SoFi to buy community bank in $22.3M deal to speed charter

Dive Brief:

SoFi has agreed to pay $22.3 million to buy Golden Pacific Bancorp — a Sacramento, California-based $150 million-asset, three-branch community bank — to accelerate the online lender’s journey toward a national bank charter, the company said Tuesday.
SoFi filed a de novo application with the Office of the Comptroller of the Currency (OCC) in July, and the regulator gave its preliminary approval in October. However, Tuesday’s move allows SoFi to switch to a change-in-bank-control application, which generally has quicker turnaround. When Varo obtained its charter via de novo last summer, for example, the process took three years.
The online lender plans to put $750 million toward SoFi Bank’s nationwide digital banking strategy if regulators give their approval. Golden Pacific and its branches would operate as a community banking division of SoFi Bank, SoFi said. The deal is expected to close by year’s end.

Dive Insight:

SoFi first applied for a charter as an industrial loan company in 2017 but withdrew after co-founder and then-CEO Mike Cagney resigned amid sexual harassment allegations made by two former employees, according to CNBC.

Tuesday’s move follows a plan SoFi announced in January to go public through a merger with a blank-check company backed by venture capital investor Chamath Palihapitiya. The $8.65 billion deal, set to close in the coming weeks, will provide the online lender with up to $2.4 billion in cash.

SoFi expects to file an application with the Federal Reserve for bank holding company status, as well as an updated business plan with the OCC, the company said Tuesday.

Under the new plan, Golden Pacific CEO Virginia Varela would lead SoFi’s community banking division under Paul Mayer, who would serve as SoFi Bank’s president.

"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," Varela said.

SoFi CEO Anthony Noto said he was thrilled to give his company’s product suite and Galileo’s technology platform a broader reach into local communities.

The online lender is hardly the only company to buy a bank to obtain a charter. LendingClub announced its intention to buy Boston-based Radius Bank for that purpose in a $185 million deal in February 2020. California fintech Jiko obtained its charter in September by buying Minnesota-based Mid-Central Federal Savings Bank.

SoFi’s $750 million contribution to its bank well exceeds the $550 million minimum the OCC required in initial paid-in capital last October, American Banker reported.

SoFi, for its part, aims to boost its customer base to 3 million this year, from the 1.7 million it reported in December, The Wall Street Journal said. The company expects its adjusted net revenue from lending to increase 38% this year. It projects its consumer-banking arm’s adjusted net revenue will quadruple, the publication reported, while Galileo’s will double.

Golden Pacific had a $50,000 loss in 2020, according to American Banker, after reporting $333,000 in net income in the previous year.