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March 4, 2024 | Premium Service  | Last week, a reader of The Institutional Risk Analyst  asked if they could not see the bottom 50 banks  in the universe behind the WGA Bank Indices. What a wonderfully diabolical idea.  Maybe a negative ETF strategy lies down the road? Subscribers to the Annual Plan of The IRA  will have access to the WGA 100 each quarter, as discussed below.  What a difference three decades make. Last week we suggested some weekend reading in the form of an important discussion between Bill Nelson  of Bank Policy Institute and David Beckworth  of Mercatus Center (“ Bill Nelson on the Using the Discount Window for Liquidity Requirements and Its Implications for the Fed’s Balance Sheet ”). They review a number of issues affecting banks and markets, most particularly the Fed’s desire that any and all banks use the Discount Window.   The Fed's desire to open the Discount Window to wider use is a delicious irony for long-time observers of the central bank. Back in the 1990s, officials of the Fed’s Board of Governors were sneaking around Washington to expand Discount Window lending to nonbanks. They inserted language into FDICIA legislation to allow essentially anybody to borrow from the Discount Window in times of exigency. Pulitzer prize winner Gretchen Morgenson described how the Fed’s Board tried to prevent Walker Todd at the Federal Reserve Bank of Cleveland  from publishing a research report about the provision. “They failed, happily, and the report was published,” Morgensen related. “But it was very, very interesting the degree to which the Federal Reserve Board seemed to want to keep that little amendment under wraps and to keep it from having the sunlight shone on it by this report that Walker Todd had produced.” Indeed not, since the subject language was drafted by the largest banks and then adopted by the Fed staff.  Wind the clock forward to today. Liquidity, not the value of collateral or protecting the taxpayer, is now the Fed’s chief concern. Fed officials have essentially thrown away Bagehot and the Federal Reserve Act, and are today concerned about how to forcibly inject fiat liquidity into the markets in times of sudden and apocalyptic levels of volatility. As the level of reverse repurchase agreements (RRPs) declines, the concern about volatility in the credit markets grows proportionately.  The chart below shows the system open market account (SOMA) in red, RRPs in blue and the mortgage-backed securities (MBS) component of the SOMA broken out in green.  Notice that the overall SOMA is falling much faster than the MBS subset, which is now performing like a portfolio of 20-year Treasury bonds due to low prepayment levels. The worry at the Fed, of course, is that once the level of RRPs falls below ~ $200 billion, the flow of cash out of the Fed and into T-bills will ebb and the visible volatility of short-term interest rates may grow. The flow of cash into T-bills and out of RRPs moderated volatility caused by the ebb and flow of the Treasury’s fiscal operations.  Now that the narrative is embracing the idea of no rate cuts at all in 2024, Beckworth summarizes the concern: “The Fed's Treasury holdings are about $5.8 trillion, now [down] to $4.7 trillion. Reserves are [at] $3.5 trillion, as you said, and they were as high as $4 trillion. Overnight reverse repo is down under $1 trillion, and it was about $2.5 trillion [before]. So, there is a reduction, but everyone's a little, I think, worried that we're going to trip over that point, which throws us back into a scarce reserve system, and what's crazy, scarce reserve at, say, $3 trillion, right? $2.8 trillion may be… oh no, we fell back into a corridor system, which is just so ironic given the enormity of it.” Ironic is one way to see it. Given the elevated concerns about liquidity, the Fed is desperately trying to find a way to convince banks to use the Discount Window. The acceleration of the potential change in a bank’s deposits illustrated at Silicon Valley Bank last year convinced the Fed that all insured depository institutions must have collateral pledged and ready to go at the Fed’s window. Much like a private repo agreement for dry poolable agency loans, the collateral must be identified and presented to the Fed for review before cash is advanced.   In plain English, in order to borrow from the Discount Window a bank needs to have collateral and the related paperwork in place before the need for cash arises. Like a private repurchase agreement, the loan administrator (in this case the Fed) must approve the collateral and set a haircut before the trade moves forward. Nelson & Beckworth note that the Discount Window has always been intended to finance the most illiquid, problematic collateral in the system, usually loans rather than securities. Nelson notes that the Standing Repo Facility (SRF) is not a substitute for the Discount Window:  “[T]he reason why the Standing Repo Facility is strictly inferior to the discount window [is], for one thing, [because] there's no prepositioned collateral. You bring your collateral there, and you engage in a repo. But, also, you can only do it once per day, and you can only do it in the middle of the day.” Maybe it's just us, but perhaps the Fed's Board of Governors ought to expand the hours and operations of the SRF to match the Discount Window? The Fed could mandate that all banks above $100 billion have documentation and whole loan collateral in place to draw funds if needed. And the SRF ought to be priced off the repo market and used by banks every day. Old wine in new bottles. Problem solved. Perhaps if the members of the Board and the Federal Open Market Committee spent less time on television discussing their personal views of monetary policy, they could focus on important issues like market liquidity and expanding the SRF. Over the weekend, Komal Sri-Kumar published a comment (" Rate Cuts: Fed Talks With Many Voices ") noted that members of the FOMC are causing confusion in the financial markets by publicly debating monetary policy in the media. Sri-Kumar: "The month-to-month core inflation rate was the highest since February 2023. These are the figures that will likely cause Fed officials to deviate even more from Chairman Jerome Powell’s suggestion at the press conference in December that markets should expect rate cuts starting soon. But they were not sufficient to make the various decision makers speak with one voice in providing guidance.” FRBNY President John Williams illustrates the problem with verbose FOMC members. Williams displays no interest in or concern with market issues, preferring the intricacies of monetary policy. So why is this Fed official disagreeing publicly with the consensus of the FOMC? We have believed for many years that FOMC members should express the consensus of the Committee or otherwise simply resign. President Williams should stay out of the media and focus on his job. How is it helpful for FOMC members to parade around the media, disagreeing with the legal vote of the Committee? Rather than helping the public, the public comments of Williams and other FOMC members confuse investors and financial markets. If a governor disagrees with the consensus of the Committee, then they should resign. More often than not, Fed Governors use media appearances to enhance their personal celebrity or job hunt rather than doing the public business. Perhaps appearing forceful on CNBC will help a governor get a nice gig at a big bank after leaving public service? We think that Federal Reserve Board Chairman Jerome Powell should prohibit media appearances by FOMC members and deputize one governor every month to express the consensus of the Committee in public. That's it. Subscribers to The IRA Annual Plan login to view the WGA 100 Banks as of Q1 2024. Notice that New York Community Bank (NYCB) dropped from being a top-10 performer earlier last year down into the top 50 in Q4 2023. NYCB will likely fall further once Q1 2024 results are released. WGA Top 100 Banks Q1 2024 The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy, or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

"And what is good, Phaedrus,

March 13, 2024 | So, how's your bank? This week we publish the 574th edition of The Institutional Risk Analyst  (at least since 2017) from beautiful Tampa, FL. Tomorrow we speak at the annual event sponsored by Fay Financial , one of America's premier high-touch mortgage servicers and residential asset managers. But today we delve into our newest product, the WGA Top Bank Index , to better understand what makes the top ten banks so unique even as the whole industry is under mounting stress. To orient the audience to just how good or bad the US banking sector is doing at present, consider the two charts below.  Things among banks as a population are not so bad based upon the measures of market performance and classical financial strength we use to triage the group. But the key issue that we wrote about in the most recent edition of The IRA Bank Book is the volatility we see emerging in credit loss metrics. We noted: " As with last year, the key issue in credit in 2024 remains volatility. Gross charge-offs on total real estate loans doubled between Q3 and Q4 2023. Credit card and nonfarm nonresidential commercial real estate loans drove the quarterly increase in the noncurrent rate in Q4, FDIC reports. We look for continued growth in reserves for credit card and commercial real estate loans in 2024..." First we show the WGA Top 100 Banks separated into quartiles based upon market capitalization. The distribution is not so terrible as you might expect, but the bottom quartile is growing fast as the number of troubled and unprofitable banks has grown. Most recently the share of unprofitable institutions increased to 10.9 percent, FDIC reports for Q4 2023, the highest share of institutions since the 16.6 percent share reported in fourth quarter 2017. Source: WGA LLC Now, small banks historically outperform their larger peers, but size does matter. Just ask JPMorgan (JPM) CEO Jamie Dimon , who thinks that the Fed should wait a couple more months to cut short-term rates. That is another way of saying that he’d like to get rid of some competition.  JPM adds over $500 billion in market cap to the top quartile, but is the only one of the top five banks in the Top 25 Bank group. Now the chart below shows the top 100 banks arrayed individually by market cap. The top ranked banks start from the left and work across to the less astute on the far right. Source: WGA LLC The big bump on the far left of the chart is JPM, which was 7th in the WGA Top Bank 100 in Q1 2024. Wells Fargo (WFC) and Citigroup (C) are in the middle of the distribution by virtue of scores at 50th and 56th place, respectively. U.S. Bancorp (USB) and Bank of America (BAC) are at the bottom of the third quartile of the group at 70th and 72nd, respectively. We own USB and bought it cheap. Note that the improved operating leverage at Citi helped CEO Jane Fraser vault over BAC CEO Brian Moynihan and almost pass a slowly improving Wells Fargo. After the dismal Q1 2024 earnings, we expect the bottom quartile of banks to grow in terms of market cap through 2024. So what makes the WGA Bank Top 10 unique? Below we provide some quantitative and qualitative comments on each bank and share the Q1 2024 WGA score results for each institution.  WGA Bank Top 10 Index Source: WGA LLC Number One on the WGA Bank 100 in Q1 2024 was First BanCorp (FBP) with a total score of 18. Notice that none of the banks in the group had a perfect score. FBP has outperformed KBWB by 25% in the past year. The $2.7 billion market cap bank trades at 1.8x book value. Next on the list is First Citizens BancShares, Inc. (FCNCA) , which acquired many of the assets of Silicon Valley Bank last year. Located in Raleigh, NC, FCNCA is an acquisitive and well-managed institution which maintains a deal team ready to assess failed banks. FCNCA is up 75% in the past year and has outperformed the KBWB by 3x. The $22 billion market cap bank trades at a modest 1.1x book value at present. Third among the WGA Bank Top Ten is International Bancshares Corporation (IBOC) in Laredo, TX. The $15 billion asset bank is a strong financial performer that has tracked the KBWB for the past year. The $3.4 billion market cap banking group trades at 1.3x book value, in part because they bucked the industry trend toward lower earnings and instead reported double-digit gains in EPS in 2023. After IBOC comes Axos Financial (AX) at fourth on the WGA Bank Top Ten, a diversified financial services company with approximately $20.3 billion in assets and approximately $34.8 billion of assets under custody and/or administration at its broker-dealer unit. From a distance, AX may appear to be a consumer and corporate lender based Las Vegas, NV. But this is a national commercial banking organization, with no brick and mortar branches, that has been sophisticated and prudently managed. AX has significantly outperformed the KBWB since the end of 2023, benefitting from hopes for a good economy in 2024. The bank is vulnerable to rising consumer loan defaults, but has the diversification of the advisor business. AX will be an interesting stock to watch in 2024. AX currently trades at 1.4x book on a 1.44 six-month beta, Next after AX is perennial top performer American Express (AXP) , the $160 billion market cap credit card issuer. AXP trades at 5.75x book value and is regularly one of the highest rated banking firms. What is the secret of AXP? High equity returns caused by equally high asset turnover and aggressive credit management. One area of weakness is operating leverage, where AXP is above 70% vs the mid-60s for Peer Group 1. After AXP, next on the WGA Bank Top Ten is Discover Financial (DFS) , the credit card issuer and payments platform that is being acquired by CapitalOne Financial (COF) . DFS is an exemplary performer that suffers from its relatively small size. The $100 billion asset bank trades at 2.2x book value or less than half the multiple of AXP but twice the multiple of COF. DFS has outperformed the KBWB consistently but, as we noted in an earlier note, really needs to join forces with a larger bank. Reports that DFS could not work out a deal with JPM suggest that management wanted a more equal partnership with COF. By taking out DFS, JPM was potentially denying COF growth and access to the DFS payments platform. At 7th on the WGA Bank Top Ten is JPM, the only top five money center bank to make it into the WGA Bank Top 25 Index. JPM has significantly better market and financial performance than its large bank peers, including an efficiency ratio that is below the Peer Group 1 average in the low 60s. JPM trades at 1.7x book and has a market return that is likewise above its asset peers. JPM has out-performed the KBWB by 100% in the past year. It is the clear default bank for institutional equity managers. At number eight on the WGA Bank Top Ten is Merchants Bancorp (MBIN) , a $1.8 billion market cap institution that currently trades at 1.65x book value. Strong earnings growth in the face of negative industry headwinds is one reason why MBIN has prospered over the past year. The bank tracked the KBWB through much of last year when markets feared a recession, but in Q4 2023 the stock followed the other performers in the group higher. This stock may weaken if recession fears grow. Next on the list after MBIN is OFG Bancorp (OFG) of Carmel, IN. OFG is the number nine stock in the WGA Bank Top Ten. MBIN has outperformed the KBWB by 3x in the past year, no surprise since the bank is consistently in the top decile of Peer Group 1 in terms of net income and low credit loss metrics. MBIN has double the capital of its peers and an efficiency ratio in the 30s. Eat your heart out Jamie Dimon. Finally, number ten in the WGA Bank Top Ten is Synchrony Financial (SYF) , the $17.6 billion market cap consumer bank that outperformed the KBWB by 100% over the past year. SYF trades at a 1.3x price to book and has superior asset and equity returns compared with its larger peers. SYF has a bank charter, but behaves like a finance company. SYF has $120 billion in assets and an efficiency ratio in the 30s or half of the average expense ratio of Peer Group 1. Gotta love it, but SYF credit performance has deteriorated over the past year. Provision for credit losses at SFY increased $603 million to $1.8 billion in Q4 2023, driven by higher net charge-offs. Net loss rates are in the mid-single digits and rising, putting SYF into the same category as COF and Citi. If we start talking about recession and consumer defaults, then SYF will be a name to watch and not in a good way as was the case in 2023. The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy, or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

March 20, 2024 | Premium Service   | First, let’s start with some happy thoughts. Over the past year, the WGA Bank Top 25 Index is up 39.7% vs 28.8% for KBWB. Because there are only three stocks that overlap the two groups, it is possible for KBWB to outperform the WGA Bank Top 25 Index, as it did over the past two months. This dichotomy is a product of market volatility and size. It also illustrates why a long/short strategy is required with financials. Of note, the WGA Bank Top 10 Index continues to outperform the larger KBWB.

April 17, 2024 | Premium Service | In this edition of The Institutional Risk Analyst , we review the results for Charles Schwab (SCHW)  and Bank of America (BAC) . We told our readers last year that SCHW would survive the liquidity storm and get smaller, and they did. We also told readers that BAC is in big trouble, not due to credit but because sub-par asset returns have left the bank underwater. Over the past year, BAC’s return on assets has fallen from 1.07% in Q1 2023 to 0.83% in Q1 2024. Hello. What happens in a rising rate scenario Brian?

April 29, 2024 | Premium Service | On Friday after the market’s closed, the FDIC seized Republic First Bank (FRBK)  in Philadelphia and sold the net assets and deposits to Fulton Financial Corp (FULT)  of Lancaster, PA. The $5.8 billion Republic had a significant concentration in commercial real estate and a yield of 2% on its securities portfolio, BankRegData  reports. Sound familiar?  Watch Bill Moreland's video assessment of Republic . Kroll Bond Ratings  just published a research report on its large rated universe in the commercial mortgage backed securities (CMBS) market. “The delinquency rate among KBRA-rated U.S. commercial mortgage-backed securities (CMBS) in April increased moderately to 4.67%, up 17 basis points (bps) from March,” KBRA reports. “However, the total delinquent and specially serviced loan rate (distress rate) markedly increased 79 bps to 8.29%.” KBRA notes that the jump in distress rate was largely driven by the multifamily sector, which saw two loans totaling over $1.5 billion transferring to the special servicer this reporting period, although retail (79 bps) and mixed-use (76 bps) also experienced some large increases. We’ll be discussing the commercial real estate market and the banks at the 31st Annual Levy Economics Institute Conference on Thursday, May 2, 2024. Of note, Blackstone Mortgage Trust (BXMT) stock declined 4.6% after reporting a net loss in Q1 due to loan problems in the office category . "The market is concerned about the credit quality of the trust's office loan portfolio, reflected in the 29% discount to book value," notes Seeking Alpha . As the month of April ended, the US banking sector was showing signs of rising stress, both from unrealized losses on legacy securities and credit losses on commercial exposures.  Despite the rally at the end of Q1 2024, only 30% of the names in the WGA Bank Top 100 Index had positive equity returns for the first four months of the year.  But there were some surprises among the top performers as once again it is proven that size matters.  The chart below shows the distribution of the 106 banks in our index test group, with Discover Financial Services (DFS)  in the lead at #1 from the far left.  Charles Schwab (SCHW) came in at number 11 among the largest US banks and FifthThird (FITB)  was number 9, riding higher on strong operating performance and a “5” handle on operating leverage. Subscribers to the Annual Plan of the Premium Service may download the latest WGA Top Bank 100 test group below. The big spike after DFS is JPMorgan (JPM) . Source: WGA LLC Bank OZK (OZK)  rose to number 25 and Bank of America (BAC)  hit 28th on strong short-term market performance and the addition of a fifth size factor in the index model that boosts the weight of the bank's $300 billion market cap. Bank of Brian is up 33% LTM, following closely behind Citigroup (C)  and JPMorgan (JPM)  at +39% LTM.  And New York Community Bank (NYCB) has fallen to 106 out of 100 in Q2 2024. We’re pleased to report that our Bank Top 10 and Top 25 indices continue to outperform the industry benchmarks, but the broader samples show the growing financial stress on the industry.  Subscribers to the Annual Plan of the Premium Service  may download the latest WGA Top Bank 100 test group below. The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

May 22, 2024  | Premium Service | The Mortgage Bankers Association Secondary Conference was revealing for a lot of reasons, but frankly working in and around the Times Square venue at the Marriott Marquis is becoming unbearable. Fortunately, we have not heard reports of any assaults on MBA members this year. NYC reminds us more and more of Gotham in the early 1980s, when we worked downtown at the FRBNY and the city was basically ungovernable. It turns out that Q1 2024 was not bad for mortgage lenders, but many participants admit that even a full point of cuts in fed funds is not going to change things in the near term. Natural portfolio runoff will take many more years to rebalance the equation for lenders by getting the average loan coupon closer to a five handle than a three APR. The big talk at the MBA Secondary was how several industry leaders are buying up mortgage servicing rights at a brisk clip, with bids at least half a multiple above the market. Source: FDIC/WGA LLC Many thanks to readers for the comments on our suggestion that Citigroup (C)  ought to acquire New York Community Bank (NYCB)  and get back in the game in the world of government mortgage servicing. Several of our readers thought this was a profoundly bad idea. In our upcoming biography of Freedom Mortgage founder Stan Middleman , we talk about mortgage lending in the 1990s. That's when Citi CEO John Reed  created the first no-doc mortgage loans in a program known as “Mortgage Power.” A print ad for Citibank mortgage power from the 1980s is below. One well-informed reader opines that former NYCB CEO Thomas Cangemi  seemingly “lacked the skillset to know not to buy Flagstar.” After all, NYCB had sold its mortgage business, including $500 million in assets, to Freedom Mortgage in 2017.  Many observers in the mortgage industry were perplexed by the April 2021 announcement of the Flagstar transaction. “Then he buys the Signature book and perhaps didn’t price it to get the capital boost,” continues the retired banker. “The Signature book and Flagstar should be outperforming his legacy book.”  Agreed.  The cash flows from the Flagstar servicing business are supporting the whole company. We came to this party with the team from Flagstar and they may yet save the bank. But we think it will take a lot more than $1 billion to fill the legacy NYCB hole. NYCB closed below 0.4x book value yesterday. Meanwhile, as the tourists and mortgage bankers mill about the sweltering streets around Times Square, above them empty office buildings stand like grim totems looking out over the rotting carcass of old Gotham. A procession of office properties are headed for foreclosure and restructuring in the next year. Tourists don’t rent commercial office space.  If you are in NYC on a Friday or over the weekend, you’ll notice that Midtown is largely devoid of street traffic. As the crowds of mostly foreign tourists fill the streets around Times Square to overflowing, the slow-motion collapse of the commercial real estate market continues apace. RXR’s property at 340 Madison Avenue at 44th Street went into foreclosure this week, the latest default among the city’s most valuable midtown office properties.  “Massachusetts Mutual Life Insurance Company filed the complaint after RXR defaulted on the property’s $315 million mortgage,” The Real Deal  reports, “which went unpaid when it matured this year.” While NYC Mayor Eric Adams worries about zoning changes to allow small retail establishments to locate in residential neighborhoods, the commercial heart of the city is dying. NYC plans to modernize and update our city’s zoning regulations to support small businesses, create affordable housing, and promote sustainability – part of Mayor Eric Adams’ vision for a more inclusive, equitable “City of Yes.” The progressives in New York continue to focus on consumers to the exclusion of all else, but don't want to admit that NYC is not "sustainable" without a business community. The exodus of businesses and capital from New York over the past decade is reflected in the valuations for commercial buildings. Discounts on commercial properties are running anywhere from 30-50% from previous valuations, forcing landlords into a desperate struggle to maintain tenancy and operating cash flows as creditors demand more cash. We continue to believe that a federal financing vehicle for restructuring moribund urban real estate is inevitable (" Should We Resurrect the Reconstruction Finance Corporation? "). But don't expect Mayor Adams or any of the deliberately clueless inhabitants of New York's progressive community to talk about this issue. They are all too busy pandering to the perceived wants and needs of New York City's increasingly desperate residents, who are being crushed by rising living expenses and falling real incomes. When NYC is forced to recognize reality, it will already be too late to avoid another fiscal crisis. Merchants Bancorp (MBIN) Below we look at Merchants Bancorp (MBIN) of Indiana, the $17 billion regional bank. MBIN ranked # 8 in Q1 2024 for the WGA Bank Top 50 Index, but fell to 32nd in Q2 due to short-term weakness in the stock. Our addition of a market cap test to the WGA Bank Top Index also pushed down MBIN’s score. Historically MBIN has been a top performer in Peer Group 1, with income in the top decile of large banks and other performance indicators that reflect a well-capitalized and managed institution. MBIN has three preferred issues outstanding. MBIN called its 7% NCUM PFD (MBINP) on April 1, 2024, because it was about to reach a coupon of almost 10%. We own the 6% preferred which is trading at a discount. H/T to Retired Investor  on Seeking Alpha.  MBIN just completed an equity raise of $98 million in net proceeds at $43 per share, somewhat offsetting the capital reduction from the call of the preferred securities. Despite the short-term weakness, the stock is still up more than 70% over the past year and is now 5x the lows of 2020 when the stock was trading near $10 per share.  The first thing to notice about MBIN is that the bank has a concentration in real estate and particularly commercial real estate. But this metric is misleading because roughly one-third of total assets is deployed in warehouse loans and other financings secured by real estate. The bank’s loan losses have been in the bottom quartile of Peer Group 1 for years, but in Q1 2024 MBIN reported elevated non-performing loans (NPLs), as shown in the chart below from BankRegData. Merchants Bancorp Source: FDIC/BankRegData MBIN’s Texas ratio has gone from 1.85 at the end of 2022 to 7.27% in Q1 2024, yet net charge-offs remain low.  In March 2024,  MBIN executed a credit default swap on a $544 million pool of its multi-family mortgage loans, to provide credit protection for the loan pool and reduce risk-based capital requirements.  It is important to remember that the change to reporting for NPLs and the elimination of "troubled debt restructuring" tends to mask the true level of delinquency in all US banks. Despite the uptick in NPLs, the bank’s earnings and growth rates remain above-peer. Return on average assets was 2.07% for the first quarter of 2024 compared to 1.71% for the first quarter of 2023 and 1.86% for the fourth quarter of 2023.  The bank’s efficiency ratio was 28% in Q1 2024 or roughly half of the average for Peer Group 1, providing enormous operating leverage for the bank’s high revenue growth rate.  Notice in the charts above the strong loan loss reserves for MBIN. A lot of investors and analysts will look at the top level asset numbers for MBIN and think, wrongly, that the bank has a lot of exposure to commercial real estate. In fact, most of the bank's exposures are short-term. The table below from the MBIN Q1 2024 earnings report summarizes the bank's commercial exposures. In fact, MBIN biggest exposure is multifamily. The bottom line on MBIN is that this bank is not NYCB. MBIN is a well-managed wholesale bank that focuses on lending in its Midwest footprint. While we are concerned about the rising NPLs at MBIN and across the industry, we have much greater confidence in the ability of MBIN to manage its balance sheet and continue its impressive operating performance. Fact is, even after the market downdraft following the NYCB restatement in Q1 2024, MBIN is still trading at a substantial premium to book value. The IRA will be leading a fishing trip to Leen's Lodge the week of June 17th. If you would like to attend, please email us: info@rcwhalen.com Thoma Stream, Maine The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

May 6, 2024  | Premium Service | We completed the rebalancing of the WGA Bank Indices last week , including adding Zions Bancorp (ZION)  and dropping two outliers, Hawaiian Electric (HE)  and First American Financial (FAF) , the giant title insurance underwriter and grandfathered thrift holding company. There are a lot of folks in the mortgage industry who don’t know that First American is a 125 year old savings bank. The WGA Bank Top 10 Index is shown below, including the new weighting, methodology and test score changes. The top ten group in particular shows the power of the score-weighted methodology. Big h/t to our friends at Thematic in Menlo Park. WGA Bank Top 10 Index (WBXSW) The big takeaway from Q1 2024 earnings is that credit pain in commercial exposures is rising fast, but we see no special concern coming from the Fed, Treasury or other regulators. Bloomberg reports that " Distress in CRE CLO Loans Jumps Back Up to Record." Yeah. And the stated, accrual accounting CRE loss numbers are way, way behind the cash reality. A reader named Burke sent us this little missive he penned for his banking team earlier in the week: "Pound-for-pound the failure of Philly’s Republic First should have been bigger news (like Rocky Balboa on the top of the museum steps). In this day and age of $1T forgiveness on a range of debts and deficit spending—a mere $667mm fairway 'divot' taken by the FDIC (ultimately you and me) on a Saturday morning when Campus Protests and Spring Golf weather distract us, was a perfect 'nothing to see, move along' moment for the FDIC. Yet, minus $667mm on a $4B loan and securities pool— in supposedly a good economy on some random local bank, should wake up some boards and accountants. But no one seems to want to connect the dots. I was on CNBC in ’23 before and during the Silicon Valley/First Republic/Signature dam breaking 'surprise', trying to hint at this upside-down MtM risk and boards needing to wake up. Banks carry about 8% common. If the run-of-the-mill Republic First interest rate mark on the loans is 13.3% that is not just wiping out one bank’s 8%, it is as though an invisible bank got wiped out too—that invisible bank is the FDIC." Ditto. The degree of blithe presumption in the financial markets as the bad debt accumulates is astounding. Below we do a “lighting round” a la CNBC's Jim Cramer through earnings in the mortgage finance ghetto. Note that the volatility in key asset values like mortgage servicing rights (MSRs) is a function of the uncertainty swirling around the direction of interest rates at the US central bank. How is the cacophony of confusion now pouring from Chairman Powell and other FOMC members in public commentary helpful to confidence or the Fed’s standing as an institution? The media circus surrounding the FOMC is ridiculous and unseemly, and increases market volatility and hedge losses for financial institutions. One member of the FOMC ought to be deputized each month to carry the message that represents the majority view. The rest of the members of the Committee should be quiet. Speaking of economists, w e had a lovely conversation with Jan Hatzius  of Goldman Sachs (GS), Gennaro Zezza  of the Levy Institute & University of Cassino, Italy, and Harriet Torry  of the Wall Street Journal  at the Levy Institute event last week . Notably, GS Chief Economist Hatzius was calling for a Fed rate cut two months hence in July. We think the proximity to the November election makes a rate cut before December pretty unlikely. And all of the participants in the Levy event should reconsider their assumption that the market for Treasury and agency debt is continuous and always functioning. Again, Menand & Younger (2023) note: "American public finance has long been closely intertwined with the American monetary framework and that deep and liquid Treasury markets are, in large part, a legal phenomenon. Treasury market liquidity, in other words, did not arise organically as a product primarily of private ordering. Instead, it was actively constructed by government officials. The high degree of convertibility between Treasury securities and cash—the market’s “liquidity”—depends upon entities that can create new, money-like claims to buy Treasuries." We clearly surprised the crowd when we said that there is a “debt deflation” underway in commercial real estate in the US and invoked Irving Fisher . But even with the wheels falling off the economic cart in cities such as New York and Los Angeles, commercial developers are still scrambling to buy these suspect assets.  And in yet another post-COVID change datapoint, Sam Ash , the century-old music retailer founded in Brooklyn, announced the closure of its 42 retail locations  because of competition from online sellers.  Whether we speak of legacy content, cars or many other products, the great aggregation of demand and fulfillment is continuing apace, with Alphabet (GOOG) unit Google and Amazon (AMZN) leading the way. The surveillance and monetization of all online activity is about processing capacity and money, just as in payments or program trading. Big is better. And even some very big players, like Microsoft (MSFT) , are marginalized in the fight for eyeballs. Does MSFT really need to surreptitiously change the default browser setting in millions of Windows 11 installs with each software update? Really? Some readers were a bit taken aback when our bro Michael Whalen  predicted in our last issue (“ Then Old Media Became Redunzl ”) that all of the existing media conglomerates would eventually be pushed out of content entirely by the great eyeball aggregators led by GOOG. But Michael may be correct. He works in the trenches of modern music and has a bad habit of being right when it comes to money and the world of content. And Michael has a new album out with Mark Isham et al: " Watercolor Sky" Hedge the MSR? PennyMac Financial (PFSI)  reported results for Q1 2024 with the non-cash gain-on-sale results from correspondents up significantly from a year ago. To give you some context, two-thirds of the mortgage industry lost money in 2023. PFSI reported $39 million in GAAP net income, and had a small non-cash down mark on its mortgage servicing rights (MSR), but also took a nearly $300 million non-cash loss on MSR hedging.  A lot of private issuers do not hedge the MSR at all. PFSI had $5.4 billion in advances with an average tenor of 3.5 months at the end of Q1 as shown in the table below. Notice that the only depository in the main, 364-day PFSI MSR lending group is Citibank. PFSI has $4.5 billion in term debt, mostly secured by the MSR. PSFI has arguably the best developed debt strategy in the industry for funding servicing assets, but remains heavily dependent upon Apollo (APO) portfolio company Atlas SPG , Goldman Sachs (GS) and other dealers for funding. Atlas SPG is the replacement for Credit Suisse, for new readers of The IRA . Note that the commitments from commercial banks are tiny compared with the Atlas-led group with GS, Citibank NA, Nomura (NMR) . The table below shows the aging of PFSI's medium-term debt. Mr. Cooper (COOP)  reported first quarter income before income tax expense of $232 and net income of $181 million. Excluding other mark-to-market and other adjustments, the Company reported pretax operating income of $199 million. COOP’s owned MSR increased to $631 million and third-party servicing assets likewise increased to a total of $1.1 trillion in servicing.  COOP issued $1 billion in HY debt at a cost of just 7.25% and increased the size of its bank lines, even as credit utilization levels were flat to down. Of note, default levels on the COOP portfolio and particularly FHA were down YOY, something that CFO Kurt Johnson attributed to the post-COVID credit waterfalls adopted by the industry. Johnson: “FHA has done a really great job from a modification standpoint of just putting programs in place that are easy for the servicer to implement and really attractive for the customer as well. So they have programs that allow the customer to stay in their low rate mortgages and capitalize part or all of their arrears on the back end of the mortgage.” Both COOP and PFSI are well-positioned going into Q2 and the rest of 2024, but we do not expect much relief in terms of lending volumes. Rates have been backing up since the end of March, but volatility is also a big concern for lenders that have recently seen higher volumes and thus have higher interest rate risk. But if rates rally, then lending volumes will rise as MSRs run off.  Yet most of the profit given current market conditions comes from the MSR over time. Both PFSI and COOP can generate significant upside earnings and volumes from current levels and without big increases in cost. In this age of low volumes and negative lender spreads, much of the industry is migrating to a twin model for acquiring loans of 1) correspondent and 2) direct-to-consumer (DTC). Being able to grow volumes without a significant increase in expenses is a key goal. Again Johnson answering a questions from Eric Hagen at BTIG: “The focus is on the balanced business model and we do think that these returns are really interest rate agnostic and that where you see a drop off in servicing because of a rate rally, you'll see an increase in our DTC channel.” Rocket Companies (RKT) reported net income of $290 million in Q1 2024 vs a $411 million loss a year ago. The fair value of the MSR fell $220 million, but strong revenue more than offset the non-cash adjustment to the servicing. In Q1 of 2021, RKT reported $2.7 billion in GAAP net income and that was below the levels of the year before. The table below shows the quarterly financials for RKT going back to 2020 from the earnings release.  RKT Q1 2024 Notice how the change in interest rates in Q1 2024 caused the FV of the RKT MSR to fall, generating a non-cash expense that hits GAAP earnings, but is added back to cash flow and calculations such as EBITDA. The MSR is recognized in full at the point of sale of the mortgage note, then deteriorates over time with the receipt of servicing fees and prepayment experience. The change in income from 2020 through to Q1 2024 illustrates the 75% drop in loan volumes since the end of the COVID boom in home lending. Below we show a snapshot of the RKT income statement, which highlights some of the moving parts in the world of mortgage lending. On line 6 of the RKT spreadsheet, we see the gain-on-sale (GOS) for loans sold followed on the next line by the FV of the MSR retained when the note is sold into an MBS. Notice that the FV of the MSR was bigger than the GOS for loans in 2023, a striking commentary on the pricing for RKT MSRs. The GOS, net of the FV of the MSR, is a non-cash item that is subtracted from cash flow (See Page 80 of the RKT 10-K). The cost of creating the MSR is also subtracted from cash flow. Mortgage firms are able to borrow against the FV of the MSR to fund their operations in times of low lending volumes. On line 12, we see the positive adjustment for MSR model assumptions, followed by the debit representing the amortization of the MSR on line 13 -- one of the more important line items for any mortgage bank. Since the full value of the MSR is recognized up front, at the point of sale of the mortgage note, the asset is amortized each quarter to reflect the receipt of loan servicing fees and prepayments. The net of these two figures is the change in the FV of the MSR on line 14. Now your understand mortgage banking. Sources: MBA, FDIC All of these large mortgage firms are doing fine at present, but largely because default rates on 1-4 family mortgages remain very low, well-below LT historical averages. As and when default rates rise into 2025, however, we expect the pain points in terms of funding and operational expenses related to loss mitigation to intensify. The low coupons of existing loans and high home prices offset other factors that would normally lead to higher levels of delinquency. Source: GNMA The table is pretty much set for the mortgage industry over the next several years, however, because even a 100bp drop in short-term interest rates by the FOMC may not result in a significant increase in lending volumes. As the table above from the latest GNMA capital markets report shows, the average coupon on GNMA MBS is barely above 3.5% and the loans in those MBS have coupons roughly a point higher, so mid-4% range or 300bp out of the money for refinance. The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

July 9, 2025  | Premium Service | Updated | We all were a little amused to learn that the Federal Reserve Board decided to ignore the massive financial and reputation risk in private equity and private credit in the most recent bank stress tests. With cash bids for private assets plummeting, and sponsors in full flight due to prospective litigation by jilted clients, how do the Fed and other bank regulators retain any credibility?

May 8, 2024  | Premium Service | A year ago, we told our readers that things are changing in the world of nonbank finance. Yet there are still a number of firms in mortgage and specialty finance that are unprofitable and do not seem to be in any particular hurry to fix this situation. Below we provide updates on our portfolio as well as our view of mortgage finance on the back end of Q1 2024 earnings season.

“You can’t lose money making deposits” Vernon Hill Former Chairman/CEO RepublicFirst Bank May 13, 2024  | We appreciate the many comments from our readers last week regarding the idea of Freddie Mac buying second lien mortgages (“ Freddie Mac Buying HELOCs? Really Meredith? | UWMC & Disappearing MSRs ”). A number of residents of the Washington housing policy community initially supported the idea, but now are strangely silent. Any readers with further thoughts on the matter please do post them to @rcwhalen  on X.com .  Below for our Premium Service  subscribers, we critique the bottom 25 banks in the WGA Bank Top 100 Index. And h/t to Joe Garrett  for the remembrance of former Commerce Bank CEO Vernon Hill , who  became chief executive officer of RepublicFirst Bancorp in 2021 and was fired in May 2022. The bank failed very notably a few weeks ago with a loss close to 15% of total assets. Hello. Just when we thought the quota of dumb ideas was filled, on Friday the US Treasury under Janet “T-bill” Yellen  issued a paper on nonbank mortgage servicers. The well-prepared paper from the Financial Stability Oversight Council  (FSOC) contains some important information, but is also a bit misguided. For example, Secretary Yellen suggests creating a fund to finance defunct IMBs after they file bankruptcy . Really? And, also last week, President Joe Biden wants to give away hundreds of dollars to first time homebuyers, like an aging Latin American dictator buying votes from campesinos  with bags of groceries on election day.  Of course, neither Biden nor Yellen want to discuss the budget deficit.   ***  To Our Readers *** We are discontinuing the monthly Premium Plan  to The Institutional Risk Analyst. Current subscribers who wish to migrate to an annual plan at the equivalent subscription rate, please contact us before the end of May 2024. All monthly Premium Plans will be discontinued at the end of May 2024.  info@rcwhalen.com Federal officials like Yellen have a fascination with the idea of planning for the defaults of private companies, as though such things were even possible. Readers of The IRA  will recall (“ Reverse Mortgage Finance Festers ”) that when Reverse Mortgage Investment Trust (RMIT)  filed for bankruptcy in December 2022, the US Treasury ended up taking control of the nation’s largest reverse mortgage lender and servicing book. Why? Private buyers were unwilling to acquire RMIT from bankruptcy and take responsibility for a money losing reverse mortgage portfolio.  When the third week of December 2022 arrived, the Treasury had to seize the servicing asset, pay the Ginnie Mae bondholders and advance cash to the elderly borrowers. The RMIT book was upside down to the tune of hundreds of millions of dollars and has cost the Treasury billions more since.  As a result of the mishandling of the RMIT default by the Biden Administration, Texas Capital Bank (TCBI)  got thrown under the bus as a lender to RMIT post-default. Of note, former Ginnie Mae President Alanna McCargo , who made verbal commitments to TCBI that resulted in a litigation between TCBI and Ginnie Mae, was just named President and Chief Executive Officer of the Federal Home Loan Bank of San Francisco . She replaces Teresa Bryce Bazemore  at the FHLB San Francisco.  Of note, the liquidity problem discussed in the FSOC report is specific to Ginnie Mae servicing assets and cannot be fixed without legislation. Conventional servicers get reimbursed by the GSEs after month four, but Ginnie Mae servicers must carry the financing load of coddling delinquent consumers and financing the float of loan forbearance for years.  The proposal from Secretary Yellen in the FSOC report asks for Congressional authority to support government MBS issuers and raises some other important concerns, but it misses the key point that should have been learned in the RMIT fiasco involving Ginnie Mae .  Once a mortgage company with a Ginnie Mae servicing business files bankruptcy, the firm will either be acquired voluntarily in a private transaction under Bankruptcy Court supervision or the US Treasury will end up the owner. Despite all of the fuss made by the FSOC and banking and housing regulators about mortgage servicers, they still don't get the joke. When a Ginnie Mae issuer runs out of cash t he decision tree for the buyer is binary: either the mortgage servicing right (MSR) has value or it does not.  If the servicing business cannot be sold in a bankruptcy auction, then nobody will lend to the debtor and the Treasury will own the servicing asset. Period. In fact, we still think Treasury may acquire another Ginnie Mae reverse MSR this year. If the Biden Administration really wanted to address the liquidity “problems” of nonbank mortgage servicers, then Secretary Yellen would be demanding that Congress give Ginnie Mae more flexibility and funding, and allow nonbanks immediate membership into the Federal Home Loan Bank system. Perhaps President McCargo of the FHLB San Francisco will take up the cause of membership for the nonbanks. The WGA Bottom 25 Banks With aspirational stocks losing ground, the banking sector is starting to get more attention from managers after a long period in the basement compared with other sectors. Are there bank bargains down in the cellar waiting to be discovered? Below we take a look at the bottom quarter of our test group, banks that rank 76th through 100 in the WGA Bank Top 100 Index.   The list below shows the bank's stock symbol, rank in the Index and raw score. The maximum score was 530 this quarter and the bottom quartile start at 215. The median score was Customers Bank (CUBI) at 54th with a score of 262 and the average for the group was 267. The chart below shows the bottom quartile of the test group. Source: Bloomberg/WGA LLC The first thing to note about this group is that most of the banks are small. Live Oak Bancshares (LOB) , for example, has a market cap of just $1.5 billion and is still trading at 1.7x book value. The stock was trading close to $50 at the end of 2023. LOB got dinged in our test matrix on efficiency and 3 month total return. WGA Bank Index Bottom Quartile Q2 2024 The largest bank in the bottom quartile is Valley National (VLY) , was trading over $11 at the start of 2024, but lost 40% of its value in the Q1 2024 downdraft following the earnings restatement by New York Community Bancorp (NYCB) . VLY ranks fiftieth in the US by assets at $60 billion, has a $4 billion market cap and is trading at 0.6x book value. Is VLY a bargain at these levels? With more than half of its loan book in commercial real estate loans in the New York footprint, we'd say no for now. Another large bank in the bottom 25 banks is Independent Bank Corp. (INDB) , a $20 billion asset bank in Rockland, MA. INDB is currently trading around 0.7x book, but missed expectations in Q1 2024 with revenue down almost 10%. The bank has a high concentration in real estate loans, partly explaining the weakness in the stock, but has a good performance profile historically. The bank scored well on efficiency in our Q2 test, but had weak results in other categories. Perhaps the most important lender in the group is TCBI, which ranked 83rd in the WGA Bank Top 100 in Q2 2024. TCBI peaked around $65 at the end of Q4 2023, then traded down into the 50s after the NYCB kerfuffle. TCBI is a peer performer that has a national mortgage lending business, including lending on government-insured reverse mortgages. Recent results have been weak, with equity returns in low single-digits. The bank has not yet reported the losses from the bankruptcy of RMIT. The $30 billion asset bank has a quarter of its balance sheet in commercial loans, another 25% in commercial real estate and another 25% in "other loans and leases," the highest percentage in Peer Group 1. Yet the bank's loan losses have been trending down since Q1 2023, much like the rest of the industry. Are declining net loss rates a head fake? Yes, we think so. TCBI guided higher on commercial losses in Q1 2024 earnings. At book value, we do not see any great value in TCBI and would be inclined to wait for the other shoe to drop in terms of increasing exposure to the stock or the bank. The fact that TCBI has chosen to lean into commercial credit exposures at a time when residential loans have negative net default rates is remarkable and does not make us positive on the bank. The fact that the bank continued to lend commercially against reverse mortgage receivables after 2022 also makes us question the judgment of bank management. Source: Google Finance The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.