Flagship Community Bank in Clearwater has given up on its plan to buy BankMobile, a digital banking operation.
Flagship decided not to pursue the deal any further on Thursday, three days after BankMobile’s parent company, Customers Bancorp Inc., said it wanted to keep BankMobile for the next two or three years.
Instead, Flagship will put a new push behind growth in the Tampa Bay area, said Frank Burke, chairman, president and CEO.
Flagship had not stopped doing business, but it was “working a little slower” while trying to hammer out the BankMobile deal, Burke said. “Now we’ll get out there and be active in the market.”
The complex deal called for Customers (NYSE: CUBI), an $11 billion bank in Wyomissing, PA to spin off BankMobile. BankMobile then would have merged with Flagship. Flagship would have changed its name to BankMobile, retained its Clearwater headquarters and become a publicly-traded company.
Flagship, currently one of the smallest banks in the area with $126 million in deposits, would have grown to one of the largest local banks after adding about $732 million in deposits from BankMobile.
But Customers effectively suspended the deal Monday, with Jay Sidhu, chairman and CEO, saying during an investor conference that it had run into a curveball from the Federal Reserve. Because of an anticipated overlap in shareholders, the Fed said a combined BankMobile/Flagship would have been an affiliate of Customers Bank.
Sidhu told analysts the deal was not dead, and Customers and Flagship were trying to renegotiate a contract.
“They made us a proposal and we elected not to move forward,” Burke told St. Pete Catalyst Thursday. “As of this morning, it’s over.”
Flagship walks away with a $1 million break-up fee from Customers. The termination fee, due to Flagship if the deal could not be completed by Sept. 30, was deposited in an escrow account in July, and “we are keeping it,” Burke said.
Now, Flagship will work on finishing out 2018, which is shaping up to be the 12-year-old bank’s best year ever, Burke said.
The bank reported $851,000 in net income for the nine months ended Sept. 30, compared to $786,000 in net income for the same nine months in 2017 and $312,000 for the first three quarters of 2016.
“The economy is good and people are borrowing money,” Burke said. “We had a slow period, but we have a big pipeline now.”
He did not rule out a future deal with another bank.
“We’re open and we’ll see what’s there,” Burke said. “We got involved [with Customers] because it was an opportunity for liquidity for our shareholders. We’ll reassess and if we end up with another great year and anyone is interested in us, we’ll look a lot better. If not, we’ll just go on.”