Industrial loan company

An industrial loan company (ILC) or industrial bank is a financial institution in the United States that lends money, and may be owned by non-financial institutions. They provide niche financial services nationwide. ILCs offer FDIC-insured deposits and are subject to FDIC and state regulator oversight. All "FDIC-insured entities are subject to Sections 23A and 23B of the Federal Reserve Act, which limits bank transactions with affiliates, including the non-bank parent company."[1] ILCs are permitted to have branches in multiple states (which is permitted by many states on a reciprocal basis). They are regulated and supervised by state charters and insured by the Federal Deposit Insurance Corporation. They are authorized to make consumer and commercial loans and accept federally insured deposits. Banks may not accept demand deposits if the bank has total assets greater than $100 million. ILCs are exempted from the Bank Holding Company Act.

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    ILCs assist numerous charities and provide millions of dollars annually in grants, low interest loans, and service through the Community Reinvestment Act (CRA). Currently, only seven states offer an ILC bank charter. Most ILCs have been chartered by the Utah Department of Financial Institutions.[2] Other states permitting ILCs include California, Colorado, Minnesota, Indiana, Hawaii, and Nevada.

    U.S. Industrial BanksTotal Assets as of December 31, 2022 (Figures in USD)[3]
    Balboa Thrift and Loan Association363,166
    Beal Bank USA25,971,989
    BMW Bank of North America11,886,358
    Celtic Bank2,136,835
    Comenity Capital Bank14,890,468
    Community Commerce Bank330,991
    Eaglemark Savings422,101
    Finance Factors, Ltd596,976
    First Electronic Bank191,215
    Hatch Bank 177,865
    LCA Bank Corporation220,200
    Medallion Bank1,954,652
    Merrick Bank5,904,023
    Minnesota First Credit and Savings25,199
    Nelnet Bank 918,716
    Optum Bank, Inc15,675,667
    Pitney Bowes Bank, Inc.789,920
    Sallie Mae Bank28,714,313
    Square Financial Services 463,875
    Toyota Financial Savings Bank6,590,970
    UBS Bank USA120,987,397
    USAA Savings Bank2,287,497
    WebBank1,961,456
    WEX Bank5,302,687
    Transportation Alliance Bank (TAB) 972,204

    Origins of the concept

    In 1910, attorney Arthur J. Morris (1881–1973) opened the Fidelity Savings and Trust Company in Norfolk, Virginia, which made small loans to working people under a concept he called the "Morris Plan". Under this lending approach, would-be borrowers had to submit references from two people of like character and earning-power to prove the borrower's creditworthiness, and agreed to repay the loan through the purchase of Installment Thrift Certificates in weekly installments equal to the face value of the loan, less origination and investigative fees. Morris Plan Banks expanded to more than 100 locations in the United States.

    Morris Plan banks pioneered the use of automotive financing (through arrangements between the Morris Plan Company of America, essentially a holding company for Morris Plan banks, and the Studebaker Corporation), and, through the subsidiary Morris Plan Insurance Society, credit life insurance (which provided for the loan to be repaid in case the borrower died during the term of the loan, with any residue going to the borrower's estate).

    References
    1. "FDIC Law, Regulations, Related Acts - FRB Regulations".
    2. "Industrial Banks | Utah Department of Financial Institutions". dfi.utah.gov.
    3. Federal Financial Institutions Examination Council Central Data Repository's Public Data Distribution, Call Reports
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