Thrivent Financial for Lutherans received an industrial loan company charter from the Federal Deposit Insurance Corp. on Friday, finalizing its yearslong quest for deposit insurance to create Thrivent Bank.
Along with its ILC approval, the first doled out by the FDIC since its 2020 approval of ILC applicants Block (née Square) and Nelnet, TFL also received approval for the merger of Thrivent Federal Credit Union of Appleton, Wisconsin, into Thrivent Bank, which will be headquartered in Salt Lake City.
TFL intends to move all TFCU’s existing products, customers, infrastructure and personnel with all assets and liabilities to Thrivent Bank, which will be online-only.
“Thrivent's deposit insurance and merger applications, subject to appropriate conditions, appear to demonstrate that the parent companies can meet the source of financial strength requirement for the parent of the proposed bank and satisfy the statutory factors the FDIC is required to consider for deposit insurance applications and merger applications," FDIC Chair Martin Gruenberg said Friday.
A condition of approval, the FDIC said, is that TFL must launch the industrial bank within 12 months. The TFCU merger requires approval of the National Credit Union Administration.
Following approvals of Square and Nelnet, ILCs looked to be an attractive route for other growth-focused nonbanks and fintechs looking to obtain bank licenses of their own.
But multiple ILC applicants, including fintech Brex and wealth firm Edward Jones, have submitted applications only to withdraw them eventually, with Edward Jones chalking it up to “the current environment” and “recent conversations” with the FDIC.
A bipartisan group of senators wrote the regulator in March to consider pending ILC applications.
“ILCs provide critical access to credit opportunities within the regulated banking sector, oftentimes serving customers in areas not traditionally serviced by larger financial institutions,” the senators, led by Mitt Romney, R-UT, wrote.
Romney’s state is the nation’s ILC capital, home to 15 industrial banks.
Bank industry trade groups, though, have pushed back at ILC charter approvals, alleging that the charter opens the door for companies to provide banking services without Federal Reserve oversight. ILCs, according to trade groups, give firms the privileges of a bank charter without the same supervisory requirements.
“[T]he ILC charter allows applicants’ parent companies to own and operate FDIC-insured banks while avoiding the Bank Holding Company Act regulations that apply to other traditional banks. In addition to creating conflicts of interest, the commercial activities of ILC applicants pose risks to the FDIC's Deposit Insurance Fund, the financial system, and consumer privacy,” said Independent Community Bankers of America CEO Rebeca Romero Rainey in a prepared statement Friday.
“Further, with only Utah and a few other states granting ILC charters, this handful of states shouldn’t dictate U.S. banking policy or serve as safe havens for companies that are unwilling to comply with the same set of rules and regulations that otherwise apply to the traditional bank charter,” she said.
Brian Milton, proposed president of Thrivent Bank, said in an emailed statement to Banking Dive that Thrivent “brings a much-needed and distinctive point-of-view to banking — the idea that money is a tool, not a goal.”
“We feel incredibly proud that regulators recognized the uniqueness of our approach and have approved our application,” he said. “Our team is excited to continue the efforts needed to ultimately launch the bank and begin offering genuinely client-centered banking solutions and guidance.”
