Contrasting CNB Financial (NASDAQ:CCNE) and Arrow Financial (NASDAQ:AROW)

Arrow Financial (NASDAQ:AROW) and CNB Financial (NASDAQ:CCNE) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, earnings, analyst recommendations, risk, valuation, dividends and institutional ownership.

Institutional and Insider Ownership

46.7% of Arrow Financial shares are held by institutional investors. Comparatively, 52.3% of CNB Financial shares are held by institutional investors. 3.5% of Arrow Financial shares are held by company insiders. Comparatively, 2.9% of CNB Financial shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Arrow Financial pays an annual dividend of $1.20 per share and has a dividend yield of 2.9%. CNB Financial pays an annual dividend of $0.76 per share and has a dividend yield of 2.1%. Arrow Financial pays out 38.7% of its earnings in the form of a dividend. CNB Financial pays out 24.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Arrow Financial has raised its dividend for 7 consecutive years and CNB Financial has raised its dividend for 1 consecutive years. Arrow Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Arrow Financial and CNB Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arrow Financial	20.56%	12.25%	1.17%
CNB Financial	19.37%	13.02%	1.26%

Volatility & Risk

Arrow Financial has a beta of 0.76, suggesting that its share price is 24% less volatile than the S&P 500. Comparatively, CNB Financial has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500.

Valuation & Earnings

This table compares Arrow Financial and CNB Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arrow Financial	$242.58 million	2.78	$43.95 million	$3.10	13.16
CNB Financial	$432.51 million	2.45	$66.13 million	$3.11	11.49

CNB Financial has higher revenue and earnings than Arrow Financial. CNB Financial is trading at a lower price-to-earnings ratio than Arrow Financial, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations for Arrow Financial and CNB Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arrow Financial	0	3	2	0	2.40
CNB Financial	0	2	2	1	2.80

Arrow Financial currently has a consensus target price of $40.83, indicating a potential upside of 0.11%. CNB Financial has a consensus target price of $36.00, indicating a potential upside of 0.78%. Given CNB Financial’s stronger consensus rating and higher probable upside, analysts clearly believe CNB Financial is more favorable than Arrow Financial.

Summary

CNB Financial beats Arrow Financial on 10 of the 17 factors compared between the two stocks.

About Arrow Financial

Arrow Financial Corporation, a bank holding company, provides commercial and consumer banking, and financial products and services. The company’s deposit products include demand deposits, interest-bearing checking accounts, savings deposits, time deposits, and other time deposits. Its lending activities comprise commercial loans, such as term loans, time notes, and lines of credit; and commercial real estate loans to finance real estate purchases, refinancing, expansions, and enhancement to commercial properties, as well as commercial construction and land development loans to finance projects. The company’s lending activities also include consumer installment loans to finance personal expenditures, personal lines of credit, overdraft protection, and automobile loans; and residential real estate loans, fixed home equity loans, and home equity lines of credit for consumers to finance home improvements, debt consolidation, education, and other uses. In addition, it maintains an indirect lending program. Further, the company provides retirement planning, trust, and estate administration services for individuals, as well as pension, profit-sharing, and employee benefit plan administration services for corporations. Additionally, it offers insurance agency services comprising group health care policies and life insurance, and property and casualty insurance products; and investment advisory services to its proprietary mutual funds, as well as holds a real estate investment trust. It operates in the northeastern region of New York State in Warren, Washington, Saratoga, Essex, Clinton, Rensselaer, Albany, and Schenectady counties. Arrow Financial Corporation was founded in 1851 and is headquartered in Glens Falls, New York.

About CNB Financial

CNB Financial Corporation operates as the bank holding company for CNB Bank that provides a range of banking products and services for individual, business, governmental, and institutional customers. The company accepts checking, savings, and time deposit accounts; and offers real estate, commercial, industrial, residential, and consumer loans, as well as various other specialized financial services. It also provides private banking; and wealth and asset management services, including the administration of trusts and estates, retirement plans, and other employee benefit plans, as well as a range of wealth management services. In addition, the company invests in debt and equity securities; sells nonproprietary annuities and other insurance products; and offers small balance unsecured loans and secured loans primarily collateralized by automobiles and equipment, as well as engages in consumer discount loan and finance business. The company was founded in 1865 and is headquartered in Clearfield, Pennsylvania.