- Key insight: Community Financial System is deepening its involvement in the insurance business at a time when other banks are exiting the market.
- What’s at stake: The Syracuse, New York-based bank is making a $37.4 million bet on its new partner, Leap Holdings.
- Expert Quote: “If you can find a carrier or an agency who does like one thing really well … that seems like a solid investment to me.”
Bucking a trend in which at least two dozen banks have sold their insurance units over the past three years, Community Financial System in Syracuse, New York, has moved to expand its exposure to the sector.
The $16.7 billion-asset corporate parent of Community Bank announced last week it had paid $37.4 million to acquire an unspecified minority stake in Leap Holdings, a Jersey City, New Jersey-based insurer that focuses on the rental housing market. The investment, which is the bank’s biggest ever, underscores Community Financial’s commitment to the insurance business, President and CEO Dimitar Karaivanov told American Banker.
Insurance “has created tremendous shareholder value for us, so we really love the space,” Karaivanov said. “We’ve been looking actively at various vertically focused strategies and niches in order to increase our presence and exposure to insurance.”
Community Financial’s new partnership with Leap is the result of those inquiries.
While Community Financial’s insurance subsidiary, OneGroup NY, isn’t involved in the rental housing market, the bank holds a substantial multifamily loan portfolio, so it’s familiar with the rental market.
“We were fortunate enough to meet Rory and his team and got introduced to the company,” Karaivanov said, referring to Leap co-Founder and CEO Rory O’Connell. “We kind of really understood well what they’re doing, the tremendous trajectory they’re on.”
“We’re very fortunate to be able to partner with them,” Karaivanov said.
Leap, founded in 2018, has a rent-guarantee service, where the insurer acts as a co-signer for renters, as well as a deposit-replacement function, where it substitutes a monthly payment plan in lieu of a traditional security deposit.
“We spend a lot of time making sure that this is a win-win,” O’Connell told American Banker. “It absolutely helps landlords with their occupancy, and it really especially helps consumers live where they want to live and find appropriate housing.”
Community Financial’s cash will help Leap refresh its capital stack, replacing venture capital investors who provided its original funding. It also spares Leap from having to conduct a costly and time-consuming initial public offering.
“I have no interest in an IPO,” O’Connell said.
Community Financial’s partnership with a niche insurance provider possessing deep experience in a particular field seems like a smart play, said Franklin Manchester, principal global insurance advisor at the Cary, North Carolina-based business analytics and software provider SAS.
“If you can find a carrier or an agency who does … one thing really well … that seems like a solid investment to me,” Manchester told American Banker. “I see that initially as just a good investment that’s going to over the long term return dollars into any organization.”
At the same time, Community Financial’s investment in Leap comes as a wave of other banks have offloaded their in-house insurance brokerages, with many reaping big payouts from buyers flush with venture capital funding.
Some of the most recognizable banks in the country were among the sellers, including the $544 billion-asset, Charlotte, North Carolina-based Truist Financial, the $55 billion-asset Cadence Bancorp and the $25.5 billion-asset Eastern Bankshares in Boston.
The trend has continued into 2025. The $77 billion-asset Old National Bancorp announced last week that it had sold the Bremer Insurance Agencies subsidiary, which it acquired in May after closing its $1.4 billion deal for Bremer Financial, to Arthur J. Gallagher & Co. In a second transaction announced last week, SmartFinancial in Knoxville, Tennessee, sold its insurance unit to Greater Sum Ventures, a Knoxville-based investment firm.
For his part, Karaivanov said Community Financial studied the trend of banks selling their insurance units, but concluded a deal made little sense given the company’s reliance on nonbank financial services businesses to supplement its revenue stream. In addition to banking and insurance, Community Financial is involved in wealth management and employee benefits services. Taken together, its nonbank businesses generated income totaling $74.5 million in the quarter ending June 30, or about 37% of its total revenue.
During the first six months of 2025, OneGroup insurance produced revenue totaling $27.7 million.
“When there’s things that happen, we need to be mindful of them and really understand the reasons,” Karaivanov said. “I would just say that for us, none of those reasons applied because we’re in the business of permanence as a company. Having four legs to our stool is a really important component of permanence versus if we had only one business.”
With premium volumes trending higher, insurance agencies are likely to continue generating stable cash flows, according to Manchester. “Owning an insurance agency is a good investment,” he said.