SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report: February 4, 2009
(Date of earliest event reported)
First Regional Bancorp
(Exact name of registrant as specified in its charter)
California |
| 000-10232 |
| 95-3582843 |
(State of |
| (Commission File Number) |
| (IRS Employer |
incorporation) |
|
|
| Identification No.) |
1801 Century Park East, Suite 800
Los Angeles, California 90067
(Address of principal executive offices, including zip code)
(310) 552-1776
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
(a) First Regional Bancorp issued a press release on February 4, 2009 announcing its financial results for the quarter and year ended December 31, 2008. The press release is furnished as Exhibit 99 and is hereby incorporated by reference in its entirety.
Item 7.01 Regulation FD Disclosure.
Executive management of First Regional Bancorp has provided the following information in response to questions received from securities analysts and others.
First Regional has stated that it meets all financial ratio requirements for “Well Capitalized” status. What are those standards, and how do First Regional’s capital ratios compare to the standards?
Under the Prompt Corrective Action program, banking regulators have established different levels of capital adequacy based on the capital ratios of financial institutions. The highest capital level under this program is “Well Capitalized.” The computation of the December 31, 2008 capital ratios of First Regional Bancorp and its subsidiary, First Regional Bank, along with the Well Capitalized ratio standards are as follows:
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| Well |
| First |
| First |
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| Capitalized |
| Regional |
| Regional |
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|
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| Standard |
| Bancorp |
| Bank |
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| Equity Capital |
|
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| 150,970,000 |
| 225,085,000 |
|
|
| Less: Unrealized Gains |
|
|
| -303,000 |
| -303,000 |
|
|
| Plus: Trust Preferred Securities Qualifying as Tier I Capital |
|
|
| 50,222,333 |
| 0 |
|
Line 1 |
| Tier I Capital |
|
|
| 200,889,333 |
| 224,782,000 |
|
|
| Plus: Trust Preferred Securities Qualifying as Tier II Capital |
|
|
| 42,278,000 |
| 0 |
|
|
| Plus: Portion of Loan Loss |
|
|
| 31,952,000 |
| 31,938,000 |
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Line 2 |
| Total Capital |
|
|
| 275,119,333 |
| 256,720,000 |
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Line 3 |
| Average Total Assets |
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| 2,439,628,000 |
| 2,437,989,000 |
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Line 4 |
| Average Risk-weighted Assets |
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| 2,520,813,000 |
| 2,518,894,000 |
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| Tier I Leverage Ratio |
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| (Line 1 / Line 3) |
| 5.00 | % | 8.23 | % | 9.22 | % |
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| Tier I Capital Ratio |
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| (Line 1 / Line 4) |
| 6.00 | % | 7.97 | % | 8.92 | % |
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| Total Capital Ratio |
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| (Line 2 / Line 4) |
| 10.00 | % | 10.91 | % | 10.19 | % |
2
Did First Regional participate in the Treasury Department’s Capital Purchase Program?
The Company thoroughly examined the Capital Purchase Program of the Treasury’s Troubled Assets Relief Program (the “TARP Capital Program”), under which the Federal government injects capital into financial institutions through the purchase of preferred stock and warrants. Since both the Company and First Regional Bank already exceed all financial ratio requirements for “Well Capitalized” status, neither the significant dilution that would result from the issuance of the warrants nor the costs related to the preferred stock appeared to be justified. Accordingly, First Regional did not seek capital under the TARP Capital Program.
3
Does First Regional anticipate involvement in other government programs relating to the Emergency Economic Stabilization Act?
First Regional is monitoring the many programs which continue to emerge as part of the Federal government’s efforts to stabilize and strengthen the nation’s economy. All programs are evaluated based on their applicability to First Regional, and whether they will provide benefit to the Company and its shareholders. The Company’s subsidiary, First Regional Bank, is participating in the program to provide full deposit insurance coverage of non-interest bearing deposit transaction accounts under the FDIC’s Temporary Liquidity Guarantee Program. As neither the Company nor First Regional Bank anticipate issuing qualifying debt, they will not participate in the debt guarantee portion of the Temporary Liquidity Guarantee Program
4
First Regional has reported its total “non-performing assets” and loans past due 30 to 89 days. Can you provide an update on the composition and status of these items?
Per banking industry convention, non-performing assets consist of loans past due 90 or more days and still accruing interest, loans on non-accrual status, and other real estate owned (“OREO”). As of December 31, 2008 First Regional’s non-performing assets were as follows:
Amount |
| Status |
| Asset Type |
| Collateral |
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|
|
|
|
|
3,734,400 |
|
|
| OREO |
| 105 acres of residential land in Riverside County, California |
5,290,400 |
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| OREO |
| 18 acres of residential land in Riverside County, California |
3,345,000 |
| Nonaccrual |
| Land Loan |
| Residential land (for 34 units) in Los Angeles County, California |
20,744,204 |
| Nonaccrual |
| Construction Loan |
| Condominium project in Spring Valley (San Diego County) California |
3,930,467 |
| Nonaccrual |
| Construction Loan |
| Luxury residence in Tarzana (Los Angeles County) California |
8,081,850 |
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|
| OREO |
| Condominium conversion in San Diego County, California |
3,050,000 |
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| OREO |
| 23 acres of residential land in Silverdale, Washington |
3,647,800 |
|
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| OREO |
| Apartment building in San Diego County, California |
1,990,000 |
| Nonaccrual |
| Loan to Individual |
| Unsecured |
3,118,500 |
| Nonaccrual |
| Construction Loan |
| Condominium project in Bakersfield (Kern County), California |
832,780 |
| Nonaccrual |
| CRE Loan |
| Retail center in Maricopa County, Arizona |
1,006,877 |
| Nonaccrual |
| CRE Loan |
| Retail center in Maricopa County, Arizona |
1,036,765 |
| Nonaccrual |
| CRE Loan |
| Retail center in Maricopa County, Arizona |
1,016,190 |
| Nonaccrual |
| CRE Loan |
| Retail center in Maricopa County, Arizona |
16,575,000 |
| Nonaccrual |
| Land Loan |
| 9 acres of residential land in Los Angeles County, California |
1,500,000 |
| Nonaccrual |
| Loan to Company |
| Unsecured |
1,741,265 |
| Nonaccrual |
| Land Loan |
| 11.62 acres of residential land in San Bernardino County, California |
845,000 |
| Nonaccrual |
| Land Loan |
| 1.95 acres of residential land in Riverside County, California |
1,100,000 |
| Nonaccrual |
| CRE Loan |
| 13.74 Acres of industrial land in Whatcom County, Washington |
7,096,050 |
| Nonaccrual |
| Residential Loan |
| Luxury residence in Newport Beach (Orange County) California |
1,968,037 |
| Nonaccrual |
| Loan to Individual |
| Unsecured |
1,609,617 |
| Nonaccrual |
| Loan to Company |
| Unsecured |
1,284,636 |
| Nonaccrual |
| CRE Loan |
| 110,000 S.F. warehouse in Whatcom County, Washington |
23,679,400 |
| Nonaccrual |
| Construction Loan |
| Apartment building in Santa Barbara County, California |
5
2,244,655 |
| Nonaccrual |
| Construction Loan |
| 3 single family residences in Santa Barbara County, California |
898,363 |
| Nonaccrual |
| CRE Loan |
| Retail center in Maricopa County, Arizona |
9,180,000 |
| Nonaccrual |
| CRE Loan |
| 29 Acre Commercial Property in Murray, Utah |
193,480 |
| Nonaccrual |
| Loan to Individual |
| Unsecured |
4,340,000 |
| 90+ days past due |
| CRE Loan |
| Apartment building in Los Angeles County, California |
8,512,500 |
| 90+ days past due |
| Land Loan |
| 82,000 S.F. of residential land in Los Angeles County, California |
3,562,024 |
| 90+ days past due |
| Land Loan |
| 29,000 S.F. of residential land in Los Angeles County, California |
2,125,000 |
| 90+ days past due |
| Land Loan |
| 18,000 S.F. of residential land in Los Angeles County, California |
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149,280,260 |
| Gross Non-performing Assets |
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26,790,838 |
| Less: prior writedowns |
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1,533,544 |
| Less: writedowns this period |
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120,955,878 |
| Reported Non-performing Assets |
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As indicated above, most of First Regional’s nonperforming assets at December 31, 2008 were secured by or consisted of real property. The value of that real property serves to mitigate potential losses that may otherwise result from a nonperforming asset. In addition, applicable accounting standards require the Company to evaluate property values periodically relative to their carrying value on the Company’s books or the loans which that property secures. Accordingly, based on current estimates of property values discounted for anticipated costs of sale and other qualitative factors, the loss potential associated with the Company’s nonperforming assets has already been recognized and is reserved for in the Company’s financial statements.
First Regional’s loans which were 30 to 89 days past due as of December 31, 2008 were as follows:
Amount |
| Status |
| Asset Type |
| Collateral |
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|
647,106 |
| Past Due 30-89 days |
| Land Loan |
| 9 acres of residential land in Los Angeles County, California |
9,375,000 |
| Past Due 30-89 days |
| Construction Loan |
| Condominium project in San Diego County, California |
3,469,308 |
| Past Due 30-89 days |
| Construction Loan |
| Condominium project in Los Angeles County, California |
3,476,557 |
| Past Due 30-89 days |
| Construction Loan |
| Condominium project in Los Angeles County, California |
4,281,967 |
| Past Due 30-89 days |
| Construction Loan |
| Condominium project in Los Angeles County, California |
6
2,475,000 |
| Past Due 30-89 days |
| Land Loan |
| 29,000 SF of residential land in Los Angeles County, California |
24,220,912 |
| Past Due 30-89 days |
| Loan to Company |
| Unsecured |
2,217,885 |
| Past Due 30-89 days |
| CRE Loan |
| Apartment building in Orange County, California |
3,450,000 |
| Past Due 30-89 days |
| Land Loan |
| 29,000 SF of residential land in Los Angeles County, California |
735,000 |
| Past Due 30-89 days |
| Land Loan |
| 30,000 SF residential land in Ventura County, California |
800,000 |
| Past Due 30-89 days |
| Land Loan |
| 4.76 acres of residential land in Los Angeles County, California |
14,476,201 |
| Past Due 30-89 days |
| Construction Loan |
| Condominium project in Los Angeles County, California |
6,953,069 |
| Past Due 30-89 days |
| Construction Loan |
| Condominium project in Los Angeles County, California |
7,632,787 |
| Past Due 30-89 days |
| CRE Loan |
| Apartment building in Santa Clara County, California |
4,760,548 |
| Past Due 30-89 days |
| Loan to Company |
| Unsecured |
224,829 |
| Past Due 30-89 days |
| Loan to Individual |
| Unsecured |
3,014,100 |
| Past Due 30-89 days |
| CRE Loan |
| Apartment building in Los Angeles County, California |
6,107,500 |
| Past Due 30-89 days |
| CRE Loan |
| Apartment building in Los Angeles County, California |
2,050,000 |
| Past Due 30-89 days |
| CRE Loan |
| Apartment building in Los Angeles County, California |
3,709,932 |
| Past Due 30-89 days |
| CRE Loan |
| Apartment building in Los Angeles County, California |
7,068,259 |
| Past Due 30-89 days |
| CRE Loan |
| Apartment building in Los Angeles County, California |
1,642,000 |
| Past Due 30-89 days |
| Land Loan |
| 16,000 SF of residential land in Los Angeles County, California |
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|
112,787,960 |
| Gross Other Delinquent Loans |
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0 |
| Less: prior writedowns |
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112,787,960 |
| Reported Other Delinquent Loans |
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7
First Regional’s time deposits experienced significant growth over the past twelve months. What is the reason for this increase?
The growth in First Regional’s time deposits reflects the Company’s decision to increase deposits obtained from under-represented sources such as time deposits. Historically, the Company has not competed aggressively for such deposits, since the cost of time deposits is typically higher than the costs of the Company’s other funding sources. In the second quarter of 2008, however, the Company made the decision to seek more time deposits in order to reduce the utilization of supplemental funding sources (such as advances from the Federal Home Loan Bank) in order to hold such supplemental sources in reserve to deal with possible future funding needs. This program continued in the third quarter of 2008. The increase in time deposits was accomplished by quoting more competitive interest rates than had previously been the Company’s practice, and while the cost of the deposits is higher than the supplemental funding sources which they replaced, the rates paid remained at the low end of the market for such deposits.
8
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99 Press Release of First Regional Bancorp, dated February 4, 2009, announcing financial results for the year and quarter ended December 31, 2008.
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included herein may constitute forward-looking statements. Although First Regional believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from First Regional’s expectations include fluctuations in interest rates, inflation, government regulations, and economic conditions and competition in the geographic and business areas in which First Regional conducts its operations.
Statements made herein are made as of the date hereof only. The Company shall have no obligation to update information and forward-looking statements presented herein.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 10, 2009
| FIRST REGIONAL BANCORP | |
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| By: | /s/ Thomas E. McCullough |
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| Thomas E. McCullough |
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| Corporate Secretary |
10