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Ameriprise Bank's latest balance sheet reflects expansion strategy

Not every U.S. insurance company with a banking presence is reconsidering the scope of the products it offers through that business.

Bank regulatory data collected by S&P Global Market Intelligence shows a dramatic expansion in the balance sheet of what has once again become known as Ameriprise Bank FSB, a subsidiary of Ameriprise Financial Inc.

Total assets at Ameriprise Bank spiked to more than $2.42 billion as of June 30 from just $24.5 million at the end of March. Total deposits surged to nearly $2.21 billion from only a token amount over the same three-month period, reflecting the addition of money market cash sweep balances.

Ameriprise's expanded banking presence is particularly noteworthy in that it was one of a number of institutions engaged primarily in insurance that opted to retrench from the business earlier in the decade. While Ameriprise is formally classified as an asset manager, the combination of the company's protection and annuities segments historically accounted for a majority of its total assets, not including investment advisory assets under management, but smaller proportions of its operating revenues and earnings.

The company received conditional approval from the Office of the Comptroller of the Currency in December 2012 for its plan to change the name, charter and purpose of Ameriprise Bank. What had been a full-service federal savings association converted to a national trust bank engaged solely in trust and fiduciary services as part of a series of transactions intended to facilitate Ameriprise's deregistration as a savings-and-loan holding company.

The likes of Northwestern Mutual Life Insurance Co. and Thrivent Financial for Lutherans opted for similar approaches that maintained their ability to provide trust banking services while permitting them to discontinue their savings-and-loan holding company status.

Nationwide Mutual Insurance Co. more recently engaged in a transition of the sort. The resulting institution, Nationwide Trust Company FSB, dramatically reduced its size and scope, ending June 30 with just $182.3 million in total assets as compared to $6.21 billion for what was then Nationwide Bank on the same date in 2018.

A number of other insurers, including Allstate Corp., MetLife Inc. and Donegal Mutual Insurance Co., opted for divestitures facilitating full exits from banking.

But Ameriprise received approval to once again become a savings-and-loan holding company in connection with its latest banking play.

TIAA's banking approach bears some commonality to Ameriprise's. Long before the company doubled down on banking through the June 2017 acquisition of Everbank Financial, it received regulatory approval to broaden the scope of its banking business to loan-making and deposit-gathering from a sole emphasis on trust services. However, unlike Ameriprise, TIAA-CREF Trust FSB had been formed as a limited-purpose institution.

Ameriprise Chairman and CEO James Cracchiolo during an April conference call said banking represented a "long-term growth opportunity" for the company.

"I feel good about the future contributions it will bring," he said.

Executive Vice President and CFO Walter Berman explained that Ameriprise would transfer at least $2 billion in sweep accounts into the bank in support of its relaunch during the second quarter, followed by a transfer of its credit card accounts, now expected to occur in the third or fourth quarter of 2019. The company also plans to introduce new deposit-based products and mortgages. The latter product is especially notable in that State Farm Mutual Automobile Insurance Co. recently announced that its agents would offer mortgages originated by the Rocket Mortgage business of Quicken Loans Inc. as opposed to State Farm Bank FSB.

Berman in April said the bank would be "accretive from an earnings standpoint" for 2019. Two months later, Berman said he expected the bank to be a "slight positive for the year" from an earnings standpoint as it prepares to ramp up in 2020. The bank only generated two weeks of earnings from the sweep account transfer in the second quarter, he said.

"It's interesting because this is our second launch, so we've had experience in doing it," Cracchiolo said during the July call, adding that he thinks that the process is moving "quite well."

Ameriprise Bank was established subsequent to its parent company's 2005 separation from American Express Co. The bank acquired insured deposits and certain assets of American Express Bank FSB in connection with its 2006 launch.