Uncle Sean's Update - 9/6/24

​Happy Friday!!!
 
For the love of everything that is holy – NO, I do not need the attendee list for Money 20/20 so please quit spamming me 5 times per day LOL!!!  Ah, the joy of conference season. 😂  Here is the Uncle Sean Update for 9/6/24:
 

• 👀 Keep an eye on this (developing) as it could have massive implications to the BaaS / Embedded Finance FBO model… 
  • Evan Weinberger published an article in Bloomberg Law stating the FDIC (in response to the Synapse bankruptcy meltdown) is “expected to release a proposed rule requiring banks to maintain ledgers of ‘for benefit of’ accounts opened by third-party fintechs so the banks can identify how much end-user money they’re holding… Banks would still be able to partner with middleman companies such as Synapse but would be required to have constant access to the third-party ledger and reconcile data each day under the proposal…” 
    • Bloomberg Law source article: FDIC Eyeing Plan to Protect Customers From Fintech Failures
      • My take (not that anyone asked – LOL) is that it appears the regulators are going to eventually demand on-core ledgering even if via sidecar model from regulated legacy core processors which effectively kills the unregulated middleware model entirely.  The bank must own the ledger.

 

• And of course some macroeconomic news to kick off the weekend with the BLS August Jobs Report showing 142K jobs added (estimate was 161K) with coming in at 4.2% as expected (July was 4.3%).
  • Noting that June Jobs report was again revised down by another 61K to 118K (was originally 206K – so a 43% miss from initial estimate 🙄); and July was revised down by 25K to 89K. 
    • Not great, but not a terrible overall report although the significantly material continued downward revisions (source - BLS Revisions 2024) remain a concern.  CNBC has pretty good summary.

 

• The FDIC released their Quarterly Banking Profile report for 2Q2024 as well as the accompanying Remarks by FDIC Chairman Martin Gruenberg.  I’ll admit – nothing really surprised me (especially if you follow the FedFis Inside the Numbers quarterly webinar) and the results for the industry are pretty strong, all things considered.  But I will highlight the following:
  • The number of banks on the FDIC’s “Problem Bank List” (defined as having a composite CAMELS rating of 4 or 5) increased from 63 in 1Q2024 to 66 in 2Q2024 representing 1.5% of all banks which is certainly within the normal range of 1 – 2 percent during non-crisis periods.
    • Warning – here comes the shameless plug (LOL - 🤠)…  For comparison, the FedFis Rating© for 2Q2024 is showing 70 banks in the bottom 1% of all FI’s with a rating of 3.85 or worse based on call report data (Source: FedFis Bank Rating).

 

• Jack Henry (Nasdaq: JKHY) partners with Moov to enable financial institutions to offer enhanced digital payment services to SMB customers.

 

• MidWestOne Bank (FDIC 14843; Total Assets $6.6B) has completed implementation and is now live with Temenos Digital Onboarding for retail depository products.

 

• 💥 Congrats to Rory O'Reilly and the entire Knot Team for a big win this week as American Express and Knot team up to simplify the process of adding payment information at select merchants.  Powered by Knot’s CardSwitcher product, this product allows eligible Amex customers to easily update their payment info at top merchants like Bloomingdale's, Hilton, and Macy's.  Nice work!  👍

 

• HawaiiUSA FCU (charter 1815; Total Assets $2.5B) selects Velera for debit card processing in addition to the already existing relationship with Velera for CC processing.
  • Yessir - Here comes another plug 😊!!!  Wanna know who was displaced as the prior Debit Processor for HawaiiUSA FCU…???  Give Bobby Button a call and ask him about our FI vendor tech stack (the FinTegration Ecosystem©) for every bank and credit union in the US.

 

• 👀 Things were interesting and BUSY in the world of M&A this week (WHEW):
  • Banyan Software announced the acquisition of Automated Systems, Inc. (ASI) core processor with over a dozen additional modules.  Banyan also announced the formation of the Financial Institutions Group where ASI will be joined by Loan Vision in order to foster collaboration while operating independently.
  • Ingo Payments has acquired Deposits Inc. to accelerate “the launch of its Modern Money Stack, which will enable banks, fintechs and brands to transform money flows into full, feature-rich accounts that foster new relationships, revenue streams, and utility, delivered in a modern, modular, compliant and cost-efficient way.”
  • Paylocity (Nasdaq: PCTY) announced a definitive agreement to acquire Airbase for approximately $325M.
  • Ncontracts has acquired Venminder (a unified platform for managing third-party risk related to the entire vendor lifecycle) via a buyout from HG.  As part of a simultaneous transaction, Hg has bought out prior Ncontracts shareholder Gryphon Investors, as well as prior Venminder shareholders.

 

• And even more M&A going on in the Bank space this week:
  • We had another CU acquisition of a bank…  REV FCU (charter 9986; Total Assets $1.135B) to acquire First Neighborhood Bank (FDIC 6800; Total Assets $149M).
    • If you are keeping score, this is now the 15th announced acquisition of a bank by a credit union thus far in 2024 compared to 11 in 2023, 16 in 2022, 13 in 2021, 7 in 2020, and 16 in 2019 (source: FedFis).  With over three months left in 2024, we may indeed set a new record.
  • ICYMI - in an even rarer transaction, we have a bank attempting to acquire a CU 🤯…  The Pittsfield Co-operative Bank (FDIC 26393; Total Assets $378M) is attempting to acquire Arrha Credit Union (Charter 61189; Total Assets $148M ) with the NCUA currently reviewing the application.
    • This deal has been rumored for awhile now with a legal ad soliciting CU member feedback posted in early July; and Arrha’s board approving the deal on July 30.  I believe the NCUA approval is needed before the CU members can vote on the merger – so not necessarily an announced deal with a definitive agreement just yet (please let me know if I am dead wrong on this)…
  • ConnectOne Bancorp (Nasdaq: CNOB) to acquire The First of Long Island Corporation.  Check out the CNOB Investor Deck related to the merger (note the 0.74x P/TBV – Oof!!! 😲 Some significant FV write-down going on)
  • Builtwell Bancorp in TN to acquire Bradley County Financial also in TN.
  • Mutual Federal Bancorp to acquire Pulaski Savings Bank.

 

• Notable FinTech funding for the week:
  • Flex (HSA and FSA payment infrastructure) raised $3.2M Seed Round.
  • Oyster (payroll platform for distributed workforces) raised $59M in Series D funding round.
  • Drip Capital (cross-border trade finance) raised $113M in capital consisting of $23M in equity and $90M in debt financing.
  • Thatch (personalized health benefits platform for businesses and employees incl Visa Debit Card) picks up $38M in Series A round – WOW, that’s a nice sized A-round!
  • Sedric (AI-powered communications monitoring of employees at FIs for compliance enhancement) raised $18.5M in Series A funding round.

 
 
Random Uncle Sean stuff:

• Cooler temps have finally arrived!!!  Rumor has it that we may see lows in the upper 50’s by the end of the weekend here in East Texas – oh yeah!!!
• Also – recall last week where I mentioned that Aunt Patty’s parents were coming to visit and we were probably going to make a trip to Shreveport for some gambling action (her Mom and Dad love those slot machines)….  Well, I must report that no casino’s went bankrupt, or were even hurt at all, during our visit….  In fact, I’m sure they can’t wait for us to come back very soon…  Ugh!!! 😬😆
• And of course some obligatory Dad / Bad Jokes:
  • Ah, the IRONY in spelling…  Hyphenated….  Non-hyphenated… 🤔
  • Sleeping 12 hours a day can reduce your chance of doing something stupid by 50%. 😅
  • My goal was to lose 10 lbs this year…  Only 15 more to go! 🫤
  • Little known fact, but…  T-shirt is actually short for “Tyrannosaurus Shirt”…  Because of the short arms…  🦖🤣😂

 
 
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.