FDIC Approves Activities of Newly Formed Industrial Loan Company
Commentary by Thomas Delaney
The FDIC approved a deposit insurance application submitted by Thrivent Financial for Lutherans to create Thrivent Bank ("Bank"), a proposed chartered industrial bank headquartered in Salt Lake City, Utah.
The Bank must become effective within 12 months from the date of the Order. The FDIC also approved a merger application to merge Thrivent Federal Credit Union, Appleton, Wisconsin, into Thrivent Bank, a wholly owned subsidiary of Thrivent Financial Holdings, Inc.
In a statement, FDIC Chair Gruenberg said that "[t]he Bank's products and services would be delivered exclusively online, [having] no branches or retail banking presence in Salt Lake City." Mr. Gruenberg stated the Bank proposed "a diversified loan portfolio centered in retail loans, funded primarily by retail deposits," following a "traditional" bank business model. He said the Bank could "attract customers nationwide [regardless of their] religious affiliations."
Commentary
It is relatively unusual for the FDIC to approve deposit insurance applications for an industrial loan company ("ILC"). Essentially, the approval of the merger transaction results in a Wisconsin credit union converting to an industrial loan company.
This is significant for a couple of reasons. First, the FDIC is generally reluctant to approve deposit insurance applications for ILCs because they are generally viewed as a loophole to parent company regulation under the Bank Holding Company Act. Second, credit unions have become much more aggressive in recent years in acquiring banks, reflecting an alternative to the more standard practice in the market of a credit union buying a bank and merging it into a credit union.
It will be interesting to see if this precedent leads to other similar transactions on the part of acquisitive credit unions who seek both market share and a way around the common bond restrictions that have historically constrained credit union growth.