Performance Comparisons
$2.50
$2.04
$2,988
$2,760
$2,605
$2,446
$2,217
$1.86
$1.74
$1.66
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
DILUTED EARNINGS PER SHARE
For the 12 Months Ended December 31*
ASSETS
As of December 31
($ in Millions)
$1.00
$.95
$.92
$.88
$.90
$2,117
$2,245
$2,346
$1,903
$2,030
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
CASH DIVIDENDS PAID PER SHARE
DEPOSITS
For the 12 Months Ended December 31*
As of December 31
($ in Millions)
$17.40
$16.28
$18.63
$14.29
$15.13
$214
$201
$233
$270
$250
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
BOOK VALUE PER SHARE
SHAREHOLDERS’ EQUITY
As of December 31*
As of December 31
($ in Millions)
*Per share amounts have been restated for stock dividends distributed.
Fellow Shareholders:
2018 FINANCIAL HIGHLIGHTS
I am proud to share
the enclosed report
highlighting the 2018
financial performance
and remarkable accom-
plishments of Arrow
Financial Corporation and
our family of companies.
Through hard work, we demonstrated steady
growth, improved profitability, and a constant
commitment to serving our customers and
their communities.
Some key points of interest from this past
year included:
Double-digit growth in our loan portfolio
for the fifth consecutive year, reaching a
record high of $2.2 billion in total loan
balances at year-end.
New records for net income, year-end
total assets and total equity.
Our cash dividend inceased to $0.26 per
share in Q3 – the first actual increase in our
cash dividend since 2008.
American Banker’s “Mid-tier Performers”
list ranked Arrow 31st out of more than 200
financial institutions. It is one of only three
New York banks, and the only one from the
Capital Region, to appear in the top 50.
Both Glens Falls National Bank and
Saratoga National Bank maintained 5-Star
Superior ratings from BauerFinancial.
Saratoga National was named “Top Small
Community Lender” by the U.S. Small Busi-
ness Administration for the Capital Region for
the fifth consecutive year.
Saratoga National also announced plans
for further expansion into the Capital Region
with its 11th location, opening in Rotterdam,
N.Y. this year.
We completed a multi-year, multi-
phase strategic plan to unify our insurance
offerings. Capital Financial Group is now the
Net Income: $36.3 million, up 23.7%
Total Loans: $2.20 billion, up 12.6%
Total Deposits: $2.35 billion, up 4.5%
Total Assets: $2.99 billion, up 8.3%
Return on Average Equity: 13.96%
Return on Average Assets: 1.27%
Return on Tangible Equity: 15.38%
Stock Dividend: 3% distributed in Sept.
Current Quarterly Cash Dividend: $0.26
Book Value Per Share: Increase of 7.1%
Shareholders’ Equity: Increase of 8.0%
“Employee Benefits Division” of Upstate
Agency, allowing us to deliver more value
and greater efficiency to our customers.
None of these accomplishments would
have been possible without the efforts of our
Arrow Team. I’d like to personally give my
thanks to them for their continued dedication
and efforts.
We continue to focus on long-term oppor-
tunities that drive our business forward. Like
most other financial institutions, we face the
pressures of economic conditions beyond
our control. Through strategic planning,
spending and investments, we will remain
a strong company that is well-positioned to
deliver value to our customers, our communi-
ties, our employees and our shareholders.
Thank you for your continued trust, support
and partnership.
Sincerely,
Tom Murphy
President and Chief Executive Officer
Consolidated Statements of Income (Unaudited)
Years Ended December 31
(in thousands, except per-share amounts)
2014
2015
2016
2017
2018
Interest and Dividend Income
Interest Expense
$ 66,861
5,767
$ 70,738
4,813
$ 76,915
5,356
$ 84,657
7,006
$ 96,503
12,485
Net Interest Income
Provision for Loan Losses
Net Interest Income after
Provision for Loan Losses
Total Noninterest Income
Total Noninterest Expense
Income Before Taxes
Provision for Income Taxes
61,094
1,848
59,246
28,316
54,028
33,534
10,174
65,925
1,347
64,578
28,124
57,430
35,272
10,610
71,559
2,033
69,526
27,832
59,609
37,749
11,215
77,651
2,736
74,915
27,645
62,705
39,855
10,529
84,018
2,607
81,411
28,949
65,055
45,305
9,026
Net Income
$ 23,360
$ 24,662
$ 26,534
$ 29,326
$ 36,279
Share and Per Share Data
Diluted Average Shares
Outstanding
Diluted Earnings Per Share
Cash Dividends Per Share
Book Value Per Share
Tangible Book Value Per Share
Key Earnings Ratios
Return on Average Assets
Return on Average Equity
Return on Tangible Equity
Net Interest Margin
Capital Ratios
Tier 1 Leverage Ratio
Total Risk-Based Capital Ratio
Asset Quality Ratios
Nonperforming Assets to
Period-End Assets
Allowance for Loan Losses to
Period-End Loans
14,080
$ 1 .66
$ .88
$ 14.29
$ 12.46
14,142
$ 1. 74
$ .90
$ 15. 1 3
$ 13.37
14,296
$ 1.86
$ .92
$ 16.28
$ 14.56
14,406
$ 2.04
$ .95
$ 17.40
$ 15. 7 1
14,488
$ 2.50
$ 1.00
$ 18.63
$ 16.99
1.07%
11.79%
13.56%
2.95%
1.05%
11.86%
13.50%
2.97%
1.06%
11.79%
13.25%
3.00%
1.09%
12.14%
13.51%
3.02%
1.27%
13.96%
15.38%
3.07%
9.44%
15.54%
9.25%
15.09%
9.47%
15.15%
9.49%
14.98%
9. 6 1 %
14.86%
0.37%
0.36%
0.28%
0.28%
0.23%
1.10%
1.02%
0.97%
0.95%
0.92%
Consolidated Balance Sheets (Unaudited)
As of December 31
(in thousands)
2014
2015
2016
2017
2018
Assets
Cash and Due from Banks
Interest-Bearing Deposits
at Banks
Investment Securities
Loans
Allowance for Loan Losses
Net Loans
Premises and Equipment, Net
Goodwill and Intangible
Assets, Net
Other Assets
$ 35,081
$ 34,816
$ 43,024
$ 42,562
$ 56,529
11,214
673,014
1,413,268
(15,570)
16,252
731,759
1,573,952
(16,038)
14,331
703,335
1,753,268
(17,012)
30,276
646,056
1,950,770
(18,586)
27,710
618,291
2,196,215
(20,196)
1,397,698
28,488
1,557,914
27,440
1,736,256
26,938
1,932,184
27,619
2,176,019
30,446
25,628
46,297
24,980
53,027
24,569
56,789
24,162
57,606
23,725
55,614
Total Assets
$ 2,217,420
$2,446,188
$2,605,242
$2,760,465
$2,988,334
Liabilities and
Shareholders’ Equity
Noninterest-Bearing Deposits
Interest-Bearing Checking
and Savings Deposits
Time Deposits
Total Deposits
Short-Term Borrowings
Federal Home Loan
Bank Term Advances
Other Long-Term Debt
Other Liabilities
$ 300,786
$ 358,751
$ 387,280
$ 441,945
$ 472,768
1,396,319
1,481,855
1,529,953
1,601,888
1,608,829
205,843
189,817
199,313
201,283
263,987
1,902,948
2,030,423
2,116,546
2,245,116
2,345,584
60,421
105,173
158,836
169,966
288,659
10,000
20,000
23,125
55,000
20,000
21,621
55,000
20,000
22,008
55,000
20,000
20,780
45,000
20,000
19,507
Total Liabilities
2,016,494
2,232,217
2,372,390
2,510,862
2,718,750
Total Shareholders’ Equity
200,926
213,971
232,852
249,603
269,584
Total Liabilities and
Shareholders’ Equity
$ 2,217,420
$2,446,188
$2,605,242
$2,760,465
$2,988,334
Total Return Performance
Comparison of Five-Year Cumulative Total Return • Assumes Initial Investment of $100
Arrow Financial Corporation
NASDAQ Banks Index
Russell 2000 Index
Zacks $1B-$5B Bank Assets Index
2013
100.00
100.00
100.00
100.00
2014
109.59
105.08
104.89
108.03
2015
114.57
114.45
100.26
116.76
2016
181.56
154.96
121.63
161.47
2017
161.42
165.08
139.44
174.08
2018
161.33
137.07
124.09
153.75
Comparison of 15-Year Cumulative Total Return • Assumes Initial Investment of $100
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017 2018
Arrow
Financial
Corporation
NASDAQ
Banks Index
Russell 2000
Index
100.00 118.58 106.58 108.20 101.28 123.94 132.30 156.43 143.40 162.12 182.92 200.46 209.58 332.12 295.27 295.11
100.00 114.52 111.86 125.60 99.40
72.47 60.30
71.71
64.14 76.73 109.82 115.40 125.69 170.18 181.29 150.53
100.00 118.44 123.78 146.52 144.22
95.49 121.43 154.03 147.60 171.73 238.39 250.05 239.02 289.96 332.44 295.83
Zacks $1B-$5B
Bank Assets
Index
100.00 116.74 114.01 127.88 107.38
87.68 75.27
85.54
83.73 98.75 128.58 138.91 150.13 207.62 223.83 197.70
Source: Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980–2019.
Arrow Financial Corporation
Board of Directors
Thomas L. Hoy (Chairman)
Retired President and CEO
Arrow/Glens Falls National Bank
David G. Kruczlnicki
Retired President and CEO
Glens Falls Hospital
Mark L. Behan
President
Behan Communications, Inc.
Elizabeth A. Miller
President and CEO
Miller Mechanical Services, Inc.
Tenée R. Casaccio, AIA
President
JMZ Architects and Planners, P.C.
Thomas J. Murphy
President and CEO
Arrow/Glens Falls National Bank
Raymond F. O’Conor
Chairman and Retired President
and CEO
Saratoga National Bank
William L. Owens, Esq.
Partner
Stafford, Owens, Piller, Murnane,
Kelleher & Trombley, PLLC
Colin L. Read, PhD
Mayor, City of Plattsburgh
Professor of Economics
and Finance
SUNY Plattsburgh
Richard J. Reisman, DMD
Chairman - Section of Dentistry
Glens Falls Hospital
Michael B. Clarke
Retired President and CEO
Lone Star Industries
Gary C. Dake
President
Stewart’s Shops Corp.
Director Emeriti
Herbert O. Carpenter
John J. Carusone, Jr.
Mary-Elizabeth T. FitzGerald
Corporate Officers
Thomas J. Murphy
President and CEO
Herbert A. Heineman, Jr.
David L. Moynehan
Elizabeth O’Connor Little
Michael F. Massiano
(Chairman Emeritus)
John J. Murphy
Doris E. Ornstein
David S. DeMarco
Senior Vice President
and Chief Banking Officer
Andrew J. Wise
Senior Vice President
and Chief Operating Officer
Edward J. Campanella
Senior Vice President, Treasurer
and Chief Financial Officer
David D. Kaiser
Senior Vice President
Shareholder Information
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
convenient 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 & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Tel: (888) 444-0058 or astfinancial.com
Our Family of Companies
250 Glen Street, PO Box 307, Glens Falls, NY 12801
(518) 745-1000 | arrowfinancial.com