A Houston-based company with a vision to link traditional banking with digital assets on a common platform has announced plans to acquire a Chicago community bank.
LevelField Financial, co-founded in 2018 by Canadian-born investment banker and tech entrepreneur Gene Grant, and fintech consultant Stephen Helmholz, said Wednesday it would acquire Burling Bank for an undisclosed sum.
Founded in 1989, Burling, with assets of $197 million, has developed a niche serving Chicago’s business community. The bank would continue to serve its existing clientele after the merger is complete, which is expected in the second half of this year.
The merged institution will retain the Burling Bank name, but will do business outside of Chicago using the LevelField brand, and will market to clients interested in digital assets, according to Grant, LevelField’s president and CEO. Burling plans to expand both business lines (traditional banking and digital assets) nationwide, though no more than 50% of total assets will be connected to the size of digital assets, Grant said in an interview on Wednesday.
The merged Burling Bank would focus on retail digital asset holders looking to monetize their assets, rather than fintechs and other institutional clients. “We like the risk profile better when it’s more distributed,” Grant said.
While loan sizes would be based on borrowers’ digital holdings, with low loan-to-value ratios as the norm, Burling’s digital asset loans will not be underwritten solely with collateral.
“We need to make sure that customers can support loans based on their good credit,” Grant said. “We use collateral as a way to … reduce the risk associated with the loan. That allows us to reduce the risk profile so that we can charge more attractive rates. At no time will we have collateral without collateral.” [digital asset] loan.”
LevelField reviewed a total of eight banks before agreeing to terms with Burling, according to Grant.
“Texas was our ideal state, but we looked at banks in several states,” Grant said. “The great thing about Burling…is that they put customers first, so we got off to a good start from the beginning because we think the same way.”
Grant will remain as CEO of the merged company. Burling’s senior management team will remain with the bank to serve Burling’s existing customer base and help expand its traditional banking operation.
“LevelField’s strategic focus presented a tremendous opportunity for the bank to expand beyond our local presence and serve clients with shared interests across the country,” Michael Busch, Burling Bank’s president and chief executive officer, said Wednesday in a press release.
LevelField currently offers trading and custody services to holders of digital assets. In September, it announced plans to commercialize a turnkey service for banks that would allow them to offer transaction, custody and other digital services to their customers. Now, in light of the Burling deal, LevelField expects to suspend its white-label efforts until the acquisition closes. “Then we’ll provide it as a bank-to-bank service,” Grant said.
LevelField’s deal for Burling comes as the digital asset sector has been hit by a series of high-profile bankruptcies, most notably that of FTX. Banks with crypto links, including Bancorp Forecast, an institution with assets of $1.6 billion in Amesbury, Massachusetts; Y Silvergate Capital, an institution with assets of $11.4 billion in La Jolla, California, has reported significant losses amid market turmoil. Banking regulators have indicated that plan scrutinize Institutions that handle crypto assets or do business with crypto-focused companies.
With those compliance concerns in mind, Burling plans to take a conservative approach to engaging with digital assets post-merger, Grant said.
“We’ve taken everything out of the business plan” that might give regulators pause, Grant said. “There is nothing new. There is nothing particularly exciting. We have read everything that has been published on digital assets to make sure we fit inside the box. We have no interest, today or at any time, in taking any major position . We are [strictly] customer facilitation”.
Grant said he was not involved with digital assets before he co-founded LevelField in 2018, adding that he resisted pleas from Helmholz, as well as those of his own son, Gene Grant III. The elder Grant changed his mind after concluding that a digital asset firm with strong compliance credentials would be well positioned.
“I was shocked at the sheer amount of money in space, and absolutely horrified by the hands through which it was flowing,” Grant said.
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