BM Technologies acquiring Seattle bank for $23 million

BM Technologies, the former unit of Customers Bancorp known for disbursing financial aid to college students, is buying a Seattle bank in a bid to diversify and build a national lending platform.

Radnor, Pennsylvania-based BM Technologies, a financial technology firm that went public earlier this year, announced Monday that it would pay $23 million to acquire the $154 million-asset First Sound Bank in a deal expected to close in the second half of 2022.

The combined company will be named BMTX Bank. Luvleen Sidhu, BM Technologies' chief executive, will become chair and CEO of BMTX. She said in a press release that First Sound would complement the company’s existing fee-based business lines with credit products that generate interest income.

“This merger is expected to meaningfully expand our already profitable, technology focused business model and will enhance our diversified earnings, as we bring BMTX-serviced deposits onto our balance sheet” and deploy them “into loans over time,” Sidhu said.

“Looking ahead, BMTX Bank expects to add direct-to-consumer and small-business operations, marketplace lending, robo-advisory and blockchain-based payment systems,” Sidhu added.

It was one of two deals announced Monday involving a fintech merging with a banking company.

The $952 million-asset Patriot National Bancorp in Stamford, Connecticut, agreed to acquire American Challenger Development Corp. through a $119 million reverse subsidiary merger, with American Challenger to survive as a wholly owned subsidiary of Patriot National.

BM Technologies was formed after BankMobile was spun off from the $19.1 billion-asset Customers and then became part of a special-purpose acquisition company called Megalith Financial Acquisition Corp. On Jan. 6, BankMobile went public through a merger with Megalith and formed BM Technologies, which trades on the New York Stock Exchange.

Jay Sidhu, Luvleen Sidhu’s father, is the chairman, CEO and founder of Customers Bancorp, of Wyomissing, Pennsylvania. Sam Sidhu, Luvleen Sidhu’s brother, became president and CEO of Customers’ bank unit on July 1.

Despite the spinoff, BM Technologies maintains a strong link to Customers Bank. Through its banking-as-a-service platform, BM Technologies provides the technology for the T-Mobile Money checking account, which is supported by Customers Bank.

BM Technologies also provides bank products through employers to their staffs and its student loan operation disburses financial aid credit balances on behalf of university administrations to students.

First Sound Bank is an independent community bank with one branch, in downtown Seattle. It provides commercial and private banking services to small businesses and midsized companies in the Puget Sound region.

Luvleen Sidhu said the combined company would continue to operate the bank locally while also delivering digital products and services nationally.

The deal “is a major step forward in executing our vision to create a disruptive fintech bank that combines the best of financial technology with a strong and compliant FDIC-insured institution,” she said.

BM Technologies did not disclose additional financial details in the release, but Sidhu said the acquisition would be “significantly” accretive to earnings within one to three years.

First Sound Bank President and CEO Marty Steele is expected to become the combined company’s chief operating officer and lead its community banking division in Seattle.