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GreatAmerica prepared for lengthy industrial bank application process


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GreatAmerica prepared for lengthy industrial bank application process

GreatAmerica Financial Services Corp. is the latest to seek the elusive industrial loan company charter, and organizers are prepared for a lengthy process.

The company hopes to establish GreatAmerica Bank to finance small-ticketed equipment for commercial entities or customers nationwide, organizers said in an interview. The Cedar Rapids, Iowa-based GreatAmerica has been operating as a nonbank commercial equipment finance lender under a California license. The group filed for an industrial loan company charter with the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions.

The group describes this move as "a long-term strategy" that it has been considering for years. "It's really an extension or expansion of our current business," Jared Hanlin, senior vice president of relationship risk management at GreatAmerica and a proposed board member for GreatAmerica Bank, said in an interview.

GreatAmerica considered other options to obtain a bank charter, but Hanlin said an ILC charter was the correct route. Forming its own industrial bank rather than partnering with an existing bank will allow GreatAmerica to maintain its independence and will provide synergies for the company, Hanlin said.

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There are five ILC applications currently pending with the FDIC. The regulator has not approved an industrial bank charter in more than a decade. GreatAmerica is now the sixth pending industrial bank charter and Hanlin said the company is prepared for a long application process.

"We are prepared for a longer application process because really we are not in control at this point of the application process," he said. Joe Terfler, executive vice president and CFO of GreatAmerica, noted that the bank plans to be operating within 12 months of receiving the necessary approvals.

The companies currently awaiting approval could get some clarity about the process on March 17 when the FDIC is scheduled to discuss a proposal related to ILC parent companies. Hanlin said his company will be watching closely, but ultimately, does not think the notice of proposed rulemaking will impact its ability to move forward with the application process.

"We feel GreatAmerica as an organization is well-positioned to be a great source of strength to the bank regardless of what that notice is," Hanlin said.

Currently, only seven states allow industrial bank charters. Most industrial banks are headquartered in Utah. Hanlin said GreatAmerica chose Utah because of the robust industrial bank market already in the state and the state regulators' familiarity with industrial bank business plans.

"There is a big regulatory advantage to being involved in a system that has a lot of people that do similar things that you do," Hanlin said.

GreatAmerica has received advice about best practices during the application process from other Utah-based industrial banks.

"That is a pretty tight group out in Utah around the industrial bank charters," he said. "They have been very willing to share their experiences."