A Houston-based firm with a vision of linking traditional banking with digital assets on a common platform is acquiring a Chicago community bank.
LevelField Financial, co-founded in 2018 by Gene Grant — a Canadian-born investment banker and tech entrepreneur — and financial technology consultant Stephen Helmholz said announced the deal for Burling Bank on Wednesday.
Founded in 1989, the $197 million-asset Burling has developed a niche serving Chicago's trading community. The bank would continue to serve its existing clientele after the merger's completion, which is expected in the second half of this year.
The merged institution will retain the Burling Bank name but do business outside Chicago using the LevelField brand, and will market itself to customers with an interest in digital assets, according to Grant, LevelField's chairman and CEO. Burling plans to expand both business lines — traditional banking and digital assets — nationally, though no more than 50% of total assets will be connected to the digital asset size, Grant said in an interview Wednesday.
The merged Burling Bank would focus on retail digital-asset holders seeking to monetize their assets, rather than fintechs and other institutional clients. "We like the risk profile better when it's more distributed," Grant said.
While loan sizes would be based on borrowers' digital holdings, with low loan-to-value ratios the rule, Burling's digital-asset loans won't be underwritten solely on collateral.
"We need to make sure customers can support the loans based on their good credit," Grant said. "We use the collateral as a way to … reduce the risk associated with the loan. That allows us to lower the risk profile so we can charge more attractive rates. At no point will we have an uncollateralized [digital asset] loan."
LevelField looked at a total of eight banks before agreeing to terms with Burling, according to Grant. Financial terms were not disclosed.
"Texas was our ideal state, but we looked at banks in a number of states," Grant said. "The great thing about Burling … is they put customers first, so right from the start we got off on a good foot because we think the same way."
Grant will stay on as the merged company's CEO. Burling's senior management team will remain with the bank to serve Burling's existing customer base and help expand its traditional banking operation.
"LevelField's strategic approach presented a tremendous opportunity for the bank to expand beyond our local footprint and serve customers with shared interests across the nation," Michael Busch, Burling Bank's president and CEO, said in a press release.
LevelField currently offers trading and custody services to digital asset holders. In September, it announced plans to market a turnkey service to banks that would enable them to offer trading, custody and other digital services to their customers. Now, in light of the deal with Burling, LevelField expects to suspend its white-label efforts until the acquisition closes. "Then we'll provide it as a bank-to-bank service," Grant said.
LevelField's deal for Burling comes as the digital-asset sector has been roiled by a number of high-profile bankruptcies, most prominently that of FTX. Banks with crypto links, including the $1.6 billion-asset
With those compliance concerns in mind, Burling plans to take a conservative approach to involvement with digital assets after the merger, Grant said.
"We've taken everything out of the business plan" that might give regulators pause, Grant said. "There is nothing novel. There is nothing particularly interesting. We've read everything that's been published on digital assets to make sure we fit within the box. We have no interest, today or at any point in time, taking any principal positions. We are [strictly] customer facilitation."
Grant said he had no involvement with digital assets before co-founding LevelField in 2018, adding he resisted entreaties from Helmholz, as well as his own son, Gene Grant III. The elder Grant changed his mind after concluding a digital-asset company with strong compliance credentials would be well positioned.
"I was shocked by the sheer amount of money in space, and I was absolutely horrified by whose hands it was flowing through," Grant said.
