By Niket Nishant

(Reuters) -New York Community Bancorp shares plunged 21% before the bell on Friday after it found "material weaknesses" in internal controls related to its loan review, rattling investors already fretting over its commercial real estate(CRE) exposure.

The weaknesses were related to "ineffective oversight, risk assessment and monitoring activities", the bank said, adding it will detail the remediation plan when it files its annual report with the U.S. Securities and Exchange Commission in 15 days.

Internal controls are processes put in place to ensure accuracy and reliability of a company's financial reports.

NYCB has been under pressure since it posted a surprise fourth-quarter loss on Jan. 31 due to higher provisions tied to CRE loans and cut its dividend to deal with tough regulation.

Late on Thursday, the lender revised its quarterly loss to 10 times higher than what it had stated, citing a $2.4 billion goodwill impairment tied to transactions from 2007 and before.

"NYCB looks like a bank that is out of control and it seems likely that they will have to take even steeper charges for loan loss provisions," said Octavio Marenzi, CEO of advisory and consulting firm Opimas LLC.

The lender's market value was set to shed more than $700 million, if the current share losses hold through the session. It has already lost more than $4 billion since its earnings report.

Citigroup analyst Keith Horowitz said the impairment should not be seen as a big surprise, but material weakness is a bigger issue.

"Significant changes will need to be made with respect to how they monitor credit risk, which we expect may lead to them being more proactive on recognizing issues," he said.

Compared to its peers, NYCB has the lowest concentration of uninsured deposits and has previously disclosed it has enough liquidity to offer its customers expanded deposit insurance.

But Brian Mulberry, client portfolio manager at Zacks Investment Management, said he "would be very cautious of the stock."

"Transparency is receding and a change in management could cause a loss of confidence from depositors," he said.

EXECUTIVE CHANGES

After the share slide due to its CRE exposure, the lender had last month named banking veteran Alessandro DiNello as executive chairman.

The former CEO of Flagstar Bank, which was acquired by NYCB in 2022, was on Thursday assigned the additional roles of president and CEO.

"The appointment will be viewed favorably given DiNello's prior history of turning around Flagstar," Raymond James analyst Steve Moss said.

Under his leadership, Flagstar got out of a consent order that the Office of the Comptroller of the Currency, a banking regulator, had imposed on the lender.

The bank also named its independent director Marshall Lux as presiding director of the board, succeeding Hanif Dahya.

"At the time of my resignation I did not support the proposed appointment of Mr. DiNello as President and CEO of the Company," Dahya said in a statement.

REGIONAL BANKS' HEALTH

The KBW Regional Banking index has lost nearly 9% since NYCB's report on Jan. 31 and will be under the spotlight on Friday after the latest disclosure by the bank.

"We continue to view the situation at NYCB as being very specific and not representative of pressure and uncertainty on regional banks," J.P. Morgan analyst Steven Alexopoulos said.

Meanwhile, shares of B Riley Financial fell 14% in premarket trading after the investment bank and brokerage late on Thursday cut its quarterly dividend by half.

Its Chairman and co-CEO Bryant Riley said the move was to focus on investment opportunities, including potentially repurchasing own debt at attractive prices.

The bank is also reviewing strategic options for its appraisal and valuation services and retail, wholesale and industrial solutions businesses, it said.

(Reporting by Niket Nishant in Bengaluru and Michelle Price in Washington; Editing by Arun Koyyur)