Student-focused challenger bank BankMobile is being sold by its parent company Customers Bank for $175m to Flagship Community Bank.
The deal includes BankMobile’s 1.7m checking accounts and $500m in non-interest bearing deposits.
The challenger bank’s 220 staff members will all join Florida-based Flagship.
Pennsylvania-based Customers Bank launched BankMobile in 2015 and saw promising early growth thanks to a relationship with Higher One, a firm distributing student financial aid reimbursements via debit card accounts.
After accounting for all expenses, the deal is expected to create a $100m pre-tax gain for Customers Bank.
The company’s primary revenue source comes from merchant fees paid when a customer uses their debit card to pay for goods or services.
This created challenges in scaling the company as banking regulations limited the income firms can earn on these fees once their balance sheet exceeds $10bn in assets.
With $9.4bn on its balance sheet at the end of 2016 Customers decided it could not run BankMobile profitably.
Counting only 26 employees, Flagship is a much smaller operation and CEO frank Burke said of the firm recognises “that digital banking is expanding and the acquisition of BankMobile provides us with an opportunity to meaningfully expand our digital banking footprint beyond our Florida markets.
“We look forward to welcoming BankMobile’s team of over 220 staff members to Flagship, so we can continue to provide BankMobile’s customers with the products and services they have come to expect.”
Customers CEO and chairman Jay Sidhu said the company “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.”
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