Uncle Sean's Update - 12/1/23

​Happy Friday!!!
 
 
Holy smokes, it’s December already!!! 😲  That means three more weeks before I have to begin Christmas shopping – LOL!!! 🎅🏻🎄🦌  Here is the Uncle Sean Update for 12/1/23:
 

• The Federal Reserve Bank of Atlanta released the November Beige Book.  The punchline is that overall, economic activity has slowed with four Districts reporting modest growth, two indicating conditions were flat to slightly down, and six noting slight declines in activity.

 

• The FDIC released the Quarterly Banking Profile for 3Q2023.  Some key takeaways:
  • Net Income decreased for the quarter by $2.4B driven by lower non-interest income (down $4.1B) and increased realized losses on securities (up $3B) as banks rebalance securities portfolios.  Aside from favorable non-recurring gains related to the acquisition of the three large bank failures, net income has basically been flat at $68B for the last 4 quarters.
  • Loans increased 0.4% (driven by CC and mortgage) while Deposits declined 0.5% (marking six consecutive quarters of deposit declines).  However, NIM eked out a gain of 3 bps to 3.30%.
  • Unrealized losses on securities are now at $683.9B an increase of 22.5% over prior quarter as we saw significant movements in treasury yields/rates.  Unrealized losses on HTM was $390.5B and AFS was $293.5B.
  • Asset Quality remains favorable (still better than pre-pandemic), although showing modest deterioration worth keeping an eye on.
  • The number of banks on the FDIC’s “Problem Bank List” increased by one from the previous quarter to 44.
    • For reference, FedFis is tracking 68 banks representing the bottom 1% of all banks with a FedFis Rating of 3.75 or worse (scale is 1.00 good – 5.00 bad). 🦬

 

• The CFPB hit Toyota Motor Credit with $60M enforcement action for illegal lending and credit reporting misconduct.  Oof!!! 😬

 

• The FDIC OIG published their Material Loss Review of First Republic Bank.  Spoiler Alert – much like the reviews of Silicon Valley Bank and Signature Bank, capital was not to blame for the First Republic Bank failure.  There are a host of recommendations in the report (11 to be exact), but the ultimate cause of the bank failure was a run on bank deposits.
  • From the Executive Summary - “First Republic’s failure was caused by contagion effects stemming from the failure of other prominent financial institutions, which led to a run on deposits, significantly reducing its liquidity and exposing vulnerabilities in First Republic’s business strategy.”
  • Additionally, the report makes specific mention of uninsured deposits – “The FDIC assessed First Republic Bank’s uninsured deposits consistent with FDIC policies, but the magnitude and velocity of uninsured deposit outflows warrants the FDIC’s re-evaluation of assumptions and guidance pertaining to uninsured deposits…”
    • Uncle Sean’s two cents:  This has been an extremely common theme with the large bank failures this year.  In the absence of any meaningful deposit insurance reform, it sure looks to me like the future is bright for deposit sweep programs that provide enhanced FDIC insurance coverage such as R&T Insured Deposits (RTID®).  And it’s only going to get more intense as we move towards a real-time / instant payments world. 

 

• Apparently the feeling is mutual…  It was reported by The Wall Street Journal that Apple has sent a proposal to Goldman Sachs to end its credit card partnership with GS within the next 12 – 15 months.  The proposal allegedly includes all of the consumer partnership including the savings account and Apple Pay Later (BNPL).

 

• COCC announced CNB Bank (FDIC 13876; $5.7B Total Assets) has chosen to partner with COCC’s Security Operations Center (SOC) and use its real-time Continuous Security Monitoring (CSM) service to strengthen their organization’s cybersecurity posture. 
  • Hugely important as cyberattacks are unfortunately becoming more and more prevalent on a daily basis (just Google search “cyberattack” and the current news feed will make your jaw drop).  😲

 

• Cable announced the launch of Transaction Assurance providing financial crime compliance and 100% transaction testing “ensuring every transaction is not only monitored but also rigorously tested for any regulatory breaches or control failures, thereby eliminating the limitations of manual dip sampling.”

 

• 👀 Socure launched Control Center specifically to help sponsor banks fight fraud, assess risk and meet compliance requirements for their fintech partners.  You can learn more about their fully automated BaaS management platform for sponsor banks at socure.com/products/control-center.

 

• Ahhh – a rare IRS reprieve…  The IRS announced a delay in 1099-K reporting threshold for third party platform payments (Venmo, PayPal, etc.).  CNBC has a good summary for 1099-K tax reporting:
  • For 2023, the old limit of more than 200 transactions worth an aggregate above $20,000 will remain in place
  • For 2024, the agency will phase in the lower threshold by adding a $5,000 limit (for returns filed in 2025)
  • The $600 threshold will go into effect for tax year 2025, and taxpayers over the limit can expect to receive a 1099-K at the beginning of 2026

 

• Greenwood announced the launch of Greenwood Invest allowing their customers to invest in stocks and exchange-traded funds (ETFs) with no hidden fees or commissions, fractional share investment ability, educational resources, spotlight on black-owned/led businesses, and SIPC insurance.  Check it out at gogreenwood.com/invest/ - Nice work! 😊

 

• Rapid Finance has partnered with Ramp to provide small businesses on Ramp’s spend management platform faster access to capital through Rapid Finance’s financing options.

 

• 🏠 For my mortgage friends - Single Family RE Loan Limits for 2024 have been released.  $766,550 is the new conforming loan limit and $498,257 is the new FHA loan limit.

 

• Symphony has partnered with Google to AI-based voice transcription to help ensure banks’ voice calls are compliant (utilizing Symphony's Cloud9 voice product with Google Cloud's speech-to-text service).

 

• SoFi announced they are halting crypto services - not too overly surprising given the current regulatory environment.  In fact, Blockworks had a really good article back in August that detailed SoFi’s ‘no assurance’ of meeting Federal Reserve crypto standards.

 

• Widely anticipated, Discover announced they are exploring the sale of their student loan portfolio and pursue the transfer of servicing of such loans to a third-party provider.  Additionally, Discover stated that they will “stop accepting new applications for student loans February 1, 2024…”

 

• Silvergate (FDIC 27330) announced they have fully repaid all of its remaining deposit liabilities without risk to the Deposit Insurance Fund as the bank continues its voluntary liquidation.

 

• Nuvei (Nasdaq: NVEI), the Canadian fintech launches card issuing in 30 markets across the European Economic Area, with a roll-out to the UK, US and Latin America planned for 2024.

 

• Notable FinTech funding for the week:
  • PayGround (healthcare payments platform) raised $19.7M in an oversubscribed Series A funding round.
  • Mozaic (payment-splitting/management solution for creators and B2B platforms) raised $20M in Series A round.
  • RepeatMD (mobile ecommerce platform for increasing inbound revenue / rewards for aesthetic and wellness practices with patient financing provided via Affirm) raised $50M in Series A funding round.
  • CapitalOS (spend management infrastructure and embedded finance for B2B platforms) raised $39M in Capital consisting of an undisclosed mix of debt and equity.

 
 
Random Uncle Sean stuff:

• Some sad news over the last few weeks… 
  • Former First Lady Rosalynn Carter passed away on November 19th at the age of 96.  Take a few moments and enjoy the pictures, tributes, and biography at rosalynncartertribute.org.  “Do what you can to show you care about others, and you will make our world a better place.”  — Rosalynn Carter
  • Charlie Munger, Vice Chairman of Warren Buffett’s Berkshire Hathaway, passed away at the age of 99.  Yahoo Finance has a good article detailing his unique and punchy quotes about life and markets.
  • Henry Kissinger, former National Security Advisor and Secretary of State, passed away at the age of 100.  More amazing pictures and timelines can be found at henryakissinger.com.
  • Sandra Day O’Connor, the first woman to serve on the Supreme Court, passed away this week at the age of 93.  NBC News has a good article of her life and service as well as excellent photos.
• WOW is the only thing that comes to mind here…  Elon Musk tells advertisers that are boycotting spending on X (fka Twitter) to “go f*** yourself” (warning – that link contains actual f-bombs)….🤐  Aren’t you glad you don’t have Linda Yaccarino’s job as CEO of X — the former advertising chief at NBCUniversal who Musk brought on board to shore up the platform’s appeal to advertisers.  LOL!!!
• Okay – on a much lighter note, here come the Dad / Bad jokes to kick the weekend off:
  • People who talk to themselves have a significantly higher IQ…..  Well that’s what I tell myself anyway - LOL!!!!!  😜
  • Chuck Norris can fold a fitted sheet with one hand…
  • A 350 credit score can prevent identity theft….
  • What did the fish say when he swam in to a wall?  Dam….
  • If you think I’m crazy, you should meet my family – I had to adapt to my surroundings. 🤠 😂

 
 
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 [email protected] | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | [email protected] #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.