March 4 (Reuters) - Short sellers targeting a key regional U.S. bank exchange-traded fund have made $977 million on paper so far in 2024, data from analytics firm Ortex showed, as troubles at New York Community Bancorp rippled across the industry.

The fallout from NYCB's exposure to the troubled commercial real estate (CRE) market has made many investors jittery about the health of the sector.

"I think it (CRE exposure) is going to affect a lot more banks, whether or not they have underwritten properly," said Robert Riva, member of real estate department at corporate law firm Cole Schotz.

"This is not something that's localized to someone who's maybe repeating the mistakes of Lehman Brothers, just 15 years later. It's an industry-wide problem."

The SPDR S&P Regional Banking ETF has dropped 9.2% this year, benefiting short sellers, who sell borrowed securities and aim to buy them back at lower prices.

ETFs track stocks, commodities, bonds or a basket of assets like an index fund.

Those betting against the Invesco KBW Regional Banking ETF , another ETF tied to the industry, are sitting on $663 million of paper profits.

Bank of Hawaii Corp, Axos Financial and Columbia Financial were the top targets for short sellers across the two ETFs, Ortex data showed.

Short interest for the three, as a percentage of their free float, stood at 15.98%, 11.73% and 9.38%, respectively, as of March 1.

The trio have a sizeable footprint in the CRE market, including multi-family properties - apartment buildings with more than four units. As of last year, such loans accounted for 27%, 32% and 48% of their loan books, respectively.

The lenders did not immediately respond to requests for comment.

"Multi-family is of big issue for almost every bank in the country. That is where most of the game will be played in the banking sector," said Brian Graham, co-founder of financial services-focused advisory and investment firm Klaros Group.

Such loans also made up for 44% of the lending portfolio at NYCB as of Dec. 31. The bank's shares have plunged 65% this year, fetching $145 million in paper profits for short sellers, according to Ortex.

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila)