Utah owns industrial banking; has 93.5% of nation's deposits
Most people don’t know what an industrial bank is or what the industrial bank category has to do with Utah. Maybe they should find out.
According to an analysis released last week by the Kem C. Gardner Policy Institute at the University of Utah, our state is nationwide center for industrial banking and Utah benefits substantially from the 110-year history of the industrial banking segment.
The report, commissioned by the Utah Center for Financial Services at the David Eccles School of Business, shows that Utah-headquartered industrial banks held $140.6 billion in assets in 2019, 93.5 percent of all industrial bank holdings in the U.S. and 0.8 percent of the U.S. total for any type of bank insured by the Federal Deposit Insurance Corp. (FDIC).
An industrial bank is a state-chartered institution that is eligible for FDIC coverage but is exempted from the technical definition of a bank for the purposes of the Bank Holding Company Act of 1956. That exemption primarily allows Utah-based industrial banks to be controlled by corporate owners that do not necessarily have to be bank holding companies. This enables non-financial companies to own and operate an industrial bank. Also known as industrial loan companies, industrial banks provide financial services to individuals and organizations, such as making loans and accepting insured deposits.
“Our research shows that Utah’s thriving financial services sector features innovative large-scale banks established under industrial bank charters,” said Levi Pace, senior research economist at the Gardner Institute and lead author of the report. “We’ve seen how being the nationwide center for industrial banking brings career-quality jobs and ongoing community contributions to our state.”
“The Utah Center for Financial Services is pleased to sponsor this study of industrial banks in Utah,” said Allan Landon, assistant dean at the David Eccles School of Business and executive director of the Utah Center for Financial Services. “The report highlights the scope and contribution of industrial banks to innovation and the Utah economy over many years.”
The report found that in 2019, industrial banks in Utah directly and indirectly generated 6,468 in-state jobs paying $443.8 million in earnings to workers who produced $722 million in state GDP, 0.4 percent of the total for all industries. The associated state and local fiscal impacts included $32 million in sales, property and state income tax revenue. Average employee compensation at Utah industrial banks was $105,400, 67.3 percent above the state’s $63,000 average for all industries.
During their most recent 12-month reporting periods, Utah industrial banks funded $1 billion in investments and donations to lower-income communities, largely for affordable housing in Utah and other states. Bank employees gave 6,500 hours of volunteer service.
The industrial sector also spawns commercial banks in Utah. The state is the home to 10 former industrial banks now operating under commercial bank charters. Their successor banks provided 1,332 in-state jobs in 2019. Total economic impacts of former industrial banks included 4,655 jobs and $315 million in employee and self-employment earnings.