Key Bank National Association acquired Laurel Road, the digital lending arm of Laurel Road Bank, because of its wealthy, well-educated client base.

Although well established in the student loan market, Laurel has expanded into the mortgage business, personal and secured loans over the past year, so it could develop relationships and cross-sell financial products to consumers.

The demographics of its consumers include: Around 70% of the clients are doctors and dentists with another 20% being lawyers and MBAs. And the overall demographics of this target client base is extremely attractive, an average age of 33, average FICOs of 760, and income of around $185,000. Laurel Road originated about $1.2 billion in loans in 2018.

“I would say that the credit quality and the nature of those loans, and more importantly the nature of those relationships, we think are consistent with our targeted customer base and we’re very excited about that,” said Don Kimble, CFO of Key, during the company’s quarterly call held earlier this week. “And so, it really is more of a relationship strategy for us.”

The Laurel Road acquisition will be about $0.02 dilutive, or add more than $50 million of expenses. In addition, Key is converting from a loan sale model to a retain model.

"However, it will continue the gain on sale model and “where we see a good quality relationship, we’ll probably retain it," said Kimble. "But one of the things we talk about is (Laurel Road’s) ability to originate mortgage loans. And if it's a conforming mortgage loan that we will probably sell that in the secondary market, like we do with our existing portfolio.”