Thrivent Federal Credit Union to Merge Into Thrivent Bank

It was a bank before it became a credit union, and now it is going to become a bank, again.

The FDIC last week approved deposit insurance for Thrivent Bank and the merger of Thrivent Federal Credit Union into the newly chartered industrial bank that is based in Salt Lake City.

When announcing its credit union charter in December 2012, Thrivent FCU began life as a credit union again, an identity it has not held since Thrivent Financial Bank was formed out of two credit unions in 2001. Thrivent Financial FCU’s sponsor was Thrivent Financial for Lutherans (TFL) in Minneapolis, a faith-based financial services firm that primarily offers insurance and investment products, which manages more than $113 billion in assets with a net income of $513 million, according to TFL’s audited Dec. 31, 2023, financial statements.

Over the 12 years it has been operating as a federally chartered credit union, the Appleton, Wis.-based financial cooperative has thrived.

When it opened for business in December 2012, it posted $478 million in assets and $341 million in loans. Its assets have increased to $930 million, while its loans have grown to $635 million, according to NCUA financial performance reports for this year’s first quarter.

In December 2012, Thrivent FCU recorded 44,871 members and by the end of this year’s first quarter it posted 52,471 members. The credit union’s multiple common bond field of membership showed its number of potential members was 2,097,151, according to NCUA Call Reports.

Apparently, Thrivent believes it can improve its growth prospects as an industrial bank.

“TFL proposes to establish the bank primarily to broaden its reach within the general population and attract new clients beyond the existing credit union’s restricted field of membership,” according to the FDIC. “The bank will be able to attract customers nationwide without regard to customers’ religious affiliations.”

TFL’s business plan is to leverage the existing products, customers, infrastructure and personnel of the credit union following its merger into the new bank. On its own, however, the credit union does not have the financial or capital support of a parent company to foster growth, according to the FDIC.

The business plan will include a diversified loan portfolio centered on retail loans, funded primarily by retail deposits, reflecting a traditional bank business model. The bank’s products and services will be delivered exclusively online, with no branches or retail banking presence at its Salt Lake City location. In addition to the strength of the credit union, the bank would also leverage certain resources available through TFL’s existing infrastructure, the FDIC said. TFL and its subsidiaries offer nationwide financial and investment advice, trust services, and investment and insurance products.

An industrial bank, which is also known as an industrial loan company (ILC), is a state-chartered financial institution that will be regulated by the state of Utah and the FDIC.

However, the new bank is wholly owned by Thrivent Financial Holdings, which did not seek to qualify for status as a bank holding company. The Bank Holding Company Act provides an exception for companies to own an industrial bank, which enable those companies to avoid the Bank Holding Company Act regulations that apply to other traditional banks, according to the Independent Bankers Association (ICBA) in Washington, which opposes ILCs.

“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,” ICBA said in a prepared statement. “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.”

Last July, ICBA produced a white paper that detailed the trade group’s opposition to ILCs and is backing the “Close the Shadow Banking Loophole Act” introduced at the end of last year by Senate Banking Committee Chair Sherrod Brown (D-Ohio) and Sen. John Kennedy (R-La.). The bill would close the ILC loophole to mitigate risks to the Deposit Insurance Fund, consumers and the economy.

The Federal Deposit Insurance Act requires that any company that owns an insured depository institution must serve as a “source of financial strength” for the depository institution.

“The term ‘source of financial strength’ means the ability of a company that directly or indirectly owns or controls an insured depository institution to provide financial assistance to such insured depository institution in the event of the financial distress of the insured depository institution,” according to the FDIC.

TFL’s history of performance and profitability supports its ability to serve as a source of financial strength for Thrivent Bank, the FDIC said.

In addition to TFL’s assets of $113.5 billion and net income of $513 million posted last year, the FDIC noted that over the past 20 years, TFL’s net income averaged $650 million per year, while capital surplus grew at an 8% compounded annual rate and 9% over the past five years.

According to the FDIC, Thrivent Bank and TFCU have already obtained all necessary approvals and/or non-objections from the NCUA on any necessary and related applications or filings.

Thrivent FCU President/CEO Ron Orrick did not respond to a CU Times request for comment.