Arrow Financial Corporation (AROW): Business Model Canvas [11-2024 Updated]

Understanding the business model of Arrow Financial Corporation (AROW) reveals how this financial institution effectively navigates the competitive landscape. By leveraging key partnerships with regional banks and investment firms, alongside a robust technology infrastructure, AROW caters to a diverse range of customer segments including individual consumers and small to medium-sized enterprises. Dive deeper into the intricacies of their value propositions, revenue streams, and more to discover how they create lasting customer relationships and drive profitability.

Arrow Financial Corporation (AROW) - Business Model: Key Partnerships

Collaborations with Regional Banks

Arrow Financial Corporation has established strategic collaborations with several regional banks to enhance its service offerings and broaden its customer base. As of September 30, 2024, total loans stood at $3.3 billion, with regional collaborations contributing significantly to the loan growth of $201.2 million year-over-year. The partnerships are aimed at sharing resources and risk management, which is critical in the current economic environment characterized by fluctuating interest rates and inflationary pressures.

Partnership Type	Loan Growth Contribution	Total Loans (as of 9/30/2024)	Impact on Deposits
Regional Banks	$201.2 million	$3.3 billion	Increased by $171 million

Dealer Relationships for Automobile Loans

Arrow maintains robust dealer relationships primarily for automobile loans, which accounted for 33.6% of the total loan portfolio as of September 30, 2024. The consumer loans segment, largely made up of automobile loans, increased by $8.6 million or 0.8% from the previous year. These partnerships with dealerships in New York and Vermont facilitate the indirect lending process, allowing Arrow to efficiently tap into a steady stream of consumer financing opportunities.

Loan Segment	Percentage of Total Loans	Growth (9/30/2023 to 9/30/2024)	Current Portfolio Value
Automobile Loans	33.6%	$8.6 million	$1.12 billion

Partnerships with Investment Firms

Arrow Financial Corporation has partnered with investment firms to diversify its investment strategies and enhance asset management. As of September 30, 2024, total investments amounted to $549.8 million, down 17.6% from the previous year due to strategic reallocations and market conditions. These partnerships are essential for leveraging expertise in investment management and improving returns on Arrow's investment portfolio.

Partnership Type	Total Investments (as of 9/30/2024)	Annual Change (%)	Strategic Focus
Investment Firms	$549.8 million	-17.6%	Diversification and Asset Management

Arrow Financial Corporation (AROW) - Business Model: Key Activities

Loan origination and underwriting

As of September 30, 2024, Arrow Financial Corporation's total loans amounted to $3.3 billion, reflecting an increase of $127 million, or 4.0%, from December 31, 2023. The loan portfolio experienced significant growth in various segments:

• Residential real estate loans grew by $93.9 million, or 7.8%.
• Commercial and commercial real estate loans increased by $24.6 million, or 2.7%.
• Consumer loans, primarily composed of automobile loans, rose by $8.6 million, or 0.8%.

The average yield on the loan portfolio was 5.27% for the third quarter of 2024, reflecting an increase of 57 basis points from the previous year. The company employs rigorous underwriting standards to maintain quality in its loan portfolio, with nonperforming loans totaling $21.9 million, equating to 0.66% of period-end loans.

Investment management services

Arrow Financial Corporation offers investment management services, managing assets totaling $1.944 billion as of September 30, 2024. The firm focuses on maximizing returns for clients while adhering to regulatory requirements and maintaining high standards of compliance.

The company's investment strategy is executed through a combination of equity and fixed-income securities, with a focus on risk-adjusted returns. As of September 30, 2024, the total investment securities portfolio was valued at $590.4 million. The investment management services also include trust services and financial planning, which are crucial for client retention and revenue generation.

Compliance and risk management

Compliance and risk management are critical components of Arrow's operations. The company adheres to regulatory capital standards, maintaining a Common Equity Tier 1 (CET1) ratio of 12.77%, exceeding the minimum requirement of 4.5%. As of September 30, 2024, Arrow's stockholders' equity stood at $393.3 million, with an increase of $13.5 million since December 31, 2023.

The allowance for credit losses was reported at $31.3 million, representing 0.94% of total loans. Arrow's risk management framework includes regular assessments of loan quality and the implementation of strategies to mitigate potential losses. The provision for credit losses in the third quarter of 2024 was $934,000, which reflects proactive measures to address credit risk.

Key Metrics	Value
Total Loans	$3.3 billion
Residential Real Estate Loans Growth	$93.9 million (7.8%)
Commercial Loans Growth	$24.6 million (2.7%)
Consumer Loans Growth	$8.6 million (0.8%)
Average Yield on Loan Portfolio	5.27%
Nonperforming Loans	$21.9 million (0.66%)
Assets Under Management	$1.944 billion
Total Investment Securities	$590.4 million
Common Equity Tier 1 Ratio	12.77%
Stockholders' Equity	$393.3 million
Allowance for Credit Losses	$31.3 million (0.94% of Total Loans)
Provision for Credit Losses (Q3 2024)	$934,000

Arrow Financial Corporation (AROW) - Business Model: Key Resources

Strong capital base and liquidity

As of September 30, 2024, Arrow Financial Corporation reported total stockholders' equity of $393.3 million, reflecting an increase of $13.5 million, or 3.6%, from the end of 2023. The book value per share was $23.50, which is a rise of 11.3% compared to the prior year. Arrow's total assets reached $4.4 billion, marking an increase of $167.0 million, or 3.9%, from June 30, 2024.

At the same date, Arrow maintained a Common Equity Tier 1 (CET1) capital ratio of 12.77%, which exceeds the minimum requirement of 4.5%. The company’s liquidity position is bolstered by overnight investments and interest-bearing cash balances totaling $286.1 million.

Experienced workforce in finance

Arrow Financial Corporation prides itself on having a skilled workforce with significant experience in the finance sector. This includes a dedicated team of professionals adept in various banking operations, credit analysis, and customer service, which is vital for maintaining operational efficiency and customer satisfaction.

The bank's management structure is designed to leverage the expertise of its employees in making strategic decisions that enhance business operations and risk assessment.

Technology infrastructure for banking operations

Arrow has invested in a robust technology infrastructure to support its banking operations. This includes advanced systems for loan processing, customer relationship management, and risk management. The technology investments enable Arrow to efficiently manage its growing loan portfolio of $3.3 billion as of September 30, 2024.

Additionally, Arrow's technology framework supports secure digital banking services, enhancing customer accessibility and satisfaction. The bank's commitment to technological advancement is evident in its continuous upgrades to ensure compliance with regulatory standards and to meet customer expectations.

Key Resource	Details
Stockholders' Equity	$393.3 million (as of September 30, 2024)
Book Value per Share	$23.50 (up 11.3% YoY)
Total Assets	$4.4 billion (as of September 30, 2024)
CET1 Capital Ratio	12.77% (exceeds minimum requirement of 4.5%)
Interest-bearing Cash Balances	$286.1 million (as of September 30, 2024)
Total Loans	$3.3 billion (as of September 30, 2024)

Arrow Financial Corporation (AROW) - Business Model: Value Propositions

Competitive interest rates on loans

As of September 30, 2024, Arrow Financial Corporation reported an average yield on its loan portfolio of 5.27%, which reflects an increase of 57 basis points compared to the third quarter of 2023. The company experienced total loan growth of $127.0 million, or 4.0%, since December 31, 2023, with the largest segment being residential real estate loans, which increased by $93.9 million, or 7.8%. Arrow's competitive positioning is further enhanced by its focus on maintaining high-quality credit standards, as evidenced by a nonperforming loan ratio of 0.66% as of September 30, 2024.

Comprehensive financial services tailored to clients

Arrow Financial Corporation offers a diverse range of financial services, including commercial and residential loans, insurance products, and investment services. As of September 30, 2024, the total loans outstanding amounted to $3.34 billion. The composition of the loan portfolio is as follows:

Loan Type	Amount (in billions)	Percentage of Total Loans
Commercial Loans	0.17	5.1%
Commercial Real Estate Loans	0.76	22.8%
Consumer Loans	1.12	33.6%
Residential Real Estate Loans	1.29	38.7%

This diversified offering allows Arrow to cater to various client needs, from personal banking to commercial lending solutions.

Strong focus on customer service and support

Arrow Financial Corporation emphasizes exceptional customer service, which is a key differentiator in its value proposition. The company has achieved a net income of $25.2 million for the first nine months of 2024, reflecting a focus on customer retention and satisfaction. The efficiency ratio was reported at 2.79%, demonstrating effective management of operational costs while maintaining service quality. Arrow's commitment to customer service is also reflected in its net interest margin, which stands at 2.79%, indicating its ability to generate income effectively from its interest-earning assets.

Arrow Financial Corporation (AROW) - Business Model: Customer Relationships

Personalized banking services

Arrow Financial Corporation offers a range of personalized banking services tailored to meet the specific needs of its customers. As of September 30, 2024, total loans amounted to $3.3 billion, reflecting a growth of $201.2 million from the previous year. The bank emphasizes strong relationships with clients, ensuring that services such as mortgage loans, personal loans, and business loans are customized to individual requirements.

Regular communication through various channels

Arrow Financial maintains regular communication with its customers through multiple channels, including email, phone, and in-person consultations. As of the third quarter of 2024, the bank reported a net income of $8.975 million, indicating effective engagement strategies that keep customers informed about their accounts and available services. The bank utilizes technology to enhance customer interactions, ensuring prompt responses and personalized service.

Customer loyalty programs and rewards

Arrow Financial has implemented customer loyalty programs designed to incentivize retention and encourage more significant engagement. These programs include rewards for deposit accounts and loan products, contributing to the bank's overall growth strategy. As of September 30, 2024, the bank's total deposit balances reached $3.8 billion, an increase of $171.0 million from the previous year, partially attributed to these loyalty initiatives.

Customer Engagement Metrics	Q3 2024	Q3 2023	Change (%)
Total Loans	$3.3 billion	$3.1 billion	6.4%
Total Deposits	$3.8 billion	$3.6 billion	4.7%
Net Income	$8.975 million	$7.743 million	15.9%
Cash Dividend per Share	$0.270	$0.262	3.1%

The bank's approach to customer relationships has proven effective, as evidenced by the steady growth in both loan and deposit balances. This strategic focus on personalized banking, consistent communication, and customer loyalty programs continues to strengthen Arrow Financial's market position.

Arrow Financial Corporation (AROW) - Business Model: Channels

Physical Bank Branches

As of September 30, 2024, Arrow Financial Corporation operates multiple physical bank branches across its regional markets. The bank has engaged in strategic acquisitions, including the acquisition of the Whitehall Branch from Berkshire Bank, which was completed on August 2, 2024. The total assets of Arrow Financial Corporation were reported at $4.41 billion, with a total loan portfolio of $3.33 billion. The bank's physical presence allows it to directly engage with customers, facilitating loan origination, deposit acceptance, and other banking services.

Online Banking Platform

Arrow Financial Corporation has developed a robust online banking platform that allows customers to perform banking activities remotely. This platform offers functionalities such as account management, funds transfer, and bill payments. As of September 30, 2024, the bank reported an increase in interest-bearing deposits at banks to $154.9 million, reflecting the shift towards digital banking solutions. The online platform is integral to Arrow's strategy to enhance customer convenience and promote digital banking use.

Mobile Banking Applications

In addition to its online banking platform, Arrow Financial Corporation offers mobile banking applications that provide customers with on-the-go access to their banking services. This application includes features such as mobile check deposits and account alerts, catering to the increasing demand for mobile banking services. The bank's emphasis on technology is evident, with cash paid for amounts included in the measurement of lease liabilities reaching $142,000 for finance leases. The mobile banking segment plays a crucial role in attracting younger demographics who prefer mobile access to banking services.

Channel Type	Key Features	Financial Impact
Physical Bank Branches	Direct customer engagement, loan origination, deposit acceptance	Total assets: $4.41 billion; Total loans: $3.33 billion
Online Banking Platform	Account management, funds transfer, bill payments	Interest-bearing deposits: $154.9 million
Mobile Banking Applications	Mobile check deposits, account alerts	Cash paid for finance leases: $142,000

Arrow Financial Corporation (AROW) - Business Model: Customer Segments

Individual consumers seeking loans

As of September 30, 2024, Arrow Financial Corporation's total loans amounted to $3.3 billion, with individual consumer loans, primarily comprising automobile loans, representing approximately 33.6% of the total loan portfolio. The consumer loan segment increased by $8.6 million, or 0.8%, from December 31, 2023. The majority of these loans are originated through partnerships with automobile dealerships located in upstate New York and Vermont.

Small to medium-sized enterprises (SMEs)

Commercial and commercial real estate loans accounted for 27.7% of Arrow's total loan portfolio as of September 30, 2024. This segment saw an increase of $24.6 million, or 2.7%, in the first nine months of 2024. The loan growth in this category is influenced by stable commercial property values in Arrow's regional markets, although there remains uncertainty due to inflation and rising interest rates. As of September 30, 2024, the total amount of commercial loans was approximately $756.4 million.

Investors looking for wealth management

Arrow Financial Corporation's stockholders’ equity was reported at $393.3 million as of September 30, 2024, reflecting an increase of 3.6% from the previous year. The company’s tangible book value per share was $21.95, representing an increase of 11.1% over the previous year. Arrow's stock price on September 30, 2024, was $28.66, translating to a trading multiple of 1.31 times the tangible book value. Furthermore, Arrow paid a quarterly cash dividend of $0.27 per share during this period.

Customer Segment	Total Loans ($ billion)	Percentage of Total Loans (%)	Growth from Previous Year ($ million)	Equity ($ million)	Book Value per Share ($)	Dividend per Share ($)
Individual Consumers	1.11	33.6	8.6
Small to Medium-sized Enterprises (SMEs)	0.76	27.7	24.6
Investors				393.3	21.95	0.27

Arrow Financial Corporation (AROW) - Business Model: Cost Structure

Operational expenses for branches and staff

Total non-interest expense for the third quarter of 2024 was $24.1 million, an increase from $23.5 million for the third quarter of 2023. This includes:

Expense Type	Q3 2024 (in thousands)	Q3 2023 (in thousands)	Change (in thousands)
Salaries and Employee Benefits	13,446	11,988	1,458
Occupancy Expense of Premises, Net	1,754	1,517	237
Technology and Equipment Expense	4,692	4,371	321
FDIC Assessments	698	515	183
Other Operating Expense	3,510	5,088	(1,578)

Marketing and advertising costs

Marketing and advertising costs are part of the overall operational expenses but specific figures for these costs were not detailed in the financial reports. However, Arrow Financial Corporation has focused on growth strategies that may include marketing investments.

Interest expenses on borrowed funds

Interest expense for the third quarter of 2024 was $21.0 million, compared to $16.8 million for the same quarter in 2023. This reflects a significant increase due to higher deposit rates and changes in deposit composition:

Detail	Q3 2024 (in millions)	Q3 2023 (in millions)	Change (in millions)
Total Interest Expense	21.0	16.8	4.2
Net Interest Income	28.4	25.4	3.0
Net Interest Margin	2.78%	2.53%	0.25%

Overall, the increase in interest expenses is largely attributed to the rising interest rate environment affecting the cost of funds for Arrow Financial Corporation.

Arrow Financial Corporation (AROW) - Business Model: Revenue Streams

Interest income from loans

For the nine months ended September 30, 2024, Arrow Financial Corporation reported interest and dividend income totaling $144.1 million, an increase of $25.9 million or 21.9% compared to $118.2 million for the same period in 2023. The net interest income for this period was $82.0 million, reflecting a 3.6% increase from $79.2 million in the prior year.

The average yield on earning assets increased to 4.72% in 2024 from 4.03% in 2023, while the cost of interest-bearing liabilities rose to 2.67% from 1.81%, resulting in a net interest margin of 2.69%, down slightly from 2.70% the previous year.

Metrics	2024 (9 months)	2023 (9 months)	Change	% Change
Interest and Dividend Income	$144,092,000	$118,240,000	$25,852,000	21.9%
Net Interest Income	$82,045,000	$79,219,000	$2,826,000	3.6%
Average Yield on Earning Assets	4.72%	4.03%	0.69%	17.1%
Cost of Interest-Bearing Liabilities	2.67%	1.81%	0.86%	47.5%
Net Interest Margin	2.69%	2.70%	-0.01%	-0.4%

Fees from banking services and transactions

For the nine months ended September 30, 2024, Arrow Financial Corporation generated non-interest income totaling $23.8 million, an increase of $2.2 million or 10.2% compared to $21.6 million in the previous year. This increase was driven by various factors including fees for banking services, which reached $8.1 million, showing a modest increase of 0.7% from $8.0 million in 2023.

Income from fiduciary activities was $7.3 million, reflecting a 3.6% increase from $7.1 million in the prior year. Additionally, Arrow recorded $5.3 million in insurance commissions, an increase of 11.0% from $4.8 million in 2023, partly due to the acquisition of A&B Agency, Inc.

Non-Interest Income Components	2024 (9 months)	2023 (9 months)	Change	% Change
Income From Fiduciary Activities	$7,337,000	$7,081,000	$256,000	3.6%
Fees for Other Services to Customers	$8,130,000	$8,073,000	$57,000	0.7%
Insurance Commissions	$5,299,000	$4,775,000	$524,000	11.0%
Net Gain on Sale of Loans	$135,000	$25,000	$110,000	440.0%
Total Non-Interest Income	$23,847,000	$21,633,000	$2,214,000	10.2%

Income from investment management services

Arrow Financial Corporation's investment management services contributed to its revenue streams with a consistent performance in fiduciary activities. The income from these services amounted to $7.3 million for the first nine months of 2024, which is a 3.6% increase from $7.1 million during the same period in 2023. This reflects Arrow's ability to leverage market conditions to enhance its investment management offerings.

In addition, Arrow reported a net gain on securities transactions of $165,000 for the nine months ending September 30, 2024, compared to a net loss of $214,000 in the previous year, showcasing a significant turnaround in performance within this segment.

Investment Management Income	2024 (9 months)	2023 (9 months)	Change	% Change
Income From Fiduciary Activities	$7,337,000	$7,081,000	$256,000	3.6%
Net Gain (Loss) on Securities	$165,000	($214,000)	$379,000	(177.1%)

Updated on 16 Nov 2024

Resources:

1. Arrow Financial Corporation (AROW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Arrow Financial Corporation (AROW)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Arrow Financial Corporation (AROW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.