LINCOLN BRUNING endacotttimmer.com 402-817-1000 Legal advice. Community banking experience. While the community bank transaction market remains slower than in prior years, community banks with affiliate insurance agencies may have an opportunity to sell affiliate agencies at elevated valuations. will assist for a period of time post-closing to ensure the smooth transfer of information technology and agency records. Sellers often over-promise and under-charge for their services in these agreements. It is important to set reasonable buyer expectations for the scope and duration of these services and sellers should not be afraid to be aggressive with the rates to be charged for these important services. 5. Other Shared Assets Affiliate insurance agencies are often physically located within bank branches, and buyers will typically require a lease of such space for at least a transition period. A selling bank should consider whether it would be difficult to lease such space to another party if the buyer would not renew the lease in the future. Additionally, as future business relationships are unpredictable, seller banks must consider the circumstances in which they would want to terminate a buyer’s lease early. Any lease should also include terms regarding the use of office furniture, equipment, parking stalls and any other assets owned by the seller bank to be used by the buyer following closing. While the community bank transaction market remains slower than in prior years, community banks with affiliate insurance agencies may have an opportunity to sell affiliate agencies at elevated valuations. The benefits of these transactions must be weighed against the operational challenges they produce. Banks with affiliate agencies should consider the previous factors when evaluating divestment opportunities in 2024. 1The Nebraska Department of Banking and Finance issued only one approval order related to a community bank merger in 2023. 2Community banks operate affiliate agencies in a variety of ways. Some operate agencies as business segments of the bank itself. Others house insurance agency businesses in an operating subsidiary of the bank or as a subsidiary of a parent bank holding company. 3Bank holding companies also may consider using proceeds from such sales to redeem shareholders seeking liquidity. Current bank valuations present a “sell-high; buy-low” opportunity to bank holding companies able to fund redemptions through insurance agency sale proceeds. 4In April, Truist completed the sale of 20% of its insurance brokerage business to Stone Point Capital for $1.95 Billion and has subsequently discussed the sale of the remainder of such business to Stone Point. See Liz Hoffman, Truist is in Talks to Sell its Insurance Business for $10 Billion, SEMAFOR (Oct. 9, 2023, 5:47 P.M.), https://www.semafor.com/ article/10/09/2023/truist-in-talks-to-sell-insurance-business-for-10-billion. Recently, CB Financial, the parent holding company of a much smaller bank, Community Bank, of Carmichaels, Pennsylvania ($1.27 Billion in assets), announced the sale of its insurance agency subsidiary to World Insurance Associates for $30.5 Million. See John Reosti, CB Financial Joins Parade of Banks Divesting Insurance Units, AMERICAN BANKER (Dec. 4, 2023, 3:51 P.M.), https://www.americanbanker.com/news/cb-financialjoins-parade-of-banks-divesting-insurance-units. 5See the following related American Banker article for further discussion. Allissa Kline, Banks’ Insurance Units are Fetching Top Dollar, but Selling Brings Risk, AMERICAN BANKER (Oct. 3, 2023, 9:00 P.M.), https://www.americanbanker.com/news/banks-insurance-units-arefetching-top-dollar-but-selling-brings-risk. 19 NEBRASKA BANKER
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