Community Banks Shift Towards Insurance Agency Acquisitions
Community banks are reversing the trend of divesting their insurance agencies, signaling a strategic shift back to acquisitions through 2026.
The landscape of insurance agency ownership among community banks is evolving again. Between 2022 and 2024, many banks sold their insurance operations to capitalize on high valuations driven by private equity interest. However, a counter-trend has emerged, with some banks resuming acquisitions of insurance agencies, aiming to expand their product offerings and deepen customer relationships. This approach contrasts with the consolidation strategy typically employed by private equity buyers.
Arrow Financial Leads the Charge
Arrow Financial Corporation exemplifies this shift with its acquisition of Skene Valley Agency, Inc., an independent insurance agency located in Washington County, New York. Arrow announced the deal on September 10, projecting completion by the third quarter of 2026. While financial details remain private, the acquisition underscores Arrow's strategy to integrate property-casualty and life insurance with its commercial operations.
Arrow Financial's annual reports reflect a successful insurance segment, with revenues rising from $6.5 million in 2023 to $7.7 million in 2025, and first-half 2026 figures already exceeding $4 million. David DeMarco, Arrow's President and CEO, has emphasized the strategic synergies from merging insurance offerings with the bank's broader commercial relationships.
Industry-wide Trends and Opportunities
While divestitures were common from 2022 to 2024, the opposite trend is now emerging. High-profile sales included M&T Bank's and Truist Financial's sizable divestments of their insurance interests. Meanwhile, Columbia Bank's purchase of Jeanne S. Frey Insurance Agency highlighted the sporadic acquisition activity.
Although there has been a 15% decline in agency acquisitions in the first half of 2026, as reported by OPTIS Partners, some banks see this as an opportunity. They face fewer competing bids from private equity firms, making the acquisition landscape more favorable for those with complementary strategic goals.
The Strategic Rationale for Acquisitions
For banks like Arrow Financial, acquiring insurance agencies provides distinct advantages over private equity consolidations. By incorporating insurance services into their existing product suite, banks can offer a comprehensive range of financial products to their established customer base. This approach enhances customer retention and deepens relationships, leveraging local ties and personal connections.
| Year | Insurance Revenue | Key Acquisition |
|---|---|---|
| 2023 | $6.5 million | Initial strategic shifts |
| 2025 | $7.7 million | Preparations for Skene Valley |
| 2026 H1 | Over $4 million | Skene Valley acquisition completion |
Looking Ahead
The acquisition of Skene Valley Agency by Arrow Financial highlights a strategic move away from the previous divestiture trend, suggesting a potential uptick in similar activities by other community banks through 2026 and beyond. As banks evaluate their paths forward, the emphasis on local relationships and customer integration could make such acquisitions increasingly attractive. This evolving trend presents vital considerations for insurance professionals, whether in agency operations, underwriting, or strategic planning, as they adapt to these shifts in the marketplace.