Commercial Federal Corp. of Omaha is yet another thrift company trying to add commercial lending to its business mix.

In an interview with American Banker, president and chief operating officer Robert Hutchinson said he hopes commercial banking will form part of a "three-legged stool" for the company, complementing mortgage and retail banking.

Commercial Federal has struggled to shore up profits this year, and has even come under pressure from investors to put itself on the block.

But the $13 billion-asset company says that is not going to happen. Instead it will follow the commercial banking lead of such other thrift companies as North Fork Bancorp Inc. of Melville, N.Y., and New York's Dime Bancorp Inc. (which is now being acquired by Washington Mutual Inc., the nation's biggest thrift company).

"We want to diversify," Mr. Hutchinson said.

The 53-year-old executive, who came to Commercial Federal in May after serving as senior vice president of retail banking at Michigan National Corp., said he also wants to enhance current strengths. Commercial Federal is in the middle of a restructuring that includes an effort to sell unprofitable branches.

It is already involved in commercial real estate; Mr. Hutchinson said he wants to capitalize on its success in that area to expand into commercial lending.

"We want to take advantage of our status as a community bank," he said. "We are small and can run in between the feet of the big guys. We can be more sensitive to our clients' needs."

Mr. Hutchinson, a banker for 28 years, left Michigan National shortly before Standard Federal Bank, a subsidiary of ABN Amro Holding NV, announced a $2.75 billion deal to buy it. The Dutch company said it would close 29 branches and consolidate 30 others.

During his seven years at the Michigan National, Mr. Hutchinson was president for small-business banking and managed its residential mortgage unit. As senior vice president of retail financial services he managed the Farmington Hills company's sales teams and its 184 branches.

Before joining Michigan National he had managed 100 branches for Chemical Bank of New York, now Chase Manhattan Bank.

Paul Miller, an analyst at Friedman Billings Ramsey & Co., said Mr. Hutchinson will need his experience with the sales teams at Michigan National to strengthen commercial banking at Commercial Federal. He will need to change the sales philosophy throughout the Omaha company, Mr. Miller said.

"Clearly, Commercial Federal wants to be a commercial bank," Mr. Miller said, but "it is going to take some time for the people in the branches to think that way. … Thrifts' sales forces are not really taught to sell.

"The issue is, can you change philosophy in an organization from the top to bottom? They will have a challenge either training current branch personnel to cross-sell or bringing in new people."

Mr. Miller, who rates Commercial Federal stock as "market perform," said the company could be ripe for a sale in three to five years.

To build the commercial lending unit, Mr. Hutchinson is searching for bankers who have experience in traditional commercial lending in Commercial's key markets of Denver, Des Moines, and Omaha. (The bank operates in six midwestern states plus Colorado.) He said he expects the commercial lending effort to produce "a real impact" on its bottom line next year.

Commercial Federal's first-quarter earnings fell 16% from a year earlier, to $22.2 million, after a $47.7 million loss in the fourth quarter. Nonetheless, Mr. Hutchinson said he is confident he can meet analysts' full-year earnings consensus of $1.75 per share.

The company consolidated 12 Commercial Federal Bank branches last quarter. It has offered 37 branches for sale, and expects to close deals for 22 of them this quarter as part of "a very intensive process" of turning itself around, Mr. Hutchinson said.

Commercial Federal says it put the branches on the block after investors began to apply pressure to sell the entire company. It is also shedding assets from its mortgage and leasing operations and has reconfigured its senior management by hiring outside executives, like Mr. Hutchinson.

Since the start of the year Commercial Federal's stock is up 19%. It closed Monday at $22.95. "We continue to believe in the growth potential of the franchise," he said.


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