WEDNESDAY APRIL 21, 2021 VOL. 186 No. 75 AMERICANBANKER.COM Follow us on Twitter @AmerBanker House passes pot banking 5 bill with bipartisan support First up for FedNow The SAFE Banking Act would prohibit federal banking regulators from penalizing Here are transactions that consumers and businesses could and other depository institutions for provid- complete immediately on the real-time payments system ing banking services to cannabis businesses. that the Federal Reserve plans to roll out in 2023 It passed Monday night on a 321-101 biparti- san vote. Page 6 See story on page 3 Marlin Business to stop Transfer money between transacǎonal accounts at different financial insǎtuǎons 6 operating as bank after parent company’s sale Funds affiliated with HPS Investment Part- Sweep funds into brokerage accounts at other insǎtuǎons ners plan to buy Marlin Business Services for $282 million. Page 6 Load prepaid cards and mobile wallets MVB in W.Va. acquires 7 fintech-focused Pool cash into single account for payroll software company Trabian Technology, which builds digital products and mobile applications, is the lat- Pay loans, uǎliǎes and other bills est in a series of technology-related purchas- es by MVB. Page 7 Send, receive and pay electronic invoices Citi plans new China investment Source: Fed 8 bank within 18 months The New York-based is pushing ahead to set up new and trading operations in China after announc- dailybriefing Why and ing it would be exiting retail banking in the 3 First Internet are world’s second-largest economy. Page 7 test-driving FedNow Webster turns to big bank M&A Wells Fargo wants to use the real-time pay- Congressional Bancshares to 1 to address growth challenges ments network being developed by the Fed- 9 form specialty finance unit The Connecticut company has struggled to eral Reserve for 24/7 liquidity management. The Maryland company recently raised $345 put deposits from its health savings account The online-only First Internet Bank aims to million to form the subsidiary and fund business to work across the Northeast. use it to help customers manage their bills growth opportunities for its bank. Page 8 Buying Sterling Bancorp for $5 billion will and cash flow. (See chart above.) Page 3 provide Webster with new opportunities First United in Maryland in a number of business lines, including AI enables banks to spot 10 buys out activist investor asset-based lending and equipment 4 bias claims in customers’ The company paid Driver Opportunity Part- finance.Page 2 complaints ners nearly $10 million for the shareholder’s “You all will not let me breathe” is just one stock and to resolve a longstanding legal CFPB rule gives renters example in the CFPB’s complaint database battle. Page 8 2 right to sue debt collectors where a consumer likened alleged mis- over evictions treatment by a financial institution to social The agency’s new policy requires collectors injustice. An artificial intelligence firm uses seeking to evict tenants to provide written technology to help companies flag such notice of their rights under a federal morato- language. Page 4 rium. Page 3 WEDNESDAY APRIL 21, 2021 AMERICANBANKER.COM PAGE 2

not necessarily the fastest-growing region of The new Webster will start with about M&A the country,” said John Carusone, president $52 billion of deposits and “the best mix of of the Bank Analysis Center in Hartford, funding channels you can get,” Kopinsky said, Conn. He added that the combined company, citing a network of more than 200 branches, Webster which will keep the Webster name, will likely commercial lenders trained to land deposit focus even more on national lending while accounts, the HSA business and Sterling’s turns to big keeping an eye on expansion towards the new banking-as-a-service initiative. mid-Atlantic. Lending opportunties will include sponsor Stephen Duong, an analyst at RBC Capital finance, factoring, mortgage warehouse, bank M&A Markets, agreed. franchise lending and commercial real estate, “The logical extension is really to head providing “significant flexibility in how to to address down to the Washington, D.C., area,” Duong invest in the future,” Kopinsky said. said. “That to me is a perfect extension: “One of the reasons we get so excited about Connect New York to Boston and then start this is that we think we can grow commercial growth moving down to the DC area.” loans by [up to] 10% annually on an organic Webster and Sterling had independently basis,” Ciulla said. “We don’t see ourselves challenges been looking at ways to grow beyond their pulling back in or repurposing any of the home turf. commercial portfolios. … We think when we By John Reosti and Laura Alix Webster is the biggest bank operating in get some economic tailwinds, we’ll be able to April 19, 2021 the health savings account market, a business outperform the market.” Webster Financial in Waterbury, Conn., is that generates plenty of low-cost deposits. Webster’s HSA business already has the latest Northeastern bank to line up a big Despite opening commercial loan 3 million customers with $7.5 billion of acquisition to build scale in a slow-growth offices in Boston, New York, Philadelphia, deposits, or roughly 12% of the national region. Washington and Providence, R.I., and market. The $33 billion-asset company agreed on significantly ramping up asset-based lending Ciulla is betting that Webster can growth Monday to buy the $29.8 billion-asset Sterling in other cities, Webster’s loan-to-deposit the business by using its newfound heft to go Bancorp in Pearl River N.Y., for $5 billion. The ratio was just 74.8% on March 31. after bigger prospects. proposed merger would create a $63 billion- Sterling had focused on national lending “We knew this was an opportunity to asset regional bank and would combine platforms, including asset-based lending supercharge the growth and our investment,” Webster’s low-cost deposits with national and equipment finance. Sterling had a 96.2% Ciulla said. lending lines that Sterling has bought and loan-to-deposit ratio on March 31, creating Webster only plans to cut about 11% of nurtured in recent years. a need for low-cost deposits at the company the combined company’s annual operating The combination should createas the economy improves and lending expenses, reflecting minimal overlap in the opportunities that both banks would opportunities return. companies’ branch networks. But Webster have struggled to gain if they had stayed Webster “needed to figure out” how to put was already in the midst of a cost-cutting independent, given their size and the markets its liquidity to work, Duong said. “They’re effort that includes plans to shutter 18 where they operate. definitely going to have some businesses branches “We’ve had to step away from great lending they’re going to cross sell and pick up on.” Ciulla, meanwhile, said he is hopeful the opportunities with longtime relationships due to balance sheet constraints,” John Ciulla, Webster’s chairman and CEO, said during a Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 conference call to discuss the deal. Phone 212-803-8200 AmericanBanker.com “On our side we’ve been limited by the size of the deals we’ve been able to do Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 because of the size of the balance sheet,” Managing Editor Dean Anason 770.621.9935 added Jack Kopinsky, Sterling’s CEO. “Now, Reporters/Producers we have a great opportunity to grow a Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 variety of categories and keep within the risk Washington Bureau Chief Joe Adler 571.403.3832 parameters that we want.” Executive Editor, Technology Miriam Cross 571.403.3834 That narrative has played a role in several Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 other big bank mergers in the Northeast. BankThink Editor Rachel Witkowski 571.403.3857 Those deals include the pending sale of John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 Century Bancorp to Eastern Bankshares; Hannah Lang 571.403.3855 M&T Bank’s proposed acquisition of People’s Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 United Financial; and the planned merger of Digital Managing Editor WSFS Financial and Bryn Mawr Bank. Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 “The Northeast, while densely packed, is

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY APRIL 21, 2021 AMERICANBANKER.COM PAGE 3 deal would avoid regulatory pitfalls. The CFPB rule clarifies that debt collectors banks and consumers to think about it more.” “Jack and I have talked in great detail who fail to provide tenants written notice of The biggest benefit for First Internet to with the Federal Reserve and Office of the their rights under the CDC moratorium are in using the FedNow system will be allowing Comptroller of the Currency,” Ciulla said. violation of the Fair Debt Collection Practices customers to manage their money in real “We believe we’ve checked all the boxes Act. The rule, which will be effective May 3, time, Sharkey said. that regulators like to see. We’ll have a lot applies to third-party debt collectors and “Consumers will be able to make their of capital, good earnings and a lot of good attorneys acting on behalf of landlords. mortgage payment on the due date and have relationships.” On a call with reporters, a senior advisor to it applied on that date as opposed to writing Uejio said that there are “probably thousands” a check or going into online banking to have of tenants who have been evicted but would a check sent that may take five to seven days, DEBT COLLECTION have been able to stay in their homes under especially with the slow mail these days, and the CDC moratorium. incurring a late charge,” Sharkey said. Small-business customers will be able CFPB rule to manage cash flow more easily through REAL-TIME PAYMENTS FedNow, she said. gives renters “They’ll be able to invoice customers through the messaging system,” Sharkey Why Wells said. “So if I have a lawn care company that right to can initiate an invoice to me saying I owe Fargo and $54 for my lawn care treatment, I can answer sue debt that message with a payment and pay my bill that way, on the due date. Because of the First Internet messaging, they’ll have all the information collectors they need to apply that payment and get are test- credit to their accounts.” over evictions Small businesses will also be able to pay their suppliers or vendors on invoice due By Neil Haggerty driving dates and know that the funds are there. April 19, 2021 They’ll be able to eventually stop paying WASHINGTON — The ConsumerFedNow for lockbox services for the payments they Financial Protection Bureau issued a receive by check. rule Monday enabling renters to sue debt By Penny Crosman Using the FedNow payments system collectors who fail to disclose the rights April 19, 2021 should also help First Internet reduce its of tenants established in a recent federal Dozens of banks are gearing up for the check-processing costs as more customers eviction moratorium. Federal Reserve’s real-time payments system, take advantage of electronic billing and The Centers for Disease Control and which is expected to go live as early as 2023. payments. Prevention announced the freeze on More than 110 have signed up to test Wells Fargo, though a much larger evictions due to the coronavirus pandemic FedNow, including Wells Fargo and First company at $1.9 trillion of assets, says it’s last year. It prevents evictions in cases where Internet Bancorp in Fishers, Ind. Executives joining FedNow for similar reasons. tenants filed a written declaration of their at these two early-adopters agreed to “We’ve seen the need for faster payments inability to pay. A tenant who has not filed interviews about what they’re hoping to get evolve and accelerate across all customer such a declaration can still be evicted. The out of it and how they’re preparing for it. segments for a number of years,” said Chuck moratorium ends June 30. Those insights could be helpful to the many Silverman, head of treasury management The CFPB’s interim rule requires debt more banks that are still on the fence about product management and development at collectors seeking to evict tenants to provide which fast payments system to join, if any. Wells. “FedNow will provide another option written notice of their rights under the CDC The $4.2 billion-asset First Internet said in the overall payments landscape to make moratorium. The rule also prohibits debt customers don’t want to wait a long time fast and secure payments on demand.” collectors from misrepresenting tenants’ for transactions to close, according to Anne One use case Wells Fargo is exploring, he eligibility for protection from eviction. Sharkey, senior vice president of operations said, is using FedNow’s liquidity management “No one should be evicted from their home of the online-only bank. function to support interbank gross settlement without understanding their rights, and we “It seemed just like anything else in our of funds during nonbusiness hours, when will hold accountable those debt collectors lives: People want things instantly, and I Fedwire is unavailable. A FedNow FAQ who move forward with illegal evictions,” think payments are starting to catch on to describes the liquidity management tool as said acting CFPB director Dave Uejio in a that,” Sharkey said. “The infrastructures are “support for FedNow Service participants in press release. “We encourage debt collectors starting to be built to be able to handle real- managing their liquidity needs in a 24/7/365 to work with tenants and landlords to find time payments, and that’s the critical part. I environment.” solutions that work for everyone.” think the Fed’s participation is driving both The Clearing House has had a competing

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY APRIL 21, 2021 AMERICANBANKER.COM PAGE 4 real-time payments network called RTP have happened if Blockbuster was in charge running since November 2017. As of today, of developing streaming.” RACIAL BIAS 115 banks are using it, including Wells Fargo. While the Fed builds a new system, Wells Fargo plans to use both real-time millions of American families are paying tens networks concurrently, Silverman said. of billions of dollars in fees trying to access AI enables “Our customers are looking for choice in their own money and $66 million of Cares Act how and when they make payments, and our money went to check cashers, he said. banks to spot expectation is to provide them with a range of “Small banks piloting the system may capabilities to meet their needs,” he said. make for great press releases,” Klein said. First Internet is also considering joining “But the reality is, the Fed was unprepared bias claims RTP. to handle emergency COVID payments. “That is something we are looking at hard Millions of American children went hungry in customers’ at right now alongside our participation in as their parents waited days and weeks for the FedNow initiative,” Sharkey said. COVID payments to clear.” The difference between the two, as In some cases, he said, the Treasury complaints she sees it, is that with Clearing House Department had the wrong bank account transactions there’s more settlement time information and ended up sending a paper By Kate Berry between participants in the network. In the check. April 19, 2021 FedNow initiative, settlement will take place “Real-time payment wouldn’t have solved In one 2020 complaint to the Consumer in real time or nearly real time in a bank’s Fed everything, but it was necessary to solve Financial Protection Bureau, a consumer Reserve account. anything,” Klein said. echoed the words of George Floyd to describe “Behind the scenes, it is different for banks The industry has dragged its feet because an experience with a financial company, in how those funds settle and because of that, banks don’t want to give up overdraft saying “you all will not let me breathe.” The there’s less risk with FedNow than with RTP,” revenue, he said. “Nearly 30% of profit from consumer wanted to know why the firm Sharkey said. the small banks comes from overdraft.” would “not take their knee off ... my neck?” The situation is similar with Zelle, the Sharkey said the reason FedNow is taking Another criticized a company for its person-to-person payments system run by so long is not that sinister. approach to sexual identity issues. “The Early Warning, she said. “With Zelle today, “It’s a huge initiative getting the technology employees refused to be sensitive to my if a transfer happens from me to you at 10:00 up to where it needs to be,” she said. “There’s pronouns’ and name change,” the consumer a.m., those funds are available to you at 10:00 a lot involved with a lot of the core providers said. “As a result, my account was closed a.m.,” Sharkey said. “However, settlement for to make that happen. There’s also the ISO after years of torture from this credit card those funds may not happen till 4:00 in the 20022 message system initiative that requires company.” afternoon. It does create risks.” a lot of preparation and infrastructure work” Such complaints showing up in the A spokesman for The Clearing House said on the part of the Federal Reserve. CFPB’s public complaint portal could have its RTP network is a real-time system, without For First Internet, the technology change reputational repercussions for a financial settlement risk. required won’t be too heavy, Sharkey said, institution if they point to discriminatory According to RTP network documentation, because the bank already uses a real-time employees inside an institution. But artificial “RTP Payments are immediately settled core system, Fiserv’s DNA. intelligence offers solutions for firms to between the Payer’s [financial institution] “This will not be a huge change for us here analyze complaint data to get ahead of risks. and the Payee’s [financial institution] by the at the bank, but we will need to make some “It only takes one complaint to drive your RTP System. This is accomplished through changes from a messaging perspective,” she institution to where you don’t want to be,” the use of an external Prefunded Balance said. said Marcia Tal, a former 25-year veteran Account held by the Federal Reserve Bank of Wells Fargo’s Silverman said he couldn’t of decision management at Citigroup who New York.” share much about the bank’s technology founded the New York artificial intelligence A common critique of the FedNow infrastructure, but “we are working through firm Tal Solutions. initiative is that it’s taking too long. FedNow both the technical and operational impacts of Other AI firms analyze the CFPB data and representatives did not respond to a request FedNow, such as the implications of cutover some financial firms do it in-house, but Tal’s for an interview. timing for our reconciliation process.” company is one of the first to focus on using “It took the Bank of England 18 months For both banks, it’s early days in the the CFPB’s complaint portal to diagnose to build a real-time payment system in FedNow pilot. cases of bias in an institution’s customer- 2007, when the first iPhone came out,” said “Right now the pilot is in its initial advisory facing teams. Aaron Klein, senior fellow in economic phase,” Silverman said. “Our role is providing Seeing Floyd’s words like that in a studies at the Brookings Institution. “I don’t input to help to further define the road map, complaint after his killing last year at the understand why more than a decade later, industry readiness and overall strategy. We hands of Minneapolis police would raise an when technology has advanced, it is taking look forward to engaging in testing.” immediate risk management concern for a the Fed four-plus years to build a similar company, Tal said. She noted that similar system. FedNow is a reminder of what would language referencing Floyd’s death had

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY APRIL 21, 2021 AMERICANBANKER.COM PAGE 5 come up in six other complaints in the CFPB gold mine compliance opportunity for any complaints, a company can also use portal. (The names of institutions in CFPB institution.” the platform for in-house monitoring complaints with such details are typically Some AI experts said they were not of employee complaints about the work blocked out.) surprised that Floyd’s words showed up in environment. Tal said firms should worry about some CFPB complaints. These days, artificial intelligence potential signs of bias in connection with “It’s definitely the case that something increasingly is used to analyze specific a consumer being denied a loan, but that happens in society can trigger or words and even the tone used in consumer consumers also raise social justice concerns awaken awareness of what’s going on” and complaints. Using AI technology to in complaints on credit reporting, managing Floyd’s death “raised awareness of these manage risk has been embedded in most a bank account, or struggling to pay bills due problems,” said Sanjib Kalita, the CEO of financial institutions’ compliance and risk to COVID. guppy.ai, a credit bureau startup built on management systems for years. “We’re trying to get ahead of all these blockchain technology. “A comment about “Risk managers identify and rank-order different pain points that are a risk to ‘I can’t breathe,’ in a [consumer] complaint where hot spots are from a compliance institutions,” Tal said. is very illuminating and also a tremendous standpoint.,” said Cliff Rossi, a finance One consumer posted a complaint opportunity for financial firms to be aware professor at the University of Maryland’s in September 2020 referring to multiple of some of these issues and how it might Robert H. Smith School of Business, and companies that “will not let me breathe and involve changing how they communicate former chief risk officer at Citi, Washington they stubbornly refuse to take their knees certain things, or changing a product.” Mutual Inc. and Countrywide Financial off my neck.” Another complaint filed in Though many financial institutions Corp. February 2021 stated: “And simply because analyze complaint data both internally Complaints that may appear unrelated they have their foot on my neck, they charge and externally, Tal said the focus should be to bias do not mean there is no reputational fees so that this account — which is all cash, on substance over volume. Issues related or business risk, Rossi said. Finding those loses value every month.” to race, gender identity and mistrust of a specific complaints can be a challenge as Using AI to identify signs of bias within an financial institution need to be identified well given that the CFPB received roughly organization gives companies a head start to and even escalated to risk managers, she 542,300 complaints last year and nearly prepare for any action taken by the CFPB. said. Most complaints about discrimination 60% of them were about credit reporting, In the CFPB’s annual fair-lending report come from face-to-face interactions at according to a recent CFPB report. to Congress last week, acting Director bank branches, though they also appear in “All this information comes in and just Dave Uejio said the bureau’s top priorities narratives describing the opening of home like in the old days, you get people looking include taking “bold and swift action to and auto loans, and checking and savings over complaints — and some might gloss address issues of pervasive racial injustice accounts, she said. over some important contextual comments and the long-term economic impacts of the When companies fail to respond and find that would have been addressed if they had COVID-19 pandemic on consumers.” the root cause of a problem, consumers been elevated earlier,” Rossi said. He vowed to find practical ways “to make often copy and paste the same issue as a Tal’s firm also does more general analysis freedom from racial prejudice and pursuit of new complaint because it wasn’t resolved of the CFPB’s complaint data, such as racial equity a priority.” the first time, and the customer moves to a ranking the most common issues that come And last month, Uejio warned that higher level of frustration. Often the follow- up in complaints from consumers that dealt the bureau is analyzing disparities in up complaints state that the company is with COVID-related setbacks. how companies address complaints not taking them seriously or even mocking Many see the use of AI technology in from minorities. He also put financial them, Tal said. compliance as a way to assist financial firms on notice that the CFPB will not While complaints alleging discrimination firms in assessing complaints in real-time tolerate discrimination against the LGBTQ or bias are infrequent, they can have an and resolving them quickly. Complaints community. outsized impact on a company’s reputation. to the CFPB are sent directly to financial Experts say weeding out discrimination And Tal also noted that many of the institutions which generally have to respond and addressing allegations of bias are complaints in 2021 “link the pandemic to a within 15 days. critically important for risk managers given consumer’s health and the struggle to pay Regulators also are turning their attention that the CFPB routinely uses complaints to their bills.” to the uses of AI for operational, governance look more closely at a financial institution’s “We are trying to look at the most severe and risk management purposes. Five federal operations. complaints to measure how frustrated the regulators including the CFPB issued a “Complaints are a focal point for consumer is based on the language they request for information last week on the regulators and serve as a launchpad for use,” said Tal. uses of AI, including machine learning. investigations and enforcement against The AI platform launched by Tal’s firm Still, it can be hard to pick out trends marketplace abuses,” said Heather McArn, in 2019 to identify prejudice is known from the volume of consumer complaints. a partner at Hinshaw & Culbertson and the as PositivityTech. The platform analyzes If a consumer wants to close an account, for former chief of staff and special counsel at language and phrases to determine a example, a company should pay attention the New York State Department of Financial customer’s frustration and whether it is specifically to what happened and why, Services. “Consumer complaints are a severe. In addition to analyzing customer especially given the expense of attracting

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY APRIL 21, 2021 AMERICANBANKER.COM PAGE 6 new customers. Debt collection is another regulators from penalizing banks and other are the main investors in the industry, and pain point for institutions that can lead to depository institutions for providing banking many American investors have put their lawsuits and enforcement actions, Tal said. services to cannabis businesses. It passed money into Canadian marijuana companies Companies also rely heavily on consumer Monday night on a 321-101 bipartisan vote. instead, because of federal legality in that feedback when launching new products and A total of 36 states and four territories have country. services. authorized the use of marijuana for medical The other regulatory burden the cannabis “Hearing pain points from customers is purposes and 17 states have authorized it for industry wants lifted from it is 280E, the tax law really critical,” said Kalita. “When you get recreational use. However, the drug is still that says companies that traffic in federally inbound complaints, it’s often hard to pick considered a prohibited substance under the illegal substances can’t take deductions the out trends from the volume of data and federal Controlled Substances Act and banks same way that other American companies being able to automate that with intelligent that provide services to cannabis businesses do. Many cannabis companies have said that algorithms raises the level of what an can be penalized under federal money if 280E is lifted, they would immediately be institution or a regulator can do.” laundering laws. much more profitable. These consumer protection issues are The legislation passed the House with Even without explicit language in the now in focus for a group of regulators who bipartisan support in 2019, but it was ignored SAFE Act, there is some hope that financial are experienced, diverse and data-savvy, by the Republican-controlled Senate. institutions could see other changes that said McArn Democrats are optimistic for the chances of make them more comfortable with cannabis “Firms are smart to invest in tools that the measure now that their party controls the investment. The Treasury Department’s can assist them in real-time assessment and chamber, though Republicans can still block Financial Crimes Enforcement Network, resolution of those complaints,” she said. most legislation. which analyzes financial transactions to The CFPB’s complaint data is open- Sens. Jeff Merkley, an Oregon Democrat, combat money laundering, may update its source and more than 35% of the narratives and Steve Daines, a Montana Republican, guidance to resolve conflicts with the new are public. By using AI to analyze and introduced the Senate companion bill. It SAFE Act, Jefferies analyst Owen Bennett measure the actual language being used in currently has 32 cosponsors, including six said in a March research note. If the agency’s complaints, companies can understand the Republicans, but the measure will still require language applies not just to banks that take biggest risks and try to repair a product or more support to reach the 60-vote threshold deposits but to all financial institutions, it practice. needed to advance in the chamber. could open up more institutional investment. “The CFPB is not only sharing statistics, Senate Majority Leader Chuck Schumer but also the narratives, the stories and has said he wants to work toward lifting the the words,” Tal said. “It’s quite a rich data federal ban on cannabis. He is currently M&A environment if institutions listen to what drafting legislation with Senate Finance Chair their customers are saying.” Ron Wyden or Oregon and Senator Cory Booker of New Jersey that proposes removing Marlin marijuana from the controlled substances list MARIJUANA BANKING and regulate it on the federal level. Business The SAFE Banking Act falls far short of what many cannabis companies would like House passes to see in the U.S., a full federal green light, or Bank to stop at least decriminalization, for marijuana. pot banking But it could solve some of their most operating pressing financial problems by allowing them to have bank accounts with traditional bill with banks. So far, the inability to do so has created as bank a number of burdens and risks the industry, bipartisan from having to store mountains of cash with after parent small credit unions, to facing extra security concerns when making all-cash payments support and creating their own debit card system to company’s receive consumer payments. By Bloomberg News This version of the act does not include sale April 19, 2021 language to address two other main The U.S. House of Representatives passed financial concerns of the cannabis industry. By Paul Davis a bill that would give state-authorized It wants more clarity around whether April 19, 2021 marijuana businesses easier access to institutional investors can put money into Marlin Business Services in Mount Laurel, banking services. marijuana companies without fear of legal N.J., will become privately owned after The bill, HR 1996, called the SAFE repercussions. So far, such concerns mean agreeing to be sold to funds managed by HPS Banking Act, would prohibit federal banking that individual investors and family offices Investment Partners.

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY APRIL 21, 2021 AMERICANBANKER.COM PAGE 7

Marlin, the parent of the $929 million- unions, digital banks and fintechs. and conduct trading for clients, as well as a asset Marlin Business Bank, said in a press The acquisition “will significantly enhance license for futures brokering within the next release Monday that the HPS-related funds our expanding fintech vertical,” Larry Mazza, two months, said a person familiar with the will buy it out for $282 million, based on its MVB’s president and CEO, said in the release. matter, who asked not to named because the shares outstanding on Feb. 26. “Trabian’s well-established reputation information is confidential. The aim is to get As part of the transaction, Marlin Business and nearly two decades of fintech experience the businesses up and running in 12 to 18 Bank would “cease operations as a bank,” the carry with it a leading role in the financial months, the person said. release said. The deal is expected to close in services ecosystem and an established book A chief executive officer will soon be the first quarter of 2022. of business,” Mazza added. The deal will add named for the business and 50 people will HPS has $68 billion of assets under “a new revenue stream and profit center and be hired initially with a plan to grow to about management. technological expertise that will benefit MVB 100 over time, the person said. The bulk The sale “will deliver significant value to and all of our stakeholders.” will be external hires but it will also transfer our shareholders,” Jeffrey Hilzinger, Marlin’s Trabian will provide more products and bankers from other mainland businesses to president and CEO, said in the release. services to MVB’s existing fintech clients. fill the gap, the person said. The U.S. bank is “After successfully executing the The software company will also play a role in a late entrant into China’s securities market transformation of Marlin into a broad MVB’s developing business serving venture after the country lifted foreign ownership provider of credit products and services to capital customers. restrictions and allowed full control starting small businesses over the last five years, Matt Dean, Trabian’s CEO, will retain last year, as it was in the process of unwinding and effectively navigating through the that position. Trey Reeme, Trabian’s chief a venture with Orient Securities Co. uncertainties of the pandemic, we believe operating officer, will serve as the firm’s Foreign banks have aggressive plans to that this transaction reflects Marlin’s intrinsic president. expand in China — seeking to double or even value and is the best opportunity to maximize MVB, which invests in fintech companies, triple their staffing — as the country opens its shareholder value,” Hilzinger added. has acquired a number of businesses that $54 trillion financial market. They have had J.P. Morgan Securities and Mayer Brown focus on that industry. limited success over the past decade with advised Marlin Business Services. Skadden, The company in September 2019 bought joint ventures, which in many cases have Arps, Slate, Meagher & Flom advised HPS. Chartwell Compliance, a fintech consulting been unprofitable. Group firm. In April 2020 it acquired Paladin Group, and JPMorgan Chase are vying to become a fraud prevention firm. the first Wall Street banks to achieve full FINTECH Taft Stettinius & Hollister advised Trabian. ownership of securities operations on the Squire Patton Boggs advised MVB. mainland. UBS Group AG, the first foreign bank to MVB in W.Va. win approval for majority control of its China INVESTMENT BANKING securities venture, is planning to buy another acquires 16% stake; while Goldman has struck an agreement with its partner to snap up the Citi plans 49% it doesn’t own. JPMorgan in November fintech- raised its stake to 71%. Group new China AG is ramping up its ambitions and is seeking focused to take full control of its securities venture over the next year. investment Citigroup continues to explore software opportunities to support clients in China, a bank within Hong Kong-based spokesman said, declining company to comment when asked about the license and hiring plans. Global Times earlier By Paul Davis 18 months reported the bank’s plans to apply for stock April 19, 2021 and futures trading license in China, without MVB Financial in Fairmont, W.Va., has By Bloomberg News giving details. acquired a software development firm. April 19, 2021 The push for licenses comes as Citigroup The $2.3 billion-asset MVB said in a Citigroup is pushing ahead to set up new announced plans to exit retail banking in press release Monday that its bank bought investment banking and trading operations China and other markets across Asia and a majority stake in Trabian Technology in in China after the lender announced it Europe, the Middle East and Africa. Fishers, Ind. MVB did not disclose the price would be exiting retail banking in the world’s Citigroup is expanding in wealth it paid. second-largest economy. management and last week announced plans Trabian, founded in 2003, builds digital The New York-based bank plans to submit to hire more than 300 relationship managers products, along with web and mobile an application for a securities license to allow in Hong Kong to double its assets by 2025. In applications, for community banks, credit it to underwrite yuan-denominated shares March, it said it would hire up to 1,700 staff

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY APRIL 21, 2021 AMERICANBANKER.COM PAGE 8 in the financial hub as it seeks to tap growing Driver has spent recent years pushing First links between the city and rising affluence in LITIGATION United to sell itself. First United and Driver southern mainland cities such as Shenzhen. have been involved in litigation in recent The bank serves close to 1,000 months over claims each made about their multinationals with operations in China and First United behavior leading up to last year’s annual more than 350 local corporates. It has raised meeting. q more than $30 billion for domestic Chinese in Maryland clients from global capital markets in the past © 2021 Arizent and American Banker. 12 months, the spokesman said. All rights reserved. Citigroup received a domestic custody buys out license last year and already has licenses to settle and underwrite bonds for clients in activist China. investor COMMUNITY BANKING By Paul Davis April 19, 2021 Congressional First United in Oaklan, Md., is buying out an activist investor to end a longstanding Bancshares to dispute. The $1.7 billion-asset company disclosed in a regulatory filing Monday that it had form specialty agreed to buy about 361,000 shares of its stock from Driver Opportunity Partners for finance unit $6.5 million. Driver disclosed in a seperate filing that it no longer owns and First United By Paul Davis stock. April 19, 2021 First United and Driver also agreed to Congressional Bancshares in Chevy a cooperative agreement, under terms of Chase, Md., plans to form a specialty finance which the banking company agreed to pay unit after raising $345 million in a private the investor $3.3 million to settle outstanding placement. litigation. The $3.5 billion-asset company said in Driver agreed to withdraw its notice a press release last week that it raised the of intent to nominate Abbott Cooper, a capital by selling stock to a group led by managing member, to stand for election to Centerbridge Partners, Gallatin Point Capital, First United’s board at the company’s next Bayview Asset Management and BlackRock. annual meeting. The investor also agreed to Each of those investors will appoint a withdraw any other shareholder proposals, director to join Congressional’s board. stop soliciting proxies and refrain from Donald Kohn, a former vice chairman of the buying First United stock. Federal Reserve, will also join the company’s First United and Driver agreed to a 10-year board. standstill period during which each side will Congressional said proceeds from the avoid disparaging the other. They also agreed private placement will be used to capitalize to a general release of claims against each its bank and to form a new specialty finance other. subsidiary as it looks to make $10 billion of First United agreed to voluntarily dismiss a loans over time in its health care, lender, declarative relief action it filed against Driver leveraged finance and sustainable finance that is pending in the U.S. District Court for businesses. the District of Maryland. “We look forward to serving our customers First United said it will record a $2.5 million with broader loan capabilities, focused charge in the first quarter. The company said financial solutions and an enhanced one of its insurers intends to contribute digital banking experience,” Don Cole, $404,000 toward the settlement payment Congressional Bank’s CEO, said in the and other legal expenses incurred, and that release. it plans to “pursue additional amounts” from other carriers.

For up to date and complete coverage go to AmericanBanker.com