Happy Friday!!!
Don’t forget to sign up here to have the Uncle Sean Update delivered straight to your inbox every week along with the FinTech Cowboy’s interviews and Bobby’s Data Timeout (12,000 subscribers and growing).  Here is the Uncle Sean Update for 8/18/23:
Shout-out to R&T Deposit Solutions as the latest innovative institution to join The BaaS Association!!!  Check them out at rnt.com
This is pretty awesome – look at all the Direct Digital Bank (a digital division of a chartered institution) headlines this week:Green Check Verified has partnered with TASI Bank, a division of Bank of Guam (FDIC 20884; $2.7B Total Assets, and an MDI), to expand the banks cannabis banking offering for communities across nine Bay Area counties.Ivy Bank, division of Cambridge Savings Bank (FDIC 17870; $6.7B Total Assets) announced it has exceeded $530 million in deposits and added over 6,600 customers nationally in only two years after launch.  WOW!!!!  😮Citizens Bank of Edmond (FDIC 4084; $375M Total Assets) announced the launch of Roger, the only digital-first bank tailored to our U.S. service members, via a partnership with Nymbus.  Check it out at Roger.bank – very cool niche offering that definitely solves a serious banking need (particularly at enlistment).  
👀 FDIC Chairman, Martin J. Gruenberg, speech at the Brookings Institution Center on The Resolution of Large Regional Banks — Lessons Learned.  No surprise that more regs are being proposed.  Key points:Capital Treatment of Unrealized Losses – allowing for unrealized losses on AFS securities to impact regulatory capital (Basel III – banks over $100B).  Would have forced banks to raise capital as unrealized losses occur (but Uncle Sean worries a little bit about the reciprocal event).Long-Term Debt Requirement (again for banks over $100B) – shifting much of the liquidity burden from short-term deposits; and coinciding enhancements to Resolution / IDI Plans. Supervision and Deposit Insurance Pricing related to risks of Uninsured Deposits as a significant source of funding – this is described a matter “of priority attention for the FDIC” as well as risk-based deposit insurance pricing. 
Yep – Uncle Sean goes completely “off the rails” here on Farmington State Bank so feel free to scroll down if you want… Deep breath – here we go: 😊What a long strange trip it’s been (or maybe more appropriately “what a tangled web we weave”)….  Farmington State Bank (FDIC 6149; $16M Total Assets) announced it is voluntarily selling its loans and deposits to Bank of Eastern Oregon (FDIC 16243; $820M Total Assets) as they wind down operations.  As a result, Farmington received a C&D enforcement action by the Federal Reserve instructing for an orderly dissolution to which Farmington consents to the Order.….  If this bank sounds familiar to you, it’s because they were formerly known as Moonstone Bank….  Let’s dig into this post mortem mess (much of which is fully detailed in the actual Cease and Desist Order):Sept 4, 2020 – Federal Reserve Bank of San Francisco approved FBH’s application to become a bank holding company via acquisition of Farmington Bancorp to which Jean Jacques Pierre Chalopin (resident of The Bahamas and owner of Deltec International Group / Deltec Bank – one of the primary banks for Tether and Alameda Research) is the principal shareholder of FBH as well as President and Chairman. June 30, 2021 – FSB becomes member of the Federal Reserve (what could possibly go wrong now – LOL)…Mar 7, 2022 – Farmington State Bank rebrands as Moonstone Bank and announces $11.5M in private equity funding from Alameda Research Ventures (yes, that Alameda owned by FTX and Sam Bankman-Fried).  Later disclosed as a 9.9% minority investment.The 9.9% minority interest is key here because 10% constitutes “change in control” from a regulatory perspective and a much more diligent review.Anyone with any M&A experience here finds this 9.9% ownership for $11.5M to be completely laughable by any standard.  Here is some Uncle Sean M&A math per Farmington State Bank’s 12/31/21 call report:Total common equity is $6,195 minus $1,164 for intangible assets gives us a Tangible Common Equity value of $5,031.$11.5M cash consideration plus $5.03M tangible common equity = $16.53M total tangible pro forma capital consideration.“roughly” 10% ownership applied gives us a multiplier of 1.653So, $11.5M cash consideration divided by 1.653 equals about a 6.96x pro forma tangible book valuation for comp purposes is ridiculous…  Or, a total valuation of $115M (6.96 x $16.53M) for a bank with $18M in Total Assets and $11.8M in deposits…Nov 11, 2022 – FTX files for bankruptcy…Nov 29, 2022 – Moonstone issues statement clarifying that Alameda has no controlling interest in Moonstone, no board membership, and no involvement with management of the bank; and even tried to explain that Alameda’s investment valuation of Moonstone Bank “was consistent with other similar technology Banks and Trust Banks startups at the time.”  Yeah – right!!!!  😝😵💀Jan 16, 2023 – Deltec Bank admits to having received a short-term loan from an FTX affiliate.Dec 24, 2022 – Farmington State Bank, d/b/a Moonstone Bank (FDIC 6149) announced they have more than sufficient liquidity to cover the material FTX deposit exposure held at the bank that was recently made public.  Moonstone is awaiting guidance from the Delaware Bankruptcy Court on where to transfer these funds.A quick look at their call report data (source: FedFis) shows a huge jump in deposits from $12.5M to $84M from Jun 2022 to Sept 2022 and a corresponding leap in Fed Funds Sold to cover the liquidity exposure (in layman’s terms, they took the FTX money and parked it at the Fed for safe keeping awaiting a BK court order).Jan 16, 2023 – More related info as Deltec discloses the receipt of a loan from an FTX affiliate – hmmm…Jan 19, 2023 – Moonstone announced they are exiting the crypto space and “returning to its original mission as a community bank.”  They also stated that they will be dropping the Moonstone Bank name.Jun 13, 2023 – U.S. Secret Service seizes $58M in funds from Deltec Bank in custodial accounts held in the U.S. “amid an investigation into international money laundering, wire and bank fraud.”For me, the key point in all of this is the Federal Reserve Consent Order.  They felt it necessary to go into (what seemed to me anyway) a lot of detail regarding deviance from the business plan and full detail of the engagement in digital assets without prior written notice of non-objection.  Feels to me like a blatant warning to other FI’s…“WHEREAS, in the most recent examination of the Bank, the Reserve Bank and the WSDFI found that Farmington violated the Bank Commitments by engaging in activities which changed the Bank’s business plan and general character without receiving prior written approval from the Board of Governors, the Reserve Bank, or the WSDFI, including the Bank’s entering into a non-binding memorandum of understanding with a third party whereby the Bank committed to “work with” the third party “to design the necessary IT infrastructure” to facilitate the third party’s issuance of stablecoins to the public in exchange for receipt of 50 percent of mint and burn fees on certain stablecoins, and took material steps to implement that memorandum of understanding…”  
After many challenges over the last two years, Better.com is set to go public via SPAC with Aurora Acquisition Corp. “on or about August 23, 2023.” 
Capital One sells roughly $1B of Office CRE Loans to Fortress Investment Group
Prime Trust has filed for Chapter 11 Bankruptcy protection…  A look back at recent events:June 8 – BitGo signs LOI to acquire Prime TrustJune 21 – Nevada regulator issues Cease and Desist order stating their financial condition was “critically deficient” and unable to honor customer withdrawalsJune 22 – BitGo terminates Prime Trust acquisition agreementJuly 18 – Prime Trust placed into receivership by Nevada Regulator 
UBS AG and several of its U.S. based affiliates agreed to pay $1.435B to settle civil action alleging that it made misrepresentations related to underwriting and issuance of residential mortgage-backed securities (RMBS) issued back in 2006 and 2007. 
For my Ag-Banking friends – Keep an eye on Hurricane Hilary as it is expected to hit Southern California as a tropical storm early next week bringing the potential for record flooding.  Could result in agricultural and supply chain disruptions.This event is being labeled as “exceedingly rare” and is the first ever tropical storm watch issued for Southern California by The National Hurricane Center.The last (and only) tropical storm to make an “official landfall” in California was Sept. 24, 1939 per this FOX Weather article
Personnel moves:PayPal (NASDAQ: PYPL) names Alex Chriss as President and CEO effective Sept 27, 2023.Discover CEO Roger C. Hochschild has resigned per this SEC filing.  Board member John Owen has been appointed Interim CEO and President and the Board has engaged a global executive search firm to identify a permanent CEO and President. 
Notable FinTech funding for the week:BitGo (qualified digital asset custodian) raised $100M in Series C funding round at a $1.75B valuation.Treasure Financial raised $7.5M in funding and announced the launch of Treasure API.ClassWallet (digital wallet-based purchasing and reimbursement platform for public funds) raised $95M in Capital funding round.Splitit (BNPL) raised $60M in Capital and will delist from the Australian Securities Exchange (ASX) in an effort to shore up their balance sheet to target larger merchants. 
Random Uncle Sean stuff:
It’s been a very happy and exciting week in the Mayo Family – definitely blessed to report:CONGRATS to Laurel Mayo – she can now introduce Brandon as her “ex-boyfriend” as they are now ENGAGED!!!!!  WOO-HOOO!!!! 🎉🥂🎈🎊💍♥️We are officially on Baby Watch as Tanner & Bre are expecting the arrival of their baby girl any day now!!!! ⌚⌛💗🍼🚼Aunt Patty and I dropped our youngest baby (Claire) off at college this week – there may have been a few tears shed. 🥹Especially after I got home and looked at my bank account – LOL!!! 😮🤣😂Okay, okay, here they are – Uncle Sean Dad/Bad Jokes:I’m not saying I’m getting old, but I’ve reached the age where I appreciate a nice handrail!  😆What do you call a man with a rubber toe?  Roberto….  (ugh – that was so weak it was actually funny)I was going to surprise Aunt Patty by making dinner, but the recipe said to turn oven to 180 degrees – and now I can’t open the door….Spelunking is beneath me.And of course an obligatory Chuck Norris joke….  Chuck Norris can ride a wheelie on a unicycle.  😊 
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.