Uncle Sean’s Update 3/4/22

Happy Friday!!!
 
Welcome to March as we celebrate Women’s History Month!  Here is the Uncle Sean Update for 3/4/22:

• Congratulations to Community Bankers of West Virginia for being the most recent association for community bankers offering access to the Bankers Helping Bankers platform for their member banks in West Virginia!!!  Uncle Sean is super proud of the work we are doing in the BHB platform together!!!!

• Our friend, Mr. Mike Fernandez at Texas National Bank in Sweetwater, TX (FDIC #34014; $171M Total Assets) made headlines this week announcing the upcoming April launch of “Bankers Lender”, a digital-first brand (we call that a Direct Bank here at FedFis) designed to serve the unique needs of individuals in the banking industry.  OUTSTANDING!!!!
  • This is a perfect example of Bankers Helping Bankers bringing profitable solutions to community banks. 

• Federal Reserve Chairman Jerome Powell testified before Congress this week.  Providing great clarity, as always (especially during a time such as now when it is needed most), Chairman Powell confirmed his support for a 25 bps interest rate hike at the upcoming March FOMC meeting; and plans to proceed carefully amid the war in Ukraine.
  • Perfect timing considering a strong February Jobs Report of +678,000 jobs (versus +440K estimate) and unemployment down to 3.8%.

• The FDIC released the Quarterly Banking Profile Report for 4Q2021 this week.  Couple of key takeaways that I personally found interesting:
  • This is my favorite – 4Q21 C&I loans increased 3.2% or $70.8B over 3Q21 in spite of PPP runoff.  This is great news as it signals business lending growth as the economy continues to expand!
  • Overall, 4Q21 Net Income of $63.9B is up 7.4% YoY, but down $5.6B or 8.1% from 3Q21.  You know the story here….  This is all a reflection of prior reserve releases.  The good news is that credit / asset quality looks good.
  • More good news – Net Interest Income (NII) is up while Net Interest Margin (NIM) is flat at 2.56%.  Why is that good news – see below.
    • In short, loan growth is happening!  For the real finance geeks out there like me (a high-five to my people!), when we see Net Interest Income is up while Net Interest Margin remains flat, it tells us that there is a corresponding increase in average earning assets (again while PPP continues to run off).  Yep – loan growth is here!!!  Look for NIM to increase (finally) as the Fed raises rates this year.
  • Only 44 banks on the “problem bank list” which is the lowest since 1984.
    • This compares to 65 banks that we are tracking with a FedFis Rating© of 3.70 or worse in the bottom 1 percentile (nice plug, right!).

• Unifimoney is now accessible through Jack Henry’s Banno Digital Platform allowing JH banks to access the Unifimoney digital wealth management platform to offer their account holders access to “trade thousands of stocks and ETFs, over 50 cryptocurrencies, and gold and other precious metals.”
  • I think our own Tanner Mayo said it best – “banks need a competitive offering to Coinbase. Further, FinTech apps like Coinbase that link to Bank accounts open up risk/fraud that the banks must cover…. Better that the bank own the channel.”  Yessir!
    • Recall a few weeks back where we talked about the Jack Henry Next-Generation Technology Strategy – essentially an open platform Marketplace for JH banks to easily access/integrate emerging technologies.  This Unifimoney announcement is a great example of that integration.

• Big bank M&A continues….  TD Bank Group (Canadian BHC for US based TD Bank, N.A.) announced an agreement to acquire First Horizon for $13.4B in an all cash transaction at 2.1X P/TBV.  That is a stout multiple for a cash transaction, but it is a great expansion plan for TD Bank and will result in a new top 6 U.S. bank upon closing.
  • Banking Dive has a good summary (note that the 9 month closing window seems tight – with an additional $0.65 per share to be paid if the deal doesn’t close before Nov. 27)
  • Check out the well done investor presentation – that’s a lot of real estate expansion with over 400+ locations across 12 states!

• Veritex Holdings, Inc. (Nasdaq: VBTX), the holding company for Veritex Community Bank announced an agreement to acquire StoneCastle Cash Insured Sweep, LLC (dba interLINK), an FDIC insured cash sweep platform, for $91M.

• Zip (BNPL firm based in Australia – fka QuadPay in the U.S.) has agreed to acquire Sezzle for approximately $353M in an all-stock deal to accelerate their U.S. expansion plans.  The combined company is forecasting 8.8M customers and 60,500 merchants in the U.S.  This deal has been widely anticipated for a few months now since they originally confirmed merger talks back in January.

• Credit Union acquisitions of banks went into hyperdrive this week:
  • Another Georgia credit union acquires a bank – Robins Financial CU (Charter #68670, $3.9B Total Assets) has agreed to acquire Persons Banking Company (FDIC #17089, Total Assets $429M), also of Georgia.
  • But wait – there’s more!  Barksdale FCU (Charter #9589; $2B Total Assets) in Louisiana to acquire HomeBank of Arkansas (Cert #5629; $74M Total Assets).
  • Oh – and one more makes 3 for the week and the 4th CU to acquire a bank so far this year!!!  Summit CU (Charter #67190; $4.8B Total Assets) in Wisconsin to acquire Commerce State Bank (Cert #58020., $837M Total Assets) in West Bend, Wisconsin.

• Southern Pine CU (Charter #67403; $42M Total Assets as of 12/31/21 Call Report) becomes the second credit union in 2022 to be released from conservatorship.  Originally conserved on 6/11/2020 with a FedFis Rating© of 4.41 at 6/30/20 placing them in the bottom 2% of all CUs to an improved 2.94 as of 12/31/21.  Nice work especially for a smaller financial institution!

• The FTC released their annual Consumer Sentinel Network Data Book.  Payments Dive has a good summary – the punchline is that consumer fraud totaled $5.9B in 2021, up about 79%  from $3.3B in 2020 – WOW!!!!
  • However…..  Keep in mind that the FTC also has a newly revamped online complaint portal in 2020 that has made it much easier for consumers to file a complaint (https://reportfraud.ftc.gov/#/).
  • If you want to dig deep, here is the actual (91 pages) Consumer Sentinel Network Data Book 2021 and includes a state by state breakdown as well.

• Acorn Finance (embedded home improvement financing) announced a partnership with Joist (mobile estimating, invoicing, and payments platform for contractors) to embed financing offers from multiple lenders directly into the Joist mobile app to allow Joist contractors to offer competitive financing at point-of-sale.

• Here are a couple of more interesting articles that caught my attention this week specifically regarding Ukraine and crypto if you want to dig deeper (just posting as “food for thought”):
  • Ukraine to issue NFT’s as War Bonds?
  • War in Ukraine as a potential catalyst for cryptocurrency adoption?  More on this from CNBC.

• Notable FinTech funding for the week:
  • Atomic (payroll API – but it’s really much more than that) raised $40M in Series B just five months after announcing their $25M Series A.  Atomic’s “API-delivered product, which focuses on payroll data, powers 70 banks, credit unions and fintech companies such as Coinbase, Dave and Propel. Atomic said it now serves more than 120 million Americans, or more than 60% of the country.”
    • Great people doing great work – check them out at atomic.financial.
  • Pinata (proptech / credit building platform for renters) raised <as%20unique%20ecosystem%20is,total%20up%20to%20%2420%20million” href=”https://www.prnewswire.com/news-releases/pinata-raises-13-million-to-transform-the-rental-landscape-strengthen-the-relationship-between-landlords-and-tenants-301489304.html#:~:text=Collectively%2C%20Pi%C3%B1ata’s%20unique%20ecosystem%20is,total%20up%20to%20%2420%20million”>$13M in Series A.</as%20unique%20ecosystem%20is,total%20up%20to%20%2420%20million”>
  • Balbix (cybersecurity posture automation) raised $70M in Series C funding round to continue to fuel AI innovation in cybersecurity following 2.5x growth in annual recurring revenue over the last twelve months.
  • Electric Capital (VC Firm) has raised $1B for two new Crypto VC funds for early-stage investments in crypto, blockchain, and Web3.
  • Tenderly (blockchain development platform) raised $40M in Series B funding to simplify blockchain development.
  • Lynx (API-connected healthcare payments and banking platform – i.e. health fintech) emerges from stealth with $17.5M in funding that includes a new $15M Series A round plus the previous unannounced $2.5M Seed.

Random Uncle Sean Stuff:

• Aunt Patty and I visited Backspin Sports Bar last Saturday afternoon – and it was AWESOME!!!  We had garlic fries, stuffed mushrooms and shared a blackened chicken Caesar salad.  Oh and the beer was cold and delicious and the service was great too!
• Looks like our friends in Germany decided to do some catfishing and water skiing this weekend – Germany seizes Russian billionaire’s superyacht as part of EU sanctions!  Whoa – hold on…  Now it looks like it’s going to be an international catfishing tournament as France seizes superyacht linked to Russia’s Sechin.
  • Do you think they will let Uncle Sean go catfishing with them???  I’m pretty good with a net!  😊
• Speaking of sanctions….  Although Russia is massive in the terms of square miles (it is the largest country in the world at 6.3 million square miles), I found it interesting to note that from an economic comparison, Russia GDP (forecasted to be about $1.7T in 2022) is smaller than the State of New York (3Q21 GDP of $1.9T), and much smaller than Texas and California.   

Have a GREAT weekend and please stay safe!!!
 
Uncle Sean