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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2025

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

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-12507

ARROW FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


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

250 Glen Street

Glens Falls

New York

12801

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

518

745-1000

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


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

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

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

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


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

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

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


Class						Outstanding as of October 31, 2025
Common Stock, par value $1.00 per share						16,442,453

ARROW FINANCIAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements			3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			42
Item 3. Quantitative and Qualitative Disclosures About Market Risk			64
Item 4. Controls and Procedures			65


PART II - OTHER INFORMATION
Item 1. Legal Proceedings			66
Item 1.A. Risk Factors			66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			66
Item 3. Defaults Upon Senior Securities			66
Item 4. Mine Safety Disclosures			66
Item 5. Other Information			66
Item 6. Exhibits			68

SIGNATURES			69

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, 2025		December 31, 2024
ASSETS
Cash and Due From Banks	$	45,925	$	27,422
Interest-Earning Deposits at Banks	351,512		127,124
Investment Securities:
Available-for-Sale at Fair Value	485,583		463,111
Held-to-Maturity (Fair Value of $62,251 at September 30, 2025 and $96,586 at December 31, 2024)	62,744		98,261
Equity Securities	5,724		5,055
Other Investments	4,369		4,353
Loans	3,442,009		3,394,541
Allowance for Credit Losses	(34,176)		(33,598)
Net Loans	3,407,833		3,360,943
Premises and Equipment, Net	60,002		59,717
Goodwill	23,789		23,789
Other Intangible Assets, Net	1,805		2,058
Other Assets	137,829		134,515
Total Assets	$	4,587,115	$	4,306,348
LIABILITIES
Noninterest-Bearing Deposits	$	771,014	$	702,978
Interest-Bearing Checking Accounts	977,871		810,834
Savings Deposits	1,526,055		1,520,024
Time Deposits over $250,000	178,843		191,962
Other Time Deposits	646,268		602,132
Total Deposits	4,100,051		3,827,930
Borrowings	4,265		8,600


Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	20,000		20,000
Finance Leases	4,928		5,005
Other Liabilities	40,184		43,912
Total Liabilities	4,169,428		3,905,447
STOCKHOLDERS’ EQUITY
Preferred Stock, $1 Par Value; 1,000,000 Shares Authorized at September 30, 2025 and December 31, 2024	—		—
Common Stock, $1 Par Value; 30,000,000 Shares Authorized (22,066,559 Shares Issued at September 30, 2025 and December 31, 2024)	22,067		22,067
Additional Paid-in Capital	414,133		413,476
Retained Earnings	93,027		77,215

Accumulated Other Comprehensive Loss	(8,640)		(18,453)
Treasury Stock, at Cost (5,628,864 Shares at September 30, 2025 and 5,323,638 Shares at December 31, 2024)	(102,900)		(93,404)
Total Stockholders’ Equity	417,687		400,901
Total Liabilities and Stockholders’ Equity	$	4,587,115	$	4,306,348

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,
	2025		2024		2025		2024
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans	$	46,832	$	44,122	$	136,982	$	126,639
Interest on Deposits at Banks	2,245		2,103		5,488		6,735
Interest and Dividends on Investment Securities:
Fully Taxable	4,066		2,656		11,464		8,851
Exempt from Federal Taxes	455		562		1,603		1,867
Total Interest and Dividend Income	53,598		49,443		155,537		144,092
INTEREST EXPENSE
Interest-Bearing Checking Accounts	2,160		1,966		5,904		5,510
Savings Deposits	9,534		10,905		28,384		31,706
Time Deposits over $250,000	1,695		1,803		5,232		5,645
Other Time Deposits	5,859		4,934		17,181		15,091

Borrowings	—		1,177		167		3,439
Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts	173		173		513		514
Interest on Financing Leases	46		47		135		142
Total Interest Expense	19,467		21,005		57,516		62,047
NET INTEREST INCOME	34,131		28,438		98,021		82,045
Provision for Credit Losses on Loans	815		934		6,428		2,326
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	33,316		27,504		91,593		79,719
NON-INTEREST INCOME
Income From Fiduciary Activities	2,600		2,429		7,533		7,337
Fees for Other Services to Customers	2,857		2,881		8,244		8,130
Insurance Commissions	1,986		1,955		5,616		5,299
Net Gain on Securities	392		94		669		165
Net Gain on Sales of Loans	259		126		573		135
Other Operating Income	622		648		1,529		2,781
Total Non-Interest Income	8,716		8,133		24,164		23,847
NON-INTEREST EXPENSE
Salaries and Employee Benefits	14,339		13,446		41,980		39,375
Occupancy Expenses, Net	1,907		1,754		5,881		5,299
Technology and Equipment Expense	4,963		4,692		15,639		14,246
FDIC Assessments	634		698		1,953		2,111
Other Operating Expense	3,590		3,510		11,677		10,399
Total Non-Interest Expense	25,433		24,100		77,130		71,430
INCOME BEFORE PROVISION FOR INCOME TAXES	16,599		11,537		38,627		32,136
Provision for Income Taxes	3,774		2,562		8,687		6,897
NET INCOME	$	12,825	$	8,975	$	29,940	$	25,239
Average Shares Outstanding:
Basic	16,402		16,710		16,541		16,746
Diluted	16,406		16,742		16,543		16,772
Per Common Share:
Basic Earnings	$	0.77	$	0.54	$	1.80	$	1.51
Diluted Earnings	0.77		0.53		1.80		1.50

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,
	2025		2024		2025		2024
Net Income	$	12,825	$	8,975	$	29,940	$	25,239
Other Comprehensive Income, Net of Tax:
Net Unrealized Securities Holding Gain Arising During the Period	2,452		9,282		12,124		8,503

Net Unrealized (Loss) on Cash Flow Hedge Agreements	(392)		(3,464)		(1,700)		(569)
Reclassification of Net Unrealized Loss (Gain) on Cash Flow Hedge Agreements to Interest Expense	222		(146)		(511)		(463)


Amortization of Net Retirement Plan Actuarial (Gain)	(95)		(58)		(284)		(174)
Amortization of Net Retirement Plan Prior Service Cost	62		50		184		151
Other Comprehensive Income	2,249		5,664		9,813		7,448
Comprehensive Income	$	15,074	$	14,639	$	39,753	$	32,687

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 Months Ended September 30, 2025
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at December 31, 2024	$	22,067	$	413,476	$	77,215	$	(18,453)	$	(93,404)	$	400,901


Net Income	—		—		29,940		—		—		29,940
Other Comprehensive Income	—		—		—		9,813		—		9,813



Cash Dividends Paid, $.85 per Share	—		—		(14,128)		—		—		(14,128)
Stock Options Exercised, Net (5,144 Shares)	—		62		—		—		40		102
Shares Issued Under the Directors’ Stock Plan (13,377 Shares)	—		247		—		—		107		354
Shares Issued Under the Employee Stock Purchase Plan (10,064 Shares)	—		165		—		—		79		244
Shares Issued Related to Restricted Stock Units (2,753 Shares)	—		(22)		—		—		22		—
Shares Issued Related to Restricted Share Awards (43,250 Shares)	—		(342)		—		—		342		—
Compensation expense related to Employee Stock Purchase Plan	—		25		—		—		—		25
Stock-Based Compensation Expense	—		522		—		—		—		522

Purchase of Treasury Stock (379,814 Shares) 1	—		—		—		—		(10,086)		(10,086)



Balance at September 30, 2025	$	22,067	$	414,133	$	93,027	$	(8,640)	$	(102,900)	$	417,687

	Three Months Ended September 30, 2025
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at June 30, 2025	$	22,067	$	413,880	$	84,970	$	(10,889)	$	(101,522)	408,506


Net Income	—		—		12,825		—		—		12,825
Other Comprehensive Income	—		—		—		2,249		—		2,249



Cash Dividends Paid, $.29 per Share	—		—		(4,768)		—		—		(4,768)

Shares Issued Under the Directors’ Stock Plan (3,732 Shares)	—		73		—		—		30		103
Shares Issued Under the Employee Stock Purchase Plan (3,184 Shares)	—		55		—		—		24		79


Compensation expense related to Employee Stock Purchase Plan	—		8		—		—		—		8

Stock-Based Compensation Expense	—		117		—		—		—		117

Purchase of Treasury Stock (52,947 Shares) 1	—		—		—		—		(1,432)		(1,432)



Balance at September 30, 2025	$	22,067	$	414,133	$	93,027	$	(8,640)	$	(102,900)	$	417,687


	Nine Months Ended September 30, 2024
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at December 31, 2023	$	22,067	$	412,551	$	65,792	$	(33,416)	$	(87,222)	$	379,772


Net Income	—		—		25,239		—		—		25,239
Other Comprehensive Income	—		—		—		7,448		—		7,448



Cash Dividends Paid, $.81 per Share	—		—		(13,602)		—		—		(13,602)
Stock Options Exercised, Net (8,620 Shares)	—		97		—		—		69		166
Shares Issued Under the Directors’ Stock Plan (15,196 Shares)	—		255		—		—		122		377
Shares Issued Under the Employee Stock Purchase Plan (8,884 Shares)	—		137		—		—		72		209
Shares Issued Related to Restricted Stock Units (2,753 Shares)	—		(23)		—		—		23		—
Shares Issued Related to Restricted Share Awards (22,230 Shares)	—		(179)		—		—		179		—
Compensation expense related to Employee Stock Purchase Plan	—		21		—		—		—		21
Stock-Based Compensation Expense	—		206		—		—		—		206

Purchase of Treasury Stock (266,517 Shares) 1	—		—		—		—		(6,525)		(6,525)


Balance at September 30, 2024	$	22,067	$	413,065	$	77,429	$	(25,968)	$	(93,282)	$	393,311


	Three Months Ended September 30, 2024
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumu-lated Other Com- prehensive Loss		Treasury Stock		Total
Balance at June 30, 2024	$	22,067	$	412,917	$	72,980	$	(31,632)	$	(93,314)	$	383,018
Net Income	—		—		8,975		—		—		8,975
Other Comprehensive Loss	—		—		—		5,664		—		5,664



Cash Dividends Paid, $.27 per Share	—		—		(4,526)		—		—		(4,526)

Shares Issued Under the Directors’ Stock Plan (4,594 Shares)	—		83		—		—		38		121
Shares Issued Under the Employee Stock Purchase Plan (3,041 Shares)	—		55		—		—		25		80
Shares Issued Related to Restricted Stock Units (2,753 Shares)	—		(23)		—		—		23		—

Compensation expense related to Employee Stock Purchase Plan	—		8		—		—		—		8
Stock-Based Compensation Expense	—		25		—		—		—		25

Purchase of Treasury Stock (0 Shares) 1	—		—		—		—		(54)		(54)
Balance at September 30, 2024	$	22,067	$	413,065	$	77,429	$	(25,968)	$	(93,282)	$	393,311

1 Cost of Treasury Stock includes the Stock Buyback Tax Under the Inflation Reduction Act of 2022.

See Notes to Unaudited Interim Consolidated Financial Statements.

ARROW FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)


	Nine Months Ended September 30,
Cash Flows from Operating Activities:	2025		2024
Net Income	$	29,940	$	25,239
Provision for Credit Losses	6,428		2,326
Depreciation and Amortization	4,130		4,008
Net gain on equity securities	(669)		(165)
Loans originated and held-for-sale	(21,510)		(6,278)
Proceeds from the sale of loans held-for-sale	19,875		6,376
Net gain on the sale of loans	(573)		(135)
Net loss (gain) on the sale of premises and equipment, other real estate owned and repossessed assets	5		(312)
Contributions to retirement benefit plans	(471)		(494)
Deferred income tax expense (benefit)	179		(255)
Shares issued under the Directors’ Stock Plan	354		377
Stock-based compensation expense	547		227
Tax benefit from exercise of stock options	111		29

Net increase in Other Assets	(1,285)		(3,458)
Net (decrease) increase in Other Liabilities	(1,690)		1,359
Net Cash Provided By Operating Activities	35,371		28,844
Cash Flows from Investing Activities:
Proceeds from maturities, calls, and principal repayments of securities AFS	82,191		72,545
Purchases of securities AFS	(87,781)		—
Proceeds from maturities, calls, and principal repayments of securities HTM	45,556		36,801
Purchases of securities HTM	(10,130)		(8,959)
Purchase of Equity Securities	—		(2,999)
Net increase in loans	(63,107)		(127,890)
Termination of Fair Value Hedge	(3,017)		—
Proceeds from sales of premises and equipment, OREO and repos	2,285		2,708
Purchases of premises and equipment	(4,015)		(4,084)
(Purchase) Redemption of FHLB stock	(16)		697
Acquisition of Whitehall Branch (net cash received)	—		32,354
Net Cash (Used) Provided By Investing Activities	(38,034)		1,173
Cash Flows from Financing Activities:
Net increase in deposits	272,121		112,211

Finance lease payments	(77)		(44)
Other borrowings - advances	—		102,100
Other borrowings - paydowns	(4,335)		(25,000)
Net cash collateral received from (paid to) derivative counterparties	2,560		(1,980)
Termination of Cash Flow Hedge	(847)		—
Purchase of treasury stock	(10,086)		(6,525)
Stock options exercised, net	102		166
Shares issued under ESPP	244		209
Cash dividends paid	(14,128)		(13,602)
Net Cash Provided By Financing Activities	245,554		167,535
Net Increase in Cash and Cash Equivalents	242,891		197,552
Cash and Cash Equivalents at Beginning of Period	154,546		142,536
Cash and Cash Equivalents at End of Period	$	397,437	$	340,088

Supplemental Disclosures to Statements of Cash Flow Information:
Interest on deposits and borrowings	$	57,379	$	60,869
Income taxes	6,807		5,553

Transfer of loans to other real estate owned and repossessed assets	2,107		1,704
Total fair value of commercial loan participation transferred to Other Assets	10,648		—
Total fair value of assets acquired in acquisition of Whitehall Branch, net of cash	—		3,819
Total fair value of liabilities assumed in acquisition of Whitehall Branch, net of cash	—		37,683

See Notes to Unaudited Interim Consolidated Financial Statements.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.RISKS AND UNCERTAINTIES

Nature of Operations - Arrow Financial Corporation, a New York corporation ("Arrow," the "Company," "we," or "us"), was incorporated on March 21, 1983 and is registered as a bank holding company within the meaning of the Bank Holding Company Act of 1956. Arrow's banking subsidiary is Arrow Bank National Association® ("Arrow Bank™") whose main office is located in Glens Falls, New York. Arrow Bank provides a full range of services to individuals and small to mid-size businesses in northeastern New York State from Albany, the State's capitol, to the Canadian border. The bank has wealth management departments which provide investment management and administrative services. An active subsidiary of Arrow Bank is Upstate Agency LLC ("Upstate"), offering insurance services including property and casualty insurance, group health insurance and individual life insurance products. North Country Investment Advisers, Inc., a registered investment adviser that provided investment advice to Arrow's proprietary mutual fund until the fund was transferred to a new investment advisor in the first half of 2025, and Arrow Properties, Inc., a real estate investment trust (REIT), are subsidiaries of Arrow Bank. Arrow also owns directly two subsidiary business trusts, organized in 2003 and 2004 to issue trust preferred securities (TRUPs), which are still outstanding.

Concentrations of Credit - With the exception of some indirect auto lending, Arrow's loans are primarily with borrowers in upstate New York. Although the loan portfolio of Arrow Bank is well diversified, tourism has a substantial impact on the northeastern New York economy. The commitments to extend credit are consistent with the distribution of loans presented in Note 5, "Loans," and generally have the same credit risk and are subject to normal credit policies. Generally, the loans are secured by assets and are expected to be repaid from cash flow or the sale of selected assets of the borrowers. Arrow evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Arrow upon extension of credit, is based upon Management's credit evaluation of the counterparty. The nature of the collateral varies with the type of loan and may include: residential real estate, cash and securities, inventory, accounts receivable, property, plant and equipment, income producing commercial properties and automobiles.

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

Arrow's primary sources of available liquidity are overnight investments in federal funds sold, interest-earning bank balances at the FRBNY, and cash flow from investment securities and borrowings.

In addition to liquidity from cash, short-term investments, investment securities and borrowings, Arrow has supplemented available operating liquidity with additional off-balance sheet sources such as a federal funds lines of credit with correspondent banks and credit lines with the FHLBNY.

Note 2. ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial statements contain all of the adjustments necessary to present fairly the financial position as of September 30, 2025 and December 31, 2024; the results of operations for the three and nine month periods ended September 30, 2025 and 2024; the consolidated statements of comprehensive income for the three and nine month periods ended September 30, 2025 and 2024; the changes in stockholders' equity for the three and nine month periods ended September 30, 2025 and 2024; and the cash flows for the nine month periods ended September 30, 2025 and 2024. All such adjustments are of a normal recurring nature. The unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements of Arrow for the year ended December 31, 2024 included in Arrow's Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K").

Recently Issued Accounting Standards

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2024-03 Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) to improve disclosures about a public business entity’s expenses, by providing more detailed information about the types of expenses in commonly presented expense captions. As amended by ASU 2025-01 issued in January 2025, the amendment is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendment may be applied prospectively or retrospectively. The Company is currently evaluating the impact of this accounting standard on its condensed consolidated financial statements.

Other ASUs issued but not effective until after September 30, 2025, are not expected to have a material effect on the Company’s consolidated financial position, annual results of operations and/or cash flows.

Recently Adopted Accounting Standards

In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires additional disclosures related to rate reconciliation, income taxes paid, and other disclosures. Under

ASU 2023-09, for each annual period presented, public entities are required to (1) disclose specific categories in the tabular rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires all reporting entities to disclose on an annual basis the amount of income taxes paid disaggregated by federal, state, and foreign taxes as well as the amount of income taxes paid by individual jurisdiction. ASU 2023-09 is effective for public companies for annual periods beginning after December 15, 2024, and can be applied on a prospective basis with an option to apply the standard retrospectively. Early adoption is permitted. The Company adopted ASU 2023-09 January 1, 2025 and the additional disclosures will be reflected on Arrow's Annual Report on Form 10-K for the year ended December 31, 2025.

Management’s Use of Estimates

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

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

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

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

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed portfolio segments for estimating loss based on type of borrower and collateral as follows:

Commercial Loans

Commercial Real Estate Loans

Consumer Loans

Residential Loans

Further details related to loan portfolio segments is included in Note 5 Loans.

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

For the loan segments utilizing the DCF method, (commercial, commercial real estate, and residential) management utilizes externally developed economic forecast of the following economic factors as loss drivers: national unemployment, gross domestic product and Case-Shiller U.S. National Home Price Index (HPI). The economic forecast is applied over a reasonable and supportable forecast period. Arrow utilizes a six quarter reasonable and supportable forecast period.

The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (NPV). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis.

Arrow uses the vintage analysis method to estimate expected credit losses for the consumer loan segment. The vintage method was selected since the loans within the consumer loan segment are homogeneous, not just by risk characteristic, but by loan structure. Under the vintage analysis method, a loss rate is calculated based on the quarterly net charge-offs to the outstanding loan balance for each vintage year over the lookback period. Once this periodic loss rate is calculated for each quarter in the lookback period, the periodic rates are averaged into the loss rate. The loss rate is then applied to the outstanding loan balances based on the loan's vintage year. Arrow maintains, over the life of the loan, the loss curve by vintage year. If estimated losses computed by the vintage method need to be adjusted based on current conditions and the reasonable and supportable economic forecast, these adjustments would be incorporated over a six quarter reasonable and supportable forecast period, reverting to historical losses using a straight-line method over an eight quarter period.

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

All loans that exceed $250,000 which are on nonaccrual, are evaluated on an individual basis. For collateral dependent financial assets where Arrow has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and Arrow expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, Arrow has elected to measure the allowance for credit loss as the difference between the fair value of the collateral less cost to sell, and the amortized cost basis of the asset as of the measurement date. In the event the repayment of a collateral dependent financial asset is expected to be provided substantially through the operation of the collateral, Arrow will use fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

Arrow evaluates whether the modification represents a new loan or a continuation of an existing loan, consistent with the current GAAP treatment for other loan modifications. In addition, Arrow evaluates and if necessary, discloses if loan modifications made to borrowers experiencing financial difficulty contain a financial concession.

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

Accrued Interest Receivable - Arrow has made the following elections regarding accrued interest receivable: (1) presented accrued interest receivable balances separately within the Other Assets balance sheet line item; (2) excluded interest receivable that is included in amortized cost of financing receivables from related disclosures requirements and (3) continued its policy to write off accrued interest receivable by reversing interest income. For loans, write off typically occurs upon becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, Arrow has not experienced uncollectible accrued interest receivable on investment securities.

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

Arrow's HTM debt securities are comprised of U.S. government-sponsored enterprises (GSEs) or state and municipal obligations. GSE securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Therefore, Arrow did not record a credit loss for these securities.

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

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

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

Note 3. CASH AND CASH EQUIVALENTS (In Thousands)

The following table is the schedule of Cash and Cash Equivalents at September 30, 2025 and December 31, 2024:



	September 30, 2025		December 31, 2024
Cash and Due From Banks	$	45,925	$	27,422
Interest-Earning Deposits at Banks	351,512		127,124
Total Cash and Cash Equivalents	$	397,437	154,546

Note 4. INVESTMENT SECURITIES (In Thousands)

The following table is the schedule of Available-For-Sale Securities at September 30, 2025 and December 31, 2024:


Available-For-Sale Securities
	U.S. Treasuries		U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
September 30, 2025
Available-For-Sale Securities, at Amortized Cost	$	98,278	$	25,000	$	200	$	368,331	$	14,000	$	505,809
Gross Unrealized Gains	2,068		—		—		1,592		211		3,871
Gross Unrealized Losses	—		(272)		—		(23,803)		(22)		(24,097)
Available-For-Sale Securities, at Fair Value	100,346		24,728		200		346,120		14,189		485,583
Available-For-Sale Securities, Pledged as Collateral, at Fair Value											322,189

Maturities of Debt Securities, at Amortized Cost:
Within One Year	$	24,992	$	—	$	—	$	3,364	$	—	$	28,356
From 1 - 5 Years	48,827		25,000		200		213,277		1,000		288,304
From 5 - 10 Years	24,459		—		—		151,690		11,000		187,149
Over 10 Years	—		—		—		—		2,000		2,000

Maturities of Debt Securities, at Fair Value:
Within One Year	$	25,009	$	—	$	—	$	3,303	$	—	$	28,312
From 1 - 5 Years	50,069		24,728		200		203,308		978		279,283
From 5 - 10 Years	25,268		—		—		139,509		11,202		175,979
Over 10 Years	—		—		—		—		2,009		2,009

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—	$	3,734	$	—	$	3,734
12 Months or Longer	—		24,728		—		200,624		978		226,330
Total	$	—	$	24,728	$	—	$	204,358	$	978	$	230,064
Number of Securities in a Continuous Loss Position	—		3		—		85		1		89

Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	—	$	4	$	—	$	4
12 Months or Longer	—		272		—		23,799		22		24,093
Total	$	—	$	272	$	—	$	23,803	$	22	$	24,097















December 31, 2024
Available-For-Sale Securities, at Amortized Cost	$	97,985	$	70,000	$	240	$	330,448	$	1,000	$	499,673
Gross Unrealized Gains	90		32		—		29		—		151
Gross Unrealized Losses	(5)		(818)		—		(35,869)		(21)		(36,713)
Available-For-Sale Securities, at Fair Value	98,070		69,214		240		294,608		979		463,111
Available-For-Sale Securities, Pledged as Collateral, at Fair Value											181,759

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	48,370	$	—	$	—	$	66,958	$	—	$	115,328


Available-For-Sale Securities
	U.S. Treasuries		U.S. Government & Agency Obligations		State and Municipal Obligations		Mortgage- Backed Securities		Corporate and Other Debt Securities		Total Available- For-Sale Securities
12 Months or Longer	—		54,182		—		221,305		979		276,466
Total	$	48,370	$	54,182	$	—	$	288,263	$	979	$	391,794
Number of Securities in a Continuous Loss Position	2		7		—		97		1		107

Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	5	$	—	$	—	$	2,037	$	—	$	2,042
12 Months or Longer	—		818		—		33,832		21		34,671
Total	$	5	$	818	$	—	$	35,869	$	21	$	36,713

There was no allowance for credit losses for the AFS debt securities portfolio at either September 30, 2025 or December 31, 2024.

The following table is the schedule of Held-To-Maturity Securities at September 30, 2025 and December 31, 2024:


Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
September 30, 2025
Held-To-Maturity Securities, at Amortized Cost	$	58,081	$	4,663	$	62,744

Gross Unrealized Losses	(387)		(106)		(493)
Held-To-Maturity Securities, at Fair Value	57,694		4,557		62,251
Held-To-Maturity Securities, Pledged as Collateral, at Carrying Value					40,457
Held-To-Maturity Securities, Pledged as Collateral, at Fair Value					39,963

Maturities of Debt Securities, at Amortized Cost:
Within One Year	$	37,396	$	928	$	38,324
From 1 - 5 Years	19,260		3,735		22,995
From 5 - 10 Years	1,425		—		1,425
Over 10 Years	—		—		—

Maturities of Debt Securities, at Fair Value:
Within One Year	$	37,233	$	916	$	38,149
From 1 - 5 Years	19,036		3,641		22,677
From 5 - 10 Years	1,425		—		1,425
Over 10 Years	—		—		—

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	37,276		4,557		41,833
Total	$	37,276	$	4,557	$	41,833


Held-To-Maturity Securities
	State and Municipal Obligations		Mortgage- Backed Securities		Total Held-To Maturity Securities
Number of Securities in a Continuous Loss Position	120		16		136

Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	—	$	—	$	—
12 Months or Longer	387		106		493
Total	$	387	$	106	$	493









December 31, 2024
Held-To-Maturity Securities, at Amortized Cost	$	91,829	$	6,432	$	98,261

Gross Unrealized Losses	(1,456)		(219)		(1,675)
Held-To-Maturity Securities, at Fair Value	90,373		6,213		96,586
Held-To-Maturity Securities, Pledged as Collateral, at Carrying Value					72,506
Held-To-Maturity Securities, Pledged as Collateral, at Fair Value					70,831

Securities in a Continuous Loss Position, at Fair Value:
Less than 12 Months	$	378	$	—	$	378
12 Months or Longer	68,112		6,212		74,324
Total	$	68,490	$	6,212	$	74,702
Number of Securities in a Continuous Loss Position	219		16		235

Unrealized Losses on Securities in a Continuous Loss Position:
Less than 12 Months	$	2	$	—	$	2
12 Months or Longer	1,454		219		1,673
Total	$	1,456	$	219	$	1,675

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

Arrow's investment policy requires that investments held in our portfolio be investment grade or better at the time of purchase. Arrow performs an analysis of the creditworthiness of municipal obligations to determine if a security is of investment grade. The analysis may include but may not solely rely upon credit analysis conducted by external credit rating agencies.

Arrow evaluates AFS debt securities in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or non-credit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized within the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. Arrow determined that at September 30, 2025 and December 31, 2024, gross unrealized losses were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. Arrow does not intend to sell, nor is it more likely than not that Arrow will be required to sell, any securities before recovery of its amortized cost basis, which may be at maturity. Therefore, Arrow carried no allowance for credit loss at September 30, 2025 or December 31, 2024 and there was no credit loss expense recognized by Arrow with respect to the securities portfolio during the three or nine months ended September 30, 2025 or the year ended December 31, 2024.

history of zero credit loss. Arrow determined that the expected credit loss on its HTM debt portfolio was immaterial and therefore no allowance for credit loss was recorded as of September 30, 2025.

The following table is the schedule of Equity Securities at September 30, 2025 and December 31, 2024:

Equity Securities

September 30, 2025

December 31, 2024

Equity Securities, at Fair Value

$5,724

$5,055

The following is a summary of realized and unrealized gains and losses recognized in income on equity securities during the three and nine month periods ended September 30, 2025 and 2024:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2025		2024		2025		2024
Net Gain on Equity Securities	$	392	$	94	$	669	$	165
Less: Net gain recognized during the reporting period on equity securities sold during the period	—		—		—		—
Unrealized net gain recognized during the reporting period on equity securities still held at the reporting date	$	392	$	94	$	669	$	165

Note 5. LOANS (In Thousands)

Loan Categories and Past Due Loans

The following two tables present loan balances outstanding as of September 30, 2025 and December 31, 2024 and an analysis of the recorded investment in loans that are past due at these dates. Generally, Arrow considers a loan past due 30 or more days when the borrower is two payments past due. Loans held-for-sale of $3.0 million and $759 thousand as of September 30, 2025 and December 31, 2024, respectively, are included in the residential real estate balances for current loans.


Schedule of Past Due Loans by Loan Category
			Commercial
	Commercial		Real Estate		Consumer		Residential		Total
September 30, 2025
Loans past due 30-59 days	$	216	$	—	$	11,089	$	660	$	11,965
Loans past due 60-89 days	231		—		5,955		5,459		11,645
Loans past due 90 or more days	245		—		1,525		1,672		3,442
Total loans past due	692		—		18,569		7,791		27,052
Current loans	169,638		809,696		1,070,664		1,364,959		3,414,957
Total Loans	$	170,330	$	809,696	$	1,089,233	$	1,372,750	$	3,442,009

December 31, 2024
Loans past due 30-59 days	$	355	$	—	$	11,211	$	391	$	11,957
Loans past due 60-89 days	156		318		5,417		2,685		8,576
Loans past due 90 or more days	102		14,902		2,225		2,239		19,468
Total loans past due	613		15,220		18,853		5,315		40,001
Current loans	158,378		781,145		1,100,128		1,314,889		3,354,540
Total loans	$	158,991	$	796,365	$	1,118,981	$	1,320,204	$	3,394,541


Schedule of Non Accrual Loans by Category
			Commercial
September 30, 2025	Commercial		Real Estate		Consumer		Residential		Total
Loans 90 or more days past due and Still Accruing Interest	$	—	$	—	$	36	$	649	$	685
Nonaccrual loans	245		—		1,644		3,726		5,615
Nonaccrual with no allowance for credit loss	245		—		1,644		3,726		5,615


December 31, 2024
Loans 90 or more days past due and Still Accruing Interest	$	—	$	—	$	19	$	379	$	398
Nonaccrual loans	102		14,902		2,241		3,376		20,621
Nonaccrual with no allowance for credit loss	102		14,902		2,241		3,376		20,621

Arrow disaggregates its loan portfolio into the following four categories:

Commercial - Arrow offers a variety of loan options to meet the specific needs of our commercial customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower. In the event of default by the borrower, Arrow may be required to liquidate collateral at deeply discounted values. To reduce the risk, management usually obtains personal guarantees to support the borrowing, as permitted by applicable law.

Commercial Real Estate - Arrow offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. Commercial real estate loans are made to finance the purchases of real property which generally consists of real estate with completed structures. These commercial real estate loans are typically secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and both owner- and non-owner-occupied facilities. Arrow also offers commercial construction and land development loans to finance projects. Many projects will ultimately be used by the borrowers' businesses, while others are developed for resale. These real estate loans are also typically secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities and both owner-occupied and non-owner-occupied facilities. There is elevated risk during the construction period, since the loan is secured by an incomplete project. Arrow’s Commercial Real Estate loans are primarily located within the footprint of the Company’s branch network, with some loans extending into the greater upstate New York area. Arrow does not provide Commercial Real Estate loans in major metropolitan areas such as New York City, Boston, etc.

Consumer Loans - This category is primarily comprised of automobile loans. Arrow primarily finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont. Most automobile loans carry a fixed rate of interest with principal repayment terms typically ranging from three to seven years. Automobile loans are underwritten on a secured basis using the underlying collateral being financed. Arrow also offers a variety of consumer installment loans to finance personal expenditures. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to five years, based upon the nature of the collateral and the size of the loan. In addition to installment loans, Arrow also offers personal lines of credit and overdraft protection. Several of these consumer loans are unsecured, which carry a higher risk of loss.

Residential - Residential real estate loans consist primarily of loans secured by first or second mortgages on primary residences. Arrow originates fixed-rate and adjustable-rate one-to-four-family residential real estate loans for the construction, purchase of real estate or refinancing of an existing mortgage. These loans are collateralized primarily by owner-occupied properties generally located in Arrow's market area. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 80% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance. Arrow’s underwriting analysis for residential mortgage loans typically includes credit verification, independent appraisals, and a review of the borrower’s financial condition. Mortgage title insurance and hazard insurance are normally required. It is Arrow's general practice to underwrite residential real estate loans to secondary market standards. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period. In addition, Arrow offers fixed home equity loans, as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses. Arrow's policy allows for a maximum loan to value ratio of 80%, although periodically higher advances are allowed. Arrow originates home equity lines of credit and second mortgage loans (loans secured by a second junior lien position on one-to-four-family residential real estate). Risk is generally reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate.

Allowance for Credit Losses

Loan segments were selected by class code, application code and product code to ensure each segment is comprised of loans with homogenous loan characteristics and similar risk profiles. The resulting loan segments are commercial, commercial real estate, consumer and residential real estate loans. Please see Note 2. Accounting Policies for additional detail on our Allowance for Credit Losses.

September 30, 2025 allowance for credit losses calculation incorporated a reasonable and supportable forecast period to account for economic conditions utilized in the measurement. The quantitative model utilized a six-quarter economic forecast sourced from reputable third-parties that projects a favorable change of approximately 0.05% in the forecasted national unemployment rate, forecasted gross domestic product projected to increase by approximately 0.23%, and the home price index (HPI) forecast to improve by approximately 0.05% from the previous quarter economic forecast.

The third quarter provision for credit losses was $0.8 million. In addition, Arrow recorded an increase for estimated credit losses on off-balance sheet credit exposures in other liabilities of $56 thousand in the third quarter of 2025. Management's evaluation considers the allowance for credit losses for loans to be appropriate as of September 30, 2025.

The following table details activity in the allowance for credit losses on loans for the three and nine months ended September 30, 2025 and September 30, 2024:


Allowance for Credit Losses
	Commercial		Commercial Real Estate		Consumer		Residential		Total
June 30, 2025	$	2,775	$	16,012	$	4,393	$	11,011	$	34,191
Charge-offs	$	—	$	—	$	(1,464)	$	—	$	(1,464)
Recoveries	$	—	$	—	$	634	$	—	$	634
Provision	$	(40)	$	(644)	$	610	$	889	$	815
September 30, 2025	$	2,735	$	15,368	$	4,173	$	11,900	$	34,176

December 31, 2024	$	1,925	$	14,507	$	3,882	$	13,284	$	33,598
Charge-offs	$	—	$	(3,818)	$	(4,208)	$	(51)	$	(8,077)
Recoveries	$	—	$	75	$	2,152	$	—	$	2,227
Provision	$	810	$	4,604	$	2,347	$	(1,333)	$	6,428
September 30, 2025	$	2,735	$	15,368	$	4,173	$	11,900	$	34,176


June 30, 2024	$	2,031	$	14,111	$	2,985	$	11,882	$	31,009
Charge-offs	$	—	$	—	$	(1,388)	$	(41)	$	(1,429)
Recoveries	$	—	$	—	$	748	$	—	$	748
Provision	$	(133)	$	(66)	$	296	$	837	$	934
September 30, 2024	$	1,898	$	14,045	$	2,641	$	12,678	$	31,262

December 31, 2023	$	1,958	$	15,521	$	2,566	$	11,220	$	31,265
Charge-offs	$	(9)	$	—	$	(4,512)	$	(41)	$	(4,562)
Recoveries	$	—	$	—	$	2,233	$	—	$	2,233
Provision	$	(51)	$	(1,476)	$	2,354	$	1,499	$	2,326
September 30, 2024	$	1,898	$	14,045	$	2,641	$	12,678	$	31,262

Estimated Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities

As of September 30, 2025, the total unfunded commitment off-balance sheet credit exposure was $1.3 million, an increase from the June 30, 2025 balance of $56 thousand. As of December 31, 2024, the total unfunded commitment off-balance sheet credit exposure was $1.6 million.

Individually Evaluated Loans

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2025 and December 31, 2024:


September 30, 2025	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		—		—
Consumer	—		—		—
Residential	2,585		—		2,585
Total	$	2,585	$	—	$	2,585


December 31, 2024	Collateral Type -Residential Real Estate		Collateral Type - Commercial Real Estate		Total Loans
Commercial	$	—	$	—	$	—
Commercial Real Estate	—		14,902		14,902
Consumer	—		—		—
Residential	1,417		—		1,417
Total	$	1,417	$	14,902	$	16,319


Allowance for Credit Losses - Collectively and Individually Evaluated
	Commercial		Commercial Real Estate		Consumer		Residential		Total
September 30, 2025
Ending Loan Balance - Collectively Evaluated	$	170,330	$	809,696	$	1,089,233	$	1,370,165	$	3,439,424
Allowance for Credit Losses - Loans Collectively Evaluated	2,735		15,368		4,173		11,900		34,176

Ending Loan Balance - Individually Evaluated	—		—		—		2,585		2,585
Allowance for Credit Losses - Loans Individually Evaluated	—		—		—		—		—

December 31, 2024
Ending Loan Balance - Collectively Evaluated	$	158,991	$	781,463	$	1,118,981	$	1,318,787	$	3,378,222
Allowance for Credit Losses - Loans Collectively Evaluated	1,925		14,507		3,882		13,284		33,598
Ending Loan Balance - Individually Evaluated	—		14,902		—		1,417		16,319
Allowance for Credit Losses - Loans Individually Evaluated	—		—		—		—		—

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

Arrow considers the need to qualitatively adjust expected credit loss estimates for information not already captured in the loss estimation process. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses. Adjustments are not made for information that has already been considered and included in the loss estimation process.

Arrow considers the qualitative factors that are relevant as of the reporting date, which may include, but are not limited to the following factors:

•The nature and volume of Arrow's financial assets;

•The existence, growth, and effect of any concentrations of credit;

•The volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

•The value of the underlying collateral for loans that are not collateral-dependent;

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

•The quality of Arrow's loan review function;

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

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

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

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

Loan Credit Quality Indicators and Modifications

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction.

In some cases, the Company provides multiple types of concession on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, may be granted.

The following tables present the amortized cost basis of loans at September 30, 2025 that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class financing receivable is also present below. We had no reportable loan modifications for the year ended December 31, 2024.


Three Months Ended September 30, 2025
	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable
Commercial	$	—	$	—	$	—	$	—	$	—	$	—	—	%
Commercial Real Estate	—		—		—		—		—		—		—	%
Consumer	—		—		—		—		—		—		—	%
Residential	—		351		—		—		—		—		0.03	%
Total	$	—	$	351	$	—	$	—	$	—	$	—	0.01	%


Nine Months Ended September 30, 2025
	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable
Commercial	$	—	$	—	$	—	$	—	$	—	$	—	—	%
Commercial Real Estate	—		—		—		—		—		—		—	%
Consumer	—		—		—		—		—		—		—	%
Residential	—		1,056		—		—		—		—		0.08	%
Total	$	—	$	1,056	$	—	$	—	$	—	$	—	0.03	%

The Company has not committed to lend additional amounts to the borrowers in the previous table.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the last 12 months. There were no reportable loan modifications for the year ended December 31, 2024.


Three Months Ended September 30, 2025
	Current		Loans Past Due 30-59 Days		Loans Past Due 60-89 Days		Loans Past Due 90 or more Days		Total Loans Past Due
Commercial	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate	—		—		—		—		—
Consumer	—		—		—		—		—
Residential	351		—		—		—		—
Total	$	351	$	—	$	—	$	—	$	—


Nine Months Ended September 30, 2025
	Current		Loans Past Due 30-59 Days		Loans Past Due 60-89 Days		Loans Past Due 90 or more Days		Total Loans Past Due
Commercial	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate	—		—		—		—		—
Consumer	—		—		—		—		—
Residential	1,056		—		—		—		—
Total	$	1,056	$	—	$	—	$	—	$	—

The following table presents the financial effect of the loan modification presented above to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2025. Loan modifications currently included in the Payment Delay column

of the tables above are modifications to bring past due balances current, without extending the term, adjusting the interest rate, or forgiving any principal amounts. The modifications increased the monthly payment amounts for a certain number of months of the remaining term of the loans. Present value of cash flows under the new terms have not changed by 10% or more in comparison to the original terms. There were no reportable loan modifications for the year ended December 31, 2024.


Three Months Ended September 30, 2025
	Principal Forgiveness		Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension
Commercial	$	—	—	%	0
Commercial Real Estate	—		—	%	0
Consumer	—		—	%	0
Residential	—		—	%	0
Total	—		—	%	0

Nine Months Ended September 30, 2025
	Principal Forgiveness		Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension
Commercial	$	—	—	%	0
Commercial Real Estate	—		—	%	0
Consumer	—		—	%	0
Residential	—		—	%	0
Total	—		—	%	0

There were no defaults during the nine months ended September 30, 2025.

The following tables present credit quality indicators by total loans amortized cost basis by origination year as of September 30, 2025 and December 31, 2024:


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
September 30, 2025	2025		2024		2023		2022		2021		Prior
Commercial:
Risk rating
Satisfactory	$	27,494	$	43,661	$	21,989	$	17,751	$	13,015	$	29,216	$	11,032	$	—	$	164,158
Special mention	495		—		60		158		—		—		478		—		1,191
Substandard	—		—		439		102		—		2,930		1,510		—		4,981
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	27,989	$	43,661	$	22,488	$	18,011	$	13,015	$	32,146	$	13,020	$	—	$	170,330

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Real Estate:
Risk rating
Satisfactory	$	46,994	$	113,780	$	93,842	$	133,133	$	100,394	$	272,312	$	3,972	$	—	$	764,427
Special mention	303		4,725		276		12,422		4,791		4,688		—		—		27,205
Substandard	—		—		343		1,141		307		14,308		1,965		—		18,064
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	47,297	$	118,505	$	94,461	$	146,696	$	105,492	$	291,308	$	5,937	$	—	$	809,696

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	1,656	$	2,162	$	—	$	—	$	3,818

Consumer:
Risk rating
Performing	$	290,403	$	309,091	$	217,438	$	166,014	$	75,359	$	28,792	$	456	$	—	$	1,087,553
Nonperforming	106		461		482		254		291		86		—		—		1,680
Total Consumer Loans	$	290,509	$	309,552	$	217,920	$	166,268	$	75,650	$	28,878	$	456	$	—	$	1,089,233

Current-period gross charge-offs	$	221	$	1,080	$	1,093	$	892	$	728	$	194	$	—	$	—	$	4,208

Residential:
Risk rating
Performing	$	104,692	$	175,578	$	165,796	$	210,304	$	173,254	$	407,817	$	130,934	$	—	$	1,368,375
Nonperforming	—		258		—		1,994		343		1,605		175		—		4,375
Total Residential Loans	$	104,692	$	175,836	$	165,796	$	212,298	$	173,597	$	409,422	$	131,109	$	—	$	1,372,750

Current-period gross charge-offs	$	—	$	—	$	—	$	20	$	—	$	31	$	—	$	—	$	51

Total Loans	$	470,487	$	647,554	$	500,665	$	543,273	$	367,754	$	761,754	$	150,522	$	—	$	3,442,009

Total gross charge-offs	$	221	$	1,080	$	1,093	$	912	$	2,384	$	2,387	$	—	$	—	$	8,077


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
December 31, 2024	2024		2023		2022		2021		2020		Prior
Commercial:
Risk rating
Satisfactory	$	42,767	$	28,988	$	23,808	$	16,941	$	6,183	$	19,211	$	15,686	$	—	$	153,584
Special mention	107		229		930		—		72		—		483		—		1,821
Substandard	—		280		264		—		—		3,030		12		—		3,586
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Loans	$	42,874	$	29,497	$	25,002	$	16,941	$	6,255	$	22,241	$	16,181	$	—	$	158,991

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	9	$	—	$	—	$	—	$	9

Commercial Real Estate:
Risk rating
Satisfactory	$	90,049	$	96,783	$	137,146	$	109,086	$	115,576	$	187,202	$	2,799	$	—	$	738,641
Special mention	3,002		200		12,680		—		—		9,506		—		—		25,388
Substandard	—		146		172		1,985		2,309		26,853		871		—		32,336
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	93,051	$	97,129	$	149,998	$	111,071	$	117,885	$	223,561	$	3,670	$	—	$	796,365

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer:
Risk rating
Performing	$	386,004	$	297,698	$	243,484	$	121,803	$	48,268	$	18,994	$	473	$	—	$	1,116,724
Nonperforming	345		424		602		593		178		115		—		—		2,257
Total Consumer Loans	$	386,349	$	298,122	$	244,086	$	122,396	$	48,446	$	19,109	$	473	$	—	$	1,118,981

Current-period gross charge-offs	$	1,272	$	949	$	1,669	$	1,270	$	434	$	243	$	—	$	—	$	5,837

Residential:
Risk rating
Performing	$	162,087	$	177,071	$	225,398	$	181,934	$	106,695	$	334,576	$	128,687	$	—	$	1,316,448
Nonperforming	—		201		254		201		464		2,386		250		—		3,756
Total Residential Loans	$	162,087	$	177,272	$	225,652	$	182,135	$	107,159	$	336,962	$	128,937	$	—	$	1,320,204

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	49	$	—	$	—	$	49

Total Loans	$	684,361	$	602,020	$	644,738	$	432,543	$	279,745	$	601,873	$	149,261	$	—	$	3,394,541

Total gross charge-offs	$	1,272	$	949	$	1,669	$	1,270	$	443	$	292	$	—	$	—	$	5,895

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

As of September 30, 2025, the amortized cost of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $1.4 million.

For the allowance calculation, an internally developed system of five credit quality indicators is used to rate the credit worthiness of each commercial loan defined as follows:

1) Satisfactory - "Satisfactory" borrowers have acceptable financial condition with satisfactory record of earnings and sufficient historical and projected cash flow to service the debt. Borrowers have satisfactory repayment histories and primary and secondary sources of repayment can be clearly identified;

2) Special Mention - Loans in this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit

position at some future date. "Special mention" assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Loans which might be assigned this credit quality indicator include loans to borrowers with deteriorating financial strength and/or earnings record and loans with potential for problems due to weakening economic or market conditions;

3) Substandard - Loans classified as “substandard” are inadequately protected by the current net worth or paying capacity of the borrower or the collateral pledged, if any. Loans in this category have well defined weaknesses that jeopardize the repayment. They are characterized by the distinct possibility that Arrow will sustain some loss if the deficiencies are not corrected. “Substandard” loans may include loans which are likely to require liquidation of collateral to effect repayment, and other loans where character or ability to repay has become suspect. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard;

4) Doubtful - Loans classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. Although possibility of loss is extremely high, classification of these loans as “loss” has been deferred due to specific pending factors or events which may strengthen the value (e.g. possibility of additional collateral, injection of capital, collateral liquidation, debt restructure, economic recovery, etc.). Loans classified as “doubtful” need to be placed on nonaccrual; and

5) Loss - Loans classified as “loss” are considered uncollectible with collateral of such little value that their continuance as bankable assets is not warranted. As of the date of the balance sheet, all loans in this category have been charged-off to the allowance for loan losses.

Commercial loans are generally evaluated on an annual basis depending on the size and complexity of the loan relationship, unless the credit related quality indicator falls to a level of "special mention" or below, when the loan is evaluated quarterly. The credit quality indicator is one of the factors used in assessing the level of incurred risk of loss in our commercial related loan portfolios.

Note 6. DEBT (Dollars in Thousands)

Schedule of Borrowings:


	September 30, 2025		December 31, 2024
Balance:

FHLBNY Overnight Advances	—		—
FHLBNY Term Advances	4,265		8,600

Total Borrowings	$	4,265	$	8,600

Maximum Borrowing Capacity:
Federal Funds Purchased	$	23,000	$	23,000
Federal Home Loan Bank of New York	714,007		654,890
Federal Reserve Bank of New York	763,091		571,107

Available Borrowing Capacity:
Federal Funds Purchased	$	23,000	$	23,000
Federal Home Loan Bank of New York	679,741		616,290
Federal Reserve Bank of New York	763,091		571,107

Arrow Bank has in place unsecured federal funds lines of credit with two correspondent banks. As a member of the FHLBNY, Arrow participates in the advance program which allows for overnight and term advances up to the limit of pledged collateral, including FHLBNY stock and any loans secured by real estate such as commercial real estate, residential real estate and home equity loans (see Note 4. Investment Securities, and Note 5. Loans). The maximum borrowing capacities at the FHLBNY and FRB are determined based on the fair value of the collateral pledged, subject to discounts determined by the respective lenders. As of September 30, 2025, the carrying cost for the FHLBNY collateral was approximately $1.0 billion and approximately $1.0 billion for the FRB. As of September 30, 2025, the fair value for the FHLBNY collateral was approximately $890.3 million and approximately $1.0 billion for the FRB. The investment in FHLBNY stock is proportional to the total of Arrow's overnight and term advances (see the schedule of FRB and FHLB Stock in Note 4. Investment Securities). Arrow Bank has also established borrowing facilities with the FRB of New York for potential “discount window” advances, pledging certain consumer loans as collateral (see Note 5. Loans).

Long Term Debt - FHLBNY Term Advances

In addition to overnight advances, Arrow Bank also borrows longer-term funds from the FHLBNY.

Maturity Schedule of FHLBNY Term Advances:


	Balances				Weighted Average Rate 1

Final Maturity	9/30/2025		12/31/2024			9/30/2025		12/31/2024
First Year	$	—	$	6,900		—	%	5.34	%
Second Year	—		—			—	%	—	%
Third Year	4,265		1,700			4.32	%	4.85	%
Fourth Year	—		—			—	%	—	%
Total	$	4,265	$	8,600		4.32	%	5.24	%

1The effective rate on the FHLBNY Advances is 0% due to subsidized funding in the form of interest rate credits.

Long Term Debt - Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated Debentures

At September 30, 2025, Arrow had two classes of financial instruments issued by two separate subsidiary business trusts of Arrow, Arrow Capital Statutory Trust II ("ACST II") and Arrow Capital Statutory Trust III ("ACST III" and, together with ACST II, the "Trusts"), identified as “Junior Subordinated Obligations Issued to Unconsolidated Subsidiary Trusts” on the Consolidated Balance Sheets and the Consolidated Statements of Income.

The first of the two classes of trust-issued instruments outstanding at September 30, 2025 was issued by ACST II, a Delaware business trust established on July 16, 2003, upon the filing of a certificate of trust with the Delaware Secretary of State. In July 2003, ACST II issued all of its voting (common) stock to Arrow and issued and sold to an unaffiliated purchaser 30-year guaranteed preferred beneficial interests in the trust's assets ("ACST II TRUPS"). The rate on the securities is variable and tied to the 3-month Secured Overnight Financing Rate (SOFR) plus 3.15%. ACST II used the proceeds of the sale of the ACST II TRUPS to purchase an identical amount of junior subordinated debentures issued by Arrow that bear an interest rate identical at all times to the rate payable on the ACST II TRUPS. The ACST II TRUPS became redeemable after July 23, 2008 and mature on July 23, 2033.

The second of the two classes of trust-issued instruments outstanding at year-end was issued by ACST III, a Delaware business trust established on December 23, 2004, upon the filing of a certificate of trust with the Delaware Secretary of State. On December 28, 2004, the ACST III issued all of its voting (common) stock to Arrow and issued and sold to an unaffiliated purchaser 30-year guaranteed preferred beneficial interests in the trust's assets ("ACST III TRUPS"). The rate on the ACST III TRUPS is a variable rate, adjusting quarterly to the 3-month SOFR plus 2.00%. ACST III used the proceeds of the sale of the ACST III TRUPS to purchase an identical amount of junior subordinated debentures issued by Arrow that bear an interest rate identical at all times to the rate payable on the ACST III TRUPS. The ACST III TRUPS became redeemable on or after March 31, 2010 and mature on December 28, 2034.

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

The primary assets of the Trusts are Arrow's junior subordinated debentures discussed above, and the sole revenues of the Trusts are payments received by them from Arrow with respect to the junior subordinated debentures. The trust preferred securities issued by the Trusts are non-voting. All common voting securities of the Trusts are owned by Arrow. Arrow used the net proceeds from its sale of junior subordinated debentures to the Trusts, facilitated by the Trusts' sale of their trust preferred securities to the purchasers thereof, for general corporate purposes. The trust preferred securities and underlying junior subordinated debentures, with associated expense that is tax deductible, qualify as Tier I capital under regulatory definitions.

Arrow's primary source of funds to pay interest on the debentures that are held by the Trusts are current dividends received by Arrow from Arrow Bank. Accordingly, Arrow's ability to make payments on the debentures, and the ability of the Trusts to make payments on their trust preferred securities, are dependent upon the continuing ability of Arrow Bank to pay dividends to Arrow. Since the trust preferred securities issued by the subsidiary trusts and the underlying junior subordinated debentures issued by Arrow at September 30, 2025 and December 31, 2024 are classified as debt for financial statement purposes, the expense associated with these securities is recorded as interest expense in the Consolidated Statements of Income for the three years.

Schedule of Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated Debentures


	September 30, 2025			December 31, 2024
ACST II
Balance	$	10,000		$	10,000
Period End:
Variable Interest Rate	7.41		%	7.74		%
Fixed Interest Rate resulting from cash flow hedge agreement	4.00		%	4.00		%

ACST III
Balance	$	10,000		$	10,000
Period End:
Variable Interest Rate	6.26		%	6.59		%
Fixed Interest Rate resulting from cash flow hedge agreement	2.86		%	2.86		%

Note 7. COMMITMENTS AND CONTINGENCIES (In Thousands)

The following table presents the notional amount and fair value of Arrow's off-balance sheet commitments to extend credit and commitments under standby letters of credit as of September 30, 2025 and December 31, 2024:


Commitments to Extend Credit and Letters of Credit
	September 30, 2025		December 31, 2024
Notional Amount:
Commitments to Extend Credit	$	462,063	$	449,491
Standby Letters of Credit	3,968		4,306
Fair Value:
Commitments to Extend Credit	$	—	$	—
Standby Letters of Credit	(9)		(7)

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

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

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

Arrow does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit. Arrow has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party. Standby letters of credit generally arise in connection with commercial lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit at September 30, 2025 and December 31, 2024 represent the maximum potential future payments Arrow could be required to make. Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements. Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Arrow's policies governing loan collateral apply to standby letters of credit at the time of credit extension. Loan-to-value ratios will generally range from 50% for movable assets, such as inventory, to 100% for liquid assets, such as bank CDs. Fees for standby letters of credit range from 1% to 3% of the notional amount. Fees are collected upfront and amortized over the life of the commitment. The carrying amount and fair value of Arrow's standby letters of credit at September 30, 2025 and December 31, 2024, were insignificant. The fair value of standby letters of credit is based on the fees currently charged for similar agreements or the cost to terminate the arrangement with the counterparties.

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

In the normal course of business, Arrow and Arrow Bank become involved in a variety of routine legal proceedings. At September 30, 2025, there were no legal proceedings pending or threatened, which in the opinion of management and counsel, would result in a material loss to Arrow. Legal expenses incurred in connection with loss contingencies are expensed as incurred.

Note 8. COMPREHENSIVE INCOME (In Thousands)

The following table presents the components of other comprehensive income (loss) for the three and nine month periods ended September 30, 2025 and 2024:


Schedule of Comprehensive Income (Loss)
	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
2025
Net Unrealized Securities Holding Gain on Securities Available-for-Sale Arising During the Period	$	3,304	$	(852)	$	2,452	$	16,336	$	(4,212)	$	12,124
Net Unrealized (Loss) on Cash Flow Swap	(538)		146		(392)		(2,300)		600		(1,700)



Reclassification of Net Unrealized Loss (Gain) on Cash Flow Hedge Agreements to Interest Expense	300		(78)		222		(688)		177		(511)
Amortization of Net Retirement Plan Actuarial (Gain)	(128)		33		(95)		(383)		99		(284)
Amortization of Net Retirement Plan Prior Service Cost	82		(20)		62		248		(64)		184
Other Comprehensive Income	$	3,020	$	(771)	$	2,249	$	13,213	$	(3,400)	$	9,813

2024
Net Unrealized Securities Holding Gain on Securities Available-for-Sale Arising During the Period	$	12,505	$	(3,223)	$	9,282	$	11,457	$	(2,954)	$	8,503
Net Unrealized (Loss) on Cash Flow Swap	(4,667)		1,203		(3,464)		(766)		197		(569)
Reclassification of Net Unrealized (Loss) on Cash Flow Hedge Agreements to Interest Expense	(196)		50		(146)		(624)		161		(463)


Amortization of Net Retirement Plan Actuarial (Gain)	(78)		20		(58)		(235)		61		(174)
Amortization of Net Retirement Plan Prior Service Cost	67		(17)		50		204		(53)		151
Other Comprehensive Income	$	7,631	$	(1,967)	$	5,664	$	10,036	$	(2,588)	$

ARROW FINANCIAL CORP 10-Q