The Next Big Short? Regional Banks Are Hiding a New Time Bomb

Three banks failed in the past eighteen months. Dozens more are quietly bleeding. But the next blow to America’s regional banking system may not come from rate hikes or bad loans — it may come from real estate.

Commercial real estate (CRE) delinquency rates hit 5.1% in June, the highest since 2013. Office towers in San Francisco and Chicago are being marked down by as much as 70%. Landlords are walking away. And who’s left holding the bag? Mid-sized banks with overexposure to dying assets.

Take New York Community Bancorp (NYCB), whose surprise losses earlier this year sent its stock down 65% YTD. Or PacWest, now absorbed by Banc of California, after its CRE book sparked investor panic. These aren’t isolated cases. Nearly 80% of all CRE debt sits on the balance sheets of regional and local lenders — many of whom are still pretending their portfolios are worth what they were in 2019.

This isn’t just about offices. Retail strip malls, low-occupancy apartment complexes, and aging industrial properties are all showing signs of decline. And when refinancing hits at 7% instead of 3%, even healthy tenants become a liability.

The Fed may be signaling rate cuts, but for banks, it might be too late. Unrealized losses and opaque accounting mean investors can’t see the rot until the earnings come out — or until the next run begins.

Want to know which tickers are most exposed, and which firms are shorting the fallout? We’re mapping the risk — and the opportunities — across the CRE-linked banking sector.

Follow the money. Before the cracks hit Main Street.

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