Zions Bancorp. in Salt Lake City warned that exposure to a pair of borrowers will lead it to boost reserves for problematic loans.
The company disclosed in a regulatory filing that it recorded a $60 million loan-loss provision and charged off $50 million in the third quarter tied to two commercial-and-industrial loans. The decision came after Zions “became aware of legal actions initiated by several banks and other lenders” against the borrowers, the filing said.
Zions did not disclose the identities of the borrowers; the loans were originated by the company’s California Bank & Trust division.
Zions said its own internal review found “what it believes to be apparent misrepresentations and contractual defaults by the borrowers and obligors,” along with “other irregularities” tied to the loans and underlying collateral. The bank’s demands and notices of default and acceleration to the borrowers and obligors have gone unanswered.
The company said it has filed a lawsuit in California against the obligors for full recovery.