Dive Brief:
- BM Technologies’ $23 million acquisition of a Seattle-based community business bank has been called off, the two firms announced in separate statements last month.
- The banking-as-a-service (BaaS) provider filed an application to acquire the $150 million-asset First Sound Bank in March.
- The deal, which the two companies initially estimated would close in the second half of 2022, would have created an institution, called BMTX Bank, with more than $2 billion in assets.
Dive Insight:
BM Technologies, which was spun out of Customers Bank in 2021, had touted the deal as a strategic move that would enable the fintech to combine its financial technology and proprietary BaaS expertise with a bank charter.
“This move enables us to become a fintech bank that can support other fintechs to come to market, similar to what Cross River, WebBank, MetaBank and a few other players are doing today,” Luvleen Sidhu, BM Technologies’ chair, CEO and founder, said at the time.
But a sign that the deal was up against regulatory hurdles first emerged in November, when BM Technologies announced the merger had been pushed to 2023, following a decision to resubmit its application to answer regulators’ questions regarding the tie-up.
Both parties said the delay provided additional time to reflect on their respective broader strategies.
“Interest rates and their outlook are materially higher today than last year when the merger was announced,” Sidhu said in a statement last month. “In this environment, we believe BMTX is better situated as a FinTech with a sponsor bank without the capital needs and credit risk that an on-balance sheet strategy would entail. We believe this is in the best long-term interest of our shareholders.”
BM Technologies is in the process of finalizing a new sponsor bank agreement, which will provide the firm with “variable pricing and improved economics,” Sidhu added.
“We are continuing with our strategy of combining the best of banking with the best of technology to attract, engage and retain bank customers with a low-cost acquisition model,” Sidhu said in a statement to Banking Dive. “We will continue to do this by working with brands and leveraging their customer bases and working with universities to provide the best banking experiences for their students. We will do all this with a strong focus towards compliance and risk management.”
Seattle Bank CEO Marty Steele said he was aware from the start that “trying to merge a regulated bank with a fintech company” would likely result in a lengthy approval process.
“As it turned out, the regulatory approval process was in fact prolonged, which gave us an opportunity to reflect on our broad strategy of maximizing the value of the bank to all of our stakeholders — our shareholders, customers, employees, business partners and regulators," Steele said in a statement. "Our board and senior management team now believe that continuing to grow the bank and continuing to increase its profitability is our best course of action."
