Why LendingClub is buying Radius Bank - San Francisco Business Times
San Francisco-based LendingClub said Tuesday that it will buy the parent of Radius Bank, marking the first time a U.S. fintech is acquiring a bank.
LendingClub said the purchase of Boston-based Radius for $185 million will allow the fintech to expand its market, increase and diversify its earnings and provide regularity clarity. The acquisition will also boost LendingClub's resiliency through economic cycles by providing a low-cost source of funds through bank deposits.
"This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems," LendingClub CEO Scott Sanborn said in a statement.
In an interview I had with Sanborn last October, he made it clear that becoming a bank was a high priority.
"We're supporting the cost structure and infrastructure without getting the benefits of running our own bank," Sanborn said in discussing what's involved in serving borrowers on its lending platform. "Imagine a world where we can provide a banking service to deepen our relationship with them.
"It's also another quiver of our funding mix that can drive more net interest income and earnings potential for our company," he said.
At the time, LendingClub was preparing to seek a banking charter, a lengthy process that San Francisco's Varo Money is experiencing firsthand. Apparently LendingClub decided buying a bank was the easier route to accomplish that goal.
Radius, founded in 1987, is an online bank with $1.4 billion in assets. The branchless digital bank offers checking and savings accounts to consumers and small businesses.
LendingClub, facilitated $12.3 billion in loans in 2019 and has worked with more than 3 million members who often turn to the lending platform to consolidate higher-cost credit card loans.
The transaction, expected to close in the next 12 to 15 months, is subject to regulatory approval.
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