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Right on the Money

Utah’s Financial Services Industry is Strong, Stable… And Ready to Lend

By By Heather Stewart

Utah may be a desert—but it’s an oasis of capital for businesses looking to launch, expand and grow. The State’s financial services industry is remarkably diverse and strong, encompassing large national banks, a network of community banks, thriving credit unions and global industrial loan companies.

Bank on It

Utah has a very healthy balance of banks and credit unions, providing a tremendous depth of options for individual depositors and businesses.

“We do have large national banks with branches here,” says Edward Leary, Commissioner of the Utah Department of Financial Institutions. “We also have a large regional bank headquartered here, Zions Bank.” The State is home to 29 state-chartered banks with combined assets of more than $90 billion. National banks account for another $104.5 billion in assets.

“Credit unions have been historically very strong in Utah,” say Leary, who notes that Utah has a high percentage of residents who are members of a credit union. Nearly 90 credit unions do business in Utah—and more than half of them are headquartered here.

Throughout the economic downturn, Utah’s financial institutions have remained stable and strong. “As far as the economy, Utah appears to be bouncing out of the current dilemma quicker than most states,” says Leary. Commercial banks and credit unions are ready and willing to lend to qualified borrowers.

The assets held in Utah’s depository institutions have grown, despite the national economic malaise. From fiscal year 2010 to fiscal year 2011, assets grew by more than 7 percent to $372 billion.

“Utah has become a global financial center,” says Howard Headlee, President of the Utah Bankers Association, who notes that international financial services companies like GE Capital and Goldman Sachs have set up operations in Salt Lake. In fact, Goldman Sachs has its second-largest division in Salt Lake, smaller only than its New York campus.

“Local companies have unprecedented access to capital when they need to expand,” says Headlee. “Utah’s banking environment is one of the strongest in the country. Our banks are well capitalized and well positioned—and eager to lend—coming out of this economic downturn.”

Serving Small Business

Small businesses and startups have tremendous access to capital in Utah. The State is among the top 10 SBA offices in the country for lending, and Utah ranks first for the number of loan approvals in SBA Region VIII. “Our approval rating is almost 70 percent of all submitted applications,” says Lori Chillingworth, Executive Vice President, Small Business Division, for Zions Bank.

In fiscal year 2010, the Utah SBA office guaranteed nearly $279 million in loans.

“All of the banks in Utah are very aggressive in their SBA lending,” says Chillingworth. “We have a lot of SBA experts in the state who understand what the SBA requires.”

Zions Bank works closely with companies to walk them through the loan process and give them the best chance possible to qualify for an SBA loan. “We have a business resource center that helps business owners prepare their business plans and financial projections—whatever they need, at no charge. We try to make sure they have the resources to be successful in obtaining their loan,” explains Chillingworth.

Sometimes even a small infusion of capital can help a small business move to the next level. Micro loans, which are generally $35,000 or less, make it possible for businesses to purchase new equipment or vehicles, add capacity or invest in technology. The Utah Microenterprise Loan Fund has been providing such loans in Utah for two decades. Over the years, the Fund has arranged loan financing for more than 700 companies throughout the State.

Capital of the Industry

Utah is one of only a small handful of states that are chartered to oversee industrial loan companies, also known as industrial banks. And due to a favorable regulatory environment and the support of local lawmakers, Utah’s industrial banking industry is one of the nation’s strongest.

“This is a great place to do business. It’s not because it’s the Wild West of regulations—it’s because the regulators are firm but fair. They’re there to protect the consumer but also the business owner from unreasonable laws,” says Frank Pignanelli, Executive Director of the National Association of Industrial Bankers.

Industrial banks are able to make all kinds of consumer and commercial loans. They can offer FDIC-insured deposits and are subject to FDIC and state regulatory oversight. “There are really strict capital requirements; they have to be very well capitalized,” says Pignanelli.

Some of Utah’s industrial banks are owned by financial companies, but many are owned by non-banking companies like Pitney Bowes and Target. “Usually they have a niche customer base. For example, Interbank provides loans for people to remodel their homes, especially for energy saving activities,” he explains.

Although the majority of the customers for industrial banks are outside of Utah, the banks bring tremendous benefits to the State. They bring high-paying jobs and have imported top banking professionals to Utah.

“The spinoffs are unbelievable. These large companies come here and they like what they see in Utah, and they bring even more enterprises, sometimes related and sometimes unrelated to the bank,” says Pignanelli, who adds, “By having industrial banks in our community, we collect great resources from the Community Reinvestment Act—the federal requirement that financial institutions spend part of their money both in low-interest loans and grants.”

The strict capital requirements for industrial banks have kept them safe and strong throughout the turmoil in the financial industry, he says. “This is a safe and very sound way of banking that is pro-consumer but also gets capital into the marketplace.”

Twenty industrial banks are headquartered in Utah—by far the largest number among any of the seven states that are chartered to have industrial banks—and together they hold more than $101 billion in assets.