BankMobile, a digital banking startup for millennials and the underbanked, is being sold by parent Customers Bank to Florida-based Flagship Community Bank for $175 million in cash.
The deal includes all of BankMobile's 1.7 million student checking accounts, around $500 million of non-interest bearing deposits and technology and intellectual property. After expenses, Customers is expected to book a pre-tax gain of around $100 million.
The brainchild of Customers Bank CEO Jay Sidhu and his daughter Luvleen Sidhu, BankMobile launched in beta at the end of 2014, following a path first trod by Simple by offering traditional services through a mobile platform.
However, unlike Simple and other neo-banks, BankMobile had the advantage of Customers Bank's relationship with Higher One, a firm that distributes college students’ financial aid reimbursements via debit card accounts. Customers Bank sits behind Higher One, servicing millions of students who then move on once they have graduated.
This relationship helped BankMobile build up an impressively large customer base in just a couple of years.
But the success has made its sale necessary. Sidhu previously revealed that because the firm's revenues are mostly drawn from debit card interchange fees, Durbin Amendment restrictions meant that Customers would not be able to profitably run BankMobile once the consolidated assets of both exceeded $10 billion.
Therefore, Customers has been talking to various potential buyers, before settling on Flagship, a small Florida outfit with just 26 employees, compared to BankMobile's 220.
Says Sidhu: "Customers is pleased to execute the sale of the BankMobile division to Flagship so that BankMobile can continue to serve its target markets -- college students, middle income Americans and underbanked Americans."