UK’s OakNorth to acquire Detroit-area community bank

London-based digital-first bank OakNorth plans to widen its U.S. beachhead by purchasing a Detroit-area community bank.

The $9.8 billion-asset OakNorth Bank announced plans Monday to acquire the $64.3 million-asset Community Unity Bank, headquartered north of the Motor City in Birmingham. Though deal terms were undisclosed, OakNorth described it as a noncash, “stock-for-stock” transaction. 

OakNorth, which received Federal Reserve approval in August to open a representative office in New York, has been lending in the U.S. for nearly two years. To date, OakNorth has been funding its growing portfolio of U.S. loans with deposits gathered in its core U.K. market, then swapped into dollars. The deal for Community Unity would allow OakNorth to gather Federal Deposit Insurance Corp.-insured deposits here, simplifying its business model. 

Besides providing the means to a more straightforward funding process, OakNorth was attracted to Community Unity’s corporate culture, CEO Rishi Khosla said Monday in a press release. “As a founder-led business built by entrepreneurs, CUB appealed to us as it shares a lot of our same values with regards to customer experience,” Khosla said. 

OakNorth has reviewed “a few dozen M&A opportunities” since 2023, Khosla wrote in a subsequent email, adding that it was introduced to Community Unity by a consultant.  

OakNorth has focused its U.S. lending efforts in the New York tristate area. Khosla, however, said it continues to look for opportunities throughout the country. “As part of this, we will discuss our plans to potentially expand Community Unity’s business in Michigan and elsewhere with regulators in due course,” Khosla wrote in the email.

OakNorth announced its intent to acquire Community Unity a little more than six months after VersaBank, another relatively small digital-first bank based outside the U.S., completed its $14 million acquisition of the $62 million-asset Stearns Bank Holdingford in Minnesota. 

VersaBank, headquartered in London, Ontario, focuses primarily on serving nonbank, point-of-sale lenders. It announced its first significant U.S. partnership, with an Iowa-based home improvement financer, in February. 

OakNorth, which reported its 2024 earnings earlier this month, said its U.S. loan portfolio had growth to $685 million on Dec. 31, up from $180 million a year earlier.  That expansion has far outstripped expectations, Khosla said Monday. 

“Demand … continues to be exceptionally strong and our differentiated offering and unique approach to lending has enabled us to rapidly establish a strong presence in the U.S. market,” Khosla said in the release. 

Community Unity, which opened its doors in October 2023, was the second Michigan de novo to launch since the 2007 financial crisis. The bank, which focuses on lending to small and midsize businesses, doubled its assets in 2024, though it failed to reach profitability, reporting a loss totaling $2.7 million for the 12 months ended Dec. 31.

Community Unity CEO Greg Wernette said his company was “very excited to be joining forces with OakNorth.”

Community Unity would adopt the OakNorth brand after the deal closes. OakNorth did not disclose a target date for completion. 

OakNorth plans to retain the entire Community Unity team. Wernette, who also helped found Level One bank in Farmington Hills, Michigan, in 2007, is expected to serve as CEO of the U.S. subsidiary.