The new president of State Farm Bank said 15% to 25% annual growth is a reasonable target for the bank over the next five years even after amassing assets of $13.6 billion in its nine years.
"I think in order to be successful we need to maintain momentum that has developed at State Farm Bank," said Michael J. Smith, who had been the bank's chief financial officer since joining it in 1997. "We have grown substantially in the last four or five years. We need to continue the integration into the core processes of State Farm."
The unit of State Farm Insurance Cos. of Bloomington, Ind., distributes its products solely through its parent company's 17,000 agents.
Stan Ommen, the bank's chief executive, said agents who wanted to offer traditional banking products to their customers were put through a training program. Ninety-six percent of State Farm's agents are trained to sell "consumer retail banking" products, including checking accounts, savings account, money market funds, auto loans, home loans, credit cards, and certificates of deposit, he said.
"We wanted to choose products that match well with different types of insurance products," Mr. Ommen, who is retiring in June, said in an interview Monday. "We knew that auto loans matched with auto insurance and a mortgage matched well with homeowner's insurance.
"When we started, we wanted to focus our marketing on existing policyholders. We have been able to attract people that aren't [policyholders], but policyholders remain our strongest channel for distribution."
Mr. Ommen, 66, was hired by State Farm in 1997 from First of America Bank of Kalamazoo, Mich., to start State Farm Bank. Back then, he said, he had some doubts about using the agents to distribute products.
"To be honest, we didn't how it was going to work, but we were always committed to using the agents for distribution," Mr. Ommen said. "We believed that because of the number of relationships that agents had and their presence in so many communities, we could develop an immediate local presence. We believed it was a model that would work."
Analysts said State Farm Bank has stood out among banks owned by insurance companies. Allstate Financial acquired a branch network in order to grow quickly, and Nationwide Financial Services Inc.'s retail bank, which opened its doors last month, plans to distribute a simple lineup of products online.
Anne Arvia, Nationwide Bank's president, told American Banker in March that she had considered using State Farm's strategy.
"That was my plan when I walked in the door, but we have spent the past four months looking intensely at what our strategy is and what we think are the easiest channels of distribution nationally," Ms. Arvia said. "We think we discovered that using the Internet was a powerful channel and a much easier one to draw customers through."
Mr. Ommen said State Farm is committed to maintaining its distribution strategy.
"Our key strategy … is to further integrate ourselves with our parent and with their agents," he said. "We want to integrate the process of buying an auto loan with the process of buying auto insurance. We want to make all of this a one-step process instead of two."
Mr. Smith, 49, was appointed president in December. He said State Farm Bank will continue to work on new offerings, including small-business lending products that could match up with its parent's small-business insurance lineup.
"It is just important for us to take our lead from the insurance side," he said. "We want to deliver products to policyholders that complement what they are doing on the insurance side."
Mr. Ommen said the bank has succeeded by listening to consumers and agents and by providing products that interest them. Customer demand prompted it to offer credit cards and health savings accounts, Mr. Ommen said.
The bank has been offering credit cards for six years. Through March of this year it had approved 682,530 cards, up 15.7% from a year earlier. Mr. Ommen said the bank is the nation's 19th-largest card issuer.
"We thought that credit card was a saturated market, but we found out it was a market with a lot of opportunities," he said. "Experts told us that we wouldn't be successful. I think our success speaks well of the strong brand that State Farm is and the relationships that agents have with their customers."
The bank rolled out its health savings account in 2005; through March it had 23,406 of the accounts, with $39.59 million of assets.
"We heard from customers that they wanted an HSA, and it was a product that really meshed well with our health insurance plans," Mr. Ommen said. "If we get that kind of demand again, we will launch additional products."
