New York Community Bank stock sinks 20% in one day (and troubled lender has now lost two-thirds of its value in a month) - is Shark Tank star Kevin O'Leary's prediction the bank would fail in MONTHS coming true?

• After markets opened on Friday shares in NYCB fell some 24 percent
• It came after the bank revealed additional losses and new leadership
• Kevin O’Leary wrote in a column for DailyMail.com that it would fail in months 

Shares in New York Community Bank fell 24 percent on Friday morning after the ailing lender announced new leadership and reported an additional $2.4 billion loss.

The bank, with 420 branches and hundreds of thousands of customers, has faced a crisis in recent months after the quality of its commercial real estate loans soured and ratings agencies downgraded its credit status to junk.

Companies are giving up on offices and downtown retail spaces – after Covid normalized working from home and catalyzed the decline of downtown shopping.

That left the owners of commercial buildings unable to pay lenders like New York Community Bank (NYCB). Some 16 percent of its loans are for commercial real estate acquisition, development and construction.

Two weeks ago, Shark Tank star Kevin O’Leary wrote in a column for DailyMail.com that small, regional banks are ‘dinosaurs’ – and predicted that ‘NYCB will be wiped out in three months.’

New York Community Bank has been facing a crisis over souring commercial real estate loans

Shark Tank star recently predicted the bank would be wiped out altogether within months

‘If your bank is in the news, be concerned,’ O’Leary wrote.

On Thursday, the Long Island-based bank made the news again after it amended its fourth-quarter results to report losses 10 times higher than it had previously, citing the $2.4 billion charge which it associated with pre-2007 purchases.

The bank’s share price first fell at the end of January – after it cut its dividend and posted a surprise loss.

On the last day of the month it plummeted 38 percent from $10.38 to $5.47. Since then it continued to edge down before last night’s big decline. Losses since January are now up to about 64 percent.

On Thursday, the bank also announced that its executive chairman Alessandro DiNello would take on the role of president and CEO, effective immediately.

NYCB also noted that it had found ‘material weaknesses’ in the processes it uses to evaluate the risks associated with loans.

Also hurting NYCB is that it is a major lender to New York apartment landlords, many of whom have suffered earnings hits on multifamily residences after New York toughened rent controls in 2019.

‘Without a doubt, the situation feels a bit uncertain at NYCB right now,’ Piper Sandler analyst Mark Fitzgibbon wrote in a note to clients.

‘We fear that there could be additional issues that get raised as a new team takes the reins,’ he added.

Covid normalized working from home and catalyzed the decline of downtown shopping

Pictured is the Chrysler Building in New York – office buildings are facing increasing vacancies

But in statement on Thursday, DiNello made assurances the bank would weather the storm.

‘It is my mandate as President and CEO, alongside our Board, to continue our transformation into a larger, more diversified commercial bank,’ he said.

‘While we’ve faced recent challenges, we are confident in the direction of our bank and our ability to deliver for our customers, employees and shareholders in the long-term.’

The bank also revealed in that statement that its presiding director of the board would be replaced by Marshall Lux.

But like Kevin O’Leary, experts and industry bodies are not quite so optimistic about the future for regional lenders.

Some $929 billion of outstanding commercial mortgages held by lenders and investors will mature in 2024, or 20 percent of the $4.7 trillion total outstanding debt, according to recent data from the Mortgage Bankers Association.

The delinquency rate on commercial mortgages, a leading indicator for defaults, ticked up last year, but so far is well below the level seen in the Great Recession, when it approached 10%

And about 14 percent of all commercial real estate loans, and 44 percent of office loans, appear to be ‘underwater,’ with current property values that are less than the outstanding loan balances, according to a recent working paper for the National Bureau of Economic Research.

‘If nothing changes – if interest rates remain elevated and property values do not improve – we do view defaults at the rate of the Great Recession, and in fact even higher, as quite a possibility,’ one of the co-authors, Columbia Business School professor Tomasz Piskorski, recently told DailyMail.com.

Piskorski said that he and his co-authors view a commercial mortgage default rate of 10 percent or more as ‘quite likely’ given the current share of underwater loans.

‘This is the icing on the cake that can really create a problem for quite a few banks, mainly smaller and mid-sized banks.’

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