With bank-owned insurance agencies, not everyone is sold

In the late 1990s, the Supreme Court’s decision in Barnett Bank of Marion County, N.A. v. Nelson, and congressional passage of the Gramm-Leach-Bliley Act, tore down restrictions that had blocked banks from selling insurance products. Over the next decade, hundreds of community banks entered the space, spending billions of dollars to acquire agencies. 

A quarter century later, traffic appears to be moving the opposite direction. In a number of high-profile deals, banks have divested  insurance assets for eye-catching valuations. The trend continued in December as the $1.4 billion-asset CB Financial sold its insurance subsidiary to World Insurance Associates for $30.5 million — or 26 times the unit’s trailing 12 months earnings. CB’s sale followed the agreement by the $2.2 billion-asset Evans Bancorp  to sell its agency to Arthur J. Gallagher & Co. for $40 million. 

Through October, seven banks agreed to sell agencies, compared with five deals with banks as acquirers. It was the first time in nearly a decade where such sales exceeded acquisitions, according to S&P.

Banks are “acutely aware” of the  prices agencies are currently commanding, Hovde Analyst David Bishop wrote in a recent research note. Still, many institutions appear to be standing pat, content with the steady income stream insurance generates for them. 

Here are profiles of some prominent community banks involved in insurance: