Fintech company BM Technologies Inc. (NYSE: BMTX) and its subsidiary BMTX are no longer acquiring Seattle-based First Sound Bank.
The companies officially called off the acquisition Friday. The acquisition, first announced in November 2021, would have given Radnor, Pennsylvania-based BMTX its own bank charter and eliminated the need to run its back-end banking services through a partner bank, currently Customers Bank. The fintech company said in a new release it signed a letter of intent with a new partner bank and would transfer deposits to that bank in the first half of next year.
"The prolonged regulatory approval process provided us the opportunity to reflect on our broader strategy to maximize the value of BMTX-serviced deposits in the context of an evolving macro environment," Luvleen Sidhu, founder and CEO of BMTX, said in the release. "Interest rates and their outlook are materially higher today than last year when the merger was announced. 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."
The companies said they weren't commenting beyond the information in the release.
BMTX was going to pay about $23 million in cash for First Sound. The deal was supposed to close in the second half of this year, after which the combined company would go as BMTX Bank, with First Sound president and CEO Marty Steele serving as chief operating officer and leading the combined bank's community banking division. The BMTX board has authorized the repurchase of up to $10 million of shares and warrants since the company doesn't need capital for the acquisition or balance sheet growth.
First Sound was founded in 2004. The bank offers both business and personal banking, and works with high-net-worth individuals, small- to medium-sized businesses, not-for-profit organizations, entrepreneurs and professional service firms. First Sound had about $161.4 million in assets as of Sept. 30.
In the release, Steele said the bank knew gaining regulatory approval would be a long process, and the lengthy process "gave us an opportunity to reflect on our broad strategy." The bank's leadership and board decided, according to Steele, that growing the bank was the better decision.
BMTX was known as BankMobile before its merger in January 2021 with a special purpose acquisition company in a move that took the company public. The company works with consumer brands, including T-Mobile, to help them launch branded checking accounts, and it works with universities to help students create accounts for accepting financial aid credits. BMTX also offers credit cards and personal loans.
At the time of the acquisition announcement, Steele said First Sound was attractive to BMTX because of its proximity to T-Mobile.
Multiple fintech companies in recent years have tried to ditch the reliance on a partner bank and gain their own bank charters and Federal Deposit Insurance Corp. insurance. LendingClub in February 2021 acquired Boston-based Radius Bank and gained a bank charter, while digital banking startup Varo Bank in 2020 gained approval from regulators for its own national bank charter, but the process took about three years to complete.
