SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~[X]~~☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2017~~

~~[ ]~~☐ 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.)


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

Large accelerated filer

☐

Accelerated filer x

☑

Non-accelerated filer

~~(Do not check if a smaller reporting company)~~☐

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

ARROW FINANCIAL CORPORATION

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)
September 30, 2017 December 31, 2016 September 30, 2016
ASSETS
Cash and Due From Banks $ 55,683
$ 43,024
$ 66,556
Interest-Bearing Deposits at Banks 24,983
14,331
35,503
Investment Securities:
Available-for-Sale 315,459
346,996
339,190
Held-to-Maturity (Approximate Fair Value of $343,899 at September 30, 2017; $343,751 at December 31, 2016; and $347,441 at September 30, 2016) 341,526
345,427
338,238
Other Investments 6,704
10,912
5,371
Loans 1,908,799
1,753,268
1,707,216
Allowance for Loan Losses (17,695 ) (17,012 ) (16,975 )
Net Loans 1,891,104
1,736,256
1,690,241
Premises and Equipment, Net 26,432
26,938
26,718
Goodwill 21,873
21,873
21,873
Other Intangible Assets, Net 2,395
2,696
2,802
Other Assets 58,303
56,789
53,993
Total Assets $ 2,744,462
$ 2,605,242
$ 2,580,485
LIABILITIES
Noninterest-Bearing Deposits $ 448,515
$ 387,280
$ 381,760
Interest-Bearing Checking Accounts 967,250
877,988
993,221
Savings Deposits 696,805
651,965
629,201
Time Deposits over $250,000 28,464
32,878
45,237
Other Time Deposits 166,082
166,435
163,768
Total Deposits 2,307,116
2,116,546
2,213,187
Federal Funds Purchased and
Securities Sold Under Agreements to Repurchase 61,419
35,836
38,589
Federal Home Loan Bank Overnight Advances 33,000
123,000
—
Federal Home Loan Bank Term Advances 55,000
55,000
55,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts 20,000
20,000
20,000
Other Liabilities 23,279
22,008
24,501
Total Liabilities 2,499,814
2,372,390
2,351,277
STOCKHOLDERS’ EQUITY
Preferred Stock, $5 Par Value; 1,000,000 Shares Authorized —
—
—
Common Stock, $1 Par Value; 20,000,000 Shares Authorized (18,481,301 Shares Issued and Outstanding at September 30, 2017; 17,943,201 at
December 31, 2016 and 17,943,201 at September 30, 2016) 18,481
17,943
17,943
Additional Paid-in Capital 289,294
270,880
269,680
Retained Earnings 22,581
28,644
25,400
Unallocated ESOP Shares (20,050 Shares at September 30, 2017; 19,466 Shares at December 31, 2016 and 38,396 Shares at September 30, 2016) (400 ) (400 ) (750 )
Accumulated Other Comprehensive Loss (6,135 ) (6,834 ) (5,442 )
Treasury Stock, at Cost (4,570,291 Shares at September 30, 2017; 4,441,093 Shares at December 31, 2016 and 4,479,257 Shares at September 30, 2016) (79,173 ) (77,381 ) (77,623 )
Total Stockholders’ Equity 244,648
232,852
229,208
Total Liabilities and Stockholders’ Equity $ 2,744,462
$ 2,605,242
$ 2,580,485

~~See Notes to Unaudited Interim Consolidated Financial Statements.~~

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans $ 17,996
$ 15,833
$ 51,693
$ 46,565
Interest on Deposits at Banks 104
34
242
100
Interest and Dividends on Investment Securities:
Fully Taxable 1,924
1,889
5,927
5,994
Exempt from Federal Taxes 1,575
1,526
4,660
4,486
Total Interest and Dividend Income 21,599
19,282
62,522
57,145
INTEREST EXPENSE
Interest-Bearing Checking Accounts 376
320
1,088
941
Savings Deposits 356
231
963
677
Time Deposits over $250,000 66
61
187
133
Other Time Deposits 241
231
702
677
Federal Funds Purchased and
Securities Sold Under Agreements to Repurchase 13
9
29
24
Federal Home Loan Bank Advances 700
390
1,651
1,013
Junior Subordinated Obligations Issued to
Unconsolidated Subsidiary Trusts 197
163
564
487
Total Interest Expense 1,949
1,405
5,184
3,952
NET INTEREST INCOME 19,650
17,877
57,338
53,193
Provision for Loan Losses 800
480
1,580
1,550
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 18,850
17,397
55,758
51,643
NONINTEREST INCOME
Income From Fiduciary Activities 2,116
1,923
6,284
5,854
Fees for Other Services to Customers 2,453
2,491
7,122
7,144
Insurance Commissions 2,113
2,127
6,426
6,468
Net Gain on Securities Transactions 10
—
10
144
Net Gain on Sales of Loans 182
310
431
649
Other Operating Income 267
263
620
925
Total Noninterest Income 7,141
7,114
20,893
21,184
NONINTEREST EXPENSE
Salaries and Employee Benefits 9,251
8,693
27,343
25,223
Occupancy Expenses, Net 2,371
2,425
7,410
7,223
FDIC Assessments 225
217
679
844
Other Operating Expense 3,701
3,747
11,229
11,047
Total Noninterest Expense 15,548
15,082
46,661
44,337
INCOME BEFORE PROVISION FOR INCOME TAXES 10,443
9,429
29,990
28,490
Provision for Income Taxes 3,027
2,691
8,735
8,556
NET INCOME $ 7,416

$ 6,738

$ 21,255

$ 19,934
Average Shares Outstanding ¹:

Basic 13,889
13,810
13,889
13,775
Diluted 13,966
13,901
13,981
13,842
Per Common Share:
Basic Earnings $ 0.53
$ 0.49
$ 1.53
$ 1.45
Diluted Earnings 0.53
0.48
1.52
1.44

¹~~Share and Per Share Amounts have been restated for the September 28, 2017 3% stock dividend.~~

~~See Notes to Unaudited Interim Consolidated Financial Statements.~~

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net Income $ 7,416
$ 6,738
$ 21,255
$ 19,934
Other Comprehensive Income, Net of Tax:
  Net Unrealized Securities Holding Gains (Losses)
     Arising During the Period
9
(810 ) 465
2,309
  Reclassification Adjustments for Securities
    Gains Included in Net Income

(6 ) —
(6 ) (88 )
  Amortization of Net Retirement Plan Actuarial Loss 64
111
245
314
  Accretion of Net Retirement Plan Prior
     Service Credit
(2 ) (1 ) (5 ) (5 )
Other Comprehensive Income (Loss) 65
(700 ) 699
2,530
  Comprehensive Income $ 7,481
$ 6,038
$ 21,954
$ 22,464

~~See Notes to Unaudited Interim Consolidated Financial Statements.~~

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS OF CHANGES IN STOCKHOLDERS~~’ ~~EQUITY~~BALANCE SHEETS

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)


	September 30, 2020		December 31, 2019		September 30, 2019
ASSETS
Cash and Due From Banks	$	54,286	$	47,035	$	65,882
Interest-Bearing Deposits at Banks	396,380		23,186		26,416
Investment Securities:
Available-for-Sale at Fair Value	374,928		357,334		314,182
Held-to-Maturity (Approximate Fair Value of $233,501 at September 30, 2020; $249,618 at December 31, 2019; and $259,128 at September 30, 2019)	224,799		245,065		255,095
Equity Securities	1,511		2,063		1,996
FHLB and Federal Reserve Bank Stock	5,574		10,317		6,627
Loans	2,592,455		2,386,120		2,335,591
Allowance for Loan Losses	(28,446)		(21,187)		(20,931)
Net Loans	2,564,009		2,364,933		2,314,660
Premises and Equipment, Net	42,075		40,629		40,228
Goodwill	21,873		21,873		21,873
Other Intangible Assets, Net	1,789		1,661		1,713
Other Assets	90,460		70,179		64,150
Total Assets	$	3,777,684	$	3,184,275	$	3,112,822
LIABILITIES
Noninterest-Bearing Deposits	$	690,232	$	484,944	$	516,876
Interest-Bearing Checking Accounts	912,980		689,221		801,446
Savings Deposits	1,354,956		1,046,568		929,691
Time Deposits over $250,000	112,555		123,968		96,770
Other Time Deposits	194,135		271,353		269,764
Total Deposits	3,264,858		2,616,054		2,614,547
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	73,949		51,099		72,869
Federal Home Loan Bank Overnight Advances	0		130,000		48,000
Federal Home Loan Bank Term Advances	50,000		30,000		30,000
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		20,000
Finance Leases	5,228		5,254		5,263
Other Liabilities	37,989		30,140		29,915
Total Liabilities	3,452,024		2,882,547		2,820,594
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value and 1,000,000 Shares Authorized at September 30, 2020, December 31, 2019 and September 30, 2019	0		0		0
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (20,194,474 Shares Issued at September 30, 2020 and 19,606,449 at December 31, 2019 and September 30, 2019)	20,194		19,606		19,606
Additional Paid-in Capital	353,062		335,355		334,597
Retained Earnings	33,434		33,218		27,375
Unallocated ESOP Shares (NaN at September 30, 2020 and December 31, 2019 and 5,151 Shares at September 30, 2019)	0		0		(100)
Accumulated Other Comprehensive Loss	(253)		(6,357)		(8,979)
Treasury Stock, at Cost (4,705,102 Shares at September 30, 2020; 4,608,258 Shares at December 31, 2019 and 4,632,657 Shares at September 30, 2019)	(80,777)		(80,094)		(80,271)
Total Stockholders’ Equity	325,660		301,728		292,228
Total Liabilities and Stockholders’ Equity	$	3,777,684	$	3,184,275	$	3,112,822

See Notes to Unaudited Interim Consolidated Financial Statements.

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings

Unallo-cated ESOP
Shares

Accumu-lated
Other Com-
prehensive
Loss

Treasury
Stock
Total
Balance at December 31, 2016 $ 17,943
$ 270,880
$ 28,644
$ (400 ) $ (6,834 ) $ (77,381 ) $ 232,852
Net Income —
—
21,255
—
—
—
21,255
Other Comprehensive Income —
—
—
—
699
—
699
3% Stock Dividend (538,100 Shares) 538
16,661
(17,199 ) —
—
—
—
Cash Dividends Paid, $.728 per Share ¹
—
—
(10,119 ) —
—
—
(10,119 )
Stock Options Exercised, Net  (34,489 Shares) —
335
—
—
—
399
734
Shares Issued Under the Directors’ Stock
  Plan (3,927 Shares)
—
84
—
—
—
42
126
Shares Issued Under the Employee Stock
  Purchase Plan (10,869 Shares)
—
230
—
—
—
121
351
Shares Issued for Dividend
  Reinvestment Plans (37,525 Shares)
—
843
—
—
—
413
1,256
Stock-Based Compensation Expense —
261
—
—
—
—
261
Purchase of Treasury Stock
  (83,256 Shares)
—
—
—
—
—
(2,767 ) (2,767 )
Balance at September 30, 2017 $ 18,481
$ 289,294
$ 22,581
$ (400 ) $ (6,135 ) $ (79,173 ) $ 244,648

Balance at December 31, 2015 $ 17,421
$ 250,680
$ 32,139
$ (1,100 ) $ (7,972 ) $ (77,197 ) $ 213,971
Net Income —
—
19,934
—
—
—
19,934
Other Comprehensive Income —
—
—
—
2,530
—
2,530
3% Stock Dividend (522,425 Shares) 522
16,415
(16,937 ) —
—
—
—
Cash Dividends Paid, $.707 per Share ¹
—
—
(9,736 ) —
—
—
(9,736 )
Stock Options Exercised, Net  (80,449 Shares) —
980
—
—
—
795
1,775
Shares Issued Under the Directors’ Stock
  Plan (3,522 Shares)
—
76
—
—
—
36
112
Shares Issued Under the Employee Stock
  Purchase Plan (13,041 Shares)
—
229
—
—
—
129
358
Shares Issued for Dividend
  Reinvestment Plans (44,448 Shares)
—
862
—
—
—
440
1,302
Stock-Based Compensation Expense —
215
—
—
—
—
215
Tax Benefit for Disposition of Stock Options —
63
—
—
—
—
63
Purchase of Treasury Stock
(64,146 Shares)
—
—
—
—
—
(1,826 ) (1,826 )
Allocation of ESOP Stock (17,997 Shares) —
160
—
350
—
—
510
Balance at September 30, 2016 $ 17,943
$ 269,680
$ 25,400
$ (750 ) $ (5,442 ) $ (77,623 ) $ 229,208

^{ARROW FINANCIAL CORPORATION AND SUBSIDIARIES}

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended September 30				Nine Months Ended September 30,
	2020		2019		2020		2019
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans	$	24,706	$	24,620	$	74,657	$	70,543
Interest on Deposits at Banks	64		182		229		572
Interest and Dividends on Investment Securities:
Fully Taxable	1,557		2,018		5,621		6,671
Exempt from Federal Taxes	969		1,132		3,017		3,606
Total Interest and Dividend Income	27,296		27,952		83,524		81,392
INTEREST EXPENSE
Interest-Bearing Checking Accounts	264		500		1,061		1,435
Savings Deposits	806		2,317		4,450		5,926
Time Deposits over $250,000	292		451		1,263		1,362
Other Time Deposits	576		1,255		2,360		3,099
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	17		28		55		75
Federal Home Loan Bank Advances	219		820		865		3,513
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	173		250		574		780
Interest on Financing Leases	49		28		148		71
Total Interest Expense	2,396		5,649		10,776		16,261
NET INTEREST INCOME	24,900		22,303		72,748		65,131
Provision for Loan Losses	2,271		518		8,083		1,445
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	22,629		21,785		64,665		63,686
NONINTEREST INCOME
Income From Fiduciary Activities	2,265		2,212		6,613		6,571
Fees for Other Services to Customers	2,619		2,623		7,348		7,570
Insurance Commissions	1,713		1,936		5,077		5,590
Net (Loss) Gain on Securities	(72)		146		(552)		222
Net Gain on Sales of Loans	1,433		257		2,193		501
Other Operating Income	739		517		2,876		1,020
Total Noninterest Income	8,697		7,691		23,555		21,474
NONINTEREST EXPENSE
Salaries and Employee Benefits	10,408		10,015		31,003		29,061
Occupancy Expenses, Net	1,427		1,324		4,221		4,023
Technology and Equipment Expense	3,228		3,305		9,807		9,689
FDIC Assessments	309		(480)		770		(56)
Other Operating Expense	2,115		2,627		6,685		7,634
Total Noninterest Expense	17,487		16,791		52,486		50,351
INCOME BEFORE PROVISION FOR INCOME TAXES	13,839		12,685		35,734		34,809
Provision for Income Taxes	2,793		2,618		7,402		7,074
NET INCOME	$	11,046	$	10,067	$	28,332	$	27,735
Average Shares Outstanding 1:
Basic	15,472		15,404		15,453		15,375
Diluted	15,481		15,441		15,467		15,417
Per Common Share:
Basic Earnings	$	0.71	$	0.65	$	1.83	$	1.80
Diluted Earnings	0.71		0.65		1.83		1.80

12019 Share and Per Share Amounts have been restated for the September 25, 2020 3% stock dividend.

See Notes to Unaudited Interim Consolidated Financial Statements.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Net Income	$	11,046	$	10,067	$	28,332	$	27,735
Other Comprehensive Income, Net of Tax:
Net Unrealized Securities Holding (Losses) Gains Arising During the Period	(296)		499		5,823		4,323

Net Unrealized Gain on Cash Flow Hedge Agreements	238		0		37		0


Amortization of Net Retirement Plan Actuarial Loss	42		127		127		381
Amortization of Net Retirement Plan Prior Service Cost	39		42		117		127
Other Comprehensive Income	23		668		6,104		4,831
Comprehensive Income	$	11,069	$	10,735	$	34,436	$	32,566

See Notes to Unaudited Interim Consolidated Financial Statements.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)


	Nine Month Period Ended September 30, 2020
	Common Stock		Additional Paid-In Capital		Retained Earnings		Unallo-cated ESOP Shares		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at December 31, 2019	$	19,606	$	335,355	$	33,218	$	0	$	(6,357)	$	(80,094)	$	301,728


Net Income	—		—		28,332		—		—		—		28,332
Other Comprehensive Income	—		—		—		—		6,104		—		6,104


3% Stock Dividend (588,025 Shares)	588		15,818		(16,406)		—		—		—		0
Cash Dividends Paid, $.757 per Share	—		—		(11,710)		—		—		—		(11,710)
Stock Options Exercised, Net (26,039 Shares)	—		344		—		—		—		252		596
Shares Issued Under the Directors’ Stock Plan (4,245 Shares)	—		83		—		—		—		42		125
Shares Issued Under the Employee Stock Purchase Plan (13,697 Shares)	—		260		—		—		—		132		392
Shares Issued for Dividend Reinvestment Plans (48,473 Shares)	—		887		—		—		—		462		1,349
Stock-Based Compensation Expense	—		315		—		—		—		—		315

Purchase of Treasury Stock (52,257 Shares)	—		—		—		—		—		(1,571)		(1,571)



Balance at September 30, 2020	$	20,194	$	353,062	$	33,434	$	0	$	(253)	$	(80,777)	$	325,660

	Three Month Period Ended September 30, 2020
	Common Stock		Additional Paid-In Capital		Retained Earnings		Unallo-cated ESOP Shares		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at June 30, 2020	$	19,606	$	336,643	$	42,704	$	0	$	(276)	$	(80,990)	$	317,687
Net Income	—		—		11,046		—		—		—		11,046
Other Comprehensive Income	—		—		—		—		23		—		23


3% Stock Dividend (588,025 Shares)	588		15,818		(16,406)		—		—		—		0
Cash Dividends Paid, $.252 per Share	—		—		(3,910)		—		—		—		(3,910)
Stock Options Exercised, Net (8,884 Shares)	—		107		—		—		—		81		188

Shares Issued Under the Employee Stock Purchase Plan (4,739 Shares)	—		84		—		—		—		43		127
Shares Issued for Dividend Reinvestment Plans (16,443 Shares)	—		304		—		—		—		153		457
Stock-Based Compensation Expense	—		106		—		—		—		—		106

Purchase of Treasury Stock (2,236 Shares)	—		—		—		—		—		(64)		(64)



Balance at September 30, 2020	$	20,194	$	353,062	$	33,434	$	0	$	(253)	$	(80,777)	$	325,660


	Nine Month Period Ended September 30, 2019
	Common Stock		Additional Paid-In Capital		Retained Earnings		Unallo-cated ESOP Shares		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at December 31, 2018	$	19,035	314,533		29,257		(100)		$	(13,810)	$	(79,331)	$	269,584
Net Income	—		—		27,735		—		—		—		27,735
Other Comprehensive Income	—		—		—		—		4,831		—		4,831


3% Stock Dividend (570,884 Shares)	571		17737		(18,308)		—		—		—		0
Cash Dividends Paid, $.735 per Share 1	—		—		(11,309)		—		—		—		(11,309)
Stock Options Exercised, Net (76,775 Shares)	—		802		—		—		—		838		1,640
Shares Issued Under the Directors’ Stock Plan (3,997 Shares)	—		86		—		—		—		44		130
Shares Issued Under the Employee Stock Purchase Plan (11,403 Shares)	—		236		—		—		—		124		360
Shares Issued for Dividend Reinvestment Plans (39,078 Shares)	—		911		—		—		—		422		1,333
Stock-Based Compensation Expense	—		292		—		—		—		—		292

Purchase of Treasury Stock (70,711 Shares)	—		—		—		—		—		(2,368)		(2,368)


Balance at September 30, 2019	$	19,606	$	334,597	$	27,375	$	(100)	$	(8,979)	$	(80,271)	$	292,228


	Three Month Period Ended September 30, 2019
	Common Stock		Additional Paid-In Capital		Retained Earnings		Unallo-cated ESOP Shares		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at June 30, 2019	$	19,035	$	316,229	$	39,397	$	(100)	$	(9,647)	$	(80,265)	$	284,649
Net Income	—		—		10,067		—		—		—		10,067
Other Comprehensive Income	—		—		—		—		668		—		668


3% Stock Dividend (570,884 Shares)	571		17,737		(18,308)		—		—		—		0
Cash Dividends Paid, $.245 per Share 1	—		—		(3,781)		—		—		—		(3,781)
Stock Options Exercised, Net (14,063 Shares)	—		164		—		—		—		151		315

Shares Issued Under the Employee Stock Purchase Plan (3,455 Shares)	—		73		—		—		—		37		110
Shares Issued for Dividend Reinvestment Plans (12,380 Shares)	—		296		—		—		—		133		429
Stock-Based Compensation Expense	—		98		—		—		—		—		98

Purchase of Treasury Stock (10,151 Shares)	—		—		—		—		—		(327)		(327)


Balance at September 30, 2019	$	19,606	$	334,597	$	27,375	$	(100)	$	(8,979)	$	(80,271)	$	292,228

1 Cash dividends paid per share have been adjusted for the September ~~28, 2017~~25, 20203% stock dividend.

See Notes to Unaudited Interim Consolidated Financial Statements.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

~~(Unaudited)~~


	Nine Months Ended September 30,
Cash Flows from Operating Activities:	2020		2019
Net Income	$	28,332	$	27,735
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Loan Losses	8,083		1,445
Depreciation and Amortization	4,669		3,994





Net Loss (Gain) on Securities Transactions	552		(222)
Loans Originated and Held-for-Sale	(60,335)		(20,612)
Proceeds from the Sale of Loans Held-for-Sale	52,099		19,424
Net Gain on the Sale of Loans	(2,193)		(501)
Net (Gain) Loss on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	(157)		798
Contributions to Retirement Benefit Plans	(540)		(492)
Deferred Income Tax Benefit	(2,255)		(644)
Shares Issued Under the Directors’ Stock Plan	125		130
Stock-Based Compensation Expense	315		292
Tax Benefit from Exercise of Stock Options	41		199
Net Increase in Other Assets	(5,924)		(9,302)
Net Increase in Other Liabilities	4,751		10,480
Net Cash Provided By Operating Activities	27,563		32,724
Cash Flows from Investing Activities:

Proceeds from the Maturities and Calls of Securities Available-for-Sale	75,449		79,077
Purchases of Securities Available-for-Sale	(86,832)		(70,418)

Proceeds from the Maturities and Calls of Securities Held-to-Maturity	26,570		31,161
Purchases of Securities Held-to-Maturity	(6,848)		(3,398)
Net Increase in Loans	(197,577)		(140,360)
Proceeds from the Sales of Premises and Equipment, Other Real Estate Owned and Repossessed Assets	2,332		1,282
Purchase of Premises and Equipment	(3,639)		(6,698)

Net Decrease in Other Investments	4,743		8,879
Purchase of Bank Owned Life Insurance	(12,000)		0
Net Cash Used By Investing Activities	(197,802)		(100,475)
Cash Flows from Financing Activities:
Net Increase in Deposits	648,804		268,963
Net Decrease in Short-Term Federal Home Loan Bank Borrowings	(130,000)		(186,000)
Net Increase in Short-Term Borrowings	22,850		18,210
Finance Lease Payments	(26)		(19)
Federal Home Loan Bank Advances	40,000		0
Repayments of Federal Home Loan Bank Term Advances	(20,000)		(15,000)
Purchase of Treasury Stock	(1,571)		(2,368)
Stock Options Exercised, Net	596		1,640
Shares Issued Under the Employee Stock Purchase Plan	392		360

Shares Issued for Dividend Reinvestment Plans	1,349		1,333

Cash Dividends Paid	(11,710)		(11,309)
Net Cash Provided By Financing Activities	550,684		75,810
Net Increase in Cash and Cash Equivalents	380,445		8,059
Cash and Cash Equivalents at Beginning of Period	70,221		84,239
Cash and Cash Equivalents at End of Period	$	450,666	$	92,298

Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings	$	11,367	$	15,329
Income Taxes	8,369		7,131
Non-cash Investing and Financing Activity:
Transfer of Loans to Other Real Estate Owned and Repossessed Assets	711		1,530

Nine Months Ended September 30,
Cash Flows from Operating Activities: 2017 2016
Net Income $ 21,255
$ 19,934
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Loan Losses 1,580
1,550
Depreciation and Amortization 4,247
4,605
Allocation of ESOP Stock —
510
Net Gains on the Sale of Securities Available-for-Sale (10 ) (144 )
Loans Originated and Held-for-Sale (14,890 ) (20,025 )
Proceeds from the Sale of Loans Held-for-Sale 14,481
19,557
Net Gains on the Sale of Loans (431 ) (649 )
Net Losses on the Sale of Premises and Equipment, Other Real Estate Owned and Repossessed Assets 197
120
Contributions to Retirement Benefit Plans (640 ) (534 )
Deferred Income Tax Benefit (20 ) (464 )
Shares Issued Under the Directors’ Stock Plan 126
112
Stock-Based Compensation Expense 261
215
Tax Benefit from Exercise of Stock Options 112
—
Net Increase in Other Assets (1,689 ) (3,045 )
Net Increase in Other Liabilities 1,819
3,427
Net Cash Provided By Operating Activities 26,398
25,169
Cash Flows from Investing Activities:
Proceeds from the Sale of Securities Available-for-Sale 10,015
10,568
Proceeds from the Maturities and Calls of Securities Available-for-Sale 43,617
65,965
Purchases of Securities Available-for-Sale (22,503 ) (10,920 )
Proceeds from the Maturities and Calls of Securities Held-to-Maturity 39,062
42,295
Purchases of Securities Held-to-Maturity (36,018 ) (60,786 )
Net Increase in Loans (156,643 ) (133,616 )
Proceeds from the Sales of Premises and Equipment, Other Real Estate Owned and Repossessed Assets 830
1,743
Purchase of Premises and Equipment (1,335 ) (1,083 )
Proceeds from the Sale of a Subsidiary, Net 72
72
Net Decrease in Other Investments 4,208
3,468
Net Cash Used By Investing Activities (118,695 ) (82,294 )
Cash Flows from Financing Activities:
Net Increase in Deposits 190,570
182,764
Net Increase (Decrease) in Short-Term Federal Home Loan Bank Borrowings (90,000 ) (82,000 )
Net Increase (Decrease) in Short-Term Borrowings 25,583
15,416
Purchase of Treasury Stock (2,767 ) (1,826 )
Stock Options Exercised, Net 734
1,775
Shares Issued Under the Employee Stock Purchase Plan 351
358
Tax Benefit from Exercise of Stock Options —
63
Shares Issued for Dividend Reinvestment Plans 1,256
1,302
Cash Dividends Paid (10,119 ) (9,736 )
Net Cash Provided By Financing Activities 115,608
108,116
Net Increase in Cash and Cash Equivalents 23,311
50,991
Cash and Cash Equivalents at Beginning of Period 57,355
51,068
Cash and Cash Equivalents at End of Period $ 80,666
$ 102,059

Supplemental Disclosures to Statements of Cash Flow Information:
Interest on Deposits and Borrowings $ 5,168
$ 3,932
Income Taxes 8,404
9,761
Non-cash Investing and Financing Activity:
Transfer of Loans to Other Real Estate Owned and Repossessed Assets 1,055
856

See Notes to Unaudited Interim Consolidated Financial Statements.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. ACCOUNTING POLICIES

In the opinion of the management of Arrow Financial Corporation ~~(Arrow)~~(Arrow, the Company, we, or us), the accompanying unaudited interim consolidated ~~interim~~ financial statements contain all of the adjustments necessary to present fairly the financial position as of September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016;~~2019; the results of operations for the ~~three-~~three and ~~nine-month~~nine month periods ended September 30, ~~2017~~2020 and ~~2016;~~2019; the consolidated statements of comprehensive income for the ~~three-~~three and ~~nine-month~~nine month periods ended September 30, ~~2017~~2020 and ~~2016;~~2019; the changes in stockholders' equity for the three and nine~~-month~~ month periods ended September 30, ~~2017~~2020 and ~~2016~~;2019; and the cash flows for the nine~~-month~~ month periods ended September 30, ~~2017~~2020 and ~~2016~~.2019. All such adjustments are of a normal recurring nature. Certain prior period amounts have been reclassified to conform to the current presentation, including a new requirement to present time deposits with balances greater than $250,000 which were previously presented as balances

Management’s Use of ~~$100,000 or greater.~~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 ~~use~~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 the Company's right-of-use lease assets, goodwill and intangible assets. Our most significant estimate is the allowance for loan losses. Other estimates include the evaluation of other-than-temporary impairment of investment securities, pension and other post-retirement liabilities and an analysis of a need for a valuation allowance for deferred tax assets. 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 loan losses. In connection with the determination of the allowance for loan losses, management obtains appraisals for properties. The allowance for loan losses is management’s best estimate of probable loan losses incurred as of the balance sheet date. While management uses available information to recognize losses on loans, future adjustments to the allowance for loan losses may be necessary based on changes in economic conditions.

The unaudited interim consolidated ~~interim~~ financial statements should be read in conjunction with the audited annual consolidated financial statements of Arrow for the year ended December 31, ~~2016~~,2019 included in Arrow's ~~2016~~Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2019.

~~New~~The following accounting standards have been adopted in the first nine months of 2020:

In August 2018, the Financial Accounting Standards ~~Updates (ASU):~~ ~~Effective January 1, 2017, Arrow adopted FASB accounting standard~~Board (FASB) issued ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting," which makes several revisions to equity compensation accounting. Under the new guidance all excess tax benefits and deficiencies that occur when an award is exercised or expires are recognized in income tax expense as discrete period items. Previously, these transactions were typically recorded directly within equity. Excess tax benefits are also recognized at the time an award is exercised compared2018-13 "Disclosure Framework-Changes to the ~~previous requirement~~Disclosure Requirements for Fair Value Measurement" as part of its disclosure framework, and pursuant to ~~delay recognition until~~which FASB has eliminated, amended and added disclosure requirements for fair value measurements. For Arrow, the ~~deduction reduces taxes payable. All tax related cash flows recognized on stock-based compensation expense are classified as an operating activity in our consolidated statements of cash flows~~standard became effective, on a prospective basis. Accordingly, prior periods have not been adjusted. ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous requirement to estimate forfeitures from inception. Further, ASU 2016-09 permits employers to use a net-settlement feature to withhold taxes on equity compensation awards up to the maximum statutory tax rate without affecting the equity classification of the award. Under previous guidance, withholding of equity awards in excess of the minimum statutory requirement resulted in liability classification for the entire award. The related cash remittance by the employer for employee taxes is treated as a financing activity in the statement of cash flows.

The annual effect of the 2017 tax provision will primarily depend upon the share price of Arrow common stock which affects the probability of exercise of certain stock options and the magnitude of windfalls upon exercise. Income tax benefits from stock options exercised in the period reduced our effective tax rate for the nine months ended September 30, 2017, which resulted in an increase in earnings of approximately $112 thousand, representing earnings per share of less than $0.01.

In addition, during 2017, through the date of this report, the FASB issued 13 accounting standards updates. Some of the standards listed below did not have an immediate impact on Arrow, but could in the future.

ASU 2014-09 - Revenue from Contracts with Customers will change revenue recognition guidance under GAAP and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. Initially, ASU 2014-09 was effective for Arrowbasis, on January 1, 2017; however, in August 2015, the FASB issued ASU No. 2015-14 - Revenue from Contracts with Customers - Deferral of the Effective Date, which deferred the effective date to January 1, 2018. Early adoption is not permitted. In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10 - Identifying Performance Obligations and Licensing, ASU No. 2016-12 - Narrow-Scope Improvements and Practical Expedients, and ASU No. 2016-20 - Technical Corrections and Improvements to Top 606 - Revenue from Contract with Customers. We are currently in the process of identifying any required changes to our revenue recognition policies. We do not expect that the2020. The adoption of this change in ~~accounting for revenue will~~fair value disclosure did not have a material impact on ~~our~~its financial position or the results of operations in ~~periods~~the period subsequent to its adoption.

~~ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities"~~In August 2018, the FASB issued Accounting Standards Update (ASU) 2018-15 "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" which will ~~significantly change the income statement impact of equity investments.~~require companies to defer potentially significant, specified implementation costs incurred in a cloud computing arrangement that are currently often expensed under US GAAP. For Arrow, the standard is effective for the first quarter of 2018, and will require that equity investments be measured at fair value, with changes in fair value measured in net income. As of September 30, 2017, we hold $1.5 million of fair value in equity investments and we do not expect that thewas adopted, on a prospective basis, on January 1, 2020. The adoption of this ~~change in accounting for equity investments will~~standard did not have a material impact on ~~our~~its financial position or the results of operations in ~~periods~~the period subsequent to its adoption.

In October 2018, the FASB issued ASU ~~2016-02 "Leases" will require the recognition of operating leases.~~No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). ASU 2018-17 provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. For Arrow, the standard ~~becomes~~was effective ~~in the first quarter of 2019. We do not expect that~~on January 1, 2020 and the adoption of this ~~change in accounting for operating leases will~~standard did not have a material impact on ~~our~~its financial position or the results of operations in periods subsequent to its adoption. As of September 30, 2017, we have less than $2.6 million in minimum lease payments for existing operating leases of branch and insurance locations with varying expiration dates from 2017 to 2031.

~~ASU 2016-13 "Financial Instruments - Credit Losses" will change~~ the way we and other financial entities recognize losses on assets measured at amortized costs and change the method for recognizing credit losses on securities available-for-sale. Currently, loan losses are recognized using an "incurred loss" methodology. Under ASU 2016-13, the methodology will change to a current expected loss over the life of the loan. Currently, credit losses on available-for-sale securities reduce the carrying value of the instrument and cannot be reversed. Under ASU 2016-13, the amount of the credit loss is carried as a valuation allowance and can be reversed. For Arrow, the

standard is effective for the first quarter of 2020 and early adoption is allowed in 2019. The Company is currently evaluating the impact of the pending adoption of the ASU on its consolidated financial statements. The initial adjustment will not be reported in earnings, but as the cumulative effect of a change in accounting principle. At this time we have not calculated the estimated impact that this Update will have on our Allowance for Loan Losses, however, we anticipate it will have a significant impact on the methodology process we utilize to calculate the allowance.

ASU 2017-01 "Business Combinations" defines when a set of assets and activities constitutes a business for the purposes of determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Currently, the three elements required to be present in a business are inputs, processes, and outputs. The amendments in this Update allow for a business to consist of inputs, processes, and the ability to create output. For Arrow, the standard becomes effective in the first quarter of 2018. This Update will likely have no effect on our accounting for acquisitions and dispositions of businesses.

ASU 2017-04 "Intangibles-Goodwill and Other" changes the procedures for evaluating impairment of goodwill. Prior to this Update, entities were required to perform procedures to determine the fair value of the underlying assets and liabilities following the guidance for determining the fair value of assets and liabilities in a business combination. This additional step to impairment testing has been eliminated. Under the amendments in this Update, entities should perform goodwill impairment testing by comparing the fair value of a reporting unit to its carrying value. This amendment should reduce the cost and complexity of evaluating goodwill for impairment. For Arrow, the standard becomes effective in the first quarter of 2019, however, early adoption is permitted. This amendment will not affect our assessment of goodwill impairment since we currently perform the analysis of comparing carrying value to fair value of our reporting units that have goodwill and we have not had to perform a Step 2 Impairment Test to date.

ASU 2017-07 "Compensation-Retirement Benefits" improves the presentation of net periodic pension cost and net periodic post-retirement benefit cost by requiring that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. For Arrow, the standard becomes effective in the first quarter of 2018, however, early adoption is permitted. We do not expect that the adoption of this change in accounting for pension costs will have a material impact on our financial position or the results of operations in periodsperiod subsequent to its adoption.

In March 2020, the FASB issued ASU 2017-08 "Receivables-Nonrefundable Fees and Other Costs" amends the amortization period for certain purchased callable debt securities held at a premium. This shortens the amortization period for the premium to the earliest call date. Under current generally accepted accounting principles (GAAP), entities generally amortize the premium as an adjustment of yield over the contractual life2020-04, Reference Rate Reform (Topic 848): Facilitation of the ~~instrument.~~Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued, such as LIBOR. Companies can apply the ASU immediately. However, the guidance will only be available for a limited time (generally through December 31, 2022), and provides optional relief for contract modifications, hedge accounting and Held-to-maturity debt securities. For Arrow, this standard was effective January 1, 2020 and can be applied prospectively beginning January 1, 2020 for contract modifications and hedging relationships. The one-time election to sell and/or transfer securities classified as Held-to-maturity may be made at any point after March 12, 2020. Arrow is evaluating the ~~standard becomes effective in the first quarter of 2019, however, early adoption is permitted as early as the first quarter of 2017. We do not expect that the adoption~~impact of this ~~change in~~standard as it will provide relief for contracts currently tied to LIBOR and hedge accounting ~~for certain callable debt securities will have a material impact on our financial position or the results of operations in periods subsequent to its adoption.~~relationships.

ASU 2017-09 "Compensation-Stock Compensation" provides guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The guidance highlights the requirements for applying modification accounting and the exception criteria relating to changes in share-based payment terms. For Arrow, the standard becomes effective in the first quarter of 2018, however, early adoption is permitted as early as the third quarter of 2017. We do not expect that the adoption of this change in accounting for share-based payment awards will have a material impact on our financial position or the results of operations in periods subsequent to its adoption.

Note 2. INVESTMENT SECURITIES (In Thousands)

The following table is the schedule of Available-For-Sale Securities at September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016:~~2019:


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
September 30, 2020
Available-For-Sale Securities, at Amortized Cost	$	35,001	$	593	$	329,887	$	1,000	$	366,481
Gross Unrealized Gains	184		0		8,700		0		8,884
Gross Unrealized Losses	(18)		0		(219)		(200)		(437)
Available-For-Sale Securities, at Fair Value	35,167		593		338,368		800		374,928
Available-For-Sale Securities, Pledged as Collateral, at Fair Value									308,879

Maturities of Debt Securities, at Amortized Cost:
Within One Year	$	0	$	68	$	7,383	$	0	$	7,451
From 1 - 5 Years	20,001		125		297,144		0		317,270
From 5 - 10 Years	15,000		400		25,360		1,000		41,760
Over 10 Years	0		0		0		0		0

Maturities of Debt Securities, at Fair Value:
Within One Year	$	—	$	68	$	7,575	$	0	$	7,643
From 1 - 5 Years	20,171		125		305,562		0		325,858
From 5 - 10 Years	14,996		400		25,231		800		41,427
Over 10 Years	0		0		0		0		0

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	29,982	$	0	$	13,847	$	0	$	43,829
12 Months or Longer	0		0		54,239		800		55,039
Total	$	29,982	$	0	$	68,086	$	800	$	98,868
Number of Securities in a Continuous Loss Position	4		0		26		1		31

Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	18	$	0	$	36	$	0	$	54
12 Months or Longer	0		0		183		200		383
Total	$	18	$	0	$	219	$	200	$	437

Disaggregated Details:


US Agency Obligations, at Amortized Cost	$	35,001
US Agency Obligations, at Fair Value	35,167
US Government Agency Securities, at Amortized Cost					$	69,575
US Government Agency Securities, at Fair Value					69,407
Government Sponsored Entity Securities, at Amortized Cost					260,312
Government Sponsored Entity Securities, at Fair Value					268,961

Available-For-Sale Securities

U.S. Government & Agency
Obligations

State and
Municipal
Obligations

Mortgage-
Backed
Securities -
Residential

Corporate
and Other
Debt
Securities

Mutual Funds
and Equity
Securities

Total
Available-
For-Sale
Securities
September 30, 2017
Available-For-Sale Securities,
  at Amortized Cost
$ 146,976
$ 11,875
$ 152,858
$ 2,500
$ 1,120
$ 315,329
Available-For-Sale Securities,
  at Fair Value
146,978
11,902
152,806
2,299
1,474
315,459
Gross Unrealized Gains 152
27
964
—
354
1,497
Gross Unrealized Losses 150
—
1,016
201
—
1,367
Available-For-Sale Securities,
  Pledged as Collateral
206,637

Maturities of Debt Securities,
  at Amortized Cost:

Within One Year $ —
$ 9,068
$ 3,649
$ 1,500
$ 14,217
From 1 - 5 Years 146,976
1,890
114,127
—
262,993
From 5 - 10 Years —
397
35,082
—
35,479
Over 10 Years —
520
—
1,000
1,520

Maturities of Debt Securities,
  at Fair Value:

Within One Year $ —
$ 9,076
$ 3,691
$ 1,499
$ 14,266
From 1 - 5 Years 146,978
1,910
114,202
—
263,090
From 5 - 10 Years —
396
34,913
—
35,309
Over 10 Years —
520
—
800
1,320

Securities in a Continuous
  Loss Position, at Fair Value:

Less than 12 Months $ 89,563
$ —
$ 85,091
$ 500
$ —
$ 175,154
12 Months or Longer —
—
—
1,800
—
1,800
Total $ 89,563
$ —
$ 85,091
$ 2,300
$ —
$ 176,954
Number of Securities in a
  Continuous Loss Position
23
—
31
3
—
57

Unrealized Losses on
  Securities in a Continuous
  Loss Position:

Less than 12 Months $ 150
$ —
$ 1,016
$ —
$ —
$ 1,166
12 Months or Longer —
—
—
201
—
201
Total $ 150
$ —
$ 1,016
$ 201
$ —
$ 1,367

Disaggregated Details:
US Treasury Obligations,
  at Amortized Cost
$ 64,711

US Treasury Obligations,
at Fair Value 64,730

US Agency Obligations,
at Amortized Cost 82,265

US Agency Obligations,
at Fair Value 82,248

US Government Agency
  Securities, at Amortized Cost
$ 503

US Government Agency
  Securities, at Fair Value
505

Government Sponsored Entity
  Securities, at Amortized Cost
152,355

Government Sponsored Entity
Securities, at Fair Value 152,301


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, 2019
Available-For-Sale Securities, at Amortized Cost	$	5,002	$	764	$	349,944	$	1,000	$	356,710
Gross Unrealized Gains	52		0		1,852		0		1,904
Gross Unrealized Losses	0		0		(1,080)		(200)		(1,280)
Available-For-Sale Securities, at Fair Value	5,054		764		350,716		800		357,334
Available-For-Sale Securities, Pledged as Collateral, at Fair Value									164,426

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	0	$	0	$	52,491	$	0	$	52,491
12 Months or Longer	0		0		97,164		800		97,964
Total	$	0	$	0	$	149,655	$	800	$	150,455
Number of Securities in a Continuous Loss Position	0		0		54		1		55

Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	0	$	0	$	317	$	0	$	317
12 Months or Longer	0		0		763		200		963
Total	$	0	$	0	$	1,080	$	200	$	1,280

Disaggregated Details:


US Agency Obligations, at Amortized Cost	$	5,002
US Agency Obligations, at Fair Value	5,054
US Government Agency Securities, at Amortized Cost					$	61,102
US Government Agency Securities, at Fair Value					60,616
Government Sponsored Entity Securities, at Amortized Cost					288,842
Government Sponsored Entity Securities, at Fair Value					290,100


Available-For-Sale Securities	Available-For-Sale Securities													Available-For-Sale Securities
		U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities - Residential		Corporate and Other Debt Securities		Mutual Funds and Equity Securities		Total 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, 2016
September 30, 2019														September 30, 2019
Available-For-Sale Securities, at Amortized Cost		$	147,110	$	27,684	$	168,189	$	3,512	$	1,120	$	347,615	Available-For-Sale Securities, at Amortized Cost	$	5,003	$	965	$	306,374	$	1,000	$	313,342
Available-For-Sale Securities, at Fair Value		147,377		27,690		167,239		3,308		1,382		346,996
Gross Unrealized Gains		304		24		986		—		262		1,576		Gross Unrealized Gains	53		0		1,482		0		1,535
Gross Unrealized Losses		37		18		1,936		204		—		2,195		Gross Unrealized Losses	0		0		(495)		(200)		(695)
Available-For-Sale Securities, at Fair Value														Available-For-Sale Securities, at Fair Value	5,056		965		307,361		800		314,182
Available-For-Sale Securities, Pledged as Collateral, at Fair Value												262,852		Available-For-Sale Securities, Pledged as Collateral, at Fair Value									232,043

Securities in a Continuous Loss Position, at Fair Value:														Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months		$	70,605	$	12,165	$	126,825	$	500	$	—	$	210,095	Less than 12 Months	$	0	$	0	$	4,763	$	0	$	4,763
12 Months or Longer		—		7,377		—		2,809		—		10,186		12 Months or Longer	0		0		114,483		800		115,283
Total		$	70,605	$	19,542	$	126,825	$	3,309	$	—	$	220,281	Total	$	0	$	0	$	119,246	$	800	$	120,046
Number of Securities in a Continuous Loss Position		19		84		40		4		—		147		Number of Securities in a Continuous Loss Position	0		0		48		1		49

Unrealized Losses on Securities in a Continuous Loss Position:														Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months		$	37	$	13	$	1,936	$	1	$	—	$	1,987	Less than 12 Months	$	0	$	0	$	70	$	0	$	70
12 Months or Longer		—		5		—		203		—		208		12 Months or Longer	0		0		425		200		625
Total		$	37	$	18	$	1,936	$	204	$	—	$	2,195	Total	$	0	$	0	$	495	$	200	$	695

Disaggregated Details:														Disaggregated Details:
US Treasury Obligations, at Amortized Cost		$	54,701
US Treasury Obligations, at Fair Value		54,706

US Agency Obligations, at Amortized Cost		92,409												US Agency Obligations, at Amortized Cost	$	5,003
US Agency Obligations, at Fair Value		92,671												US Agency Obligations, at Fair Value	5,056
US Government Agency Securities, at Amortized Cost						$	3,694							US Government Agency Securities, at Amortized Cost					$	64,455
US Government Agency Securities, at Fair Value						3,724								US Government Agency Securities, at Fair Value					64,364
Government Sponsored Entity Securities, at Amortized Cost						164,495								Government Sponsored Entity Securities, at Amortized Cost					241,919
Government Sponsored Entity Securities, at Fair Value						163,515								Government Sponsored Entity Securities, at Fair Value					242,997

Available-For-Sale Securities

U.S. Government & Agency
Obligations

State and
Municipal
Obligations

Mortgage-
Backed
Securities -
Residential

Corporate
and Other
Debt
Securities

Mutual Funds
and Equity
Securities

Total
Available-
For-Sale
Securities
September 30, 2016
Available-For-Sale Securities,
  at Amortized Cost
$ 152,511
$ 31,562
$ 144,598
$ 4,500
$ 1,120
$ 334,291
Available-For-Sale Securities,
  at Fair Value
153,926
31,628
148,087
4,299
1,250
339,190
Gross Unrealized Gains 1,415
69
3,489
—
130
5,103
Gross Unrealized Losses —
3
—
201
—
204
Available-For-Sale Securities,
  Pledged as Collateral
277,832

Securities in a Continuous
  Loss Position, at Fair Value:

Less than 12 Months $ —
$ 9,237
$ —
$ 1,022
$ —
$ 10,259
12 Months or Longer —
—
—
1,800
—
1,800
Total $ —
$ 9,237
$ —
$ 2,822
$ —
$ 12,059
Number of Securities in a
  Continuous Loss Position
—
1
2
3
—
6

Unrealized Losses on Securities
  in a Continuous Loss Position:

Less than 12 Months $ —
$ 3
$ —
$ 1
$ —
$ 4
12 Months or Longer —
—
—
200
—
200
Total $ —
$ 3
$ —
$ 201
$ —
$ 204

Disaggregated Details:
US Agency Obligations,
at Amortized Cost $ 152,511

US Agency Obligations,
at Fair Value 153,926

US Government Agency
  Securities, at Amortized Cost
$ 10,849

US Government Agency
  Securities, at Fair Value
11,003

Government Sponsored Entity
  Securities, at Amortized Cost
133,749

Government Sponsored Entity
Securities, at Fair Value 137,084

The following table is the schedule of Held-To-Maturity Securities at September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016:~~2019:


Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
September 30, 2020
Held-To-Maturity Securities, at Amortized Cost	$	195,735	$	29,064	$	224,799
Gross Unrealized Gains	7,488		1,257		8,745
Gross Unrealized Losses	(43)		0		(43)
Held-To-Maturity Securities, at Fair Value	203,180		30,321		233,501
Held-To-Maturity Securities, Pledged as Collateral, at Fair Value					221,844

Maturities of Debt Securities, at Amortized Cost:
Within One Year	$	15,605	$	4,685	$	20,290
From 1 - 5 Years	138,412		24,379		162,791
From 5 - 10 Years	40,656		0		40,656
Over 10 Years	1,062		0		1,062

Maturities of Debt Securities, at Fair Value:
Within One Year	$	15,677	$	4,812	$	20,489
From 1 - 5 Years	143,598		25,509		169,107
From 5 - 10 Years	42,825		0		42,825
Over 10 Years	1,080		0		1,080

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	1,476	$	0	$	1,476
12 Months or Longer	0		0		0
Total	$	1,476	$	0	$	1,476

Number of Securities in a Continuous Loss Position	4		0		4

Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	42	$	0	$	42
12 Months or Longer	1		0		1
Total	$	43	$	0	$	43

Disaggregated Details:
US Government Agency Securities, at Amortized Cost			$	10,669
US Government Agency Securities, at Fair Value			11,049
Government Sponsored Entity Securities, at Amortized Cost			18,395
Government Sponsored Entity Securities, at Fair Value			19,272

Held-To-Maturity Securities

State and
Municipal
Obligations

Mortgage-
Backed
Securities -
Residential

Corporate
and Other
Debt
Securities

Total
Held-To
Maturity
Securities
September 30, 2017
Held-To-Maturity Securities,
  at Amortized Cost
$ 277,738
$ 63,788
$ —
$ 341,526
Held-To-Maturity Securities,
  at Fair Value
279,384
64,515
—
343,899
Gross Unrealized Gains 2,977
738
—
3,715
Gross Unrealized Losses 1,331
11
—
1,342
Held-To-Maturity Securities,
  Pledged as Collateral
325,096

Maturities of Debt Securities,
  at Amortized Cost:

Within One Year $ 39,609
$ —
$ —
$ 39,609
From 1 - 5 Years 79,412
54,504
—
133,916
From 5 - 10 Years 154,981
9,284
—
164,265
Over 10 Years 3,736
—
—
3,736

Maturities of Debt Securities,
  at Fair Value:

Within One Year $ 39,782
$ —
$ —
$ 39,782
From 1 - 5 Years 80,944
55,120
—
136,064
From 5 - 10 Years 154,892
9,395
—
164,287
Over 10 Years 3,766
—
—
3,766

Securities in a Continuous
  Loss Position, at Fair Value:

Less than 12 Months $ 78,238
$ 3,544
$ —
$ 81,782
12 Months or Longer 13,331
—
—
13,331
Total $ 91,569
$ 3,544
$ —
$ 95,113

Number of Securities in a
  Continuous Loss Position
252
7
—
259

Unrealized Losses on Securities
   in a Continuous Loss Position:

Less than 12 Months $ 1,034
$ 11
$ —
$ 1,045
12 Months or Longer 297
—
—
297
Total $ 1,331
$ 11
$ —
$ 1,342

Disaggregated Details:
US Government Agency
  Securities, at Amortized Cost
$ 2,792

US Government Agency
  Securities, at Fair Value
2,799

Government Sponsored Entity
  Securities, at Amortized Cost
60,996

Government Sponsored Entity
Securities, at Fair Value 61,716


Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
December 31, 2019
Held-To-Maturity Securities, at Amortized Cost	$	208,243	$	36,822	$	245,065
Gross Unrealized Gains	4,170		477		4,647
Gross Unrealized Losses	(94)		0		(94)
Held-To-Maturity Securities, at Fair Value	212,319		37,299		249,618
Held-To-Maturity Securities, Pledged as Collateral, at Fair Value					237,969

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	1,438	$	0	$	1,438
12 Months or Longer	1,994		0		1,994
Total	$	3,432	$	0	$	3,432
Number of Securities in a Continuous Loss Position	10		0		10

Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	85	$	0	$	85
12 Months or Longer	9		0		9
Total	$	94	$	0	$	94

Disaggregated Details:
US Government Agency Securities, at Amortized Cost			$	1,703
US Government Agency Securities, at Fair Value			1,720
Government Sponsored Entity Securities, at Amortized Cost			35,119
Government Sponsored Entity Securities, at Fair Value			35,579

September 30, 2019
Held-To-Maturity Securities, at Amortized Cost	$	215,661	$	39,434	$	255,095
Gross Unrealized Gains	3,669		408		4,077
Gross Unrealized Losses	(34)		(10)		(44)
Held-To-Maturity Securities, at Fair Value	219,296		39,832		259,128
Held-To-Maturity Securities, Pledged as Collateral, at Fair Value					244,373

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	763	$	3,082	$	3,845
12 Months or Longer	6,764		1,711		8,475
Total	$	7,527	$	4,793	$	12,320
Number of Securities in a Continuous Loss Position	19		19		38

Held-To-Maturity Securities

State and
Municipal
Obligations

Mortgage-
Backed
Securities -
Residential

Corporate
and Other
Debt
Securities

Total
Held-To
Maturity
Securities
December 31, 2016
Held-To-Maturity Securities,
  at Amortized Cost
$ 268,892
$ 75,535
$ 1,000
$ 345,427
Held-To-Maturity Securities,
  at Fair Value
267,127
75,624
1,000
343,751
Gross Unrealized Gains 2,058
258
—
2,316
Gross Unrealized Losses 3,823
169
—
3,992
Held-To-Maturity Securities,
  Pledged as Collateral
321,202

Securities in a Continuous
  Loss Position, at Fair Value:

Less than 12 Months $ 107,255
$ 13,306
$ —
$ 120,561
12 Months or Longer 12,363
—
—
12,363
Total $ 119,618
$ 13,306
$ —
$ 132,924
Number of Securities in a
  Continuous Loss Position
347
13
—
360

Unrealized Losses on
  Securities in a Continuous
  Loss Position:

Less than 12 Months $ 3,129
$ 169
$ —
$ 3,298
12 Months or Longer 694
—
—
694
Total $ 3,823
$ 169
$ —
$ 3,992

Disaggregated Details:
US Government Agency
  Securities, at Amortized Cost
$ 3,206

US Government Agency
  Securities, at Fair Value
3,222

Government Sponsored Entity
  Securities, at Amortized Cost
72,329

Government Sponsored Entity
Securities, at Fair Value 72,402

September 30, 2016
Held-To-Maturity Securities,
  at Amortized Cost
$ 257,255
$ 79,983
$ 1,000
$ 338,238
Held-To-Maturity Securities,
  at Fair Value
263,897
82,544
1,000
347,441
Gross Unrealized Gains 6,712
2,561
—
9,273
Gross Unrealized Losses 70
—
—
70
Held-To-Maturity Securities,
  Pledged as Collateral
320.774

Securities in a Continuous
  Loss Position, at Fair Value:

Less than 12 Months $ 11,891
$ —
$ —
$ 11,891
12 Months or Longer 1,172
—
—
1,172
Total $ 13,063
$ —
$ —
$ 13,063
Number of Securities in a
  Continuous Loss Position
3
—
—
3

Unrealized Losses on
  Securities in a Continuous
  Loss Position:

Less than 12 Months $ 68
$ —
$ —
$ 68
12 Months or Longer 2
—
—
2
Total $ 70
$ —
$ —
$ 70


Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	1	$	9	$	10
12 Months or Longer	33		1		34
Total	$	34	$	10	$	44


Disaggregated Details:
US Government Agency Securities, at Amortized Cost			$	1,844
US Government Agency Securities, at Fair Value			1,854
Government Sponsored Entity Securities, at Amortized Cost			37,590
Government Sponsored Entity Securities, at Fair Value			37,978

Held-To-Maturity Securities

State and
Municipal
Obligations

Mortgage-
Backed
Securities -
Residential

Corporate
and Other
Debt
Securities

Total
Held-To
Maturity
Securities
September 30, 2016
Disaggregated Details:
US Government Agency
  Securities, at Amortized Cost
$ 3,497

US Government Agency
  Securities, at Fair Value
3,622

Government Sponsored Entity
  Securities, at Amortized Cost
76,486

Government Sponsored Entity
Securities, at Fair Value 78,922

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

Securities in a continuous loss position, in the tables above for September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016,~~2019, do not reflect any deterioration of the credit worthiness of the issuing entities.

U.S. ~~Government and Agency issues,~~government agency securities, including ~~agency-backed collateralized mortgage obligations and~~ mortgage-backed securities, are all rated ~~at least Aaa~~AAA by Moody's orand AA+ by Standard and Poor's. The state and municipal obligations are general obligations supported by the general taxing authority of the issuer, and in some cases are insured. Obligations issued by school districts are supported by state aid. ~~For any non-rated municipal securities, credit~~Credit analysis is performed in-house based upon data that has been submitted by the issuers to the NYNew York State Comptroller. That analysis ~~reflects satisfactory~~shows no deterioration in the credit worthiness of the municipalities. ~~Corporate and other debt securities continue to be rated above investment grade according to Moody's and Standard and Poor's.~~ Subsequent to September 30, ~~2017, and through the date of filing this report,~~2020, there were no securities downgraded below investment grade.

The unrealized losses on these temporarily impaired securities are primarily the result of changes in interest rates for fixed rate securities where the interest rate received is less than the current rate available for new offerings of similar securities, changes in market spreads as a result of shifts in supply and demand, and/or changes in the level of prepayments for mortgage related securities. Because ~~we do not currently intend~~there is no current intention to sell any of our temporarily impaired securities, and because it is not more ~~likely-than-not~~likely than not that weit would be required to sell the securities prior to recovery, the impairment is considered temporary.

Pledged securities in the tables above are primarily used to collateralize state and municipal deposits, as required under New York State law. A portion of the pledged securities are used to collateralize repurchase agreements and pooled deposits of our trust customers.

The following table is the schedule of Equity Securities at September 30, 2020, December 31, 2019 and September 30, 2019:

Equity Securities

September 30, 2020

December 31, 2019

September 30, 2019

Equity Securities, at Fair Value

$1,511

$2,063

$1,996

The following is a summary of realized and unrealized gains and losses recognized in net income on equity securities during the three and nine month periods ended September 30, 2020 and 2019:


	Quarterly Period Ended:		Year-to-Date Period Ended:
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net (Loss) Gain on Equity Securities	$	(72)	$	146	$	(552)	$	222
Less: Net gain (loss) recognized during the reporting period on equity securities sold during the period	0		0		0		0
Unrealized net (loss) gain recognized during the reporting period on equity securities still held at the reporting date	$	(72)	$	146	$	(552)	$	222

Note 3. LOANS (In Thousands)

Loan Categories and Past Due Loans

The following table presents loan balances outstanding as of September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016~~2019 and an analysis of the recorded investment in loans that are past due at these dates. Generally, Arrow considers ~~an amortizing~~a loan past due 30 or more days when the borrower is two payments past due. Loans held-for-sale of ~~$1,323, $483~~$10,580, $150 and ~~$1,414~~$1,905 as of September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016,~~2019, respectively, are included in the residential real estate balances for current loans.


Schedule of Past Due Loans by Loan Category											Schedule of Past Due Loans by Loan Category
														Commercial
												Commercial		Real Estate		Consumer		Residential		Total

			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
September 30, 2017
September 30, 2020											September 30, 2020
Loans Past Due 30-59 Days	$	122	$	442	$	4,781	$	1,675	$	7,020	Loans Past Due 30-59 Days	$	43	$	0	$	4,238	$	428	$	4,709
Loans Past Due 60-89 Days	—		—		914		77		991		Loans Past Due 60-89 Days	79		85		2,853		765		3,782
Loans Past Due 90 or more Days	102		807		291		1,742		2,942		Loans Past Due 90 or more Days	22		1,475		1,303		1,517		4,317
Total Loans Past Due	224		1,249		5,986		3,494		10,953		Total Loans Past Due	144		1,560		8,394		2,710		12,808
Current Loans	125,136		439,467		586,043		747,200		1,897,846		Current Loans	275,777		539,673		841,132		923,065		2,579,647
Total Loans	$	125,360	$	440,716	$	592,029	$	750,694	$	1,908,799	Total Loans	$	275,921	$	541,233	$	849,526	$	925,775	$	2,592,455

Loans 90 or More Days Past Due and Still Accruing Interest	$	—	$	—	$	41	$	926	$	967	Loans 90 or More Days Past Due and Still Accruing Interest	$	0	$	0	$	0	$	121	$	121
Nonaccrual Loans	609		1,249		507		3,117		5,482		Nonaccrual Loans	72		1,475		1,559		2,898		6,004

December 31, 2016
December 31, 2019											December 31, 2019
Loans Past Due 30-59 Days	$	112	$	121	$	5,593	$	2,368	$	8,194	Loans Past Due 30-59 Days	$	150	$	0	$	5,670	$	152	$	5,972
Loans Past Due 60-89 Days	29		—		898		142		1,069		Loans Past Due 60-89 Days	42		266		2,700		2,027		5,035
Loans Past Due 90 or more Days	148		—		513		1,975		2,636		Loans Past Due 90 or more Days	21		326		445		1,807		2,599
Total Loans Past Due	289		121		7,004		4,485		11,899		Total Loans Past Due	213		592		8,815		3,986		13,606
Current Loans	104,866		431,525		530,357		674,621		1,741,369		Current Loans	150,447		509,949		802,383		909,735		2,372,514
Total Loans	$	105,155	$	431,646	$	537,361	$	679,106	$	1,753,268	Total Loans	$	150,660	$	510,541	$	811,198	$	913,721	$	2,386,120

Loans 90 or More Days Past Due and Still Accruing Interest	$	—	$	—	$	158	$	1,043	$	1,201	Loans 90 or More Days Past Due and Still Accruing Interest	$	0	$	0	$	0	$	253	$	253
Nonaccrual Loans	$	155	$	875	$	589	$	2,574	4,193		Nonaccrual Loans	81		326		663		2,935		4,005

September 30, 2016
September 30, 2019											September 30, 2019
Loans Past Due 30-59 Days	$	38	$	—	$	3,793	$	271	$	4,102	Loans Past Due 30-59 Days	$	99	$	0	$	5,216	$	241	$	5,556
Loans Past Due 60-89 Days	67		—		1,412		1,450		2,929		Loans Past Due 60-89 Days	48		30		1,624		1,011		2,713
Loans Past Due 90 or more Days	160		1,106		343		1,467		3,076		Loans Past Due 90 or more Days	0		328		415		2,387		3,130
Total Loans Past Due	265		1,106		5,548		3,188		10,107		Total Loans Past Due	147		358		7,255		3,639		11,399
Current Loans	102,789		427,905		518,155		648,260		1,697,109		Current Loans	141,988		497,725		798,542		885,937		2,324,192
Total Loans	$	103,054	$	429,011	$	523,703	$	651,448	$	1,707,216	Total Loans	$	142,135	$	498,083	$	805,797	$	889,576	$	2,335,591

Loans 90 or More Days Past Due and Still Accruing Interest	$	—	$	—	$	—	$	548	$	548	Loans 90 or More Days Past Due and Still Accruing Interest	$	0	$	0	$	86	$	980	$	1,066
Nonaccrual Loans	$	160	$	3,689	$	532	$	1,726	6,107		Nonaccrual Loans	28		465		564		2,408		3,465

The Company disaggregates its loan portfolio into the following four categories:

Commercial - The Company offers a variety of loan options to meet the specific needs of 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. ~~These~~Generally, these loans carry a higher risk than commercial real estate loans, due primarily 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, the Company may be required to liquidate collateral at deeply discounted values. To reduce the risk, management usually obtains personal guarantees ofto support the ~~borrowers.~~borrowing, as permitted by applicable law.

Commercial Real Estate - The Company offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. Commercial real estate loans are often 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~~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, the Company also offers commercial construction and land development loans to finance ~~projects, primarily within the communities that we serve.~~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 ~~business,~~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 - Included in this category are automobile loans. The Company primarily finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont. Most of these indirect consumer loans carry a fixed rate of interest with principal repayment terms typically ranging fromone to five years. Indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed. The Company 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, the Company also offers personal lines of credit and overdraft protection. Several of these consumer loans are unsecured, which carry a higher risk of loss. Also included in this category are automobile loans. The Company primarily finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to seven years. Indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed.

Residential ~~Real Estate Mortgages~~ - Residential real estate loans consist primarily of loans secured by first or second mortgages on primary residences. ~~We originate~~The Company originates fixed-rate and adjustable-rate ~~and fixed-rate~~ one-to-four-family residential real estate loans for construction, the ~~construction,~~ purchase of real estate or refinancing of an existing mortgage. These loans are collateralized primarily by owner-occupied properties generally located in the Company’s market area. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than ~~85%~~80% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance. The Company’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 the Company'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, the Company offers fixed home equity loans, as well as variable rate home equity lines of credit, to consumers to finance home improvements, debt consolidation, education and other uses. ~~Company~~The Company's policy allows for a maximum loan to value ratio of 80%, although periodically higher advances are allowed. The Company 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 Loan Losses

The following table presents a roll-forward of the allowance for loan losses and other information pertaining to the allowance for loan losses:


Allowance for Loan Losses
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
Roll-forward of the Allowance for Loan Losses for the Quarterly Periods:
June 30, 2020	$	1,917	$	8,361	$	10,639	$	5,383	$	26,300
Charge-offs	(17)		(5)		(370)		0		(392)
Recoveries	0		0		267		0		267
Provision	419		1,013		609		230		2,271
September 30, 2020	$	2,319	$	9,369	$	11,145	$	5,613	$	28,446

June 30, 2019	$	1,231	$	5,459	$	9,654	$	4,351	$	20,695
Charge-offs	(11)		0		(351)		(40)		(402)
Recoveries	0		0		120		0		120
Provision	42		162		263		51		518
September 30, 2019	$	1,262	$	5,621	$	9,686	$	4,362	$	20,931

Allowance for Loan Losses
Commercial
Commercial Real Estate Consumer Residential Unallocated Total
Roll-forward of the Allowance for Loan Losses for the Year-to-Date Periods:
December 31, 2016 $ 1,017
$ 5,677
$ 6,120
$ 4,198
$ —
$ 17,012
Charge-offs (2 ) (342 ) (847 ) (6 ) —
(1,197 )
Recoveries 8
—
292
—
—
300
Provision (143 ) (248 ) 2,043
(72 ) —
1,580
September 30, 2017 $ 880
$ 5,087
$ 7,608
$ 4,120
$ —
$ 17,695

December 31, 2015 $ 1,827
$ 4,520
$ 5,554
$ 3,790
$ 347
$ 16,038
Charge-offs (86 ) —
(591 ) (107 ) —
(784 )
Recoveries 20
—
150
1
—
171
Provision (738 ) 1,221
958
418
(309 ) 1,550
September 30, 2016 $ 1,023
$ 5,741
$ 6,071
$ 4,102
$ 38
$ 16,975

September 30, 2017
Allowance for loan losses - Loans Individually Evaluated for Impairment $ 104
$ —
$ —
$ 34
$ —
$ 138
Allowance for loan losses - Loans Collectively Evaluated for Impairment 776
5,087
7,608
4,086
—
17,557
Ending Loan Balance - Individually Evaluated for Impairment 489
1,543
104
1,139
—
3,275
Ending Loan Balance - Collectively Evaluated for Impairment $ 124,871
$ 439,172
$ 591,925
$ 749,556
$ —
$ 1,905,524

December 31, 2016
Allowance for loan losses - Loans Individually Evaluated for Impairment $ —
$ —
$ —
$ —
$ —
$ —
Allowance for loan losses - Loans Collectively Evaluated for Impairment 1,017
5,677
6,120
4,198
—
17,012
Ending Loan Balance - Individually Evaluated for Impairment —
890
91
1,098
—
2,079
Ending Loan Balance - Collectively Evaluated for Impairment $ 105,155
$ 430,756
$ 537,270
$ 678,008
$ —
$ 1,751,189

September 30, 2016
Allowance for loan losses - Loans Individually Evaluated for Impairment $ —
$ 240
$ —
$ —
$ —
$ 240
Allowance for loan losses - Loans Collectively Evaluated for Impairment 1,023
5,501
6,071
4,102
38
16,735
Ending Loan Balance - Individually Evaluated for Impairment —
3,538
90
317
—
3,945
Ending Loan Balance - Collectively Evaluated for Impairment $ 103,054
$ 425,473
$ 523,613
$ 651,131
$ —
$ 1,703,271


Allowance for Loan Losses
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
September 30, 2019
Allowance for loan losses - Loans Individually Evaluated for Impairment	$	5	$	0	$	0	$	0	$	5
Allowance for credit losses - Loans Collectively Evaluated for Impairment	1,257		5,621		9,686		4,362		20,926
Ending Loan Balance - Individually Evaluated for Impairment	36		0		113		575		724
Ending Loan Balance - Collectively Evaluated for Impairment	$	142,099	$	498,083	$	805,684	$	889,001	$	2,334,867

Through the provision for loan losses, an allowance for loan losses is maintained that reflects the best estimate of the ~~inherent~~incurred risk of loss in the Company’s loan portfolio as of the balance sheet date. Additions are made to the allowance for loan losses through a periodic provision for loan losses. Actual loan losses are charged against the allowance for loan losses when loans are deemed uncollectible and recoveries of amounts previously charged off are recorded as credits to the allowance for loan losses.

~~Loan~~Our 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~~our independent internal loan review department performs periodic reviews of the ~~risk ratings~~credit quality indicators on individual loans in the commercial loan portfolio.

~~We use~~The Company uses a two-step process to determine the provision for loan losses and the amount of the allowance for loan losses. ~~We measure impairment~~An evaluation of impaired loans is performed on a quarterly basis. Impaired loans are generally nonaccrual loans over $250 thousand and all troubled debt restructured loans. ~~Impaired~~Specific reserves on individually identified impaired loans that are ~~generally considered to be~~not collateral dependent ~~with the specific reserve, if any, determined~~are measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs, and such impaired amounts are generally charged off. In general, Arrow's impaired loans are collateral dependent impaired loans that have limited exposure or require limited specific reserves because of the amount of collateral support with respect to ~~sell.~~these loans. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured. In these cases, interest is recognized on a cash basis.

The remainder of the portfolio is evaluated on a pooled ~~basis.~~basis, as described below. For each homogeneous loan pool, ~~we estimate~~ a total loss factor is estimated based on the historical net loss rates adjusted for applicable qualitative factors. ~~We update the~~The total loss factors assigned to each loan category are updated on a quarterly basis. For the commercial, commercial construction and commercial real estate categories, ~~we further segregate~~ the loan categories are further segregated by credit risk profile (pools of loans graded ~~satisfactory,~~pass, special mention and accruing substandard). Additional description of the credit risk classifications is detailed in the Credit Quality Indicators section of this note.

~~We determine the annualized~~The historical net loss rate is determined for each loan category using a trailing three-year net charge-off average. ~~We then apply a loss emergence period factor to the historical net loss rate to account for the time it takes to identify the loss after a loss-causing event.~~ While historical net loss experience provides a reasonable starting point for analysis, historical net losses, or even recent trends in net losses, do not by themselves form a sufficient basis to determine the appropriate level of the allowance for loan losses. Therefore, ~~we also consider and adjust~~ historical net loss factors are considered and adjusted for qualitative factors that impact the ~~inherent~~incurred risk of loss associated with the loan categories within the total loan portfolio. These include:

•Changes in the volume and severity of past due, nonaccrual and adversely classified loans

•Changes in the nature and volume of the portfolio and in the terms of loans

•Changes in the value of the underlying collateral for collateral dependent loans

•Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses

•Changes in the quality of the loan review system

•Changes in the experience, ability, and depth of lending management and other relevant staff

•Changes in international, national, regional, and local economic and business conditions and developments that affect the collectibility of the portfolio

•The existence and effect of any concentrations of credit, and changes in the level of such concentrations

•The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio or pool

Loan Credit Quality Indicators

The following table presents the credit quality indicators by loan category at September 30, ~~2017,~~2020, December 31, ~~2016~~2019 and September 30, ~~2016:~~2019:


Loan Credit Quality Indicators
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
September 30, 2020
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	264,094	$	493,982					$	758,076
Special Mention	1,485		12,620						14,105
Substandard	10,342		34,631						44,973
Doubtful	0		0						0


Credit Risk Profile Based on Payment Activity:
Performing					$	847,967	$	922,756	$	1,770,723
Nonperforming					1,559		3,019		4,578

December 31, 2019
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	144,283	$	484,267					$	628,550
Special Mention	32		263						295
Substandard	6,345		26,011						32,356
Doubtful	0		0						0

Credit Risk Profile Based on Payment Activity:
Performing					$	810,535	$	910,533	$	1,721,068
Nonperforming					663		3,188		3,851

September 30, 2019
Credit Risk Profile by Creditworthiness Category:
Satisfactory	$	135,355	$	471,637					$	606,992
Special Mention	107		2,484						2,591
Substandard	6,673		23,962						30,635
Doubtful	0		0						0
Credit Risk Profile Based on Payment Activity:
Performing					$	805,147	$	886,188	$	1,691,335
Nonperforming					650		3,388		4,038

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

~~We use~~The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $1.3 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~~’smanagement’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the ~~institution~~’sinstitution’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 ~~risk rating~~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~~”“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 the ~~bank~~Company will sustain some loss if the deficiencies are not corrected. “~~Substandard~~”“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~~”“doubtful” have all of the weaknesses inherent in those classified as “~~substandard~~”“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~~”“loss” has been deferred due to specific pending factors or events which may strengthen the value ~~(i.e.~~(e.g. possibility of additional collateral, injection of capital, collateral liquidation, debt restructure, economic recovery, etc). Loans classified as “~~doubtful~~”“doubtful” need to be placed on

5) Loss - Loans classified as “~~loss~~”“loss” are considered uncollectible ~~and~~with collateral of such little value that their continuance as a bankable ~~asset~~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. ~~Large commercial~~

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 ~~to determine any~~in assessing the level of incurred risk of loss ~~as further described~~ in ~~this footnote.~~our commercial related loan portfolios.

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

The following table presents information on impaired loans as of September 30, 2020, December 31, 2019 and September 30, 2019 based on whether the impaired loan has a recorded related allowance or has no recorded related allowance:


Impaired Loans
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
September 30, 2020
Recorded Investment:
With No Related Allowance	$	0	$	1,124	$	124	$	1,178	$	2,426
With a Related Allowance	46		0		0		249		295
Unpaid Principal Balance:
With No Related Allowance	0		1,128		124		1,178		2,430
With a Related Allowance	47		0		0		249		296

December 31, 2019
Recorded Investment:
With No Related Allowance	$	0	$	0	$	108	$	699	$	807
With a Related Allowance	34		0		0		260		294
Unpaid Principal Balance:
With No Related Allowance	0		0		107		699		806
With a Related Allowance	35		0		0		260		295

September 30, 2019
Recorded Investment:
With No Related Allowance	$	0	$	0	$	114	$	575	$	689
With a Related Allowance	35		0		0		0		35
Unpaid Principal Balance:
With No Related Allowance	0		0		113		575		$	688
With a Related Allowance	36		0		0		0		36

For the Quarter Ended:
September 30, 2020
Average Recorded Balance:
With No Related Allowance	$	2	$	1,127	$	120	$	938	$	2,187
With a Related Allowance	46		0		0		253		299
Interest Income Recognized:
With No Related Allowance	0		0		0		0		0
With a Related Allowance	0		0		0		0		0
Cash Basis Income:
With No Related Allowance	0		0		0		0		0
With a Related Allowance	0		0		0		0		0

September 30, 2019
Average Recorded Balance:
With No Related Allowance	$	0	$	1	$	119	$	1,489	$	1,609
With a Related Allowance	36		0		0		0		36
Interest Income Recognized:
With No Related Allowance	0		0		0		0		0
With a Related Allowance	0		0		0		0		0
Cash Basis Income:
With No Related Allowance	0		0		0		0		0
With a Related Allowance	0		0		0		0		0

Impaired Loans
Commercial
Commercial Real Estate Consumer Residential Total
September 30, 2017

Recorded Investment:
With No Related Allowance $ —
$ 818
$ 104
$ 851
$ 1,773
With a Related Allowance 489
725
—
288
1,502
Unpaid Principal Balance:
With No Related Allowance —
818
90
850
1,758
With a Related Allowance 489
723
—
288
1,500

December 31, 2016

Recorded Investment:
With No Related Allowance $ —
$ 890
$ 91
$ 1,098
$ 2,079
With a Related Allowance —
—
—
—
—
Unpaid Principal Balance:
With No Related Allowance —
890
91
1,098
2,079
With a Related Allowance —
—
—
—
—

September 30, 2016
Recorded Investment:
With No Related Allowance $ —
$ 898
$ 90
$ 317
$ 1,305
With a Related Allowance —
2,640
—
—
2,640
Unpaid Principal Balance:
With No Related Allowance —
898
90
317
$ 1,305
With a Related Allowance —
2,640
—
—
2,640

For the Quarter Ended:
September 30, 2017
Average Recorded Balance:
With No Related Allowance $ —
$ 998
$ 96
$ 827
$ 1,921
With a Related Allowance 496
363
—
288
1,147
Interest Income Recognized:
With No Related Allowance —
—
1
—
1
With a Related Allowance —
—
—
—
—
Cash Basis Income:
With No Related Allowance —
—
—
—
—
With a Related Allowance —
—
—
—
—

September 30, 2016
Average Recorded Balance:
With No Related Allowance $ —
$ 1,374
$ 92
$ 479
$ 1,945
With a Related Allowance —
2,166
—
—
2,166
Interest Income Recognized:
With No Related Allowance —
3
2
—
5
With a Related Allowance —
—
—
—
—
Cash Basis Income:
With No Related Allowance —
—
—
—
—
With a Related Allowance —
—
—
—
—

At September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016,~~2019, all impaired loans were considered to be collateral dependent and were therefore evaluated for impairment based on the fair value of collateral less estimated cost to sell. Interest income recognized in the table above represents income earned after the loans became impaired and includes restructured loans in compliance with their modified terms and nonaccrual loans where ~~we have recognized~~ interest income was recognized on a cash basis.

Loans Modified in Trouble Debt Restructurings

The following table presents information on loans modified in trouble debt restructurings during the periods indicated. ~~All loans were modified under Arrow's own programs. The principal modification, for all the modifications in the table below, involved payment deferrals.~~


Loans Modified in Trouble Debt Restructurings During the Period
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
For the Quarter Ended:
September 30, 2020
Number of Loans	0		0		0		0		0
Pre-Modification Outstanding Recorded Investment	$	0	$	0	$	0	$	0	$	0
Post-Modification Outstanding Recorded Investment	0		0		0		0		0
Subsequent Default, Number of Contracts	0		0		0		0		0
Subsequent Default, Recorded Investment	0		0		0		0		0

September 30, 2019
Number of Loans	0		0		0		0		0
Pre-Modification Outstanding Recorded Investment	$	0	$	0	$	0	$	0	$	0
Post-Modification Outstanding Recorded Investment	0		0		0		0		0
Subsequent Default, Number of Contracts	0		0		0		0		0
Subsequent Default, Recorded Investment	0		0		0		0		0

Loans Modified in Trouble Debt Restructurings During the Period
Commercial
Commercial Real Estate Consumer Residential Total
For the Quarter Ended:
September 30, 2017
Number of Loans 1
—
2
—
3
Pre-Modification Outstanding Recorded Investment $ 725
$ —
$ 25
$ —
$ 750
Post-Modification Outstanding Recorded Investment 725
—
25
—
750
Subsequent Default, Number of Contracts —
—
—
—
—
Subsequent Default, Recorded Investment —
—
—
—
—

September 30, 2016
Number of Loans —
—
1
—
1
Pre-Modification Outstanding Recorded Investment $ —
$ —
$ 15
$ —
$ 15
Post-Modification Outstanding Recorded Investment —
—
15
—
15
Subsequent Default, Number of Contracts —
—
—
—
—
Subsequent Default, Recorded Investment —
—
—
—
—

For the Year-To-Date Period Ended:
September 30, 2017
Number of Loans 2
—
6
—
8
Pre-Modification Outstanding Recorded Investment $ 1,228
$ —
$ 51
$ —
$ 1,279
Post-Modification Outstanding Recorded Investment 1,228
—
51
—
1,279
Subsequent Default, Number of Contracts —
—
—
—
—
Subsequent Default, Recorded Investment —
—
—
—
—

September 30, 2016
Number of Loans —
—
2
—
2
Pre-Modification Outstanding Recorded Investment $ —
$ —
$ 23
$ —
$ 23
Post-Modification Outstanding Recorded Investment —
—
23
—
23
Subsequent Default, Number of Contracts —
—
—
—
—
Subsequent Default, Recorded Investment —
—
—
—
—

In general, prior to the novel coronavirus (COVID-19) pandemic, loans requiring modification are restructured to accommodate the projected ~~cashflows~~cash-flows of the borrower. NoSuch 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 September 30, ~~2017.~~2020. In ~~addition, no commitments have been~~accordance with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, if a short-term loan modification (e.g. six months) is made ~~to extend credit to borrowers whose loans have been modified in~~for a borrower as the result of the COVID-19 pandemic, and who was current on contractual payments as of December 31, 2019, this modification is not considered a troubled debt ~~restructuring.~~restructuring (TDR).

Note 4. ~~GUARANTEES~~COMMITMENTS AND CONTINGENCIES (In Thousands)

The following table presents the ~~balance for~~notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit ~~for the periods ended~~as of September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016:~~2019:

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. ~~These~~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 ~~expire without being~~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 ~~commitments~~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 September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016~~2019 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. Company 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 ~~typically~~ range from 1% to 3% of the notional amount. Fees are collected upfront and ~~are~~ amortized over the life of the commitment. The carrying amount and fair ~~values~~value of Arrow's standby letters of credit at September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016, in the table above,~~2019, were ~~the same as the carrying amounts.~~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.

Note 5. COMPREHENSIVE INCOME (In Thousands)

The following table presents the components of other comprehensive income for the ~~three-month period~~three and nine month periods ended September 30, ~~2017~~2020 and ~~2016~~:2019:


Schedule of Comprehensive Income
	Three Months Ended September 30						Nine Months Ended September 30,
			Tax						Tax
	Before-Tax		(Expense)		Net-of-Tax		Before-Tax		(Expense)		Net-of-Tax
	Amount		Benefit		Amount		Amount		Benefit		Amount
2020
Net Unrealized Securities Holding (Losses) Gains on Securities Available-for-Sale Arising During the Period	$	(397)	$	101	$	(296)	$	7,823	$	(2,000)	$	5,823
Net Unrealized Gains on Cash Flow Swap	317		(79)		238		48		(11)		37



Amortization of Net Retirement Plan Actuarial Loss	57		(15)		42		171		(44)		127
Amortization of Net Retirement Plan Prior Service Cost	53		(14)		39		159		(42)		117
Other Comprehensive Income	$	30	$	(7)	$	23	$	8,201	$	(2,097)	$	6,104

2019
Net Unrealized Securities Holding Gains on Securities Available-for-Sale Arising During the Period	$	668	$	(169)	$	499	$	5,796	$	(1,473)	$	4,323



Amortization of Net Retirement Plan Actuarial Loss	172		(45)		127		514		(133)		381
Amortization of Net Retirement Plan Prior Service Cost	56		(14)		42		169		(42)		127
Other Comprehensive Income	$	896	$	(228)	$	668	$	6,479	$	(1,648)	$	4,831

Schedule of Comprehensive Income
Three Months Ended September 30, Nine Months Ended September 30,
Tax Tax
Before-Tax (Expense) Net-of-Tax Before-Tax (Expense) Net-of-Tax
Amount Benefit Amount Amount Benefit Amount
2017
Net Unrealized Securities Holding (Losses) Gains Arising During the Period 6
$ 3
9
749
$ (284 ) 465
Reclassification Adjustment for Securities Gains Included in Net Income (10 ) 4
(6 ) (10 ) 4
(6 )
Amortization of Net Retirement Plan Actuarial Loss 179
(115 ) 64
537
(292 ) 245
Accretion of Net Retirement Plan Prior Service Credit (3 ) 1
(2 ) (8 ) 3
(5 )
Other Comprehensive Income (Loss) $ 172
$ (107 ) $ 65
$ 1,268
$ (569 ) $ 699

2016
Net Unrealized Securities Holding Gains (Losses) Arising During the Period (1,264 ) $ 454
(810 ) 3,868
$ (1,559 ) 2,309
Reclassification Adjustment for Securities Gains Included in Net Income —
—
—
�� (144 ) 56
(88 )
Amortization of Net Retirement Plan Actuarial Loss 181
(70 ) 111
503
(189 ) 314
Accretion of Net Retirement Plan Prior Service Credit (3 ) 2
(1 ) (7 ) 2
(5 )
Other Comprehensive Income (Loss) $ (1,086 ) $ 386
$ (700 ) $ 4,220
$ (1,690 ) $ 2,530

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


Changes in Accumulated Other Comprehensive Income (Loss) by Component (1)

	Unrealized Gains and Losses on Available-for-Sale Securities		Unrealized Loss on Cash Flow Swap		Defined Benefit Plan Items				Total
					Net Actuarial Gain (Loss)		Net Prior Service (Cost) Credit


For the Quarter-To-Date periods ended:

June 30, 2020	$	6,584	$	(201)	$	(5,762)	$	(897)	$	(276)
Other comprehensive income or loss before reclassifications	(296)		238		0		0		(58)
Amounts reclassified from accumulated other comprehensive income	0		0		42		39		81
Net current-period other comprehensive income	(296)		238		42		39		23

September 30, 2020	$	6,288	$	37	$	(5,720)	$	(858)	$	(253)

June 30, 2019	$	127	$	0	$	(8,717)	$	(1,057)	$	(9,647)
Other comprehensive loss before reclassifications	499		0		0		0		499
Amounts reclassified from accumulated other comprehensive loss	0		0		127		42		169
Net current-period other comprehensive income	499		0		127		42		668

September 30, 2019	$	626	$	0	$	(8,590)	$	(1,015)	$	(8,979)


For the Year-To-Date periods ended:

December 31, 2019	$	465	$	0	$	(5,847)	$	(975)	$	(6,357)
Other comprehensive income or loss before reclassifications	5,823		37		0		0		5,860
Amounts reclassified from accumulated other comprehensive income	0		0		127		117		244
Net current-period other comprehensive income	5,823		37		127		117		6,104

September 30, 2020	$	6,288	$	37	$	(5,720)	$	(858)	$	(253)

December 31, 2018	$	(3,697)	$	0	$	(8,971)	$	(1,142)	$	(13,810)
Other comprehensive income or loss before reclassifications	4,323		0		0		0		4,323
Amounts reclassified from accumulated other comprehensive income	0		0		381		127		508
Net current-period other comprehensive income	4,323		0		381		127		4,831

September 30, 2019	$	626	$	0	$	(8,590)	$	(1,015)	$	(8,979)

Changes in Accumulated Other Comprehensive Income (Loss) by Component ⁽¹⁾

Unrealized Defined Benefit Plan Items
Gains and
Losses on Net Prior
Available-for- Net Gain Service
Sale Securities (Loss) (Cost ) Credit Total
For the Quarter-To-Date periods ended:

June 30, 2017 $ 74
$ (5,556 ) $ (718 ) $ (6,200 )
Other comprehensive income or loss before reclassifications 9
—
—
9
Amounts reclassified from accumulated other comprehensive income (6 ) 64
(2 ) 56
Net current-period other comprehensive income 3
64
(2 ) 65
September 30, 2017 $ 77
$ (5,492 ) $ (720 ) $ (6,135 )

June 30, 2016 $ 3,660
$ (7,690 ) $ (712 ) $ (4,742 )
Other comprehensive income or loss before reclassifications (810 ) —
—
(810 )
Amounts reclassified from accumulated other comprehensive income —
111
(1 ) 110
Net current-period other comprehensive income (810 ) 111
(1 ) (700 )
September 30, 2016 $ 2,850
$ (7,579 ) $ (713 ) $ (5,442 )

For the Year-To-Date periods ended:

December 31, 2016 $ (382 ) $ (5,737 ) $ (715 ) $ (6,834 )
Other comprehensive income or loss before reclassifications 465
—
—
465
Amounts reclassified from accumulated other comprehensive income (6 ) 245
(5 ) 234
Net current-period other comprehensive income 459
245
(5 ) 699
September 30, 2017 $ 77
$ (5,492 ) $ (720 ) $ (6,135 )

December 31, 2015 $ 629
$ (7,893 ) $ (708 ) $ (7,972 )
Other comprehensive income or loss before reclassifications 2,309
—
—
2,309
Amounts reclassified from accumulated other comprehensive income (88 ) 314
(5 ) 221
Net current-period other comprehensive income 2,221
314
(5 ) 2,530
September 30, 2016 $ 2,850
$ (7,579 ) $ (713 ) $ (5,442 )

(1) All amounts are net of tax. ~~Amounts in parentheses indicate debits.~~

The following table presents the reclassifications out of accumulated other comprehensive income:


Reclassifications Out of Accumulated Other Comprehensive Income

	Amounts Reclassified
Details about Accumulated Other	from Accumulated Other			Affected Line Item in the Statement
Comprehensive Income (Loss) Components	Comprehensive Income			Where Net Income Is Presented

For the Quarter-to-date periods ended:

September 30, 2020





Amortization of defined benefit pension items:
Prior-service costs	$	(53)	(1)	Salaries and Employee Benefits
Actuarial loss	(57)		(1)	Salaries and Employee Benefits
	(110)			Total before Tax
	29			Provision for Income Taxes
Total reclassifications for the period	$	(81)		Net of Tax



September 30, 2019





Amortization of defined benefit pension items:
Prior-service costs	$	(56)	(1)	Salaries and Employee Benefits
Actuarial loss	(172)		(1)	Salaries and Employee Benefits
	(228)			Total before Tax
	59			Provision for Income Taxes
Total reclassifications for the period	$	(169)		Net of Tax



For the Year-to-date periods ended:

September 30, 2020





Amortization of defined benefit pension items:
Prior-service costs	$	(159)	(1)	Salaries and Employee Benefits
Actuarial loss	(171)		(1)	Salaries and Employee Benefits
	(330)			Total before Tax
	86			Provision for Income Taxes
Total reclassifications for the period	$	(244)		Net of Tax



September 30, 2019





Amortization of defined benefit pension items:
Prior-service costs	$	(169)	(1)	Salaries and Employee Benefits
Actuarial loss	(514)		(1)	Salaries and Employee Benefits
	(683)			Total before Tax
	175			Provision for Income Taxes
Total reclassifications for the period	$	(508)		Net of Tax

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

Reclassifications Out of Accumulated Other Comprehensive Income ⁽¹⁾

Amounts Reclassified
Details about Accumulated Other from Accumulated Other Affected Line Item in the Statement
Comprehensive Income (Loss) Components Comprehensive Income Where Net Income Is Presented

For the Quarter-to-date periods ended:

September 30, 2017
Unrealized gains and losses on available-for-sale securities $ 10
Gain on Securities Transactions
10
Total before Tax
(4 ) Provision for Income Taxes
$ 6
Net of Tax

Amortization of defined benefit pension items:
Prior-service costs $ 3
⁽²⁾
Salaries and Employee Benefits
Actuarial gains/(losses) (179 )
⁽²⁾
Salaries and Employee Benefits
(176 ) Total before Tax
114
Provision for Income Taxes
$ (62 ) Net of Tax

Total reclassifications for the period $ (56 ) Net of Tax

September 30, 2016
Unrealized gains and losses on available-for-sale securities $ —
Gain on Securities Transactions
—
Total before Tax
—
Provision for Income Taxes
$ —
Net of Tax

Amortization of defined benefit pension items:
Prior-service costs $ 3
⁽²⁾
Salaries and Employee Benefits
Actuarial gains/(losses) (181 )
⁽²⁾
Salaries and Employee Benefits
(178 ) Total before Tax
68
Provision for Income Taxes
$ (110 ) Net of Tax

Total reclassifications for the period $ (110 ) Net of Tax

For the Year-to-date periods ended:

September 30, 2017
Unrealized gains and losses on available-for-sale securities $ 10
Gain on Securities Transactions
10
Total before Tax
(4 ) Provision for Income Taxes
$ 6
Net of Tax

Amortization of defined benefit pension items:
Prior-service costs $ 8
⁽²⁾
Salaries and Employee Benefits
Actuarial gains/(losses) (537 )
⁽²⁾
Salaries and Employee Benefits
(529 ) Total before Tax
289
Provision for Income Taxes
$ (240 ) Net of Tax

Total reclassifications for the period $ (234 ) Net of Tax

~~(1) Amounts in parentheses indicate debits to profit/loss.~~

~~(2) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.~~

Note 6. ~~STOCK BASED~~STOCK-BASED COMPENSATION ~~PLANS~~(Dollars In Thousands, Except Share and Per Share Amounts)

~~Under the 2013 Long-Term~~Arrow has established 3 stock-based compensation plans: a Long Term Incentive Plan, ~~Arrow granted~~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 25, 2020 3% stock dividend.

Long Term Incentive Plan

The Long Term Incentive Plan provides for the grant of incentive stock options, ~~in the first quarter of~~ ~~2017~~ ~~to purchase shares of common stock.~~non-qualified stock options, restricted stock, restricted stock units, performance units and performance shares. The ~~fair values~~Compensation Committee of the ~~options were estimated~~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 using the Black-Scholes option-pricing model.~~grant. The ~~fair value of grants is expensed~~options usually vest over ~~the four year vesting~~a four-year period.

The following table ~~presents a roll-forward of~~summarizes information about stock option ~~plans and grants issued during 2017:~~activity for the year to date period ended September 30, 2020.


	Shares			Weighted Average Exercise Price

Outstanding at January 1, 2020	248,495			$	26.78
Granted	52,324			34.25
Exercised	(26,822)			22.23
Forfeited	(2,834)			28.79
Outstanding at September 30, 2020	271,163			28.65
Vested at Period-End	147,759			25.84
Expected to Vest	123,404			32.01

Stock Options Granted
Weighted Average Grant Date Information:
Fair Value of Options Granted	$	4.84
Fair Value Assumptions:
Dividend Yield	2.90		%
Expected Volatility	20.25		%
Risk Free Interest Rate	1.53		%
Expected Lives (in years)	6.68

Schedule of Share-based Compensation Arrangements
Stock Option Plans
Roll-Forward of Shares Outstanding:
Outstanding at January 1, 2017 366,329
Granted 55,621
Exercised (35,937 )
Forfeited —
Outstanding at September 30, 2017 386,013
Exercisable at Period-End 242,706
Vested and Expected to Vest 143,307

Roll-Forward of Shares Outstanding - Weighted Average Exercise Price:
Outstanding at January 1, 2017 $ 21.86
Granted 36.12
Exercised 20.46
Forfeited —
Outstanding at September 30, 2017 24.05
Exercisable at Period-End 21.34
Vested and Expected to Vest 28.62

Grants Issued During 2017 - Weighted Average Information:
Fair Value $ 6.25
Fair Value Assumptions:
Dividend Yield 2.72 %
Expected Volatility 21.40 %
Risk Free Interest Rate 2.25 %
Expected Lives (in years) 6.88

The following table presents information on the amounts expensed related to stock options for the three and nine month periods ended September 30, 2020 and 2019:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Amount expensed	$	76	$	79	$	227	$	237

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 September 30, ~~2017~~2020 and ~~2016~~:2019.


	Restricted Stock Units	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2020	7,721	$	30.27
Granted	3,942	34.25


Non-vested at September 30, 2020	11,663	31.62

Non-vested at January 1, 2019	3,582	30.70
Granted	4,139	29.89


Non-vested at September 30, 2019	7,721	30.27

Share-Based Compensation Expense
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Share-Based Compensation Expense $ 90
$ 71
$ 262
$ 215

The following table presents information on the amounts expensed related to restricted stock units for the periods ended September 30, 2020 and 2019:

~~Arrow also sponsors an~~


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Amount expensed	$	30	$	19	$	88	$	55

Employee Stock Purchase Plan

Arrow sponsors an ESPP under which employees may purchase Arrow's common stock at a 5% discount below market price. 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 ESOP borrowed funds from one of Arrow’s subsidiary banks to purchase outstanding shares of Arrow’s common stock. The notes, which were fully repaid as of December 31, 2019, required annual payments of principal and interest through 2019. As the debt was repaid, shares were released from collateral based on the proportion of debt paid to total debt outstanding for the year and allocated to active employees. In addition, the Company makes additional cash contributions to the Plan each year.

Shares pledged as collateral were reported as unallocated ESOP shares in stockholders' equity. As shares were released from collateral, Arrow reported compensation expense equal to the current average market price of the shares, and the shares became outstanding for earnings per share computations.

Note 7. 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 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 for automatic increases of Company contributions each year is based on the increase in inflation and is limited to a maximum of 5%.

As of December 31, 2019, Arrow updated its mortality assumption to the Pri-2012 mortality tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements with the Scale MP-2019 mortality improvement scale on a generational basis to reflect newly published mortality tables. The Pension Plan uses the sex-distinct amount-weighted tables, the Select Executive Retirement Plan uses the sex-distinct white collar amount-weighted tables, and the Postretirement Benefit Plan uses the sex-distinct headcount-weighted tables. The change in mortality tables resulted in a decrease in liabilities for the Employee's Pension Plan, the Select Executive Retirement Plan and the Postretirement Benefit Plan.

The mortality table used in determining the present value of a lump sum payment/annuitizing cash balance accounts was changed to the applicable mortality table for the determination of present values under Internal Revenue Code (IRC) Section 417(e)(3)(B). This table is currently a 50/50 blend of male and female rates from the 2020 sex distinct optional combined mortality tables, as prescribed under IRC Section 430. The change in mortality table was made to reflect the continued improvement in mortality rates and resulted in an increase in liabilities for the Employee's Pension Plan and the Select Executive Retirement Plan.

The interest rates used in determining the present value of a lump sum payment/annuitizing cash balance accounts were changed to the segment rates in effect for the January 1, 2020 plan year (2.04%, 3.09%, 3.68%) as of December 31, 2019. This change resulted in a decrease in liability for the Employees' Pension Plan and the Select Executive Retirement Plan.

The following tables provide the components of net periodic benefit costs for the three and ~~nine-month~~nine month periods ended September 30, ~~2017~~2020 and ~~2016.~~2019.


	Employees'		Select Executive		Postretirement
	Pension		Retirement		Benefit
	Plan		Plan		Plans
Net Periodic (Benefit) Cost
For the Three Months Ended September 30, 2020:
Service Cost 1	$	416	$	102	$	30
Interest Cost 2	387		48		78
Expected Return on Plan Assets 2	(902)		0		0
Amortization of Prior Service Cost 2	15		11		27
Amortization of Net Loss 2	20		37		0
Net Periodic (Benefit) Cost	$	(64)	$	198	$	135

Plan Contributions During the Period	$	0	$	116	$	54

For the Three Months Ended September 30, 2019:
Service Cost 1	$	382	$	81	$	30
Interest Cost 2	513		54		91
Expected Return on Plan Assets 2	(765)		0		0
Amortization of Prior Service Cost 2	17		14		25
Amortization of Net Loss (Gain) 2	153		29		(10)
Net Periodic Cost	$	300	$	178	$	136

Plan Contributions During the Period	$	0	$	117	$	51

Select
Employees' Executive Postretirement
Pension Retirement Benefit
Plan Plan Plans
Net Periodic Benefit Cost
For the Three Months Ended September 30, 2017:
Service Cost $ 350
$ 10
$ 37
Interest Cost 362
55
75
Expected Return on Plan Assets (800 ) —
—
Amortization of Prior Service (Credit) Cost (14 ) 14
(3 )
Amortization of Net Loss 148
31
—
Net Periodic Benefit Cost $ 46
$ 110
$ 109

Plan Contributions During the Period $ —
$ 116
$ 65

For the Three Months Ended September 30, 2016:
Service Cost $ 376
$ 8
$ 63
Interest Cost 420
56
83
Expected Return on Plan Assets (828 ) —
—
Amortization of Prior Service (Credit) Cost (14 ) 14
(3 )
Amortization of Net Loss 140
28
—
Net Periodic Benefit Cost $ 94
$ 106
$ 143

Plan Contributions During the Period $ —
$ 131
$ 47

Net Periodic Benefit Cost
For the Nine Months Ended September 30, 2017:
Service Cost $ 1,050
$ 30
$ 110
Interest Cost 1,085
164
224
Expected Return on Plan Assets (2,399 ) —
—
Amortization of Prior Service Cost (Credit) (43 ) 43
(8 )
Amortization of Net Loss 443
94
—
Net Periodic Benefit Cost $ 136
$ 331
$ 326

Plan Contributions During the Period $ —
$ 345
$ 295

Estimated Future Contributions in the Current Fiscal Year $ —
$ 115
$ 98

For the Nine Months Ended September 30, 2016:
Service Cost $ 1,127
$ 24
$ 188
Interest Cost 1,262
163
178
Expected Return on Plan Assets (2,483 ) —
—
Amortization of Prior Service (Credit) Cost (42 ) 43
(8 )
Amortization of Net Loss 419
84
—
Net Periodic Benefit Cost $ 283
$ 314
$ 358

Plan Contributions During the Period $ —
$ 350
$ 197


Net Periodic Benefit Cost
For the Nine Months Ended September 30, 2020:
Service Cost 1	$	1,247	$	306	$	92
Interest Cost 2	1,159		144		233
Expected Return on Plan Assets 2	(2,706)		0		0
Amortization of Prior Service Cost 2	47		32		80
Amortization of Net Loss 2	61		110		0
Net Periodic (Benefit) Cost	$	(192)	$	592	$	405

Plan Contributions During the Period	$	0	$	349	$	191

Estimated Future Contributions in the Current Fiscal Year	$	0	$	0	$	0

For the Nine Months Ended September 30, 2019:
Service Cost 1	$	1,146	$	243	$	91
Interest Cost 2	1,253		162		273
Expected Return on Plan Assets 2	(2,296)		0		0
Amortization of Prior Service Cost 2	52		41		76
Amortization of Net Loss (Benefit) 2	460		86		(32)
Net Periodic Cost	$	615	$	532	$	408

Plan Contributions During the Period	$	0	$	350	$	142

Footnotes:

~~We were not required to make a~~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 in ~~2017,~~2020 was not required, and currently, ~~we do not expect to make~~ additional contributions in ~~2017.~~2020 are not expected. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.

Note 8. 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~~”(“EPS”) for periods ended September 30, ~~2017~~2020 and ~~2016~~.2019. All share and per share amounts have been adjusted for the September ~~28, 2017~~25, 2020, 3% stock dividend.


Earnings Per Share
	Three Months Ended				Year-to-Date Period Ended:
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Earnings Per Share - Basic:
Net Income	$	11,046	$	10,067	$	28,332	$	27,735
Weighted Average Shares - Basic	15,472		15,404		15,453		15,375
Earnings Per Share - Basic	$	0.71	$	0.65	$	1.83	$	1.80

Earnings Per Share - Diluted:
Net Income	$	11,046	$	10,067	$	28,332	$	27,735
Weighted Average Shares - Basic	15,472		15,404		15,453		15,375
Dilutive Average Shares Attributable to Stock Options	9		37		14		42
Weighted Average Shares - Diluted	15,481		15,441		15,467		15,417
Earnings Per Share - Diluted	$	0.71	$	0.65	$	1.83	$	1.80

Earnings Per Share
Quarterly Period Ended: Year-to-Date Period Ended:
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Earnings Per Share - Basic:
Net Income $ 7,416
$ 6,738
$ 21,255
$ 19,934
Weighted Average Shares - Basic 13,889
13,810
13,889
13,775
Earnings Per Share - Basic $ 0.53
$ 0.49
$ 1.53
$ 1.45

Earnings Per Share - Diluted:
Net Income $ 7,416
$ 6,738
$ 21,255
$ 19,934
Weighted Average Shares - Basic 13,889
13,810
13,889
13,775
Dilutive Average Shares Attributable to Stock Options 77
91
92
67
Weighted Average Shares - Diluted 13,966
13,901
13,981
13,842
Earnings Per Share - Diluted $ 0.53
$ 0.48
$ 1.52
$ 1.44

Note 9. FAIR ~~VALUE OF FINANCIAL INSTRUMENTS (In~~VALUES (Dollars In Thousands)

FASB ASC Subtopic 820-10 defines fair value, establishes a framework for measuring fair value in ~~Generally Accepted Accounting Principles (GAAP)~~GAAP and requires certain disclosures about fair value measurements. ~~We do not have any~~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 September 30, ~~2017,~~ 2020, December 31, ~~2016~~2019 and September 30, ~~2016~~2019 were securities ~~available-for-sale.~~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:
September 30, 2020
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	35,167	$	0	$	35,167	$	0
State and Municipal Obligations	593		0		593		0
Mortgage-Backed Securities	338,368		0		338,368		0
Corporate and Other Debt Securities	800		0		800		0
Total Securities Available-for-Sale	374,928		0		374,928		0
Equity Securities	1,511		0		1,511		0
Total Securities Measured on a Recurring Basis	376,439		0		376,439		0
Derivatives, included in other assets	6,366		0		6,366		0
Total Measured on a Recurring Basis	$	382,805	$	0	$	382,805	$	0
Liabilities:
Derivatives, included in other liabilities	6,366		0		6,366		0
Total Measured on a Recurring Basis	$	6,366	$	0	$	6,366	$	0
December 31, 2019
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	5,054	$	0	$	5,054	$	0
State and Municipal Obligations	764		0		764		0
Mortgage-Backed Securities	350,716		0		350,716		0
Corporate and Other Debt Securities	800		0		800		0
Total Securities Available-for-Sale	357,334		0		357,334		0
Equity Securities	2,063		0		2,063		0

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 Gains (Losses)
Fair Value of Assets and Liabilities Measured on a Recurring Basis:
September 30, 2017
Securities Available-for Sale:
U.S. Government & Agency Obligations $ 146,978
$ 64,730
$ 82,248
$ —

State and Municipal Obligations 11,902
—
11,902
—

Mortgage-Backed Securities - Residential 152,806
—
152,806
—

Corporate and Other Debt Securities 2,299
—
2,299
—

Mutual Funds and Equity Securities 1,474
—
1,474
—

Total Securities Available-for-Sale $ 315,459
$ 64,730
$ 250,729
$ —

December 31, 2016
Securities Available-for Sale:
U.S. Government & Agency Obligations $ 147,377
$ 54,706
$ 92,671
$ —

State and Municipal Obligations 27,690
—
27,690
—

Mortgage-Backed Securities - Residential 167,239
—
167,239
—

Corporate and Other Debt Securities 3,308
—
3,308
—

Mutual Funds and Equity Securities 1,382
—
1,382
—

Total Securities Available-for Sale $ 346,996
$ 54,706
$ 292,290
$ —

September 30, 2016
Securities Available-for Sale:
U.S. Government & Agency Obligations $ 153,926
$ —
$ 153,926
$ —

State and Municipal Obligations 31,628
—
31,628
—

Mortgage-Backed Securities - Residential 148,087
—
148,087
—

Corporate and Other Debt Securities 4,299
—
4,299
—

Mutual Funds and Equity Securities 1,250
—
1,250
—

Total Securities Available-for Sale $ 339,190
$ —
$ 339,190
$ —

Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
September 30, 2017
Collateral Dependent Impaired Loans $ 1,502
$ —
$ —
$ 1,502
$ (138 )
Other Real Estate Owned and Repossessed Assets, Net 1,713
—
—
1,713
(655 )
December 31, 2016

Collateral Dependent Impaired Loans $ —
$ —
$ —
$ —
$ —
Other Real Estate Owned and Repossessed Assets, Net $ 1,686
$ —
—
1,686
$ (587 )
September 30, 2016
Collateral Dependent Impaired Loans $ 2,640
$ —
$ —
$ 2,640
$ (240 )
Other Real Estate Owned and Repossessed Assets, Net 1,016
—
—
1,016
(319 )


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	359,397		0		359,397		0
Derivatives, included in other liabilities	69		0		69		0
Total Measured on a Recurring Basis	$	359,466	$	0	$	359,466	$	0
Liabilities:
Derivatives, included in other liabilities	$	69	$	0	$	69	$	0
Total Measured on a Recurring Basis	$	69	$	0	$	69	$	0
September 30, 2019
Assets:
Securities Available-for Sale:
U.S. Government & Agency Obligations	$	5,056	$	0	$	5,056	$	0
State and Municipal Obligations	965		0		965		0
Mortgage-Backed Securities	307,361		0		307,361		0
Corporate and Other Debt Securities	800		0		800		0
Total Securities Available-for-Sale	314,182		0		314,182		0
Equity Securities	1,996		0		1,996		0
Total Securities Measured on a Recurring Basis	$	316,178	$	0	$	316,178	$	0
Derivatives, included in other assets	498		$	0	498
Total Measured on a Recurring Basis	$	316,676	$	0	$	316,676	$	0
Liabilities:
Derivatives, included in other liabilities	498		0		498		0
Total Measured on a Recurring Basis	$	498	$	0	$	498	$	0


	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses Recognized in Earnings
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis:
September 30, 2020
Collateral Dependent Impaired Loans	$	594	$	0	$	0	$	594
Other Real Estate Owned and Repossessed Assets, Net	126		0		0		126		0
December 31, 2019
Collateral Dependent Impaired Loans	$	285	$	0	$	0	$	285
Other Real Estate Owned and Repossessed Assets, Net	1,261		0		0		1,261		(186)
September 30, 2019
Collateral Dependent Impaired Loans	$	324	$	0	$	0	$	324
Other Real Estate Owned and Repossessed Assets, Net	1,274		0		0		1,274		(111)

~~We determine the~~

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

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

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

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

~~There were no transfers between Levels 1, 2 and 3 for the three months ended September 30, 2017, December 31, 2016 and September 30, 2016.~~

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 impaired 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 September 30, 2020, December 31, 2019 and September 30, 2019.

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.

~~Fair Value Methodology for~~ASU 2016-01 "Recognition and Measurement of Financial Assets and ~~Liabilities Measured on a Nonrecurring Basis~~

~~The Company uses~~Financial Liabilities" requires that the fair value for loans must be disclosed using the "exit price" notion which is a reasonable estimate of ~~underlying collateral to estimate the specific reserves~~what another party might pay in an orderly transaction. Fair values for ~~collateral dependent impaired~~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 ~~underlying collateral~~performing loans is ~~generally~~calculated by determining the estimated future cash flow, which is the contractual cash flow adjusted for estimated prepayments. The discount rate is determined ~~through independent appraisals, which generally include various Level 3 inputs which are not identifiable.~~ 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 loan and lease 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 ~~appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 15% to 25%. Based~~fair value of time deposits is based on the ~~valuation techniques used,~~discounted value of contractual cash flows, except that the fair value ~~measurements for collateral dependent impaired loans~~is limited to the extent that the customer could redeem the certificate after imposition of a premature withdrawal penalty. The discount rates are ~~classified as Level 3. Other assets~~estimated using the Federal Home Loan Bank of New York ("FHLBNY") yield curve, which ~~might have been included in this table include mortgage servicing rights, goodwill~~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 ~~other intangible assets.~~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 LIBOR) and Arrow ~~evaluates each of these assets for impairment on a quarterly basis, with no impairment recognized for these assets at September 30, 2017,~~ ~~December 31, 2016~~ ~~and September 30, 2016.~~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
September 30, 2020
Cash and Cash Equivalents	$	450,666	$	450,666	$	450,666	$	0	$	0
Securities Available-for-Sale	374,928		374,928		0		374,928		0
Securities Held-to-Maturity	224,799		233,501		0		233,501		0
Equity Securities	1,511		1,511		0		1,511		0
Federal Home Loan Bank and Federal Reserve Bank Stock	5,574		5,574		0		5,574		0
Net Loans	2,564,009		2,560,043		0		0		2,560,043
Accrued Interest Receivable	7,962		7,962		0		7,962		0
Derivatives, included in other assets	6,366		6,366				6,366
Deposits	3,264,858		3,265,208		0		3,265,208		0
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	73,949		73,949		0		73,949		0

Federal Home Loan Bank Term Advances	50,000		51,576		0		51,576		0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		0		20,000		0
Accrued Interest Payable	841		841		0		841		0
Derivatives, included in other liabilities	6,366		6,366		0		6,366		0


Schedule of Fair Values by Balance Sheet Grouping	Schedule of Fair Values by Balance Sheet Grouping										Schedule of Fair Values by Balance Sheet Grouping
					Fair Value Hierarchy											Fair Value Hierarchy
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3			Carrying Value		Fair Value		Level 1		Level 2		Level 3
September 30, 2017

December 31, 2019											December 31, 2019
Cash and Cash Equivalents	$	80,666	$	80,666	$	80,666	$	—	$	—	Cash and Cash Equivalents	$	70,221	$	70,221	$	70,221	$	0	$	0
Securities Available-for-Sale	315,459		315,459		64,730		250,729		—		Securities Available-for-Sale	357,334		357,334		0		357,334		0
Securities Held-to-Maturity	341,526		343,899		—		343,899		—		Securities Held-to-Maturity	245,065		249,618		0		249,618		0
Equity Securities											Equity Securities	2,063		2,063		0		2,063
Federal Home Loan Bank and Federal Reserve Bank Stock	6,704		6,704		—		6,704		—		Federal Home Loan Bank and Federal Reserve Bank Stock	10,317		10,317		0		10,317		0
Net Loans	1,891,104		1,870,379		—		—		1,870,379		Net Loans	2,364,933		2,332,797		0		0		2,332,797
Accrued Interest Receivable	7,692		7,692		—		7,692		—		Accrued Interest Receivable	7,377		7,377		0		7,377		0
Derivatives, included in other assets											Derivatives, included in other assets	69		69		0		69		0
Deposits	2,307,116		2,299,011		—		2,299,011		—		Deposits	2,616,054		2,614,170		0		2,614,170		0
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	61,419		61,419		—		61,419		—		Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	51,099		51,099		0		51,099		0
Federal Home Loan Bank Overnight Advances	33,000		33,000		—		33,000		—		Federal Home Loan Bank Overnight Advances	130,000		130,000		0		130,000		0
Federal Home Loan Bank Term Advances	55,000		55,110		—		55,110		—		Federal Home Loan Bank Term Advances	30,000		29,993		0		29,993		0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—		Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		0		20,000		0
Accrued Interest Payable	260		260		—		260		—		Accrued Interest Payable	1,436		1,436		0		1,436		0
Derivatives, included in other liabilities											Derivatives, included in other liabilities	69		69		0		69		0

December 31, 2016
September 30, 2019											September 30, 2019
Cash and Cash Equivalents	$	57,355	$	57,355	$	57,355	$	—	$	—	Cash and Cash Equivalents	$	92,298	$	92,298	$	92,298	$	0	$	0
Securities Available-for-Sale	346,996		346,996		54,706		292,290		—		Securities Available-for-Sale	314,182		314,182		0		314,182		0
Securities Held-to-Maturity	345,427		343,751		—		343,751		—		Securities Held-to-Maturity	255,095		259,128		0		259,128		0
Equity Securities											Equity Securities	1,996		1,996		0		1,996
Federal Home Loan Bank and Federal Reserve Bank Stock	10,912		10,912		—		10,912		—		Federal Home Loan Bank and Federal Reserve Bank Stock	6,627		6,627		0		6,627		0
Net Loans	1,736,256		1,720,078		—		—		1,720,078		Net Loans	2,314,660		2,274,701		0		0		2,274,701
Accrued Interest Receivable	6,684		6,684		—		6,684		—		Accrued Interest Receivable	8,097		8,097		0		8,097		0
Derivatives, included in other assets											Derivatives, included in other assets	498		498		0		498		0
Deposits	2,116,546		2,109,557		—		2,109,557		—		Deposits	2,614,547		2,610,404		0		2,610,404		0
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	35,836		35,836		—		35,836		—		Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	72,869		72,869		0		72,869		0
Federal Home Loan Bank Overnight Advances	123,000		123,000		—		123,000		—		Federal Home Loan Bank Overnight Advances	48,000		48,000		0		48,000		0
Federal Home Loan Bank Term Advances	55,000		55,118		—		55,118		—		Federal Home Loan Bank Term Advances	30,000		29,988		0		29,988		0
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—		Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		0		20,000		0
Accrued Interest Payable	247		247		—		247		—		Accrued Interest Payable	1,500		1,500		0		1,500		0

September 30, 2016
Cash and Cash Equivalents	$	102,059	$	102,059	$	102,059	$	—	$	—
Securities Available-for-Sale	339,190		339,190		—		339,190		—
Securities Held-to-Maturity	338,238		347,441		—		347,441		—
Federal Home Loan Bank and Federal Reserve Bank Stock	5,371		5,371		—		5,371		—
Net Loans	1,690,241		1,696,929		—		—		1,696,929
Accrued Interest Receivable	7,046		7,046		—		7,046		—
Deposits	2,213,187		2,207,985		—		2,207,985		—
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	38,589		38,589		—		38,589		—
Federal Home Loan Bank Overnight Advances	—		—		—		—		—
Federal Home Loan Bank Term Advances	55,000		55,955		—		55,955		—
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		—		20,000		—
Accrued Interest Payable	247		247		—		247		—
Derivatives, included in other liabilities											Derivatives, included in other liabilities	498		498		0		498		0

Note 10. LEASES (Dollars In Thousands)

~~Fair Value Methodology~~

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

Arrow leases 4 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 ~~Recurring~~director on the board of directors of each of Arrow and Saratoga National Bank and Trust Company.

The following includes quantitative data related to the Company's leases as of and for the nine months ended September 30, 2020 and September 30, 2019:


		Nine Months Ended
Finance Lease Amounts:	Classification	September 30, 2020			September 30, 2019
Right-of-Use Assets	Premises and Equipment, Net	$	5,036		$	5,199
Lease Liabilities	Finance Leases	5,228			5,263

Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	5,496		$	5,815
Lease Liabilities	Other Liabilities	5,577			5,876

Other Information:

Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		$	148		$	71
Operating Outgoing Cash Flows From Operating Leases		567			563
Financing Outgoing Cash Flows From Finance Leases		26			19
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		0			5,271
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		294			6,266
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		29.4			31.05
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		13.1			13.75
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		3.27		%	3.35		%


Lease cost information for the Company's leases is as follows:
	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Lease Cost:
Finance Lease Cost:
Reduction of Right-of-Use Assets	$	44	$	28	$	133	$	72
Interest on Lease Liabilities	49		28		148		71
Operating Lease Cost	214		211		624		577
Short-term Lease Cost	11		17		32		73
Variable Lease Cost	77		45		165		140
Total Lease Cost	$	395	$	329	$	1,102	$	933


Future Lease Payments at September 30, 2020 are as follows:
	Operating Leases		Financing Leases
Twelve Months Ended:
9/30/2021	$	781	$	243
9/30/2022	665		243
9/30/2023	601		243
9/30/2024	590		247
9/30/2025	551		259
Thereafter	3,773		7,867
Total Undiscounted Cash Flows	$	6,961	$	9,102
Less: Net Present Value Adjustment	1,384		3,874
Lease Liability	$	5,577	$	5,228

Note 11. 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 ~~Nonrecurring Basis~~

~~Securities held-to-maturity~~payment of future known and uncertain cash amounts, the value of which are ~~fair valued utilizing an independent bond pricing~~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 ~~for identical~~provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or ~~significantly similar securities.~~liabilities. The ~~pricing service uses~~Company manages a ~~variety~~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 Arrow entered 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 ~~techniques to arrive~~income. Arrow records its interest rate swap agreements 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.~~

Fair values for loans are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, commercial real estate, residential mortgage, indirectis presented on a gross basis within other assets and other ~~consumer loans. Each loan category is further segmented into fixed and adjustable interest rate terms and by performing and nonperforming categories. The~~liabilities on the consolidated balance sheets. Changes in the fair value of ~~performing loans is calculated by discounting scheduled~~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
	September 30, 2020		December 31, 2019		September 30, 2019
Fair value adjustment included in other assets	$	6,366	$	69	$	498
Fair value adjustment included in other liabilities	6,366		69		498
Notional amount	166,329		44,531		39,577

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 ~~flows through the estimated maturity using estimated market discount rates~~flow hedges.

For derivatives designated and that ~~reflect the credit and~~qualify as cash flow hedges of interest rate risk, ~~inherent~~the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income ("AOCI") and subsequently reclassified into interest expense in the ~~loan. The estimate of maturity is based~~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 historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions. Fair value for nonperforming loans is generally based on recent external appraisals. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows and discount rates are judgmentally determined using available market information and specific borrower information.

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 estimated based on the discounted value of contractual cash flows. The discount rate is estimated using current rates on FHLBNY advances with similar maturities and call features.

~~Based on Arrow~~’~~s capital adequacy, the book value of the outstanding trust preferred securities (Junior~~Arrow's Junior Subordinated Obligations Issued to Unconsolidated Subsidiary ~~Trusts) are considered to approximate fair value since~~Trusts borrowings.

The following table indicates the ~~interest rates are variable (indexed to LIBOR)~~effect of cash flow hedge accounting on AOCI and ~~Arrow is well-capitalized.~~

on the unaudited interim consolidated statement of income.


Derivatives Designated as Hedging Instruments - Cash Flow Hedge Agreements
	September 30, 2020		December 31, 2019		September 30, 2019
Amount of gain recognized in AOCI	$	48	$	0	$	0
Amount of gain reclassified from AOCI interest expense	0		0		0

Note 12. COVID-19 PANDEMIC

The outbreak of the novel coronavirus (COVID-19) pandemic has impacted the global economy, including the banking sector and many industries in which our customers operate, in a variety of significant ways.

Report of Independent Registered Public Accounting Firm

~~The~~To the Stockholders and Board of Directors ~~and Stockholders~~

Arrow Financial Corporation:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheets of Arrow Financial Corporation andsubsidiaries (the Company) as of September 30, ~~2017~~2020 and ~~2016,~~2019, the related consolidated statements of income, comprehensive income, and changes in stockholders’ equity for the three-month and nine-month periods ended September 30, ~~2017~~2020 and ~~2016, and~~2019, the related consolidated statements of ~~changes in stockholders’ equity and~~ cash flows for the nine-month periods ended September 30, ~~2017~~2020 and ~~2016. These~~2019, and the related notes (collectively, the consolidated interim financial ~~statements~~information). Based on our reviews, we are not aware of any material modifications that should be made to the ~~responsibility of the Company’s management.~~consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We ~~conducted our reviews~~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, 2019, 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 February 28, 2020, 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, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

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 ~~Public Company Accounting Oversight Board (United States),~~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~~opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Arrow Financial Corporation and subsidiaries as of December 31, 2016, 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 14, 2017, 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, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

Albany, New York

November ~~7, 2017~~5, 2020

Item 2.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

September 30, ~~2017~~2020

~~Note on Terminology -~~NOTE ON TERMINOLOGY

In this Quarterly Report on Form 10-Q (this Report), the terms ~~“Arrow,” “the~~"Arrow," "the registrant,~~” “the company,” “we,” “us,”~~" "the Company," "we," "us," and ~~“our”~~"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, ~~our~~Arrow's performance is compared with that of ~~our “peer group”~~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 ~~338~~146 domestic bank holding companies with $1$3 to $3$10 billion in total consolidated assets as identified in the Federal Reserve Board’s ~~“Bank~~"Bank Holding Company Performance ~~Report”~~Report" for June 30, ~~2017~~2020 (the most recent such ~~Report~~report currently available), and peer group data contained herein has been derived from such ~~Report.~~report.

~~The Company and Its Subsidiaries -~~ THE COMPANY AND ITS SUBSIDIARIES

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

~~Forward Looking Statements -~~FORWARD LOOKING STATEMENTS

This ~~Quarterly~~ Report on Form 10-Q contains statements that are not historical in nature but rather are based on ~~our~~the Company's beliefs, assumptions, expectations, estimates and projections about the future. These statements are ~~“forward-looking statements”~~"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 ~~“expects,” “believes,” “anticipates,” “estimates”~~"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 the Company's asset quality, the level of allowance for credit losses, the sufficiency of liquidity sources, interest rate change exposure, changes in accounting standards, and the Company'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~~"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 ~~our~~Arrow's general perceptions of market conditions and trends in business activity, both ~~our own~~the Company's and in the banking industry generally, as well as current management strategies for future operations and development.



~~Examples of Forward-Looking Statements:~~
~~Topic~~	~~Page~~	~~Location~~
~~Future compliance with regulatory capital standards~~	46	~~First paragraph under "Regulatory Capital and Increase in Stockholders' Equity"~~
~~VISA~~	47	~~"VISA Class B Common Stock"~~
~~Impact of market rate structure on net interest margin, loan yields and deposit rates~~	51	~~All paragraphs under "Quarterly Taxable Equivalent Yield on Loans"~~
~~Impact of market rate structure on net interest margin, loan yields and deposit rates~~	65	~~Last paragraph under "Quantitative and Qualitative Disclosures about Market Risk~~
~~Future level of residential real estate loans~~	50	~~Both paragraphs under "Residential Real Estate Loans"~~
~~Future level of indirect consumer loans~~	51	~~Last paragraph under "Consumer Loans"~~
~~Future level of commercial loans~~	51	~~Third paragraph under "Commercial Loans, and Commercial Real Estate Loans"~~
~~Impact of changes in mortgage rates~~	53	~~First paragraph under "Investment Sales, Purchases and Maturities"~~
~~Provision for loan losses~~	54	~~First paragraph in section~~
~~Future level of nonperforming assets~~	55	~~Last four paragraphs under "Risk Elements"~~
~~Liquidity~~	58	~~Last paragraph under "LIQUIDITY"~~
~~Fees for other services to customers~~	~~60, 63~~	~~Second paragraph under "Noninterest Income"~~

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:~~ to the following, which are or may be amplified by the novel coronavirus (COVID-19) pandemic:


a.	~~rapid and dramatic changes in economic and market conditions, such as the U.S. economy experienced during the financial crisis of 2008-2010;~~

b.•the current and rapidly evolving 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;

c.•sudden changes in the market for products ~~we provide,~~provided, such as real estate loans;


d.	significant changes in banking, corporate income tax, or other laws and regulations, including both enactment of new legal or regulatory measures (e.g., the Dodd-Frank Act) or the modification or elimination of pre-existing measures;


e.	significant changes in U.S. monetary or fiscal policy, including new or revised monetary 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");


f.	~~enhanced competition from unforeseen sources (e.g., so-called Fintech enterprises); and~~


g.	~~similar uncertainties inherent in banking operations or business generally, including technological developments and changes.~~

~~Readers are cautioned not~~•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 monetary 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 ~~place undue reliance on~~time within our filings with the Securities and Exchange Commission ("SEC").

The Company 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 ~~which speak only as of~~and the ~~date hereof.~~ ~~We undertake no general obligation~~documents incorporated by reference and that are attributable to ~~revise~~the Company are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or ~~update the~~oral forward-looking statements ~~contained in this Report to reflect~~that the ~~occurrence of unanticipated events at~~Company or any ~~point in the future.~~persons acting on our behalf may issue. This ~~Quarterly~~ Report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2019 (the 2019 Annual Report) and our other filings with the SEC.

USE OF NON-GAAP FINANCIAL MEASURES

The ~~Securities and Exchange Commission (SEC)~~SEC has adopted Regulation G, which applies to ~~all~~certain public disclosures, including earnings releases, made by registered companies that contain “~~non-GAAP~~"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 the ~~Company~~’sCompany’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~~"non-GAAP financial ~~measures~~”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 ~~new~~ rules, although ~~we are~~the Company 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 ~~the~~one financial institution's net interest income ~~(before tax)~~ to that of another institution or in analyzing ~~the institution~~’sany 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, orand 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 ~~(before tax)~~ 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/or~~and to better demonstrate a single ~~institution~~’sinstitution’s performance over time. ~~We follow~~The Company 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). ~~We make~~The Company makes these adjustments.

Tangible Book Value per Share: Tangible equity is total ~~stockholders~~’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~~’stockholders’ equity including intangible assets divided by total shares issued and outstanding. Intangible assets ~~includes~~include many items, but in our 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, wethe Company also may 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 (i.e. EPS), return on average assets (i.e. ROA), and return on average equity (i.e. ROE), to provide as well certain comparative disclosures that adjust these GAAP financial measures, typically by removing ~~therefrom~~them from the impact of certain transactions or other material items of income or expense that are unusual or unlikely to be repeated. WeThe Company will do so only if ~~we believe~~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.

~~We believe~~The Company believes that the non-GAAP financial measures disclosed ~~by us~~ 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. ~~Our non-GAAP~~Non-GAAP financial measures may differ from similar measures presented by other companies.

Arrow Financial Corporation
Selected Quarterly Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Quarter Ended 9/30/2017
6/30/2017
3/31/2017
12/31/2016
9/30/2016
Net Income $ 7,416
$ 7,208
$ 6,631
$ 6,600
$ 6,738
Transactions Recorded in Net Income (Net of Tax):
Net Gain (Loss) on Securities Transactions 6
—
—
(101 ) —

Share and Per Share Data:⁽¹⁾

Period End Shares Outstanding 13,891
13,900
13,886
13,887
13,828
Basic Average Shares Outstanding 13,889
13,890
13,889
13,844
13,810
Diluted Average Shares Outstanding 13,966
13,975
14,001
13,972
13,901
Basic Earnings Per Share $ 0.53
$ 0.52
$ 0.48
$ 0.48
$ 0.49
Diluted Earnings Per Share 0.53
0.52
0.47
0.47
0.48
Cash Dividend Per Share 0.243
0.243
0.243
0.243
0.236

Selected Quarterly Average Balances:
  Interest-Bearing Deposits at Banks 27,143
24,480
23,565
34,731
21,635
  Investment Securities 677,368
684,570
695,615
684,906
696,712
  Loans 1,892,766
1,842,543
1,781,113
1,726,738
1,680,850
  Deposits 2,193,778
2,206,365
2,161,798
2,160,156
2,063,832
  Other Borrowed Funds 262,864
207,270
205,436
157,044
209,946
  Stockholders’ Equity 243,801
239,396
235,257
230,198
228,048
  Total Assets 2,725,653
2,677,843
2,626,470
2,572,425
2,528,124
Return on Average Assets, annualized 1.08 % 1.08 % 1.02 % 1.02 % 1.06 %
Return on Average Equity, annualized 12.07 % 12.08 % 11.43 % 11.41 % 11.75 %
Return on Tangible Equity, annualized ⁽²⁾
13.40 % 13.45 % 12.76 % 12.77 % 13.18 %
Average Earning Assets 2,597,277
2,551,593
2,500,293
2,446,375
2,399,197
Average Paying Liabilities 2,012,802
2,005,421
1,977,628
1,933,974
1,892,583
Interest Income, Tax-Equivalent ⁽³⁾
22,565
21,875
20,945
20,709
20,222
Interest Expense 1,949
1,699
1,536
1,404
1,405
Net Interest Income, Tax-Equivalent ⁽³⁾
20,616
20,176
19,409
19,305
18,817
Tax-Equivalent Adjustment ⁽³⁾
966
949
948
939
940
Net Interest Margin, annualized ⁽³⁾
3.15 % 3.17 % 3.15 % 3.14 % 3.12 %

Efficiency Ratio Calculation: ⁽⁴⁾

Noninterest Expense $ 15,548
$ 15,637
$ 15,475
$ 15,272
$ 15,082
Less: Intangible Asset Amortization 69
70
71
73
74
Net Noninterest Expense 15,479
15,567
15,404
15,199
15,008
Net Interest Income, Tax-Equivalent ⁽³⁾
20,616
20,176
19,409
19,305
18,817
Noninterest Income 7,141
7,057
6,695
6,648
7,114
Less: Net Securities Gain (Loss) 10
—
—
(166 ) —
Net Gross Income 27,747
27,233
26,104
26,119
25,931
Efficiency Ratio (Non-GAAP) 55.79 % 57.16 % 59.01 % 58.19 % 57.88 %

Period-End Capital Information:
Total Stockholders’ Equity (i.e. Book Value) $ 244,648
$ 240,752
$ 236,111
$ 232,852
$ 229,208
Book Value per Share ⁽¹⁾
17.61
17.32
17.00
16.77
16.58
Goodwill and Other Intangible Assets, net 24,268
24,355
24,448
24,569
24,675
Tangible Book Value per Share ^(1,2)
15.86
15.57
15.24
15.00
14.79

Capital Ratios:⁽⁵⁾

Tier 1 Leverage Ratio 9.30 % 9.35 % 9.37 % 9.47% 9.44%
Common Equity Tier 1 Capital Ratio 12.70 % 12.68 % 12.84 % 12.97% 12.80%
Tier 1 Risk-Based Capital Ratio 13.79 % 13.79 % 13.99 % 14.14% 13.98%
Total Risk-Based Capital Ratio 14.77 % 14.77 % 14.98 % 15.15% 14.99%

Assets Under Trust Administration
  and Investment Management $ 1,411,608
$ 1,356,262
$ 1,333,690
$ 1,301,408
$ 1,284,051

Arrow Financial Corporation

Selected Quarterly Information

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


Quarter Ended	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Net Income	$	11,046		$	9,159		$	8,127		$	9,740		$	10,067
Transactions in Net Income (Net of Tax):

Net Changes in Fair Value of Equity Investments	(53)			(80)			(279)			50			109


Share and Per Share Data:1
Period End Shares Outstanding	15,489			15,461			15,432			15,448			15,418
Basic Average Shares Outstanding	15,472			15,441			15,446			15,427			15,404
Diluted Average Shares Outstanding	15,481			15,448			15,476			15,476			15,441
Basic Earnings Per Share	$	0.71		$	0.59		$	0.53		$	0.63		$	0.65
Diluted Earnings Per Share	0.71			0.59			0.53			0.63			0.65
Cash Dividend Per Share	0.252			0.252			0.252			0.252			0.245

Selected Quarterly Average Balances:
Interest-Bearing Deposits at Banks	$	242,928		$	155,931		$	32,787		$	28,880		$	27,083
Investment Securities	592,457			607,094			603,748			582,982			545,073
Loans	2,582,253			2,518,198			2,394,346			2,358,110			2,308,879
Deposits	3,082,499			2,952,432			2,670,009			2,607,421			2,472,528
Other Borrowed Funds	136,117			129,383			170,987			177,877			231,291
Stockholders’ Equity	324,269			316,380			306,527			296,124			289,016
Total Assets	3,583,322			3,437,155			3,180,857			3,113,114			3,023,043
Return on Average Assets, annualized	1.23		%	1.07		%	1.03		%	1.24		%	1.32		%
Return on Average Equity, annualized	13.55		%	11.64		%	10.66		%	13.05		%	13.82		%
Return on Average Tangible Equity, annualized 2	14.61		%	12.58		%	11.55		%	14.18		%	15.05		%
Average Earning Assets	$	3,417,638		$	3,281,223		$	3,030,881		$	2,969,972		$	2,881,035
Average Paying Liabilities	2,545,435			2,457,690			2,362,515			2,293,804			2,213,642
Interest Income	27,296			28,002			28,226			28,367			27,952
Tax-Equivalent Adjustment 3	284			281			288			321			344
Interest Income, Tax-Equivalent 3	27,580			28,283			28,514			28,688			28,296
Interest Expense	2,396			3,160			5,220			5,449			5,649
Net Interest Income	24,900			24,842			23,006			22,918			22,303
Net Interest Income, Tax-Equivalent 3	25,184			25,123			23,294			23,239			22,647
Net Interest Margin, annualized	2.90		%	3.05		%	3.05		%	3.06		%	3.07		%
Net Interest Margin, Tax Equivalent, annualized 3	2.93		%	3.08		%	3.09		%	3.10		%	3.12		%

Efficiency Ratio Calculation: 4
Noninterest Expense	$	17,487		$	17,245		$	17,754		$	17,099		$	16,791
Less: Intangible Asset Amortization	56			57			58			60			61
Net Noninterest Expense	$	17,431		$	17,188		$	17,696		$	17,039		$	16,730
Net Interest Income, Tax-Equivalent 3	$	25,184		$	25,123		$	23,294		$	23,238		$	22,647
Noninterest Income	8,697			7,164			7,694			7,081			7,691

Less: Net Changes in Fair Value of Equity Invest.	(72)			(106)			(374)			67			146
Net Gross Income	$	33,953		$	32,393		$	31,362		$	30,252		$	30,192
Efficiency Ratio 4	51.34		%	53.06		%	56.42		%	56.32		%	55.41		%

Period-End Capital Information:
Total Stockholders’ Equity (i.e. Book Value)	$	325,660		$	317,687		$	309,398		$	301,728		$	292,228
Book Value per Share 1	21.03			20.55			20.05			19.53			18.95
Goodwill and Other Intangible Assets, net	23,662			23,535			23,513			23,534			23,586
Tangible Book Value per Share 1,2	19.50			19.03			18.53			18.01			17.42

Capital Ratios:5

Tier 1 Leverage Ratio	9.17		%	9.32		%	9.87		%	9.98		%	10.04		%
Common Equity Tier 1 Capital Ratio	13.20		%	13.07		%	12.84		%	12.94		%	12.93		%
Tier 1 Risk-Based Capital Ratio	14.06		%	13.94		%	13.72		%	13.83		%	13.85		%
Total Risk-Based Capital Ratio	15.28		%	15.10		%	14.76		%	14.78		%	14.81		%

Assets Under Trust Admin. & Investment Mgmt.	$	1,537,128		$	1,502,866		$	1,342,531		$	1,543,653		$	1,485,116

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 25, 2020, 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 the Company believes provide investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 42.
		9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
	Total Stockholders' Equity (GAAP)	$	325,660		$	317,687		$	309,398		$	301,728		$	292,228
	Less: Goodwill and Other Intangible assets, net	23,662			23,535			23,513			23,534			23,586
	Tangible Equity (Non-GAAP)	$	301,998		$	294,152		$	285,885		$	278,194		$	268,642

	Period End Shares Outstanding	15,489			15,461			15,432			15,448			15,418
	Tangible Book Value per Share (Non-GAAP)	$	19.50		$	19.03		$	18.53		$	18.01		$	17.42
	Net Income	11,046			9,159			8,127			9,740			10,067
	Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)	14.61		%	12.58		%	11.55		%	14.18		%	15.05		%

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 42.
		9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
	Interest Income (GAAP)	$	27,296		$	28,002		$	28,226		$	28,367		$	27,952
	Add: Tax-Equivalent adjustment (Non-GAAP)	284			281			288			321			344
	Interest Income - Tax Equivalent (Non-GAAP)	$	27,580		$	28,283		$	28,514		$	28,688		$	28,296
	Net Interest Income (GAAP)	$	24,900		$	24,842		$	23,006		$	22,918		$	22,303
	Add: Tax-Equivalent adjustment (Non-GAAP)	284			281			288			321			344
	Net Interest Income - Tax Equivalent (Non-GAAP)	$	25,184		$	25,123		$	23,294		$	23,239		$	22,647
	Average Earning Assets	$	3,417,638		$	3,281,223		$	3,030,881		$	2,969,972		$	2,881,035
	Net Interest Margin (Non-GAAP)*	2.93		%	3.08		%	3.09		%	3.10		%	3.12		%

4.	Non-GAAP Financial Measures: Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. Arrow believes 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 42.

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 September 30, 2020 listed in the tables (i.e., 13.20%) exceeds the sum of the required minimum CET1 ratio plus the fully phased-in Capital Conservation Buffer (i.e., 7.00%).
		9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019

	Total Risk Weighted Assets	$	2,321,637		$	2,283,430		$	2,275,902		$	2,237,127		$	2,184,214
	Common Equity Tier 1 Capital	306,356			298,362			292,165			289,409			282,485
	Common Equity Tier 1 Capital Ratio	13.20		%	13.07		%	12.84		%	12.94		%	12.93		%

* Quarterly ratios have been annualized.

Footnotes:

1. Share and Per Share Data have been restated for the September 28, 2017, 3% stock dividend.

2. 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 we believe provide investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 38.
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Total Stockholders' Equity (GAAP) $ 244,648
$ 240,752
$ 236,111
$ 232,852
$ 229,208
Less: Goodwill and Other Intangible assets, net 24,268
24,355
24,448
24,569
24,675
Tangible Equity (Non-GAAP) $ 220,380
$ 216,397
$ 211,663
$ 208,283
$ 204,533

Period End Shares Outstanding 13,891
13,900
13,886
13,887
13,828

Tangible Book Value per Share
     (Non-GAAP)
$ 15.86
$ 15.57
$ 15.24
$ 15.00
$ 14.79
Net Income 7,416
7,208
6,631
6,600
6,738
Return on Tangible Equity (Net Income/Tangible Equity - Annualized) 13.40 % 13.45 % 12.76 % 12.77 % 13.18 %
3. Net Interest Margin is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which we believe provides investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 38.
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Interest Income (GAAP) $ 21,599
$ 20,926
$ 19,997
$ 19,770
$ 19,282

Add: Tax-Equivalent adjustment
     (Non-GAAP)
966
949
948
939
940

Interest Income - Tax Equivalent
     (Non-GAAP)
$ 22,565
$ 21,875
$ 20,945
$ 20,709
$ 20,222
Net Interest Income (GAAP) $ 19,650
$ 19,227
$ 18,461
$ 18,366
$ 17,877

Add: Tax-Equivalent adjustment
     (Non-GAAP)
966
949
948
939
940

Net Interest Income - Tax Equivalent
     (Non-GAAP)
$ 20,616
$ 20,176
$ 19,409
$ 19,305
$ 18,817
Average Earning Assets $ 2,597,277
$ 2,551,593
$ 2,500,293
$ 2,446,375
$ 2,399,197
Net Interest Margin (Non-GAAP)* 3.15 % 3.17 % 3.15 % 3.14 % 3.12 %

4. Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. We believe the efficiency ratio provides investors with information that is useful in understanding our financial performance. We define our efficiency ratio as the ratio of our noninterest expense to our net gross income (which equals our 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 38.

5. For the recently-completed quarter, all of the regulatory capital ratios in the table on page 40 and the table in this Note 5, below, 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. The Common Equity Tier 1 Capital Ratio (CET1 Ratio) of Arrow as of 9/30/2017 that is listed in the tables (i.e., 12.70%) not only exceeds the currently required minimum CET1 Ratio (including Conservation Buffer) of 5.750%, but also exceeds the minimum CET1 Ratio that will be required when the Conservation Buffer is fully phased-in, on January 1, 2019, of 7.00% (including the ultimate required Conservation Buffer of 2.50%).
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Total Risk Weighted Assets $ 1,830,730
$ 1,802,455
$ 1,747,318
$ 1,707,829
$ 1,690,646
Common Equity Tier 1 Capital 232,473
228,586
224,369
221,472
216,382
Common Equity Tier 1 Capital Ratio 12.70 % 12.68 % 12.84 % 12.97 % 12.80 %

Arrow Financial Corporation

* ~~Quarterly ratios have been annualized.~~Selected Year-to-Date Information

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


Nine Months Ended	9/30/2020			9/30/2019
Net Income	$	28,332		$	27,735
Transactions Recorded in Net Income (Net of Tax):
Net Changes in Fair Value of Equity Investments	(412)			166

Share and Per Share Data: 1
Period End Shares Outstanding	15,489			15,418
Basic Average Shares Outstanding	15,453			15,375
Diluted Average Shares Outstanding	15,467			15,417
Basic Earnings Per Share	$	1.83		$	1.80
Diluted Earnings Per Share	1.83			1.80
Cash Dividend Per Share	0.76			0.74

Selected Year-to-Date Average Balances:
Interest-Bearing Deposits at Banks	$	144,244		$	26,121
Investment Securities	601,069			580,062
Loans	2,498,573			2,258,633
Deposits	2,902,307			2,419,390
Other Borrowed Funds	145,463			271,198
Stockholders’ Equity	315,757			280,769
Total Assets	3,401,114			2,999,354
Return on Average Assets, annualized	1.11		%	1.24		%
Return on Average Equity, annualized	11.99		%	13.21		%
Return on Average Tangible Equity, annualized 2	12.95		%	14.42		%
Average Earning Assets	3,243,886			2,864,816
Average Paying Liabilities	2,455,544			2,224,463
Interest Income	83,524			81,392
Tax-Equivalent Adjustment 3	853			1,093
Interest Income, Tax-Equivalent 3	84,377			82,485
Interest Expense	10,776			16,261
Net Interest Income	72,748			65,131
Net Interest Income, Tax-Equivalent 3	73,601			66,224
Net Interest Margin, annualized	3.00		%	3.04		%
Net Interest Margin, Tax Equivalent, annualized 3	3.03		%	3.09		%

Efficiency Ratio Calculation: 4
Noninterest Expense	$	52,486		$	50,351
Less: Intangible Asset Amortization	171			184
Net Noninterest Expense	52,315			50,167
Net Interest Income, Tax-Equivalent 3	73,601			66,224
Noninterest Income	23,555			21,474

Less: Net Changes in Fair Value of Equity Securities	(552)			222
Net Gross Income	97,708			87,476
Efficiency Ratio 4	53.54		%	57.35		%

Arrow Financial Corporation
Selected Year-to-Date Information
(Dollars In Thousands, Except Per Share Amounts - Unaudited)
Nine Months Ended 9/30/2017
9/30/2016
Net Income $ 21,255
$ 19,934
Transactions Recorded in Net Income (Net of Tax):
Net Gain on Securities Transactions 6
88

Share and Per Share Data:⁽¹⁾

Period End Shares Outstanding 13,891
13,828
Basic Average Shares Outstanding 13,889
13,775
Diluted Average Shares Outstanding 13,981
13,842
Basic Earnings Per Share $ 1.53
$ 1.45
Diluted Earnings Per Share 1.52
1.44
Cash Dividend Per Share 0.73
0.71

Selected Year-to-Date Average Balances:
  Interest-Bearing Deposits at Banks 25,076
21,665
  Investment Securities 685,784
704,890
  Loans 1,839,216
1,641,899
  Deposits 2,187,431
2,072,052
  Other Borrowed Funds 225,400
173,159
  Stockholders’ Equity 239,516
223,214
  Total Assets 2,677,018
2,493,909
Return on Average Assets, annualized 1.06 % 1.07 %
Return on Average Equity, annualized 11.86 % 11.93 %
Return on Tangible Equity, annualized (Non-GAAP) ⁽²⁾
13.21 % 13.42 %
Average Earning Assets 2,550,076
2,368,454
Average Paying Liabilities 1,998,746
1,883,717
Interest Income, Tax-Equivalent (Non-GAAP) ⁽³⁾
65,385
59,925
Interest Expense 5,184
3,952
Net Interest Income, Tax-Equivalent (Non-GAAP) ⁽³⁾
60,201
55,973
Tax-Equivalent Adjustment (Non-GAAP) ⁽³⁾
2,863
2,780
Net Interest Margin, annualized (Non-GAAP) ⁽³⁾
3.16 % 3.16 %

Efficiency Ratio Calculation: ⁽⁴⁾

Noninterest Expense 46,661
44,337
Less: Intangible Asset Amortization 210
223
Net Noninterest Expense 46,451
44,114
Net Interest Income, Tax-Equivalent (Non-GAAP) ⁽³⁾
60,201
55,973
Noninterest Income 20,893
21,184
Less: Net Securities Gain 10
144
Net Gross Income 81,084
77,013
Efficiency Ratio (Non-GAAP) 57.29 % 57.28 %

Arrow Financial Corporation

Selected Year-to-Date Information - Continued

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


Footnotes:

1.	Share and Per Share Data have been restated for the September 25, 2020, 3% stock dividend.

2.	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 the Company believes provide investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 42.
		9/30/2020			9/30/2019
	Total Stockholders' Equity (GAAP)	$	325,660		$	292,228
	Less: Goodwill and Other Intangible assets, net	23,662			23,586
	Tangible Equity (Non-GAAP)	$	301,998		$	268,642

	Period End Shares Outstanding	15,489			15,418
	Tangible Book Value per Share (Non-GAAP)	$	19.50		$	17.42
	Net Income	28,332			27,735
	Return on Average Tangible Equity (Net Income/Tangible Equity - Annualized)	12.95		%	14.42		%

3.	Net Interest Margin is the ratio of our annualized tax-equivalent net interest income to average earning assets. This is also a non-GAAP financial measure which the Company believes provides investors with information that is useful in understanding our financial performance. See "Use of Non-GAAP Financial Measures" on page 42.
		9/30/2020			9/30/2019
	Interest Income (GAAP)	$	83,524		$	81,392
	Add: Tax-Equivalent adjustment (Non-GAAP)	$	853		$	1,093
	Net Interest Income - Tax Equivalent (Non-GAAP)	$	84,377		$	82,485
	Net Interest Income (GAAP)	$	72,748		$	65,131
	Add: Tax-Equivalent adjustment (Non-GAAP)	853			1,093
	Net Interest Income - Tax Equivalent (Non-GAAP)	$	73,601		$	66,224
	Average Earning Assets	$	3,243,886		$	2,864,816
	Net Interest Margin (Non-GAAP)*	3.03		%	3.09		%

4.	Financial Institutions often use the "efficiency ratio", a non-GAAP ratio, as a measure of expense control. The Company believes efficiency ratio provides investors with information that is useful in understanding financial performance. Efficiency ratio is defined as the ratio of our noninterest expense to our net gross income (which equals our tax-equivalent net interest income plus noninterest income, as adjusted). See "Use of Non-GAAP Financial Measures" on page 42.

* Year-to-date ratios have been annualized.

* Year-to-date ratios have been annualized.


Average Consolidated Balance Sheets and Net Interest Income Analysis


(Dollars In Thousands)

Quarter Ended September 30:	2020						2019
			Interest		Rate				Interest		Rate
	Average		Income/		Earned/		Average		Income/		Earned/
	Balance		Expense		Paid		Balance		Expense		Paid
Interest-Bearing Deposits at Banks	$	242,928	$	64	0.10	%	$	27,083	$	182	2.67	%
Investment Securities:
Fully Taxable	395,349		1,557		1.57		328,328		2,018		2.44
Exempt from Federal Taxes	197,108		969		1.96		216,745		1,132		2.07
Loans	2,582,253		24,706		3.81		2,308,879		24,620		4.23
Total Earning Assets	3,417,638		27,296		3.18		2,881,035		27,952		3.85
Allowance for Credit Losses	(26,310)						(20,617)
Cash and Due From Banks	37,905						36,423
Other Assets	154,089						126,202
Total Assets	$	3,583,322					$	3,023,043
Deposits:
Interest-Bearing Checking Accounts	$	764,614	264		0.14		$	686,017	500		0.29
Savings Deposits	1,314,241		806		0.24		924,868		2,317		0.99
Time Deposits of $250,000 or More	121,027		292		0.96		86,018		451		2.08
Other Time Deposits	209,436		576		1.09		285,448		1,255		1.74
Total Interest-Bearing Deposits	2,409,318		1,938		0.32		1,982,351		4,523		0.91
Short-Term Borrowings	60,894		17		0.11		176,028		703		1.58
FHLBNY Term Advances & Other Long-Term Debt	70,000		392		2.23		50,000		395		3.13
Finance Leases	5,223		49		3.73		5,263		28		2.11
Total Interest-Bearing Liabilities	2,545,435		2,396		0.37		2,213,642		5,649		1.01
Noninterest-bearing deposits	673,181						490,177
Other Liabilities	40,437						30,208
Total Liabilities	3,259,053						2,734,027
Stockholders’ Equity	324,269						289,016
Total Liabilities and Stockholders’ Equity	$	3,583,322					$	3,023,043


Net Interest Income			$	24,900					$	22,303
Net Interest Spread					2.81	%					2.84	%
Net Interest Margin					2.90	%					3.07	%



Average Consolidated Balance Sheets and Net Interest Income Analysis	Average Consolidated Balance Sheets and Net Interest Income Analysis																Average Consolidated Balance Sheets and Net Interest Income Analysis
(see “Use of Non-GAAP Financial Measures” on page 38)
(Fully Taxable Basis using a marginal tax rate of 35%)

(Dollars In Thousands)	(Dollars In Thousands)																(Dollars In Thousands)

Quarter Ended September 30:	2017								2016
Nine Months Ended September 30:																	Nine Months Ended September 30:	2020						2019
				Interest			Rate					Interest			Rate					Interest		Rate				Interest		Rate
	Average			Income/			Earned/		Average			Income/			Earned/			Average		Income/		Earned/		Average		Income/		Earned/
	Balance			Expense			Paid		Balance			Expense			Paid			Balance		Expense		Paid		Balance		Expense		Paid
Interest-Bearing Deposits at Banks	$	27,143		$	104		1.52	%	$	21,635		$	34		0.63	%	Interest-Bearing Deposits at Banks	$	144,244	$	229	0.21	%	$	26,121	$	572	2.93	%
Investment Securities:																	Investment Securities:
Fully Taxable	389,092			1,928			1.97		409,355			1,893			1.84		Fully Taxable	399,958		5,621		1.88		353,428		6,671		2.52
Exempt from Federal Taxes	288,276			2,404			3.31		287,357			2,332			3.23		Exempt from Federal Taxes	201,111		3,017		2.00		226,634		3,606		2.13
Loans	1,892,766			18,129			3.80		1,680,850			15,963			3.78		Loans	2,498,573		74,657		3.99		2,258,633		70,543		4.18
Total Earning Assets	2,597,277			22,565			3.45		2,399,197			20,222			3.35		Total Earning Assets	3,243,886		83,524		3.44		2,864,816		81,392		3.80
Allowance for Loan Losses	(17,393		)						(16,696		)
Allowance for Credit Losses																	Allowance for Credit Losses	(24,037)						(20,352)
Cash and Due From Banks	37,592								36,041								Cash and Due From Banks	34,624						34,907
Other Assets	108,177								109,582								Other Assets	146,641						119,983
Total Assets	$	2,725,653							$	2,528,124							Total Assets	$	3,401,114					$	2,999,354
Deposits:																	Deposits:
Interest-Bearing Checking Accounts	$	869,748		376			0.17		$	869,439		320			0.15		Interest-Bearing Checking Accounts	$	737,647	1,061		0.19		$	728,931	1,435		0.26
Savings Deposits	682,347			356			0.21		607,850			231			0.15		Savings Deposits	1,207,896		4,450		0.49		879,576		5,926		0.90
Time Deposits of $250,000 or More	31,067			66			0.84		75,388			128			0.68		Time Deposits of $250,000 or More	127,659		1,263		1.32		87,714		1,362		2.08
Other Time Deposits	166,776			241			0.57		129,960			164			0.50		Other Time Deposits	236,879		2,360		1.33		257,044		3,099		1.61
Total Interest-Bearing Deposits	1,749,938			1,039			0.24		1,682,637			843			0.20		Total Interest-Bearing Deposits	2,310,081		9,134		0.53		1,953,265		11,822		0.81
Short-Term Borrowings	187,864			465			0.98		134,946			152			0.45		Short-Term Borrowings	69,132		241		0.47		212,977		3,102		1.95
FHLBNY Term Advances and Other Long-Term Debt	75,000			445			2.35		75,000			410			2.17		FHLBNY Term Advances and Other Long-Term Debt	71,095		1,253		2.35		54,469		1,266		3.11
Finance Leases																	Finance Leases	5,236		148		3.78		3,752		71		3.72
Total Interest-Bearing Liabilities	2,012,802			1,949			0.38		1,892,583			1,405			0.30		Total Interest-Bearing Liabilities	2,455,544		10,776		0.59		2,224,463		16,261		0.98
Demand Deposits	443,840								381,195
Noninterest-bearing deposits																	Noninterest-bearing deposits	592,226						466,125
Other Liabilities	25,210								26,298								Other Liabilities	37,587						27,998
Total Liabilities	2,481,852								2,300,076								Total Liabilities	3,085,357						2,718,586
Stockholders’ Equity	243,801								228,048								Stockholders’ Equity	315,757						280,768
Total Liabilities and Stockholders’ Equity	$	2,725,653							$	2,528,124							Total Liabilities and Stockholders’ Equity	$	3,401,114					$	2,999,354
Net Interest Income (Tax-equivalent Basis) (Non-GAAP) ⁽¹⁾				20,616								18,817
Reversal of Tax Equivalent Adjustment				(966		)	(0.15	)%				(940		)	(0.16	)%

Net Interest Income				$	19,650							$	17,877				Net Interest Income			$	72,748					$	65,131
Net Interest Spread (Non-GAAP) ⁽¹⁾							3.07	%							3.05	%
Net Interest Margin (Non-GAAP) ⁽¹⁾							3.15	%							3.12	%
Net Interest Spread																	Net Interest Spread					2.85	%					2.82	%
Net Interest Margin																	Net Interest Margin					3.00	%					3.04	%

¹~~See Note 3 on p. 43.~~

Average Consolidated Balance Sheets and Net Interest Income Analysis
(see “Use of Non-GAAP Financial Measures” on page 38)
(Fully Taxable Basis using a marginal tax rate of 35%)
(Dollars In Thousands)
Nine-Month Period Ended September 30: 2017 2016
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
Interest-Bearing Deposits at Banks $ 25,076
$ 242
1.29 % $ 21,665
$ 100
0.62 %
Investment Securities:
Fully Taxable 398,231
5,940
1.99
427,937
6,006
1.87
Exempt from Federal Taxes 287,553
7,116
3.31
276,953
6,861
3.31
Loans 1,839,216
52,087
3.79
1,641,899
46,958
3.82
Total Earning Assets 2,550,076
65,385
3.43
2,368,454
59,925
3.38
Allowance for Loan Losses (17,172 ) (16,316 )
Cash and Due From Banks 36,056
32,327

Other Assets 108,058
109,444

Total Assets $ 2,677,018
$ 2,493,909

Deposits:
Interest-Bearing Checking Accounts $ 894,206
1,088
0.16
$ 909,268
941
0.14
Savings Deposits 680,419
963
0.19
604,886
677
0.15
Time Deposits of $250,000 or More 31,974
187
0.78
66,230
313
0.63
Other Time Deposits 166,747
702
0.56
130,174
497
0.51
Total Interest-Bearing Deposits 1,773,346
2,940
0.22
1,710,558
2,428
0.19
Short-Term Borrowings 150,400
946
0.84
98,159
303
0.41
FHLBNY Term Advances and Other Long-Term Debt 75,000
1,298
2.31
75,000
1,221
2.17
Total Interest-Bearing Liabilities 1,998,746
5,184
0.35
1,883,717
3,952
0.28
Demand Deposits 414,085
361,494

Other Liabilities 24,671
25,484

Total Liabilities 2,437,502
2,270,695

Stockholders’ Equity 239,516
223,214

Total Liabilities and Stockholders’ Equity $ 2,677,018
$ 2,493,909

Net Interest Income (Tax-equivalent Basis)
(Non-GAAP)
60,201
55,973

Reversal of Tax Equivalent Adjustment (2,863 ) (0.15 )% (2,780 ) (0.16 )%
Net Interest Income $ 57,338
$ 53,193

Net Interest Spread (Non-GAAP) ⁽¹⁾
3.08 % 3.10 %
Net Interest Margin (Non-GAAP) ⁽¹⁾
3.16 % 3.16 %

¹~~See Note 3 on p. 43.~~

OVERVIEW

~~We reported net~~

The following discussion and analysis focuses on and reviews the results of operations for the three month period ended September 30, 2020 and the financial condition as of September 30, 2020 and 2019. The discussion below should be read in conjunction with the selected quarterly and annual information set forth above and the 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:

In March 2020, the World Health Organization recognized COVID-19 as a pandemic. In response, the United States federal government and various state and local governments have, among other actions, imposed travel and business restrictions and required or advised communities in which we do business to adopt stay-at-home orders and social distancing guidelines, causing some businesses to adjust, reduce or suspend operating activities. Like many businesses, we expect the operations and financial results to continue to be adversely impacted by the COVID-19 pandemic. The severity, magnitude and duration of the current pandemic are still uncertain, rapidly changing and hard to predict.

Arrow continues to manage its COVID-19 response with health and safety concerns as a top priority. In the third quarter, the Business Continuity Task Force, representing leadership from across the organization, focused on maintaining protocols that have allowed Arrow to keep the team healthy and the branches open. Arrow actively monitors developments, and if future restrictions are imposed, is confident in its ability to continue to provide essential banking services and meet customer needs.

Throughout the third quarter, Arrow maintained open lobbies for the majority of its bank branches and insurance offices. Safety measures continue to be followed, including clear shields for desks and teller lines, hand sanitizing stations, required face coverings, and social distancing markers. Traffic to lobbies is stable, and Arrow continues to promote usage of no-contact alternatives such as digital banking, drive-ins and ATMs. While some positions have returned to the office, a significant portion of the Arrow workforce remains remote as part of our risk-mitigation strategy. Additionally, employee travel remains paused, self-quarantine protocol is in place for personal travel to areas classified as hot spots, in-person meetings are minimized, social distancing is strongly enforced, and increased cleaning and sanitizing of Arrow's locations continue. Arrow believes these measures have helped to keep the workforce healthy and has aided in community efforts to slow the spread of the COVID-19 virus. Arrow will continue to utilize these measures as appropriate based on public health guidance.

During the third quarter, support continued for customers experiencing financial hardship. Arrow worked closely with individuals and businesses seeking temporary financial assistance. On the small business side, support for Small Business Administration Paycheck Protection Program ("PPP") borrowers shifted from taking new loan applications to preparing for loan forgiveness. In total, Arrow has assisted more than 1,400 small businesses in acquiring more than $142.7 million in PPP funding. The Arrow team has engaged in regular communication concerning updates to the PPP and the start of our digital forgiveness application process.

While COVID-19 did not have a material adverse effect on third-quarter 2020 financial results, Arrow is actively monitoring the impact of the pandemic on the business and results of operations. Currently, all banking locations and a portion of insurance locations are open to the public, and through a mix of onsite and remote work amongst the Arrow team, Arrow continues to meet customer needs and deliver high-quality service daily.

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, Arrow is unable to reasonably estimate the overall impact on the Company. For further discussion of the impact COVID-19 has had and may in the future have on Arrow and its financial results and operations, please refer to the risk factor included in Item 8.01 of Arrow's Current Report on Form 8-K filed April 24, 2020.

Summary of Q3 2020 Financial Results: Net income for the third quarter of ~~2017 of $7.4~~2020 was $11.0 million, ~~an increase of $678 thousand, or 10.1%, over our net income for~~compared to $10.1 million in the third quarter of ~~2016.~~ 2019. Net interest income increased to $24.9 million in the third quarter of 2020, compared to $22.3 million for the comparable quarter of 2019.

Diluted earnings per share (EPS) for the quarter was ~~$0.53,~~$0.71, an increase of ~~10.4%~~9.2% from the EPS of ~~$0.48~~$0.65 reported for the third quarter of ~~2016.~~2019. Return on average equity (ROE) for the third quarter of ~~2017 continued~~2020 decreased to ~~be strong at 12.07%~~13.55%, ~~up from an~~as compared to a ROE of ~~11.75%~~13.82% for the ~~third~~ quarter ended September 30, ~~2016.~~2019. Return on average assets (ROA) for the ~~2017~~2020 third quarter was ~~1.08%~~1.23%, ~~an increase~~a decrease from an ROA of ~~1.06%~~1.32% for the ~~third~~ quarter ended September 30, 2016. Tax-equivalent net interest income (a non-GAAP measure) increased between the respective quarters by approximately 9.6%, mainly due to the 8.3% increase in average earning assets in the third quarter of 2017. The composition of earning assets changed in the current quarter through an increase in higher yielding loans and a decrease in lower yielding investment securities. 2019.

Total loans increased between the respective period ends by $201.6 million, or 11.8%, while investment securities decreased by $18.4 million, or 2.7%. Salaries and employee benefits expenses increased by 6.4% in the third quarterreached $2.6 billion as of ~~2017 compared to the 2016 quarter, due to increased staffing levels, normal salary increases, and increases in medical claims under our health benefit plans. Total assets were $2.74 billion at~~ September 30, ~~2017,~~2020, which represented an increase of ~~$139.2~~$256.9 million, or ~~5.3%~~11.0% as compared to September 30, 2019. In the third quarter, loans grew by $30.5 million. The consumer loan portfolio grew by $43.7 million, or 5.4%, as compared to September 30, 2019, primarily within the indirect automobile lending program. Total outstanding residential real estate loans increased $36.2 million, or 4.1%, as compared to September 30, 2019. Total outstanding commercial loans increased $176.9 million, or 27.6%, as compared to September 30, 2019. The increase in commercial loans includes $142.7 million of the Small Business Administration's Paycheck Protection Program loans.

At September 30, 2020, deposit balances reached $3.3 billion, up $650.3 million, or 24.9%, from the prior-year level. Deposit growth for the third quarter of 2020 was $196.1 million. Noninterest-bearing deposits represented 21.1% of total deposits at September 30, 2020, compared to 19.8% of total deposits on September 30, 2019. At September 30, 2020, other time deposits were $194.1 million, a decrease of $75.6 million compared to the prior year. Municipal deposits increased $218.8 million, or 34.6% from September 30, 2019.

Net interest income for the third quarter increased to $24.9 million, up 11.6% from $22.3 million in the comparable quarter of 2019. The net interest margin was 2.90% for the quarter, compared to 3.07% for the third quarter of 2019. The decrease in net interest margin from the prior year was due to a variety of factors, including: lower interest rates, increased cash balances and the impact of participating in the Small Business Administration Paycheck Protection Program.

Noninterest income for the three months ended September 30, 2020 was $8.7 million, compared to $7.7 million in the comparable 2019 quarter. For the third quarter of 2020, the net gain on the sale of loans was $1.4 million. In addition, income from fiduciary activities for the three months ended September 30, 2020 increased over the comparable quarter of 2019.

Noninterest expense for the third quarter of 2020 increased 4.1% to $17.5 million, from $16.8 million for the third quarter of 2019. Salaries and benefits increased $393 thousand. In the third quarter, both the Saratoga National Bank Latham branch and the Capital Region Business Development Office opened, increasing occupancy expenses for the quarter.

Asset quality remained strong at September 30, 2020, with continued low levels of nonperforming loans and net charge-offs. Nonperforming loans at September 30, 2020, were $6.3 million, up $1.6 million from the level at September 30, 2019. Net charge-offs, expressed as an annualized percentage of average loans outstanding, were 0.02% for the three month period ended September 30, 2020, a decrease from both 0.06% for the three month period ended December 31, ~~2016,~~2019 and ~~an increase~~from 0.05% for the three month period ended September 30, 2019. The allowance for loan losses was $28.4 million at September 30, 2020, which represented 1.10% of ~~$164.0~~loans outstanding, as compared to 0.90% at September 30, 2019. The loss provision expense for the third quarter of 2020 was $2.3 million, ~~or 6.4%,~~up $1.8 million from the ~~September 30, 2016 level.~~provision expense for the comparable 2019 quarter. Although credit quality remains very strong, the increase in loss provision reflects the uncertainty resulting from the COVID-19 pandemic.

The changes in net income, net interest income and net interest margin between the three ~~and nine-month~~month periods are discussed in detail under the heading "RESULTS OF OPERATIONS," beginning on page ~~59.~~65.

Stockholders’ equity was $244.6 million at September 30, 2017, an increase of $11.8 million, or 5.1%, from the December 31, 2016 level of $232.9 million, and an increase of $15.4 million, or 6.7%, from the prior-year level. The components of the change in stockholders’ equity since year-end 2016 are presented in the Consolidated Statement of Changes in Stockholders’ Equity on page 6, and are discussed in more detail in the next section.

Regulatory Capital and Increase in Stockholders' Equity: At September 30, ~~2017, we~~2020, Arrow continued to exceed ~~by a substantial amount~~ all required minimum capital ratios under the ~~new~~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 ~~of our~~subsidiary banks, as well as ~~our~~the holding company, continued to qualify as "well-capitalized" under the ~~revised~~ capital classification guidelines ~~that became effective contemporaneously with~~as defined by the ~~new bank regulatory capital rules in 2015.~~Capital Rules. Because of ~~our~~ continued profitability and strong asset quality, ~~our~~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. ~~As a result of~~Pursuant to the ~~Dodd-Frank Act, however,~~Capital Rules, required minimum regulatory capital levels for insured banks and their parent holding companies increased in 2019.

The federal bank regulators have issued a final rule to implement the “community bank leverage ratio”, introducing an optional simplified measure of capital adequacy for qualifying community banking organizations (the CBLR framework). To qualify for the CBLR framework, a community banking organization must satisfy certain requirements, including having a leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the CBLR framework and meets all requirements under the CBLR framework will ~~continue~~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. Subsequently, Section 4012 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act required the federal banking agencies to temporarily lower the threshold for election of the CBLR framework, issuing two interim final rules to set the CLBR at 8% as of the second quarter of 2020 and then gradually re-establish the CBLR at 9%.

Under the final rule, the CBLR will remain at 8% through the end of 2020. Community banks that have a leverage ratio of 8% or greater and meet certain other criteria may elect to use the CBLR framework. Beginning in 2021, the CBLR will increase to 8.5% for the calendar year. Community banks will have until January 1, 2022, before the leverage ratio requirement to use the CBLR framework will return to 9%.

The final rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than one percentage point below the applicable CBLR requirement.

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

Stockholders’ equity was $325.7 million at September 30, 2020, an increase of $23.9 million, or 7.9%, from the December 31, 2019 level of $301.7 million, and an increase of $33.4 million, or 11.4%, from the prior-year level. The increase in stockholders' equity over the first nine months of 2020 principally reflected the following factors: (i) $28.3 million of net income for the period, plus (ii) other comprehensive income of $6.1 million, plus (iii) issuance of $2.8 million of common stock through employee benefit and dividend reinvestment plans; reduced by (iv) cash dividends of $11.7 million; and (v) repurchases of common stock of $1.6 million. The components of the change in stockholders’ equity since year-end 2019 are presented in the ~~upcoming years through 2019.~~Consolidated Statement of Changes in Stockholders’ Equity on page 6, and are discussed in more detail in the next section.

At September 30, ~~2017, our~~2020, book value per share was ~~$17.61,~~$21.03, up by ~~6.2%~~11.0% over the prior-year ~~level, and our tangible~~level. Tangible book value per share (a non-GAAP measure that deducts intangible assets from stockholders' equity) was ~~$15.86,~~$19.50, an increase of ~~$1.07,~~ $2.08,or ~~7.2%~~11.9%, over the level as of September 30, ~~2016.~~2019. See the disclosure on page 3842 related to ~~our~~the use of non-GAAP financial measures ~~generally, and~~including tangible book value, specifically. In the first nine months of 2017, total stockholders' equity increased by 5.1% (not annualized) and our total book value per share also increased by 5.0%. The increase in stockholders' equity over the first nine months of 2017 principally reflected the following factors: (i) $21.3 million of net income for the period and (ii) issuance of $2.7 million of common stock through our employee benefit and dividend reinvestment plans; reduced by (iii) cash dividends of $10.1 million; and (iv) repurchases of our own common stock, primarily in connection with our approved treasury stock repurchase plan, of $2.8 million. value.

On September 30, ~~2017, our~~2020, the Company's closing stock price was ~~$34.35,~~$29.73, representing a trading multiple of ~~2.17~~1.52 to ~~our~~ tangible book value. As adjusted for ~~a 3.0%~~the 3% stock dividend distributed on September ~~28, 2017,~~25, 2020, in the third quarter of 2020, the Company paid a quarterly cash dividend of ~~$0.236 per share for~~$0.25. Further discussion of dividends is included in the ~~third quarter of 2016, and a cash dividend of $0.243 per share for the last quarter of 2016 and the first, second, and third quarters of 2017.~~Capital Components; Stock Repurchases; Dividends section located on page 62.

Loan Quality: ~~Our net~~ Net charge-offs for the third quarter of ~~2017~~2020 were ~~$547~~$125 thousand as compared to ~~$303~~$282 thousand for the comparable ~~2016~~2019 quarter. ~~Our~~The ratio of net charge-offs to average loans (annualized) was ~~0.11%~~0.02% for the ~~third quarter of 2017 compared to 0.07%~~three month period ended September 30, 2020, a decrease from both 0.06% for the ~~third quarter of 2016. Our peer group's weighted average ratio of net charge-offs to average loans was 0.07%~~three month period ended December 31, 2019 and from 0.05% for the ~~quarter~~three month period ended ~~June~~September 30, ~~2017. See page 37 for a discussion of our peer group.~~2019. At September 30, ~~2017, our~~2020, the allowance for ~~loan~~credit losses was ~~$17.7~~$28.4 million representing ~~0.93%~~1.10% of total loans, ~~down 4 basis points~~which is an increase from the ~~December 31, 2016 ratio. We believe this allowance is appropriate and~~September 30, 2019 ratio of 0.90%. Although credit quality remains very strong, the increase in loan loss provision expense reflects the ~~continuing strong~~uncertainty resulting from the COVID-19 pandemic. As permitted by the CARES Act, Arrow has elected to defer the adoption of the Current Expected Credit Losses ("CECL") methodology in determining credit ~~quality in the loan portfolio.~~losses.

Nonperforming loans were ~~$7.3~~$6.3 million at September 30, ~~2017,~~2020, representing ~~0.38%~~0.24% of period-end loans, ~~a decrease~~an increase from the September 30, 2019 ratio of ~~2 basis points from our prior year comparable quarter~~0.20%. The ratio ~~which compares~~continues to compare favorably with the weighted average ratio of ~~our~~the peer group of ~~0.72%~~0.59% at June 30, ~~2017.~~2020.

Loan Segments: ~~During the third quarter~~As of 2017, we experienced increases in outstanding balances in consumer loan and residential real estate loan segments of our loan portfolio, without any significant deterioration in our credit quality. During the quarter, ourSeptember 30, 2020, total loans grew by ~~$30.2~~$206.3 million, or ~~1.6%.~~8.6%, as compared to the balance at December 31, 2019. The largest ~~portion of such~~ increase was in ~~residential~~commercial and commercial real estate loans, which ~~expanded~~increased by ~~$18.9~~$156.0 million, or ~~2.6%. Consumer~~23.6%, from December 31, 2019. The majority of the increase in commercial loans ~~also increased during~~resulted from the ~~quarter by $13.3~~origination of approximately $142.7 million of Small Business Administration's Paycheck Protection Program loans. In addition, consumer loans expanded $38.3 million, or ~~2.3%~~4.7%. The ~~total commercial~~economic factors resulting from the COVID-19 pandemic, including but not limited to restrictions on non-essential businesses, will most likely adversely impact loan ~~portfolio decreased slightly by $2.0 million, or 0.4%.~~

~~Commercial Loans:~~ ~~These loans comprised 6.6%~~growth for the remainder of our loan portfolio at period-end. The business sector in our service area, including small- and mid-sized businesses with headquarters in the area, continued to be in reasonably good financial condition at period-end, and some lines of business appear to be experiencing modest improvement during the year.

•Commercial and Commercial Real Estate Loans: ~~These~~ Combined, these loans ~~comprised 23.1%~~comprise 31.5% of ~~our~~the total loan portfolio at period-end. Commercial property values in ~~our~~the Company’s region have largely remained stable ~~in recent periods. We update~~year-to-date, however, there remains uncertainty surrounding market conditions due to the ~~appraisals~~pandemic. Appraisals on ~~our~~ nonperforming and watched CRE loan properties are updated as deemed necessary, usually when the loan is downgraded or when ~~we perceive~~there has been significant market deterioration since ~~our~~the last appraisal. The temporary closure of nonessential business in New York has impacted, and may continue to impact, the Bank's customer base. Government intervention, with programs such as the Small Business Administration’s Paycheck Protection Program, may mitigate the economic risk to both Arrow and its customers, however the full impact cannot be determined at this time.

•Consumer Loans: These loans (primarily automobile loans) comprised ~~31.0%~~32.8% of ~~our~~the total loan portfolio at period-end. Consumer automobile loans at September 30, ~~2017,~~2020, were ~~$585~~$844 million, or ~~98.8%~~99.4% of this portfolio segment. In the first nine months of ~~2017, we~~2020, Arrow did not experience any significant increase in ~~our~~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. The physical sale of vehicles through dealerships had been curtailed for a significant part of 2020 as part of the response to the COVID-19 pandemic in New York and Vermont, our primary dealer network. Thus, the volume of originations of consumer loans will be negatively impacted, although the magnitude of the impact cannot be determined.

•Residential Real Estate Loans: These loans, including home equity loans, made up ~~39.3%~~35.7% of ~~our~~the total loan portfolio at period-end. The residential real estate market in ~~our~~the Company's service area has been stable in recent periods. ~~During the first nine months of 2017, refinancings of our own loans represented about 20% of our total originations. We~~Arrow originated nearly all of the residential real estate loans currently held in ~~our~~the loan portfolio and ~~apply~~applies conservative underwriting standards to ~~our~~loan originations. WeArrow typically ~~sell~~sells a portion of ~~our~~ residential real estate mortgage originations into the secondary market. The ratio of ~~our~~the sales of originations to total originations tends to fluctuate from period to period ~~although this ratio has generally declined somewhat~~based on market conditions. Due to the COVID-19 pandemic, it is not yet possible to determine the long term economic impact of the mandated closure of non-essential business and its resulting impact on our residential real estate loan portfolio. It should be noted, however, that in ~~recent periods.~~the third quarter of 2020, historically low interest rates have led to higher originations compared to the third quarter of the prior year.

Liquidity and Access to Credit Markets: ~~We have~~ The Company has not experienced any liquidity problems or special concerns in recent years or thus far in ~~2017, nor did we in~~2020. Arrow’s liquidity position provides the necessary flexibility to address any ~~prior years back~~unexpected near-term disruptions that may develop as a result of the COVID-19 pandemic such as: reduced cash-flows from the investment and loan portfolios and aggressive funding of programs associated with response efforts. Interest-bearing cash balances at September 30, 2020 were $396.4 million compared to $26.4 million at September 30, 2019. Operating collateralized lines of credit are established and ~~during~~available through the ~~financial crisis.~~FHLBNY and FRB, totaling $1.3 billion. The terms of ~~our~~Arrow's lines of credit ~~with our correspondent banks, the FHLBNY and the Federal Reserve Bank~~ have not changed significantly in recent periods (see ~~our~~the general liquidity discussion on page ~~58), although rates on such borrowings have begun to move a little recently in response to gradual tightening of short-term rates.~~62). Historically, ~~we have~~the Company 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 ~~(our~~(the main liability-based sources are an overnight borrowing ~~arrangements~~arrangement with ~~our~~ 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). ~~We regularly perform a~~Regular liquidity stress ~~test~~tests and ~~periodically test our~~tests of the contingent liquidity plan are performed to ensure that ~~we can generate~~ an adequate amount of available funds can be generated to meet a wide variety of potential liquidity crises including ~~a severe crisis.~~the current COVID-19 pandemic.

Visa Class B Common Stock: ~~We,~~ Arrow's subsidiary bank, Glens Falls National, like other ~~former~~ Visa member banks, ~~bear~~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 ~~remaining~~amount funded in its litigation escrow account. On September 18, 2018, Visa issued a press release announcing that it and other defendants entered into a settlement agreement with class action plaintiffs in the related litigation case. But certain merchants opted out of the class action settlement and filed separate litigation cases. Once the class action and other merchant litigation cases are settled and the balance in the litigation escrow account ~~amount. In light of the current state of covered litigation at Visa, which~~ is ~~winding down, as well as the substantial remaining dollar amounts in Visa's escrow fund, we determined that the balance that Visa maintains in its escrow fund is substantially~~ sufficient to ~~satisfy Visa's remaining direct liability~~cover the litigation claims and related expenses, Arrow could potentially realize a gain on the receipt of Visa Class A common stock. On September 27, 2019, Visa deposited $300 million into the litigation escrow account that was established pursuant to ~~such claims without further resort~~Visa’s U.S. retrospective responsibility plan, which reduces the conversion rate of Class B shares to Class A shares. This did not have a significant effect on the ~~contingent liability~~number of ~~the former Visa member banks such as ours.~~Class B shares currently convertible to Class A shares by Glens Falls National. At September 30, ~~2017, the Company~~2020, Glens Falls National held 27,771 shares of Visa Class B common ~~stock.~~stock, and utilizing the conversion ratio to Class A ~~potential future conversion~~common stock at that time, these Class B shares would convert to 45,000 shares of ~~these shares into~~ Visa Class A common ~~stock could result in our receiving approximately 46 thousand shares of~~stock. Since the ~~latter. There continue to be restrictions remaining on Visa Class B shares held by us. We continue~~litigation settlement is not tocertain, the Company does not recognize any economic value for these shares.

CHANGE IN FINANCIAL CONDITION

Summary of Selected Consolidated Balance Sheet Data

(Dollars in Thousands)


	At Period-End						$ Change			$ Change			% Change		% Change
	September 30, 2017		December 31, 2016		September 30, 2016		From December			From September			From December (not annualized)		From September			September 30, 2020		At Period-End December 31, 2019		September 30, 2019		$ Change From December		$ Change From September		% Change From December (not annualized)		% Change From September
Interest-Bearing Bank Balances	$	24,983	$	14,331	$	35,503	$	10,652		$	(10,520	)	74.3	%	(29.6	)%	Interest-Bearing Bank Balances	$	396,380	$	23,186	$	26,416	$	373,194	$	369,964	1,609.6	%	1,400.5	%
Securities Available-for-Sale	315,459		346,996		339,190		(31,537		)	(23,731		)	(9.1	)%	(7.0	)%	Securities Available-for-Sale	374,928		357,334		314,182		17,594		60,746		4.9	%	19.3	%
Securities Held-to-Maturity	341,526		345,427		338,238		(3,901		)	3,288			(1.1	)%	1.0	%	Securities Held-to-Maturity	224,799		245,065		255,095		(20,266)		(30,296)		(8.3)	%	(11.9)	%
Equity Securities																	Equity Securities	1,511		2,063		1,996		(552)		(485)		(26.8)	%	(24.3)	%
Loans⁽¹⁾	1,908,799		1,753,268		1,707,216		155,531			201,583			8.9	%	11.8	%	Loans (1)	2,592,455		2,386,120		2,335,591		206,335		256,864		8.6	%	11.0	%
Allowance for Loan Losses	17,695		17,012		16,975		683			720			4.0	%	4.2	%
Allowance for loan losses																	Allowance for loan losses	28,446		21,187		20,931		7,259		7,515		34.3	%	35.9	%
Earning Assets⁽¹⁾	2,597,471		2,470,934		2,425,518		126,537			171,953			5.1	%	7.1	%	Earning Assets (1)	3,595,647		3,024,085		2,939,907		571,562		655,740		18.9	%	22.3	%
Total Assets	$	2,744,462	$	2,605,242	$	2,580,485	$	139,220		$	163,977		5.3	%	6.4	%	Total Assets	$	3,777,684	$	3,184,275	$	3,112,822	$	593,409	$	664,862	18.6	%	21.4	%
Demand Deposits	$	448,515	$	387,280	$	381,760	$	61,235		$	66,755		15.8	%	17.5	%
Noninterest-Bearing Deposits																	Noninterest-Bearing Deposits	$	690,232	$	484,944	$	516,876	$	205,288	$	173,356	42.3	%	33.5	%
Interest-Bearing Checking Accounts	967,250		877,988		993,221		89,262			(25,971		)	10.2	%	(2.6	)%	Interest-Bearing Checking Accounts	912,980		689,221		801,446		223,759		111,534		32.5	%	13.9	%
Savings Deposits	696,805		651,965		629,201		44,840			67,604			6.9	%	10.7	%	Savings Deposits	1,354,956		1,046,568		929,691		308,388		425,265		29.5	%	45.7	%
Time Deposits over $250,000	28,464		32,878		45,237		(4,414		)	(16,773		)	(13.4	)%	(37.1	)%	Time Deposits over $250,000	112,555		123,968		96,770		(11,413)		15,785		(9.2)	%	16.3	%
Other Time Deposits	166,082		166,435		163,768		(353		)	2,314			(0.2	)%	1.4	%	Other Time Deposits	194,135		271,353		269,764		(77,218)		(75,629)		(28.5)	%	(28.0)	%
Total Deposits	$	2,307,116	$	2,116,546	$	2,213,187	$	190,570		$	93,929		9.0	%	4.2	%	Total Deposits	$	3,264,858	$	2,616,054	$	2,614,547	$	648,804	$	650,311	24.8	%	24.9	%
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	$	61,419	$	35,836	$	38,589	$	25,583		$	22,830		71.4	%	59.2	%	Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	$	73,949	$	51,099	$	72,869	$	22,850	$	1,080	44.7	%	1.5	%
FHLBNY Advances - Overnight	33,000		123,000		—		(90,000		)	33,000			(73.2	)%	—	%	FHLBNY Advances - Overnight	—		130,000		48,000		(130,000)		(48,000)		(100.0)	%	(100.0)	%
FHLBNY Advances - Term	55,000		55,000		55,000		—			—			—	%	—	%	FHLBNY Advances - Term	50,000		30,000		30,000		20,000		20,000		66.7	%	66.7	%
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts																	Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000		20,000		—		—		—	%	—	%
Stockholders' Equity	244,648		232,852		229,208		11,796			15,440			5.1	%	6.7	%	Stockholders' Equity	325,660		301,728		292,228		23,932		33,432		7.9	%	11.4	%

(1) Includes Nonaccrual ~~Loans~~Loans.

Changes in Earning Assets: The loan portfolio at September 30, 2020, was $2.6 billion, an increase of $206.3 million, or 8.6%, from the December 31, 2019 level and up by $256.9 million, or 11.0%, from the September 30, 2019 level. The following trends were experienced in our largest segments:

•Commercial and commercial real estate loans: This segment of the loan portfolio increased by $156.0 million, or 23.6%, during the first nine months of 2020. The majority of the increase resulted from the origination of approximately of $142.7 million of the Small Business Administration's Payroll Protection Program loans.

•Consumer loans (primarily automobile loans through indirect lending):As of September 30, 2020, these loans, primarily auto loans, increased by $38.3 million, or 4.7%, from the December 31, 2019 balance. The physical sale of vehicles through dealerships, which had been curtailed for a portion of the year as part of the New York State and Vermont response to the COVID-19 pandemic, has resumed. However, while certain restrictions and guidelines have been lifted or relaxed, they may be reinstituted in response to the continuing effects of the pandemic.

•Residential real estate loans:This segment increased during the first nine months of 2020 by $12.1 million, or 1.3%. The likely impact of the COVID-19 pandemic on the volume of residential real estate loans is difficult to determine. We expect that elevated unemployment and the temporary closure of some non-essential businesses in New York State may have an adverse impact on new originations. The rapid decline of interest rates has, however, increased near-term demand for refinancing and new purchase loans, both with existing and new customers.

Changes in Sources of Funds: Deposit balances reached $3.3 billion, up $650.3 million, or 24.9%, from the prior-year level. Deposit growth for the third quarter of 2020 was $196.1 million. Noninterest-bearing deposits represented 21.1% of total deposits at September 30, 2020, compared to 19.8% of total deposits on September 30, 2019. At September 30, 2020, other time deposits were $194.1 million, a decrease of $75.6 million compared to the prior year. Municipal deposits increased $218.8 million, or 34.6% from September 30, 2019.

Municipal Deposits:Fluctuations in balances of ~~our~~ interest-bearing checking accounts are largely the result of timing and behavior of municipal ~~deposit fluctuations.~~deposits. Municipal deposits on average represent ~~28%~~20% to ~~34%~~25% of ~~our~~ total ~~deposits.~~deposits, although slightly higher at September 30, 2020. Municipal deposits are typically placed in interest-bearing checking, ~~and~~ savings ~~accounts, as well as~~and various time ~~deposits.~~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 ~~these~~ seasonal ~~fluctuations within types of accounts,~~behavior, the overall level of municipal deposit balances fluctuates from year-to-year as ~~some municipalities move their accounts~~a result of local economic factors as well as competition from other banks and non-bank entities.

FINANCIAL CONDITION

Investment Portfolio Trends

The table below presents the changes in ~~and out of our banks due to competitive factors. Often,~~ the ~~balances of municipal deposits at the end of a quarter are not representative of the average~~period-end balances for ~~that quarter.~~

If in the future, interest rates begin to rise significantly or the competition for municipal deposits otherwise becomes more intense, we may experience an elevation in the rates we are forced to pay on such deposits above our normal rates or, if we decline to pay such rates, we may experience a sustained decrease in municipal deposit levels.

~~Changes in Sources of Funds:~~ ~~Our total deposits increased $190.6 million, or 9.0%,~~available-for-sale, held-to-maturity and equity securities from December 31, ~~2016~~2019 to September 30, ~~2017. Our municipal deposits increased~~2020 (in thousands).


	(Dollars in Thousands)
	Fair Value at Period-End						Net Unrealized Gains (Losses) For Period Ended
	9/30/2020		12/31/2019		Change		9/30/2020		12/31/2019		Change
Securities Available-for-Sale:

U.S. Agency Securities	$	35,167	$	5,054	$	30,113	$	166	$	52	$	114
State and Municipal Obligations	593		764		(171)		—		—		—
Mortgage-Backed Securities	338,368		350,716		(12,348)		8,481		772		7,709
Corporate and Other Debt Securities	800		800		—		(200)		(200)		—

Total	$	374,928	$	357,334	$	17,594	$	8,447	$	624	$	7,823

Securities Held-to-Maturity:
State and Municipal Obligations	$	203,180	$	212,319	$	(9,139)	$	7,445	$	4,076	$	3,369
Mortgage-Backed Securities	30,321		37,299		(6,978)		1,257		477		780

Total	$	233,501	$	249,618	$	(16,117)	$	8,702	$	4,553	$	4,149

Equity Securities	$	1,511	$	2,063	$	(552)	$	—	$	—	$	—

At September 30, 2020, the Company 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 ~~14.5% during the period, mainly due~~U.S. federal agencies. Mortgage pass-through securities provide to the ~~collection~~investor monthly portions of ~~school taxes, while our consumer~~principal and ~~business deposit balances increased~~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. The Company's practice has been to purchase pass-through securities and CMOs that are issued or guaranteed by ~~6.7%. Our significant~~U.S. federal agencies, and the tranches of CMOs purchased are generally those having shorter average lives and/or durations. As a result of payment deferrals on underlying loan ~~growth during~~collateral that make up mortgage-backed securities, some cashflows may be temporarily impacted.

Other-Than-Temporary Impairment

Each quarter all investment securities with a fair value less than amortized cost are evaluated in the available-for-sale portfolio, the held-to-maturity portfolio and the equity securities portfolio, to determine if there exists other-than-temporary impairment for any such security as defined under generally accepted accounting principles. The evaluation also examined the potential impact of the COVID-19 pandemic on other-than-temporary impairment. There were no other-than-temporary impairment losses in the first nine months of ~~2017~~2020.

Change in Net Unrealized Securities Gains (Losses): Nearly all of the change in net unrealized gains or losses during recent periods has been 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 ~~our reduction~~Maturities

There were no sales of investment securities within the nine month periods ended September 30, 2020 or 2019.


(In Thousands)	Three Months Ended				Nine Months Ended
Purchases:	9/30/2020		9/30/2019		9/30/2020		9/30/2019
Available-for-Sale Portfolio



Mortgage-Backed Securities	$	30,000	$	55,028	$	86,832	$	70,418



Maturities & Calls	$	32,809	$	27,391	$	75,449	$	79,077


	Three Months Ended				Nine Months Ended
Purchases:	9/30/2020		9/30/2019		9/30/2020		9/30/2019
Held-to-Maturity Portfolio
State and Municipal Obligations	$	1,842	$	1,302	$	6,848	$	3,398



Maturities & Calls	$	10,384	$	8,553	$	26,570	$	31,161

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. Over the last five quarters, the average balances for Commercial, Commercial Real Estate, Consumer and Residential Real Estate have steadily increased, although at different rates. As result of the economic impact of the COVID-19 pandemic, it is uncertain if this consistent growth will continue through the pandemic.

Quarterly Average Loan Balances

(Dollars in ~~FHLBNY Advances-Overnight was funded by~~Thousands)


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Commercial	$	276,296	$	234,732	$	140,486	$	133,550	$	125,498
Commercial Real Estate	538,914		530,808		518,931		505,639		493,819
Consumer	841,009		840,734		818,892		817,463		809,641
Residential Real Estate	926,034		911,924		916,037		901,458		879,921
Total Loans	$	2,582,253	$	2,518,198	$	2,394,346	$	2,358,110	$	2,308,879

Percentage of Total Quarterly Average Loans


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Commercial	9.3	%	9.3	%	5.9	%	5.7	%	5.4	%
Commercial Real Estate	21.1	%	21.1	%	21.6	%	21.4	%	21.4	%
Consumer	33.4	%	33.4	%	34.2	%	34.7	%	35.1	%
Residential Real Estate	36.2	%	36.2	%	38.3	%	38.2	%	38.1	%
Total Loans	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Quarterly Yield on Loans


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Commercial	3.73	%	3.84	%	4.52	%	4.54	%	4.60	%
Commercial Real Estate	3.91	%	4.05	%	4.34	%	4.53	%	4.57	%
Consumer	3.89	%	3.90	%	3.97	%	4.01	%	3.95	%
Residential Real Estate	3.86	%	4.08	%	4.20	%	4.20	%	4.27	%
Total Loans	3.81	%	4.01	%	4.18	%	4.19	%	4.23	%

The average yield of the overall total loan portfolio decreased during each of the previous four quarters. The COVID-19 pandemic and the rapid decline to historically low market rates, as well as the addition of $142.7 million of Small Business Administration Paycheck Protection Program loans (as described below) will continue to negatively impact loan yields for the remainder of 2020.

Maintenance of High Quality in the Loan Portfolio: In early 2020, prior to the COVID-19 pandemic, there were 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 the Company has not engaged in subprime mortgage lending as a ~~combination~~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. The economic events related to the COVID-19 pandemic, specifically elevated unemployment and the temporary mandated closure of nonessential business, may impact the ability of our ~~increase~~borrowers to satisfy their obligations.

Commercial Loans and Commercial Real Estate Loans: Substantially all commercial and commercial real estate loans in ~~deposits~~the loan portfolio were extended to businesses or borrowers located in the Company's regional markets. A portion of the loans in the commercial portfolio have variable rates tied to Prime, LIBOR or FHLBNY rates.

Many of the commercial and ~~our securities sold under agreements~~commercial real estate loans are in industries that have been heavily impacted by the COVID-19 pandemic. In 2020, Arrow originated over 1,400 PPP loans totaling approximately $142.7 million. The PPP loans yield 1% and Arrow expects to ~~repurchase,~~earn approximately $5.1 million in ~~addition~~fees related to ~~a reduction in our investment securities portfolio.~~the origination of these loans. The original term on the PPP loans is two years, however the borrower will have 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 is recognizing 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. Additional government intervention, if any, may mitigate the economic risk to both Arrow and its customers, however, the extent of such intervention and its impact cannot be determined at this time.

Consumer Loans: At September 30, ~~2017, our term advances from~~2020, consumer loans (primarily automobile loans originated through dealerships located primarily in upstate New York and Vermont) continue to be a significant component of Arrow's business, comprising more than one third of this total loan portfolio. The physical sale of vehicles through dealerships had been curtailed for a portion of the ~~FHLBNY were $55 million, unchanged from both our year-end 2016 balance~~year as part of the New York State and ~~our September 30, 2016 balance.~~Vermont response to the COVID-19 pandemic. Accordingly, we believe, the volume of originations of consumer loans have been impacted. However, the magnitude of the impact cannot be determined.

~~Changes in Earning Assets:~~ ~~Our~~New consumer loan ~~portfolio at September 30, 2017, was $1.91 billion, up by $155.5 million, or 8.9%, from the~~ ~~December 31, 2016~~ ~~level and up by $201.6 million, or 11.8%, from the September 30, 2016 level. We experienced the following trends in our four largest segments:~~


1.	~~Commercial loans. This segment of our portfolio increased significantly by $20.2 million, or 19.2%, during the first nine months of 2017, representing the impact of demand~~volume for ~~such loans during the period.~~

2. ~~Commercial real estate loans. This segment of our portfolio increased by $9.1 million, or 2.1%, during~~ the first nine months of ~~2017, representing~~2020 was $292.8 million, down from the ~~continued strong demand for such loans offset~~$319.6 million originated in ~~part by a few large payoffs during the period.~~


3.	~~Consumer loans (primarily automobile loans through indirect lending)~~. As of September 30, 2017, these loans, primarily auto loans, had increased by $54.7 million, or 10.2%, from the December 31, 2016 balance, reflecting a continuation of strong demand for new and used vehicles region-wide and an expansion of our dealer network for indirect lending.

4. ~~Residential real estate loans. This segment increased during~~ the first nine months of ~~2017, by $71.6~~2019.

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. The COVID-19 pandemic has created elevated unemployment, which may impact borrowers' ability to satisfy their obligations to Arrow. Government intervention may mitigate a significant portion of the credit risk, however, the extent of such intervention and its impact cannot be determined at this time.

Residential Real Estate Loans: In recent years, residential real estate loans, including home equity loans, have represented the largest category of the total loan portfolio. Gross originations for residential real estate loans (including refinancings of mortgage loans) for the first nine months of 2020 were $157.0 million, as compared to $102.2 million for the first nine months of 2019. Arrow has also sold portions of these originations in the secondary market. In the first nine months of 2020, the Company sold $50.5 million, or ~~10.5%. As in prior periods, we elected~~32.2%, of originations. In the first nine months of 2019, $19.0 million, or 18.6%, of originations were sold. Arrow expects to continue to sell a portion of mortgage loan originations in upcoming periods if market conditions warrant. It is not currently possible to determine the ~~residential mortgage loans we originated during~~long term economic impact of the ~~period to Freddie Mac. Gross originations were up during~~COVID-19 pandemic, which had resulted in the ~~period, compared to the comparable 2016 period,~~temporary closure of non-essential business and ~~we retained a higher percentage of our originations than in~~elevated unemployment.

~~the year earlier period. Nevertheless, demand for new mortgage loans remained strong throughout the first nine months, reflecting continuing low rates and a stable local economy with low unemployment.~~

Deposit Trends

The following ~~two~~ tables provide information on trends in the balance and mix of ~~our~~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 ~~principal~~quarterly average balances of both noninterest-bearing deposits and interest-bearing checking and savings accounts have increased significantly in the last two quarters. Time deposits, over $250,000 as well as other time deposits, have decreased over the last two quarters. Market rates, beginning to decline prior to the COVID-19 pandemic, reached historic lows in the first quarter and have remained low through the third quarter. We do not currently expect any change in ~~deposit balances over~~ the ~~period was the steady and significant increase in demand deposits and savings deposits and little or no increase in other types~~rate environment for remainder of deposits, including time deposits. As mentioned previously, the volatility in interest-bearing checking deposit account balances is mainly due to seasonal fluctuations in municipal deposits. If and to the extent that interest rates, and corresponding deposit rates, across all maturities, begin to increase in future periods from their current continuing very low rates, even if such increases are very gradual, we would expect this multi-year migration to lower-rate deposits to change, as depositors shift back to higher-rate, longer term deposits, putting heightened pressure on our net interest margin.2020.

Quarterly Average Deposit Balances

(Dollars in Thousands)


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Noninterest-Bearing Deposits	$	673,181	$	624,125	$	478,481	$	491,494	$	490,177
Interest-Bearing Checking Accounts	764,614		740,284		707,747		724,668		686,017
Savings Deposits	1,314,241		1,215,296		1,092,980		1,003,612		924,868
Time Deposits over $250,000	121,027		135,978		126,046		120,321		86,018
Other Time Deposits	209,436		236,749		264,755		267,326		285,448
Total Deposits	$	3,082,499	$	2,952,432	$	2,670,009	$	2,607,421	$	2,472,528

Quarter Ended
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Demand Deposits $ 443,840
$ 408,214
$ 389,606
$ 383,226
$ 381,195
Interest-Bearing Checking Accounts 869,748
918,235
894,911
921,971
869,439
Savings Deposits 682,347
681,197
677,662
649,928
607,850
Time Deposits over $250,000 31,067
31,126
33,758
39,058
41,267
Other Time Deposits 166,776
167,593
165,861
165,973
164,081
Total Deposits $ 2,193,778
$ 2,206,365
$ 2,161,798
$ 2,160,156
$ 2,063,832

Percentage of Total Quarterly Average Deposits


												Quarter Ended
	Quarter Ended											9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
	9/30/2017		6/30/2017		3/31/2017		12/31/2016		9/30/2016
Demand Deposits	20.2	%	18.5	%	18.0	%	17.7	%	18.5	%
Noninterest-Bearing Deposits											Noninterest-Bearing Deposits	21.8	%	21.1	%	17.9	%	18.8	%	19.8	%
Interest-Bearing Checking Accounts	39.6	%	41.6	%	41.4	%	42.7	%	42.1	%	Interest-Bearing Checking Accounts	24.8		25.1		26.5		27.8		27.7
Savings Deposits	31.2	%	30.9	%	31.3	%	30.1	%	29.4	%	Savings Deposits	42.7		41.2		41.0		38.5		37.5
Time Deposits over $250,000	1.4	%	1.4	%	1.6	%	1.8	%	2.0	%	Time Deposits over $250,000	3.9		4.6		4.7		4.6		3.5
Other Time Deposits	7.6	%	7.6	%	7.7	%	7.7	%	8.0	%	Other Time Deposits	6.8		8.0		9.9		10.3		11.5
Total Deposits	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	Total Deposits	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Quarterly Cost of Deposits


	Quarter Ended											Quarter Ended
	9/30/2017		6/30/2017		3/31/2017		12/31/2016		9/30/2016			9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Demand Deposits	—	%	—	%	—	%	—	%	—	%	Demand Deposits	—	%	—	%	—	%	—	%	—	%
Interest-Bearing Checking Accounts	0.17		0.17		0.15		0.15		0.15		Interest-Bearing Checking Accounts	0.14	%	0.17	%	0.28	%	0.30	%	0.29	%
Savings Deposits	0.21		0.19		0.17		0.16		0.15		Savings Deposits	0.24	%	0.39	%	0.91	%	0.98	%	0.99	%
Time Deposits over $250,000	0.84		0.85		0.66		0.55		0.59		Time Deposits over $250,000	0.96	%	1.30	%	1.70	%	1.88	%	2.08	%
Other Time Deposits	0.57		0.56		0.56		0.60		0.56		Other Time Deposits	1.09	%	1.33	%	1.52	%	1.67	%	1.74	%
Total Deposits	0.19		0.18		0.17		0.16		0.16		Total Deposits	0.25	%	0.37	%	0.68	%	0.72	%	0.73	%

During the quarter ended September 30, ~~2017, our average deposit~~2020, the total cost ~~on our interest bearing deposit categories increased slightly due~~of deposits continued to ~~certain deposit customers shifting funds~~decrease. The Federal Reserve set the targeted short-term rates to ~~higher rate deposit products. This shift may represent the beginning of a general increase in deposit rates for banks~~0.00%-0.25% in response to the ~~program initiated by~~economic uncertainty related to the ~~Federal Reserve in late 2015 to drive up short term rates through~~COVID-19 pandemic. Arrow is well positioned for a ~~series~~variety of ~~gradual~~ rate increases. Given the uncertainty surrounding the future of interest rates, we are unable to predict at this time what the short- or long-term effect of the Federal Reserve’s interest rate determinations may be.environments, see Part I, Item 3, entitled "Quantitative and Qualitative Disclosures About Market Risk," for further discussion.

~~We have several sources of funding other than new deposits. Historically, we have borrowed funds from~~The table below presents the ~~FHLBNY under a variety of programs, including fixed and variable rate short-term borrowings and borrowings~~changes in the ~~form~~period-end balances for available-for-sale, held-to-maturity and equity securities from December 31, 2019 to September 30, 2020 (in thousands).


	(Dollars in Thousands)
	Fair Value at Period-End						Net Unrealized Gains (Losses) For Period Ended
	9/30/2020		12/31/2019		Change		9/30/2020		12/31/2019		Change
Securities Available-for-Sale:

U.S. Agency Securities	$	35,167	$	5,054	$	30,113	$	166	$	52	$	114
State and Municipal Obligations	593		764		(171)		—		—		—
Mortgage-Backed Securities	338,368		350,716		(12,348)		8,481		772		7,709
Corporate and Other Debt Securities	800		800		—		(200)		(200)		—

Total	$	374,928	$	357,334	$	17,594	$	8,447	$	624	$	7,823

Securities Held-to-Maturity:
State and Municipal Obligations	$	203,180	$	212,319	$	(9,139)	$	7,445	$	4,076	$	3,369
Mortgage-Backed Securities	30,321		37,299		(6,978)		1,257		477		780

Total	$	233,501	$	249,618	$	(16,117)	$	8,702	$	4,553	$	4,149

Equity Securities	$	1,511	$	2,063	$	(552)	$	—	$	—	$	—

At September 30, 2020, the Company held no investment securities in the securities portfolios that consisted of ~~"structured advances." These structured advances typically~~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. 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 ~~original maturities~~generally been separated into two or more components (tranches), where each tranche has a separate estimated life and yield. The Company's practice has been to purchase pass-through securities and CMOs that are issued or guaranteed by U.S. federal agencies, and the tranches of ~~3 to 10 years with some advances being callable by the FHLBNY at certain dates. If the advances~~CMOs purchased are called, we may elect to receive replacement advances from the FHLBNY at the then prevailing FHLBNY rates of interest. We currently do not have, and have not had in recent periods, any structured advances in this portfolio.

~~We no longer rely on TRUPs as a source of new funds.~~generally those having shorter average lives and/or durations. As a result of payment deferrals on underlying loan collateral that make up mortgage-backed securities, some cashflows may be temporarily impacted.

Each quarter all investment securities with a fair value less than amortized cost are evaluated in the ~~passage~~available-for-sale portfolio, the held-to-maturity portfolio and the equity securities portfolio, to determine if there exists other-than-temporary impairment for any such security as defined under generally accepted accounting principles. The evaluation also examined the potential impact of the ~~Dodd-Frank Act in 2010 and its removal of Tier 1 regulatory capital treatment for TRUPs issued after the Act's grandfathering date, we like all insured financial institutions of our size~~

~~or larger have not issued any TRUPs since that date and are not likely to issue any TRUPs~~COVID-19 pandemic on other-than-temporary impairment. There were no other-than-temporary impairment losses in the ~~future. However, consistent~~first nine months of 2020.

There were no sales of ~~Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts listed on our consolidated balance sheet as of~~investment securities within the nine month periods ended September 30, ~~2017 (i.e., our previously issued TRUPS) will, subject to certain limits, continue to qualify~~2020 or 2019.

The following table summarizes purchases of investment securities within the available-for-sale and held-to-maturity portfolios for the nine month periods ended September 30, 2020 and 2019, as ~~Tier 1 regulatory capital~~well as proceeds from the maturity and calls of investment securities within each portfolio for Arrow until such TRUPs mature or are redeemed, as is further discussed under “Capital Resources” beginning on page 55 of this Report. These trust preferred securities are subject to early redemption by us if the proceeds cease to qualify as Tier 1 capital of Arrow for any reason, or if any of certain other unanticipated but negative events should occur, such as any adverse change in tax laws that might deny the Company the ability to deduct interest paid on these obligations for federal income tax purposes.respective periods presented:


(In Thousands)	Three Months Ended				Nine Months Ended
Purchases:	9/30/2020		9/30/2019		9/30/2020		9/30/2019
Available-for-Sale Portfolio



Mortgage-Backed Securities	$	30,000	$	55,028	$	86,832	$	70,418



Maturities & Calls	$	32,809	$	27,391	$	75,449	$	79,077


	Three Months Ended				Nine Months Ended
Purchases:	9/30/2020		9/30/2019		9/30/2020		9/30/2019
Held-to-Maturity Portfolio
State and Municipal Obligations	$	1,842	$	1,302	$	6,848	$	3,398



Maturities & Calls	$	10,384	$	8,553	$	26,570	$	31,161

The following ~~two~~three tables present, for each of the last five quarters, the quarterly average balances by loan type, ~~and~~ the percentage of total loans represented by each loan ~~type. For purposes~~type and the annualized yield of the following tables only, we have broken out Home Equity loans from Residential Real Estate loans (they are otherwise included in a single category in this Report). We have also combined Commercial Loans and Commercial Real Estate Loans into a single category (they are treated as separate categories in other sections of this Report).each loan category. Over the last five quarters, the average balances for ~~all of the below-listed categories of loans~~Commercial, Commercial Real Estate, Consumer and Residential Real Estate have steadily increased, although at different rates. As result of the economic impact of the COVID-19 pandemic, it is uncertain if this consistent growth will continue through the pandemic.

Quarterly Average Loan Balances

(Dollars in Thousands)

Quarter Ended
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Commercial and Commercial Real Estate $ 561,260
$ 556,014
$ 541,187
$ 532,456
$ 524,523
Residential Real Estate 563,793
538,884
518,263
490,427
470,865
Home Equity 137,251
138,125
135,910
135,939
133,009
Consumer Loans⁽¹⁾
630,462
609,520
585,753
567,916
552,454
Total Loans $ 1,892,766
$ 1,842,543
$ 1,781,113
$ 1,726,738
$ 1,680,851


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Commercial	$	276,296	$	234,732	$	140,486	$	133,550	$	125,498
Commercial Real Estate	538,914		530,808		518,931		505,639		493,819
Consumer	841,009		840,734		818,892		817,463		809,641
Residential Real Estate	926,034		911,924		916,037		901,458		879,921
Total Loans	$	2,582,253	$	2,518,198	$	2,394,346	$	2,358,110	$	2,308,879

Quarter Ended
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Commercial and Commercial Real Estate 29.7 % 30.2 % 30.4 % 30.8 % 31.2 %
Residential Real Estate 29.8 % 29.2 % 29.1 % 28.4 % 28.0 %
Home Equity 7.3 % 7.5 % 7.6 % 7.9 % 7.9 %
Consumer Loans⁽¹⁾
33.2 % 33.1 % 32.9 % 32.9 % 32.9 %
Total Loans 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

The ~~category “Other Consumer Loans”, in~~average yield of the ~~tables above, includes home improvement~~overall total loan portfolio decreased during each of the previous four quarters. The COVID-19 pandemic and the rapid decline to historically low market rates, as well as the addition of $142.7 million of Small Business Administration Paycheck Protection Program loans ~~secured by mortgages, which are otherwise included by us as part~~(as described below) will continue to negatively impact loan yields for the remainder of ~~our residential real estate loans in this Report.~~2020.

Maintenance of High Quality in the Loan Portfolio: In early 2020, prior to the ~~first nine months of 2017, we did not experience any material weakening~~COVID-19 pandemic, there were no significant fluctuations in the quality of ~~our~~the loan portfolio or any segment thereof. In general, ~~we have historically underwritten our~~ residential real estate loans have historically been underwritten to secondary market standards for prime loans and ~~have~~the Company has not engaged in subprime mortgage lending as a business line. Similarly, ~~we have historically applied~~ high underwriting standards ~~in our~~have generally been applied to commercial and commercial real estate lending operations and generally in ~~our~~the indirect ~~(automobile)~~ lending program as well. ~~We have occasionally made loans, including indirect loans,~~The economic events related to ~~borrowers having FICO scores below~~ the highest credit quality classifications, where special circumstances such as competitive considerations have led us to conclude it was appropriate to do so, with suitable protections against any enhanced perceived risk in such loans. We also have had extensionsCOVID-19 pandemic, specifically elevated unemployment and the temporary mandated closure of ~~credit outstanding to borrowers who have developed credit problems after origination resulting in deterioration of their FICO scores.~~

~~Residential Real Estate Loans:~~ ~~In recent years, residential real estate and home equity loans have represented~~nonessential business, may impact the ~~largest single segment~~ability of our loan portfolio (comprising 39.3% of the entire portfolio at September 30, 2017), eclipsing both our commercial and commercial real estate loans, which represented 29.7% of the portfolio on that date, and our consumer loans (primarily automobile loans), which were 31.0% of the portfolio. Our gross originations for residential real estate loans (including refinancings of pre-existing mortgage loans) were $151.7 million and $113.4 million for the first ~~nine~~ ~~months of 2017 and 2016, respectively. We expect this trend (i.e., substantially increased originations over the prior year periods)~~borrowers to continue through 2017 and into 2018. Origination totals substantially exceeded the sum of repayments and prepayments in the third quarters of both years, but in each period we also sold a portion of these originations on or immediately after origination. In the first nine months of 2017, we sold $13.7 million, or 9.0%, of our originations. In the first nine months of 2016, we sold a larger dollar amount, $19.3 million, or 17.1%, of our originations, and at a higher premium. During recent periods, commencing in 2014, we have offered additional competitive products for variable rate (adjustable) residential real estate and construction loans. These variable rate loans have not been subprime loans. We have not sold any of these variable rate loans into the secondary market.satisfy their obligations.

Commercial Loans and Commercial Real Estate Loans: ~~For the first nine months of 2017, combined commercial and commercial real estate loan originations continued to be strong, with an annualized growth rate of 7.3%.~~

Substantially all commercial and commercial real estate loans in ~~our~~the loan portfolio were extended to businesses or borrowers located in ~~our~~the Company's regional ~~market. Less than 12%~~markets. A portion of the loans in the commercial portfolio have variable rates tied to ~~prime,~~Prime, LIBOR or FHLBNY ~~rates or U.S. Treasury indices. We have not experienced any significant weakening in~~rates.

Many of the ~~quality of our commercial loan portfolio in recent years.~~

~~Growth in our commercial loans and commercial real estate loans has slowed in recent periods. It is entirely possible that demand for~~ commercial and commercial real estate loans ~~may generally weaken~~are in ~~upcoming periods and/or~~industries that have been heavily impacted by the COVID-19 pandemic. In 2020, Arrow originated over 1,400 PPP loans totaling approximately $142.7 million. The PPP loans yield 1% and Arrow expects to earn approximately $5.1 million in fees related to the origination of these loans. The original term on the PPP loans is two years, however the borrower will have the option to apply for forgiveness. Subsequent to the funding of the loans, additional guidance was provided that the ~~quality of this segment~~term of the ~~portfolio~~loan may ~~experience stress in upcoming periods. This~~be extended to five years if both parties agree to the revised terms. Arrow is ~~particularly likely~~recognizing the fees earned over the life of the loan and will accelerate recognition of the fees if the ~~ultimate effect of~~loan is forgiven by the ~~Fed's current rate hike program triggers a significant~~Small Business Administration. Additional government intervention, if any, may mitigate the economic risk to both Arrow and ~~long-lasting increase in prevailing interest rates for medium- or long-term credits. Generally,~~its customers, however, the ~~business sector,~~extent of such intervention and its impact cannot be determined at ~~least in our service area, appeared to be in reasonably good financial condition at period-end.~~this time.

Consumer ~~Loans (primarily automobile loans through indirect lending):~~Loans: At September 30, ~~2017, our automobile~~2020, consumer loans (primarily automobile loans originated through dealerships located primarily in upstate New York and Vermont) ~~represented the third largest category of loans in our portfolio, and continued~~continue to be a significant component of ~~our~~Arrow's business, comprising ~~almost a~~more than one third of ~~our~~this total loan portfolio. The physical sale of vehicles through dealerships had been curtailed for a portion of the year as part of the New York State and Vermont response to the COVID-19 pandemic. Accordingly, we believe, the volume of originations of consumer loans have been impacted. However, the magnitude of the impact cannot be determined.

~~Our new automobile~~New consumer loan volume for the first nine months of ~~2017 remained strong, at $234.6~~2020 was $292.8 million, updown from the ~~$218.5~~$319.6 million originated in the first nine months of ~~2016. As a result of these originations, our consumer loan portfolio also grew in the first nine months of 2017, by $54.7 million, or 10.2%, from our December 31, 2016 balance.~~2019.

For credit quality purposes, ~~we assign our~~Arrow assigns potential automobile loan customers into one of four tiers, ranging from lower to higher quality in terms of anticipated credit risk. ~~Our~~Arrow's experienced lending staff not only utilizes credit evaluation software tools but also reviews and evaluates each loan ~~individually. We believe our~~individually prior to the loan being funded. Arrow believes that this disciplined approach to evaluating risk has contributed to maintaining ~~our~~the strong ~~loan~~credit quality in this ~~segment~~portfolio. The COVID-19 pandemic has created elevated unemployment, which may impact borrowers' ability to satisfy their obligations to Arrow. Government intervention may mitigate a significant portion of ~~our portfolio.~~the credit risk, however, the extent of such intervention and its impact cannot be determined at this time.

Recently, several market indicators have suggested that auto loan demand is weakening somewhat on a national scale, although not in every market area. Our average maturity for automobile loan originations has expanded in

Residential Real Estate Loans: In recent years, ~~reflective~~residential real estate loans, including home equity loans, have represented the largest category of the total loan portfolio. Gross originations for residential real estate loans (including refinancings of mortgage loans) for the first nine months of 2020 were $157.0 million, as compared to $102.2 million for the first nine months of 2019. Arrow has also sold portions of these originations in the secondary market. In the first nine months of 2020, the Company sold $50.5 million, or 32.2%, of originations. In the first nine months of 2019, $19.0 million, or 18.6%, of originations were sold. Arrow expects to continue to sell a ~~larger market development. If we encounter some weakening in auto demand in our service area (and we have not, to date), we may experience limited, if any, overall growth in this segment~~portion of ~~our portfolio~~mortgage loan originations in upcoming periods ~~regardless~~if market conditions warrant. It is not currently possible to determine the long term economic impact of ~~whether~~ the ~~auto company lending affiliates continue to offer highly-subsidized loans. Of course, in this segment of our portfolio, as~~COVID-19 pandemic, which had resulted in the temporary closure of non-essential business and elevated unemployment.

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 in the last two quarters. Time deposits, over $250,000 as well as other ~~segments,~~time deposits, have decreased over the last two quarters. Market rates, beginning to decline prior to the COVID-19 pandemic, reached historic lows in the first quarter and have remained low through the third quarter. We do not currently expect any ~~substantial increase~~change in ~~prevailing interest~~the rate environment for remainder of 2020.

Quarterly Average Deposit Balances

(Dollars in Thousands)


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Noninterest-Bearing Deposits	$	673,181	$	624,125	$	478,481	$	491,494	$	490,177
Interest-Bearing Checking Accounts	764,614		740,284		707,747		724,668		686,017
Savings Deposits	1,314,241		1,215,296		1,092,980		1,003,612		924,868
Time Deposits over $250,000	121,027		135,978		126,046		120,321		86,018
Other Time Deposits	209,436		236,749		264,755		267,326		285,448
Total Deposits	$	3,082,499	$	2,952,432	$	2,670,009	$	2,607,421	$	2,472,528

Percentage of Total Quarterly Average Deposits


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Noninterest-Bearing Deposits	21.8	%	21.1	%	17.9	%	18.8	%	19.8	%
Interest-Bearing Checking Accounts	24.8		25.1		26.5		27.8		27.7
Savings Deposits	42.7		41.2		41.0		38.5		37.5
Time Deposits over $250,000	3.9		4.6		4.7		4.6		3.5
Other Time Deposits	6.8		8.0		9.9		10.3		11.5
Total Deposits	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Quarterly Cost of Deposits


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Demand Deposits	—	%	—	%	—	%	—	%	—	%
Interest-Bearing Checking Accounts	0.14	%	0.17	%	0.28	%	0.30	%	0.29	%
Savings Deposits	0.24	%	0.39	%	0.91	%	0.98	%	0.99	%
Time Deposits over $250,000	0.96	%	1.30	%	1.70	%	1.88	%	2.08	%
Other Time Deposits	1.09	%	1.33	%	1.52	%	1.67	%	1.74	%
Total Deposits	0.25	%	0.37	%	0.68	%	0.72	%	0.73	%

During the quarter ended September 30, 2020, the total cost of deposits continued to decrease. The Federal Reserve set the targeted short-term rates ~~in upcoming periods, presumably~~to 0.00%-0.25% in response to the ~~Fed's rate rise program, would likely have some negative impact on our originations. The same also may occur if~~ economic ~~conditions in our indirect loan service area should generally weaken in upcoming periods.~~

~~The following table indicates the annualized tax-equivalent yield of each loan category for the past five quarters.~~

~~The average yield in our total loan portfolio during the third quarter of 2017 was down slightly compared~~uncertainty related to the average yield during the third quarter of 2016. For the quarter, yields on all loan types increased in comparison to the immediately preceding quarter with the exception of the residential real estate portfolio. The residential real estate portfolio's overall yield continues to decline as cash flow from the portfolioCOVID-19 pandemic. Arrow is replaced with new production in the current rate environment. However, the average rates on newly-originated loans made by us in all segments of our portfolio were at least equal to, and in most cases slightly above, the average rateswell positioned for ~~comparable loans originated by us in the year-earlier quarter.~~

Regardless of the future direction or magnitude of changes in prevailing interest rates, the yield on our loan portfolio will ultimately be impacted by such changes. However, the timing and degree of responsiveness, in loans generally and as between various categories of loans, will also be influenced by a variety of ~~other factors, including the extent of federal government participation in the home mortgage market, the makeup of our loan portfolio, the shape of the yield curve, consumer expectations~~rate environments, see Part I, Item 3, entitled "Quantitative and ~~preferences, and the rate at which the portfolio expands.~~Qualitative Disclosures About Market Risk," for further discussion.

The table below presents the changes in the period-end balances for ~~the~~available-for-sale, held-to-maturity and equity securities ~~available-for-sale and the securities held-to-maturity investment portfolios~~ from December 31, ~~2016~~2019 to September 30, ~~2017~~2020 (in thousands).

The net reduction in the two portfolios on a combined basis during the period (of $31.5 million, or 4.8%) reflected our strategy in recent years to reallocate earning assets from investment securities to higher yielding loans to maximize earning asset yields.

Net Unrealized Gains (Losses)

At September 30, ~~2017, we~~2020, the Company held no investment securities in ~~either of our~~the securities portfolios that consisted of or included, directly or indirectly, obligations of foreign governments or governmental agencies orof foreign issuers.

AsIn the periods referenced above, Mortgage-Backed Securities consisted solely of ~~both period-ends presented in the above table, all listed Mortgage-Backed Securities-Residential consisted of mortgage-backed security pools~~mortgage pass-through securities and ~~collateralized mortgage obligations (CMOs) that were~~Collateralized Mortgage Obligations ("CMOs") issued or guaranteed by U.S. ~~Government Agency or government sponsored enterprises (GSEs), such as Fannie Mae or Freddie Mac. Mortgage-backed security pools~~federal agencies. Mortgage pass-through securities provide to the investor monthly portions of principal and interest ~~payments~~ pursuant to the contractual obligations of the underlying mortgages. InCMOs are pools of mortgage-backed securities, the ~~case of most CMOs, the principal and interest payments~~repayments on ~~the pooled mortgages are~~which have generally been separated into two or more components (tranches), ~~with~~where each tranche ~~having~~has a separate estimated life ~~risk profile~~ and yield. ~~Our~~The Company's practice has been to purchase ~~only those~~pass-through securities and CMOs that are issued or guaranteed by ~~GSEs or other~~U.S. federal agencies, and ~~only~~the tranches of CMOs purchased are generally those ~~CMO tranches with~~having shorter ~~maturities and no more than moderate extension risk. Included in corporate and other debt~~average lives and/or durations. As a result of payment deferrals on underlying loan collateral that make up mortgage-backed securities, ~~are trust preferred securities issued by other financial institutions prior to May 19, 2010, the grandfathering date for TRUPs in Dodd Frank, that were highly rated at the time of purchase.~~some cashflows may be temporarily impacted.

Each quarter ~~we evaluate~~ all investment securities with a fair value less than amortized cost ~~both~~are evaluated in the available-for-sale portfolio, the held-to-maturity portfolio and the ~~held-to-maturity~~equity securities portfolio, to determine if there exists other-than-temporary impairment for any such security as defined under generally accepted accounting principles. The evaluation also examined the potential impact of the COVID-19 pandemic on other-than-temporary impairment. There were no other-than-temporary impairment losses in the first nine months of ~~2017.~~2020.

Change in Net Unrealized Securities Gains (Losses): Nearly all of the change in ~~our~~ net unrealized gains or losses during recent periods has been attributable to changes in the market ~~yields~~rates during the periods in question, with ~~little or~~ no change in the credit-worthiness of the issuers.

~~The following table summarizes~~There were no sales of investment securities within the ~~available-for-sale and held-to-maturity portfolios for the three and nine-month~~nine month periods ended September 30, ~~2017 and 2016:~~2020 or 2019.

Investment yields in the debt markets experienced some volatility in the fourth quarter of 2016 and the first nine months of 2017. We regularly review our interest rate risk position along with our security holdings to evaluate if market opportunities have arisen that may permit us to reposition certain securities available-for-sale to enhance portfolio performance.

The following table summarizes purchases of investment securities within the available-for-sale and held-to-maturity portfolios for the ~~three and nine-month~~nine month periods ended September 30, ~~2017~~2020 and ~~2016,~~2019, 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				Nine Months Ended
Purchases:	9/30/2020		9/30/2019		9/30/2020		9/30/2019
Available-for-Sale Portfolio



Mortgage-Backed Securities	$	30,000	$	55,028	$	86,832	$	70,418



Maturities & Calls	$	32,809	$	27,391	$	75,449	$	79,077


	Three Months Ended				Nine Months Ended
Purchases:	9/30/2020		9/30/2019		9/30/2020		9/30/2019
Held-to-Maturity Portfolio
State and Municipal Obligations	$	1,842	$	1,302	$	6,848	$	3,398



Maturities & Calls	$	10,384	$	8,553	$	26,570	$	31,161

Quarterly Average Loan Balances

(Dollars in Thousands)


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Commercial	$	276,296	$	234,732	$	140,486	$	133,550	$	125,498
Commercial Real Estate	538,914		530,808		518,931		505,639		493,819
Consumer	841,009		840,734		818,892		817,463		809,641
Residential Real Estate	926,034		911,924		916,037		901,458		879,921
Total Loans	$	2,582,253	$	2,518,198	$	2,394,346	$	2,358,110	$	2,308,879

Three Months Ended Nine Months Ended
Purchases: 9/30/2017 9/30/2016 9/30/2017 9/30/2016
Available-for-Sale Portfolio
U.S. Treasury Securities $ 10,179
$ —
$ 10,179
$ —
U.S. Agency Securities —
—
—
—
State and Municipal Obligations —
—
—
10,920
Mortgage-Backed Securities-Residential —
—
12,324
—
Other —
—
—
—
Total Purchases $ 10,179
$ —
$ 22,503
$ 10,920

Maturities & Calls $ 11,750
$ 22,185
$ 43,617
$ 65,965

Maintenance of High Quality in the Loan Portfolio: In early 2020, prior to the COVID-19 pandemic, there were 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 the Company 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. The economic events related to the COVID-19 pandemic, specifically elevated unemployment and the temporary mandated closure of nonessential business, may impact the ability of our borrowers to satisfy their obligations.

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 the Company's regional markets. A portion of the loans in the commercial portfolio have variable rates tied to Prime, LIBOR or FHLBNY rates.

Many of the commercial and commercial real estate loans are in industries that have been heavily impacted by the COVID-19 pandemic. In 2020, Arrow originated over 1,400 PPP loans totaling approximately $142.7 million. The PPP loans yield 1% and Arrow expects to earn approximately $5.1 million in fees related to the origination of these loans. The original term on the PPP loans is two years, however the borrower will have 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 is recognizing 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. Additional government intervention, if any, may mitigate the economic risk to both Arrow and its customers, however, the extent of such intervention and its impact cannot be determined at this time.

Consumer Loans: At September 30, 2020, consumer loans (primarily automobile loans originated through dealerships located primarily in upstate New York and Vermont) continue to be a significant component of Arrow's business, comprising more than one third of this total loan portfolio. The physical sale of vehicles through dealerships had been curtailed for a portion of the year as part of the New York State and Vermont response to the COVID-19 pandemic. Accordingly, we believe, the volume of originations of consumer loans have been impacted. However, the magnitude of the impact cannot be determined.

New consumer loan volume for the first nine months of 2020 was $292.8 million, down from the $319.6 million originated in the first nine months of 2019.

Residential Real Estate Loans: In recent years, residential real estate loans, including home equity loans, have represented the largest category of the total loan portfolio. Gross originations for residential real estate loans (including refinancings of mortgage loans) for the first nine months of 2020 were $157.0 million, as compared to $102.2 million for the first nine months of 2019. Arrow has also sold portions of these originations in the secondary market. In the first nine months of 2020, the Company sold $50.5 million, or 32.2%, of originations. In the first nine months of 2019, $19.0 million, or 18.6%, of originations were sold. Arrow expects to continue to sell a portion of mortgage loan originations in upcoming periods if market conditions warrant. It is not currently possible to determine the long term economic impact of the COVID-19 pandemic, which had resulted in the temporary closure of non-essential business and elevated unemployment.

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 in the last two quarters. Time deposits, over $250,000 as well as other time deposits, have decreased over the last two quarters. Market rates, beginning to decline prior to the COVID-19 pandemic, reached historic lows in the first quarter and have remained low through the third quarter. We do not currently expect any change in the rate environment for remainder of 2020.

~~Asset Quality~~Quarterly Average Deposit Balances

(Dollars in Thousands)


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Noninterest-Bearing Deposits	$	673,181	$	624,125	$	478,481	$	491,494	$	490,177
Interest-Bearing Checking Accounts	764,614		740,284		707,747		724,668		686,017
Savings Deposits	1,314,241		1,215,296		1,092,980		1,003,612		924,868
Time Deposits over $250,000	121,027		135,978		126,046		120,321		86,018
Other Time Deposits	209,436		236,749		264,755		267,326		285,448
Total Deposits	$	3,082,499	$	2,952,432	$	2,670,009	$	2,607,421	$	2,472,528

Percentage of Total Quarterly Average Deposits


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Noninterest-Bearing Deposits	21.8	%	21.1	%	17.9	%	18.8	%	19.8	%
Interest-Bearing Checking Accounts	24.8		25.1		26.5		27.8		27.7
Savings Deposits	42.7		41.2		41.0		38.5		37.5
Time Deposits over $250,000	3.9		4.6		4.7		4.6		3.5
Other Time Deposits	6.8		8.0		9.9		10.3		11.5
Total Deposits	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Quarterly Cost of Deposits


	Quarter Ended
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Demand Deposits	—	%	—	%	—	%	—	%	—	%
Interest-Bearing Checking Accounts	0.14	%	0.17	%	0.28	%	0.30	%	0.29	%
Savings Deposits	0.24	%	0.39	%	0.91	%	0.98	%	0.99	%
Time Deposits over $250,000	0.96	%	1.30	%	1.70	%	1.88	%	2.08	%
Other Time Deposits	1.09	%	1.33	%	1.52	%	1.67	%	1.74	%
Total Deposits	0.25	%	0.37	%	0.68	%	0.72	%	0.73	%

During the quarter ended September 30, 2020, the total cost of deposits continued to decrease. The Federal Reserve set the targeted short-term rates to 0.00%-0.25% in response to the economic uncertainty related to the COVID-19 pandemic. 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.

The Company's other sources of funds include securities sold under agreements to repurchase, overnight advances and term advances from the FHLBNY. The securities sold under agreements to repurchase are 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.

Arrow no longer relies on TRUPs as a source of new funds. As a result of the passage of Dodd-Frank in 2010 and its removal of Tier 1 regulatory capital treatment for TRUPs issued after Dodd-Frank's grandfathering date, the Company, like other banking organizations of Arrow's size or larger, have not issued any TRUPs since that date and are not likely to issue any TRUPs in the future. However, consistent with the grandfathering provision in Dodd-Frank, the $20 million principal amount of Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts listed on the consolidated balance sheet as of September 30, 2020 (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 60 of this Report. These trust preferred securities are subject to early redemption by the Company if the proceeds cease to qualify as Tier 1 capital of Arrow for any reason, or if certain other unanticipated but negative events should occur. An example of such an event would be an adverse change in tax laws that might deny the Company the ability to deduct interest paid on these obligations for federal income tax purposes.

In the first quarter of 2020, Arrow entered into an interest rate swap agreement to synthetically fix the variable rate interest payments associated with $20 million in outstanding subordinated trust securities.

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

Summary of the Allowance and Provision for Loan Losses

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


	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Loan Balances:
Period-End Loans	$	2,592,455		$	2,561,915		$	2,414,193		$	2,386,120		$	2,335,591
Average Loans, Year-to-Date	2,498,573			2,456,272			2,394,346			2,283,707			2,258,633
Average Loans, Quarter-to-Date	2,582,253			2,518,198			2,394,346			2,358,110			2,308,879
Period-End Assets	3,777,684			3,547,177			3,291,332			3,184,275			3,112,822

Allowance for loan losses, Year-to-Date:
Allowance for loan losses, Beginning of Period	$	21,187		$	21,187		$	21,187		$	20,196		20,196
Provision for Loan Losses, YTD	8,083			5,812			2,772			2,079			1,445
Loans Charged-off, YTD	(1,360)			(968)			(481)			(1,735)			(1,232)
Recoveries of Loans Previously Charged-off	536			269			159			647			522
Net Charge-offs, YTD	(824)			(699)			(322)			(1,088)			$	(710)
Allowance for loan losses, End of Period	$	28,446		$	26,300		$	23,637		$	21,187		$	20,931

Allowance for loan losses, Quarter-to-Date:
Allowance for loan losses, Beginning of Period	$	26,300		$	23,637		$	21,187		$	20,931		$	20,695
Provision for Loan Losses, QTD	2,271			3,040			2,772			634			518
Loans Charged-off, QTD	(392)			(487)			(481)			(503)			(402)
Recoveries of Loans Previously Charged-off	267			110			159			125			120
Net Charge-offs, QTD	(125)			(377)			(322)			(378)			(282)
Allowance for loan losses, End of Period	$	28,446		$	26,300		$	23,637		$	21,187		$	20,931

Nonperforming Assets, at Period-End:
Nonaccrual Loans	$	6,004		$	5,461		$	4,943		$	4,005		$	3,465
Loans Past Due 90 or More Days and Still Accruing Interest	121			901			437			253			1,066
Restructured and in Compliance with Modified Terms	157			150			136			143			150
Total Nonperforming Loans	6,282			6,512			5,516			4,401			4,681
Repossessed Assets	126			116			160			139			76
Other Real Estate Owned	—			595			782			1,122			1,198
Total Nonperforming Assets	$	6,408		$	7,223		$	6,458		$	5,662		$	5,955

Asset Quality Ratios:
Allowance to Nonperforming Loans	452.82		%	403.87		%	428.52		%	481.41		%	447.15		%
Allowance to Period-End Loans	1.10		%	1.03		%	0.98		%	0.89		%	0.90		%
Provision to Average Loans (Quarter) (1)	0.35		%	0.49		%	0.47		%	0.11		%	0.09		%
Provision to Average Loans (YTD) (1)	0.43		%	0.48		%	0.47		%	0.09		%	0.09		%
Net Charge-offs to Average Loans (Quarter) (1)	0.02		%	0.06		%	0.05		%	0.06		%	0.05		%
Net Charge-offs to Average Loans (YTD) (1)	0.04		%	0.06		%	0.05		%	0.05		%	0.04		%
Nonperforming Loans to Total Loans	0.24		%	0.25		%	0.23		%	0.18		%	0.20		%
Nonperforming Assets to Total Assets	0.17		%	0.20		%	0.20		%	0.18		%	0.19		%
(1) Annualized

Restructured and in Compliance with

Provision to Average Loans (Quarter) ⁽¹⁾

Provision to Average Loans (YTD) ⁽¹⁾

Net Charge-offs to Average Loans (Quarter) ⁽¹⁾

Net Charge-offs to Average Loans (YTD) ⁽¹⁾

Through the provision for loan losses, an allowance is maintained that reflects ~~our~~the Company's best estimate of probable incurred loan losses related to specifically identified impaired loans as well as the inherent risk of loss related to the remaining portfolio. Loan charge-offs are recorded to this allowance when loans are deemed uncollectible, in whole or in part. As loans become past due, consideration is given to the status of those loans and whether or not to classify them as nonaccrual loans. Any loans listed as "past due 90 or more days and still accruing interest" have been evaluated and determined to be secured and is the ~~borrowers have been deemed~~process of collection.

As permitted by the CARES Act, Arrow has elected to ~~have~~defer the ~~capacity to repay all principal and interest and, therefore, have not been classified as nonaccrual.~~adoption of the Current Expected Credit Losses ("CECL") methodology in determining credit losses.

In the third quarter of ~~2017, we~~2020, the Company made a ~~$800 thousand~~$2.3 million provision for loan losses, compared to a provision of ~~$480~~$518 thousand for the third quarter of ~~2016~~2019 and a provision of ~~$422 thousand~~$8.1 million for the ~~second quarter~~first nine months of ~~2017.~~2020. The significant increase in the provision ~~was primarily driven by net charge-offs~~for loan losses reflects the uncertainty resulting from the COVID-19 pandemic despite the continued strong asset quality of ~~$547 thousand, growth in outstanding loan balances, and minor changes in qualitative factors.~~Arrow. See

the unaudited interim consolidated financial statements for a discussion on how ~~we classify our~~the Company classifies credit quality indicators as well as the balance in each category.

The ratio of the allowance for ~~loan~~credit losses to total loans was ~~0.93%~~1.10% at September 30, ~~2017, a decrease~~2020, an increase from 0.89% at December 31, 2019 and an increase of 420 basis points from ~~the 0.97% ratio at December 31, 2016 and a decrease of 6 basis points from the 0.99% ratio~~0.90% at September 30, ~~2016.~~2019.

~~We consider our~~The accounting policy relating to the allowance for ~~loan~~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 inherent in the loan portfolio, and the material effect that such judgments may have on ~~our~~the results of operations. ~~Our~~The process for determining the provision for loan losses is described in Note 3 to ~~our~~the unaudited interim consolidated financial statements.

~~Our nonperforming~~Nonperforming assets at September 30, ~~2017~~2020 amounted to ~~$9.0~~$6.4 million, ~~an increase of $1.8 million,~~up from the $5.7 million total at December 31, ~~2016 total~~2019 and an increase of ~~$1.2~~$0.5 million, from September 30, 2019. For the ~~year earlier total. In all recent~~three month periods ~~our~~ended September 30, 2020 and 2019, ratios of nonperforming assets to total assets have remained below the average ratios for ~~our~~the peer group, although the average peer group ratios have improved dramatically in recent years, from post-crisis levels that were substantially higher than their current levels (and substantially higher than our ratios during such periods).group. (See page 3741 for a discussion of ~~our~~the peer group.) At June 30, ~~2017, our~~2020, the ratio of loans past due 90 or more days plus nonaccrual loans plus other real estate owned to total assets was ~~0.32%~~0.20%, ~~well~~ below the ~~0.68%~~0.48% ratio of ~~our~~the peer group at such date (the latest date for which peer group information is available). At September 30, ~~2017 our~~2020 the ratio ~~increased slightly to 0.33%~~was 0.17%, ~~however, this~~which is ~~still far~~ below the most recent ratio for ~~our~~the peer group.

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 ~~our~~ nonperforming assets, but entail heightened risk.

At September 30, ~~2017, our~~2020, the loans in ~~this~~the above-referenced category totaled ~~$6.8~~$8.4 million,, a decrease of $2.3 million, or ~~25.1%~~21.7%, from the ~~$9.1~~$10.7 million of such loans at December 31, ~~2016~~.2019. The September 30, ~~2017~~2020 total of non-current loans equaled ~~0.36%~~0.32% of loans then outstanding, ~~whereas the year-end~~ ~~2016~~ ~~total equaled 0.52% of loans then outstanding.~~compared to 0.49% at December 31, 2019 and 0.34% at September 30, 2019. The decrease from December 31, ~~2016~~2019 is primarily attributable to a decrease in delinquent automobile loans ~~which were at a seasonally elevated level at year-end~~ ~~2016~~ ~~but declined (improved) during the first nine months of 2017.~~and residential real estate loans.

The number and dollar amount of ~~our~~ performing loans that demonstrate characteristics of potential weakness from time-to-time (potential problem loans) typically is a very small percentage of ~~our~~the loan portfolio. See the table of Credit Quality Indicators in Note 3 to ~~our~~the unaudited interim consolidated financial statements. ~~We consider~~The Company considers all performing commercial and commercial real estate loans classified as substandard or lower (as reported in Note 3) to be potential problem loans. The dollar amount of such loans at September 30, ~~2017~~2020 was ~~$31.0~~$45.0 million, ~~down~~up from the dollar amount of such loans at December 31, ~~2016,~~2019, when the amount was ~~$35.8 million, due primarily to the upgrade of several commercial borrowers.~~$32.4 million. These loans will continue to be closely monitored and ~~we do expect~~the Company expects to collect all payments of contractual ~~interest~~principal and ~~principal~~interest in full on these classified loans. Total nonperforming assets at period-end increased by ~~$1.2 million, or 15.6%~~$453 thousand from September 30, ~~2016. This change resulted primarily from several commercial loans moving to nonaccrual status.~~2019.

The ~~economy~~economic impact of the COVID-19 pandemic, specifically unemployment levels and the temporary mandated closure of nonessential businesses, may impact the borrowers' ability to satisfy their obligations, and may therefore result in ~~our market area has~~increased delinquencies. Government interventions, on both the federal and state level, have been ~~relatively strong in recent years, compared~~deployed to mitigate a significant portion of the credit risk. Arrow cannot make a determination as to the ~~immediate post-crisis years, but any general weakening~~overall impact on its business of the U.S. economy in upcoming periods would likely have an adverse effect on the economy in our market area as well, and ultimately on our loan portfolio, particularly our commercial and commercial real estate portfolio.COVID-19 pandemic at this time.

As of September 30, ~~2017, we~~2020, the Company held ~~for sale three residential real estate properties and one commercial~~no property in other real estate owned. ~~We do~~At this time, the Company 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.

The COVID-19 pandemic has created economic uncertainty resulting in elevated unemployment as well as the temporary closure of nonessential businesses. In the table below, loans deferred by industry sector as the result of the COVID-19 pandemic are presented and compared to total loans by sector as of September 30, 2020. In accordance with the CARES Act, the deferrals listed below are not ~~currently anticipate significant increases~~considered troubled debt restructurings. In 2020, Arrow originated $142.7 million of PPP loans. These loans are included in ~~our nonperforming assets, other non-current~~the loan balances by sector as listed below, however, these loans are not considered deferred as ~~to which interest income is still being accrued or potential problem loans, but can give no assurances in this regard.~~of September 30, 2020.


COVID-19 Deferrals by Loan Category at September 30, 2020 ($ in 000's)

	Balances by Sector					Deferrals
		Total		% of Total Loans		Balance		% of Loan Segment		% of Total Loans
Commercial and Commercial Real Estate Loans:
Lessors of Non-Residential Real Estate		$	141,550	5.5	%	$	6,809	0.8	%	0.3	%
Health Care and Social Assistance		126,126		4.9	%	—		—	%	—	%
Lessors of Residential Real Estate		107,377		4.1	%	105		—	%	—	%
Hotels and Motels		105,883		4.1	%	65,304		8.0	%	2.5	%
Arts/Recreation/Restaurants/Vacation Camps		53,268		2.1	%	12,557		1.5	%	0.5	%
Retail		46,008		1.8	%	121		—	%	—	%
Construction & Related		36,671		1.4	%	—		—	%	—	%
Other		200,271		7.7	%	1,180		—	%	—	%
Total Commercial and Commercial Real Estate Loans		817,154		31.5	%	86,076		10.5	%	3.3	%

Consumer Loans		849,526		32.8	%	2,810		0.3	%	0.1	%

Residential Real Estate Loans		925,775		35.7	%	11,098		1.2	%	0.4	%

Total Loans		$	2,592,455			$	99,984			3.9	%

Capital Adequacy ~~Requirements~~.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, the federal bank regulators have issued a final rule to implement the Community Bank Leverage Ratio ("CBLR"), introducing an optional simplified measure of capital adequacy for qualifying community banks that satisfy certain requirements, including having a leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community bank that opts into the CBLR framework and meets all 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 is calculated as the ratio of “tier 1 capital” divided by “average total consolidated assets.” This final rule was effective as of January 1, 2020, and qualifying community banks can utilize the CBLR framework for purposes of filing their call reports or Form FR Y-9C, as applicable, for the first quarter of 2020 (i.e., as of March 31, 2020). Arrow elected to opt out of utilizing the CBLR framework. The Capital Rules promulgated under Dodd-Frank will remain applicable to Arrow.

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 ~~(we~~(the Company 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 percent~~1.25% of risk-weighted assets) minus applicable regulatory adjustments and deductions.

The following table presents the ~~current~~ minimum regulatory capital ratios applicable to ~~our~~the holding company and banks under the revised capital rules (as of January 1, 2017), as well as the increased minimum capital ratios that will apply at certain dates over the remaining portion of the phase-in period (i.e., as of January 1, 2018 and January 1, 2019):current Capital Rules:

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 ~~ours~~Arrow previously had to meet under the prior capital rules.

At September 30, ~~2017, our~~2020, Arrow's holding company and both of ~~our~~its subsidiary banks exceeded by a substantial amount each of the applicable minimum capital ratios established under the ~~revised capital rules,~~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 ~~phased-in portion of the~~ capital buffer.

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". As a result of the regulators' adoption of the revised capital rules, the definitions for determining which of the five capital classifications a particular banking organization will fall into were changed, effective as of January 1, 2015. Under the ~~revised~~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 ~~ranking~~rankings of these capitalization categories, i.e., as "well-capitalized" or "adequately capitalized."



Class						Outstanding as of October ~~31, 2017~~30, 2020
Common Stock, par value $1.00 per share						~~13,920,322~~15,491,432



	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements		3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		3741
Item 3. Quantitative and Qualitative Disclosures About Market Risk		6571
Item 4. Controls and Procedures		6671


PART II - OTHER INFORMATION
Item 1. Legal Proceedings		6772
Item 1.A. Risk Factors		6772
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		6772
Item 3. Defaults Upon Senior Securities		6772
Item 4. Mine Safety Disclosures		6772
Item 5. Other Information		6873
Item 6. Exhibits		6873

SIGNATURES		6974


Commitments to Extend Credit and Letters of Credit	Commitments to Extend Credit and Letters of Credit						Commitments to Extend Credit and Letters of Credit
	September 30, 2017		December 31, 2016		September 30, 2016			September 30, 2020		December 31, 2019		September 30, 2019
Notional Amount:							Notional Amount:
Commitments to Extend Credit	$	316,449	$	296,442	$	300,439	Commitments to Extend Credit	$	364,861	$	349,718	$	340,976
Standby Letters of Credit	3,672		3,445		3,483		Standby Letters of Credit	3,330		3,129		3,164
Fair Value:							Fair Value:
Commitments to Extend Credit	$	—	$	—	$	—	Commitments to Extend Credit	$	0	$	0	$	0
Standby Letters of Credit	18		30		31		Standby Letters of Credit	30		31		26

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts) (Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans	$	17,996	$	15,833	$	51,693	$	46,565
Interest on Deposits at Banks	104		34		242		100
Interest and Dividends on Investment Securities:
Fully Taxable	1,924		1,889		5,927		5,994
Exempt from Federal Taxes	1,575		1,526		4,660		4,486
Total Interest and Dividend Income	21,599		19,282		62,522		57,145
INTEREST EXPENSE
Interest-Bearing Checking Accounts	376		320		1,088		941
Savings Deposits	356		231		963		677
Time Deposits over $250,000	66		61		187		133
Other Time Deposits	241		231		702		677
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	13		9		29		24
Federal Home Loan Bank Advances	700		390		1,651		1,013
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	197		163		564		487
Total Interest Expense	1,949		1,405		5,184		3,952
NET INTEREST INCOME	19,650		17,877		57,338		53,193
Provision for Loan Losses	800		480		1,580		1,550
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	18,850		17,397		55,758		51,643
NONINTEREST INCOME
Income From Fiduciary Activities	2,116		1,923		6,284		5,854
Fees for Other Services to Customers	2,453		2,491		7,122		7,144
Insurance Commissions	2,113		2,127		6,426		6,468
Net Gain on Securities Transactions	10		—		10		144
Net Gain on Sales of Loans	182		310		431		649
Other Operating Income	267		263		620		925
Total Noninterest Income	7,141		7,114		20,893		21,184
NONINTEREST EXPENSE
Salaries and Employee Benefits	9,251		8,693		27,343		25,223
Occupancy Expenses, Net	2,371		2,425		7,410		7,223
FDIC Assessments	225		217		679		844
Other Operating Expense	3,701		3,747		11,229		11,047
Total Noninterest Expense	15,548		15,082		46,661		44,337
INCOME BEFORE PROVISION FOR INCOME TAXES	10,443		9,429		29,990		28,490
Provision for Income Taxes	3,027		2,691		8,735		8,556
NET INCOME	$	7,416	$	6,738	$	21,255	$	19,934
Average Shares Outstanding ¹:
Basic	13,889		13,810		13,889		13,775
Diluted	13,966		13,901		13,981		13,842
Per Common Share:
Basic Earnings	$	0.53	$	0.49	$	1.53	$	1.45
Diluted Earnings	0.53		0.48		1.52		1.44



Changes in Accumulated Other Comprehensive Income (Loss) by Component ⁽¹⁾

	Unrealized			Defined Benefit Plan Items
	Gains and
	Losses on						Net Prior
	Available-for-			Net Gain			Service
	Sale Securities			(Loss)			(Cost ) Credit			Total
For the Quarter-To-Date periods ended:

June 30, 2017	$	74		$	(5,556	)	$	(718	)	$	(6,200	)
Other comprehensive income or loss before reclassifications	9			—			—			9
Amounts reclassified from accumulated other comprehensive income	(6		)	64			(2		)	56
Net current-period other comprehensive income	3			64			(2		)	65
September 30, 2017	$	77		$	(5,492	)	$	(720	)	$	(6,135	)

June 30, 2016	$	3,660		$	(7,690	)	$	(712	)	$	(4,742	)
Other comprehensive income or loss before reclassifications	(810		)	—			—			(810		)
Amounts reclassified from accumulated other comprehensive income	—			111			(1		)	110
Net current-period other comprehensive income	(810		)	111			(1		)	(700		)
September 30, 2016	$	2,850		$	(7,579	)	$	(713	)	$	(5,442	)


For the Year-To-Date periods ended:

December 31, 2016	$	(382	)	$	(5,737	)	$	(715	)	$	(6,834	)
Other comprehensive income or loss before reclassifications	465			—			—			465
Amounts reclassified from accumulated other comprehensive income	(6		)	245			(5		)	234
Net current-period other comprehensive income	459			245			(5		)	699
September 30, 2017	$	77		$	(5,492	)	$	(720	)	$	(6,135	)

December 31, 2015	$	629		$	(7,893	)	$	(708	)	$	(7,972	)
Other comprehensive income or loss before reclassifications	2,309			—			—			2,309
Amounts reclassified from accumulated other comprehensive income	(88		)	314			(5		)	221
Net current-period other comprehensive income	2,221			314			(5		)	2,530
September 30, 2016	$	2,850		$	(7,579	)	$	(713	)	$	(5,442	)



Schedule of Share-based Compensation Arrangements
	Stock Option Plans
Roll-Forward of Shares Outstanding:
Outstanding at January 1, 2017	366,329
Granted	55,621
Exercised	(35,937		)
Forfeited	—
Outstanding at September 30, 2017	386,013
Exercisable at Period-End	242,706
Vested and Expected to Vest	143,307

Roll-Forward of Shares Outstanding - Weighted Average Exercise Price:
Outstanding at January 1, 2017	$	21.86
Granted	36.12
Exercised	20.46
Forfeited	—
Outstanding at September 30, 2017	24.05
Exercisable at Period-End	21.34
Vested and Expected to Vest	28.62

Grants Issued During 2017 - Weighted Average Information:
Fair Value	$	6.25
Fair Value Assumptions:
Dividend Yield	2.72		%
Expected Volatility	21.40		%
Risk Free Interest Rate	2.25		%
Expected Lives (in years)	6.88



Share-Based Compensation Expense
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Share-Based Compensation Expense	$	90	$	71	$	262	$	215



				Select
	Employees'			Executive		Postretirement
	Pension			Retirement		Benefit
	Plan			Plan		Plans
Net Periodic Benefit Cost
For the Three Months Ended September 30, 2017:
Service Cost	$	350		$	10	$	37
Interest Cost	362			55		75
Expected Return on Plan Assets	(800		)	—		—
Amortization of Prior Service (Credit) Cost	(14		)	14		(3		)
Amortization of Net Loss	148			31		—
Net Periodic Benefit Cost	$	46		$	110	$	109

Plan Contributions During the Period	$	—		$	116	$	65

For the Three Months Ended September 30, 2016:
Service Cost	$	376		$	8	$	63
Interest Cost	420			56		83
Expected Return on Plan Assets	(828		)	—		—
Amortization of Prior Service (Credit) Cost	(14		)	14		(3		)
Amortization of Net Loss	140			28		—
Net Periodic Benefit Cost	$	94		$	106	$	143

Plan Contributions During the Period	$	—		$	131	$	47

Net Periodic Benefit Cost
For the Nine Months Ended September 30, 2017:
Service Cost	$	1,050		$	30	$	110
Interest Cost	1,085			164		224
Expected Return on Plan Assets	(2,399		)	—		—
Amortization of Prior Service Cost (Credit)	(43		)	43		(8		)
Amortization of Net Loss	443			94		—
Net Periodic Benefit Cost	$	136		$	331	$	326

Plan Contributions During the Period	$	—		$	345	$	295

Estimated Future Contributions in the Current Fiscal Year	$	—		$	115	$	98

For the Nine Months Ended September 30, 2016:
Service Cost	$	1,127		$	24	$	188
Interest Cost	1,262			163		178
Expected Return on Plan Assets	(2,483		)	—		—
Amortization of Prior Service (Credit) Cost	(42		)	43		(8		)
Amortization of Net Loss	419			84		—
Net Periodic Benefit Cost	$	283		$	314	$	358

Plan Contributions During the Period	$	—		$	350	$	197



	Three Months Ended				Nine Months Ended
Sales	9/30/2017		9/30/2016		9/30/2017		9/30/2016
Available-For-Sale Portfolio:
Mortgage-Backed Securities-Residential	$	—	$	—	$	—	$	—
U.S. Treasury Securities	—		—		—		—
U.S. Agency Securities	10,005		—		10,005		4,793
Corporate Bonds and Other	—		—		—		5,631
Total	10,005		—		10,005		10,424
Net Gains on Securities Transactions	10		—		10		144
Proceeds on the Sales of Securities	$	10,015	$	—	$	10,015	$	10,568

Held-to-Maturity Portfolio:
State and Municipal Obligations	$	—	$	—	$	—	$	2
Net Gains on Securities Transactions	—		—		—		—
Proceeds on the Sales of Securities	$	—	$	—	$	—	$	2


Loans Past Due 30-89 Days and Accruing Interest ($ in 000's)	Loans Past Due 30-89 Days and Accruing Interest ($ in 000's)						Loans Past Due 30-89 Days and Accruing Interest ($ in 000's)
	9/30/2017		12/31/2016		9/30/2016			9/30/2020		12/31/2019		9/30/2019
Commercial Loans	$	122	$	134	$	105	Commercial Loans	$	122	$	192	$	148
Commercial Real Estate Loans	—		121		—		Commercial Real Estate Loans	85		266		30
Residential Real Estate Loans	1,063		2,461		1,693		Residential Real Estate Loans	1,224		1,960		1,000
Consumer Loans - Primarily Indirect Automobile	5,615		6,369		5,144		Consumer Loans - Primarily Indirect Automobile	6,963		8,305		6,804
Total Delinquent Loans	$	6,800	$	9,085	$	6,942
Total Loans Past Due 30-89 Days and Accruing Interest							Total Loans Past Due 30-89 Days and Accruing Interest	$	8,394	$	10,723	$	7,982


Capital Ratio	2020
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	%



Capital Ratio	Year, as of January 1
	2017		2018		2019
Minimum CET1 Ratio	4.500	%	4.500	%	4.500	%
Capital Conservation Buffer ("Buffer")	1.250	%	1.875	%	2.500	%
Minimum CET1 Ratio Plus Buffer	5.750	%	6.375	%	7.000	%
Minimum Tier 1 Risk-Based Capital Ratio	6.000	%	6.000	%	6.000	%
Minimum Tier 1 Risk-Based Capital Ratio Plus Buffer	7.250	%	7.875	%	8.500	%
Minimum Total Risk-Based Capital Ratio	8.000	%	8.000	%	8.000	%
Minimum Total Risk-Based Capital Ratio Plus Buffer	9.250	%	9.875	%	10.500	%
Minimum Leverage Ratio	4.000	%	4.000	%	4.000	%



	Common		Tier 1		Total
	Equity		Risk-Based		Risk-Based		Tier 1
	Tier 1 Capital		Capital		Capital		Leverage
	Ratio		Ratio		Ratio		Ratio
Arrow Financial Corporation	12.70	%	13.79	%	14.77	%	9.30	%
Glens Falls National Bank & Trust Co.	13.35	%	13.36	%	14.33	%	8.88	%
Saratoga National Bank & Trust Co.	13.20	%	13.20	%	14.15	%	9.42	%

Current Regulatory Minimum (2017)	5.750%⁽¹⁾		7.250%⁽¹⁾		9.250%⁽¹⁾		4.000	%
FDICIA's Prompt Corrective Action - "Well-Capitalized" Standard (2017)	6.500	%	8.000	%	10.000	%	5.000	%
Final Regulatory Minimum (1/1/2019)	7.000%⁽²⁾		8.500%⁽²⁾		10.500%⁽²⁾		4.000	%

⁽¹⁾ Including currently phased-in 1.25% capital conservation buffer
⁽²⁾ Including the fully phased-in 2.50 % capital conservation buffer


					Cash
	Market Price				Dividends
	Low		High		Declared
2019
First Quarter	$	28.71	$	34.17	$	0.245
Second Quarter	30.05		32.94		0.245
Third Quarter	29.38		34.28		0.245
Fourth Quarter	31.09		37.19		0.252
2020
First Quarter	$	20.18	$	36.93	$	0.252
Second Quarter	22.87		30.76		0.252
Third Quarter	24.58		29.13		0.252
Fourth Quarter (dividend payable December 15, 2020)	TBD		TBD


	Quarter Ended September 30
	2020			2019
Cash Dividends Per Share	$	0.252		$	0.245
Diluted Earnings Per Share	0.71			0.65
Dividend Payout Ratio	35.49		%	37.69		%
Total Equity (in thousands)	325,660			$	292,228
Shares Issued and Outstanding (in thousands)	15,489			15,418
Book Value Per Share	$	21.03		$	18.95
Intangible Assets (in thousands)	23,662			23,586
Tangible Book Value Per Share	$	19.50		$	17.42



	Quarter Ended September 30,
	2017			2016
Cash Dividends Per Share	$	0.243		$	0.236
Diluted Earnings Per Share	0.53			0.48
Dividend Payout Ratio	45.85		%	49.17		%
Total Equity (in thousands)	244,648			$	229,208
Shares Issued and Outstanding (in thousands)	13,891			13,828
Book Value Per Share	$	17.61		$	16.58
Intangible Assets (in thousands)	24,268			24,675
Tangible Book Value Per Share	$	15.86		$	14.79


	Change in Interest Rate
	+ 200 basis points	- 100 basis points
Calculated change in Net Interest Income - Year 1	(0.46)%	(0.87)%
Calculated change in Net Interest Income - Year 2	0.57%	(12.07)%


Third Quarter 2020 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
July	971	$	27.48	—	$	3,493,345
August	1,597	28.00		—	3,493,345
September	19,811	26.94		—	3,493,345
Total	22,379	27.04		—



Third Quarter 2017 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 ³
July	8,138	$	31.28	6,180	$	3,502,520
August	22,678	31.34		20,600	2,856,516
September	14,456	31.88		—	2,856,516
Total	45,272	31.50		26,780



Exhibit Number			Exhibit
~~10.1~~3.(i)			~~Executive Separation Agreement and Release between~~Certificate of Incorporation of the Company and Terry R. Goodemote signed November 1, 2017*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
153.(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)
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.



November 5, 2020
~~November 7, 2017~~	/s/Thomas J. Murphy
Date		Thomas J. Murphy ~~President and~~
		President and Chief Executive Officer

November ~~7, 2017~~5, 2020		/s/Edward J. Campanella
Date		Edward J. Campanella
		Senior Vice President, Treasurer and
		~~Treasurer and~~ Chief Financial Officer
		(Principal Financial Officer and
		Principal Accounting Officer)