More Fintechs Could Follow Lead of Buying 'vanilla' Community Bank
Fintech Jiko Group Inc. recently purchased a small community bank in the Midwest. Observers said the tie-up makes sense and could be a harbinger of deals to come.
While some fintechs have opted to partner with banks or establish bank startups, Jiko chose to purchase an existing lender outright, in the process cutting some of the time and expense related to setting up a de novo. As Jiko CEO and co-founder Stephane Lintner told S&P Global Market Intelligence: "A bank comes with processes and supervision already in place. It was a very smooth and incremental path."
The target of Jiko's deal was Mid-Central National Bank, a Minnesota-based bank with about $124 million in assets, the right size for the fintech's ambitions.
Mid-Central came to Jiko's attention in part because one of the fintech's investors and co-founders had owned a stake in the bank for more than 25 years. "So what started as a friendly exploration turned into a mutual decision to merge and lead us to where we are now," Lintner explained.
There can be strategic benefits to buying a bank like Mid-Central, which has a national charter and received an 'Outstanding' rating in its most recent Community Reinvestment Act examination.
The acquisition received approval from the OCC and the Federal Reserve Bank of San Francisco. Jiko's CEO described the regulatory process as "friendly and thorough, therefore, lengthy."
Some observers say the pandemic could make small lenders increasingly amendable to selling. With an acting comptroller at the helm of the OCC who has been vocally encouraging fintech innovation, more firms may follow Jiko's lead in seeking to acquire existing banks and all the infrastructure and regulatory relationships that come with an established company.
Source: S&P Global Market Intelligence