Nevada State Farm agents start selling banking services

Monday, Aug. 7, 2000 | 3:14 a.m.

Internet interest

The State Farm Bank is located on the Internet at www.statefarm.com.

Leonard Pineda, State Farm Bank superintendent for the company's Sunland Region, which includes Nevada, said by operating on the Internet and not as a traditional brick-and-mortar bank, State Farm can save money and offer better interest rates on savings accounts and on loans.

The bank last week advertised a savings account interest rate of 4%. A money-market account with between $100 and $1,000 on deposit would have an interest rate of 4.73%. Interest rates on certificates of deposit with less than $100,000 on deposit range from 5.98% for a 90-day CD to 7% for a two-year term.

The bank recommends contacting a local State Farm insurance agent for information on loans and their rates.

Nevada's top automobile insurer has trained most of its agents to offer financial services through an Internet bank.

State Farm Insurance Cos. has begun offering in Nevada checking and savings accounts, certificates of deposit, home equity credit lines and mortgage, car and home equity loans through the federally chartered State Farm Federal Savings Bank.

The bank is regulated by the Federal Deposit Insurance Corp. and was chartered through the Office of Thrift Supervision in November 1998 as State Farm Financial Services. The bank opened as a pilot project in central Illinois and in the St. Louis area in May 1999.

Leonard Pineda, State Farm Bank superintendent for the company's Sunland Region, which includes Nevada, Arizona and New Mexico, said the immediate focus of the bank would be serving customers the company insures. But that will change as more people learn about the bank's existence, he said.

By last week, some 72 of the company's 101 Nevada insurance agents had completed training that will help them explain the products the Internet bank offers. By the end of August, about 95 will have completed the two-day training, which was approved by the Office of Thrift Supervision.

"Our primary concern is to help with the retention of our (insurance) customers," Pineda said. "We want to strengthen our relationship with our clients."

But Pineda said customers don't have to be State Farm policy holders to open an account at the bank. Eventually, he said the company hopes to attract insurance customers from among its bank clientele.

Chris Lopez, a State Farm agent at 3812 Meadows Lane, adjacent to the Meadows Mall, said adding the service has been easy because the initial roll-out is targeted at existing customers.

"It's another avenue to build long-standing relationships with our clients," Lopez said. "We're able to promote one-stop shopping with someone they already trust with all their financial affairs, including insurance."

Pineda also said with banks going into the insurance business and insurance companies going into the banking industry, State Farm wanted to offer competitive savings rates that will keep their insurance customers from defecting to banks.

Cash accessibility is as close as the nearest automatic teller machine, but State Farm doesn't operate any of its own machines yet in Nevada.

Because an Internet bank doesn't offer the same ease of accessibility to cash, State Farm says it will rebate up to $1.50 on five ATM surcharges per account per statement period. That means a State Farm Bank customer could access cash at any ATM and the bank would pay up to $1.50 per transaction, for a total of up to $7.50.

Pineda said State Farm's regional offices will have their own ATMs, but the closest regional office to Las Vegas is in Tempe, Ariz. Eventually, ATMs will be offered in State Farm service centers. There are two of those in Las Vegas and one in Reno.

With most of Nevada's State Farm agents just now completing training, there aren't many bank customers in Nevada yet. At the end of June, there were 19 accounts and six loans completed. There are 403,914 State Farm auto, fire, life and health insurance policies currently in effect in Nevada.

Bloomington, Ill.-based State Farm has most of its banking customers in Illinois and Missouri. Nationwide, it has $141 million on deposit as of July 24 and it had made $73 million in consumer loans and $26 million in mortgages.

L. Scott Walshaw, commissioner for the Financial Institutions Division of the Nevada Business and Industry Administration, said he has heard of several insurance companies exploring the possibility of establishing Internet banking, but State Farm is the first he is aware of soliciting Nevada customers.

He said he only has second-hand knowledge, since federally chartered banks like State Farm are not regulated by the state.

"A lot of companies are out there kicking the tires, exploring their options," Walshaw said.

Because new legislation enables insurance companies to offer financial services and banks to operate subsidiaries that sell insurance, Walshaw said companies are looking for ways to protect their own interests.