DEF 14A of Arrow Financial Corp, Apr 25, 2024

DEF 14A of Arrow Financial Corp

Filed Apr 25, 2024 · FY20230000717538-24-000062

Open on EDGAR

  1. Class B Nominees (terms expiring in 2027, if elected)

    Class B Nominees (terms expiring in 2027, if elected)

  2. Class B Nominees (terms expiring in 2027, if elected)

    | | David S. DeMarco Mr. DeMarco, age 62, has been a Director of the Company since July 26, 2023; he has been a Director of SNB and GFNB since December 2012 and April 2022, respectively. He has been President and Chief Executive Officer of Arrow Financial Corporation and GFNB since May 13, 2023; he was Senior Executive Vice President of Arrow since May 1, 2009 and Chief Banking Officer of Arrow from January 1, 2018 to May 13, 2023. Mr. DeMarco has been the President and Chief Executive Officer of SNB since January 1, 2013. Prior to that date, Mr. DeMarco served as Executive Vice President and Head of the Branch, Corporate Development, Financial Services and Marketing Division of GFNB since January 1, 2003. Mr. DeMarco started with the Company in 1987. Mr. DeMarco is also a Board Member of Independent Bankers Association of New York State and New York State Bankers Association Profit Solutions Board of Directors. |

  3. Class B Nominees (terms expiring in 2027, if elected)

    | | David G. Kruczlnicki Mr. Kruczlnicki, age 71, has been a Director of the Company since 1989; he has been a Director of SNB and GFNB since 2015 and April 2022, respectively. He previously served 26 years as a Director of GFNB. Mr. Kruczlnicki is President of a consulting firm that advises nonprofits on business planning and teaches at Siena College and Clarkson University Graduate School, and UNC/Chapel Hill. He was President and CEO of Glens Falls Hospital, a large regional medical center, from 1989 until his retirement in 2013. Mr. Kruczlnicki received a bachelor’s degree from Siena College and a master’s degree from Rensselaer Polytechnic Institute. He also served on the boards of directors of several affiliates of Glens Falls Hospital, numerous other health-related organizations, and Pruyn & Company, a local, privately owned paper company. As a former health care executive, Mr. Kruczlnicki has significant experience overseeing finance and human resources as well as directorship experience from his service as a director of numerous private and regional organizations. |

  4. Class B Nominees (terms expiring in 2027, if elected)

    | | Raymond F. O’Conor Mr. O'Conor, age 68, became a Director of the Company on January 1, 2017; he has been a Director of SNB since 1996 and Chair of the SNB Board since 2001. He has also served as a Director of GFNB since April 2022. He was a Senior Vice President of the Company from 2009 until his retirement and served as President and CEO of SNB from 1995 until his retirement at the end of 2012. Mr. O’Conor is also a published author and CEO of Saratoga County Capital Resource Corporation, a community development agency. He has extensive knowledge of community banking, and more specifically, the Company, as a former member of the executive management team. |

  5. Continuing Class A Directors (terms expiring in 2026)

    Continuing Class A Directors (terms expiring in 2026)

  6. Continuing Class A Directors (terms expiring in 2026)

    | | Mark L. Behan Mr. Behan, age 63, became a Director of the Company on January 1, 2017; he has been a Director of the Company’s Subsidiary banks, GFNB and SNB, since 2015 and April 2022, respectively. Mr. Behan founded Behan Communications, Inc., in 1988; the company is a public affairs and strategic communications firm serving national and regional clients and is an adviser to chief executives in major businesses and non-profit organizations in the Capital Region of New York. Mr. Behan is a director or trustee of several non-profit organizations. Mr. Behan is also a former newspaper executive with extensive knowledge of the economic, political and community issues of the Capital Region and the Adirondacks. He is a graduate of Colgate University. |

  7. Continuing Class A Directors (terms expiring in 2026)

    | | Gregory J. Champion Mr. Champion, age 69, became a Director of the Company on May 5, 2021; he has been a Director of GFNB and SNB since April 2018 and April 2022, respectively. Mr. Champion brings more than 30 years of legal experience, including advising both privately held and publicly traded companies on corporate governance matters. Mr. Champion has a B.A. from St. Lawrence University and a J.D. (summa cum laude) from Syracuse University College of Law. Mr. Champion now serves as Chief Legal Officer for Syncromune, Inc., a startup company seeking to develop intra-tumoral immunotherapy treatment for metastatic cancer patients. |

  8. Continuing Class A Directors (terms expiring in 2026)

    | | Elizabeth A. Miller Ms. Miller, age 70, has been a Director of the Company since January 2017; she has been a Director of GFNB and SNB since 2015 and April 2022, respectively. Ms. Miller is President and CEO of Miller Mechanical Services, Inc. and Miller Industrial Manufacturing in Glens Falls. She holds bachelor’s and master’s degrees from the College of Saint Rose. Ms. Miller has a strong understanding of the community and its business base, particularly local manufacturing. |

  9. Continuing Class A Directors (terms expiring in 2026)

    | | William L. Owens, Esq. Mr. Owens, age 75, has been a Director of the Company and GFNB since 2015; he has been a Director of SNB since April 2022. Mr. Owens is a former U.S. Congressman who represented New York’s 21st District from 2009 to 2014. Prior to his election to Congress, he was a managing partner at Stafford, Owens, Piller, Murnane, Kelleher & Trombley, PLLC, a Plattsburgh, New York law firm, where he practiced business and tax law for more than 30 years. In 2015, he rejoined the firm as a partner and resumed his role as Managing Partner in 2016. He also serves as Senior Advisor for Dentons (formerly McKenna Long & Aldridge, LLP), an international law firm. Mr. Owens holds a bachelor’s degree from Manhattan College and a law degree from Fordham University. He has a unique understanding of the North Country, and specifically the Plattsburgh market, and is a leading authority on U.S.-Canada trade issues. |

  10. Continuing Class C Directors (terms expiring in 2025)

    Continuing Class C Directors (terms expiring in 2025)

  11. Continuing Class C Directors (terms expiring in 2025)

    | | Tenée R. Casaccio, AIA Ms. Casaccio, age 58, has been a Director of the Company since January 2014; she has also served as a Director of GFNB and SNB since 2010 and April 2022, respectively. Ms. Casaccio is the President of JMZ Architects and Planners, PC ("JMZ"), a nationally certified Women-Owned Business Enterprise located in Glens Falls, New York. She earned a Bachelor of Architecture degree from Virginia Tech and holds licenses to practice architecture in New York and several other states. Ms. Casaccio has been with JMZ since 1993. She has significant executive experience and a strong understanding of the New York business climate. |

  12. Continuing Class C Directors (terms expiring in 2025)

    | | Gary C. Dake Mr. Dake, age 63, has been a Director of the Company since 2003; he has also served as a Director of SNB and GFNB since 2001 and April 2022, respectively. Mr. Dake is President of Stewart’s Shops Corp., a large, privately owned, vertically integrated, multi-state convenience store chain. Mr. Dake holds a bachelor’s degree from St. Lawrence University. He has experience with large business operations as a result of his management of Stewart’s, which also gives him a unique and broad understanding of the many communities the Company serves. |

  13. Continuing Class C Directors (terms expiring in 2025)

    | | Colin L. Read, PhD Dr. Read, age 64, has been a Director of the Company since 2013; he has also served as a Director of GFNB and SNB since 2010 and April 2022, respectively. Dr. Read is a professor of economics and finance in the State University of New York system. He served as Mayor of the City of Plattsburgh, New York for four years, after three years of service on the Clinton County Legislature. He is President of ESG Analytics Group, an organization that assists corporations in environment, social and governance ("ESG") risk management. He has taught money and banking since 1987, and teaches sustainability. He is a published author, with various contributions to print, online and television media, as well as 12 books on global finance. Dr. Read has a PhD in economics from Queen’s University, an MBA from the University of Alaska, a law degree from the University of Connecticut, a master’s degree in Taxation from the University of Tulsa and a bachelor's degree in Physics from Simon Fraser University. His expertise in economics and understanding of the Plattsburgh, New York area are key strengths. |

  14. Continuing Class C Directors (terms expiring in 2025)

    Director Compensation: The Compensation Committee makes recommendations to the full Board regarding Director compensation. The Board itself, however, is responsible for determining the compensation payable to Directors for their services. Amounts paid for service on Subsidiary bank boards are considered by the Board in its periodic review of total Director compensation.

  15. • Director Compensation for 2023

    • Director Compensation for 2023 With respect to 2023 Director compensation, at its October 2022 meeting, the Arrow Board of Directors approved the following Director retainer fees for 2023:

  16. • Director Compensation for 2023

    | 2023 Director Compensation Table | | | Annual Retainer | Position | | $30,000 | Arrow Director | | $24,000 | GFNB Director | | $12,000 | SNB Director | | $4,000 | Member, Audit Committee | | $2,500 | Member, Compensation Committee | | $2,500 | Member, Governance Committee | | $2,500 | Member, NCIA Board and Wealth Management Committee | | $2,500 | Manager, Upstate Agency, LLC | | $10,000 | Chair, Audit Committee | | $10,000 | Chair, Compensation Committee | | $10,000 | Chair, Governance Committee | | $7,500 | Chair, Wealth Management Committee/NCIA | | $5,000 | Chair, Upstate Agency, LLC | | $25,000 | Chair, Arrow Board | | $10,000 | Chair, GFNB Board | | $10,000 | Chair, SNB Board |

  17. • Director Compensation for 2023

    Only non-management Directors receive compensation for their services as Directors. Management Directors (those persons who are also officers) receive no additional compensation for their services as Directors. Therefore, neither Mr. DeMarco, our President and CEO who also became a Director effective July 26, 2023, nor Mr. Murphy, who was both a Director and an executive officer until May 12, 2023, received Director compensation in 2023, although they were entitled to reimbursement of any expenses incurred in connection with their service as Directors. Further, upon his appointment as Chair, Mr. Owens waived the member fees for each of the committees on which he served. The January 2023 and October 2023 Director payments included a portion of the fees payable in shares of Company common stock in accordance with the Arrow Financial Corporation 2023 Directors' Stock Plan (the "2023 DSP") and the predecessor plan. As a result of the delayed filing of the Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K"), and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the "2023 Q1 Form 10-Q"), the April 2023 and July 2023 quarterly director fees were paid solely in cash. In 2023, fees earned in shares of Company common stock consisted of $7,500 of the Director’s basic annual retainer fee for serving as a Company Director, $6,000 of the Director’s basic annual retainer fee for serving as a Director of GFNB and $3,000 of the Director's basic annual retainer fee for serving as a Director of SNB, as well as 25% of the fees related to serving as Chair of the Board and serving on or chairing the various Board committees.

  18. • Director Compensation for 2024

    • Director Compensation for 2024 With respect to 2024 Director compensation, at its January 2024 meeting, the Arrow Board of Directors left the 2024 Director retainer fees unchanged from 2023. In accordance with the 2023 DSP, a portion of the Directors’ fees, as determined by the Board in its sole discretion, will be payable to the Directors in shares of Company common stock, as opposed to cash or any other form of compensation, subject to applicable law and the provisions of the plan. Each Director may elect to receive a greater amount or percentage of his or her directors’ fees payable in common stock from the portion that would otherwise be payable to the director by submitting a written annual election to the Chair of the Board by December 15 of each year. With respect to director compensation payable In 2024, Directors Dake and Miller elected to increase the portion of their fee payable in Common Stock such that 100% would be payable in Company common stock.

  19. 2023 Director Compensation Table

    2023 Director Compensation Table The following Director Compensation Table summarizes all compensation paid by the Company and its Subsidiaries to the non-management Directors of the Company for the fiscal year ended December 31, 2023. Management Directors (who, in 2023, consisted of Messrs. DeMarco and Murphy) do not receive any compensation for service as Directors of the Company or either of its Subsidiary banks. Compensation received in 2023 by Messrs. DeMarco and Murphy is reported in the “Summary Compensation Table” within the Executive Compensation section.

  20. 2023 Director Compensation Table

    | Director | Fees Earned or Paid in Cash (a) | Stock Awards (b) | Option Awards (c) | Change in Pension Value/ Nonqualified Deferred Compensation Earnings | All Other Compensation | | 2023 Director Compensation Total | | Mark L. Behan | $53,250 | $17,750 | $8,017 | $— | | — | $79,017 | | Tenée R. Casaccio | 57,000 | 19,000 | 8,017 | — | — | | 84,017 | | Gregory J. Champion | 54,375 | 18,125 | 8,017 | — | — | | 80,517 | | Gary C. Dake | 58,874 | 19,626 | 8,017 | — | — | | 86,517 | | Thomas L. Hoy (e) (f) | 37,875 | 12,625 | 8,017 | — | — | | 58,517 | | David G. Kruczlnicki | 60,000 | 20,000 | 8,017 | — | 1,164 | (d) | 89,181 | | Elizabeth A. Miller | 54,375 | 18,125 | 8,017 | — | — | | 80,517 | | Raymond F. O'Conor | 57,000 | 19,000 | 8,017 | — | — | | 84,017 | | William L. Owens | 74,083 | 22,750 | 8,017 | — | — | | 104,850 | | Colin L. Read | 58,874 | 19,626 | 8,017 | — | — | | 86,517 |

  21. 2023 Director Compensation Table

    (a)Represents the cash portion of Basic Annual Retainer and fees relating to service on Boards and Committees. (b)Represents that portion of each listed Director’s total 2023 Directors’ fees that were paid in shares of Company stock, in accordance with the 2023 DSP and its predecessor plan. For purposes of determining the number of shares of the Company’s common stock distributable to these Directors, the shares are valued at the market price of the Company’s common stock on the date of distribution, in accordance with FASB ASC TOPIC 718. For the quarterly payments made in January 2023 and October 2023 payments, the Directors received, as payment of that portion of their basic annual retainer fee regularly payable in such year, shares of Company stock and a quarterly distribution of shares at a per share price based on the closing price of Company Stock on the date of distribution. As of December 31, 2023, no non-employee Directors held any unvested stock awards. (c)Stock options granted to Directors are valued in accordance with FASB ASC TOPIC 718. The stock options were granted February 1, 2023, at a per share exercise price of $31.47, the closing price of our common stock on the date of grant as restated for the 3% stock dividend distributed in September 26, 2023. Options vest ratably over a period of four years following the date of grant. As of December 31, 2023, each non-employee Director held the following aggregate number of unexercised stock options (whether vested or not vested): Behan 6,665 options, Casaccio 10,456 options, Champion 2,637 options, Dake 6,701 options, Kruczlnicki 4,910 options, Miller 6,439 options, O'Conor 6,665 options, Owens 6,395 options and Read 7,011 options. (d)Represents interest earned by the listed Director during 2023 on the principal balance of the Director’s account under the Directors’ Deferred Compensation Plan. (e)Mr. Hoy passed away on June 11, 2023 and his 2023 Director compensation is reflective of the term of his service as a Director. (f)Pursuant to the stock option award agreement, all unvested stock awards automatically vested in connection with Mr. Hoy's death. Such vested awards are exercisable by his beneficiary for the full exercise period of 10 years from the grant date.

  22. Key Compensation Decisions and Actions

    Key Compensation Decisions and Actions The business environment and our performance impacted various compensation decisions. The following is a summary of key decisions and actions regarding executive compensation in 2023 and early 2024. •Base Salary Adjustments: Recognizing the uncertainty of current macro-economic forecasts, at the request of management, the Compensation Committee did not approve salary increases for the NEOs until July 1, 2023. Mr. DeMarco's salary increased from $395,000 to $575,000 related to his promotion to President and CEO on May 13, 2023. Mr. Ivanov's salary increased from $360,000 to $390,000 related to his promotion to Senior Executive Vice President on July 18, 2023. Mr. Kaiser's salary increased from $325,000 to $350,000. Mr. Wise's salary increased from $325,000 to $350,000. •Short-Term Incentive Plan (“STIP”) Awards: In February 2024, awards were paid to our NEOs based on the achievement of specified Company and individual performance results for fiscal year 2023. Actual bonus payouts as a percentage of target were 75% on average for 2023 for our NEOs. Further details are available under the "STIP Award Decisions" in the Compensation Discussion and Analysis section. •Long-Term Incentive Plan ("LTIP") Awards: In January 2023, grants of stock options were made to the NEOs. These awards were made to better align our NEOs' interests with those of our shareholders and to foster a long-term performance orientation. The awards vest ratably in four equal annual installments which helps promote retention. •Restricted Stock Unit Award: In January 2023, the now former CEO Mr. Murphy was awarded RSUs that vest after three years and will be distributed ratably over 10 years post retirement. As a result of Mr. Murphy's departure, all of his RSUs accelerated and will be subject to the established distribution schedule in accordance with the terms of the award. •New Employment Agreements: On February 1, 2024, the Company entered into new employment agreements with each of Messrs. DeMarco, Ivanov, Kaiser and Wise. The employment agreements are described in more detail in the Agreements with Named Executive Officers section, below. •New Clawback Policy: During 2023, the Board of Directors adopted a new Clawback Policy that is in compliance with the SEC’s and Nasdaq’s recently adopted final rules. In addition, the Clawback Policy includes a broader recoupment feature that allows the Compensation Committee, in its discretion, to require recoupment, repayment or forfeiture, as applicable, of any time- or performance-based cash or equity compensation awards under certain triggering events. Philosophy and Program: The following section describes our overall compensation philosophy and program elements. Our executive compensation program is designed to attract and retain key executives and to motivate our executives to improve the Company’s long-term profitability within acceptable risk parameters. We accomplish this through a number of compensation elements, each with its own purpose, operation and timing.

  23. STIP

    STIP •Purpose: Reward Company and individual performance relative to our annual performance goals. •Operation: Our STIP is based on a comprehensive quantitative and qualitative assessment of both Company and individual performance. In setting goals under the STIP, the Compensation Committee considers multiple inputs, including but not limited to: specific financial goals, trend analysis regarding our financial performance, general business and economic outlook, and individual goals and objectives. The Compensation Committee, in its sole discretion, will determine, on a case-by-case basis, whether an NEO will receive a bonus award for the year and, if so, the amount of this bonus. •Timing: The Compensation Committee meets at the beginning of each year to determine the STIP awards for the previous year when the Company’s final year-end performance is generally known and can be accurately measured. At the same meeting, the Compensation Committee also typically sets the STIP goals for the current year.

  24. LTIP

    LTIP •Purpose: Align the interests of our NEOs with those of our shareholders and foster a long-term performance orientation. •Operation: Long-term incentive compensation is provided through the Company’s LTIP. The LTIP allows for grants of various types of equity awards, such as restricted stock, RSUs and stock options. Historically, the Company has provided long-term incentive compensation in the form of stock options, which only provide value to our NEOs if the Company’s stock price increases. Stock options vest 25% per year over a four-year period which promotes participant retention. The stock options have a term of 10 years, which we believe effectively focuses management on long-term performance. In 2018, we expanded the use of long-term incentives to include RSUs for Mr. Murphy. The RSUs granted in 2021, 2022 and 2023 vested 100% due to Mr. Murphy's departure and all of Mr. Murphy's RSU's will be settled over a 10-year period beginning in May 2024, with the first tranche of 2,236 shares settling May 13, 2024. •Timing: The Company’s annual stock option awards and RSUs are generally granted in January each year, shortly after the close of the Company’s fiscal year.

  25. Compensation Policies and Features

    Compensation Policies and Features In addition to our compensation elements, the executive compensation program also incorporates the following policies and features, which the Compensation Committee feel are important aspects of a well-constructed, balanced compensation program. •Hedging and Pledging Policies: The Company has hedging and pledging policies for its Directors and officers who are subject to the SEC’s Section 16 reporting requirements. The policies prohibit Directors and Section 16 Officers from entering into financial transactions designed to hedge or offset any decrease in market value of Company common stock. In addition, the Company requires Board approval prior to the pledging of any Company stock by an NEO. The Company does not have a hedging policy for non-Executive Officer employees. •Clawback Policy: The Board adopted a policy to provide for the recoupment, repayment or forfeiture, as applicable, of certain compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws. The Policy also provides the Compensation Committee, in its discretion, to require recoupment, repayment or forfeiture, as applicable, of any time- or performance-based cash or equity compensation awards under certain triggering events including, but not limited to, engaging in intentional or other misconduct, including dishonesty or unethical conduct. •Stock Ownership Policy: The Company has a stock ownership policy for NEOs. NEOs are required to own shares of the Company’s common stock equal in value to three times base salary for the CEO and equal in value to one times base salary for other NEOs. Until the required ownership is attained, this policy restricts the NEO’s ability to sell shares of the Company’s common stock obtained through the 2022 LTIP (or predecessor plans). These stock ownership requirements are measured each year by the Compensation Committee, using holdings valued as of the Company's annual meeting record date for that year. Common shares owned outright or vested shares held through benefit plans are currently counted toward the stock ownership requirement. Individuals have five years from appointment or promotion to a Company executive officer to meet these requirements. The independent members of the Board have the discretion to address and approve exceptions on a case-by-case basis. Mr. Ivanov has until February 21, 2028 to attain compliance with the Stock Ownership Policy. All of the Company's other NEOs are in compliance with the Stock Ownership Policy. •No Tax Gross-Ups: The Company does not pay any taxes that are owed by its NEOs. •Double-Trigger Mechanism: Employment agreements for all NEOs include a “double-trigger” mechanism for change-of-control payments. •No Stock Option Repricing: The Company has never repriced stock options. The 2022 LTIP prohibits repricing without shareholder approval. Process: The following section describes the process and key inputs that are considered in making decisions regarding NEO compensation.

  26. Benchmarking

    Benchmarking In setting program targets and making compensation decisions, the Compensation Committee uses a variety of data sources and information related to market practices for bank holding companies like ours. The Compensation Committee considers a select number of key inputs, summarized below, to provide market-competitive information for base salary, short and long-term incentive targets, and estimated total direct compensation, with ranges for performance. This information allows the Compensation Committee to see potential pay and range of pay for executive roles, and it provides context for the Committee in setting targeted pay levels going forward. On an annual basis, the Compensation Committee conducts a peer review of benchmarking data through the Company's participation in the annual New York Bankers Association ("NYBA") Pearl Meyer Report. Additionally, the group periodically commissions an independent outside consulting firm to conduct a comprehensive review of the Company’s executive compensation program. These periodic reviews provide an independent and objective analysis of all elements of compensation, individually and in aggregate, relative to market and peer group practices. The primary data sources used in determining the competitive market for NEO compensation include the information publicly disclosed by a peer group of other publicly traded banks and data from other banking industry surveys representing bank holding companies of similar asset size and regions to that of the Company. The peer group is determined using objective parameters that reflect bank holding companies of similar asset size located in our general geographic region. Our peer group used for purpose of setting compensation levels is listed below. It consists of 29 companies in the Northeast that ranged from approximately $3.0 billion and above in assets, positioning the Company at approximately the median for size at the time of the NYBA Pearl Meyer Report:

  27. Benchmarking

    | Bangor Savings Bank Bar Harbor Bank & Trust Bristol County Savings Bank Brookline Bancorp Cambridge Savings Bank Camden National Corporation Cape Cod 5 Coastal1 Credit Union Columbia Bank (NJ) Eastern Bank | Five Star Bank (NY) HarborOne Bank Hudson Valley Credit Union Institution for Savings Kearny Bank Leader Bank, N.A. Metro City Bank Middlesex Savings Bank Navigant Credit Union Northwest Bancshares, Inc. | OceanFirst Bank PeoplesBank Ridgewood Savings Bank Rockland Trust Company Salem Five Bank The Washington Trust Company Union Savings Bank United Nations Federal Credit Union Visions Federal Credit Union |

  28. STIP Award Decisions

    STIP Award Decisions Each year, the Compensation Committee sets goals that will result in bonus awards only in years of successful financial performance by the Company. The STIP has a master governor feature that limits the total pool for all participants to 10% of Net Operating Earnings (defined below) after subtracting 7% of fiscal year end shareholders equity. Each of our NEOs has a stated target bonus amount based on their role. For 2023, each NEO other than Mr. Murphy was eligible to receive an award under the STIP. Mr. Murphy did not receive an award due to his separation from the Company prior to the end of the year. Determining the Individual NEO STIP Funding Maximums: To determine individual NEO STIP maximum bonus payouts for the year, the Compensation Committee uses Internal Net Operating Earnings (“Internal NOE”), which is different from U.S. Generally Accepted Accounting Principles (“GAAP”) in that it represents the net income of the Company before considering significant nonrecurring items, net of tax. The significant nonrecurring items are reviewed by the Compensation Committee on a case-by-case basis to determine their appropriateness for inclusion or exclusion from the calculation. Items are included to the extent that they are relevant, regularly recurring and deemed to be in the normal course of business operations. Individual NEO STIP maximums are funded based on Internal NOE performance relative to the stated goals. The interpolations between threshold and target, and target and maximum are to increase the funding by 5 percentage points for every one percentage point increase in Internal NOE.

  29. STIP Award Decisions

    | Named Executive Officer | Base Salary | Target STIP % | Target STIP Amount | Maximum STIP Payout Opportunity | | David S. DeMarco | $575,000 | 50 | $287,500 | $431,250 | | Penko Ivanov | 390,000 | 40 | 156,000 | 234,000 | | David D. Kaiser | 350,000 | 40 | 140,000 | 210,000 | | Andrew J. Wise | 350,000 | 40 | 140,000 | 210,000 |

  30. STIP Award Decisions

    Determining the amount of the annual STIP awards for an NEO consists of the following three-part process. 1.Financial Performance Assessment: The Company performs an assessment of financial performance using the basket of weighted Company performance measures that were approved at the beginning of the year. The Compensation Committee believes this structure provides an appropriate portfolio of performance goals and a balanced perspective while ensuring sound risk management. In the case of each goal, participants can receive less than the stated amount if the goal is not met, but not greater than such amount if the goal is exceeded. The following table shows the performance measure and goal weighting for 2023:

  31. STIP Award Decisions

    | Company Performance Measure | Target Weighting for Goals (CEO) | Target Weighting for Goals (Other NEOs) | Target Goal | Actual Achieved | Actual % Funded (CEO) | Actual % Funded (Other NEOs) | | Internal NOE ($M) | 60% | 80% | $50.00 | $34.47 | 41.36 | 55.15 | | ROE (using Internal NOE) | 10% | 5% | 13.48% | 9.50% | 7.05 | 3.52 | | Efficiency Ratio | 10% | 5% | 55.45% | 65.18% | 8.03 | 4.01 | | Non-Performing Loans | 10% | 5% | 0.50% | 0.66% | 6.80 | 3.40 | | Net Charge-Offs | 10% | 5% | 0.15% | 0.08% | 10.00 | 5.00 | | Total | 100% | 100% | | | 73.24 | 71.09 |

  32. STIP Award Decisions

    2.Individual Performance: The Compensation Committee also performs an overall assessment of each NEO's performance (excluding the CEO for purposes of STIP measurement, since the CEO's goal is weighted 100% to Company performance). The Compensation Committee relies on input from the CEO for assessment of the other NEOs. Based on the CEO's assessment, the Committee approved individual achievement against individual performance goals for each NEO (excluding the CEO). 3.Application of Corporate and Individual Goal Weighting: The next step in determining the NEO’s STIP awards is the application of the relative weighting assigned to Company performance versus individual performance for that NEO. Typically, the relative weighting for NEOs is based on their position with the Company. For 2023, the mix emphasizes corporate performance at 75%, with individual performance weighted at 25%. The CEO's mix remained unchanged at 100% corporate performance.

  33. STIP Award Decisions

    | Named Executive Officer | Bonus Weighting | | | | % Company | % Individual | | David S. DeMarco | 100 | 0 | | Penko Ivanov | 75 | 25 | | David D. Kaiser | 75 | 25 | | Andrew J. Wise | 75 | 25 |

  34. STIP Award Decisions

    Although there is a formula for determining STIP awards, the Compensation Committee retains full discretion for approving awards to all our NEOs. In February 2024, the Compensation Committee reviewed the parameters and results of the 2023 STIP award goals for its NEOs. The Compensation Committee approved 2023 bonus funding levels at 75% of the target, reflecting on both achievement of Company and individual goals, and an overall assessment of performance. The amounts of the STIP awards paid to Messrs. DeMarco, Ivanov, Kaiser and Wise were as set forth below. Payments were made in February of 2024.

  35. STIP Award Decisions

    | Named Executive Officer | 2023 Annual Incentive Actual Awards | | | | Amount | % of Base Salary | | David S. DeMarco | $215,625 | 37.5 | | Penko Ivanov | 97,500 | 25.0 (1) | | David D. Kaiser | 105,000 | 30.0 | | Andrew J. Wise | 105,000 | 30.0 | | (1) Penko Ivanov was appointed Chief Financial Officer, Executive Vice President, Treasurer and Chief Accounting Officer effective February 21, 2023. His 2023 STIP payment was prorated to reflect his service time. | | |

  36. LTIP Award Decisions

    LTIP Award Decisions At its February 2023 meeting, the Compensation Committee awarded stock options to our NEOs. The Compensation Committee has had a long-standing practice of granting a fixed number of stock options to executives that it believes provides a proper incentive for alignment and motivation while maintaining a conservative risk profile. The following stock option awards were granted at an exercise price of $32.41, the closing price of our common stock on the date of grant, and vest ratably over a four-year period. The grant date fair value of such awards was estimated in each case using the Black-Scholes method.

  37. LTIP Award Decisions

    | Named Executive Officer | Stock Option Grants in February 2023 (# shares) | Grant Date Fair Value of February 2023 Option Awards | | David S. DeMarco | 5,000 | $40,100 | | David D. Kaiser | 5,000 | 40,100 | | Andrew J. Wise | 5,000 | 40,100 | | Thomas J. Murphy | 10,000 | 80,200 |

  38. LTIP Award Decisions

    In addition to the annual stock option grants awarded to the NEOs, Mr. Murphy received 5,014 RSUs that were scheduled to vest 100% after three years of service and settled over a 10-year period beginning one year after his retirement. As adjusted for the 3% stock dividend distributed on September 26, 2023, the RSU grant now contains 5,164 shares. The RSU grant value represented 25% of Mr. Murphy’s fiscal year-end base salary at December 31, 2022. The Committee determined to grant this award to Mr. Murphy based on a comprehensive analysis and discussion with the Company’s independent compensation advisor, with the goal of fostering long-term shareholder alignment through and following the executive’s career at the Company. All of Mr. Murphy's unvested RSU grants accelerated in connection with his 2023 departure and will settle over 10 years consistent with the award terms.

  39. Executive Compensation

    | Name and Principal Position | Year | Salary | Bonus (a) | Stock Awards (b) | Option Awards (c) | | Non-Equity Incentive Plan Compensation (d) | Change in Pension Value and Non-qualified Deferred Compensation Earnings (e) | All Other Compensation (f) | Total | | David S. DeMarco Senior Executive Vice President and CEO (g) | 2023 | $502,308 | | — | | 40,100 | $215,625 | $151,195 | $34,304 | $943,532 | | | 2022 | 395,000 | | — | 38,250 | | 176,557 | 98,377 | 34,005 | 742,189 | | | 2021 | 365,000 | | — | 24,250 | | 157,246 | 84,891 | 32,522 | 663,909 | | Penko Ivanov, Senior Executive Vice President, Treasurer and CFO | 2023 | 310,154 | 40,000 | — | — | | 97,500 | — | 21,678 | 469,332 | | David D. Kaiser Senior Executive Vice President and CCO | 2023 | 336,538 | | — | 40,100 | | 105,000 | 108,509 | 34,489 | 624,636 | | | 2022 | 325,000 | | — | 38,250 | | 145,268 | 71,538 | 32,769 | 612,825 | | | 2021 | 300,000 | | — | 24,250 | | 129,243 | 54,844 | 30,354 | 538,691 | | Andrew J. Wise Senior Executive Vice President and CRO (h) | 2023 | 336,538 | | — | 40,100 | | 105,000 | 47,382 | 41,458 | 570,478 | | | 2022 | 325,000 | | — | 38,250 | | 145,268 | 21,388 | 40,358 | 570,264 | | | 2021 | 300,000 | | — | 24,250 | | 129,243 | 21,178 | 37,363 | 512,034 | | Thomas J. Murphy Former President and CEO, Interim Treasurer, CFO, and CAO (g) | 2023 | 367,500 | | 162,504 | 80,200 | | — | 1,031,417 | 20,383 | 1,662,004 | | | 2022 | 650,000 | | 149,984 | 76,500 | | 363,170 | 470,237 | 32,313 | 1,742,204 | | | 2021 | 600,000 | | 139,297 | 48,500 | | 430,229 | 908,942 | 19,121 | 2,146,089 |

  40. Executive Compensation

    (a) Mr. Ivanov received a sign-on bonus of $40,000 after 90 days of employment. (b) This column sets forth the grant date fair value of the RSUs granted under the Company’s 2013 LTIP for each of the listed years, calculated in accordance with FASB ASC TOPIC 718 using the assumptions referred to in the Company's financial statements, footnotes to financial statements and Management's Discussions and Analysis in the Company's Form 10-K for the year ended December 31, 2023. The estimated value of each RSU granted in 2023 under the 2013 LTIP was $31.47, the closing price of our common stock on the date of the grant as restated for the 3% stock dividend distributed in September 2023. (c) This column sets forth the grant date fair value of option awards granted under the Company’s compensatory stock plans for each of the listed years, calculated in accordance with FASB ASC TOPIC 718 using the assumptions referred in the Company's financial statements, footnotes to financial statements and Management's Discussions and Analysis in the Company's Form 10-K for the year ended December 31, 2023. The grant date fair value of each stock option granted under the 2013 LTIP, in each case using the Black-Scholes model to estimate fair value, was $4.85 per option share in 2021 (all grants were made January 27, 2021); $7.65 per option share in 2022 (all grants were made January 26, 2022) and $8.02 per option share in 2023 (all grants were made February 1, 2023). All such stock options vest ratably in equal installments over the first four anniversaries following the date of grant. In connection with Mr. Murphy's May 12, 2013 departure, all unvested options held by Mr. Murphy on May 12, 2023 were forfeited and he has until May 12, 2024 to exercise all vested options held by him on his last day of employment. (d) This column sets forth the STIP payments made for each of the listed years, based on the financial performance of the Company, strategic Company results and individual performance factors during that year, as applicable. STIP amounts payable for a given year are generally paid in February of the succeeding year. (e) This column sets forth the actuarial increase during each of the listed years in the present value of the retirement benefits under qualified pension plans and nonqualified deferred compensation plans established by the Company that cover such NEO, determined using interest rate, mortality rate and other assumptions consistent with those used in the Company’s financial statements. The increase in present value of retirement benefits reported for each of the NEOs for 2023 includes (i) under the Company’s Employees’ Pension Plan (“Pension Plan”), $153,706 for Mr. Murphy, $53,855 for Mr. DeMarco, $51,003 for Mr. Kaiser and $30,644 for Mr. Wise and (ii) under the Company’s SERP, $44,522 for Mr. DeMarco, $20,535 for Mr. Kaiser and $16,738 for Mr. Wise. For Mr. Murphy, as discussed in "Payments to Our Former President and CEO," the Compensation Committee approved the Special SERP Award for Mr. Murphy in 2018, the present value of which was calculated by the Company at year-end 2023 to be approximately $1,864,180, leading to a total increase in the present value of his "makeup" SERP and Special SERP Award of $877,711. (f) All Other Compensation includes the following components for 2023:

  41. Executive Compensation

    | Name | Company Contribution to ESOP | Life Insurance & Long Term Disability Premiums Paid by Company for Benefit of NEO | Dollar Value of Discount in Share Price for Company Common Stock Purchased Under Employees' Stock Purchase Plan | Perquisites Received Greater than $10,000 | Total Other Compensation | | David S. DeMarco | $19,800 | $1,146 | $26 | $13,332(1) | $34,304 | | Penko K. Ivanov | — | 2,159 | — | 19,519(1) | 21,678 | | David D. Kaiser | 19,800 | 1,146 | 5 | 13,538(1) | 34,489 | | Andrew J. Wise | 19,800 | 1,146 | 105 | 20,407(1) | 41,458 | | Thomas J. Murphy | 19,800 | 477 | 105 | —(1) | 20,383 |

  42. Executive Compensation

    (1)Messrs. DeMarco, Ivanov, Kaiser, Wise and Murphy received both a country club membership and personal use of a Company vehicle. (g) Mr. Murphy's Departure was effective May 12, 2023. Effective on May 13, 2023, the Company appointed Mr. DeMarco to serve as President and CEO of the Company and President and CEO of GFNB in addition to continuing to serve as President and CEO of SNB. (h) Mr. Wise served as the COO of the Company until his appointment on February 1, 2024 as the CRO. Grants of Plan-Based Awards Table: As noted in the Compensation Discussion and Analysis, the Company provides officers and key employees with both an annual STIP and an LTIP to attract and retain such officers and employees and to motivate them to improve the Company’s short- and long-term performance, respectively. The STIP bonus payable to covered individuals, including NEOs, is based on a comprehensive quantitative and qualitative assessment of both Company and individual performance. The amounts listed in the table below represent each NEO’s 2023 target incentive award, as well as their threshold incentive award (50% of target) and maximum incentive award (150% of target). The Compensation Committee, in its sole discretion, will determine on a case-by-case basis whether an NEO will receive a STIP bonus payment for the year and, if so, the amount of this bonus, which typically falls within the limits set forth above. Because a STIP bonus payment is discretionary, no NEO has a contractual right to a bonus under the STIP for any given year, even if the pre-established quantitative performance standards for the Company or the Company function for which the NEO is responsible have been met for such year, or the NEO’s individual performance standards have been met. Historically, the Company has limited its grants of stock-based awards under its long-term incentive plans to stock options. However, beginning in January 2018, the Company awarded Mr. Murphy RSUs. (See "January 2023 Long-Term Incentive Award Decisions" in the Compensation Discussion and Analysis section for a description of the material terms of this award.) The Company’s 2022 LTIP authorizes the granting of stock options and other stock-based awards as a long-term incentive component within the overall compensation program.

  43. Executive Compensation

    | Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan | | | Estimated Future Payouts Under Equity Incentive Plan | | | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards ($/Share) | Grant Date Fair Value of Stock and Option Awards | | | | Threshold (a) | Target | Max | Threshold | Target | Max | | | | | | David S. DeMarco | | $143,750 | $287,500 | $431,250 | — | — | — | — | — | — | — | | | 2/1/2023 | | | | | | | | 5,000 | $32.41 | $40,100 | | Penko Ivanov | | 78,000 | 156,000 | 234,000 | | | | | — | — | — | | | 2/1/2023 | | | | | | | | — | — | — | | David D. Kaiser | | 70,000 | 140,000 | 210,000 | — | — | — | — | — | — | — | | | 2/1/2023 | | | | | | | | 5,000 | 32.41 | 40,100 | | Andrew J. Wise | | 70,000 | 140,000 | 210,000 | — | — | — | — | — | — | — | | | 2/1/2023 | | | | | | | | 5,000 | 32.41 | 40,100 | | Thomas J. Murphy (b) | | — | — | — | — | — | — | — | — | — | — | | | 2/1/2023 | | | | | | | | 10,000 | 32.41 | 80,200 | | | 2/1/2023 | | | | | | | 5,014 | | | 162,504 |

  44. Executive Compensation

    (a)The threshold incentive award to any covered person under the STIP, including an NEO, is not the minimum bonus payment such person may receive under the STIP. The Compensation Committee may choose to pay a bonus under the STIP to any covered person, including an NEO, that is less than their threshold incentive award, or not to pay such person any bonus under the STIP, even if applicable performance thresholds or targets have been met by the Company and/or such person for the year in question. (b)As a result of Mr. Murphy's departure on May 12, 2023, he was not entitled to receive a STIP payment with respect to 2023 performance; further, in connection with Mr. Murphy's departure from the Company, all unvested options held by Mr. Murphy on May 12, 2023 were forfeited and he has until May 12, 2024 to exercise all vested options held by him on his last day of employment. Outstanding Equity Awards at Fiscal Year-End Table: The following table shows all outstanding stock-based awards held by each NEO as of December 31, 2023. All such awards consist of stock options to acquire the Company’s common stock granted under the Company’s 2022 LTIP (or predecessor plans). The number of shares and exercise prices on this table have been adjusted for the 3% stock dividend distributed on September 26, 2023.

  45. Executive Compensation

    | Name | Securities Underlying Unexercised Options (Exercisable) | Securities Underlying Unexercised Options (Unexercisable) (a) | Equity Incentive Plan Awards: Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Shares or Units of Stock Not Vested | Market Value of Shares or Units of Stock Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights Not Vested | | David S. DeMarco | 6,150 | — | — | $30.26 | 1/25/2027 | — | — | — | — | | | 5,970 | — | — | $27.47 | 1/31/2028 | — | — | — | — | | | 5,796 | — | — | $27.35 | 1/30/2029 | — | — | — | — | | | 4,220 | 1,407 | — | $31.34 | 1/29/2030 | — | — | — | — | | | 2,732 | 2,732 | — | $27.04 | 1/27/2031 | — | — | — | — | | | 1,326 | 3,979 | — | $33.78 | 1/26/2032 | — | — | — | — | | | — | 5,150 | — | $31.47 | 2/1/2033 | — | — | — | — | | Penko Ivanov (b) | — | — | — | — | — | — | — | — | — | | David D. Kaiser | 6,150 | — | — | $30.26 | 1/25/2027 | — | — | — | — | | | 5,971 | — | — | $27.47 | 1/31/2028 | — | — | — | — | | | 5,797 | — | — | $27.35 | 1/30/2029 | — | — | — | — | | | 4,220 | 1,407 | — | $31.34 | 1/29/2030 | — | — | — | — | | | 2,732 | 2,732 | — | $27.04 | 1/27/2031 | — | — | — | — | | | 1,326 | 3,979 | — | $33.78 | 1/26/2032 | — | — | — | — | | | — | 5,150 | — | $31.47 | 2/1/2033 | — | — | — | — | | Andrew J. Wise | 614 | — | — | $30.26 | 1/25/2027 | — | — | — | — | | | 3,971 | — | — | $27.35 | 1/30/2029 | — | — | — | — | | | 4,222 | 1,406 | — | $31.34 | 1/29/2030 | — | — | — | — | | | 2,732 | 2,733 | — | $27.04 | 1/27/2031 | — | — | — | — | | | 1,326 | 3,978 | — | $33.78 | 1/26/2032 | — | — | — | — | | | — | 5,150 | — | $31.47 | 2/1/2033 | — | — | — | — | | Thomas J. Murphy (c) | 2,985 | — | — | $27.47 | 1/31/2028 | — | — | — | — | | | 5,798 | — | — | $27.35 | 1/30/2029 | — | — | — | — | | | 5,627 | — | — | $31.34 | 1/29/2030 | — | — | — | — | | | 5,463 | — | — | $27.04 | 1/27/2031 | — | — | — | — | | | 2,652 | — | — | $33.78 | 1/26/2032 | — | — | — | — |

  46. Executive Compensation

    (a)All stock options vest ratably in equal installments over the first four anniversaries following the date of the grant. (b)Mr. Ivanov does not have outstanding equity awards due to his 2023 employment start date. (c)Mr. Murphy has until May 12, 2024 to exercise vested options held by him on his last day of employment. All unvested options held by Mr. Murphy forfeited on May 12, 2023. Mr. Murphy's RSUs vested 100% upon his May 2023 departure and will settle over a ten year period starting in May 2024. See the Option Exercises and Stock Vested Table for additional information. Option Exercises and Stock Vested Table: The following table sets forth information regarding the stock option exercises and shares vested for each NEO during 2023:

  47. Executive Compensation

    | Name | Option Awards | | Stock Awards | | | | Number Shares Acquired on Exercise (a) | Value Realized on Exercise (b) | Number Shares Acquired on Vesting (c) | Value Realized on Vesting (d) | | David S. DeMarco | — | — | — | — | | Penko Ivanov | — | — | — | — | | David D. Kaiser | — | — | — | — | | Andrew J. Wise | — | — | — | — | | Thomas J. Murphy | — | $— | 14,352(e) | $281,156(e) |

  48. Executive Compensation

    (a)Represents the total number of shares subject to stock options that the NEO exercised during the year, restated for the September 26, 2023 3% stock dividend, if applicable. (b)Represents the “spread” of options on the date of exercise, i.e., the difference between the dollar value of the shares of common stock for which options were exercised, based on the closing price of the Company's common stock on the date of exercise, and the exercise price (purchase price) of such shares under the options. (c)Represents the total number of shares subject to RSUs that vested during the year, restated for the September 26, 2023 3% stock dividend. (d)Represents the fair market value of the Company's common stock on the vest date multiplied by the number of shares vested. (e)14,352 restricted stock units were unvested prior to Mr. Murphy's departure which vested in full on May 12, 2023 as a result of the departure. Mr. Murphy's RSUs vested 100% upon his May 2023 departure and will settle in equal increments over a 10-year period starting in May 2024. Pension Benefits and Table: The Company maintains a qualified retirement plan for eligible employees who have attained the age of 18, completed one year of service and work a minimum of 1,000 hours per calendar year. Eligible compensation under the retirement plan includes salary, overtime, sick pay, bonuses and other cash and non-cash benefits. Participants in the retirement plan with 25 years of service may retire at any age, participants with 10 years of service may retire at or after age 55, and participants with five years of service may retire at or after age 65. For early retirement prior to age 65, annuity payments, if elected, would be reduced by 0.25% for each month the participant elects to retire before age 65. Participants who are eligible to retire may not commence receipt of their benefit prior to age 55, unless the lump sum present value of the their accrued benefit does not exceed $50,000. The Company maintains an unfunded, non-qualified SERP, in part for the benefit of NEOs, as determined by the Compensation Committee on a case-by-case basis. The SERP contains both a qualified retirement plan “makeup” benefit feature and a special additional SERP benefit feature. For those NEOs who qualify and are selected to participate in the “makeup” benefit feature, the award provides enhanced installment payments post-retirement that are designed to give the NEO the overall level of retirement payments he would have received under the qualified retirement plan alone if there were no limitations on maximum retirement payments to high-paid personnel in the Internal Revenue Code. Under the additional SERP benefit feature, the Compensation Committee is authorized to grant to selected executive officers additional payments upon their retirement, beyond their SERP “make-up” benefit payments. Such additional payments are also typically structured as post-retirement installment payments, the amounts of which are determined on a case-by-case basis by the Compensation Committee at or before the time of retirement. Messrs. Murphy (prior to Mr. Murphy's Departure), DeMarco, Kaiser, and Wise participate in the “make-up” benefit feature of the SERP. In 2023, none of the NEOs, excluding Mr. Murphy, participated in the special additional benefit feature of the SERP. In January 2018, Mr. Murphy was provided a special SERP award. Specifically, the Compensation Committee approved the adjustment of Mr. Murphy’s existing arrangement to increase the formula for pay-based credits up to 30% of eligible compensation. Further, in 2018 the Compensation Committee approved an award of special retirement benefits to Mr. Murphy, providing him with an annuity payable at a normal retirement age of 65 that is equal to 40% of his compensation, averaged over the 60 calendar months that produce the highest average during the last 120 consecutive calendar months of Mr. Murphy’s employment, offset by his Social Security retirement benefits that would be payable at age 65 and further offset by the actuarial value of other qualified and non-qualified plan benefits derived from contributions made by the Company. The following table sets forth the present value of accumulated benefits under both the qualified and non-qualified retirement plans of the Company payable to each NEO as of December 31, 2023, and the number of years of service credited to them under the plans. The present value was determined using interest rate and mortality rate assumptions consistent with those described in Note 13 in Item 8 of the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2023, as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

  49. Executive Compensation

    | Name | Plan Name | Years of Credited Service | Value of Accumulated Benefit as of 12/31/23 (b) | Payments During Last Fiscal Year | | David S. DeMarco | Retirement Plan | 36.08 | 822,954 | — | | | SERP | 11.00 | 222,026 | — | | Penko Ivanov (a) | Retirement Plan | — | — | — | | | SERP | — | — | — | | David D. Kaiser | Retirement Plan | 23.00 | 609,815 | — | | | SERP | 7.00 | 90,390 | — | | Andrew J. Wise | Retirement Plan | 7.00 | 113,241 | — | | | SERP | 5.00 | 31,277 | — | | Thomas J. Murphy (c) | Retirement Plan | 19.00 | 854,858 | 854,858 | | | SERP | 11.00 | 3,403,086 | — |

  50. Executive Compensation

    (a) Penko Ivanov is not eligible for the Pension or SERP as of December 31, 2023. (b) The increase in present value of retirement benefits reported for each of the Named Executive Officers for 2023 includes the Company's contribution. (c) Includes the additional annuity benefit having an approximate present value of $1,864,180 derived from the Special SERP Award described in "Payments to Our Former President and CEO." The entire SERP benefit granted to Mr. Murphy with a value of $3,403,086 at December 31, 2023, will be paid by an annuity and is not eligible for a lump sum cash payout. Nonqualified Deferred Compensation: The Company has an Executive Officer Deferred Compensation Plan (“Officers’ Deferral Plan”) under which an executive officer may elect on a year-to-year basis to defer until retirement all or a portion of his salary or bonus payments otherwise payable to him during and for such year. Amounts deferred earn interest at a rate equal to the highest rate currently paid on individual retirement accounts by GFNB. None of the NEOs elected to defer under the plan salary or bonus amounts payable to them in or for 2023 or in or for the prior two years. Pay Ratio Disclosure: As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing this disclosure regarding the relationship of the annual total compensation of the individual identified as the median paid employee of our Company and the annual total compensation of Mr. DeMarco, our President and Chief Executive Officer since May 13, 2023. As of December 31, 2023, our total employee population, excluding Mr. DeMarco, consisted of 539 employees who were all located in the United States. To identify the median compensated employee, we used Box 5 of Form W-2 compensation for the full year 2023 for all such employees, annualizing compensation for those employees hired during 2023. We used the median employee, and calculated that employee's total compensation for the year ended December 31, 2023, for this pay ratio disclosure. The 2023 annual total compensation of the median employee described above was $56,057. Mr. DeMarco’s 2023 annual total compensation, annualized as if he had been in the position for the full year, was $1,016,224. The ratio of these amounts is 1-to-18. This calculation is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

  51. Pay Versus Performance Disclosure

    Pay Versus Performance Disclosure In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive “compensation actually paid” (“CAP”) and certain Company performance for the fiscal years listed below. You should refer to the Compensation Discussion and Analysis section of this Proxy Statement for a complete description of how executive compensation relates to Company performance and how the Compensation Committee makes its decisions.

  52. Pay Versus Performance Table

    Pay Versus Performance Table The following table provides the information required for our NEOs for each of the fiscal years ended December 31, 2023, December 31, 2022, December 31, 2021, and December 31, 2020 along with the financial information required to be disclosed for each fiscal year:

  53. Pay Versus Performance Table

    | | | | | | | | Year-end value of $100 invested on December 31, 2019 in: | | | | | Year | Summary Compensation Table Total for PEO (Murphy) | Compensation Actually Paid to PEO (Murphy) | Summary Compensation Table Total for PEO (DeMarco) | Compensation Actually Paid to PEO (DeMarco) | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs | Arrow Financial Corporation | ABA NASDAQ Community Bank Index (TR) | Net Income (in millions) | Net Operating Earnings (in millions) | | | (1) | (1)(2)(3)(4) | (1) | (1)(2)(3)(4) | (5) | (2)(3)(4)(5) | | | | (6) | | 2023 | $1,662,004 | $692,271 | $943,532 | $798,398 | $541,482 | $480,734 | $96.33 | $97.22 | $30.10 | $34.47 | | 2022 | $1,742,204 | $1,922,576 | N/A | N/A | $584,089 | $562,080 | $107.97 | $102.65 | $48.80 | $48.31 | | 2021 | $2,146,089 | $2,013,535 | N/A | N/A | $557,166 | $601,047 | $105.51 | $113.25 | $49.90 | $49.99 | | 2020 | $1,692,259 | $1,430,452 | N/A | N/A | $481,414 | $436,109 | $84.42 | $85.57 | $40.80 | $40.84 |

  54. Pay Versus Performance Table

    (1) The PEO in each reporting year is Thomas J. Murphy, who was an Executive Officer until May 12, 2023. The new PEO is David S. DeMarco. (2) Subtractions from, and additions to, total compensation in the Summary Compensation table by year to calculate CAP include:

  55. Pay Versus Performance Table

    | | | 2023 | | | 2022 | | 2021 | | 2020 | | | | | PEO (Murphy) | PEO (DeMarco) | Average of Other Non-PEO NEOs | PEO | Average of Other Non-PEO NEOs | PEO | Average of Other Non-PEO NEOs | PEO | Average of Other Non-PEO NEOs | | Total Compensation from from Summary Compensation Table | | $1,662,004 | $943,532 | $541,482 | $1,742,204 | $584,089 | $2,146,089 | $557,166 | $1,692,259 | $481,414 | | Adjustments for Pension | | | | | | | | | | | | | Adjustment Summary Compensation Table Pension | $(1,031,417) | $(151,195) | $(51,964) | $(470,237) | $(52,579) | $(908,942) | $(46,099) | $(614,685) | $(49,985) | | | Amount added for current year service cost | $530,040 | $65,438 | $24,772 | $595,215 | $33,255 | $571,465 | $31,163 | $482,936 | $29,857 | | Total Adjustments for Pension | | $(501,377) | $(85,757) | $(27,192) | $124,978 | $(19,324) | $(337,477) | $(14,936) | $(131,749) | $(20,128) | | Adjustments for Equity Awards | | | | | | | | | | | | | Adjustment for grant date values in the Summary Compensation Table | $(242,704) | $(40,100) | $(26,733) | $(226,485) | $(38,251) | $(187,798) | $(24,251) | $(184,917) | $(24,950) | | | Year-end fair value of unvested awards granted in the current year | $— | $32,551 | $21,701 | $230,583 | $32,940 | $279,970 | $54,023 | $173,356 | $27,724 | | | Year-over-year difference of year-end fair values and vest date fair values for awards granted in prior years | $— | $(35,652) | $(25,412) | $38,559 | $18,756 | $106,511 | $29,766 | $(110,642) | $(21,395) | | | Fair values at vest date for awards granted and vested in current year | $99,539 | $— | $— | $— | $— | $— | $— | $— | $— | | | Difference in fair values between prior year-end fair values and vest date fair values for awards granted in prior years | $(159,079) | $(2,844) | $(3,112) | $(986) | $1,098 | $(6,543) | $(721) | $(18,867) | $(6,556) | | | Forfeitures during current year equal to prior year-end fair value | $(169,874) | $— | $— | $— | $(17,228) | $— | $— | $— | $— | | | Dividends or dividend equivalents not otherwise included in total compensation | $3,762 | $— | $— | $13,723 | $— | $12,783 | $— | $11,012 | $— | | Total Adjustments for Equity Awards | | $(468,356) | $(46,054) | $(33,557) | $55,394 | $(2,685) | $204,923 | $58,817 | $(130,058) | $(25,177) | | Compensation Actually Paid (as calculated) | | $692,271 | $798,398 | $480,734 | $1,922,576 | $562,080 | $2,013,535 | $601,047 | $1,430,452 | $436,109 |

  56. Pay Versus Performance Table

    (3) The following table illustrates the valuation assumptions used for stock option awards included as part of CAP: •Expected life of each stock option is based on the "simplified method" using an average of the remaining vest and remaining term, as of the vest/fiscal year end date. •Number of options and exercise price are valued as of Fiscal Year End 2023 point-in-time. •Risk-free-rate is based on the Treasury Constant Maturity rate closest to the remaining expected life as of the vest/fiscal year end date. •Historical volatility is based on daily price history for each expected life (years) prior to each vest/fiscal year end date. Closing prices provided by S&P Capital IQ are adjusted for dividends and splits.

  57. Pay Versus Performance Table

    | | For Stock Options Vesting in | | | | | | 2023 | 2022 | 2021 | 2020 | | Expected volatility | 35% - 40% | 36% - 39% | 36% - 41% | 28% - 29% | | Expected dividend yield | 3.3% - 3.3% | 3.1% - 3.1% | 3.4% - 3.6% | 2.9% - 3.0% | | Expected term, in years | 3.0 - 4.5 | 3.0 - 4.5 | 3.0 - 4.5 | 3.0 - 4.5 | | Risk-free interest rate | 3.6% - 4.0% | 1.4% - 1.7% | 0.2% - 0.5% | 1.3% - 1.4% |

  58. Pay Versus Performance Table

    (4) The following table illustrates the valuation assumptions as of the vesting date for restricted stock awards that vested in each of 2023, 2022, 2021 and 2020 (note that no awards vested during 2020):

  59. Pay Versus Performance Table

    | | Weighted Average Fair Value | | | | | | 2023 | 2022 | 2021 | 2020 | | Weighted Average Fair Value at vesting | $22.56 | $34.35 | $27.61 | N/A |

  60. Pay Versus Performance Table

    (5) Non-PEO NEOs reflect the average Summary Compensation Table total compensation and average CAP for Penko Ivanov, David D Kaiser and Andrew J. Wise in the 2023 reporting year, and Edward J. Campanella, David S. DeMarco, David D. Kaiser and Andrew J. Wise in for the 2020-2022 reporting years. (6) Net Operating Earnings are as defined in the Compensation Discussion and Analysis section of this Proxy Statement.

  61. Pay Versus Performance: Graphical Description

    Pay Versus Performance: Graphical Description The illustrations below provide a graphical description of CAP (as calculated in accordance with the SEC rules) and the following measures: •the Company’s cumulative TSR and the Peer Group’s cumulative TSR; •the Company’s Net Income; and •the Company Selected Measure, for which we have selected Net Operating Earnings. CAP and Cumulative TSR / Cumulative TSR of the Peer Group CAP and Company Net Income CAP and Company Selected Measure, Net Operating Earnings