Mutual of Omaha's foray into banking is still in the formative stage, but the insurer has already made clear it wants its operation to have a higher stand-alone retail profile than those run by rivals.
The insurance giant formed a thrift holding company in January and since May has struck deals to acquire community banks in its home state of Nebraska and Colorado. Ultimately it intends to have branches — featuring amenities like Internet stations and Starbucks coffee stands — in 15 to 20 major U.S. markets.
The distribution model for its Mutual of Omaha Bank is quite different from those of MetLife Inc., State Farm Insurance Cos., and Allstate Life Insurance Co.
Their banks operate just one or two branches near the companies' headquarters. Banking products such as certificates of deposits, mortgages, and car loans are sold mainly online or through their insurance agents. Nationwide Financial Services Inc. opened an affiliate bank in Columbus, Ohio, and is aiming to grow its bank by cross-selling banking products online to its insurance customers.
"Most insurance companies today treat their banks purely as a commodity product," said Jeffrey R. Schmid, the president and chief executive of Mutual of Omaha's banking subsidiary, Omaha Financial Holdings. "We want to build good community banks in our markets, with bankers who have relationships with customers in their local community, while we leverage the very strong brand of our company."
Mutual of Omaha has deals pending for three small banks: the $208 million-asset Peak National Bank of Golden, Colo.; the $122 million-asset Security Federal Savings of Lincoln, Neb.; and the $262 million-asset Midlands Financial Services Inc. of Omaha.
Mr. Schmid said he expects the Office of Thrift Supervision to approve its application for a thrift charter next month and said the deals would close shortly thereafter. The three banks are to be merged into Mutual of Omaha Bank, though Security Federal would retain its name.
Mr. Schmid said the company chose a federal thrift charter because thrifts have fewer restrictions than banks in expanding into multiple states. Though it plans to expand primarily through acquisitions, Mr. Schmid said it would consider branching into markets where it is unable to find acquisition targets at its price. Its goal is to have $1 billion of assets within five years, he said.
Like other insurance companies that own banks, Mutual of Omaha Bank intends to have online operations to cross-sell to insurance customers who may be far from a bank branch.
As part of its strategy to attract new customers, particularly members of Generation X and Y, it plans to remodel or building new branches to include coffee stands in their lobbies, Internet cafes, and patio seating outside, Mr. Schmid said.
"The average insurance customer is an older person," he said, "but we think the bank can be a portal to bring in younger people, who may be just thinking of buying insurance products like life or disability."
Carmen Effron, the president of C.F. Effron Co., a bank and insurance consulting firm in Weston, Conn., said it makes sense for Mutual of Omaha to target the Gen X and Gen Y demographic because of the huge potential to sell both insurance and banking products to them. Making its branches more inviting than the typical bank branch is also a good idea, she said.
Members of Generations X and Y "love having a place to congregate, and if Mutual can give them a meeting place that really feels like a cafe, with insurance and banking on the side, then that's just more palatable to them," Ms. Effron said.
Michael D. White, the president of Michael White Associates LLC, a bank and insurance consulting firm in Radnor, Pa., said the main reason most insurance companies get into the banking business is to attract beneficiaries of life insurance customers who have died and left them hefty death benefit checks.
Instead of taking those checks to another bank, beneficiaries are enticed by insurance agents to keep their money with the insurance companies' banks.
Mutual of Omaha will certainly try to do the same, but its bank will also aim to attract customers that are not necessarily referrals from insurance agents, said Michael J. Homa, who would be president and chief operating officer of Mutual of Omaha Bank.
"We want to be true community bankers, serving individuals as well as businesses, with commercial loans and cash management services, and we want to offer trust services as well," Mr. Homa said. "We want to be that centerpiece for all of those resources."
Another plan is to cross-sell insurance products such as employee benefits packages to commercial customers.
Both Mr. Homa and Mr. Schmid have been longtime community bankers in the Midwest. Most recently, Mr. Schmid was president of the $1.6 billion-asset American National Bank in Omaha, and Mr. Homa was one of the bank's executive vice presidents.
Like any new banking company, it will have its challenges. It can leverage the respected Mutual of Omaha brand — it will show reruns of the "Wild Kingdom" television program in its branches — but still will have to duke it out with established banks in highly competitive markets, Mr. White said.
"They've got a long way to go to exploit that presence to be competitive with everybody that's already in those markets," he said.
