Uncle Sean's Update - 11/19/21

Happy Friday & Happy Thanksgiving wishes for next week!!!
 
Turkey Day is right around the corner which means the annual two month carb loading binge starts in 3, 2, 1, and GO!!!!!  Don’t forget to sign up here to have the Uncle Sean Update sent direct to your inbox each week; and tell all your friends too!!!  Here is the Uncle Sean Update for 11/19/21:
 

• A special shout out to Locality Bank for obtaining FDIC approval!!!  Looking forward to seeing South Florida’s latest de novo bank open up in December (and the grand opening ceremony to follow) – CONGRATS!!!!

 

• BM Technologies (NYSE: BMTX) announced a definitive agreement to acquire First Sound Bank (OTCPK: FSWA; FDIC #57799; Total Assets $154M) for $23M.  BM Technologies is the old BankMobile that was spun off and sold from Customers Bank for $140M back in August of 2020 (the deal closed in January 2021).
  • So we have now come full circle in what some in our industry are referring to as “a new age de novo” process:  Bank creates Direct Bank (i.e. digital branch) → Bank sells Direct Bank → Direct Bank becomes fintech Challenger Bank → Challenger Bank buys a charter.  I like it!!!!!

 

• Patriot Bancorp announced an agreement to merge with American Challenger Development Corp.  American Challenger is actually the accounting acquirer here (I know – that’s an Uncle Sean geek-out moment) as referenced in this KBRA preliminary ratings report – which is cool as this is another example of a fintech obtaining a bank charter.
  • American Challenger had previously applied for a national bank charter and had received preliminary conditional approval from the OCC, but was still waiting on FDIC approval.
  • After this merger closes, American Challenger Bank will operate as a digital division of Patriot Bank (we call that a Direct Bank here at FedFis).  Patriot Bank is already an existing Sponsor Bank as they are the virtual card provider for Otto automated bill payment services.  So Patriot Bank will end up with the fantastic structure of being: 1) a Durbin exempt bank (no cap on interchange) at $952M in total assets, 2) an existing fintech Sponsor Bank, and 3) upon closing of the merger, a Host Bank for a Direct Bank (digital brand of American Challenger Bank). 
  • That’s what Uncle Sean refers to as “the FI trifecta” - very nice!!!

 

• Alt lender Oportun (Nasdaq: OPRT) also announced a definitive agreement this week to acquire Digit (PFM Savings and Investing App) that effectively creates a true Neobank / Challenger FI for $219.9M in cash and equity.  Check out the well done Investor Presentation Deck by Oportun showing 600K paid Digit customers combining for a total of 1.4M members; and a 3-5 year acceleration of the Oportun vision of being a full Neobank (offering savings, investing, digital banking, lending, debit and credit cards).

 

• U.S. Bancorp announced an agreement to acquire TravelBank (corporate T&E management platform).  U.S. Bank and TravelBank have already been working with each other about a year as the U.S. Bank Instant Card is integrated within the TravelBank platform.  Banking Dive has a good summary of the two firms mutual history here.

 

• nCino (Nasdaq: NCNO) gets in on the action too this week by acquiring SimpleNexus, an end-to-end mortgage platform, for $1.2B in cash and stock.  This certainly appears to be a nice compliment to nCino’s cloud based Bank Operating System®.

 

• French based BNP Paribas is working with advisers to assess a sale of Bank of the West, its $100B U.S. arm, as it seeks to retreat from the American retail banking market.  We also saw Spain based BBVA exit the U.S. market recently via a sale to PNC.
  • Bank of the West is one of the Mastercard Business Credit Card issuers for Brex.  Uncle Sean will be watching to see if Brex; 1) remains with the new acquirer, 2) fully moves to Emigrant Bank (their other business CC sponsor issuer), or 3) if Brex will seek out an entirely new sponsor issuer to mitigate vendor concentration risk.

 

• Jiko makes their debut into the BaaS / Sponsor Bank arena by announcing a  partnership with Euphoria – more specifically as the sponsor bank behind Euphoria’s Bliss mobile banking app.
  • For a refresher – Jiko was a fintech challenger that specialized in investing consumer deposits in Treasury Bills and providing a debit card with real-time processing when those funds were needed.  Jiko was using Mid-Central Bank as their sponsor bank.  Jiko always knew they wanted to be an actual FDIC insured bank and through a mutual shareholder relationship, they ended up buying their sponsor bank (another instance of a fintech obtaining a charter).
  • Uncle Sean loves this model – corporate treasuries have been doing this for decades (overnight sweep of excess liquidity into T-bills).  It’s nice to see this become mainstream for everyday consumers.

 

• Voyager (crypto investing app) announced the upcoming launch of their Voyager Debit Mastercard (a quick look into the FedFis Fintech Analytics© platform shows that thus is actually a Stream Prepaid Mastercard GPR issued by Metropolitan Commercial Bank) with up to 9% rewards (rates subject to change).  Wait – what???  Up to NINE PERCENT DEBIT CARD REWARDS!!!???  Okay – here is the rest of the story:
  • You can link a bank account to fund your Voyager account; or you direct deposit into your Voyager account for funding (thus the prepaid component).  Once funds are received you can convert to USDC (issued by Circle) which is where the “rewards” come in as there is no need to spend to generate rewards.  Once converted to USDC, this becomes another crypto asset scenario (your funds are no longer held at Metropolitan or any FDIC or SIPC insured institution and risk of loss creeps in – thus the higher return).  Rewards are generated just for holding USDC (i.e. Circle lending spread) and are paid / credited in USDC.  When you actually use your Voyager Debit Card, Voyager converts the USDC to process in real-time.  You can read more about it on Voyager’s blog.

 

• BlockFI finds itself in the middle of more regulatory woes as the U.S. SEC joins the list of entities scrutinizing BlockFI's high-yield crypto accounts, earning as much as 9.5%, as “lending programs” and are classifying many of these crypto asset accounts as “investment contracts” that are akin to securities that should be registered with the SEC.  It is important to note, however, that the SEC hasn’t accused BlockFi of any wrongdoing and not all agency investigations lead to enforcement actions.

 

• Beginning Christmas Day, the Staples Center in Los Angles will be renamed to Crypto.com Arena in a 20 year deal worth $700M (CHA-CHING); and will include a 3,300 sq ft crypto activation space.  The 20,000-seat arena is currently home to the NBA’s Lakers and Clippers, the NHL’s Kings, and the WNBA’s Sparks.  “Each year, the world-class venue hosts over 240 major high-profile events of national and international distinction and over 4 million guests with events ranging from professional sports, concerts, family and award shows, boxing and special events, including the GRAMMY Awards, NBA All-Star Games and NHL All-Star Games among others.”  Now that’s some high-profile advertising!!!

 

• N26 to ‘exit stage left’ as they discontinue U.S. operations to focus on Europe.  N26 told their 500,000 existing U.S. customers that their service will no longer be available after January 11, 2022; and will receive “further instructions on how to withdraw their funds to ensure a smooth transition.”

 

• Notable FinTech funding for the week (some of which were HUGE):
  • Gemini (crypto platform) raised $400M in growth equity round with a valuation of $7.1B.  Not bad for their first-ever outside financing!
  • ConsenSys (blockchain infrastructure provider) raised $200M at a valuation of $3.2B
  • UNest (RIA investment app for parents to benefit their children) raised $26M in Series B funding round
  • Upgrade (Alt lending and mobile banking challenger) raised $280M in Series F at a whopping $6.28B valuation just four months after their Series E at a $3.43B valuation
  • Oxygen (Gig PFM App) is in talks to raise $70M in Series B round at a $500M valuation
  • Podium (communications and payments platform with text-to-pay and card readers) raised $201M in Series D funding round at a valuation in excess of $3B
  • Imprint (partners with businesses to provide branded rewards cards for customers) raised $38M in Series A
  • Airwallex (cross-border payments) raised an additional $100M in Series E1 for a total E round of $300M at a new valuation of $5.5B (recall in Sept where Airwallex raised $200M in Series E at a $4B valuation)
  • Stytch (API identity authentication) raised $90B in Series B round at a valuation in excess of $1B
  • Netography (security platform across atomized networks) raised  $45M in Series A funding
  • Expel (cybersecurity) raised $140.3M in Series E funding with a valuation north of $1B
  • DefenseStorm (cyber safety & soundness platform for banks and CUs) raised $5M in funding from Curql as DefenseStorm logs its 100th FI customer
  • SnapAttack (cybersecurity) raised $8M in Series A funding round after announcing that it was spun off from IT consulting firm Booz Allen Hamilton
  • Lacework (cybersecurity) raised a massive $1.3B in Series D funding at a valuation of $8.3B – WOW!!!!
  • And lastly for all my blockchain and gaming fans – Forte (interoperable blockchain gaming platform) raised a huge $725M Series B round.  This comes just 6 months after their $185M Series A at an initial $1B valuation.  DANG!!!!

 
 
Random Uncle Sean Stuff:

• Wishing EVERYONE a very Happy Thanksgiving next week!!!!  Which means there are only 36 days until Christmas Day – NEW SOCKS AND UNDERWEAR FOR ALL!!!!!!!!
• Here are a few Dad Jokes to kick off your weekend and get you prepped for Thanksgiving:
  • This one is for my friend and FedFis Superstar, Mr. Dan Heilveil - The technical difference between a violin and a fiddle is that a violin has strings and a fiddle has strangs!!!! 😊
  • I brought home one of those greyhound dogs the other day and Aunt Patty asked if I was going to race it - I said nope, I’m pretty sure he’s faster than me!
  • I told Aunt Patty that our Thanksgiving dinner this year was going to be expensive.  She asked if it was because of transitory inflation and I said, nope – it’s because it has 24 carrots!!!
  • Aunt Patty said that last joke was lame and I shouldn’t tell anymore Thanksgiving jokes, but Uncle Sean just can’t quit cold turkey!  See what I did there - LOL!!!!
• This week’s November Recipe Sharing is for a time proven Texas staple -  good ole fashioned chili con queso in the slow cooker / crock pot (this is our daughter Claire’s favorite):
  • 32 ounces of Velveeta (that’s the whole thing) – cut it up into 1” – 2” cubes to help it melt faster
  • One 15 ounce can of Chili (no beans)
  • 1 lb cooked / drained 94% lean ground beef
  • One 8 ounce can of tomato sauce
  • 2 cups (one pint) of Half and Half
  • 4 TBL Chili Powder
  • 2 TBL Paprika (I use smoked paprika)
  • 2 TBL Cumin
  • 1 tsp Cayenne pepper
  • Juice from 3 limes (very important – don’t skip this)
  • Dump everything into the slow cooker / crockpot and set on high for 2 hours stirring about every 30 minutes.  Goes great with chips, tortillas, hot dogs, on top of baked potatoes, drizzled over fries – heck you are only limited by your imagination with this Texas culinary jewel!  It makes a TON of chili con queso, but we have NEVER had to throw any of it away (and its good as a leftover in the fridge for several days) - enjoy!!!! 😊

 
 
Have a GREAT weekend and please stay safe!!!
 
Uncle Sean
 
 
Sometimes known as Sean Mayo – contact me directly for scope and pricing of custom reports / analysis projects at smayo@fedfis.com | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | info@fedfis.com #FedFisHasTheData FedFis
 
FedFis, LLC disclaimer – The views and opinions of Uncle Sean are of his own and may not necessarily represent the views, endorsements, and/or opinions of FedFis, LLC – we all know he’s a little bit different; but that’s why we love him.
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