Facing exposure to bad residential construction loans and increased regulatory pressure to raise capital, Corus Bankshares Inc. and Capital Corp of the West are running out of options, analysts said.

Both companies reported substantial fourth-quarter losses in preliminary reports Friday, and they said they must raise capital, though few avenues remain open to them.

Daniel Cardenas, who covers Corus for Howe Barnes Hoefer & Arnett Inc., and Brett Rabatin, an analyst at Sterne, Agee & Leach Inc., say the companies may be forced into government-assisted deals if they cannot secure funds.

Corus said Friday that fresh capital is unlikely to come from selling a stake in itself to the government under the Treasury Department's Capital Purchase Program.

The Chicago company, which applied for funds in November, said it "has received a preliminary response from the Treasury Department indicating that they intend to reject our application."

The $8.4 billion-asset Corus said it plans to continue to pursue its Tarp application in conjunction with other options.

Capital Corp, which also applied for Treasury funds in November, is still waiting to hear whether it was approved, according to Richard S. Cupp, the $1.8 billion-asset Merced, Calif., company's chief executive.

Mr. Cupp said Monday that it has been trying to raise between $50 million and $75 million of capital or find a buyer for several months. So far it has struck out on both fronts, he said.

"Institutional investors have no tolerance for risk whatsoever," he said. "They want to know where the bottom is, both in real estate and asset valuation, and they don't want to put money in an institution until they know whether further deterioration would continue."

Mr. Cupp would not say whether he would consider a government-assisted transaction. However, Capital Corp said that if it fails to raise funds, it is unlikely to "continue as a going concern."

The CEO said the "very existence" of the Troubled Asset Relief Program has made it even harder to raise common equity. "Most investors would look at a bank that is able to raise Tarp funds as being so-called 'viable.' But if Tarp is not available to a bank, institutional investors say, 'I'm not going to put money in it, if the government won't.' "

Mr. Cupp came out of semi-retirement in August, after Thomas Hawker retired as the CEO, to help turn around Capital Corp. It has been hit with huge losses on residential construction loans made in California's San Joaquin Valley.

Before he joined Capital Corp, Mr. Cupp's last banking job was in 2007 as the CEO of a start-up, 1st Century Bancshares Inc. in Los Angeles, but he said Monday that he has been involved in about a half-dozen turnaround situations at banks in his 40-year career.

Mr. Rabatin said small banking companies face an uphill battle finding outside investors, because of the fear that the bankers will keep coming back for more funds.

"With smaller banks, the margin of error is just so much tighter — just a few bad loans can change whether a bank is well capitalized or not," he said.

Capital Corp has lost money four out of the last five quarters. (It posted a profit for the first quarter of last year.) On Friday it said preliminary results show that its fourth-quarter loss nearly doubled from a year earlier, to about $35.1 million. Nonperforming loans more than doubled, to $109 million, or 9% of total loans.

The company did not disclose its yearend capital ratios in its report.

Corus did not return calls Monday. On Friday it posted a preliminary fourth-quarter loss of $260.7 million, or $4.85 a share — its third loss in as many quarters. Nonperforming assets rose more than fivefold from a year earlier, to $2 billion. Corus posted $1.5 billion of nonaccrual loans, or more than 40% of total loans, and it said the "extraordinary level" of nonperforming assets caused its net interest income to fall below zero for the fourth quarter.

Mr. Cardenas said Corus, once a major condo development lender in one of the fastest-growing parts of the country, would be hard pressed to find an investor, especially given the Treasury's rejection.

"They need additional capital to sustain themselves, and there is limited access to it," he said. "If they continue to reserve at the levels that we've seen, it really puts into question the survivability of this company. I doubt that this company makes it."

In its report, Corus said it is "suffering from the extraordinary effects of what may ultimately be the worst economic downturn since the Great Depression."

The company said its portfolio, which consists of "primarily of condominium construction loans, many in the hard hit areas of Arizona, Nevada, south Florida, and southern California, has seen a rapid and precipitous decline in the value of the collateral securing our loan portfolio."

Corus, which stopped lending altogether in October, also said its fourth-quarter loss could be higher than its preliminary results show, since the company is waiting for updated appraisals.

It said it had total capital of $758 million on Dec. 31. Its Tier 1 risk-based capital ratio was 10.99%, and its total risk-based capital ratio was 12.29%, making it well capitalized.

However, Corus also said that after discussions with regulators, it has determined that it "may no longer be considered well-capitalized and may be required to identify additional sources of capital."

Mr. Cardenas said he doubts Corus would be able to find any willing buyers, except for those getting help from the Federal Deposit Insurance Corp. to buy deposits and branches.

Likewise, Mr. Rabatin said the most likely outcome for Capital Corp is having its banking operations sold in an FDIC-assisted deal. He named the $4 billion-asset Westamerica Bancorp in San Rafael, Calif., as a possible buyer. Westamerica officials did not return calls for comment.

On Monday, Corus' stock fell 53 cents, to 58 cents a share. Capital Corp's stock fell 56 cents, to 19 cents.

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