LEASES (Dollars In Thousands)

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

Arrow leases three of its branch offices, at market rates, from Stewart’s Shops Corp. Additionally, on June 14th, 2024, Arrow entered into a sale-leaseback agreement with Stewart's Shops Corp. for a bank branch location. The sale price of the property was $1.1 million which resulted in a gain of $377 thousand. The lease agreement began in June 2024 and runs through May 2029, with rent totaling $5 thousand per month for the remainder of the lease. Mr. Gary C. Dake, President of Stewart’s Shops Corp., serves as a director on the board of directors for Arrow and Arrow Bank. Additional information regarding this relationship can be found in Part III, Item 13 under the caption "Related Party Transactions."

The following includes quantitative data related to the Company's leases as of and for the twelve months ended December 31, 2024 and December 31, 2023:


		Twelve Months Ended
Finance Lease Amounts:	Classification	December 31, 2024			December 31, 2023
Right-of-Use Assets	Premises and Equipment, Net	$	4,283		$	4,460
Lease Liabilities	Finance Leases	5,005			5,066

Operating Lease Amounts:
Right-of-Use Assets	Other Assets	$	4,628		$	4,948
Lease Liabilities	Other Liabilities	4,842			5,152

Other Information:

Cash Paid For Amounts Included In The Measurement Of Lease Liabilities:
Operating Outgoing Cash Flows From Finance Leases		189			191
Operating Outgoing Cash Flows From Operating Leases		636			817
Financing Outgoing Cash Flows From Finance Leases		61			53
Right-of-Use Assets Obtained In Exchange For New Finance Lease Liabilities		—			—
Right-of-Use Assets Obtained In Exchange For New Operating Lease Liabilities		326			146
Weighted-average Remaining Lease Term - Finance Leases (Yrs.)		25.58			26.28
Weighted-average Remaining Lease Term - Operating Leases (Yrs.)		10.44			11.15
Weighted-average Discount Rate—Finance Leases		3.75		%	3.75		%
Weighted-average Discount Rate—Operating Leases		3.37		%	3.08		%


Lease cost information for the Company's leases is as follows:
	Three Months Ended				Twelve Months Ended
	December 31, 2024		December 31, 2023		December 31, 2024		December 31, 2023
Lease Cost:
Finance Lease Cost:
Reduction in the Carrying Amount of Right-of-Use Assets	$	44	$	44	$	176	$	176
Interest on Lease Liabilities	47		48		189		191
Operating Lease Cost	202		195		799		981
Short-term Lease Cost	10		15		38		61
Variable Lease Cost	57		52		234		231
Total Lease Cost	$	360	$	354	$	1,436	$	1,640


Future Lease Payments at December 31, 2024 are as follows:
	Operating Leases		Finance Leases
Twelve Months Ended:
12/31/2025	$	779	$	263
12/31/2026	691		268
12/31/2027	632		268
12/31/2028	550		268
12/31/2029	521		275
Thereafter	2,620		6,721
Total Undiscounted Cash Flows	5,793		8,063
Less: Net Present Value Adjustment	951		3,058
Lease Liability	$	4,842	$	5,005

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

ARROW FINANCIAL CORP Leases Disclosure

About Leases Disclosures

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