Utah's industrial bank sector dominates U.S. — and it's still growing

Need to establish an industrial bank in the U.S.? Utah's certainly the place to do it.

At least that's what an overwhelming majority of corporations that operate these specialized banking institutions have found. Of the 23 operating industrial banks in the U.S., 15 are headquartered in the Beehive State. These 15 banks sport almost 90 percent of the country's industrial bank assets — in excess of $221 billion, according 2025 data from the Federal Register, the official daily journal of the United States federal government.

Utah's dominance in the industrial bank field will only grow. There are currently nine new industrial banks coming down the pike in the state — four of which have received necessary approvals and are preparing to open and five more in the application process. Official opening dates are expected soon from corporate giants like Edward Jones Bank, General Motors Financial Bank and Ford Credit Bank. Among those awaiting approval from the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions are PayPal Bank, rent financing provider Flex and Swedish installment loan behemoth Klarna, whose application was filed in July.

So, what's behind Utah's supremacy in the industrial bank arena? And why the sudden bull rush to establish more?

This story goes back to the early part of the 20th century, when industrial loan corporations (ILC), as they were known then, sprung up as small lenders serving industrial workers who often couldn't qualify for conventional bank loans. These small firms were popular long before they became attractive to the General Motors and Goldman Sachs of the world and Utah had its share.

In 1982, Congress made ILCs eligible for FDIC insurance under the Garn-St. Germain Act (Yeah, that Garn), making it legal for them to accept deposits. Four years later, Utah required all of its ILCs to obtain FDIC insurance but imposed a moratorium on new ILCs. This turned out to be enormously important when Congress rewrote bank-holding-company laws the following year.

In 1987, Congress passed the Competitive Equality Banking Act (CEBA), which, among other things, ended a provision that allowed "nonbank companies" to own ILCs. But Congress carved out an exception for ILCs in states that, as of March 5, 1987, already had laws requiring ILCs to have FDIC insurance. That left Utah among the few states where a corporation not engaged in banking could own its own industrial bank. Without the exception, for example, a car maker that wanted to offer its own financing had to employ a third-party bank to make the loans.

Without the nonbank exemption, to own an industrial bank, entire corporations would have to submit to the same FDIC and state regulatory scrutiny that banks do. Think what that would mean to Utah industrial bank owners like BMW Motors or Switzerland's UBS AG and its 105,000 worldwide employees.

In 1997, Utah lifted its moratorium on new ILC charters, allowed ILCs to use "bank" in their names and greatly expanded their traditional banking abilities. That put ILCs on a much more equal footing with conventional commercial banks. Utah renamed ILCs "industrial banks" in 2004.

Under a Utah industrial bank charter, as an FDIC-insured institution it can accept deposits, make loans, participate in the federal payments system, issue credit and debit cards and offer banking products nationwide. The major difference from commercial banks is a prohibition on industrial banks offering "demand" deposits such as checking accounts.

As Utah became the center of the U.S. industrial-bank industry, the Beehive State was one of several states that benefited from the "nonbank" ownership exemption but seemed to be the only state to grasp the opportunity and take advantage of its federally granted edge.

Other states fell under the CEBA grandfathered exemption. Today, neighboring Nevada has three industrial banks, including the Toyota Financial Savings Bank in Henderson and Harley-Davidson's Eaglemark Savings Bank in Reno. California, which has slightly different laws than Utah, has three such banks but does not allow commercial ownership. Hawaii and Minnesota each have a single industrial bank.

Although the non-bank ownership exemption is a major plus in Utah's industrial bank dominance, it certainly isn't the only factor. Because of its early foray into the arena, Utah has built an infrastructure conducive to success in the field. As the state regulates an overwhelming majority of the nation's industrial bank assets, it calls on the decades of experience supervising such institutions. It has overseen FDIC-insured industrial banking for more than 35 years.

"Utah attracts new banks because of its concentration of banking talent, culture of financial innovation and reputation for firm but fair supervision," said Bryan Farnsworth, supervisor of industrial banks for the Utah Department of Financial Institutions (DFI).

That creates something of a self-reinforcing ecosystem. DFI has experienced examiners and banking professionals working in the sector. This is especially attractive and helpful for the fintechs and specialty-finance companies seeking to establish chartered banks in the state.

And Utah's industrial banks are not lightly regulated. They receive safety-and-soundness, consumer-compliance, Community Reinvestment Act, Anti-Money Laundering Act, cybersecurity and IT examinations, just like other FDIC-insured banks.

"Utah's industrial banks are state-chartered, FDIC-insured institutions subject to the same supervision and examinations as every other bank in the country," said Farnsworth. "Obtaining a new charter and federal deposit insurance involves a rigorous application process with our department and the FDIC. Applicants must meet high regulatory standards to be approved."

So, who owns these local industrial banks and who are the applicants on the way into Utah?

Far and away the largest is UBS Bank USA, owned by wealth management company UBS Group of Zurich, Switzerland. Its Utah banking activities include securities-backed lending, mortgages, deposits and other banking services for its clients. In its late 2025 call report, the detailed financial statement banks file with federal regulators, UBS listed assets in excess of $115 billion.

Sallie Mae Bank uses its Utah operations for private student loans, education finance and other savings and deposit products. Sallie Mae lists assets at about $30 billion. Optum Bank, owned by United Health Group, handles health savings accounts, health-benefit accounts, payment services and related deposits through its local bank, and BMW Bank of North America finances retail auto sales and leasing for its nationwide dealer network.

Four very large, established companies have received approvals and will soon bring their banking operations to Utah. These include automobile makers Ford, GMC and Stellantis, the giant car company formed when French PSA Group and Italian-American Fiat Chrysler merged. Also waiting to open is wealth management leader Edward Jones Bank, which will provide cash-sweep deposits and securities-based loans to its customers.

Financial technology companies lead the group of recent applicants waiting for approvals. They include online payments company PayPal and rent financing provider Flex Bank.

Industrial banks are also good contributors to Utah's employment scene, according to figures compiled by the Gardner Policy Institute at the University of Utah. Its 2025 study found 2,547 people employed at these institutions, with total wages paid over $315 million and an average salary of $123,700.

It's not a new phenomenon but given a regulatory advantage and a long history of success, Utah's industrial-bank sector isn't merely surviving; it is thriving and expanding into a new generation of fintech and platform banking.

— Art to place (from the doc; remove before publishing):

• IndustrialBanksGraphic_Original_JRogers_Sep26_BizJournal.pdf — Utah industrial banks hold almost 90 percent of industrial bank assets in the U.S., boasting 15 of the country's 23 banks chartered in the category. (Salt Lake Business Journal graphic)