Nov. 3--Bank of the West staggered to a $97 million third-quarter loss -- but the red ink was considerably less than the $143 million the regional bank lost in the second quarter, regulatory filings show.

San Francisco-based Bank of the West has lost a cumulative $325 million for the first nine months of 2009, including a first-quarter loss of $85 million. The bank has branches throughout the Bay Area and a major operational presence in the East Bay.

The last profit for Bank of the West occurred a year ago, when it earned $8.1 million in the third quarter of 2008. The bank has lost money for four-straight quarters.

Bank officials pointed to some hopeful signs amid the dismal financial losses.

"We saw further aggressive growth in core deposits," said Jim Cole, a spokesman for the bank, which is owned by BancWest Corp., a subsidiary of France-based BNP Paribas.

Core deposits rose 4.7 percent from the second quarter and 18.9 percent from the third quarter of 2008, Cole said. Third-quarter deposits totaled $39.7 billion, the regulatory filing showed.

"Our third-quarter loss narrowed from the second quarter," Cole said.

"A loss of that amount is pretty sizeable for a bank the size of Bank of the West," said Michael Yoshikami, president and chief investment strategist with Walnut Creek-based YCMNET Advisors, a financial services firm.

The bank's bad loans also increased in the third quarter, but the regulatory filing

indicated that the rate of increase of these loans, also known as non-accrual loans, has begun to ease.

The bank's non-accrual loans increased by $384.1 million in the third quarter. In the second quarter, the bank's bad loans increased by $416.7 million. So far this year, the bank's non-accrual loans total $1.5 billion.

Plus, Bank of the West remains in the category of "well capitalized" as defined by federal regulators.

Despite the hopeful trends, some analysts found the bank's financial results and balance sheet disquieting.

"There are still a lot of unknown losses in small, medium, and regional banks such as Bank of the West," said Brad Kemp, an economist with Beacon Economics, which tracks local economies in California and elsewhere. "As these banks process more foreclosures, their losses will rise."

Perhaps the biggest unknown: the financial effect on bank balance sheets from a surge in mortgage defaults and foreclosures for commercial properties such as office buildings, retail centers and vacant development sites.

"We will see more foreclosures in construction loans and commercial property," Yoshikami said. "Bank of the West is continuing down that road with no sign that the difficulties will let up soon."

The real problem with commercial real estate is that community and regional banks tend to depend on these types of loans for revenue to a greater extent than huge banks such as Wells Fargo, Bank of America, Chase and Citibank.

"The commercial real estate problems are just starting," Kemp said.

In a quest to harbor cash to cover future losses from bad loans, Bank of the West has set aside $1 billion so far this year as a provision for loan losses.

The bank set aside $320 million in the third quarter as a provision against loan losses. That compares with $342 million set aside in the second quarter and $341 million in the first quarter.

"We continued to build our loan loss reserves amidst ongoing economic uncertainty," Cole said.

The bank also undertook new initiatives to help it prosper in the future.

"We launched a redesigned bankofthewest.com, and we continued rolling out new branch technology to improve service and better meet the needs of our customers," Cole said. "We also announced the acquisition of two branches that will allow us to expand our presence in Monterey and Santa Cruz counties."

George Avalos can be phoned at 925-977-8477

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