0
Derivatives, included in other assets	0	0	0
Total Measured on a Recurring Basis	0	0	0
Derivatives, included in other liabilities	0	0	0
Total Measured on a Recurring Basis	0	0	0
Available-for-Sale at Fair Value	0	0	0
Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral Dependent Evaluated Loans	2,168	2,457	2,423
Collateral Dependent Impaired Loans, Losses Recognized in Earnings
Other Real Estate Owned and Repossessed Assets, Net	180	126	242
Other Real Estate owned and Repossessed Assets, Net, Losses Recognized in Earnings	0	0	0
Fair Value, Measurements, Nonrecurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral Dependent Evaluated Loans	0	0	0
Other Real Estate Owned and Repossessed Assets, Net	0	0	0
Fair Value, Measurements, Nonrecurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral Dependent Evaluated Loans	0	0	0
Other Real Estate Owned and Repossessed Assets, Net	0	0	0
Fair Value, Measurements, Nonrecurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral Dependent Evaluated Loans	2,168	2,457	2,423
Other Real Estate Owned and Repossessed Assets, Net	180	126	242
U.S. Government & Agency Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	132,744	108,365	108,370
U.S. Government & Agency Obligations | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	132,744	108,365	108,370
U.S. Government & Agency Obligations | Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	0	0	0
U.S. Government & Agency Obligations | Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	132,744	108,365	108,370
U.S. Government & Agency Obligations | Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	0	0	0
State and Municipal Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	380	400	508
State and Municipal Obligations | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	380	400	508
State and Municipal Obligations | Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	0	0	0
State and Municipal Obligations | Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	380	400	508
State and Municipal Obligations | Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	0	0	0
Mortgage-Backed Securities - Residential | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	448,504	449,751	354,411
Mortgage-Backed Securities - Residential | Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	0	0	0
Mortgage-Backed Securities - Residential | Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	448,504	449,751	354,411
Mortgage-Backed Securities - Residential | Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	0	0	0
Corporate and Other Debt Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	800	800	800
Corporate and Other Debt Securities | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	800	800	800
Corporate and Other Debt Securities | Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Indentical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	0	0	0
Corporate and Other Debt Securities | Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	800	800	800
Corporate and Other Debt Securities | Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale at Fair Value	$ 0	$ 0	$ 0

XML

Fair Values - Fair Value by Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020
Carrying Value
Cash and Cash Equivalents	$ 487,578	$ 457,696	$ 452,207	$ 380,991
Securities Available-for-Sale	582,428	559,316	464,089
Held-To-Maturity Securities, at Amortized Cost	196,661	196,566	214,561
Equity Securities	1,877	1,747	1,796
Net Loans	2,709,606	2,640,660	2,612,403
Deposits	3,715,373	3,550,497	3,453,588
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	0	0	6,795
Federal Home Loan Bank Term Advances	25,000	45,000	45,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Fair Value
Securities Available-for-Sale	582,428	559,316	464,089
Securities Held-to-Maturity	195,862	201,292	221,360
Equity Securities	1,877	1,747	1,796
Carrying Amount
Carrying Value
Cash and Cash Equivalents	487,578	457,696	452,207
Securities Available-for-Sale	582,428	559,316	464,089
Held-To-Maturity Securities, at Amortized Cost	196,661	196,566	214,561
Equity Securities	1,877	1,747	1,796
Federal Home Loan Bank and Federal Reserve Bank Stock	4,491	5,380	5,360
Net Loans	2,709,606	2,640,660	2,612,403
Accrued Interest Receivable	8,099	7,384	8,258
Derivatives, included in other assets	4,131	2,083	2,298
Deposits	3,715,373	3,550,497	3,453,588
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase			6,795
Federal Home Loan Bank Overnight Advances		45,000
Federal Home Loan Bank Term Advances	25,000		45,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Accrued Interest Payable	102	138	237
Derivatives, included in other liabilities	4,131	2,083	2,298
Fair Value
Securities Available-for-Sale	582,428	559,316	464,089
Equity Securities	1,877	1,747	1,796
Derivatives, included in other assets	4,131	2,083	2,298
Derivatives, included in other liabilities	4,131	2,083	2,298
Fair Value
Carrying Value
Securities Available-for-Sale	582,428	559,316	464,089
Equity Securities	1,877	1,747	1,796
Derivatives, included in other assets	4,131	2,083	2,298
Derivatives, included in other liabilities	4,131	2,083	2,298
Fair Value
Cash and Cash Equivalents	487,578	457,696	452,207
Securities Available-for-Sale	582,428	559,316	464,089
Securities Held-to-Maturity	195,862	201,292	221,360
Equity Securities	1,877	1,747	1,796
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	4,491	5,380	5,360
Net Loans	2,648,804	2,618,311	2,603,225
Accrued Interest Receivable	8,099	7,384	8,258
Derivatives, included in other assets	4,131	2,083	2,298
Deposits	3,711,189	3,548,554	3,265,208
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase			6,795
Federal Home Loan Bank Overnight Advances		45,518
Federal Home Loan Bank Term Advances	25,001		46,176
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Accrued Interest Payable	102	138	237
Derivatives, included in other liabilities	4,131	2,083	2,298
Quoted Prices In Active Markets for Indentical Assets (Level 1) | Fair Value
Carrying Value
Securities Available-for-Sale	0	0	0
Equity Securities	0	0	0
Derivatives, included in other assets		0	0
Derivatives, included in other liabilities	0	0	0
Fair Value
Cash and Cash Equivalents	487,578	457,696	452,207
Securities Available-for-Sale	0	0	0
Securities Held-to-Maturity	0	0	0
Equity Securities	0	0	0
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	0	0	0
Net Loans	0	0	0
Accrued Interest Receivable	0	0	0
Derivatives, included in other assets		0	0
Deposits	0	0	0
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase			0
Federal Home Loan Bank Overnight Advances		0
Federal Home Loan Bank Term Advances	0		0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	0	0	0
Accrued Interest Payable	0	0	0
Derivatives, included in other liabilities	0	0	0
Significant Other Observable Inputs (Level 2) | Fair Value
Carrying Value
Securities Available-for-Sale	582,428	559,316	464,089
Equity Securities	1,877	1,747	1,796
Derivatives, included in other assets	4,131	2,083	2,298
Derivatives, included in other liabilities	4,131	2,083	2,298
Fair Value
Cash and Cash Equivalents	0	0	0
Securities Available-for-Sale	582,428	559,316	464,089
Securities Held-to-Maturity	195,862	201,292	221,360
Equity Securities	1,877	1,747	1,796
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	4,491	5,380	5,360
Net Loans	0	0	0
Accrued Interest Receivable	8,099	7,384	8,258
Derivatives, included in other assets	4,131	2,083	2,298
Deposits	3,711,189	3,548,554	3,265,208
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase			6,795
Federal Home Loan Bank Overnight Advances		45,518
Federal Home Loan Bank Term Advances	25,001		46,176
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000	20,000	20,000
Accrued Interest Payable	102	138	237
Derivatives, included in other liabilities	4,131	2,083	2,298
Significant Unobservable Inputs (Level 3) | Fair Value
Carrying Value
Securities Available-for-Sale	0	0	0
Equity Securities	0
Derivatives, included in other assets		0	0
Derivatives, included in other liabilities	0	0	0
Fair Value
Cash and Cash Equivalents	0	0	0
Securities Available-for-Sale	0	0	0
Securities Held-to-Maturity	0	0	0
Equity Securities	0
Federal Home Loan Bank and Federal Reserve Bank Stock, Fair Value	0	0	0
Net Loans	2,648,804	2,618,311	2,603,225
Accrued Interest Receivable	0	0	0
Derivatives, included in other assets		0	0
Deposits	0	0	0
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase			0
Federal Home Loan Bank Overnight Advances		0
Federal Home Loan Bank Term Advances	0		0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	0	0	0
Accrued Interest Payable	0	0	0
Derivatives, included in other liabilities	$ 0	$ 0	$ 0

XML

Leases - Narrative (Details)	3 Months Ended
	Mar. 31, 2022 office
Leases [Abstract]
Number of branch offices	2
Number of leased administrative offices	1

XML

Leases - Quantitative Lease Data (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Finance Lease Amounts:
Right-of-Use Assets	$ 4,770	$ 4,947
Lease Liabilities	5,156	5,205	$ 5,169
Operating Lease Amounts:
Right-of-Use Assets	6,676	5,435
Lease Liabilities	6,863	5,522
Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases	49	49
Operating Outgoing Cash Flows From Operating Leases	260	261
Financing Outgoing Cash Flows From Finance Leases	13	12
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities	0	0
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities	$ 0	$ 331
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)	28 years	28 years 10 months 24 days
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)	11 years 2 months 12 days	12 years 6 months
Weighted-average Discount Rate—Finance Leases	3.75%	3.75%
Weighted-average Discount Rate—Operating Leases	2.81%	3.13%
Finance Lease Cost:
Reduction of Right-of-Use Assets	$ 44	$ 44
Interest on Lease Liabilities	49	49
Operating Lease Cost	312	209
Short-term Lease Cost	10	5
Variable Lease Cost	95	104
Total Lease Cost	$ 510	$ 411

XML

Leases - Future Lease Payments on Finance and Operating Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Operating Leases
2023	$ 1,206
2024	904
2025	732
2026	682
2027	618
Thereafter	4,053
Total Undiscounted Cash Flows	8,195
Less: Net Present Value Adjustment	1,332
Lease Liabilities	6,863		$ 5,522
Financing Leases
2023	243
2024	243
2025	254
2026	265
2027	268
Thereafter	7,465
Total Undiscounted Cash Flows	8,738
Less: Net Present Value Adjustment	3,582
Lease Liabilities	$ 5,156	$ 5,169	$ 5,205

XML

Derivative Instruments and Hedging Activities - Interest Rate Swap Agreements (Details) - Not Designated as Hedging Instrument - Interest Rate Swap - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Derivative [Line Items]
Notional amount	$ 171,182	$ 172,668	$ 175,113
Other Assets
Derivative [Line Items]
Derivative asset	4,131	2,083	2,298
Other Liabilities
Derivative [Line Items]
Derivative liability	$ 4,131	$ 2,083	$ 2,298

XML

Derivative Instruments and Hedging Activities - Cash Flow Hedge Agreements (Details) - Interest Rate Swap - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Derivative [Line Items]
Amount of hedged item	$ 20,000
Amount of gain recognized in AOCI	1,512	$ 1,982	$ 1,249
Amount of gain reclassified from AOCI to interest expense	$ 29	$ 28	$ 126

XML

Label	Element	Value
Accounting Standards Update [Extensible Enumeration]	us-gaap_AccountingStandardsUpdateExtensibleList	Accounting Standards Update 2016-13 [Member]