LendingClub to Acquire Radius Bank for $185 Million
As various FinTech disruptors have grown over the years, some observers have theorized that banks would look to acquire these startups in order to integrate their services into their own (which has happened in some cases). However fewer would have guessed that things might end up the other way around — yet that seems to be what’s at play for LendingClub. This week the marketplace lender announced that it was acquiring Radius Bancorp including Radius Bank.
Radius Bank was founded in 1987 and has operated as an online-only bank, holding no physical branches. Incidentally, Bankrate recently named them the Best Online Bank for 2020, putting them ahead of other popular options such as Ally, Discover, and more. According to LendingClub, with the acquisition, the company will become “the first digitally native bank able to generate both loans and deposits at scale.” They note that this ability will not only allow users to borrow for less but also earn more interest on savings.
For their acquisition of Radius, LendingClub will be paying $185 million — 75% in cash and 25% in stock. Currently the company believes the deal will close within 12 to 15 months. In order to prevent any regulatory delays from impacting that timeline, LendingClub’s board has approved what it’s calling the Temporary Bank Charter Protection Agreement. This agreement will provide dilution for those with stock positions above the threshold outlined by the Federal Reserve.
In a press release announcing the acquisition, LendingClub CEO Scott Sanborn remarked, “This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems and where the success of LendingClub is aligned with the success of our customers.” He added, “By combining with Radius, we will create a category-defining experience for our members that will dramatically enhance the resilience and earnings trajectory of our business.” Meanwhile Radius’ president and CEO Mike Butler said of the deal, “LendingClub has always been a FinTech innovator, and I look forward to leveraging the strengths of both of our talented teams as we usher in a new era in banking. We are excited for our employees to operate our virtual banking platform with more resources and for our clients to gain access to an industry-leading lending product. This is a perfect marriage, with LendingClub bringing the leading digital asset generation platform, and Radius contributing a leading online deposit gathering platform, to position the combined company for long-term success.”
Since going public in 2014, LendingClub has endured some hard times. Not only did they withstand scandal that arose when founder and former CEO Renaud Laplanche was ousted but the company’s stock has floundered ever since that IPO — even leading to a five-for-one reverse stock split last year. That said this acquisition of Radius could be just what the FinTech needs to turn things around. While there are certainly unknowns (namely regulatory concerns) that could get in the way, it does seem like a unique opportunity for the company that could also have implications for the larger industry. This will definitely be one to watch as more about the deal emerges and hopefully nears closing.