Troubled Real Estate Firm at Center of Banks’ Latest Loan Pinch

Bad loans reported by Zions Bancorp NA and Western Alliance Bancorp this week can be traced back to the bankruptcy of a commercial real estate investment firm in Southern California earlier this year.

In a lawsuit filed Wednesday, Zions listed 16 addresses of properties pledged as collateral to more than $60 million loaned to an investor group. When Newport Beach, California-based real estate firm MOM CA Investco LLC filed for bankruptcy in February, six of those properties were listed as investments.

Back when bankers at Zions subsidiary California Bank & Trust underwrote the loans in 2016 and 2017, they made ...