Enova-Grasshopper $369M Acquisition

Enova International, the parent company of OnDeck, Headway Capital, and The Business Backer, has agreed to acquire Grasshopper Bank for approximately $369 million in cash and stock, creating what management calls a "powerful digital bank" that will fundamentally reshape Enova's funding structure and competitive positioning.¹

• Purchase price: ~$369 million, 50% cash / 50% Enova stock²

• Grasshopper metrics: $1.4 billion in assets, approximately $3 billion in deposits, $18.76 billion in BaaS transaction volume (2024)³

• Valuation multiple: 2.54x price-to-tangible book value — roughly double what LendingClub paid for Radius Bank in 2020⁴

• Expected close: Second half of 2026, pending OCC and Federal Reserve approvals¹

• EPS accretion: 15%+ in year one, 25%+ once synergies are realized¹

• Post-close structure: Enova becomes a bank holding company; Mike Butler (current Grasshopper CEO) stays as President, reporting to Steve Cunningham as bank CEO⁵

This is the largest fintech-to-bank acquisition since LendingClub bought Radius in 2020, and it signals a clear strategic pivot: Enova is betting that owning a bank charter will dramatically lower its cost of capital while expanding its product capabilities.

What Alternative Business Lenders Need to Know

Why This Deal Matters: The Funding Cost Arbitrage

Enova's cost of funds stood at 9.6% in Q3 2024.¹⁶ Compare that to what LendingClub reported when they acquired Radius Bank: deposit costs of approximately 28 basis points.⁷ That's not a typo. We're talking about a potential funding cost reduction measured in hundreds of basis points, not dozens.

LendingClub's CEO Scott Sanborn told analysts the Radius acquisition would save approximately $40 million annually in bank fees and funding costs alone.⁷ He also noted their cost for holding loans on balance sheet dropped by 90% by using deposits instead of warehouse lines.

Now scale that math to Enova's operation. The company originated $1.4 billion in small business loans in Q3 2025 alone — a record quarter.¹⁵ If they can fund even a portion of that volume with Grasshopper's $3 billion deposit base instead of warehouse facilities priced off SOFR plus a spread, the margin expansion is substantial.

The Comparable: LendingClub-Radius vs. Enova-Grasshopper

The LendingClub-Radius deal is the obvious comp, and the pricing tells a story:

Enova is paying roughly double the price-to-assets multiple that LendingClub paid five years ago. Part of that premium reflects Grasshopper's larger deposit base and established BaaS infrastructure. Part of it reflects the regulatory environment — bank charters for fintechs have been scarce since 2021, making existing charters more valuable.¹⁹

The SmartBiz-Centrust deal that closed in March 2025 doesn't provide a clean comp on price (terms weren't disclosed), but it does confirm that regulators are approving these transactions again.¹⁸ Michele Alt of Klaros Group, who advised SmartBiz, has said she expects additional applications to flow through 2026.¹⁷

The BaaS Question: Asset or Liability?

Here's where it gets complicated. Grasshopper isn't just a deposit-gathering machine — it's a Banking-as-a-Service platform with over 20 fintech programs and $18.76 billion in transaction volume processed in 2024.³ BaaS deposits grew by $133 million in 2024.³

That BaaS business is both an asset and a risk. On one hand, it's a growth engine that explains why Grasshopper's deposit base is 2x its asset base. On the other hand, anyone following the Synapse collapse knows BaaS relationships have become regulatory landmines.

When Synapse filed for Chapter 11 in April 2024, it left more than 100,000 customers with $265 million in deposits locked out of their accounts.⁸ The bankruptcy trustee identified a shortfall of $65–95 million between what customers were owed and what the banks actually held.¹¹ Federal regulators have since issued consent orders to nearly every major sponsor bank in the space: Evolve, Blue Ridge, Cross River, Choice Financial, and others.⁹

The FDIC proposed its "Synapse Rule" in late 2024, requiring banks to verify custodial account records daily.¹⁰ While the regulatory posture may soften under the current administration, the operational and reputational risks of BaaS haven't disappeared.

To Grasshopper's credit, the bank has positioned itself as a more conservative BaaS operator. CEO Mike Butler has publicly stated that BaaS "is a hard business" requiring "outstanding response" to clients while navigating "large hurdles on the regulatory side."¹³ Butler's experience matters here — he sold Radius Bank to LendingClub and then rebuilt Grasshopper's tech stack from scratch.¹² He's been through this exact transition before.

What This Means for Competing Alternative Lenders

If you're running a high-volume alternative lending operation funded by warehouse lines, securitization, or forward-flow arrangements, this deal should focus your attention.

• Direct competitive pressure: Enova owns OnDeck, Headway Capital, and The Business Backer. Combined, they originated $1.4 billion in Q3 2025 alone.¹⁵ With a bank charter and deposit funding, Enova can either (a) maintain pricing and widen margins, or (b) lower rates and take market share. Either way, pure-play alternative lenders face a competitor with a structural cost advantage they can't match without their own charter.

• Funding cost divergence: The gap between bank-funded lenders and warehouse-funded lenders is widening. Enova's current cost of funds at 9.6%¹⁶ could potentially drop by several hundred basis points post-acquisition. For context, that kind of improvement on $1B+ in quarterly originations translates to tens of millions in annual margin.

• Product expansion: The deal isn't just about funding. Grasshopper brings SBA lending, commercial real estate lending, and consumer banking capabilities. Enova has flagged the ability to "serve customers in more states" and "expand into new, complementary products."²¹ If you're competing with OnDeck on term loans today, you may be competing with them on SBA loans tomorrow.

Regulatory Path and Timeline Risks

The deal requires approvals from both the OCC and the Federal Reserve, with an expected close in H2 2026.¹ That's a long runway, and bank M&A approvals are never guaranteed.

Key conditions in the merger agreement include:²

• Grasshopper must remain "well capitalized" with at least an 8% Tier 1 leverage ratio

• Enova can walk away if regulators impose a "Burdensome Condition"

• Either party can terminate after 360 days (extendable to 450 days with a $5 million payment)

• Voting agreements from 56.3% of Grasshopper shareholders are already locked up

The SmartBiz-Centrust approval suggests regulators are open to fintech-bank combinations, but Enova's scale is different. This isn't a small SBA lender buying a $148 million community bank — it's a $3.8 billion loan portfolio operator becoming a bank holding company.¹⁵ Expect scrutiny around consumer protection, given Enova's higher-cost lending segments.

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