Uncle Sean's Update - 3/3/23

​Happy Friday!!!
 
Here is the Uncle Sean Update for 3/3/23:
 

• The FDIC released the Quarterly Banking Report for Fourth Quarter 2022 and the banking industry looks good.  Key Points include:
  • Net Income slightly lower than 2021 (mainly due to higher provision expense as banks are starting to increase reserve levels), but still higher than pre-pandemic averages.
  • Loan balance increased by a massive 8.7%; and  NIM continues to expand to 3.37% - above pre-pandemic levels.
  • Asset quality remains favorable.  While noncurrent and net charge-off rates ticked up, they are still better than pre-pandemic levels.
  • Deposit balance are still declining, but at a slower pace – and deposit balances are still well above pre-pandemic levels.
  • Number of problem banks declined to 39 (lowest since data collection began in 1984) from 42 and includes the removal of a larger institution from the list since the total assets held declined from $116.3B to $47.5B.

 

• Redemption Holding Company (RHC) announced an agreement to acquire Holladay Bank and Trust (FDIC 21448; $68M Total Assets) “marking the first time in American history that an existing commercial bank would become a Black-owned Minority Depository Institution ("MDI") through acquisition. RHC will become the only Black-owned bank serving the Mountain West pending federal regulatory approval.”  VERY COOL!!! 😊

 

• This is great - Our Credit Union friends are making headlines this week,  Michigan State University FCU (charter 23279; $7.3B Total Assets) goes live with not one, but two new standalone digital brands powered by NYMBUS.  Check them both out at AlumniFi and Collegiate.
  • At FedFis we refer to this as the direct digital bank concept (a division of the chartered institution); and can be a profitable and compliant way for FI’s to bring a diversified revenue stream into the bank via targeted market solutions (or “niche segments” as Nymbus accurately describes them in the press release).  Uncle Sean loves seeing this in the CU space – great work!!!!

 

• Prepaid Technologies (digital payments and prepaid debit) is rebranding to Dash Solutions and will also bring WorkStride (rewards platform) under the same unified brand.

 

• BankProv (Provident Bank; FDIC 12010) announced a partnership with MaxMyInterest (cash management platform to maximize savings rates) via the BankProv Max Savings offered exclusively on the Max platform.   

 

• Spruce by H&R Block (mobile app) has partnered with Atomic to help customers set up direct deposit from their employer quickly and easily to their Spruce spending account without the need for complicated payroll forms or tedious processes.

 

• And another really cool partnership – Baker Hill (loan origination, risk management and analytics) has partnered with Alloy (identity decisioning platform) allowing FI’s using Baker Hill NextGen® to leverage Alloy Onboarding to “verify prospective borrowers quickly and accurately with fewer manual reviews and less fraud while complying with KYC and AML requirements.”

 

• DoorDash announced the launch of the DoorDash Rewards Mastercard co-branded CC adding more embedded finance functionality to their overall ecosystem (see DasherDirect platform).

 

• LendingTree (NASDAQ: TREE) makes the jump into embedded finance by announcing the launch of the LendingTree Win Card (wait list) by Visa and powered by Upgrade with the ability to earn up to 2% cash back.
  • Essentially, this is a co-branded credit builder platform via Visa Signature secured credit card backed by a personal loan that allows for credit increases as customers improve their credit score through successful payments.

 

• Remitly announced they will be winding down Passbook (neobank app for immigrants) effective May 1, 2023 to focus on their core business of global money-transfer.

 

• Ugh, tough times…  Silvergate (NYSE: SI; BHC FR 3695667; Bank Sub is Silvergate Bank – FDIC 27330) warned in a SEC filing that it was delaying its annual report due to the following:
  • Had to sell additional securities beyond what was anticipated to repay the $4.3B FHLB advance, resulting in additional losses negatively impacting regulatory capital.  As a result, the bank may be less than well-capitalized.
  • Dealing with regulatory, audit, and legal investigations; as well as congressional inquiry.  Forcing the bank to reevaluate their business strategy.
  • Evaluating the full effect this will all have on their ability to continue as a going concern.
    • Unfortunately, CNBC is reporting that additional firms (Coinbase and Galaxy) are now dropping Silvergate as their banking partner fueling additional liquidity concerns.  ☹

 

• While on the topic of crypto, Uncle Sean did notice that 2 crypto firms have made announcements to acquire small IL state chartered banks in February……  We shall see if these pass regulatory approval given the current environment:
  • 2/1/23 – LevelField Financial to acquire Burling Bank (FDIC 27556; Total Assets $197K with 18 full time employees and 1 location).
    • LevelField is a start-up crypto trading platform with additional services “coming soon” such as mobile app, custody, and crypto rewards credit card.  They are developing an Easy Trade White Label solution for banks.
  • 2/22/23 - Metallicus, Inc. has formed FBBT Holdings, Inc. to acquire State Bank of Nauvoo (FDIC 13582; Total Assets $37K with 8 full time employees and 2 locations).
    • Metallicus is a crypto and blockchain company with a crypto mobile trading app.

 

• Meanwhile, Circle released their first annual State of the USDC Economy report which I found to be a very good read.  Check out the easy to understand glossary on page 20 if you need to brush up on your crypto lingo (like me).

 

• On the reg side, the CFPB published their new findings on financial profiles of BNPL borrowers essentially rebuking BNPL as an avenue for credit to those who lack access to credit products. 
  • CFPB Director, Rohit Chopra stated, “Since Buy Now, Pay Later is like other forms of credit, we are working to ensure that borrowers have similar protections and that companies play by similar rules.”

 

• And more bad news for SBF…  FTX former engineering head, Nishad Sigh, plead guilty to criminal charges this week including “conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to violate campaign finance laws.”

 

• Rumor mill – Uncle Sean usually tries to stay away from reporting on rumors, but this one caught my attention pretty quick:
  • Visa Inc. is allegedly in talks to acquire Fidelity National Information Services (FIS).  WOWZA!!! 😲
    • There are certainly plenty of arguments on both sides of the fence related to if / how / should a deal like this be allowed (recall DOJ blocking Visa’s $5.3B proposed acquisition of Plaid).  Also recall FIS’s recent divestiture/spinoff of WorldPay that could certainly be viewed as strategic posturing to this merger.  I guess only time will tell….

 

• Notable FinTech funding for the week:
  • Pagos (payments infrastructure) raised $34M in Series A funding round that was oversubscribed.
  • Vouched (red hot identity verification space) raised $6.3M in Capital and now serves “more than 300 banks, fintechs, and healthcare providers.”
  • Marco (trade finance platform for LatAm exporters) raised $8.2M in new equity capital plus a $200M credit facility
  • Archway (API enabled modern tech integration platform - recently spun off from WaFd Bank) raised $15M in Series A round.

 
 
Random Uncle Sean Stuff:

• Happy Texas Independence Day!!!!  March 2, 1836, Texas declared its independence from Mexico and became a republic – basically its own country for nearly 10 years until Texas officially became a state in 1845.

• ICYMI, Berkshire Hathaway released their 2022 Annual Report – its’s always entertaining to read the Chairman’s Letter by Warren Buffet.  The “Charlie Thoughts” on pages 9-10 are solid gold!
• Anyone besides me notice instances of “shrinkflation” recently??? 
  • A bag of ice was $2 for a 10lb bag and is now $2 for a 7lb bag – 30% shrinkflation.
  • The double bag of charcoal I have been buying was $20 for 2 bags that were 20lbs each and is now $20 for 2 bags that are 16lbs each – 20% shrinkflation.
  • Pretty soon a 6-pack of beer will only have 4….. LOL!!!

• And of course some Dad Jokes to get us into the weekend vibe:
  • The sign in the grocery store said, “Manager’s Special.”  Seemed odd as he looked fairly average to me!
  • The French love escargot because they don’t like “fast” food….
  • That silent moment after a toddler falls over is the epitome of parental anxiety – because they are either absolutely fine or filling their lungs with enough air to mimic a tornado siren.  Bwahahahaha!!!!  
  • And lastly, I successfully changed a lightbulb in the house this week and immediately had to remind Aunt Patty of the high quality stud that she married – LOL!!!!  😝

 
 
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.