Uncle Sean's Update - March 12

Happy Friday once again!!!!!

Here is the Uncle Sean Update for 3/12/21 (one year after the pandemic started):

• SoFi makes the headline of the week by announcing the acquisition of Golden Pacific Bancorp, Inc.. and its wholly owned subsidiary Golden Pacific Bank, N.A. ($150M in total assets and $17M tangible common equity).  For my non-banking brethren, think of this as a reverse merger where SoFi is buying a Bank Holding Company (BHC) and the Bank as a wholly owned subsidiary, but maintaining the Holding Company Federal Reserve number as well as the Bank Charter number and just renaming the BHC and the Bank.  They also plan on injecting $750M (that is a heck-of-a-lot of capital) into the national bank to expand their digital banking operations. 

• GEEK WARNING (LOL) – Uncle Sean geeks out a little here related to SoFi and Bank Charters:  For a “relatively” small sum of only $22.3M (basically the cost of a Series A round), SoFi just bought a national bank charter.  Evidently, this is the path of least resistance as well as the cheapest solution for SoFi (the OCC granted SoFi conditional approval for a national bank charter last October, but they still needed Federal Reserve and FDIC blessings).  Taking a page from the Jiko playbook, all SoFi has to do now is apply to become a Bank Holding Company.  This is the culmination of a long and expensive process as SoFi has been trying to obtain a charter since 2016.  To my Bank friends, THIS PART IS FOR YOU – there is a new breed of acquirer now and traditional M&A performance metrics really don’t apply.  The value of a bank charter can be way more than you think in this new environment.  Instead of selling your bank at essentially 1.3x P/TBV (Golden Pacific Bank), look at what your buyer is willing to pay (i.e. opportunity cost of not having a charter) – as well as WHAT the acquirer is actually buying…..  Recall just two months ago where we talked about SoFi going public via SPAC acquisition - see page 35 in the SoFi Investor Deck where SoFi discloses the value of a bank charter (reiterate – ANY charter, not a specific bank) to their operations to be $200M - $300M in incremental EBITDA per year for the next 4 years.  HOLY COW!!!  Now, I know this can be a stretch and I don’t mean to presume that GPB could have received 10x – 20x more purchase price, but if you STILL want to focus on bank financial performance metrics and acquisition pricing in the traditional bank M&A sense, then SoFi just bought a national bank with a 1 month pay-back period (that’ll make your stock jump!)……  Summary – it’s the Charter that is being sold, NOT your bank performance…  So what’s next for SoFi?  Uncle Sean is very interested to see how quickly SoFi Bank becomes a Sponsor Bank offering BaaS solutions while leveraging the Galileo platform (April 2020 acquisition for $1.2B) to assist with third-party fintech card issuance as Program Manager and Processor.  VERY cool stuff (whew - I need a nap now)!!!

• And another interesting industry group launched this week – the Financial Technology Association founding members include Afterpay, Betterment, Brex, Carta, Figure, Marqeta, Quadpay, Plaid, Ribbit Capital, Wise, and Zest AI (pretty dang impressive).  The group strives to be an advocate for consumer-centric fintech development and “will educate stakeholders and support the modernization of financial regulation to drive greater financial inclusion, equity and opportunity.”

• It’s official - PayPal is again taking on more crypto technology strategy.  Widely rumored last week, but actually confirmed this week as they announced the acquisition of Curv to “accelerate and expand its initiatives to support cryptocurrencies and digital assets.”  Financial terms of the deal were not disclosed (but several sources are reporting approximately $200M).  Curv is a leading provider of cloud-based infrastructure for digital asset security.

• Check out Paymynt Financial Group – they announced the upcoming launch of the MYNT PayCard (coming 2Q2021) described as a “next-gen bankless smart card” targeting the U.S. underbanked population.  It is both a cryptocurrency wallet and a payment card that allows members to reload, send, and receive multiple cryptocurrencies through non-bank blockchain technology that they refer to as “chip-to-chain”.

• BlockFI raises $350M in Series D funding with a valuation of approximately $3B in anticipation of doubling their 500 person team by the end of 2021 and launching the BlockFI Bitcoin Rewards Credit Card in early 2021.

• M1 Finance raises $75M in Series D funding round citing rapid growth in assets-under-management in excess of 350% since February 2020. 

• NYDIG raises $200M in new growth funding from strategic investors to help fund its business initiatives related to bitcoin.  NYDIG started to gain serious media attention in December when it helped Massachusetts Mutual Life Insurance Co. purchase $100 million in bitcoin.  MassMutual took a $5 million stake in NYDIG at the time and has returned with an additional investment in the company with this round.

• Autobooks raises $25M in Series B round following a strong 2020 with “232% revenue growth and the addition of 46 financial institutions to Autobook’s rapidly growing customer base of banks and credit unions with assets ranging from $50 million to $350 billion.”

• This article in CU Insight about Konstantina Baker made me happy - ProFed promotes Konstantina G. Baker to President / CEO.  This is super cool as she began her career at ProFed Credit Union in 1985 as a teller handling member deposits and loan payments. She worked her way through the ranks and served as assistant vice president of data processing, vice president and controller, chief operating officer, and is now President / CEO of the $570M Indiana CU.  WOW – Congratulations on an amazing career!!!!

Random Uncle Sean Stuff:

• Aunt Patty and I are celebrating 27 years of marriage today!!!!
• Don’t forget to set your clocks forward an hour this Sunday at 2:00 AM for Daylight Savings Time (where observed). 
• Looking back at one year of Covid-19 this month, here are a few notable terms / phrases that I was pleasantly ignorant of before the pandemic began:  Virtual Happy Hour, Anti-Masker, Social Distancing, Quarantini (I actually like that one), Covidiots, Amazon Spendemic, Coronacut (when your wife shaves your head), and TP Hoarders.  Remember when Corona was just a beer?  Wearing a mask in the bank lobby is now normal and required…  And my personal favorite – Covid-19 gave me 20 (as in pounds gained)!!!!

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.