Uncle Sean's Update - 3/17/23

Happy Friday!!!
 
Here is the St. Patrick’s Day edition (queue up the bag-pipes and green beer) of the Uncle Sean Update for 3/17/23:
 
Okay – Uncle Sean will be fairly brief on the SVB and Signature Bank stuff as sometimes it is more powerful (and appropriate) to say very little than to continue shouting the same narrative.  So here is a quick commentary and then on to MANY GOOD THINGS that happened this week:
 

• As everyone knows, last Friday Silicon Valley Bank was closed.  In an extremely rare Sunday maneuver, Signature Bank was closed…  Both of which are being labeled as idiosyncratic events that resulted in a modern-day bank run and NOT indicative of a greater systemic problem (and Uncle Sean agrees). 
  • This leads me to two main premises: 1) What exactly is a sticky deposit (this is an intentional rhetorical and sarcastic thought provoking question); and 2) I wonder if we are fully prepared for the speed and convenience at which we can move money now (and it is only going to get faster)…..
    • To put the speed factor in perspective (credit Felix Salmon at Axios for pointing this out), SVB depositors withdrew $42B from the bank on a Thursday…  The largest bank run in history (WaMu in 2008) had deposit outflows of $16.7B over the course of 10 days…  Please take a moment to let that really sink in…..  Here is some more info (again, credit Felix Salmon at Axios):
      • The SVB outflow equates to about $4.2B an hour, or more than $1M per second for ten hours straight…..  HOLY MOLY!!! 😲
  • Also for reference, the 2 bank failures in the last few days totaled $319.4B in Total Assets compared to 25 failures totaling $373.6B in all of 2008 (source: FDIC).

 
HERE IS THE GOOD NEWS that we can all feel better about (Uncle Sean sending good vibes): 😊
 

• The Fed response to the bank failures was swift and two-fold in an effort to stave off any further contagion:
  • 1) All deposits at Silicon Valley Bank and Signature bank will be honored regardless of amount  (including in excess of $250K) under the systemic risk approval.
  • 2) The launch of the Bank Term Funding Program (BTFP) offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par (not fair value). The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress.
    • Of course this only lasts for a year, but it allows for favorable borrowing and immediate relief surrounding liquidity concerns stemming from interest rate / duration risk in securities portfolios.
    • Both of these steps were extremely important and completed very quickly over the weekend.  Uncle Sean was happy to see this - nicely done!!!

 

• Here are some more good things to check out if you are concerned about uninsured deposits (Dad used to tell me and Davey to try to offer solutions, not just complaints):
  • IntraFi Network Deposits (an IBAT Endorsed Service Provider) absorbed what used to be called the Certificate of Deposit Account Registry Service (CDARS), and Insured Cash Sweep (ICS).  IntraFi Network Deposits providing “millions of FDIC insurance and peace of mind.”
  • Reich & Tang Deposit Solutions – check out their recent PR stating up to $50M in FDIC insurance through the Demand Deposit Marketplace® Program (DDM®).
  • Impact Deposits Corp. (f/k/a CDC Deposits Corp.) can offer FDIC insurance up to $50M per tax ID according to their website - Impact Deposits Corp.

 

• And another SUPER COOL thing that happened this week – the largest U.S. banks banded together to provide $30B in liquidity to First Republic Bank.  This is essentially a 120-day unsecured loan, but here are three things that caught my attention and made me feel good:
  • 1) Although the U.S. Treasury was in contact with these institutions, these largest banks did this on their own; and is a first of its kind!
  • 2) If you’ve ever tried to get a joint press release out (especially with a publicly traded institution), it almost requires divine intervention to get anything accomplished within a month – so I was amazed (and happy) to see this PR go out so quick and efficiently - LOL!!!!
  • 3) I want to REALLY focus on these specific lines in the PR (bold and cap emphasis added by Uncle Sean):
    • “This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities.  Regional, midsize and small banks are critical to the health and functioning of our financial system.”
    • “America’s banks – large, midsize and COMMUNITY BANKS – do an extraordinary job serving the banking needs of their unique customers and communities.  The banking system has strong credit, plenty of liquidity, strong capital and strong profitability. Recent events did nothing to change this.”
    • “Smaller- and medium-sized banks support their local customers and businesses, CREATE MILLIONS OF JOBS AND UPLIFT COMMUNITIES.  America’s larger banks stand united with all banks to support our economy and all of those around us.” 
      • HELL YEAH!!!!  And I will add on a personal note that Uncle Sean is proud to be a part of this amazing and hugely important industry!!!!  😊

 
Now, the rest of the news:
 

• COCC announced a partnership with Advanced Fraud Solutions (AFS) - Despite the diminishing number of checks being produced, the majority of institutions have reported steady or increased rates of check fraud.

 

• Sezzle announced proposed direct U.S. listing on Nasdaq pending release of S-1 and SEC review.

 

• Guild Mortgage announced the acquisition of Cherry Creek Mortgage.

 

• Federal Reserve announces July launch of the FedNow service.

 

• Just in time for tax-prep (YUCK), Creative Juice announced the launch of Juice Books, a tax prep toolkit to help creators sort out their finances for tax-time.

 

• Notable FinTech funding for the week (see - the sky didn’t fall):
  • It finally happened!  😊 Rumored for about a year now, Stripe officially announced that they raised $6.5B in Series I funding round at a $50B valuation.
  • Apexx Global (merchant payment platform) raised $25M in Series B funding round with continued expansion efforts targeting North America.
  • Payabli (SaaS payments API provider) completed an $8M extension round bringing their total Seed Round to $12M.
  • Wingspan (payroll and onboarding platform for independent contractors that also includes business banking) raised $14M in Series A funding.
  • Parker (corporate credit cards to e-commerce businesses) emerged from stealth this week and announced that they have raised $157M in total funding including $5.9M in Seed, $31.1M in Series A, and a $70M debt facility with an option to upsize by $50M.

 
 
Random Uncle Sean Stuff:

• Well CRAP!!!  March Madness brackets got crushed before the sun went down on Day 1 as #13 Furman beat #4 Virginia and #15 Princeton took down #2 Arizona. 😲

• It’s now daylight savings time; and Spring officially starts on Monday – so turn off the TV and social media, GO OUTSIDE AND PLAY, breathe fresh air, and enjoy nature – it’s SUPER GOOD for you!!!!  All this other news crap will be here on Monday, I promise!  😊
• Alright – you knew it was coming….  Here are some Saint Patrick’s Day jokes:
  • Never loan money to leprechauns…  They are always a little short!
  • Faux Irish stones are called shamrocks….
  • The bartender said to me, “Your glass is empty, can I get you another one?”  To which I calmly replied, “why on Earth would I want two empty glasses???” 😝

 
 
Have a GREAT weekend, GO OUTSIDE AND PLAY - 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.