Happy Friday and Happy Labor Day Weekend!!!
Hard to believe we are already in September (although the 100+ degree heat is still sticking with us for now here in Texas)…  Here is the Uncle Sean Update for 9/1/23
Huge shout-out and THANK YOU to COCC for their recently announced sponsorship of the Bankers Helping Bankers platform!!!!Love this from Susan – “As a core banking technology provider committed to the growth of community banks, we are pleased to support BHB. Being able to support the wider adaption of new technology solutions sets up community banks for long term success and that aligns with our operating philosophy” said Susan Salecky, Senior Vice President & Chief Marketing Officer at COCC. 😊 
And more coming out of the broader BHB Ecosystem…  MCBank joins as a strategic investor to the Bankers Helping Bankers (BHB) Fund. “As an investor in the BHB Fund, MCBank has the opportunity to directly support the adoption of technology within community banks and contribute its century-spanning expertise to a collaborative ecosystem of like-minded bankers who are driving innovation within the industry,” says Robert Hemsath, CEO of MCBank. 
Check out my friends over at Fintegrate Technology (leaders in Dispute Management and Collections and Recovery solutions for financial institutions) as they surpass sales and operational growth projections for 1H23 with 28 new client engagements, 3 reseller partnerships and released 3 new Dispute Management products; serving a diverse range of financial institutions, ranging from $120M to almost $160B in assets.  Nice Work!!! 🚀 
Okay – it was kind of a light news week headed into the Holiday Weekend, so here is a quick “off the rails” unsolicited M&A commentary from Uncle Sean….
This week I was asked a couple of times about the slow down in bank M&A activity, to which I explained the following (seemed legit at the time – LOL):Depressed stock performance….  Many bank acquisitions are done as a stock purchase or a mix of stock & cash.  Regardless of what index you look at (KBW, BKX, etc.), bank stocks are still considerably depressed.As a result, acquiring banks are not really enthused about issuing more stock (dilution) to finance an acquisition; and target banks are not thrilled about accepting stock that is significantly underperforming the market.Additionally, due to deposit competition and prior liquidity tremors, acquiring banks don’t want to do all cash deals right now.Unrealized losses in bank securities portfolios….  We are still seeing fluctuations in treasuries (particularly in the 10yr) and other bonds that are impacting bank securities portfolios resulting on AOCI losses.  As rates continue to rise, we will likely see more of this until the yield curve flattens / normalizes.M&A accounting requires an adjustment to market value on securities forcing a negative impact to Retained Earnings and Regulatory Capital (not to mention effecting the pricing nature of deals) that is causing acquiring banks to pause right now.Lastly, some uncertainty in where the economy is headed also very likely plays a role here as many banks are playing a “wait and see” type of approach before committing to deals.Much of this appears temporary (my opinion) with pent up demand likely to result in accelerated M&A activity next year; although it could be later next year before we see a material rebound in activity. 
👀  Well, somehow Credit Unions didn’t get my memo above on M&A slowdown…. 😬 LOL!!!
This week brought a handful (5 to be exact) of CU acquisitions of a Bank including a pair of “double doubles”… 😮Five Star Credit Union (Charter #68302; $773M) to acquire OneSouth Bank (FDIC 15813; Total Assets $212M).“But wait, there’s more” – Five Star Credit Union also announced an agreement to acquire Wilcox County State Bank (FDIC 17126; Total Assets $178M).This marks the third and fourth time that Five Star CU has acquired a bank (previous acquisitions include Farmers State Bank in 2015 and Flint River National Bank in 2013 – Source FedFis).Michigan State University FCU (Charter 23279; Total Assets $7.7B) to acquire McHenry Savings Bank (FDIC 30864; Total Assets $322M).Hold on – they’re not done…  Michigan State University FCU also announced an agreement to acquire Algonquin State Bank (FDIC 13080; Total Assets $145M).Michigan State University FCU is an intriguing and innovative CU with two separate direct-digital brands (AlumniFi and Collegiate).  Now they can add the moniker of “serial bank acquirer” to the list.Shameless plug 😊 – reach out to our own Bobby Button if you want more info on direct-digital bank / CU brands.Innovations Financial Credit Union (Charter 68732; Total Assets $400M) has agreed to acquire First National Bank Northwest Florida (FDIC 25122; Total Assets $169M).If you are keeping score, this brings the total to 10 announced CU acquisition of a bank so far for 2023.  That compares to 16 in 2022, 13 in 2021, 7 in 2020, and 16 in 2019 (Source FedFis). 
So – I don’t know if this was coincidence or if there is a strong trend forming (I broke my crystal ball years ago; and sometimes it’s okay to say “I don’t know” LOL).  But the punchline from what I see is that these are all very small banks (add all 5 together and you barely get to $1B in total assets) – pretty much the M.O. of CU acquisition of BK targets.  Almost all have loan concentrations in RE (both Res and CRE) which make sense from a CU perspective as well as local deposit market / limited branch footprint.  Worth noting that several of these small banks had yields on average earning assets north of 5% which is pretty good comparatively speaking right now; and only two had larger emphasis on securities with only one that had material unrealized losses on securities.  Also of interest is the significant cash position for First National Bank Northwest Florida of $95M (total assets are only $169M with a Cost of Funds of only 1.1% and pushing 5.24% Yield on Avg Earning Assets – and a roughly 50% CRE emphasis drawing 6.8% Yield – WOW).
Fortuna Bank (in organization) gets conditional approval from the Ohio Department of Financial Institutions (ODFI) and is now initiating capital raise. 
Some other M&A news:Guild Mortgage (NYSE: GHLD) acquires First Centennial MortgageICE & Black Knight merger deal gets the nod from the FTC and is expected to close on Sept 5 following divestitures of the Empower LOS and Optimal Blue businesses to subsidiaries of Constellation Software Inc. 
Sallie Mae announces Pete Graham as next CFO
IBT Apps (core and digital banking software provider) launches mobile banking app for community banks.  Check it out at i2Mobile page
Zelle announced 2Q23 results with 10% quarter-over-quarter growth stating “over 2,100 bank and credit union brands offer Zelle® to their customers—consumers and small businesses—representing more than 80% of U.S. deposit accounts.” 
Well, well, well….  The Office of Financial Research (OFR) announced the launch of their LinkedIn page – check it out at Office of Financial Research where their first post highlights specific contributions made to promote financial stability over the past 12 years.Welcome to the show!!!!  😊 
Random Uncle Sean stuff:
So happy that college football is back again!!!!! 🏈 😊Did anyone else see that Nebraska vs Minnesota game at Huntington Bank Stadium in Minneapolis?  WOW that was a crazy 4th quarter!!!  I felt bad for the Cornhusker faithful, but what an exciting game!Okay – a couple of quick Dad / bad jokes and then it’s off for some Labor Day shenanigans!!! 🍺🍷I heard that David Hasselhoff changed his name to David Hoff….  It’s less “hassle” that way….The doctor asked if any members of my family suffer from insanity.  I said, no – we all seem to enjoy it!!! 😵🤘One tectonic plate bumped into another and said – sorry, my fault!There once was a time where “a new hip joint” meant someplace I would go on the weekends…. 🙄🤣 
Have a GREAT Labor Day 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.