Five Star Bank's parent company reported a 32 percent decrease in its fourth-quarter profits, partly due to struggles at its SDN insurance subsidiary.
Financial Institutions, based in Warsaw, reported profits of $7.5 million, down from $11.1 million the year before. The bank recorded a $2.4 million non-cash goodwill impairment charge related to SDN, which it acquired in 2014.
The charge was driven by two factors, said Martin K. Birmingham, the bank's president and CEO. Market multiples for insurance agencies decreased on a year-over-year basis, he said. And SDN lost its only carrier for a specialty line of business and was unable to find a replacement.
"We acknowledge that the process of converting SDN into a bank-owned agency has been challenging," Birmingham said. "As disappointing as this quarter's impairment charge is, we are seeing good momentum in core insurance revenue growth from bank customers."
For all of 2018, Financial Institutions reported record-high profits of $39.5 million.