One of the "blowing up" small banks in the U.S. announces its financial report, exceeding the expectations of most Wall Street analysts

Last Thursday, the loan fraud cases disclosed by two regional banks in the United States, Zions Bancorp and Western Alliance Bancorp, triggered market panic, causing a sharp decline in U.S. stocks that day, with the S&P Regional Banking Select Industry Index plummeting 6.3%, marking the worst single-day performance in months. Investors are concerned that this is just the tip of the iceberg.

On Tuesday after the U.S. stock market closed, one of the main players, Western Alliance Bancorp, headquartered in Phoenix, Arizona, announced its financial results, reporting a more than 27% year-on-year increase in third-quarter profits, exceeding the expectations of most Wall Street analysts, which undoubtedly relieved investors.

The previously concerning alleged fraud incident related to a commercial real estate investment group did not impair the overall financial health of Western Alliance Bancorp. Following the announcement, the bank's stock price rose about 4% in after-hours trading, nearly recovering the losses from last Thursday, although it still has a distance to cover to reach the peak in early September.

Western Alliance Bancorp achieved a net profit of $250.2 million for the three months ending September 30, translating to earnings per share of $2.28. Net interest income (the difference between bank loan income and deposit interest expenses) increased by 7.7% year-on-year to $750.4 million, surpassing the average analyst expectation of $737 million.

Western Alliance Bancorp made a provision for $31.1 million in bad loan impairments, close to the market estimate of $30 million; future credit loss reserves increased to $80 million, nearly double the analysts' expectations.

The financial report from Western Alliance Bancorp did not reveal any new adverse news, and the overall strong performance alleviated the market's tension from the previous week. At that time, Western Alliance acknowledged that some loans issued to the investment group had issues, raising concerns; other banks suffered losses due to the sudden deterioration of similar loans, further exacerbating market panic.

In August of this year, Western Alliance filed a lawsuit against the investment group, accusing it of manipulating the loan structure, which caused the bank to fail to receive repayments in priority order. Western Alliance stated that the investment group still owes about $98 million, but the latest assessment shows that the bank has sufficient collateral.

According to the lawsuit filed in Los Angeles in August, these loans were supposed to be secured by real estate in the group's investment fund, but in reality, these properties were already in foreclosure, and this situation was not disclosed to the bank. The group denies any wrongdoing.

The case drew renewed attention last week—Zions Bancorp also filed a lawsuit against the same investment group and disclosed a provision for $50 million in bad debt impairment due to alleged fraud. On the day the news broke, October 16, the stock prices of both banks plummeted by over 10%