For my June column for the magazine "Islamic Finance News" I decided to continue the US theme by looking at another American bank, Devon Bank.
This is a conventional bank which also offers Shariah compliant financial services, which is the meaning of the Islamic finance term "Islamic window." You can read it below.
Last month I wrote about University Islamic Financial, (legal name UIF Corporation) which offers Shariah compliant banking services in the USA, albeit as an agent of its parent company University Bank, since UIF Corporation appears not to have its own banking license. My key point was the small size of UIF Corporation.
Subsequently someone suggested that I look at Devon Bank, based in Chicago, which is another well known US Islamic bank.
As with UIF Corporation, finding publicly available financial data for Devon Bank of the same quality that one takes for granted in the UK proved to be impossible. (If my searching has been inadequate and any reader can find it, please could they send it to me!) In particular, Devon Bank’s website publishes no financials as far as I can see, and its parent company Devon Bancorp, Inc. appears not to have a website.
However, I did find relatively detailed financial information presented in a standardised manner on the website www.ibanknet.com but without the narrative reporting that normally accompanies financial accounts. Devon Bank’s 2020 Impact Report also contains an informative history.
Founded as Devon North Town State Bank in 1945, the bank was closed by regulators in 1953! The banking charter was bought by an investor group, with someone called Mason Loundy as CEO. Over time, the Loundy family acquired control. While I never assume what religion anyone practices, the pattern of given names in the Loundy family gives no reason to think that they are Muslims, and their religion is not mentioned in the sources I have seen.
Faith Based Banking is a major section on Devon Bank’s website, explaining that it has offered Islamic home financing since 2003. Its products were reviewed by the Honorable Mufti Muhammad Nawal-ur-Rahman and the Shariah Supervisory Board of America which is based in Chicago. However the bank does not appear to have its own Shariah Supervisory Board.
Devon Bank does not disclose how much of its business is Islamic. I did find an ABC News article, undated but I deduce from about 2010, indicating that 75% of Devon Bank’s home mortgages were Shariah compliant. The bank itself is clearly a conventional bank, as it holds large amounts of interest paying US government bonds. Its Islamic operations therefore constitute an Islamic window.
Like UIF Corporation, Devon Bank is relatively small. At 31 December 2022 its total equity was only US$ 30.6 million, making it much smaller than any of the UK’s Islamic banks. Its total loans and leases were US$ 228.9 million. Since these include both Islamic financings and conventional lending, the Islamic figure will be less than US$ 228.9 million but I have no data.
During the calendar year 2022, Devon Bank’s aggregate net income was US$ 8.1 million. As the average of the opening and closing equity for the year was US$ 30.4 million, this represents a return on equity of 26.6%.
That is an outstanding result.
I think the message is that a small, well run, local bank can be very profitable. It may also indicate that its Muslim customers, though few in absolute numbers, are willing to pay over the odds for Shariah compliant financial services because Shariah compliance is so important to them.
Mohammed Amin is an Islamic finance consultant and former tax partner at PwC in the UK.