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Financial Institutions Inc., the parent of Five Star Bank, has agreed to acquire Scott Danahy Naylon Co., an Amherst-based insurance agency.

SDN will operate as a subsidiary of Financial Institutions and as an affiliate of Five Star, according to the bank.

The deal is expected to close in the third quarter. SDN was founded in 1923 and has 30 employees.

“The acquisition of an insurance agency of this quality and magnitude is a strategically important first step to diversify our revenue base by increasing non-interest income,” said Martin K. Birmingham, president and chief executive officer of Five Star Bank, in a statement. “It also provides a scalable platform to support our future growth in insurance sales and meets our internal rate of return standards to add value for our shareholders.”

email: mglynn@buffnews.com