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Hello! Kiah here. Welcome to Fintech Takes Banking, my weekly newsletter where I highlight things I think are interesting or important for bankers and the surrounding environs.

👩🏻‍💻Before we dive into this quarter’s recap: Do you live in Nashville or have a cool coworker or friend in financial services who does? Do you/they work remotely or can stop by for a coworking day? Finity is hosting a Nashville coworking day and networking event on Oct. 7, and I would love to work alongside y’all! RSVP at that link; spots are limited but still available.

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3Q’26: One Quarter Short of a Dollar

Maybe it’s my recency bias with the restart of the fall conference season; maybe it’s that the midterms are coming up, but man! It felt like there was a lot of news this quarter, especially in September. So many applications and proposed regulations, not to mention the broader financial services and political spheres. Let’s get into it!

How are Banks Doing?

Net income for the banking industry was $90.1 billion in the second quarter, up 12% from the prior quarter, according to the Federal Deposit Insurance Corp.’s Quarterly Banking Profile. (Reminder that the publication of the quarter prior's data happens in the current quarter — so second quarter financials published in third quarter, which is being summarized here.)

The FDIC said the gains came from increases in both interest and noninterest income, securities gains and lower loan loss provisions. The banking industry notched an aggregate return on assets ratio of 1.37% in the second quarter, up 11 basis points from the first quarter. Net income at community banks increased 8.2% from the first quarter, and that segment recorded an ROA of 1.53%.

Domestic deposits grew for the eighth consecutive quarter, driven solely by uninsured deposits while insured deposits decreased slightly. Total loans at banks ticked up 1.8% in the second quarter. All categories grew, but loans to nondepository financial institutions and commercial and industrial loans saw the largest dollar increase. Loans at community banks grew 1.6% from the prior quarter, due to commercial and residential real estate and C&I lending.

The number of problem banks in the second quarter declined a net of seven to 47 banks, or 1.1% of total banks. Two banks failed during the third quarter.

In August, regulators closed Philadelphia-based Tioga-Franklin Savings Bank. All $68 million in assets and $67 million in deposits were assumed by Second Federal Savings and Loan Association, also in Philly. The FDIC estimated the failure’s cost to be $5.5 million. California-based Nano Banc was closed by regulators on Sept. 25; Utah-based Sunwest Bank agreed to assume substantially all $686 million of the bank’s deposits and acquire $476 million of Nano Banc’s $736 million assets. The FDIC’s preliminary estimate of the cost of the failure is $114 million, which could change as it disposes of assets. Nano Banc was the sixth bank to fail in 2026.

Notable Transactions

The banking as a service space, not normally a target of transactions, saw some deal announcements and terminations during the quarter.

In August, Kansas-based Equity Bancshares agreed to acquire Iowa-based Lincoln Bancorp and bank unit Lincoln Savings Bank for roughly $123.8 million, or 105% of tangible book value, according to the deal presentation. The deal adds 16 branches and pushes Equity to a pro forma $9.1 billion in assets. What is less certain is what would happen to LSBX, Lincoln Saving’s banking as a service business, which wasn’t mentioned in the presentation.

In September, San Francisco-based Chime Financial agreed to acquire Oklahoma-based Stride Bank in a $590 million cash deal that valued the bank around 150% of tangible book. Stride has been one of Chime’s banking partners for more than seven years. The plan is to consolidate its banking at the $5.4 billion institution, which will be renamed Chime Bank. In its deal announcement, Chime said it expects to realize more than $100 million in net synergies through sponsor bank fee savings, expanded lending products and a significantly lower cost of funds.

September also saw a rare deal termination, this time with banking as a service player Grasshopper Bancorp, which had agreed to sell to Enova International, a consumer lending fintech, for $369 million in December 2025. The deal may have been complicated by Enova’s partnership with banks in states that don’t have interest rate caps, which allow the firm to extend high-rate loans to consumers. That arrangement had spurred 20 state and district attorneys general and two Democrats on the Senate Banking Committee to pressure regulators to deny the deal application.

“Regulators do not have clear standards for nonbanks that want to become banks and that serve customers whose credit needs today are met mostly outside of the banking system,” Enova CEO Steve Cunningham said in a statement, which was included in an article on BankingDive. “Without clearly articulated standards, the process is susceptible to political pressure and outside advocacy, rather than being guided strictly by the statutory factors that should govern it.”

The more-traditional bank space also saw an unusual deal structure. Seattle-based WaFd agreed to a reverse merger with Florida-based EverBank Financial Corp. in a $3.9 billion all-stock deal. WaFd is the smaller of the two institutions, with $28 billion in assets; EverBank has $47 billion.

WaFd would be the surviving institution and take EverBank’s name; the pro forma company would have around $75 billion in assets. EverBank’s private equity investors along with its former parent company TIAA would hold about 59% of the new company. EverBank is a mostly digital institution.

Bank M&A activity was muted during the quarter. Activity this year lagged 2025, Raymond James analysts highlighted in a mid-September report. There have been only 118 deals announced by early September, which translated to an annualized consolidation pace of 3.9%, compared to 4.2% in 2025. The median acquisition target remains small.

“Management teams generally open to transactions as a way to deploy capital, add scale, improve efficiency, and enhance franchise value,” the analysts wrote in their report, which recapped their firm’s bank conference. “However, actual appetite remains disciplined, and activity continues to skew toward smaller institutions rather than larger, investible public-bank combinations.”

The muted activity comes as the banking industry enjoys several tailwinds: regulatory friendliness toward applications, healthy capital levels, stronger stock prices and benign credit. But “easier regulatory approval does not necessarily translate into attractive deal economics,” the analysts wrote.

“Coupled with weak initial stock reactions for some acquirers, we believe elevated target pricing and tangible-book-value dilution/earnback requirements remain important governors on activity,” they added.

Charter Watch

The charter applications and approvals continued apace during the quarter. In August, the Office of the Comptroller of the Currency conditionally approved the national trust charter application of World Liberty Financial, the crypto company that has ties to the family of President Donald Trump. Dakota, which provides stablecoin infrastructure, and Block both applied to the OCC for a national trust charter.

The OCC also conditionally approved OpenReserve’s national bank charter application for an on-chain institution. Avant, an online lending platform, applied for a national bank charter in late September. In an article about the Avant application, BankingDive reported there have been 42 other firms that have applied for OCC de novo charters since January 2025. The agency has approved 27: 12 have been for national trust charters, and 15 have been for full bank charters.

The OCC declined two applications: London-based fintech Wise Group PLC's national trust bank charter application to establish Texas-based Wise National Trust and Dutch fintech bunq BV's national bank charter application to establish New York-based bunq US Bank NA. An article from S&P Global Market Intelligence cited management deficiencies as reasons for both. The OCC returned Zerohash’s application.

The FDIC gave conditional approval to VALT Bank, a proposed Eagle, Idaho-based digital business bank that is aiming to open in the fourth quarter, as well as Mercury Bank, the proposed bank of Mercury Technologies. Flex, a fintech that offers rent financing, applied for an industrial loan company charter from the Utah Department of Financial Institutions and FDIC insurance.

New Policies, Rules, Laws and Standards

The Clarity Act failed and was voted down by the U.S. Senate in September after months of what The Wall Street Journal called “protracted negotiations.” I’m no politico, so I will spare everyone the dramatics and blow-by-blow, but it seems like the banking industry was able to successfully push back against the bill over concerns about crypto companies paying rewards on customer balances and political opposition fixed on ethics language.

“It marked a spectacular choke by an industry that had just recently begun reveling in its new lobbying clout, with President Trump in its corner,” the Journal wrote.

CNBC reported that state and federal regulators like the U.S. Securities and Exchange Commission are continuing rulemaking in the wake of Clarity’s failed passage.

Bloomberg Law reported in August that the FDIC is collaborating with banking and fintech trade associations to establish an independent standard-setting body for bank service providers. The standards are intended to assist banks in ascertaining whether fintechs and other service providers meet risk management standards and onboard them; the group could also certify that third parties meet the standards.

After the Bloomberg report, federal banking agencies and the National Credit Union Administration did indeed release a proposal to replace the 2023 third-party risk management guidance with a risk-based framework. The proposal would also allow the use of standard-setting and certification organizations.

The agencies also issued a statement about core service providers’ relationships with their community bank customers. The agencies flagged several practices of the cores, including opaque pricing and billing, retroactive charges and unsupported deconversion fees, integration restrictions and technology underinvestment, and stated they will consider the providers’ transparency, contract practices and technology capabilities when determining the scope and frequency of supervision. The agencies also said the providers may qualify as “institution-affiliated parties” under federal law, which would allow regulators to issue enforcement actions directly against them in some circumstances.

More than 180 financial institutions could move to an 18-month on-site examination interval if a proposed interim rule from the federal banking agencies goes into effect. The rule would increase the asset threshold for qualifying institutions eligible for the 18-month interval from $3 billion to $6 billion if they are otherwise well capitalized, well managed and highly rated, among other requirements. Regulators would continue offsite monitoring between examinations.

The FDIC is proposing changes that it says would modernize and expedite merger application reviews. The changes would include both credit unions and centrally booked deposits in the merger competitive analysis and establish a letter filing process with “deemed approval” for “de minimis merger transactions." Some transactions involving extremely small targets or certain types of operating subsidiaries could be processed in as few as five days, according to a statement from Chairman Travis Hill. (Fun fact: I wrote about how banks and regulators conceptualize competition differently in bank M&A back in 2023 for Bank Director magazine.)

At the state level, the Conference of State Bank Supervisors issued an artificial intelligence supervisory framework to assist state banking agencies as they examine institutions. The framework is an optional tool that state examiners can use to identify and understand AI at financial institutions, assess risks and determine when a deeper review may be appropriate using existing supervisory resources, according to the group. It takes into account an institution’s size, complexity, risk profile and use of AI.

Fed Stuff!

The Federal Open Market Committee raised the federal funds target range to 3.75% to 4% at its September meeting, the first increase in three years. The summary of economic projections, released at the same time, indicates that the committee may raise rates again before the end of the year.

Better Markets, an advocacy group that promotes financial reform, filed a lawsuit in September against the Federal Reserve Board and Vice Chair for Supervision Michelle Bowman, alleging that “Bowman and other Fed officials broke the law by manipulating the rulemaking process and record for the Fed’s 2026 proposed bank capital rules.” The complaint alleges that there was improper coordination with executives at large banks during the comment period to limit their objections, produced a public record that overstated support for the proposals and violated constitutional due-process requirements. Better Markets is asking a federal court to declare the rulemaking process “fatally compromised” and force the Fed to withdraw the capital proposal and start over without the involvement of Bowman or other Fed officials facing similar allegations. BankingDive coverage mentioned that in June testimony, Bowman told the House Financial Services Committee that she “did not direct anyone about their comments for the rule,” adding that it was her “responsibility” to engage with bank leaders.

FROM THE VAULT

What’s on my mind and filling my time:

🏈 Chief Financial Playmaker: Fernando Mendoza is either the sportiest finance nerd, or the dorkiest athlete, in modern collegiate history. He has partnered with US Bank on a series called “Finance with Fernando” that’s aimed at educating Gen Z on finances. I applaud the idea, but the actual video made me cringe so hard I worried I would implode and become a black hole. It is, of course, on his LinkedIn. (As a palate cleanser, this parody finance reel about unboxing a 2008 mortgage made me literally laugh out loud several times.)

👀 Recommendations: This sleek travel steamer, this weird little magnet arm that holds my dryer door open, pasta in fun shapes from Zelli Pasta. I can't recommend "The Love Hypothesis" on Prime Video, but I can recommend watching it remotely with a friend and texting the whole time. If you want to explore Reylo fanfic that was published as a book but you've already read Love Hypothesis, check out Julie Soto's "Not Another Love Song." 😉

🎙️ On Bank Nerd Corner: Taylor Nelms, vice president of research and insights at the Financial Health Network, joins me to discuss the high-level findings and three forward-looking warning signs from the 2026 Financial Health Network Pulse Survey.

🛫 Catch Me At: MX Money Experience, Oct. 4-6, in Park City, Utah. Money2020, Oct. 18-21, in Vegas baby! Make sure to sign up for Fintech Takes the Court on Oct. 18 and either play or spectate/commentate with me. AFC Policy Summit on Nov. 17 in Washington. Piper Sandler’s Balance Sheet Strategy Seminar on Dec. 7 in New York.

As a reminder, I am looking to gamify my Money2020 experience, given it's the last year at the Venetian, and would love your ideas of things I should add to my list. As always, feel free to reply to this newsletter with ideas, thoughts, comments and questions! - Kiah