Retirement Benefit Plans

12 Months Ended

Dec. 31, 2024

Retirement Benefits [Abstract]

Retirement Benefit Plans

RETIREMENT BENEFIT PLANS (Dollars in Thousands)

Arrow sponsors qualified and nonqualified defined benefit pension plans and other postretirement benefit plans for its employees. Arrow maintains a non-contributory pension plan, which covers substantially all employees.  Effective December 1, 2002, all active participants in the qualified defined benefit pension plan were given a one-time irrevocable election to continue participating in the traditional plan design, for which benefits were based on years of service and the participant’s final compensation (as defined), or to begin participating in the new cash balance plan design.  All new employees who participate in the plan after December 1, 2002 automatically participate in the cash balance plan design.  The interest credits under the cash balance plan are based on the 30-year U.S. Treasury rate in effect for November of the prior year with a minimum interest credit of 3.0%.  The service credits under the cash balance plan are equal to 6.0% of eligible salaries for employees who become participants on or after January 1, 2003.  For employees in the plan prior to January 1, 2003, the service credits are scaled based on the age of the participant, and range from 6.0% to 12.0%.  The funding policy is to contribute up to the maximum amount that can be deducted for federal income tax purposes and to make all payments required under ERISA.  Arrow also maintains a supplemental non-qualified unfunded retirement plan to provide eligible employees of Arrow and its subsidiaries with benefits in excess of qualified plan limits imposed by federal tax law.

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

As of December 31, 2024, Arrow uses the sex-distinct Amount-Weighted Pri-2012 Mortality Tables for employees, healthy retirees and contingent survivors, with mortality improvements projected using Scale MP-2021 on a generational basis for the Pension Plan and the sex-distinct White Collar Amount-Weighted Pri-2012 Mortality Tables for employees, healthy retirees and contingent survivors, with mortality improvements projected using Scale MP-2021 on a generational basis for the Select Executive Retirement Plan.

Segment interest rates of 4.66%, 5.25% and 5.57% were used in determining the present value of a lump sum payment/annuitizing cash balance accounts as of December 31, 2024

Effective January 1, 2021, Arrow Bank, formerly GFNB, amended the Arrow Financial Corporation Employees' Pension Plan. The plan change was adopted January 1, 2021 and the amendment was valued as of December 31, 2020. The plan amendment included the following:

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

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

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

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

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

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

The plan amendment caused a $352 thousand increase in the projected benefit obligation creating a positive service cost which will be amortized over 9.70 years (the average expected future service of active plan participants.)

Effective January 1, 2021, Arrow Bank, formerly GFNB, amended the Arrow Financial Corporation Employees' Select Executive Retirement Plan. The plan change was adopted January 1, 2021 and the amendment was valued as of December 31, 2020. The plan amendment provides a special adjustment to the monthly benefit payment for certain retirees. The plan amendment caused a $123 thousand increase in the projected benefit obligation creating a positive prior service cost which will be amortized over 12.5 years.

Effective December 1, 2023, Arrow amended the Arrow Financial Corporation Employees' Pension Plan. The plan change was adopted December 1, 2023 and was valued as of December 31, 2023. The plan amendment was made to reflect a one-time four percent cost of living increase applied to monthly benefit payments. The amendment caused a $526 thousand increase in the projected benefit obligation, creating a positive prior service cost. The amount will be amortized over 7.64 years which is the average expected future years of service of active plan participants.

Effective January 1, 2024, Arrow amended the schedule of participants to the Arrow Financial Corporation Employees' Select Executive Retirement Plan. The amendment expanded the pool of eligible participants to include all members of the Executive Leadership Team. The impact on the December 31, 2024 pension benefit obligation was minimal.

Effective December 31, 2024, Arrow amended the Arrow Financial Corporation Employees' Pension Plan. The plan change was adopted December 31, 2024 and was valued as of December 31, 2024. The plan amendment established a minimum account balance for certain executives and caused a $441 thousand increase in the projected benefit obligation, creating a positive prior service cost. The amount will be amortized over 7.64 years which is the expected future years of service of active plan participants.

Settlement accounting is required when lump sum payments during a fiscal year exceed that fiscal year's Service Cost plus Interest Cost components of the Net Periodic Pension Cost. For 2024 and 2023, settlement accounting was not required. For 2022, the sum of the Service Cost and Interest Cost was $3.3 million and the 2022 total lump sum payments exceeded that amount. The Plan therefore recognized in the 2022 Net Periodic Pension Cost a portion of the Unamortized Net (Gain)/Loss equal to the ratio of the projected benefit obligation for the participants that received a lump sum to the total projected benefit obligation. As of December 31, 2022, the Unamortized Net Loss prior to reflecting settlement accounting was $7.2 million. The ratio of the projected benefit obligation for participants that received a lump sum to the total projected benefit obligation was 8.06%. The effect of the settlement that was recognized in the 2022 Net Periodic Pension Cost was $577 thousand.

The following tables set forth changes in the plans’ benefit obligations (projected benefit obligation for pension benefits and accumulated benefit obligation for postretirement benefits) and changes in the plans’ assets and the funded status of the pension plans and other postretirement benefit plan at December 31:

Schedule of Defined Benefit Plan Disclosures

	Employees' Pension Plan		Select Executive Retirement Plan		Postretirement Benefit Plans
Defined Benefit Plan Funded Status
December 31, 2024
Fair Value of Plan Assets	$	63,893	$	—	$	—
Benefit Obligation	39,763		4,940		5,550
Funded Status of Plan	$	24,130	$	(4,940)	$	(5,550)
December 31, 2023
Fair Value of Plan Assets	$	59,199	$	—	$	—
Benefit Obligation	42,914		6,904		6,221
Funded Status of Plan	$	16,285	$	(6,904)	$	(6,221)

	Employees' Pension Plan		Select Executive Retirement Plan		Postretirement Benefit Plans
Change in Benefit Obligation
Benefit Obligation, at January 1, 2024	$	42,914	$	6,904	$	6,221
Service Cost 1	1,692		78		45
Interest Cost 2	2,242		320		320
Plan Participants' Contributions	—		—		483
Amendments / Curtailments / Special Termination	441		—		—
Actuarial Loss	(3,256)		(1,770)		(497)
Benefits Paid	(4,270)		(592)		(1,022)
Benefit Obligation, at December 31, 2024	$	39,763	$	4,940	$	5,550
Benefit Obligation, at January 1, 2023	$	39,528	$	6,070	$	6,482
Service Cost 1	1,593		570		56
Interest Cost 2	2,099		336		332
Plan Participants' Contributions	—		—		459
Amendments	526		—		—
Actuarial Gain (Loss)	2,125		357		(397)
Benefits Paid	(2,957)		(429)		(711)
Benefit Obligation, at December 31, 2023	$	42,914	$	6,904	$	6,221
Change in Fair Value of Plan Assets
Fair Value of Plan Assets, at January 1, 2024	$	59,199	$	—	$	—
Actual Return on Plan Assets	8,964		—		—
Employer Contributions	—		592		539
Plan Participants' Contributions	—		—		483
Benefits Paid	(4,270)		(592)		(1,022)
Fair Value of Plan Assets, at December 31, 2024	$	63,893	$	—	$	—
Fair Value of Plan Assets, at January 1, 2023	$	54,300	$	—	$	—
Actual Return on Plan Assets	7,856		—		—
Employer Contributions	—		429		252
Plan Participants' Contributions	—		—		459
Benefits Paid	(2,957)		(429)		(711)
Fair Value of Plan Assets, at December 31, 2023	$	59,199	$	—	$	—
Accumulated Benefit Obligation at December 31, 2024	$	39,763	$	4,940	$	5,550

	Employees' Pension Plan		Select Executive Retirement Plan		Postretirement Benefit Plans
Amounts Recognized in the Consolidated Balance Sheets
December 31, 2024
Prepaid Pension Asset	$	24,130	$	—	$	—
Accrued Benefit Liability	—		(4,940)		(5,550)
Net Benefit (Expense) Recognized	$	24,130	$	(4,940)	$	(5,550)
December 31, 2023
Prepaid Pension Asset	$	16,285	$	—	$	—
Accrued Benefit Liability	—		(6,904)		(6,221)
Net Benefit (Expense) Recognized	$	16,285	$	(6,904)	$	(6,221)
Amounts Recognized in Other Comprehensive (Loss) Income
For the Year Ended December 31, 2024
Net Unamortized Gain Arising During the Period	$	(8,509)	$	(1,770)	$	(498)
Prior Service Cost	441		—		—
Amortization of Net (Loss) Gain	—		(24)		337
Amortization of Prior Service Cost	(131)		(39)		(102)
Total Other Comprehensive Loss for Pension and      Other Postretirement Benefit Plans	$	(8,199)	$	(1,833)	$	(263)
For the Year Ended December 31, 2023
Net Unamortized Loss (Gain) Arising During the Period	$	(2,315)	$	358	$	(397)
Net Prior Service Cost Arising During the Period	526		—		—
Amortization of Net (Loss) Gain	(118)		(73)		353
Amortization of Prior Service Cost	(62)		(39)		(104)
Total Other Comprehensive (Loss) Income for Pension and      Other Postretirement Benefit Plans	$	(1,969)	$	246	$	(148)
For the Year Ended December 31, 2022
Net Unamortized Loss (Gain) Arising During the Period	$	9,492	$	(983)	$	(1,571)
Amortization of Net (Loss) Gain	—		(212)		156
Amortization of Prior Service Cost	(78)		(44)		(106)
Settlement Cost	(577)		—		—
Total Other Comprehensive Income (Loss) for Pension and      Other Postretirement Benefit Plans	$	8,837	$	(1,239)	$	(1,521)
Accumulated Other Comprehensive Income
December 31, 2024
Net Actuarial Gain	$	(4,369)	$	(55)	$	(2,801)
Prior Service Cost	1,150		291		160
Total Accumulated Other Comprehensive (Loss) Income, Before Tax	$	(3,219)	$	236	$	(2,641)

	Employees' Pension Plan			Select Executive Retirement Plan			Postretirement Benefit Plans
December 31, 2023
Net Actuarial Loss (Gain)	$	4,141		$	1,739		$	(2,641)
Prior Service Cost	840			330			262
Total Accumulated Other Comprehensive Income (Loss), Before Tax	$	4,981		$	2,069		$	(2,379)
Net Periodic Benefit Cost
For the Year Ended December 31, 2024
Service Cost 1	$	1,692		$	78		$	45
Interest Cost 2	2,242			320			320
Expected Return on Plan Assets 2	(3,710)			—			—
Amortization of Prior Service Cost 2	131			39			102
Amortization of Net Loss (Gain) 2	—			25			(337)
Net Periodic Benefit Cost	$	355		$	462		$	130
For the Year Ended December 31, 2023
Service Cost 1	$	1,593		$	570		$	56
Interest Cost 2	2,099			336			332
Expected Return on Plan Assets 2	(3,416)			—			—
Amortization of Prior Service Cost 2	62			39			104
Amortization of Net Loss (Gain) 2	118			73			(353)
Net Periodic Benefit Cost	$	456		$	1,018		$	139
For the Year Ended December 31, 2022
Service Cost 1	$	1,877		$	835		$	90
Interest Cost 2	1,439			225			248
Expected Return on Plan Assets 2	(4,314)			—			—
Amortization of Prior Service Cost 2	77			44			106
Amortization of Net Loss 2	—			212			(156)
Settlement Cost 2	577			—			—
Net Periodic Benefit (Income) Cost	$	(344)		$	1,316		$	288
Weighted-Average Assumptions Used in   Calculating Benefit Obligation
December 31, 2024
Discount Rate	6.15		%	6.21		%	6.12		%
Rate of Compensation Increase	4.00		%	4.00		%	4.00		%
Interest Rate Credit for Determining   Projected Cash Balance Account	4.54		%	4.54		%
Interest Rates segments to Annuitize Cash       Balance Account (Segment 1, Segment 2 and Segment 3,       respectively)	4.66%, 5.25% and 5.57%			4.66%, 5.25% and 5.57%
Interest Rates to Convert Annuities to Actuarially       Equivalent Lump Sum Amounts (Segment 1, Segment 2 and       Segment 3, respectively)	4.66%,5.25% and 5.57%			4.66%, 5.25% and 5.57%
December 31, 2023
Discount Rate	5.52		%	5.53		%	5.51		%
Rate of Compensation Increase	4.00		%	4.00		%	4.00		%
Interest Rate Credit for Determining   Projected Cash Balance Account	4.66		%	4.66		%

	Employees' Pension Plan		Select Executive Retirement Plan		Postretirement Benefit Plans
Weighted-Average Assumptions Used in   Calculating Net Periodic Benefit Cost
December 31, 2024
Discount Rate	5.52	%	5.53	%	5.51	%
Expected Long-Term Return on Plan Assets	6.50	%
Rate of Compensation Increase	4.00	%	4.00	%	4.00	%
Interest Rate Credit for Determining       Projected Cash Balance Account	4.66	%	4.66	%
Interest Rates to Annuitize Cash     Balance Account (Segment 1, Segment 2, and Segment 3,     respectively)	4.66%, 5.25% and 5.57%		4.66%,5.25% and 5.57%
Interest Rates to Convert Annuities to Actuarially     Equivalent Lump Sum Amounts (Segment 1, Segment 2 and     Segment 3, respectively)	4.66%, 5.25% and 5.57%		4.66%, 5.25% and 5.57%
December 31, 2023
Discount Rate	5.59	%	5.61	%	5.62	%
Expected Long-Term Return on Plan Assets	6.50	%
Rate of Compensation Increase	3.50	%	3.50	%	3.50	%
Interest Rate Credit for Determining       Projected Cash Balance Account	3.99	%	3.99	%
Interest Rates to Annuitize Cash     Balance Account (Segment 1, Segment 2, and Segment 3,     respectively)	5.50%, 5.76% and 5.83%		5.50%, 5.76% and 5.83%
Interest Rates to Convert Annuities to Actuarially     Equivalent Lump Sum Amounts (Segment 1, Segment 2 and     Segment 3, respectively)	5.50%, 5.76% and 5.83%		5.50%, 5.76% and 5.76%
December 31, 2022
Discount Rate	3.30	%	5.61	%	3.32	%
Expected Long-Term Return on Plan Assets	6.50	%
Rate of Compensation Increase	3.50	%	3.50	%	3.50	%
Interest Rate Credit for Determining       Projected Cash Balance Account	3.00	%	3.99	%
Interest Rates to Annuitize Cash     Balance Account (Segment 1, Segment 2, and Segment 3,     respectively)	5.09%, 5.60% and 5.41%		5.09%, 5.60% and 5.41%
Interest Rates to Convert Annuities to Actuarially     Equivalent Lump Sum Amounts (Segment 1, Segment 2 and     Segment 3, respectively)	5.09%, 5.60% and 5.41%		5.09%, 5.60% and 5.41%

Footnotes:

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

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

Schedule of Defined Benefit Plan Disclosures

Information about Defined Benefit Plan Assets - Employees' Pension Plan

Fair Value Measurements Using:
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Percent of Total		Target Allocation Minimum		Target Allocation Maximum
December 31, 2024
Cash	$	—	$	—	$	—	$	—	—	%	—	%	15.0	%
Interest-Bearing Money Market Fund	2,699		—		—		2,699		4.2	%	—	%	15.0	%
Arrow Common Stock	5,593		—		—		5,593		8.8	%	—	%	10.0	%
North Country Funds - Equity 1	18,740		—		—		18,740		29.3	%
Other Mutual Funds - Equity	26,598		—		—		26,598		41.6	%
Total Equity Funds	45,338		—		—		45,338		70.9	%	55.0	%	85.0	%
Other Mutual Funds - Fixed Income	10,263		—		—		10,263		16.1	%
Total Fixed Income Funds	10,263		—		—		10,263		16.1	%	10.0	%	30.0	%
Total	$	63,893	$	—	$	—	$	63,893	100.0	%
December 31, 2023
Cash
Interest-Bearing Money Market Fund	1,257		—		—		1,257		2.1	%	—	%	15.0	%
Arrow Common Stock	5,443		—		—		5,443		9.2	%	—	%	10.0	%
North Country Funds - Equity 1	20,012		—		—		20,012		33.8	%
Other Mutual Funds - Equity	19,883		—		—		19,883		33.6	%
Total Equity Funds	39,895		—		—		39,895		67.4	%	55.0	%	85.0	%
Other Mutual Funds - Fixed Income	12,012		—		—		12,012		20.3	%
Total Fixed Income Funds	12,012		—		—		12,012		20.3	%	10.0	%	30.0	%
Alternative ETF	592		—		—		592		1.0	%	—	%	20.0	%
Total	$	59,199	$	—	$	—	$	59,199	100.0	%

Footnote:

1 The North Country Funds - Equity is a publicly traded mutual funds advised by Arrow's subsidiary, North Country Investment

Advisers, Inc.

Schedule of Defined Benefit Plan Disclosures

	Employees' Pension Plan		Select Executive Retirement Plan		Postretirement Benefit Plans
Expected Future Benefit Payments
2025	$	3,679	$	579	$	642
2026	3,037		549		657
2027	3,293		531		662
2028	3,294		501		628
2029	3,129		471		615
2030 - 2034	16,966		1,992		2,520
Estimated Contributions During 2025	$	—	$	579	$	642
Assumed Health Care Cost Trend Rates
December 31, 2024
Health Care Cost Trend   Rate Assumed for Next Year					7.75		%
Rate to which the Cost Trend   Rate is Assumed to Decline   (the Ultimate Trend Rate)					4.04		%
Year that the Rate Reaches    the Ultimate Trend Rate					2075
December 31, 2023
Health Care Cost Trend   Rate Assumed for Next Year					7.75		%
Rate to which the Cost Trend   Rate is Assumed to Decline   (the Ultimate Trend Rate)					4.04		%
Year that the Rate Reaches    the Ultimate Trend Rate					2075

Fair Value of Plan Assets (Defined Benefit Plan):

For information on fair value measurements, including descriptions of level 1, 2 and 3 of the fair value hierarchy and the valuation methods employed by Arrow, see Notes 2, Summary of Significant Accounting Policies, and 17, Fair Values, to the Consolidated Financial Statements.

The fair value of level 1 financial instruments in the table above are based on unadjusted, quoted market prices from exchanges in active markets.

In accordance with ERISA guidelines, the Board authorized the purchase of Arrow common stock up to 10% of the fair market value of the plan's assets at the time of acquisition.  

Pension Plan Investment Policies and Strategies:

The pension assets are held in trust and are invested for the exclusive purpose of providing benefits to participants.  The investment objective is to achieve an inflation-protected rate of return that meets the actuarial assumption which is used for funding purposes.  The investment strategy attempts to maximize the investment return on assets at a level of risk deemed appropriate by the Company while complying with ERISA and any applicable regulations and laws.  The investment strategy utilizes asset allocation as a principal determinant for establishing the risk/reward profile of the assets. Asset allocation ranges are established, periodically reviewed, and adjusted as funding levels, and participant benefit characteristics change. Active and passive investment management is employed to help enhance the risk/return profile of the assets.

The plan’s assets are invested in a diversified portfolio of equity securities comprised of companies with small, mid, and large capitalizations.  Both domestic and international equities are allowed to provide further diversification and opportunity for return in potentially higher growth economies with lower correlation of returns.  Growth and value styles of investment are employed to increase the diversification and offer varying opportunities for appreciation.  The fixed income portion of the plan may be invested in U.S. dollar denominated debt securities that shall be rated within the top four ratings categories by nationally recognized ratings agencies.   The fixed income portion will be invested without regard to industry or sector based on analysis of each target security’s structural and repayment features, current pricing and trading opportunities as well as credit quality of the issuer.  Individual bonds with ratings that fall below the plan’s rating requirements will be sold only when it is in the best interests

of the plan.  Hybrid investments, such as convertible bonds, may be used to provide growth characteristics while offering some protection to declining equity markets by having a fixed income component.  Alternative investments such as Treasury Inflation Protected Securities, commodities, and REITs may be used to further enhance diversification while offering opportunities for return.  In accordance with ERISA guidelines, common stock of the Company may be purchased up to 10% of the fair market value of the plan’s assets at the time of acquisition.  Derivative investments are prohibited in the plan.  

The return on assets assumption was developed through review of historical market returns, historical asset class volatility and correlations, current market conditions, the plan’s past experience, and expectations on potential future market returns. The assumption represents a long-term average view of the performance of the assets in the plan, a return that may or may not be achieved during any one calendar year. The assumption is based on the return of the plan using the historical returns adjusted for the potential for lower than historical returns due to low interest rates and other items of potential impact.    

Cash Flows - We were not required to and we did not make any contribution to our qualified pension plan in 2024.  Arrow makes contributions for its postretirement benefits in an amount equal to actual expenses for the year.