Reliant Bancorp is a community bank by almost any definition of the word. It has $3 billion in assets and focuses on its Middle Tennessee community around its headquarters in Brentwood, Tennessee. It funds what community banks commonly fund: loans mostly tied to real estate, commercial and industrial loans and a small amount of consumer loans. And now, it’s funding something less common for a community bank: startups.
Reliant Bancorp is joining a group of 66 institutions, mostly community banks, who recently helped close a new $150 million fund for financial technology companies called JAM FINTOP Banktech. JAM Special Opportunity Ventures, an affiliate of New York based-bank investor Jacobs Asset Management, and Nashville-based technology investor FINTOP Capital announced the joint raise last month, which will plow Series A funding into startups that cater to community banks.
I got a chance recently to speak to Reliant’s chairman and CEO, DeVan Ard Jr., a longtime Middle Tennessee banker. He explains the logic of community banks putting their hard-earned dollars into one of the riskiest investment categories there is.
“I don’t view it as risky as much as I do giving us a window into new financial technology opportunities,” he says. Ard declines to disclose Reliant’s investment amount, but says it was small. Currently, no institution owns more than 4.4% of the fund, says John Philpott, general partner at FINTOP Capital.
The sizeable list of community banks joining the funding round shows that even fairly small institutions are investing as a way to get in on the ground floor of technological development. Ard thinks JAM FINTOP Banktech will help the bank get early access to opportunities in the tech space.
“All banks today know they can be nimble,” Ard says. “That’s the lesson we learned throughout the pandemic. You have to do business with your customers wherever and whenever they want to do business with you.”
But the fund wasn’t exclusive to community banks. A few mid-sized and large institutions joined in on the raise, including $57 billion East West Bancorp, based in Pasadena, California, and the St. Louis-based investment bank Stifel Financial Corp., according to JAM FINTOP’s website.
The investment managers billed the fund as a way for community banks to learn about the technology space, given the sheer number of financial technology companies competing for their business. “The banks [are] being shown thousands of demos,” says Adam Aspes, a general partner at Jam Special Opportunity Ventures. “It’s overwhelming. If you make the wrong decision, it can really set you back.”