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: July 30, 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 July 30, 2009 announcing its financial results for the quarter and six months ended June 30, 2009. 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.” As First Regional has no material intangible assets, all of First Regional’s equity capital, and its equity capital ratios, are tangible. The computation of the June 30, 2009 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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| Standard |
| Bancorp |
| Bank |
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| Equity Capital |
|
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| 129,582,022 |
| 222,304,953 |
|
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| Less: Unrealized Gains |
|
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| -604,000 |
| 0 |
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| Plus: Trust Preferred Securities |
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| Qualifying as Tier I Capital |
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| 42,992,674 |
| 0 |
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Line 1 |
| Tier I Capital |
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| 171,970,696 |
| 222,304,953 |
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| Plus: Trust Preferred Securities |
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| Qualifying as Tier II Capital |
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| 54,507,326 |
| 0 |
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| Plus: Portion of Loan Loss |
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| Reserve Qualifying as Tier II |
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| Capital |
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| 29,320,151 |
| 29,593,351 |
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Line 2 |
| Total Capital |
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| 255,798,173 |
| 251,898,304 |
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Line 3 |
| Average Total Assets |
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| 2,401,772,786 |
| 2,401,772,786 |
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Line 4 |
| Total Risk-weighted Assets |
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| 2,324,637,000 |
| 2,322,466,000 |
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| Tier I Leverage Ratio |
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| (Line 1 / Line 3) |
| 5.00 | % | 7.16 | % | 9.26 | % |
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| Tier I Capital Ratio |
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| (Line 1 / Line 4) |
| 6.00 | % | 7.40 | % | 9.57 | % |
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| Total Capital Ratio |
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| (Line 2 / Line 4) |
| 10.00 | % | 11.00 | % | 10.85 | % |
2
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 June 30, 2009 First Regional’s non-performing assets were as follows:
NON-PERFORMING ASSETS
Amount |
| Status |
| Asset Type |
| Collateral |
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|
|
|
|
|
|
786,900 |
|
|
| OREO |
| 105 acres of residential land in Homeland (Riverside County), California |
1,162,050 |
|
|
| OREO |
| 18 acres of residential land in Menifee (Riverside County), California |
3,118,920 |
|
|
| OREO |
| Residential land (for 34 units) in Glendale (Los Angeles County), California |
6,299,697 |
|
|
| OREO |
| Condominium project in Spring Valley (San Diego County) California |
3,930,467 |
|
|
| OREO |
| Luxury residence in Tarzana (Los Angeles County) California |
1,098,000 |
|
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| OREO |
| 23 acres of residential land in Silverdale (Kitsap County), Washington |
1,990,000 |
| Non-accrual |
| Loan to Individual |
| Unsecured |
3,085,214 |
| Non-accrual |
| Construction Loan |
| Condominium project in Bakersfield (Kern County), California |
16,516,297 |
| Non-accrual |
| Land Loan |
| 9 acres of residential land in Palos Verdes (Los Angeles County), California |
1,316,000 |
|
|
| OREO |
| 11.62 acres of residential land in San Bernardino (San Bernardino County), California |
814,703 |
| Non-accrual |
| Land Loan |
| 1.95 acres of residential land in Corona (Riverside County), California |
1,100,000 |
| Non-accrual |
| CRE Loan |
| 13.74 Acres of industrial land in Bellingham (Whatcom County), Washington |
1,968,037 |
| Non-accrual |
| Loan to Individual |
| Unsecured |
1,609,617 |
| Non-accrual |
| Loan to Company |
| Unsecured |
1,284,636 |
| Non-accrual |
| CRE Loan |
| 110,000 sq. ft. warehouse in Bellingham (Whatcom County), Washington |
23,479,400 |
| Non-accrual |
| Construction Loan |
| Apartment building in Carpenteria (Santa Barbara County), California |
2,211,572 |
| Non-accrual |
| Construction Loan |
| 3 single family residences in Carpenteria (Santa Barbara County), California |
9,180,000 |
| Non-accrual |
| CRE Loan |
| 29 Acre Commercial Property in Murray (Salt Lake County), Utah |
14,282,842 |
| Non-accrual |
| Construction Loan |
| Condominium Project in Sparks (Washoe County), Nevada |
12,442,772 |
| Non-accrual |
| Construction Loan |
| Condominium project in Oceanside (San Diego County), California |
2,369,550 |
| Non-accrual |
| Construction Loan |
| Luxury residence in Palm Springs (Riverside County), California |
1,642,000 |
| Non-accrual |
| Land Loan |
| 16,000 sq. ft. of residential land in Santa Monica (Los Angeles County), California |
3
9,375,000 |
| Non-accrual |
| Land Loan |
| 100,000 sq. ft. of residential land in Valley Village (Los Angeles County), California |
7,068,259 |
| Non-accrual |
| Land Loan |
| 62,000 sq. ft. of residential land in Valley Village (Los Angeles County), California |
800,000 |
| Non-accrual |
| Land Loan |
| 4.76 acres of residential land in Sunland (Los Angeles County), California |
2,898,600 |
| Non-accrual |
| Land Loan |
| 5.5 acres of residential land in Henderson (Clark County), California |
4,852,852 |
| Non-accrual |
| Land Development |
| 24 acres of commercial and residential land in Ontario (San Bernardino County), California |
2,593,713 |
| Non-accrual |
| Construction Loan |
| 22 unit condominium project in Los Angeles (Los Angeles County), California |
735,000 |
| Non-accrual |
| Land Loan |
| 30,000 sq. ft. residential land in Thousand Oaks, (Ventura County), California |
9,193,419 |
| Non-accrual |
| CRE Loan |
| 180 Unit Apartment in North Hollywood (Los Angeles County), California |
530,225 |
| Non-accrual |
| CRE Loan |
| 98 Unit Apartment in Las Vegas (Clark County), Nevada |
1,217,250 |
| Non-accrual |
| Land Loan |
| 6 Unit Apartment in Valley Village (Los Angeles County), California |
1,217,250 |
| Non-accrual |
| Land Loan |
| 6 Unit Apartment in Valley Village (Los Angeles County), California |
1,217,250 |
| Non-accrual |
| Land Loan |
| 6 Unit Apartment in Valley Village (Los Angeles County), California |
1,565,000 |
| Non-accrual |
| Land Loan |
| 14,000 sq. ft. of residential land in Los Angeles (Los Angeles County), California |
5,311,000 |
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| OREO |
| 128 Unit Apartment in Daphne (Baldwin County), Alabama |
3,508,093 |
| Non-accrual |
| CRE Loan |
| Restaurant in Summerland (Santa Barbara County), California |
8,512,500 |
| Non-accrual |
| Land Loan |
| 82,000 sq. ft. of residential land in Valley Village (Los Angeles County), California |
3,562,024 |
| Non-accrual |
| Land Loan |
| 29,000 sq. ft. of residential land in Valley Village (Los Angeles County), California |
14,935,906 |
| Non-accrual |
| Construction Loan |
| 29 Unit condominium project in Beverly Hills (Los Angeles County), California |
199,829 |
| Non-accrual |
| Loan to Individual |
| Unsecured |
3,469,308 |
| Non-accrual |
| Construction Loan |
| 7 Unit condominium project in Los Angeles (Los Angeles County), California |
7,090,000 |
| Non-accrual |
| Construction Loan |
| Condominium project in Los Angeles County, California |
8,149,789 |
| Non-accrual |
| Construction Loan |
| 22 unit condominium project in Thousand Oaks (Ventura County), California |
5,874,484 |
| Non-accrual |
| Construction Loan |
| 18 unit condominium project in South Pasadena (Los Angeles County), California |
1,265,841 |
| Non-accrual |
| Land Loan |
| 15,000 sq. ft. lot in Santa Monica (Los Angeles County) California |
1,257,564 |
| Non-accrual |
| Land Loan |
| 16,000 sq. ft. lot in Santa Monica (Los Angeles County) California |
5,068,000 |
| Non-accrual |
| Land Loan |
| 5.2 acres of commercial land in Las Vegas (Clark County) Nevada |
5,399,685 |
| Non-accrual |
| Construction Loan |
| Luxury residence in Irvine (Orange County) California |
1,520,000 |
| Non-accrual |
| CRE Loan |
| 4 unit apartment in Los Angeles (Los Angeles County), California |
4,251,115 |
| 90+ days past due |
| CRE Loan |
| Medical office building in Newport Beach (Orange County) California |
3,975,000 |
| Non-accrual |
| CRE Loan |
| 56 room hotel in Santa Barbara (Santa Barbara County) California |
408,326 |
| Non-accrual |
| Loan to Individual |
| Unsecured |
500,000 |
| Non-accrual |
| Loan to Individual |
| Unsecured |
4
75,000 |
| Non-accrual |
| Loan to Individual |
| Unsecured |
13,772,079 |
| Non-accrual |
| CRE Loan |
| 272 Unit apartment in Fern Park (Seminole County), Florida |
3,186,170 |
| Non-accrual |
| CRE Loan |
| 96 unit mobile home park in San Diego, California |
6,160,000 |
| Non-accrual |
| CRE Loan |
| 15,000 sq.ft. bldg. In Los Angeles (Los Angeles County), California |
13,904,421 |
| Non-accrual |
| Construction Loan |
| 27 Unit condo project in Los Angeles (Los Angeles County), California |
17,898,574 |
| Non-accrual |
| Construction Loan |
| 42 unit Condo project in Los Angeles (Los Angeles County), California |
1,439,797 |
| Non-accrual |
| Construction Loan |
| 15,000 sq. ft. lot in West Hollywood (Los Angeles County) California |
5,634,677 |
| Non-accrual |
| Land Loan |
| 56 acres of land in Cedar Park, Texas |
249,962 |
| Non-accrual |
| Loan to Company |
| Unsecured |
46,489 |
| Non-accrual |
| Loan to Company |
| Unsecured |
23,500 |
| Non-accrual |
| Loan to Individual |
| Unsecured |
3,400,000 |
| 90+ days past due |
| Land Loan |
| 31,000 sq. ft. residential lot in Brentwood (Los Angeles County) California |
80,666 |
| 90+ days past due |
| Loan to Company |
| Unsecured |
362,933 |
| 90+ days past due |
| Loan to Company |
| Unsecured |
4,205,850 |
| 90+ days past due |
| CRE Loan |
| 97 unit apartment in Federal Heights, Colorado |
4,779,492 |
| 90+ days past due |
| Land Loan |
| 320 Acres of land in Bullhead City, Arizona |
70,597 |
| 90+ days past due |
| Loan to Company |
| Federally guaranteed |
77,083 |
| 90+ days past due |
| Loan to Company |
| Federally guaranteed |
499,000 |
| 90+ days past due |
| Loan to Individual |
| Unsecured |
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|
315,077,246 |
| Gross Non-performing Assets | ||||
0 |
| Less: prior writedowns | ||||
550,748 |
| Less: writedowns this period | ||||
314,526,498 |
| Reported Non-performing Assets | ||||
46,531,351 |
| Less: specific reserves | ||||
267,995,147 |
| Net Book Value of Non-performing Assets |
As indicated above, most of First Regional’s nonperforming assets at June 30, 2009 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
5
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 June 30, 2009 were as follows:
OTHER DELINQUENT LOANS
Amount |
| Status |
| Asset Type |
| Collateral |
|
|
|
|
|
|
|
4,833,581 |
| Past Due 30-89 days |
| Construction Loan |
| 32 unit condominium project in Santa Monica (Los Angeles County), California |
1,889,995 |
| Past Due 30-89 days |
| Loan to Company |
| Unsecured |
136,326 |
| Past Due 30-89 days |
| Loan to Individual |
| Unsecured |
1,799,660 |
| Past Due 30-89 days |
| Loan to Company |
| Unsecured |
299,880 |
| Past Due 30-89 days |
| Loan to Individual |
| Unsecured |
75,000 |
| Past Due 30-89 days |
| Loan to Company |
| Unsecured |
1,884,940 |
| Past Due 30-89 days |
| CRE Loan |
| 26 room hotel in Morro Bay, California |
2,545,381 |
| Past Due 30-89 days |
| Loan to Individual |
| 3 story parking structure in Los Angeles (Los Angeles County), California |
11,049,989 |
| Past Due 30-89 days |
| CRE Loan |
| 98 Unit Apartment in Las Vegas (Clark County), Nevada |
11,861,212 |
|
|
| CRE Loan |
| 98 Unit Apartment in Las Vegas (Clark County), Nevada |
2,496,982 |
|
|
| Land Loan |
| 4.9 Acre lot in Redlands, California |
2,418,072 |
|
|
| Land Loan |
| 7.24 Acres lot in Temecula, California |
9,481,516 |
|
|
| CRE Loan |
| 19 unit condo project in Los Angeles (Los Angeles County) California |
|
|
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|
50,772,534 |
| Gross Other Delinquent Loans |
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| ||
0 |
| Less: prior writedowns |
|
| ||
50,772,534 |
| Reported Other Delinquent Loans |
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|
6
What is the status of First Regional’s regulatory agreements?
First Regional’s wholly-owned subsidiary, First Regional Bank, consented to an agreement with the FDIC and the California Department of Financial Institutions in the form of an order to cease and desist which become effective on February 23, 2009.
The Bank has already achieved substantial compliance with the agreement. The principle components of the agreement, and the status of the Bank’s compliance efforts, are as follows:
· Retain qualified management, and continue the active involvement of the board of directors in managing the Bank’s activities.
The Bank’s existing management remains in place; no changes in management were suggested or required, and none have been made. The board of directors is maintaining its active involvement in the management of the Bank.
· Increase capital by $12 million, increase capital ratios based on a pre-determined schedule, and develop a comprehensive capital plan to assure compliance with that schedule. No dividends may be declared without prior regulatory approval.
The $12 million capital increase called for in the agreement, as well as a subsequent $5 million contribution, was made by First Regional Bancorp in the first quarter of 2009 using its existing cash reserves. The schedule referred to in the agreement calls for the Bank to increase its Tier 1 leverage ratio to 9.5% immediately, and to further increase it to 10% by September 30. For the second quarter of 2009 the Bank’s Tier 1 leverage ratio (based on average assets) was 9.3%, but was 9.5% based on total assets at the end of the quarter. A comprehensive capital plan was developed and adopted, which includes plans to meet the September 30 goal, and at this time that objective is expected to be met without the need to raise additional outside capital. No dividends have been declared by the Bank.
· Eliminate from the books any assets classified loss and a portion of any assets classified doubtful that have not already been charged-off or collected, and develop a comprehensive plan to reduce classified assets based on a pre-determined schedule.
This provision relates solely to the Bank’s classified assets as of June 30, 2008. The assets classified loss and the portion of the assets classified doubtful were eliminated from the Bank’s books by the end of 2008. The Bank developed a written plan to reduce the remaining classified assets, and has implemented it. The schedule referred to in the agreement calls for the Bank to reduce the classified assets from their original level of $218 million to $130 million by June 30, and to $110 million by September 30. As of June 30 the balance of the classified assets had been reduced to $101.5 million, meaning that the Bank has met both the June 30 and the September 30 goals. Naturally, the Bank is continuing its efforts to collect all of the classified assets even though the goals contained in the agreement have already been met.
· Create and implement a plan to increase the diversification of the Bank’s lending activities.
The Bank has adopted and implemented the diversification plan called for in the agreement. Under the plan, over time the Bank will reduce the amount of real estate lending it does, and increase its other types of lending. The Bank has also adopted revised policies reducing the permissible amount of credit that may be extended to individual borrowers and their related interests.
· Create and implement a comprehensive profit plan to improve the Bank’s earnings performance.
The profit plan called for in the agreement has been adopted and implemented. While profits are expected to remain under pressure for a time as the Bank deals with its problem assets, improvement is anticipated in the future.
· Update or revise the Bank’s written policies in the areas of credit administration and liquidity management.
Updated policies have been adopted by the board of directors for both of these functional areas.
7
· Correct all violations of laws or regulations, and take action to prevent future violations.
Such violations included certain technical violations, such as regulations requiring a bank to prepare an updated evaluation of real property value, even for a loan extension made with no new money lent. It is believed that all previous violations of laws or regulations have been corrected, and that procedures are in place to prevent future violations.
As evidenced above, the Bank has made considerable progress thus far in complying with its agreement, and expects to remain in full compliance.
In addition, First Regional Bancorp has entered into a written agreement with the Federal Reserve Bank of San Francisco which became effective on April 21, 2009. The Company is currently in full compliance with the agreement, and expects to remain so. The principle components of this agreement, and the status of the Company’s compliance efforts, are as follows:
· The Company shall not declare or pay dividends without prior regulatory approval
The Company has never declared or paid dividends in its history, and no dividends are anticipated at this time.
· The Company shall not take dividends or other forms of payment from First Regional Bank without prior regulatory approval.
No such payments are being sought at this time, and dividend payments by the Bank are already restricted under the terms of the Bank’s regulatory agreement.
· The Company and its non-bank subsidiaries shall not make any distributions of principal, interest or other sums on subordinated debentures or trust preferred securities without prior regulatory approval.
In accordance with their terms, the Company has deferred payments on its outstanding trust preferred securities and the associated subordinated debentures.
· The Company and its non-bank subsidiaries shall not incur, increase, or guarantee any debt without prior regulatory approval.
No such debt transactions have occurred since the effective date of the agreement, and none are contemplated at this time.
· The Company shall not purchase or redeem stock without prior regulatory approval.
No shares have been purchased or redeemed since the effective date of the agreement, and no further purchases or redemptions are contemplated at this time.
· The Company shall develop and submit a revised written capital plan to maintain sufficient capital on a consolidated and a bank-only basis.
The revised plan has been adopted and implemented.
As just described, the Company expects to achieve and maintain full compliance with its written agreement.
8
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99 Press Release of First Regional Bancorp, dated July 30, 2009, announcing financial results for the year ended June 30, 2009.
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.
9
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: August 4, 2009
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| 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
Exhibit Index
99 Press Release of First Regional Bancorp, dated July 30, 2009, announcing financial results for the quarter ended June 30, 2009.
11