It has been a busy first quarter of 2021 for SoFi. The new year kicked off with the announcement that SoFi will go public via SPAC in a groundbreaking merger that valued the company at $8.65 billion. Today, we learned that the company will be acquiring a small community bank called Golden Pacific Bank based in the Sacramento region. The transaction will cost SoFi $22 million and is expected to close by the end of the year.
Now, we know that last July SoFi applied for a national bank charter with the OCC and that was conditionally approved in October. But according to sources close to SoFi there was a parallel process that has been running this entire time. While the charter application progressed SoFi was also looking for a community bank to acquire. They have found the perfect match in Golden Pacific, a three-branch community bank with $150 million in assets. Now, they are changing their OCC application from a de novo bank to a change of control application.
If the OCC and Federal Reserve approve the merger then Golden Pacific will change their name to SoFi Bank and SoFi will contribute an additional $750 million in capital for its national digital bank. Its entire lending business, which operates with state lending licenses today, will move under the new bank as well as the SoFi Money accounts. The community bank will continue, operating as a division of SoFi Bank, and the leadership will remain in place.
Here is what Anthony Noto, CEO of SoFi said of this acquisition:
We believe that by pursuing a national bank charter, we will be able to help even more people get their money right with enhanced value and more products and services. We are thrilled to have found a partner in Golden Pacific Bank to both accelerate our pursuit to establish a national bank subsidiary, as well as begin to expand our offerings in SoFi’s financial products and Galileo’s technology platform to serve local communities. We look forward to working with Virginia and her team.
The CEO and President of Golden Pacific Bank, Virginia Varela said:
We’re excited for this new partnership with SoFi and the strength it will bring to enhance our ability to serve our customers at the highest level. We will continue our commitment to bringing more services and convenience for our individual customers, small businesses, and the communities that we serve in Sacramento and surrounding counties.
One interesting part of this deal is that it gives SoFi an entry point for their Galileo division to expand to providing their technology platform to community banks. They are already working with fintechs around the world and now they can potentially adapt their platform for community banks.
Is This the Start of a Trend?
SoFi is not the first fintech to acquire a community bank. Jiko acquired a community bank in Minnesota last year and, of course, LendingClub recently acquired Radius Bank although that is a little different in that Radius is a former community bank, they switched to become a digital bank in 2012.
Around 18 months ago I recorded this podcast with the CEO of ProBank Austin, Chris Hargrove, where we spent the entire episode discussing this very topic. Back then Chris predicted we would see a dozen or more transactions where fintechs acquire community banks. We are not quite on that pace yet but I think we could see this accelerate in the next year or so.
Late last year I wrote about the flood of fintechs that want to become banks. Since then more fintechs have announced plans to acquire a banking license so the trend is continuing. Following SoFi’s lead you can be sure that many future banks will be looking at the acquisition route as well as the de novo application. So, stay tuned for more news here.