Oct 16 (Reuters) - U.S. regional bank stocks fell on Thursday after Zions Bancorporation

disclosed that it would take a $50 million charge-off in the third quarter on two

commercial and industrial loans extended by its California division.

The disclosure added to growing investor unease about hidden credit stress as lenders

navigate elevated interest rates and economic uncertainty.

"The optics of a large balance C&I loan to a fraudulent borrower from a bank that

specializes in small balance C&I loans is not great, and puts into question Zions' underwriting

standards and risk management policies," analysts at Raymond James said in a note.

Shares of Zions were last down 6% in late-morning trading. The bank said it expects to

recognize the charges in the third-quarter and has filed a lawsuit in California to recover the

loans.

"Zions faces the challenge of showing that this is a one-off event and not indicative of

broader supervision or credit control weakness," said Brian Mulberry, senior client portfolio

manager at Zacks Investment Management.

Western Alliance's stock pared losses after the bank disclosed it had initiated a lawsuit

alleging fraud by a borrower. The Phoenix, Arizona-based bank said that it is providing

additional information about one of its credit relationships after a recent peer bank 8-K

filing.

The lender sought to reassure investors, saying its total criticized assets - credit

identified as weak - were lower than on June 30. The shares were last down 5.4%.

"If further disclosures reveal more losses or related exposures, the risk is that the

broader regional banking index - or weaker names - gets re-rated aggressively downward,"

Mulberry added.

The broader regional banking index fell about 3.4%.

Wall Street analysts pointed to JPMorgan Chase CEO Jamie Dimon's comments this week about

anxiety in the credit market following the twin bankruptcies of auto parts maker First Brands

and subprime lender Tricolor.

"When you see one cockroach, there are probably more, and so everyone should be forewarned

of this one," Dimon said.