Nationwide Financial Services Inc. is looking to make a big splash into retail banking by buying the credit union that serves its employees.
The Columbus, Ohio, insurance giant announced Friday that its Nationwide Bank - which just recently gained retail banking powers - has a deal to acquire the $523 million-asset Nationwide Federal Credit Union for $79 million in cash.
John Skubik, the president and chief executive officer of the $112 million-asset Nationwide Bank, said the deal for the credit union, which has 40,000 retail customers and a full range of deposit and loan products, "gives us a running start" into the retail banking market.
The bank, which Nationwide established in 1998, had only trust powers until April, when the Office of Thrift Supervision approved its application to offer retail products.
The deal, though unusual, would not be the first in which a bank unit of an insurance company merges with an affiliated credit union. Thrivent Financial Bank, a Wisconsin unit of Thrivent Life Insurance Co. in Minneapolis, acquired two affiliated credit unions in 2001.
Both Nationwide Federal Credit Union and Nationwide Bank are based in Columbus.
The credit union was formed in 1951 to serve Nationwide employees, their families, and retirees, and the bank has said that it would also target employees.
Paula A. Edwards, the credit union's CEO, said that merging with the bank would make sense, because otherwise, the bank and credit union could wind up competing for the same customers.
The deal must be approved by the OTS, the National Credit Union Administration, and the credit union's members.
Alan D. Theriault, the president of CU Financial Services, a Portland. Maine, credit union consulting firm, said he does not expect members to oppose the deal - as some people have when their credit unions have tried to convert to banks. In April the $1.8 billion-asset DFCU Financial Federal Credit Union in Dearborn, Mich., gave up its attempt to convert after fierce opposition from members.
"I think the members will support something like this, because they won't see any change of services and because they work for the acquiring firm," Mr. Theriault said.
He also said that he would expect other large insurers to keep a close eye on the Nationwide deal. He noted that the NCUA gave State Farm Mutual Automobile Insurance Co. of Bloomington, Ill., permission this month to combine the 12 credit unions it sponsors into a $3 billion-asset one. State Farm also owns a $12 billion-asset thrift.
"I wouldn't be surprised to see other companies like State Farm would have similar transactions on their radar," he said.
Mr. Skubik said, Nationwide Bank would try to cross-sell to the insurance company's customers. He wants to open accounts for people who receive payouts from Nationwide life insurance policies, for example.
"As soon as that payout is received, it can be earning interest," he said.
To reach customers throughout the country, Nationwide Bank is planning to join an automated teller machine network and set up an online bank and a call center.
The credit union's two branches would remain open, but Mr. Skubik said the bank is not planning any more branches in the immediate future.
Members of the credit union would receive a portion of the price. The portion would be based on their account balance as of March 31. For example, a member with $1,000 in an account would receive $150, according to the credit union.
The sale is expected to close in the fourth quarter.
