Thrivent acquires ILC charter, plans to convert credit union

Bloomberg News

After more than three years in limbo, Thrivent Financial for Lutherans in Minneapolis has received an industrial loan company charter from the Federal Deposit Insurance Corporation.

The FDIC's board of directors announced in a Friday press release that it approved both the Fortune 500 nonprofit's application for deposit insurance to create Thrivent Bank, as well as a simultaneous application to merge the company's member-owned Thrivent Federal Credit Union into the bank. 

The industrial bank will be owned by Thrivent Financial Holdings, a subsidiary of TFL, and is required by the conditions of deposit insurance to be launched within 12 months of the decision.

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"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," Martin Gruenberg, chairman of the FDIC, said in statements published Friday. 

Merger plans will provide Thrivent Bank with the existing products, customers, infrastructure and staff of the $931 million-asset TFCU located in Appleton, Wisconsin, to support operations under the current business plan. Business plans also call for a wholly digital approach for offering products and services to clients (regardless of religion), closing all physical branches.

The merger between TFCU and Thrivent Bank will require the approval of the National Credit Union Administration before it can be executed.

Back in 2012, TFL cited regulatory pressures associated with insurance companies that owned banks as the reason behind its decision to convert its wholly owned subsidiary thrift Thrivent Financial Bank into a credit union under the National Credit Union Administration. Credit union to bank conversions are "historically rare events" according to Curt Long, deputy chief economist for America's Credit Unions.

Executives of Thrivent Financial began the application process for an ILC charter in February 2021 to establish the Salt Lake City-based Thrivent Bank in conjunction with both the FDIC and the Utah Department of Financial Institutions. 

"Thrivent Bank will allow us to grow and serve clients with a unique, advice-based approach to banking and cash management that helps clients with their long-term financial goals and well-being," said David Royal, chief financial and investment officer of Thrivent. "We're grateful that Thrivent has received conditional approval from both the [FDIC] and [UDFI] to move forward with forming Thrivent Bank." 

To say the ILC environment has had a rough go of it over the last few years wouldn't be far from the truth.

The March 2020 application approvals of Block, then known as Square Financial Services, and Nelnet Bank broke a 14-year lull by the FDIC, followed by new standards for the parent entities of ILCs set by the agency at a public meeting later that year.

But experts were less than optimistic about the prospects of future approvals following President Biden taking office in 2021.

In a previous story for American Banker, Isaac Boltansky, managing director and director of policy research at BTIG, said regardless of legislation that puts bank holding companies and ILCs on equal footing, the FDIC's current regime will severely hinder charter efforts while Biden is in office.

"Whenever we think about an institution that's attempting to get access to the benefits without compliance with the requirements, there will inherently be questions," Boltanksy said. "It doesn't mean that ILCs don't make sense. It just means that no one's going to get a charter during the Biden administration."

As bipartisan cohorts of senators call for increased fairness in ILC considerations, the likelihood of future charters remains uncertain.