Regional bank stocks are tumbling Thursday after a pair of banks raised credit quality concerns. Here’s what you need to know.
What Happened: Several regional bank stocks, including Western Alliance Bancorporation (NYSE:WAL) and Zions Bancorporation (NASDAQ:ZION), are trading lower amid overall market weakness as traders move into safe-haven assets like gold and metals. Regional bank shares have been moving lower as concerns grow over sour loans.
Western Alliance disclosed in a regulatory filing that it has a note finance revolving credit facility to Cantor Group V, secured by pledged commercial real estate loans and cash proceeds. In August, the bank said it initiated a lawsuit alleging the borrower failed to provide collateral loans in first position, among other claims.
“We have evaluated the existing collateral and believe it covers the obligation, based on ‘as-is’ appraisals,” the company stated.
The bank also has limited and full guaranty from two ultra-high net worth individuals under certain circumstances, such as fraud, Western Alliance said in the filing.
Western Alliance affirmed its guidance and 2025 outlook included in the company’s second-quarter financial results.
Meanwhile, Zions Bancorp revealed it recently became aware of legal actions initiated by several banks and lenders against parties affiliated with two borrowers under related commercial and industrial loans extended by its California Bank & Trust division. The bank said its loans are guaranteed by several individuals.
Following an internal review, Zions identified apparent misrepresentations and contractual defaults by the borrowers and other irregularities with the loans and collateral. The bank’s subsequent demands and notices of default and acceleration to the borrowers have gone unanswered.
On Oct. 13, Zions determined it would take a provision for the full approximately $60 million outstanding under the loans and related charge-off. The provision will be reflected in the bank’s third-quarter earnings report.
Zions intends to pursue legal remedies and has commenced a lawsuit in California for full recovery. The company stated it believes this is an isolated situation and plans to engage counsel to coordinate an independent review.
WAL, ZION Price Action: Western Alliance shares were down 12.02% at $69.36, while Zions Bancorporation shares were down 12.84% at $47.10 at the time of publication on Thursday, according to Benzinga Pro.
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