2 0 1 5 A N N UA L R E V I EW
Saratoga National Bank Expands to Troy
Saratoga National Bank opened an office in Troy last September, marking our entry into Rensselaer County
and further strengthening our position in the Capital Region. The branch is Saratoga National’s ninth overall
and third to open in the last three years.
Glens Falls National Helps Launch the “Saratoga” Quarter
Glens Falls National Bank was proud to be selected by the National Park Service as bank sponsor for the
2015 Saratoga National Historical Park quarter’s ceremonial release in November. This coin is part of the
U.S. Mint’s America the Beautiful Quarters® program and is available for purchase at select branches.
Cover Photo: Aerial of Glens Falls National Bank’s Main Office complex, Glens Falls, New York
To Our Shareholders, Our Team and Our Friends:
Thank you for taking the
time to read our Annual
Review, featuring a brief
summary of Arrow
Financial Corporation’s
financial performance
and accomplishments
in 2015.
Thanks to the efforts of our dedicated
team, we reported double-digit growth
in our loan portfolio, which reached a re-
cord high at year-end. We also set new re-
cords for net income and diluted earnings
per share for the year, and total equity as
of December 31, 2015. Our profitability
measurements remained strong and our
asset quality ratios continued to be better
than our peer group.
Among other highlights, our Company
was again named one of “America’s 50
Most Trustworthy Companies” by Forbes.
Arrow also appeared on top-performer
lists for American Banker and Bank
Director magazines and was awarded the
Raymond James Community Bankers
Cup. In addition, both subsidiary banks
maintained 5-Star Superior ratings from
BauerFinancial, and Saratoga National was
recognized as the Capital Region’s No. 1
Small Community Lender by the Small
Business Administration for the second
year running. Finally, our proprietary
mutual fund, the North Country Equity
Growth Fund, appeared twice in the Wall
Street Journal’s “Category of Kings” as a
top-performer in the Large-Cap Core
Equity Category.
We continue to expand in the Capital
District, which has proven to be a key
market for Arrow’s growth. During 2015,
Saratoga National Bank opened its ninth
office in Troy, New York.
2015 Financial HigHligHts
• Record net income of $24.7 million
• Strong profitability, represented by
11.86% return on average equity (ROE),
1.05% return on average assets (ROA),
and 13.50% return on tangible equity
• 2% stock dividend distributed in
September effectively increasing cash
dividends by 2%
• Continued strong levels of capital, includ-
ing increases in book value per share
of 5.96% and shareholders’ equity of 6.5%
• Record assets of $2.45 billion at year-end
• Total loans increased by 11.4%
• $144.2 million in mortgage loans originated
• Strong asset quality, represented by non-
performing assets at year-end of only 0.36%
and loans charged-off just 0.06% of average
loans outstanding.
Looking ahead, our Company will con-
tinue to pursue banking and insurance
opportunities, and our management team
will continue to do what it does best:
Strive to increase shareholder value by
following our tried-and-true conservative
business model.
I am very pleased with our performance
and the team that made it happen. I am
proud of our employees and their service
to our customers, our communities and
our shareholders.
Thank you for your continued support.
Sincerely,
Tom Murphy
President and Chief Executive Officer
PerFormance comParisons
$1.91
$1.81
$2,217
$2,446
$2,164
$1.72
$1.74
$1.70
$2,023
$1,963
2012
2015
2013
2011
DILUTED EARNINGS PER SHARE
2014
For the 12 Months Ended December 31*
2011
2012
2014
2015
2013
ASSETS
As of December 31
($ in Millions)
$.90
$.93
$.95
$.97
$.99
$1,731
$1,644
$1,842
$1,903
$2,030
2012
2015
2013
2011
CASH DIVIDENDS PAID PER SHARE
2014
For the 12 Months Ended December 31*
2011
2012
2013
DEPOSITS
2014
2015
As of December 31
($ in Millions)
$14.94
$13.78
$13.07
$15.61
$16.54
$192
$201
$214
$176
$166
2011
2012
2013
BOOK VALUE PER SHARE
2014
2015
2011
2012
2013
SHAREHOLDERS’ EQUITY
2014
2015
As of December 31*
As of December 31
($ in Millions)
*Per share amounts have been restated for stock dividends distributed.
total return PerFormance
Comparison of 5-Year Cumulative Total Return Assumes Initial Investment of $100
Comparison of 5-Year Cumulative Total Return Assumes Initial Investment of $100
December 2015
December 2015
250.00
250.00
200.00
200.00
150.00
150.00
100.00
100.00
50.00
50.00
0.00
0.00
2010
2010
Arrow Financial Corporation
Arrow Financial Corporation
2011
2011
2012
2012
NASDAQ Banks Index
NASDAQ Banks Index
2013
2013
Russell 2000 Index
Russell 2000 Index
2014
2014
2015
2015
Zacks $1B-$5B Bank Assets Index
Zacks $1B-$5B Bank Assets Index
Arrow Financial Corporation
Arrow Financial Corporation
NASDAQ Banks Index
NASDAQ Banks Index
Russell 2000 Index
Russell 2000 Index
Zacks $1B-$5B Bank Assets Index
Zacks $1B-$5B Bank Assets Index
2010
2010
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
2011
2011
91.47
91.47
89.43
89.43
95.82
95.82
93.98
93.98
2012
2012
103.50
103.50
107.00
107.00
111.49
111.49
111.99
111.99
2013
2013
116.93
116.93
153.14
153.14
154.78
154.78
159.46
159.46
2014
2014
128.33
128.33
160.92
160.92
162.35
162.35
166.25
166.25
2015
2015
134.33
134.33
175.27
175.27
155.18
155.18
184.07
184.07
Comparison of 10-Year Cumulative Total Return Assumes Initial Investment of $100
Comparison of 10-Year Cumulative Total Return Assumes Initial Investment of $100
December 2015
December 2015
2005
2005
Arrow Financial Corporation
2006
2006
2007
2007
2009
2008
2008
2009
NASDAQ Banks Index
2010
2010
2011
2011
Russell 2000 Index
2012
2012
2013
2013
Zacks $1B-$5B Bank Assets Index
2014
2014
2015
2015
250.00
250.00
200.00
200.00
150.00
150.00
100.00
100.00
50.00
50.00
0.00
0.00
Arrow Financial Corporation
NASDAQ Banks Index
Russell 2000 Index
Zacks $1B-$5B Bank Assets Index
Arrow
Financial
Arrow
Corporation
Financial
NASDAQ
Corporation
Banks Index
NASDAQ
Russell 2000
Banks Index
Index
Russell 2000
Zacks $1B-
Index
$5B Bank
Zacks $1B-
Assets Index
$5B Bank
Assets Index
2005
2005
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
2006
2006
101.28
101.28
112.29
112.29
118.37
118.37
115.68
115.68
2007
2007
94.59
94.59
88.87
88.87
116.51
116.51
89.15
89.15
2008
2008
115.50
115.50
64.79
64.79
77.15
77.15
87.23
87.23
2009
2009
123.08
123.08
53.91
53.91
98.11
98.11
62.63
62.63
2010
2010
145.18
145.18
64.11
64.11
124.46
124.46
72.79
72.79
2011
2011
132.80
132.80
57.34
57.34
119.26
119.26
68.40
68.40
2012
2012
150.27
150.27
68.60
68.60
138.76
138.76
81.52
81.52
2013
2013
169.77
169.77
98.18
98.18
192.63
192.63
116.07
116.07
2014
2014
186.31
186.31
103.17
103.17
202.06
202.06
121.01
121.01
2015
2015
195.02
195.02
112.37
112.37
193.14
193.14
133.99
133.99
Source: Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980 - 2016
consolidated statements oF income (unaudited)
(in thousands, except per share amounts)
2011
2012
2013
2014
2015
Interest and Dividend Income
$ 76,791 $ 69,379 $ 64,138 $ 66,861 $ 70,738
Years Ended December 31
Interest Expense
18,679 11,957 7,922 5,767 4,813
_______ _______ _______ _______ _______
Net Interest Income
58,112 57,422 56,216 61,094 65,925
Provision for Loan Losses 845 845 200 1,848 1,347
_______ _______ _______ _______ _______
Net Interest Income After
Provision for Loan Losses
Total Noninterest Income
Total Noninterest Expense
57,267 56,577 56,016 59,246 64,578
25,928 27,099 28,061 28,316 28,124
51,548 51,836 53,203 54,028 57,430
_______ _______ _______ _______ _______
Income Before Taxes
31,647 31,840 30,874 33,534 35,272
Provision for Income Taxes 9,714 9,661 9,079 10,174 10,610
_______ _______ _______ _______ _______
Net Income
$ 21,933 $ 22,179 $ 21,795 $ 23,360 $ 24,662
_______ _______ _______ _______ _______
_______ _______ _______ _______ _______
Share and Per Share Data
Diluted Average Shares
Outstanding 12,715 12,752 12,825 12,886 12,942
Diluted Earnings Per Share $ 1.72 $ 1.74 $ 1.70 $ 1.81 $ 1.91
Cash Dividends Per Share
.90 .93 .95 .97 .99
Book Value Per Share 13.07 13.78 14.94 15.61 16.54
Tangible Book Value Per Share 10.97 11.70 12.91 13.62 14.61
Key Earnings Ratios
Return on Average Assets 1.13% 1.11% 1.04% 1.07% 1.05%
Return on Average Equity 13.45% 12.88% 12.11% 11.79% 11.86%
Return on Tangible Equity 15.84% 15.24% 14.19% 13.56% 13.50%
Net Interest Margin 3.36% 3.26% 3.06% 3.17% 3.17%
Capital Ratios
Tier 1 Leverage Ratio 8.95% 9.10% 9.19% 9.44% 9.59%
Total Risk-Based Capital Ratio 15.96% 16.26% 15.77% 15.54% 15.09%
Asset Quality Ratios
Nonperforming Assets to
Period-End Assets
Allowance for Loan Losses to
Period-End Loans
0.41% 0.45% 0.37% 0.37% 0.36%
1.33% 1.30% 1.14% 1.10% 1.02%
Share and per share amounts have been restated for stock dividends distributed.
consolidated Balance sHeets (unaudited)
(in thousands)
Assets
As of December 31
2011
2012
2013
2014
2015
Cash and Due from Banks $ 29,598 $ 37,076 $ 37,275 $ 35,081 $ 34,816
Interest-Bearing Deposits
14,138 11,756 12,705 11,214 16,252
at Banks
Investment Securities 713,948 724,293 763,148 673,014 731,759
Loans 1,131,457 1,172,341 1,266,472 1,413,268 1,573,952
Allowance for Loan Losses (15,003) (15,298) (14,434) (15,570) (16,038)
________ ________ ________ ________ ________
Net Loans 1,116,454 1,157,043 1,252,038 1,397,698 1,557,914
Premises and Equipment, Net 22,629 28,897 29,154 28,488 27,440
Goodwill and
Intangible Assets, Net 26,752 26,495 26,143 25,628 24,980
Other Assets 39,165 37,236 43,235 46,297 53,027
________ ________ ________ ________ ________
Total Assets $1,962,684 $2,022,796 $2,163,698 $2,217,420 $2,446,188
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Liabilities and
Shareholders' Equity
Noninterest-Bearing Deposits $ 232,038 $ 247,232 $ 278,958 $ 300,786 $ 358,751
NOW and Savings Deposits 1,059,350 1,200,650 1,316,145 1,396,319 1,481,855
Time Deposits of $100,000
or More 123,668 93,375 78,928 61,797 59,792
Other Time Deposits 228,990 189,898 168,299 144,046 130,025
________ ________ ________ ________ ________
Total Deposits 1,644,046 1,731,155 1,842,330 1,902,948 2,030,423
Short-Term Borrowings 68,293 41,678 64,777 60,421 105,173
Federal Home Loan
Bank Term Advances 40,000 30,000 20,000 10,000 55,000
Other Long-Term Debt 20,000 20,000 20,000 20,000 20,000
Other Liabilities 23,960 24,138 24,437 23,125 21,621
________ ________ ________ ________ ________
Total Liabilities 1,796,299 1,846,971 1,971,544 2,016,494 2,232,217
Total Shareholders' Equity 166,385 175,825 192,154 200,926 213,971
________ ________ ________ ________ ________
Total Liabilities and
Shareholders' Equity $1,962,684 $ 2,022,796 $2,163,698 $ 2,217,420 $2,446,188
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Boards oF directors
Arrow Financial Corporation
Thomas L. Hoy (Chairman)
Retired President and CEO
John J. Carusone, Jr.
Attorney
Carusone & Carusone
Tenée R. Casaccio, AIA
President
JMZ Architects and Planners, P.C.
Michael B. Clarke
Retired President and CEO
Lone Star Industries
Gary C. Dake
President
Stewart’s Shops Corp.
Director Emeriti
Jan-Eric O. Bergstedt
Herbert O. Carpenter
David G. Kruczlnicki
Retired President and CEO
Glens Falls Hospital
Elizabeth O’Connor Little
New York State Senator
45th District
David L. Moynehan
Retired President
Riverside Gas & Oil Company, Inc.
John J. Murphy
Retired Executive Vice President,
Treasurer and CFO
Thomas J. Murphy, CPA
President and CEO
William L. Owens, Esq.
Partner
Stafford, Owens, Piller, Murnane,
Kelleher & Trombley, PLLC
Dr. Colin L. Read
Professor of Economics
and Finance
SUNY Plattsburgh
Richard J. Reisman, DMD
Chairman - Section of Dentistry
Glens Falls Hospital
George C. Frost
Michael F. Massiano (Chairman Emeritus)
Herbert A. Heineman, Jr.
Doris E. Ornstein
Mary-Elizabeth T. FitzGerald
Dr. Edward F. Huntington
Glens Falls National Bank and Trust Company
Thomas L. Hoy (Chairman)
Retired President and CEO
Mark L. Behan
President
Behan Communications, Inc.
Tenée R. Casaccio, AIA
President
JMZ Architects and Planners, P.C.
Michael B. Clarke
Retired President and CEO
Lone Star Industries
Elizabeth O’Connor Little
New York State Senator
45th District
Elizabeth A. Miller
President
Miller Mechanical Services, Inc.
David L. Moynehan
Retired President
Riverside Gas & Oil Company, Inc.
Thomas J. Murphy, CPA
President and CEO
William L. Owens, Esq.
Partner
Stafford, Owens, Piller, Murnane,
Kelleher & Trombley, PLLC
Dr. Colin L. Read
Professor of Economics
and Finance
SUNY Plattsburgh
Richard J. Reisman, DMD
Chairman - Section of Dentistry
Glens Falls Hospital
Saratoga National Bank and Trust Company
Raymond F. O’Conor (Chairman)
Retired President and CEO
David S. DeMarco
President and CEO
John J. Carusone, Jr.
Attorney
Carusone & Carusone
Gary C. Dake
President
Stewart’s Shops Corp.
James M. Dawsey
President
MLB Industries, Inc.
David G. Kruczlnicki
Retired President and CEO
Glens Falls Hospital
Marianne Pompa LaRoche
Vice President
Pompa Bros.
Frank J. Parillo
President
Saratoga Prime Properties
and Wilton Travel Plaza
Mary L. Passaretti, MS
Principal
Aztech Technologies, Inc.
management team
Arrow Financial Corporation
Thomas J. Murphy, CPA
President and CEO
David S. DeMarco
Senior Vice President
Terry R. Goodemote, CPA
Executive Vice President and CFO
David D. Kaiser
Senior Vice President
Glens Falls National Bank and Trust Company
Thomas J. Murphy, CPA
President and CEO
Terry R. Goodemote, CPA
Senior Executive Vice President
and CFO
David D. Kaiser
Executive Vice President
and Chief Credit Officer
Kathleen Kelleher
Executive Vice President
and Chief Information Officer
Donna M. Perkett
Executive Vice President
Retail Banking
Timothy C. Badger
Senior Vice President
Marketing
Suzanna M. Bernd
Senior Vice President
Customer/Shareholder Relations
Corporate Secretary
Katherine M. Dier
Senior Vice President
Branch Services
Karen E. Guiseppe
Senior Vice President
Director of Internal Audit
Michael J. Jacobs
Senior Vice President
Information Technology
Peter J. Lareau
Senior Vice President
and Chief Risk Officer
Peter F. Luciano
Senior Vice President
Consumer Loan Administration
Debra A. Meier
Senior Vice President
Human Resources
Kurt E. Moser
Senior Vice President
Corporate Banking
Kevin T. O’Brien
Senior Vice President
Insurance Division
Mickey S. Orta
Senior Vice President
Wealth Management Division
Saratoga National Bank and Trust Company
David S. DeMarco
President and CEO
Thomas E. Ratsep
Senior Vice President
Corporate Banking
sHareHolder inFormation
Richard J. Ferguson
Senior Vice President
Corporate Secretary
and Community Development
Arrow Stock
Arrow’s common stock trades on the NASDAQ Global Select MarketSM under the symbol “AROW”.
Dividend Reinvestment Plan
The Arrow Financial Corporation Dividend
Reinvestment Plan offers participants a conven-
ient and economical way to acquire common
stock of Arrow Financial Corporation without
payment of any brokerage commission or
service charge.
Participants may reinvest all cash dividends in
additional shares as well as make optional cash
contributions to buy shares.
Since the Plan is entirely voluntary, you may
join at any time and terminate whenever
you wish.
For more information, please contact:
American Stock Transfer and Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Tel: (800) 278-4353 or amstock.com
our locations
Glens Falls National Bank and Trust Company
gfnational.com
Main Office
250 Glen Street
Glens Falls, NY 12801
(518) 793-4121
Argyle Office
93 Main Street
Argyle, NY 12809
(518) 638-8261
Aviation Road Office
339 Aviation Road
Queensbury, NY 12804
(518) 793-5386
Bay Road Office
402 Bay Road
Queensbury, NY 12804
(518) 743-8349
Broad Street Plaza Office
Four Broad Street Plaza
Glens Falls, NY 12801
(518) 793-8844
Cambridge Office
25 West Main Street
Cambridge, NY 12816
(518) 677-2642
Chestertown Office
6353 State Route 9
Chestertown, NY 12817
(518) 494-2691
Cornelia Street Office
308 Cornelia Street
Plattsburgh, NY 12901
(518) 566-6650
Exit 18 Office
221 Corinth Road
Queensbury, NY 12804
(518) 636-3146
Fort Ann Office
110 George Street
Fort Ann, NY 12827
(518) 639-5591
Fort Edward Office
159 Broadway
Fort Edward, NY 12828
(518) 747-4165
Granville Office
8646 State Route 22
Granville, NY 12832
(518) 642-2206
Greenwich Office
132 Main Street
Greenwich, NY 12834
(518) 692-2201
Greenwich Drive-In Office
1153 State Route 29
Greenwich, NY 12834
(518) 692-9021
Kingsbury Office
3019 State Route 4
Hudson Falls, NY 12839
(518) 747-2061
Lake George Office
2252 State Route 9
Lake George, NY 12845
(518) 668-5461
Lake Luzerne Office
15 Main Street
Lake Luzerne, NY 12846
(518) 696-5819
Margaret Street Office
25 Margaret Street
Plattsburgh, NY 12901
(518) 561-3101
Port Henry Office
4307 Main Street
Port Henry, NY 12974
(518) 546-3312
Queensbury Office
696 Upper Glen Street
Queensbury, NY 12804
(518) 793-9656
Rt.9 - Queensbury Office
1002 State Route 9
Queensbury, NY 12804
(518) 798-7201
Salem Office
212 Main Street
Salem, NY 12865
(518) 854-3500
Schroon Lake Office
1080 Main Street
Schroon Lake, NY 12870
(518) 532-7121
Schuylerville Office
73 Broad Street
Schuylerville, NY 12871
(518) 695-3224
South Glens Falls Office
147 Saratoga Avenue
South Glens Falls, NY 12803
(518) 793-4431
Ticonderoga Office
123 Montcalm Street
Ticonderoga, NY 12883
(518) 585-9025
Ticonderoga Drive-In Office
1127 Wicker Street
Ticonderoga, NY 12883
(518) 585-3621
U.S. Avenue Office
5023 U.S. Avenue
Plattsburgh, NY 12903
(518) 324-4362
Warrensburg Office
3853 Main Street
Warrensburg, NY 12885
(518) 623-3036
Washington County Office
343 Broadway
Fort Edward, NY 12828
(518) 747-0601
Saratoga National Bank and Trust Company
saratoganational.com
Main Office
171 South Broadway
Saratoga Springs, NY 12866
(518) 583-3114
Ballard Road Office
227 Ballard Road
Wilton, NY 12831
(518) 587-4051
Colonie Office
501 New Karner Road
Albany, NY 12205
(518) 608-1044
Corinth Office
238 Main Street
Corinth, NY 12822
(518) 654-9001
Route 9 Wilton Office
3 Carpenter Lane
Saratoga Springs, NY 12866
(518) 584-8120
Troy Office
120 Hoosick Street
Troy, NY 12180
(518) 953-0109
Clifton Park Office
386 Clifton Park Center Road
Clifton Park, NY 12065
(518) 935-2707
Jones Road Office
4208 Route 50
Saratoga Springs, NY 12866
(518) 587-8484
West Avenue Office
91 West Avenue
Saratoga Springs, NY 12866
(518) 583-6504
Capital Financial Group, Inc.
capitalfinancialgroupinc.com
89 Saratoga Avenue
South Glens Falls, NY 12803
(518) 793-2885
Upstate Insurance Agency, LLC
upstateagency.com
Chestertown Office
93 Riverside Drive
Chestertown, NY 12817
(518) 494-2417
Elizabethtown Office
223 Water Street, Suite 2
Elizabethtown, NY 12932
(518) 873-2149
Schroon Lake Office
1072 State Route 9
Schroon Lake, NY 12870
(518) 532-7396
South Glens Falls Office
89 Saratoga Avenue
South Glens Falls, NY 12803
(518) 793-5806
Ticonderoga Office
98 Montcalm Street
Ticonderoga, NY 12883
(518) 585-6774
Warrensburg Office
3857 Main Street
Warrensburg, NY 12885
(518) 623-2710
McPhillips Insurance Agency – A Division of Glens Falls National Insurance Agencies, LLC
mcpins.com
Glens Falls Office
20 East Washington Street
Glens Falls, NY 12801
(518) 792-5841
Greenwich Office
132 Main Street
Greenwich, NY 12834
(518) 692-2831
Lake Luzerne Office
15 Main Street
Lake Luzerne, NY 12846
(518) 696-2000
Saratoga Springs Office
171 South Broadway
Saratoga Springs, NY 12866
(518) 306-2771
Warrensburg Office
3857 Main Street
Warrensburg, NY 12885
(518) 623-3151
The Thoroughbred of Banks
A Subsidiary of Glens Falls National Bank and Trust Company
LLC
Arrow Financial Corporation
250 Glen Street • P. O. Box 307
Glens Falls, NY 12801
Tel: (518) 745-1000
arrowfinancial.com