Aug. 11--Utah's Advanta Bank Corp., under pressure from federal regulators, is winding down its business.

The Draper-based industrial bank provides credit cards for small-business owners. It quit funding its charge cards in May after its defaults reached 20 percent at the end of the first quarter of this year.

Advanta Bank, a subsidiary of Advanta Corp. of Spring House, Pa., was ordered by the Federal Deposit Insurance Corp. on June 30 to come up with a plan that provides for the "orderly discontinuance of deposit-taking operations and the voluntary termination of deposit insurance after the repayment in full of all deposits."

Although that order left open the possibility that Advanta Bank could, with FDIC approval, eventually begin taking deposits again, it is unclear whether the bank intends to pursue that path.

Advanta officials did not respond to repeated telephone calls seeking comment on its current status or future plans.

But Frank Pignanelli, executive director of the Utah Association of Financial Services, an organization that represents the interests of the state's industrial banks, believes that Advanta Bank will stick around.

"They have been extremely aggressive in the past in fighting to protect the industrial-bank charter here in Utah," Pignanelli said. "And from that perspective, it is hard for me to imagine that they would just walk away."

Industrial banks, also known as industrial loan corporations

or ILCs, are state-chartered but federally insured financial institutions that historically have operated in narrow niches, such as issuing credit cards or offering automobile loans. Utah is home to about half of the nation's ILCs but they account for approximately 80 percent of the industry's assets.

The industrial bank charter, however, has been under attack from some members of Congress and earlier this year saw a new and formidable enemy appear -- President Barack Obama -- who called for their elimination and signaled he wants them all shut down within five years.

Advanta's future will depend on "how bad losses get" as it winds down the credit-card unit, FBR Capital Markets analyst Scott Valentin recently told Bloomberg News. "The question becomes, 'What is the business model here?'" Valentin said. "Management hasn't said what their long-term plans are."

In mid-July, Advanta spokeswoman Amy Holderer declined to discuss Advanta's future strategy but said the company's current focus is to service and collect the (credit-card) balances from its nearly one million customers.

Bankrate.com, which rates the performance of individual banks, assigned Advanta Bank a three-star rating for its financial condition at the end of the first three months of this year. Bankrate has a five-star ranking system.

"Bankrate believes that, as of March 31, 2009, this bank exhibited a generally satisfactory condition," it reported, noting that Advanta had assets of $2.9 billion and deposits of $2.5 billion.

For the first three months of this year, though, Advanta Bank, which at one time employed as many as 300 Utahns, reported a loss of $58.8 million while a year earlier it recorded a first quarter profit of $6.3 million, according to Bankrate.

steve@sltrib.com

Bloomberg News contributed to this story.

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