Smokes. A bank just dropped 35% the same day. The Spy is falling folks. The banking crisis might be coming back.

We might be gearing up for Banking Crisis 2.0 I Want to tell you what's going on here? New York Community Bank Corp Which owns Surprise Surprise New York Community Bank and Flagstar That's a big one. They are dropping to levels roughly in line with what we saw during the last banking crisis. Jump on over here. What do we have we have 2023 going into March Banking Crisis Begins Bank Stocks plummet including New York Community Bank down to the lower sixes as low as 554 bobbing around in that $6 range for a while after the Federal Reserves bailout taxpayer backed bailout.

Mind you, the bank term funding program helped prop up Bank stocks until of course. Oh wait, the bailout wasn't enough. What happened? Well, well, the bank cut its dividend down to 5 cents and took larger losses than expected. What the heck is going on here? Well, let's get into the specifics and then talk about how this affects the Federal Reserve Let's start by looking at their quarterly income.

Now it's very important that we look at their quarterly income. Why? Because this company actually acquired a lot of these Signature Bank assets. So when you go back to last year, a lot of their income looks higher because you have two Banks worth of income included in it. So of course their income is going to be higher.

but if you look at the quarter to quarter, you can see the real picture of what's going on of how the two Banks together are operating. And let me tell you, it's not good. In fact, net interest income was down 16% quarter over quarter. folks.

If your net income, your net interest income in a high interest rate environment is going from 882 million to 700 40 in a quarter. It's worth noting if you annualize that more than half of your net interest Revenue would be gone in a year 64% That's very bad and their total losses moved to $252 million from a gain of 207. Now, a lot of that was due to the bank taking substantially larger credit losses than expected. Markets were looking at a $45 million allowance for credit losses.

Basically, loans going bad. They actually took a $552 million write down of future loans that could go bad. In other words, they're like we're giving up on 12x what the market thought. So in other words, the bank itself is like yeah, this is a lot worse than we thought.

Sorry, we're going to cut the dividend because these loans are not performing or may soon not be performing. Yikes! Now they do give a description on this and and they also somewhat I Hate saying this, but try to mislead Their audience or their investors in two different ways. The number one way they like to mislead H is you have to look really carefully at this. This is a deposit flow analysis and when you look at this chart at a glance and I understand this is an Investor's mistake if they're just looking at a glance, but at a glance, it doesn't look like the deposit bar chart is that different.

but the way they've set this up is really hiding the fact that they had a 1.3 billion doll outflow. The chart is somewhat rigged to make that $1.3 billion outflow in the quarter not look that bad. And for a bank that has about $1 billion in cash, $9 billion in short-term assets, so about $20 billion available for outflows. but all of that is financed likely by a wholesale line of credit that they have.

Which basically means if you pay off the wholesale line of credit the debt they have, you don't have any cash available for withdrawals, and you're Lo losing deposits at an annual rate of $5.2 billion, right? 1.3 * 4. That doesn't look good, especially when your stock's down 35% and you're cutting your dividend, which will probably accelerate the rate of deposit outflows. Not good at all. scary, but that's just one way they try to mislead folks.

The second way they try to mislead investors is they show this chart here: Net Charge offs on average SL average loans So they're basically hi myself here. they're basically trying to say hey, look, look how low our charge offs are on our loans. Most of our loans are good. That's fine, but they're not telling you that most loans are small loans.

Very few big loans need to go bad, in fact. Guess how many loans went bad? Or that they started really charging off like there's provision for credit losses. Which is, we might write this off completely and we're going to write it off completely. For right now.

we might take a loss on that. they might not, You know. JP Morgan took like massive charge offs back during Co and then they added that back in as income when those loans didn't default because the Federal, Reserve and Congress basically bailed out people's loans, right? so you could take the loss and not actually realize the loss. Here, they're taking loss and they're telling you, hey, we think $552 Million worth of loans are going to go bad.

But we're also going to identify two specific loans that we're just going to go ahead and charge off. That is, we're we're going to assume we'll never get it back. Take a look at this Fourth quarter. Net charge offs were primarily related to two loans, folks.

Two loans exploded their net charge offs or the bulk of their $185 million in net charge offs just in the quarter. Just two loans. one that was a co-op loan with a unique feature. Oh, God When have we heard that before that prefunding did cap? X Uhoh, the borrower was not in default, but we moved it to available for sale and took the write off.

Interesting, so nobody else wants to buy the loan. Why are they about to be in default? I Mean I Hate to sound jaded here, but this is scary. This isn't good and I'll tell you why. this is scary practically.

Second, we had an additional charge off of an office loan. Whatever, that's not a surprise. The problem is they're telling you. Oh look, look look our deposit.

see the bar charts are close to good. We're good, and then oh look how few loans are bad. Look, we're good. You know they're doing all the fugazi fugazi while at the same time basically the only cash they have is financed on their line of credit.

Okay, after that, their deposit outflow after dropping 35% their stock dropping 35% is probably going to Skyrocket. They are now literally at banking crisis levels. and guess what? The FED bailout is coming to an end on March 11th the FED Bank term funding program ends, which means no more opportunity to just call up. AJ Uh, I've got some uh, pile of dog crap here.

It's worth about $10 but the original balance said it was worth $100 Will you lend me $100 and I'll hand you this pile of dog crap in exchange for that $100 And then between now and March 11th, the answer is going to be absolutely, here's your $100 for your pile of dog crap. What? Yeah, Taxpayers back in that by the way. Okay, fine. March 12th hey, Jay I Got a pile of dog poop worth $10 Will you lend me any money? No.

F off. what's that going to do to Banks I'm not saying we need to be here to bail out Banks I'm just saying I think Bank Crisis number Two is around the corner, especially with the ending of the bank term funding program on March 11th, which I think will substantially increase the odds of the FED cutting soon. not because they want to or because their 100% convinced inflation is over, but because they're going to need to. This is scary.

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