ARROW FINANCIAL CORP Income Taxes Disclosure
| Current Tax Expense: | 2024 | 2023 | 2022 | ||||||||||||||
| Federal | $ | 7,187 | $ | 4,611 | $ | 12,263 | |||||||||||
| State | 1,251 | 1,035 | 3,103 | ||||||||||||||
| Total Current Tax Expense | 8,438 | 5,646 | 15,366 | ||||||||||||||
| Deferred Tax (Benefit) Expense: | |||||||||||||||||
| Federal | (631) | 1,825 | (798) | ||||||||||||||
| State | (158) | (26) | (454) | ||||||||||||||
| Total Deferred Tax (Benefit) Expense | (789) | 1,799 | (1,252) | ||||||||||||||
| Total Provision for Income Taxes | $ | 7,649 | $ | 7,445 | $ | 14,114 | |||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||||||||
| Statutory Federal Tax Rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||||||||
| (Decrease) Increase Resulting From: | |||||||||||||||||||||||
| Tax-Exempt Investment Income | (2.1) | (2.3) | (1.4) | ||||||||||||||||||||
| State Taxes, Net of Federal Income Tax Benefit | 2.3 | 2.3 | 3.4 | ||||||||||||||||||||
| Bank Owned Life Insurance | (0.9) | (1.0) | (0.5) | ||||||||||||||||||||
| Other Items, Net | 0.2 | (0.2) | (0.1) | ||||||||||||||||||||
| Effective Tax Rate | 20.5 | % | 19.8 | % | 22.4 | % | |||||||||||||||||
| 2024 | 2023 | ||||||||||
| Deferred Tax Assets: | |||||||||||
| Net Unrealized Losses on Securities Available-for-Sale Included in Accumulated Other Comprehensive Income | $ | 9,427 | $ | 11,003 | |||||||
| Allowance for Credit Losses | 9,068 | 8,475 | |||||||||
| Lease liabilities | 2,539 | 2,635 | |||||||||
| Pension and Deferred Compensation Plans | 3,460 | 3,708 | |||||||||
| Pension Liability Included in Accumulated Other Comprehensive Income | — | 1,210 | |||||||||
| Historic Tax Credit | — | 363 | |||||||||
| Other | 773 | 781 | |||||||||
| Total Gross Deferred Tax Assets | 25,267 | 28,175 | |||||||||
| Valuation Allowance for Deferred Tax Assets | — | — | |||||||||
| Total Gross Deferred Tax Assets, Net of Valuation Allowance | $ | 25,267 | $ | 28,175 | |||||||
| Deferred Tax Liabilities: | |||||||||||
| Pension Plans | $ | 5,397 | $ | 5,489 | |||||||
| Depreciation | 4,692 | 5,094 | |||||||||
| ROU assets | 2,298 | 2,426 | |||||||||
| Deferred Income | 3,524 | 3,905 | |||||||||
| Prepaid Pension Included in Accumulated Other Comprehensive Income | 1,445 | — | |||||||||
| Net Unrealized Gains on Equity Securities | 241 | 207 | |||||||||
| Goodwill | 3,373 | 3,379 | |||||||||
| Gain on Cash Flow Hedge Agreements Included in Accumulated Other Comprehensive Income | 1,620 | 590 | |||||||||
| Other | 64 | — | |||||||||
| Total Gross Deferred Tax Liabilities | $ | 22,654 | $ | 21,090 | |||||||
| Deferred Tax Asset, Net | $ | 2,613 | $ | 7,085 | |||||||
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.