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Zions’ Stock Rises After Earnings Reassure Investors About Credit Losses

Oct 20, 2025 13:08:00 -0400 by Andrew Welsch | #Earnings Report

The Zions Bank headquarters in Salt Lake City, Utah. (Kim Raff/Bloomberg)

Key Points

Zions Bancorp stock was punished last week after an unexpected $50 million charge, but it had good earnings news to share with investors Monday after the close.

The bank reported third-quarter earnings per share of $1.48, beating Wall Street analysts’ forecast of $1.46, according to according to estimates compiled by FactSet. For the same period a year ago, Salt Lake City-based Zions reported EPS of $1.37.

Shares of the bank were up about 2.6% in Tuesday morning trading. The S&P 500 was unchanged.

Last week the bank disclosed a $50 million charge related to an internal investigation that identified “apparent misrepresentations” by two borrowers. The disclosure sent shares of Zions and other banks tumbling last Thursday, though they pared some of their losses on Friday as analysts said the selloff was overdone.

“We view this as an isolated situation that was related to just a couple of borrowers,” CEO Harris H. Simmons told analysts during the company’s earnings call on Monday afternoon. “We have no further exposure related to these borrowers or guarantors.”

Zions said net interest income for the third quarter was $672 million, up 8% from the same period a year ago. Analysts had expected the bank to report net interest income of $668 million, according to FactSet. Net interest income, an important performance metric, is the difference between what banks earn on interest-bearing assets and what they pay in interest on customer deposits.

The bank said its provision for credit losses was $49 million compared with $13 million during the prior year period.

Net loan and lease charge-offs were $56 million for the quarter, up from $3 million for the same period a year ago, according to the company. The increase included the $50 million charge that was previously disclosed.

Simmons said that the credit results were “marred” by the charge-off, which he described as related to recently detected apparent irregularities and misrepresentations related to two borrowers.

“Legal action has been initiated to pursue recovery of the amounts owed
from guarantors of the credits,” he said in a statement. “Excluding this loss, remaining net charge-offs were very benign at $6 million, or 4 basis points of average loans on an annualized basis.”

Zions has been “under the microscope by just about every investor over the past week” following the company’s disclosure, J.P. Morgan Securities analyst Anthony Elian wrote in a Tuesday research note. He says he was “relieved to see that credit quality trends outside of that exposure were well contained.” Elian rates the stock Neutral.

Scrutiny. Zions’ disclosure of the charge-off and the subsequent selloff in regional bank stocks took place amid heightened concerns about credit quality following the bankruptcies of two heavily indebted companies in the auto sector, First Brands and Tricolor. Explosive growth of bank lending to nondepository financial institutions, or NDFIs, which in turn provide financial services to other companies, is in focus.

The nation’s largest banks reported strong earnings last week, driven by revenue growth from banks’ trading desks and investment banking units. Nonetheless, news about First Brands and NDFIs has put some investors on edge about unexpected credit issues.

JPMorgan Chase CEO Jamie Dimon made waves last week when he said the bankruptcies of auto lender Tricolor Holdings and First Brands should raise red flags. “I probably shouldn’t say this, but when you see one cockroach, there are probably more,” Dimon said. “Everyone should be forewarned on this one.”

What the lawsuits say. Zions’s disclosure was unrelated to Tricolor Holdings and First Brands. Zions sued a group of real estate investors that includes Andrew Stupin and Gerald Marcil and two investment funds. The bank is seeking to recover more than $60 million in unpaid loans that a Zions unit, California Bank & Trust, had extended to the borrowers under two revolving credit facilities, according to the lawsuit, filed on Oct. 15 in California state court in Los Angeles. The borrowers used money provided by the bank to purchase distressed residential and commercial mortgage loans.

“The case arises from a sweeping betrayal of trust by sophisticated financial professional borrowers who abused CB&T’s confidence, manipulated loan structures for their own enrichment, and systematically eliminated the collateral protections that were supposed to secure the bank’s loans,” Zions says in its legal complaint.

Stupin and Marcil are members or managers of the funds, according to Zions’ lawsuit. They deny any wrongdoing, according to their attorney, Brandon Tran of Newport Beach-based Dhillon Law Group.

“These claims are unfounded and misrepresent the facts,” Tran said in an email. “We are confident that once all the evidence is presented, our clients will be fully vindicated.”

Zions’ lawsuit says that underlying properties that the funds invested in were allegedly transferred to other entities or foreclosed upon, actions that weren’t disclosed to the bank, according to the lawsuit. Zions discovered the alleged misconduct after Western Alliance Bank filed a lawsuit in August against Stupin, Marcil, and a real estate company. Western Alliance’s lawsuit, also filed in California state court, says it extended a $100 million revolving credit facility to the borrower on Oct. 28, 2024.

The borrower allegedly failed to disclose “numerous” material facts and it engaged in a fraudulent scheme to create fake title policies that it provided to the bank, Western Alliance’s lawsuit says. The borrower also failed to provide a required quarterly financial statement on June 30 and violated a requirement that it maintain a monthly average amount of $2 million in an operating account, according to the lawsuit. As of Aug. 18, the borrower held only $1,009.47 in the account, according to the lawsuit.

Write to Andrew Welsch at andrew.welsch@barrons.com