Zions Bancorp discloses $50M charge-off related to commercial, industrial loans

Zions Bancorp. NA disclosed a $50 million charge-off and a $60 million provision related to commercial and industrial loans following the discovery of legal actions against parties affiliated with two borrowers.

The Salt Lake City-based company said it recently learned of legal proceedings initiated by various banks and other lenders against parties linked to borrowers of two related commercial and industrial loans from its California Bank & Trust division, according to a Form 8-K filing. The loans are guaranteed by several individuals.

The bank said it conducted an internal investigation of the borrowers, the obligors, the loans and the supporting collateral and identified what it believes to be apparent misrepresentations and contractual defaults by the borrowers and obligors and other irregularities with respect to the loans and collateral.

Despite the bank's demands and notices of default, there has been no response from the borrowers or obligors, according to the filing.

On Oct. 15, Zions decided to provision for the entire outstanding loan amount of approximately $60 million and to charge off $50 million of that total. The financial adjustments will be reflected in the bank's third-quarter earnings and financial statements.

Further, Zions has initiated legal action in California against the obligors to seek full recovery and plans to engage legal counsel for an independent review, although it believes the issue is an isolated situation, the bank said in the filing.