Professional Bancorp of Santa Monica, Calif., said it would report a loss in 1999 because of mounting troubles in its loan portfolio.

The $270 million-asset parent of First Professional Bank -- which was left at the altar by a potential buyer last fall -- also announced that it is in merger talks with another suitor.

Professional, which specializes in lending to doctors, dentists, and medical billing companies, said it plans to boost reserves by at least $2.7 million for the fourth quarter to cover losses in its health care lending portfolio. The company said that as a result it would report unspecified losses for the quarter that ended Dec. 31 and for its fiscal 1999.

Professional lost $2.4 million in the third quarter. Gene F. Gaines, Professional's chief executive officer in November, blamed the company's lending woes on federal cutbacks in Medicare and Medicaid reimbursements, which have cut into the revenues of its customers.

Mr. Gaines, who took over as CEO in November, said the company is addressing the problems and is moving "forward with our strategy to return the bank to profitability."

Professional has named two new executives to help lead its turnaround. Robert Dyck was recently appointed senior vice president of credit administration, and David Carrington was named senior vice president of the special assets group. Mr. Dyck previously served as senior credit officer of Newport Beach, Calif.-based Western Bancorp. Mr. Carrington had been vice president of Los Angeles-based Sanwa Bank.

Professional's struggles were highlighted last September when FirstFed Financial Inc., a neighboring thrift, called off its planned $50 million deal to buy Professional. Sources said FirstFed, with $3.8 billion of assets, terminated the deal because it felt the asking price was too high for a bank with mounting loan troubles.

Since then, Professional's stock has plunged TK%. It closed Wednesday at $TK.

In a news release last week, Mr. Gaines said the company is in talks with an unspecified buyer. Sources said the Professional would consider offers from outside the banking industry, including health care financing companies.

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