First Republic Bank plunged back to all-time lows this week even after the $30 billion back-stop from a consortium of mega banks led by Jamie Dimon and JPMorgan.

So what's going wrong here in the bail-out nation?

While the market may have "known something" last week when they ignored Jamie -- and cratered the stock back down from a rally above $30 to below $15 again -- something else happened this week that made investor eyes go wide.

That event was the purchase of Silicon Valley Bank (SVB) assets by First Citizens BancShares (FCNCA Quick QuoteFCNCA - Free Report) for wonderful pennies on the dollar.

And that implied that no buyer might step in for FRC at any less of a significant fire-sale price.

The shifting fault-lines of the current regional banking crisis will not be fixed this month, or even next quarter.

With hundreds of smaller banks in the cross-hairs, investors need to take their time and examine the balance sheets of each before they invest.

To give you a broader idea of where I stand in my macro and micro analysis, I'll share my 3/27 commentary  with my TAZR Trader members at Zacks...

TAZR Traders

As markets carefully digest the regional banking crisis, many astute eyes are on the credit markets and lending liquidity under the surface -- and how they will evolve and impact the economy and markets for the next 6-12 months.

Given that the FDIC commitments and the $30 billion backstop from big banks did little to support First Republic Bank , more guarantees and liquidity won't necessarily solve the next problem: most banks will contract and tighten lending standards.

The wild gyrations in the inverted yield curve are telling us about that stress and uncertainty, which in itself creates a negative feedback loop of reduced visibility, confidence, business development and clarity about how to hedge/refinance exposures.

And let me be clear: I am not rattling the bear cage here to confirm my bias or scare anyone. I am simply wondering if the fault lines we have seen exposed in the past few weeks are just the tip of the iceberg.

I'm especially focused on data about commercial real estate (CRE) debt and values after...

(a) the big office building defaults earlier this year by Vornado Realty Trust for $450 million and Columbia Property Trust for $1.7 billion, and

(b) learning that the size of exposure for regional banks to CRE is so high. From a Wall Street Journal article last week...

"Smaller banks hold around $2.3 trillion in commercial real estate debt, almost 80% of commercial mortgages held by all banks."

I don't want to ignore these potential fault lines just because they are not the immediate "crisis" headlines. I want to explore them and talk about them so we are not left unprepared.

So let's look at other views and facts that might align with the forecast that a credit crunch could tip the economy and markets over.

This morning, I have 3 recent angles that align with increased probability for this view:

1) Morgan Stanley's Mike Wilson last week...

"...the path of stocks is now about growth and our belief that earnings forecasts are 15 to 20% too high has increased. From an equity market perspective, the events of the past week mean that credit availability is decreasing for a wide swath of the economy, which may be the catalyst that finally convinces market participants that valuations are way too high. We've been waiting patiently for this acknowledgment because with it comes the real buying opportunity, which remains several months away."

2) Minneapolis Fed president Neel Kashkari on Sunday...

"It definitely brings us closer right now" -- Minneapolis Fed President Neel Kashkari's response to a question, during a CBS "Face The Nation" interview, on whether the latest turmoil in the banking sector could bring the U.S. closer to a recession.

"What's unclear for us is how much of these banking stresses are leading to a widespread credit crunch."

3) Commercial Real Estate Exposure of Regionals...

Scott Rechler of RXR Realty: "There is $1.5T in commercial real estate debt maturing in the next 3 years. The bulk of this debt was financed when base interest rates were near zero. This debt needs to be refinanced in an environment where rates are higher, values are lower, & in a market with less liquidity."

The RXR platform, based in NYC, manages 84 commercial real estate properties and investments with an aggregate gross asset value of $22.4 billion. Rechler thinks regulators need to intervene and provide smoother refinancing options for this debt over the next 12-18 months.

More from the WSJ article mentioned and linked above...

This year will be critical because about $270 billion in commercial mortgages held by banks are set to expire, according to Trepp—the highest figure on record. Most of these loans are held by banks with less than $250 billion in assets.

If those loans pay off, it would reassure markets. But a large number of defaults could force banks to mark down the value of these and other loans, analysts say, reinforcing fears over the financial health of the U.S. banking system.

Many of these borrowers will have a hard time paying off their loans, said Tomasz Piskorski, the Edward S. Gordon professor of real estate at Columbia Business School. “The destruction of value is quite big,” he said.

While a number of banks have seen drops in the value of their bondholdings—a key factor in Silicon Valley Bank’s collapse—figuring out by how much the value of their mortgages has dropped is trickier because they aren’t publicly traded and every building is different.

In a recent paper, a group of economists including Mr. Piskorski estimated that the value of loans and securities held by banks is around $2.2 trillion lower than the book value on their balance sheets.

That drop in value puts 186 banks at risk of failure if half their uninsured depositors decide to pull their money, the economists estimate. Real-estate loans account for more than a quarter of the shortfall, said Mr. Piskorski.

(end of WSJ excerpt)

As promised, I'm working to keep you informed about this unfolding crisis.

We continue to hold the Regional Bank ETF (KRE Quick QuoteKRE - Free Report) as a favorable risk/reward opportunity should stability prevail.

Cooker

(end of TAZR commentary excerpt from 3/27)

This is a very volatile situation and I don't pretend to know how it ends.

But to follow real-time insights, check out my Twitter feed @KevinBCook where I'm frequently commenting on all things real estate and finance.