Dive Brief:

• Rocky Mount, North Carolina-based First Carolina Bank has agreed to buy digital banking platform BM Technologies in an all-cash transaction valued at roughly $67 million, the companies announced Friday.
• Following the transaction, BM Technologies will become a wholly-owned subsidiary of First Carolina Bank. But it will continue to operate under the BM Technologies name and be led by its current president and chief technology officer, Jamie Donahue.
• The transaction, approved by both boards, is expected to close in the first quarter of 2025, BM Technologies said.

Dive Insight:

First Carolina Bank replaced Customers Bank as BM Technologies’ bank partner last December. The bank supports the fintech’s product, which is focused on college students and called the BankMobile Vibe Account. 

That service primarily provides students with bank accounts and debit cards that allow them to receive money directly from their college or university related to refunds from financial aid awards, grants, scholarships, paychecks, and other payments.

The initial partnership with First Carolina Bank was slated to last five years starting Dec. 1 and included 286,484 active accounts, totaling over $431 million in Federal Deposit Insurance Corp.-insured deposits. BM Technologies, formerly known as BankMobile, was spun out of Customers Bank in 2021.

Under the purchase agreement, BM Technologies stockholders will receive $5 per share in cash, representing a 55% premium to the trading price per share of BM Technologies common stock as of Thursday and a 90% premium to market as of Aug. 14, the day before the fintech revealed it had received inbound interest. 

The North Carolina state-chartered lender has a brick-and-mortar footprint that spans Virginia, North and South Carolina and Georgia. 

The deal will give the $3.1 billion-asset bank a deposit-gathering opportunity across the country and expand banking relationships with educational institutions and their students, First Carolina Bank CEO Ron Day said.

“We believe this is a game-changing combination,” Day said.

Discussions with BM Technologies began in 2022, and First Carolina Bank was attracted to the company’s market position and its technology stack, Day said in a statement.

Donahue will report to Pat Pritchard, First Carolina’s chief information officer, Day said.

“Both will lead the integration of the new line of business into the core activities of the Bank and the plan to grow the platform over time,” Day said in a statement.

Luvleen Sidhu, founder, chair and CEO of BM Technologies, said the transaction “delivers a significant premium” to the firm’s stockholders and also “brings enhanced banking services and technology” to all current customers of BM Technologies and First Carolina Bank.

“After closing, I look forward to supporting Jamie and the FCB team in integrating BMTX successfully and supporting their future growth plans while exploring new opportunities for the next phase of my career,” Sidhu said.

The acquisition announcement has drawn criticism from law firms Ademi and Halper Sadeh, which said they are investigating whether BM Technologies and its board violated federal securities laws or breached their fiduciary duties to shareholders by failing to obtain the best possible consideration.

In December 2022, BM Technologies called off its $23 million acquisition of Seattle-based First Sound Bank, as regulatory hurdles delayed the merger timeline. The deal was touted as a strategic move by BM Technologies to combine its financial technology and proprietary banking-as-a-service expertise with a bank charter. 

BM Technologies reported a loss of $4.8 million in the second quarter of this year and a loss of $4.1 million for the first six months.

For the second quarter, the fintech also reported its banking-as-a-service average serviced deposits were $261 million and ending serviced deposits were $250 million. Debit card spending declined 6% year-over-year, and average deposits dropped 47%, according to the earnings report.

BM Technologies noted that its BaaS partnership agreement expires in February 2025. 

“In the current regulatory and interest rate environment, this business is unprofitable for us. In the event of a wind-down, we expect our pro-forma core [earnings before interest, taxes, depreciation, and amortization] to increase at least $1 million per quarter on a run-rate basis,” BM Technologies said in August.