Dive Brief:

• Financing platform SmartBiz has been granted regulatory approval to acquire United Community Bancshares and its subsidiary, Centrust Bank, both based in Northbrook, Illinois, making SmartBiz the first fintech to become a bank during President Donald Trump’s second term.
• The transaction was approved by the Federal Reserve Bank of Chicago and the Office of the Comptroller of the Currency in February, and closed Friday, SmartBiz CEO Evan Singer said. Centrust’s Northbrook branch will remain, as will the Centrust branding in the Chicago area, operating as a division of SmartBiz Bank, a spokesperson said.
• Singer declined to share the terms of the deal. San Francisco-based SmartBiz has about 100 employees, and the bank has 30; all bank employees will stay on. SmartBiz Bank will be headquartered in Chicago, with offices in San Francisco and Austin, Texas.

Dive Insight:

The acquisition makes SmartBiz “the first OCC fintech approval since 2021 and is the first of many to come in the new regulatory environment,” said Michele Alt, partner and co-founder of financial services advisory and investing firm Klaros Group, who worked with SmartBiz and Centrust on regulatory applications.

Alt has said she anticipates a “reopening of the regulatory gates” toward bank licensing for fintechs and nonbanks, with new leaders atop regulatory agencies. Alt said Monday the industry should expect to see more applications in three waves: first, the re-filing of applications withdrawn during the Biden administration; then, through the second quarter, the filing of applications prepared but not filed during the Biden administration; and finally, through 2026, the filing of applications now being prepared.

SmartBiz’s applications were submitted to the OCC in October 2023, and to the Fed in February 2024, Singer said. 

“We got some very good feedback from the regulators that we incorporated into our final business plan,” including around risk management and governance, he said.

Singer said he wasn’t sure whether the change in administration played a role in receiving regulatory approvals, but said he wouldn’t be surprised to see more fintechs acquire bank charters this year.

The OCC’s approval came with certain conditions. During the bank’s first three years of operation, it must get the regulator’s consent before SmartBiz deviates from its business plan or operations. The bank must adhere to certain loan concentration limits established in its business plan, and maintain minimum capital levels, with a tier 1 leverage ratio of no less than 11% in the first three years.

The OCC said the bank also must receive a $6 million capital infusion from its parent company immediately following the deal’s closure, and get the regulator’s consent prior to any new executive officer or director appointment during the bank’s first two years of operation. SmartBiz also must submit a draft Community Reinvestment Act strategic plan within 90 days of the deal’s closure, and a finalized plan within a year.

“A safe, sound and fair fintech business model has a place in today’s federal banking system,” Acting Comptroller Rodney Hood said in the OCC’s release. “This conditional approval demonstrates the OCC’s commitment to a regulatory framework that supports innovations in banking that expand access to financial services for consumers and communities across the country.”

A Federal Reserve spokesperson declined to comment. 

Singer – who said he’s spent his career building and growing businesses in the tech industry – has been CEO of SmartBiz since 2013. The fintech, which has facilitated some 230,000 small-business loans totaling about $9 billion, started thinking about the bank charter pursuit about three years ago, Singer said. 

Initially, the fintech considered obtaining its own charter, but decided it made more sense to find a bank that could complement SmartBiz’s strengths, he said. 

“We were very deliberate in looking for a bank that had different attributes,” including a lender “already focused on small businesses, that was already doing [Small Business Administration] lending,” and had a suite of products and a strong community presence, Singer said. 

Also important: a bank “that was clean” – not operating under any regulatory consent orders or enforcement actions – and “that had a fantastic management team … that wanted to join forces and stay after the acquisition,” Singer said. 

The fintech looked at “hundreds” of lenders, Singer said. 

“It was hard for us to find the right bank. It took a while,” he said. 

The acquisition puts SmartBiz in a position to better serve small businesses nationally, and the bank is keeping a “laser focus” on serving that client segment, Singer said. Initially, SmartBiz will lend nationally with SBA loans, then also launch small- to midsize business deposit product nationally this year. He classified the SMB segment the bank is serving as businesses generating $500,000 to $5 million annually, which is about 8 million businesses in the U.S.  

He expects the bank will launch additional products over time. In the Chicago area, the single-branch bank isn’t changing the current product line, Singer said. 

With the acquisition, Gerard Buccino, formerly CEO of Centrust Bank, becomes president of SmartBiz Bank. Matt Tilton, who had been the bank’s president and chief lending officer, retains the chief lending officer title at SmartBiz, Singer said. 

“We've spent quite a bit of time to ensure that the teams are well integrated,” Singer said.

“This acquisition will enable Centrust to expand beyond its local presence to serve small businesses nationally, ensuring they can access the financial products and support they need to thrive,” Buccino said in a statement. “Our customers will benefit from streamlined financing, personalized banking solutions, and a broader range of services tailored to their growth objectives.”

Singer said he sees an opportunity to better serve small businesses. The fintech aims to do that by combining SmartBiz’s proprietary software with a loan origination system, which he said bolsters efficiency and compliance, and the customer service focus that Centrust brings, having people that understand small-business needs develop solutions specifically for them.

“It’s this combination of technology and customer service that have to come together in order to really meet the small business’s needs,” he said.

Singer said he expects the bank to hire additional staff this year, without specifying the types of roles or the number of hires. The bank has 10 job openings on its website. 

Fintech chartering activity has been muted in recent years. SoFi in 2021 agreed to pay $22.3 million to buy Sacramento, California-based Golden Pacific Bancorp. Before that, in 2020, LendingClub bought Boston-based Radius Bank in a $185 million deal, and the fintech Jiko bought Wadena, Minnesota-based Mid-Central Federal Savings Bank for an undisclosed sum.