State Farm Bank is Growing Fast

In 1999 State Farm Insurance Company set up a bank subsidiary to begin cross-selling auto loans, credit cards, CDs and mortgage loans to its huge customer base. The original business plan called for operations in three states at the end of three years. Instead, the bank has established operations in 48 states in just two and a half years, and has $1.8 billion in assets. At current growth rates, the thrift should have $3 billion by the end of 2002.

State Farm Bank is headquartered in Bloomington, Illinois (also headquarters of the parent company). It uses the insurance company's nationwide network of 14,000 agents to cross-sell financial services. Not surprisingly, the top product on the asset side of the business is the automobile loan. Agents had been referring auto insurance customers who needed loans to partner banks for years, so the switch of referrals to the State Farm Bank was easy. On the deposit side of the business, Certificates of Deposit are the dominant product. Stanley Ommen, president of State Farm Bank, told the American Banker, "Its easier for a bank customer to move a CD from one bank to another than it is to move their primary transaction account." Consequently, the CDs and money market accounts are the introductory product for many of the thrift's customers.

Carmen Effron, president of the consulting firm C.F. Effron and Co, (Westport, CT) told the American Banker that the distinctions between different kinds of financial services companies are fading and this will help State Farm reach out to customers with its new products. "Nobody's a bloody bank anymore, nor do they call themselves a bank anymore." What kind of company is selling products is becoming less important. "The services, the products, the pricing, that's what is going to make the difference." She added that, although some people today might balk at banking with an insurance agent, "10 years from now they're not going to know the difference."