Arrow Financial Corp. CEO David S. DeMarco Sees The Value Of Building Relationships

Editor’s Note: Arrow Financial Corp.—the parent company of Saratoga National Bank and Glens Falls National Bank—announced in May that David S. DeMarco is the new president and chief executive officer of the company.

DeMarco was chief banking officer and senior executive vice president at the company. He replaces Thomas J. Murphy who terminated his employment. The Glens Falls Business Journal recently caught up with DeMarco.

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Retirement Planing With SECURE Act 2.0

BY MARK PRIAN

The original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was designed to expand access to tax-advantaged retirement savings accounts, and it made changes to existing laws to ensure that older Americans are less likely to outlive their retirement assets.

BY PAUL POST

The Digital Age has made communication faster and more far-reaching than ever with email and various social media platforms.

But it’s also led to a breakdown of face-to-face, interpersonal relations that a strong community bank needs to serve customers most effectively.

That’s one of the biggest challenges Dave DeMarco sees in his new role as president and CEO of Arrow Financial Corp., and its subsidiaries Glens Falls National Bank and Trust Co. and Saratoga National Bank and Trust Co.

“Technology has changed the banking industry dramatically,” he said. “We’re in the relationship building business. It’s hard to do that with someone who’s taking a picture of a check and banking on their cell phone or computer instead of coming to the bank. You couldn’t do that when I joined Glens Falls National 35 years ago.”

“We don’t see customers as much as we used to,” he said. “So we basically have to get out of the office to meet people and build relationships.”

DeMarco, 61, a Saratoga Springs resident, has been intimately involved with many facets of the evolving industry during his lengthy banking career.

A Niskayuna High School graduate (1980), he earned a degree in finance from the University of Texas at Austin (1984) and started out as a commercial lending officer for a large bank in Dallas before returning home to join Glens Falls National, in 1987, as manager of its commercial loan department.

From there he was put in charge of branch offices and marketing, and in 2004 was responsible for building the bank’s insurance operation, The Upstate Agency.

“New banking laws allowed us to get into that business,” DeMarco said. “We finance homes, cars and businesses. They all need insurance and businesses need health insurance. It was a real nice complement to our banking services and it continues today.”

In this regard, branch offices have taken on new roles, too, including wealth management, which Arrow Corp. also provides.

“Branches are becoming more like consulting or financial advisory centers,” DeMarco said. “You can now go into one of our branches and not only make a deposit or get a loan, you can get insurance and talk to your investment advisor. We’ve tried to create a one-stop-shop over the past 15 years. That’s been a real change.”

With Glens Falls National, his retail banking territory stretched north all the way to Plattsburgh. But in 2012, DeMarco was named president and CEO of Saratoga National Bank and Trust Company, following the retirement of Raymond F. O’Conor, who continues as bank chair.

DeMarco oversaw a major expansion of the Saratoga bank’s territory into the Greater Capital Region with new branch offices in Clifton Park, Colonie, Troy, Schenectady, Rotterdam and Latham. There are now 37 Glens Falls National and Saratoga National branch offices from Albany to Plattsburgh.

COVID and unfavorable economic trends have slowed such growth.

“We do plan to expand going forward, but I doubt it will happen this year,” he said. “We’re evaluating communities we might move into, which is interesting because some banks have been closing and we’ve actually consolidated where we’ve had two branches in the same community a mile apart. But we still believe and the industry still proves that in order to do business in a community you have to have a presence. We’re looking at surrounding communities, primarily outside the Capital District, as we continue to expand outward.”

DeMarco said the Capital Region’s diverse, stable employment base with a large state government, nearly two dozen colleges and universities and numerous private-sector firms is a major asset that offsets the worst effects of economic volatility.

“We tend to be isolated to some degree from recessions, not completely, of course,” he said. “We don’t have the high highs or the low lows we read about nationally in some of the bigger cities. I think the rest of the year will be stable with no significant downturns. We aren’t seeing the growth of our loan portfolio we have the past couple years, but we’re seeing modest growth. I think that will continue.”

“At some point the Fed’s (Federal Reserve) going to stop raising interest rates,” he said. “They’re talking about a pause, potentially this month or in July. I’d like to think as we get into 2024 that they will have leveled off. If the economy slows a little further they’ll probably be forced next year to start lowering rates, which hopefully will spur some more economic activity.”

DeMarco believes the challenging current economic environment is an advantage for Arrow Corp., as a long-time local institution.

“Our company’s been around since 1851,” he said. “We’ve been through ups and downs in the economy and industry. Because we’ve been around so long, we’re one of the top performing banking companies for a bank our size in the country. We have very strong capital, very strong liquidity, a very safe loan portfolio. At a time when there’s been a lot of headlines about bank failures, feeling comfortable about your hometown bank is what our two banks are all about.”

“I’m not looking to change our path,” DeMarco said. “My job is to support them and lead them in the direction that fulfills our mission of providing community banking services. When you have a company that’s 172 years old, you can walk in anywhere and people know what you stand for. You’re able to build relationships much faster.”

Arrow Corp. employs approximately 500 people.

An ongoing labor shortage crisis is another big challenge he’s faced with as the company’s new leader.

“It’s absolutely affecting our company,” he said. “We’ve always had some turnover in the teller position, primarily, but many people changed their thought process about working during COVID. We have some remote business, but with those 37 branch offices you’ve got to be there to serve your customer.

“We have been challenged, like all industries, finding people,” he said. “We’re trying to remain competitive on salary. We have an internal program that rewards employees for referring their friends. We have a phenomenal benefit program. We’re doing everything we can to be an employer of choice, but it’s not easy.”

Prior to his recent promotion, DeMarco had been Arrow Corp.’s chief banking officer and senior executive vice president.

As the new president and CEO he succeeds Thomas J. Murphy who terminated his employment, his director’s position and all other positions with the company, a press release said.

“As chairman of the Saratoga National Bank board I’ve worked closely with Dave and have no doubt that he will do a superb job in his new role,” O’Conor said.

Active in the community, DeMarco is a board member and treasurer of the Saratoga Hospital Foundation and Greater Capital Region United Way; is treasurer of the Center for Economic Growth (part of Capital Region Chamber of Commerce); is on the Independent Bankers of New York State Board and the CAPTAIN Advisory Council.

Arrow board Chairman William L. Owens said, “Dave has dedicated his career to the company, understands community banking and he is well-known throughout our organization and the communities we serve.”

The intent of this act was also to improve the way businesses provide retirement benefits to employees.

In 2022, some long-awaited changes to the original act were introduced, and, in December, what is now known as SECURE 2.0 was passed by Congress and signed into law by President Biden.

SECURE 2.0 builds on the original objectives and makes some important adjustments to the 2019 legislation. With more than 100 provisions in the law, these new changes are bound to impact just about everyone who is saving for retirement. So, whether your employees are close to retiring or have many more years to save, here are some highlights you need to know.

Starting in 2023, the biggest change in SECURE 2.0 might be the adjustments to Required Minimum Distributions (RMDs). Under the 2019 act, a plan participant had to begin withdrawing retirement savings at the age of 72. The 2022 law increases this to age 73, that began on Jan. 1, 2023. By 2033, the starting age for RMDs will be 75.

Also starting this year, the penalties for failing to take the RMD are cut from 50 percent of the amount not taken down to 25 percent. If you correct this mistake in a timely manner within an IRA, the penalty drops to 10 percent.

Employers may now choose to offer matching or nonelective contributions as Roth contributions.

The legislation permits employers to offer small financial incentives, like low-dollar-amount gift cards, to help boost employee participation.

For new retirement plans, companies may be able to take advantage of tax credits on start-up administration costs. There may also be company tax credits available for each employee that enrolls. Limits do apply.

Starting in 2024:

If you have employees who are putting off participating in a retirement plan because they have student loans to pay back, starting in 2024 employers can “match” those employee student loan payments as contributions to a retirement account. This provision may help the employee save for retirement while getting out of debt.

Catch-up contributions for those participants over age 50 may be required to be Roth contributions. This is dependent on employee income.

RMDs will not be required for Roth 401(k) and Roth 403(b) accounts. Employees’ accounts can continue to grow tax-free.

Employees may claim a personal emergency withdrawal of up to $1,000. Restrictions apply.

A “Side-Car” Emergency Savings Account can be established within the plan. Employees can access this additional Roth savings account tax and penalty free.

Plan Force-Out and Portability rules, which guide how employers manage the retirement accounts of former employees, are also changing.

Starting in 2025: Upcoming changes in catch-up contributions might help you reach your retirement savings goals faster. For employees ages 60 to 63, the catch-up limit increases to $10,000 effective January 1, 2025.

SECURE 2.0 expands automatic enrollment in retirement plans. The new legislation requires employers who introduce new plans to automatically enroll any eligible new employees. Small businesses with 10 or fewer employees are exempt, as are new businesses, defined in the bill as those which have been in business for three or less years.

Long-term, part-time employees will be allowed to save through the company’s retirement plan.

Starting in 2027:

The Saver’s Match program will reward low-tomoderate income workers for saving in a retirement plan. The Treasury will reward eligible savers with up to $1,000 in free match into their retirement account. The program currently in existence is the Saver’s Credit which allows for retirement savings-related tax credits.

One other interesting and potentially very helpful provision in the new law relates to lost 401(k) plans. If concern about dormant accounts due to staff turnover has kept you from offering your employees a retirement plan, this provision could help. For past employees who may have changed jobs and subsequently lost track of their 401(k) accounts, the new law establishes a retirement savings “lost and found” database to help people track down their missing and forgotten accounts. The database is anticipated to be up and running in about two years.

The original SECURE Act sought to make it easier for small businesses to create retirement accounts for employees, which was difficult and expensive in the past. With nearly half of all U.S. workers employed by small businesses, Congress recognizes that this is an important sector to reach and encouraging small businesses to offer retirement plans is critical. According to the U.S. Bureau of Labor Statistics, 67 percent of private industry workers have access to an employer provided retirement plan as of March 2020.

The intent behind the original SECURE Act was to encourage working Americans to plan for retirement. SECURE 2.0 builds on that by enhancing incentives for small business owners to motivate employees to participate. If you are interested in setting up a retirement plan for your small business, your financial institution is ready to help you get your employees on the road to saving for their retirement.