v3.25.2
Loans
 6 Months Ended
Jun. 30, 2025
Receivables [Abstract]  
Loans LOANS (In Thousands)
Loan Categories and Past Due Loans

The following two tables present loan balances outstanding as of June 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 $4.5 million and $759 thousand as of June 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
CommercialReal EstateConsumerResidentialTotal
June 30, 2025
Loans Past Due 30-59 Days$549 $— $10,627 $391 $11,567 
Loans Past Due 60-89 Days196 312 5,548 3,150 9,206 
Loans Past Due 90 or more Days88 — 925 2,488 3,501 
Total Loans Past Due833 312 17,100 6,029 24,274 
Current Loans161,370 807,854 1,092,172 1,339,084 3,400,480 
Total Loans$162,203 $808,166 $1,109,272 $1,345,113 $3,424,754 
December 31, 2024
Loans Past Due 30-59 Days$355 $— $11,211 $391 $11,957 
Loans Past Due 60-89 Days156 318 5,417 2,685 8,576 
Loans Past Due 90 or more Days102 14,902 2,225 2,239 19,468 
Total Loans Past Due613 15,220 18,853 5,315 40,001 
Current Loans158,378 781,145 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
June 30, 2025CommercialReal EstateConsumerResidentialTotal
Loans 90 or More Days Past Due
  and Still Accruing Interest		$— $— $24 $916 $940 
Nonaccrual Loans170 — 1,154 3,951 5,275 
Nonaccrual With No Allowance for Credit Loss170 — 868 3,951 4,989 
Interest Income on Nonaccrual Loans— — — — — 
December 31, 2024
Loans 90 or More Days Past Due
  and Still Accruing Interest		$— $— $19 $379 $398 
Nonaccrual Loans102 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 and application code to ensure each segment is comprised of loans with homogenous loan characteristics and similar risk profiles. The resulting loan segments are commercial, commercial real estate, consumer and residential real estate loans. Please see Note 2 Accounting Policies for additional detail on our Allowance for Credit Losses.
June 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 an unfavorable change of approximately 0.28% in the forecasted national unemployment rate, forecasted gross domestic product projected to decline by approximately 0.60%, and the home price index (HPI) forecast to improve by approximately 1.18% from the previous quarter economic forecast.
The second quarter provision for credit losses was $0.6 million. In addition, Arrow recorded a decrease for estimated credit losses on off-balance sheet credit exposures in other liabilities of $38 thousand in the second quarter of 2025. Management's evaluation considers the allowance for credit losses for loans to be appropriate as of June 30, 2025.
The following table details activity in the allowance for credit losses on loans for the three and six months ended June 30, 2025 and June 30, 2024:

Allowance for Credit Losses
CommercialCommercial Real EstateConsumerResidentialTotal
March 31, 2025$1,801 $18,236 $4,147 $13,587 $37,771 
Charge-offs$— $(3,818)$(1,225)$(20)$(5,063)
Recoveries$— $75 $814 $— $889 
Provision$974 $1,519 $657 $(2,556)$594 
June 30, 2025$2,775 $16,012 $4,393 $11,011 $34,191 
December 31, 2024$1,925 $14,507 $3,882 $13,284 $33,598 
Charge-offs$— $(3,818)$(2,744)$(51)$(6,613)
Recoveries$— $75 $1,518 $— $1,593 
Provision$850 $5,248 $1,737 $(2,222)$5,613 
June 30, 2025$2,775 $16,012 $4,393 $11,011 $34,191 
March 31, 2024$2,842 $14,168 $2,756 $11,795 $31,561 
Charge-offs$— $— $(1,850)$— $(1,850)
Recoveries$— $— $523 $— $523 
Provision$(811)$(57)$1,556 $87 $775 
June 30, 2024$2,031 $14,111 $2,985 $11,882 $31,009 
December 31, 2023$1,958 $15,521 $2,566 $11,220 $31,265 
Charge-offs$(9)$— $(3,124)$— $(3,133)
Recoveries$— $— $1,485 $— $1,485 
Provision$82 $(1,410)$2,058 $662 $1,392 
June 30, 2024$2,031 $14,111 $2,985 $11,882 $31,009 


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

As of June 30, 2025, the total unfunded commitment off-balance sheet credit exposure was $1.3 million, a decrease from the March 31, 2025 balance of $38 thousand.

Individually Evaluated Loans

As of June 30, 2025, there were three total relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $2.7 million.
The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2025 and December 31, 2024:
June 30, 2025Collateral Type -Residential Real EstateCollateral Type - Commercial Real EstateTotal Loans
Commercial$— $— $— 
Commercial Real Estate— — — 
Consumer— — — 
Residential2,688 — 2,688 
Total$2,688 $— $2,688 

December 31, 2024Collateral Type -Residential Real EstateCollateral Type - Commercial Real EstateTotal Loans
Commercial$— $— $— 
Commercial Real Estate— 14,902 14,902 
Consumer— — — 
Residential1,417 — 1,417 
Total$1,417 $14,902 $16,319 




Allowance for Credit Losses - Collectively and Individually Evaluated
CommercialCommercial Real EstateConsumerResidentialTotal
June 30, 2025
Ending Loan Balance - Collectively Evaluated$162,203 $808,166 $1,109,272 $1,342,425 $3,422,066 
Allowance for Credit Losses - Loans Collectively Evaluated2,775 16,012 4,093 11,011 33,891 
Ending Loan Balance - Individually Evaluated— — — 2,688 2,688 
Allowance for Credit Losses - Loans Individually Evaluated— — 300 — 300 
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 Evaluated1,925 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 loan at June 30, 2025 that were both experiencing financial difficulty and modified during the six months ended June 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.

June 30, 2025Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionCombination Term Extension and Principal ForgivenessCombination Term Extension and Interest Rate ReductionTotal Class of Financing Receivable
Commercial$— $— $— $— $— $— — %
Commercial Real Estate— — — — — — — %
Consumer— — — — — — — %
Residential— 705 — — — — 0.05 %
Total$— $705 $— $— $— $— 0.02 %
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.

June 30, 2025CurrentLoans Past Due 30-59 DaysLoans Past Due 60-89 DaysLoans Past Due 90 or more DaysTotal Loans Past Due
Commercial$— $— $— $— $— 
Commercial Real Estate— — — — — 
Consumer— — — — — 
Residential705 — — — — 
Total$705 $— $— $— $— 
The following table presents the financial effect of the loan modification presented above to a borrower experiencing financial difficulty for the six months ended June 30, 2025. There were no reportable loan modifications for the year ended December 31, 2024.

June 30, 2025Principal ForgivenessWeighted-Average Interest Rate ReductionWeighted-Average Term Extension
Commercial$— — %0
Commercial Real Estate— — %0
Consumer— — %0
Residential— — %0
Total
— — %0

There were no defaults during the six months ended June 30, 2025.
The following tables present credit quality indicators by total loans amortized cost basis by origination year as of June 30, 2025 and December 31, 2024:
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving Loan Converted to TermTotal
June 30, 202520252024202320222021Prior
Commercial:
Risk rating
Satisfactory$18,018 $45,640 $24,474 $19,884 $14,728 $22,123 $11,354 $— $156,221 
Special mention208 — 65 174 — — 481 — 928 
Substandard— — 467 113 — 2,964 1,510 — 5,054 
Doubtful— — — — — — — — — 
Total Commercial Loans$18,226 $45,640 $25,006 $20,171 $14,728 $25,087 $13,345 $— $162,203 
Current-period gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial Real Estate:
Risk rating
Satisfactory$34,837 $108,474 $95,905 $134,044 $101,383 $283,479 $4,349 $— $762,471 
Special mention305 4,751 278 12,508 4,831 4,809 — — 27,482 
Substandard— — 344 1,320 312 14,570 1,667 — 18,213 
Doubtful— — — — — — — — — 
Total Commercial Real Estate Loans$35,142 $113,225 $96,527 $147,872 $106,526 $302,858 $6,016 $— $808,166 
Current-period gross charge-offs$— $— $— $— $1,656 $2,162 $— $— $3,818 
Consumer:
Risk rating
Performing$206,582 $338,067 $243,023 $191,311 $89,591 $39,077 $442 $— $1,108,093 
Nonperforming151 217 243 213 265 85 5 — 1,179 
Total Consumer Loans$206,733 $338,284 $243,266 $191,524 $89,856 $39,162 $447 $— $1,109,272 
Current-period gross charge-offs$17 $691 $741 $618 $536 $141 $— $— $2,744 
Residential:
Risk rating
Performing$58,615 $175,993 $168,417 $213,071 $176,292 $419,389 $128,469 $— $1,340,246 
Nonperforming— — 110 2,082 397 1,863 415 — 4,867 
Total Residential Loans$58,615 $175,993 $168,527 $215,153 $176,689 $421,252 $128,884 $— $1,345,113 
Current-period gross charge-offs$— $— $— $20 $— $31 $— $— $51 
Total Loans$318,716 $673,142 $533,326 $574,720 $387,799 $788,359 $148,692 $— $3,424,754 
Total gross
charge-offs		$17 $691 $741 $638 $2,192 $2,334 $— $— $6,613 
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving Loan Converted to TermTotal
December 31, 202420242023202220212020Prior
Commercial:
Risk rating
Satisfactory$42,767 $28,988 $23,808 $16,941 $6,183 $19,211 $15,686 $— $153,584 
Special mention107 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 mention3,002 200 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 
Nonperforming345 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 June 30, 2025, the amortized cost of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $1.8 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.