Arrow Reports $12.6 million in Q1 Net Income, Loan Growth of $69.3 Million

About this update from Arrow Financial Corporation

GLENS FALLS, N.Y. , April 26, 2022 /PRNewswire/ -- Arrow Financial Corporation (NasdaqGS® – AROW) announced financial results for the three-month period ended March 31, 2022 . Net income for the first quarter of 2022 was $12.6 million and diluted earnings per share was $0.78 . Loan growth was strong in the first quarter of 2022, with gross loans increasing by $69 million . Excluding Paycheck Protection Program (PPP) loans, which decreased by $24 million , loans grew by $93 million in the quarter. "We are pleased to start 2022 with another exceptional quarter with both strong earnings and notable organic loan growth," said Arrow President and CEO Thomas J. Murphy . "I thank the entire Arrow Team for their dedication and hard work. We expect another challenging year, yet I am confident in our ability to meet these challenges and deliver strong results for our customers, our shareholders and our communities." For the first quarter of 2022, net income was $12.6 million compared to $13.3 million for the first quarter of 2021. The year-over-year change in first quarter net income was primarily due to: A provision expense of $769 thousand for the first quarter of 2022 compared to a credit to the provision of $648 thousand in the first quarter of 2021. Secondary market loan sale transactions were strategically curtailed in 2021, which reduced gain- on-sale income by $1.4 million when comparing year-over-year quarters. Even with the reduction in loan sales, total revenue for Q1 2022 of nearly $36.0 million was still higher by $1.2 million, or 3.5%, when compared to Q1 2021 total revenue of $34.8 million . Net Interest Income increased by 6.4% in Q1 2022, when compared to Q1 2021. First Quarter Highlights Earnings: Net income was $12.6 million . Net interest margin was 2.90%. Return on average assets (ROA) was 1.26%. Return on average equity (ROE) was 13.77%. Diluted earnings per share (EPS) was $0.78 for the first quarter. First-quarter revenue increased $1.2 million , or 3.5%, over the prior-year comparative quarter. Net charge-offs for the first quarter of 2022 were $389 thousand as compared to $444 thousand for the comparable 2021 quarter. Balance Sheet: Total assets were $4.2 billion as of March 31, 2022 representing a record high for Arrow. Total loans were $2.7 billion as of March 31, 2022 , also a record high for Arrow. Deposit growth in the first quarter of 2022 was $164.9 million . A Federal Home Loan Bank (FHLB) term advance of $20 million was prepaid during Q1 2022. Additional Items: $24 million of PPP loans were forgiven in the first quarter of 2022. Book value per share was $22.31 , up by 4.3% over the prior-year level. 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 . Following New York State guidelines, COVID-19 restrictions, including New York HERO safety protocols were lifted in the first quarter of 2022. Arrow continued to respond in a socially-conscious manner, while meeting the needs of the low-to- moderate income population with the launch of our nationally certified Bank On Smart Steps checking account with no overdraft fees. Arrow continues to advance its focus on technology enhancement with preparations for upgrading its core platform system later in 2022. Income Statement Net Interest Income: 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: 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. Three Months Ended March 31, 2022 March 31, 2021 Interest and Dividend Income $ 28,947 $ 27,694 Interest Expense 1,122 1,539 Net Interest Income 27,825 26,155 Average Earning Assets(1) 3,886,787 3,546,339 Average Interest-Bearing Liabilities 2,855,884 2,639,240 Yield on Earning Assets(1) 3.02 % 3.17 % Cost of Interest-Bearing Liabilities 0.16 0.24 Net Interest Spread 2.86 2.93 Net Interest Margin 2.90 2.99 Net Interest Income excluding PPP loans $ 26,759 $ 24,814 Net Interest Margin excluding PPP loans 2.81 % 2.94 % (1) Includes Nonaccrual Loans. Provision for Credit Losses: For the first quarter of 2022, the provision for credit losses was $769 thousand compared to a credit of $648 thousand in provision expense in the first quarter of 2021. The key drivers for the changes were strong loan growth and current forecasted economic conditions in Q1 2022 as compared to the economic conditions forecasted at the implementation of the current expected credit loss (CECL) model as of January 1, 2021 . Noninterest Income: 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: 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 . Provision for Income Taxes: The provision for income taxes was $3.7 million for the first quarter of 2022, compared to $3.5 million for the same quarter of 2021. The effective income tax rates for the three-month periods ended March 31, 2022 and 2021, were 22.7% and 20.6%, respectively. The increase in the effective tax rate in the first quarter of 2022 compared to the first quarter of 2021 was primarily due to the reduction of tax exempt investments held and the related investment income. Balance Sheet Total Assets: Total assets were $4.2 billion at March 31, 2022 an increase of $252.7 million , or 6.5%, from March 31, 2021 . Investments: Total investments increased by $100.5 million , or 14.8%, compared to March 31, 2021 . Loans: 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 . In the first quarter, total outstanding commercial loans decreased $7.5 million , or 0.9%. PPP loans, which are included in the commercial portfolio, decreased $24.9 million in the first quarter as a result of the continued loan forgiveness processed by the Small Business Administration . 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 , or 2.2%, for the first quarter of 2022. Allowance for Credit Losses: 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% at March 31, 2021 . Asset quality remained solid at March 31, 2022 , as evidenced by low levels of nonperforming assets and charge-offs. Net loan losses, expressed as an annualized percentage of average loans outstanding, were 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 . Nonperforming assets of $10.1 million at March 31, 2022 represented 0.24% of period-end assets compared to 0.22% at March 31, 2021 . Deposit Growth: 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. Capital: Total stockholders' equity was $357.2 million on March 31, 2022 , up $14.8 million , or 4.3%, from March 31, 2021 . Arrow's regulatory capital ratios remained strong in the first quarter of 2022. As of March 31, 2022 , Arrow's Common Equity Tier 1 Capital Ratio was 13.48% and Total Risk-Based Capital Ratio was 15.33%. The capital ratios of Arrow and both its subsidiary banks continued to exceed the "well capitalized" regulatory standards. Additional Commentary Cash and Stock Dividends: On March 15, 2022 , Arrow distributed a cash dividend of $0.27 per share. The cash dividend was 7% higher than the cash dividend paid by Arrow in the first quarter of 2021 due to a one cent increase in the cash dividend rate and after adjusting for the 3% stock dividend distributed on September 24, 2021 . Industry Recognition: In the first quarter of 2022, both of Arrow's banking subsidiaries, Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company , earned BauerFinancial, Inc. 5- Star Exceptional Performance Bank ratings. About Arrow Arrow Financial Corporation is a multi-bank holding company headquartered in Glens Falls , New York, serving the financial needs of northeastern New York . Arrow is the parent of Glens Falls National Bank and Trust Company and Saratoga National Bank and Trust Company . Other subsidiaries include Upstate Agency, LLC and North Country Investment Advisers, Inc. Non-GAAP Financial Measures Reconciliation In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). Some measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission (SEC) and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules. These non-GAAP financial measures include: tangible equity, return on tangible equity, tax- equivalent adjustment and related net interest income, tax-equivalent, and the efficiency ratio. Management believes that the non-GAAP financial measures disclosed by Arrow are useful in evaluating Arrow's performance and that such information should be considered as supplemental in nature and not as a substitute for, or superior to, the related financial information prepared in accordance with GAAP. Non-GAAP financial measures may differ from similar measures presented by other companies. See the reconciliation of GAAP to non-GAAP measures in the section "Selected Quarterly Information." Safe Harbor Statement The information in this document may contain statements based on management's beliefs, assumptions, expectations, estimates and projections about the future. Such "forward-looking statements," as defined in Section 21E of the Securities Exchange Act of 1934, as amended, involve a degree of uncertainty and attendant risk. Actual outcomes and results may differ, explicitly or by implication. We are not obliged to revise or update these statements to reflect unanticipated events. This document should be read in conjunction with Arrow's Annual Report on Form 10-K for the year ended December 31, 2021 and other filings with the SEC . 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. 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 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 Shareholders' 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 $ 28,095 $ 27,487 $ 28,930 $ 28,653 $ 26,390 Noninterest Income 8,162 7,589 7,694 8,478 8,608 Less: Net (Loss) Gain on Securities 130 (139) (106) 196 160 Net Gross Income $ 36,127 $ 35,215 $ 36,730 $ 36,935 $ 34,838 Efficiency Ratio 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 Arrow Financial Corporation Selected Quarterly Information - Continued (Dollars In Thousands, Except Per Share Amounts - Unaudited) Footnotes: 1. Share and Per Share Data have been restated for the September 24, 2021, 3% stock dividend. 2. Non-GAAP Financial Measures Reconciliation: Tangible Book Value and Tangible Equity exclude goodwill and other intangible assets, net from total equity. These are non-GAAP financial measures which Arrow believes provides investors with information that is useful in understanding its financial performance. 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 its financial performance. 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 the efficiency ratio provides investors with information that is useful in understanding its financial performance. Arrow defines efficiency ratio as the ratio of noninterest expense to net gross income (which equals tax-equivalent net interest income plus noninterest income, as adjusted). 5. For the current quarter, all of the regulatory capital ratios in the table above, as well as the Total Risk-Weighted Assets and Common Equity Tier 1 Capital amounts listed in the table below, are estimates based on, and calculated in accordance with, bank regulatory capital rules. All prior quarters reflect actual results. The CET1 ratio at 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 Ratio 13.48 % 13.77 % 13.71 % 13.79 % 13.56 % * Quarterly ratios have been annualized. Average Consolidated Balance Sheets and Net Interest Income Analysis (Dollars in Thousands - Unaudited) 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 % Arrow Financial Corporation Consolidated Financial Information (Dollars in Thousands - Unaudited) Quarter Ended: Loan Portfolio 3/31/2022 12/31/2021 3/31/2021 Commercial Loans $ 155,467 $ 172,518 $ 288,551 Commercial Real Estate Loans 638,437 628,929 581,507 Subtotal Commercial Loan Portfolio 793,904 801,447 870,058 Consumer Loans 976,648 920,556 861,171 Residential Real Estate Loans 966,715 945,938 908,014 Total Loans $ 2,737,267 $ 2,667,941 $ 2,639,243 Allowance for Credit Losses Allowance for Credit Losses, Beginning of Quarter $ 27,281 $ 26,956 $ 29,232 Impact of the Adoption of ASU 2016-13 — — (1,300) Loans Charged-off (829) (719) (633) Less Recoveries of Loans Previously Charged-off 440 486 189 Net Loans Charged-off (389) (233) (444) Provision for Credit Losses 769 558 (648) Allowance for Credit Losses, End of Quarter $ 27,661 $ 27,281 $ 26,840 Nonperforming Assets Nonaccrual Loans $ 9,750 $ 10,764 $ 8,087 Loans Past Due 90 or More Days and Accruing 55 823 242 Loans Restructured and in Compliance with Modified Terms 74 77 97 Total Nonperforming Loans 9,879 11,664 8,426 Repossessed Assets 180 126 242 Other Real Estate Owned — — — Total Nonperforming Assets $ 10,059 $ 11,790 $ 8,668 Key Asset Quality Ratios Net Loans Charged-off to Average Loans, Quarter-to-date Annualized 0.06 % 0.03 % 0.07 % Provision for Credit Losses to Average Loans, Quarter-to-date Annualized 0.12 % 0.08 % (0.10)% Allowance for Credit Losses to Period-End Loans 1.01 % 1.02 % 1.02 % Allowance for Credit Losses to Period-End Nonperforming Loans 280.00 % 233.89 % 318.54 % Nonperforming Loans to Period-End Loans 0.36 % 0.44 % 0.32 % Nonperforming Assets to Period-End Assets 0.24 % 0.29 % 0.22 % View original content: https://www.prnewswire.com/news-releases/arrow-reports-12-6-million-in-q1-net-income-loan-growth-of-69-3-million-301532996.html SOURCE Arrow Financial Corporation

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