David DeMarco
About David DeMarco
David S. DeMarco, age 63, is President and CEO of Arrow Financial Corporation and Arrow Bank since 2023, and has served as a Director of AROW since 2023 (subsidiary bank director since 2012/2022). He joined the company in 1987 as a commercial lender. He holds a BBA in Finance from the University of Texas at Austin and is a graduate of the Stonier Graduate School of Banking and the Adirondack Regional Chamber Leadership Program . Under his leadership in 2024, Arrow reported net income of $29.7M (EPS $1.77), ROE of 7.72%, ROA of 0.70%, and NIM of 2.72%; since 12/31/2019, Arrow’s TSR measured $103.22 vs the ABA NASDAQ Community Bank Index at $108.39 .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Arrow Financial Corporation / Arrow Bank | President & CEO | 2023–present | Led unification of subsidiary banks under Arrow Bank brand and balance-sheet repositioning; delivered loan growth and higher NIM in 2024 . |
| Saratoga National Bank (AROW subsidiary) | President & CEO | Appointed 2013 (end date not disclosed) | Community bank leadership; prior to Arrow Bank unification . |
| Arrow Financial Corporation | Commercial Lender and successive roles | Joined 1987 | Progressive leadership experience across lending and operations . |
External Roles
| Organization | Role | Years |
|---|---|---|
| Capital Region Chamber of Commerce | Chair, Board of Directors | Current |
| Various non-profits (healthcare, economic development) | Director/Trustee | Current |
Fixed Compensation
- CEO base salary progression and 2025 approved salary.
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Base Salary ($) | 502,308 | 695,000 | 715,850 (approved) |
- 2024 total compensation detail (as reported in Summary Compensation Table).
| Component ($) | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary | 395,000 | 502,308 | 695,000 |
| Restricted Stock Awards (grant-date fair value) | — | — | 103,926 |
| Option Awards (grant-date fair value) | 38,250 | 40,100 | — |
| Non-Equity Incentive (STIP) | 176,557 | 215,625 | 312,750 |
| Change in Pension Value/Deferred Comp | 98,377 | 151,195 | 96,736 |
| All Other Compensation | 34,005 | 34,304 | 25,274 |
| Total | 742,189 | 943,532 | 1,233,686 |
- 2024 “All Other Compensation” detail for DeMarco: ESOP contribution $20,700; life/LTD premiums $1,146; ESPP discount $1,167; dividends on unvested RS $2,261; total $25,274 .
Performance Compensation
- Short-Term Incentive Plan (STIP): CEO target = 50% of salary; max 150% of target . 2024 actual award $312,750 (90% of target) .
| 2024 STIP Metric | Weight (of financial goals) | Target | Actual (Adj.) | Outcome |
|---|---|---|---|---|
| EPS | 80% | $2.35 | $2.05 | Between Threshold & Target |
| TBV Growth | 5% | 6.50% | 6.52% | Between Target & Max |
| ROA | 5% | 0.95% | 0.81% | Between Threshold & Target |
| Non-Performing Loans | 5% | 0.50% | 0.62% | Between Threshold & Target |
| Net Charge-Offs | 5% | 0.15% | 0.06% | Maximum |
| CEO STIP Terms | Value |
|---|---|
| 2024 Base Salary | $695,000 |
| Target % of Salary | 50% |
| Target $ | $347,500 |
| Max $ | $521,250 |
| Actual Payout | $312,750 (90% of target) |
- Long-Term Incentive Plan (LTIP): time-based restricted stock, 25% vest per year over 4 years; no performance share program disclosed .
| Grant | Shares | Grant-Date Fair Value ($) | Vesting |
|---|---|---|---|
| May 29, 2024 | 4,111 | 103,926 | 25% annually over 4 years |
| Jan 2025 | 8,798 | 243,265 | 25% annually over 4 years |
- Options: prior grants vest ratably over four years; no option grant in 2024; last option award value for DeMarco was 2023 ($40,100) .
Equity Ownership & Alignment
| As of Apr 7, 2025 | Value |
|---|---|
| Beneficial Ownership (shares) | 79,570 (<1%) |
| Shares owned outright (subset of above) | 42,981 |
| Restricted shares vesting within 60 days | 1,028 |
| Options exercisable within 60 days | 35,561 |
| Shares pledged as collateral | Prohibited by policy (hedging/pledging ban) |
| Insider trading policy | Blackouts; 10b5-1 compliant plans permitted |
| Executive stock ownership policy | Required; amount tied to salary (multiple not disclosed) |
| Director ownership guideline | 5x annual retainer within 5 years (for non-management directors) |
- Outstanding option tranches (12/31/24):
| Options | Status | Exercise Price | Expiration |
|---|---|---|---|
| 6,150 | Exercisable | $30.26 | 1/25/2027 |
| 5,970 | Exercisable | $27.47 | 1/31/2028 |
| 5,796 | Exercisable | $27.35 | 1/30/2029 |
| 5,627 | Exercisable | $31.34 | 1/29/2030 |
| 4,098 | 1,366 unexercisable | $27.04 | 1/27/2031 |
| 2,653 | 2,652 unexercisable | $33.78 | 1/26/2032 |
| 1,287 | 3,863 unexercisable | $31.47 | 2/1/2033 |
| Unvested restricted stock | 4,111 shares | N/A | 4-year ratable vest |
Notes:
- As of 12/31/24, AROW stock was $28.71; tranches at $27.04/$27.35/$27.47 were in-the-money on that date; higher strikes were out-of-the-money .
Employment Terms
- Effective Feb 1, 2025, DeMarco entered a new 3-year employment agreement: base salary $715,850; target cash bonus 50% of salary .
- Non-compete/non-solicit: two years post-termination across NY counties where AROW operates; non-disparagement and confidentiality covenants .
- Clawback policy in place; no tax gross-ups; double-trigger CIC benefits; no option repricing .
Selected severance/CIC economics (assumes 12/31/24 termination):
| Scenario | Cash | Equity Acceleration | Other | Total |
|---|---|---|---|---|
| Without Cause / Good Reason | $1,447,917 (greater of remaining term or 1 year salary) | — | SERP-ESOP $142,091 | $1,590,008 |
| CIC + Qualifying Termination (double-trigger) | $3,023,250 (3x salary+target bonus) | Options $2,281; RS $118,027 | Health & welfare $43,849; SERP-ESOP $142,091 | $3,329,498 |
Board Governance
- AROW separates Chair and CEO; Chair is independent (Tenée R. Casaccio). No lead independent director needed under this structure .
- DeMarco is a Class B Director (term expiring 2027), not independent due to management role; not listed on Audit/Comp/Governance committees (independent directors only) .
- Board held 4 regular, 3 special, and 17 committee meetings in 2024; all then-current members met >75% attendance; independent directors held 5 executive sessions .
- Governance notes: majority independent; director retirement age 75; committee charters posted; codes of ethics maintained .
Compensation Structure Analysis
- Cash vs equity mix: 2024 saw a sizeable base increase (+20.9% to $695k) and a shift to time-based RSUs; no 2024 option grant to CEO (vs prior option grants in 2022–2023) .
- STIP alignment: heavy weighting on EPS (80%) with additional capital/credit quality metrics; 2024 payout at 90% of target reflects below-target EPS offset by strong TBV growth and low charge-offs .
- Governance safeguards: clawback, hedging/pledging prohibition, double-trigger CIC, no gross-ups, no repricing; say-on-pay support at 89% in 2024 .
- Peer benchmarking: Compensation informed by NYBA Pearl Meyer survey and regional peers (e.g., Bar Harbor, Camden National, NBT, OceanFirst, Tompkins, Washington Trust) with Pearl Meyer as independent consultant; no interlocks disclosed .
Risk Indicators & Red Flags
- Internal controls history: material weaknesses associated with the 2022 core system conversion were previously reported (2022/2023); audit oversight discussed with new auditor Crowe for 2024 .
- Litigation: 2023 securities class action settled (approved Feb 13, 2025; immaterial impact); derivative action settlement in principle focused on governance enhancements (immaterial) .
- Related party transactions: none disclosed for DeMarco in 2024; broader board-related party items reviewed under policy .
- Policy protections: hedging and pledging prohibited; robust insider trading controls; stock ownership policies for executives and directors .
Equity Vesting & Potential Selling Pressure
- Near-term vesting: 1,028 restricted shares scheduled to vest within 60 days of the 4/7/2025 record date .
- Ongoing cadence: 2024 and 2025 RSU grants vest 25% annually over four years; standard quarterly blackout windows apply, and 10b5-1 plans may be used .
- Options: several tranches outstanding, with mixed moneyness at $28.71 YE price; expirations span 2027–2033 .
Say-on-Pay & Shareholder Feedback
- 2024 say-on-pay approval: 89% “for” .
- Annual say-on-pay going forward; Compensation Committee uses shareholder input in program design .
Director Service, Independence, and Dual-Role Implications
- DeMarco is both CEO and a board member; AROW mitigates dual-role concentration by separating the Chair and CEO roles and holding independent director executive sessions .
- Committee independence preserved: CEO does not serve on Audit/Comp/Governance; all three are fully independent .
Employment & Contracts (Retention Risk)
- New 3-year CEO agreement (effective Feb 1, 2025) provides tenure stability; double-trigger 3x CIC benefit is shareholder standard; two-year non-compete/non-solicit lowers immediate flight risk .
- Deferred compensation: plan exists but no CEO deferrals in 2024; retirement plan present value $1.142M at 12/31/24 (SERP “make-up” features consolidated into retirement plan) .
Investment Implications
- Pay-for-performance alignment is reasonable: STIP centered on EPS and balance-sheet quality; 2024 payout below target aligns with adjusted EPS underperformance, while RSUs drive multi-year alignment and retention .
- Retention risk appears contained: multi-year contract, significant pension accruals, two-year non-compete/non-solicit, and layered RSU vesting reduce near-term turnover risk .
- Potential technical supply: incremental RSU vesting (1,028 shares near-term) and continued 4-year vesting schedule could create periodic sell-to-cover activity during open windows; options create conditional supply with several tranches expiring 2027–2033 .
- Governance watch items: prior control weaknesses tied to system conversion and derivative action settlement warrant monitoring; however, say-on-pay support (89%) and strong governance practices (no pledging/gross-ups, clawback, independent committees) are positives .