Nov. 14--Capital Corp of the West, parent of County Bank, expects to post a $2.7 million loss for its third quarter and plans to apply for help under the $700 billion federal bailout plan, CEO Richard Cupp said Thursday.

The Merced-based publicly traded firm will delay filing the report while it tackles complex accounting issues, including further evaluating troubled loans.

It expects to file the report by Monday and blames troubled loans on property and development projects as the driving force behind the losses. "It's a continued weakness in property values across all sectors in the Valley," Cupp said.

Capital Corp is expecting the loans to cost it $7.5 million in the third quarter, which ended Sept. 30, and $22.8 million for the past nine months.

County Bank never carried any subprime mortgages that have plagued some of the nation's top lenders. However, it lent money to construction companies and developers, two sectors hit hard by the housing crash.

County Bank's parent company projects a net loss of $12.4 million since the beginning of the year. That contrasts with the first nine months of 2007, when it posted a net income of $10.6 million.

However, as the housing market crashed and economic climate worsened, it posted a $3.6 million loss, its first ever, for all of 2007.

The company's stock, closing Thursday at $1.98 a share, hit an all-time low earlier in the afternoon of $1.86. Its peak within the last 52 weeks was $20.

Despite repeated phone calls, none of the outside industry analysts who follow the firm was available for comment.

Besides looking for private investment, the company applied to sell up to $46 million in stock to the U.S. Treasury under the Troubled Asset Relief Program.

Applying for the aid had been in the company's plan to boost its on-hand cash. The bank is "adequately capitalized," Cupp said, though its goal is to be well capitalized. "We had planned this for some time," he said. "It's not a last-minute approach."

Today is the application deadline for bailout funds. Cupp is unsure when banks will learn whether they'll be able to sell stock to the government.

Another major Valley financial institution, Sierra Bancorp, decided against applying for any of the bailout money, though it could have been eligible for $32 million.

The holding company runs Bank of the Sierra, which has 22 branches from Fresno to Bakersfield.

The Sierra board decided it didn't need the money and noted it would face federal restrictions if it tried to declare dividends or repurchase stock if it was part of the bailout.

"This has been described as 'cheap capital' if needed, but in reality equates to expensive debt if it cannot be quickly utilized," Sierra officials said in a statement.

As with any business in tough times, Cupp said Capital Corp of the West is running carefully and efficiently, focusing on its customers and 39 branches across the Valley and Bay Area.

"We're going through a tremendous upheaval in property values in the Valley," Cupp said. "I'm still bullish (about the area) -- always have been."

Reporter Scott Jason can be reached at (209) 385-2453 or sjason@mercedsun-star.com.

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