8-K

UNITED STATESSECURITIES 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 (Date of earliest event reported): February 11, 2009

______________

TEMECULA VALLEY BANCORP INC.
(Exact name of Registrant as specified in its charter)

California	001-33897	46-0476193
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

27710 Jefferson Avenue Suite A100 Temecula, California	92590
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (951) 694-9940

Not Applicable
(Former name or former address, if changed since last report)

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:

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 – Entry into a Material Definitive Agreement.

Temecula Valley Bank (the “Bank”), a wholly owned subsidiary of Temecula Valley Bancorp Inc. (the “Company”), entered into a Stipulation and Consent (our “Consent”) to the issuance of an Order to Cease and Desist (the “Order”) by the Federal Deposit Insurance Corporation (the “FDIC”) and the California Department of Financial Institutions (the “DFI”). Based upon our Consent, the FDIC and the DFI jointly issued the Order on February 12, 2009, which is described under Item 8.01 below.

On February 11, 2009, the Company entered into a written agreement (the “FRB Agreement”) with the Federal Reserve Bank of San Francisco (the “FRB”), which is described under Item 8.01 below.

Item 8.01 – Other Events.

The Order is a formal corrective action pursuant to which the Bank has agreed to address specific areas through the adoption and implementation of procedures, plans and policies designed to enhance the safety and soundness of the Bank. These affirmative actions include management assessment, increased Board participation, implementation of plans to address capital, disposition of assets, allowance for loan losses, reduction in the level of classified and delinquent loans, loan portfolio diversification, profitability, strategic planning, funds management and a reduction in the level of brokered deposits. In addition, the Bank is required to maintain specified capital levels, notify the FDIC and the DFI of director and management changes and obtain prior approval of dividend payments.

The Order specifies certain timeframes for meeting these requirements, and the Bank must furnish periodic progress reports to the FDIC and DFI regarding its compliance with the Order. The Order will remain in effect until modified or terminated by the FDIC and the DFI.

The FRB Agreement is designed to enhance the Company’s ability to act as a source of strength to the Bank and requires that the Company obtain FRB approval before paying dividends, taking dividends from the Bank, making payments on subordinated debt or trust preferred securities, incurring debt or purchasing/redeeming Company stock. Similar to the Order, the FRB Agreement requires the Company to submit a capital plan, obtain FRB approval before appointing new directors or senior executive officers and comply with certain payment restrictions on golden parachute payments and indemnification restrictions.

The Company must furnish periodic progress reports to the FRB regarding its compliance with the FRB Agreement. The FRB Agreement will remain in effect until modified or terminated by the FRB.

Compliance Efforts

As previously disclosed by the Company, many of the corrective actions requested by the FDIC, the DFI and the FRB were initiated by the Bank and the Company some time ago, including significant management changes as well as other changes to preserve capital and enhance operations, The Company and the Bank recognize that the current challenging real estate and operating environments require a disciplined focus to achieve quality earnings with a reduced risk profile. The requirements of the Order and the FRB Agreement will assist us in this focus. The Bank expects to continue to provide to its customers the services previously provided including making loans, establishing lines of credit, accepting deposits and processing banking transactions.

The descriptions of our Consent, the Order and the FRB Agreement are qualified in their entirety by reference to our Consent and the Order, a copy each of which is attached hereto as Exhibits 10.1 and the FRB Agreement which is attached as Exhibit 10.2 hereto, and all are incorporated herein by reference in their entirety.

These events are also discussed in the press release attached as exhibit 99.1. The information found in exhibit 99.1 to this report is being furnished, not filed, pursuant to Section 18 of the Securities Exchange Act of 1934, as amended. Accordingly, exhibit 99.1 of this report will not be incorporated by reference into any of our filings, unless specifically identified therein as being incorporated therein by reference. The furnishing of the information in the exhibit to this report is not intended to, and does not, constitute a determination or admission by the Company that such information is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Company.

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The Company and the Bank have made forward-looking statements in this document that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of management, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations, and statements preceded by, followed by, or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. Management believes these forward-looking statements are reasonable. However, you should not place undue reliance on the forward-looking statements, since they are based on current expectations. Actual results may differ materially from those currently expected or anticipated.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The Company’s future results and shareholder values may differ materially from those expressed in these forward-looking statements. Many of the factors described below, that will determine these results and values, are beyond the Company’s ability to control or predict. For those statements, we claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995.

A number of factors, some of which are beyond the Company’s ability to predict or control, could cause future results to differ materially from those contemplated. These factors include but are not limited to:

--	the currently anticipated bail out actions by the governments and those recently implemented
--	a further slowdown in the national and California economies
--	volatility of rate sensitive deposits
--	changes in the regulatory environment
--	increasing competitive pressure in the banking industry
--	operational risks including data processing system failures or fraud
--	asset/liability matching risks and liquidity risks
--	changes in the securities markets

-- change in loan prepayment speeds

The consequences of these factors, any of which could hurt the Company and its business, could include, among others:

--	increased loan delinquencies
--	an escalation in problem assets and foreclosures
--	a decline in demand for our products and services
--	a reduction in the value of the collateral for loans made by us, especially real estate which, in turn, would likely reduce our customers’ borrowing power and the value of assets and collateral associated with our existing loans
--	a reduction in the value of certain assets held by our company

Item 9.01 – Financial Statements and Exhibits.

(d)      Exhibits.

The following exhibits are filed with this Form 8-K:

10.1	Stipulation and Consent to the Issuance of an Order to Cease and Desist and FDIC and DFI Order to Cease and Desist, issued February 12, 2009
10.2	Written Agreement with the Federal Reserve Bank of San Francisco, dated February 11, 2009

The following exhibit is being furnished, not filed, pursuant to Section 18 of the Securities Exchange Act of 1934, as amended.

99.1 Press Release dated February 18, 2009

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.

	TEMECULA VALLEY BANCORP INC.
Date: February 17, 2009	By:	/s/ FRANK BASIRICO
		Frank Basirico
		Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1	Stipulation and Consent to the Issuance of an Order to Cease and Desist and FDIC and DFI Order to Cease and Desist, issued February 12, 2009
10.2	Written Agreement with the Federal Reserve Bank of San Francisco, dated February 11, 2009
99.1	Press Release dated February 18, 2009

EX-10.1

Exhibit 10.1

FEDERAL DEPOSIT INSURANCE CORPORATION

WASHINGTON, D.C.

CALIFORNIA DEPARTMENT OF FINANCIAL INSTITUTIONS

SAN FRANCISCO, CALIFORNIA

	)
	)
In the Matter of	)
	)	STIPULATION AND CONSENT
TEMECULA VALLEY BANK	)	TO THE ISSUANCE
TEMECULA, CALIFORNIA	)	OF AN ORDER
	)	TO CEASE AND DESIST
(INSURED STATE NONMEMBER BANK)	)
	)	Docket FDIC-09-057b
	)

         Subject to the acceptance of this STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST (“CONSENT AGREEMENT”) by the Federal Deposit Insurance Corporation (“FDIC”) and the California Department of Financial Institutions (“CDFI”), it is hereby stipulated and agreed by and between a representative of the Legal Division of FDIC, a representative of the CDFI, and Temecula Valley Bank, Temecula, California (“Bank”), as follows:

1.       The Bank has been advised of its right to receive a NOTICE OF CHARGES AND OF HEARING (“NOTICE”) detailing the unsafe or unsound banking practices and violations of law alleged to have been committed by the Bank and of its right to a public hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b)(1), and Section 1912 of the California Financial Code (“CFC”), and has waived those rights.

2.       The Bank, solely for the purpose of this proceeding and without admitting or denying any of the alleged charges of unsafe or unsound banking practices and any violations of law, hereby consents and agrees to the issuance of an ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC and the CDFI. The Bank further stipulates and agrees that such ORDER will be deemed to be an order which has become final under the Act and the CFC, and that said ORDER shall become effective upon its issuance by the FDIC and the CDFI, and fully enforceable by the FDIC and the CDFI pursuant to the provisions of the Act and the CFC.

3.       In the event the FDIC and the CDFI accepts the CONSENT AGREEMENT and issues the ORDER, it is agreed that no action to enforce said ORDER in the United States District Court will be taken by the FDIC, and no action to enforce said ORDER in State Superior Court will be taken by the CDFI, unless the Bank or any institution-affiliated party, as such term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), has violated or is about to violate any provision of the ORDER.

4.       The Bank hereby waives:

(a)       The receipt of a NOTICE;

(b)       All defenses in this proceeding;

(c)       A public hearing for the purpose of taking evidence on such alleged charges;

(d)       The filing of Proposed Findings of Fact and Conclusions of Law;

(e)       A recommended decision of an Administrative Law Judge; and

(f)       Exceptions and briefs with respect to such recommended decision.

Dated:   February 10, 2009

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FEDERAL DEPOSIT INSURANCE	TEMECULA VALLEY BANK
CORPORATION, LEGAL DIVISION	TEMECULA, CALIFORNIA
BY: February 10, 2009
/s/ SANDRA A. QUIGLEY	/s/ STEVE W. AICHLE
Sandra A. Quigley	Steve W. Aichle
Counsel
CALIFORNIA DEPARTMENT OF
FINANCIAL INSTITUTIONS
BY:
/s/ PAUL T. CRAYTON	/s/ FRANK BASIRICO
Paul T. Crayton	Frank Basirico
Senior Counsel
	/s/ ROBERT P. BECK
	Robert P. Beck
	/s/ NEIL M. CLEVELAND
	Neil M. Cleveland
	/s/ GEORGE COSSOLIAS
	George Cossolias
	/s/ LUTHER J. MOHR
	Luther J. Mohr
	/s/ MARTIN E. PLOURD
	Martin E. Plourd
	/s/ RICHARD W. WRIGHT
	Richard W. Wright
	Comprising the Board of Directors
	of Temecula Valley Bank,
	Temecula, California

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FEDERAL DEPOSIT INSURANCE CORPORATION

WASHINGTON, D.C.

CALIFORNIA DEPARTMENT OF FINANCIAL INSTITUTIONS

SAN FRANCISCO, CALIFORNIA

	)
	)
In the Matter of	)
	)	ORDER TO
TEMECULA VALLEY BANK	)	CEASE AND DESIST
TEMECULA, CALIFORNIA	)
	)	Docket FDIC-09-057b
(INSURED STATE NONMEMBER BANK)	)
	)
	)

         Temecula Valley Bank, Temecula, California ("Bank"), having been advised of its right to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), and Section 1912 of the California Financial Code, and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), and with counsel for the California Department of Financial Institutions (“CDFI”), dated February 10, 2009, whereby solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC and the CDFI.

         The FDIC and the CDFI considered the matter and determined that they had reason to believe that the Bank had engaged in unsafe or unsound banking practices.  The FDIC and the CDFI, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

         IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns, cease and desist from the following unsafe and unsound banking practices, as more fully set forth in the joint FDIC and CDFI Report of Examination (“ROE”) dated December 1, 2008:

(a)      operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;

(b)      operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank;

(c)      operating with inadequate capital in relation to the kind and quality of assets held by the Bank;

(d)      operating with an inadequate loan valuation reserve;

(e)      operating with a large volume of poor quality loans;

(f)      operating in such a manner as to produce operating losses; and

(g)      operating with inadequate provisions for liquidity.

         IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

1.       The Bank shall have and retain qualified management.

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(a)      Each member of management shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank.  Management shall include the following:  (i) a chief executive officer with proven ability in managing a bank of comparable size, and experience in upgrading a low quality loan portfolio, improving earnings, and other matters needing particular attention; (ii) a chief financial officer with demonstrated ability in all financial areas including but not limited to, accounting, regulatory reporting, budgeting and planning, management of the investment function, liquidity management, and interest rate risk management; and (iii) a chief credit officer with significant appropriate lending, collection, and loan supervision experience and experience in upgrading a low quality loan portfolio.  The chief executive officer, the chief financial officer, and the chief credit officer are hereafter referred to collectively as “Senior Executive Officers.”  Each Senior Executive Officer shall be provided appropriate written authority from the Bank’s Board to implement provisions of this ORDER and shall perform his or her duties onsite at the Bank.  Without limiting the generality of the foregoing, the Regional Director of the FDIC’s San Francisco Regional Office (“Regional Director”) and the Commissioner of the CDFI (“Commissioner”) reserve the right to determine whether current senior executive officers and directors of the Bank will be considered to be qualified for purposes of this Order.

(b)      During the life of this ORDER, the Bank shall notify the Regional Director and the Commissioner in writing when it proposes to add any individual to the Bank's Board or employ any individual as a senior executive officer.  The notification must be received at least 30 days before such addition or employment is intended to become effective and should include a description of the background and experience of the individual or individuals to be added or employed.  The Bank shall not add, elect or appoint any individual to the Bank’s Board or employ any individual as a senior executive officer if the Regional Director or Commissioner, in response to the Bank’s notification as required in this paragraph, notifies the Bank of his or her disapproval.

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2.       Within 30 days from the effective date of this ORDER, the Bank’s Board shall increase its participation in the affairs of the Bank, assuming full responsibility for the approval of sound policies and objectives and for the supervision of all of the Bank's activities, consistent with the role and expertise commonly expected for directors of banks of comparable size.  This participation shall include meetings to be held no less frequently than monthly at which, at a minimum, the following areas shall be reviewed and approved: reports of income and expenses; new, overdue, renewal, insider, charged-off, and recovered loans; investment activity; operating policies; and individual committee actions.  The Bank’s Board minutes shall document these reviews and approvals, including the names of any dissenting directors.

3.       (a)       Within 90 days from the effective date of this ORDER, the Bank shall develop and adopt a capital plan that requires the maintenance of the Bank’s Tier 1 Leverage Capital ratio above 10 (ten) percent throughout the life of this ORDER.

(b)      Within 60 days from the effective date of this ORDER, the Bank shall develop and adopt a plan to meet and thereafter maintain the minimum risk-based capital requirements as described in the FDIC’s Statement of Policy on Risk-Based Capital contained in Appendix A to Part 325 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 325, Appendix A.  The Plan shall be in a form and manner acceptable to the Regional Director and the Commissioner as determined at subsequent examinations.

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(c)      If all or part of the increase in Tier 1 capital required by Paragraph 3 of this Order is accomplished by the sale of new securities, the Bank’s Board shall forthwith take all necessary steps to adopt and implement a plan for the sale of such additional securities, including the voting of any shares owned or proxies held or controlled by them in favor of the plan.  Should the implementation of the plan involve a public distribution of the Bank’s securities (including a distribution limited only to the Bank’s existing shareholders), the Bank shall prepare offering materials fully describing the securities being offered, including an accurate description of the financial condition of the Bank and the circumstances giving rise to the offering, and any other material disclosures necessary to comply with the federal securities laws.  Prior to the implementation of the plan and, in any event, not less than fifteen (15) days prior to the dissemination of such materials, the plan and any materials used in the sale of the securities shall be submitted to the FDIC, Registration and Disclosure Unit, Washington, D.C. 20429, for review and to the Commissioner to obtain any and all necessary securities permits or other approvals.  Any changes requested to be made in the plan or materials by the FDIC or the Commissioner shall be made prior to their dissemination.  If the increase in Tier 1 capital is provided by the sale of noncumulative perpetual preferred stock, then all terms and conditions of the issue, including but not limited to those terms and conditions relative to interest rate and convertibility factor, shall be presented to the Regional Director and the Commissioner for prior approval.

(d)      For the purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have, the meanings ascribed to them in Part 325 of the FDIC’s Rules and Regulations, 12 C.F.R. §§ 325.2(v) and 325.2(x).

4.       (a)       Within 60 days from the effective date of this ORDER, the Bank shall develop written asset disposition plans for each classified asset greater than 2.5 million.  The plans shall be reviewed and approved by the Bank’s Board and acceptable to the Regional Director and the Commissioner as determined at subsequent examinations and/or visitations.

                   (b)       Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan for the reduction and collection of delinquent loans and a written plan to reduce the overall level of classified assets.  The plans shall be acceptable to the Regional Director and the Commissioner as determined at subsequent examinations and/or visitations.

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5.       Within 60 days from the effective date of this ORDER, the Bank shall develop, adopt, and implement a comprehensive policy for determining the appropriateness of the allowance for loan and lease losses.  The policy shall include requirements for complying with the standards and guidelines in the Policy Statement on Allowance for Loan and Lease Loss Methodology and Documentation for the Bank and Savings and Loans dated July 2, 2001, and the Interagency Policy Statement on Allowance for Loan and Lease Losses dated December 13, 2006.

6.       Within 60 days from the effective date of this ORDER, the Bank shall develop a written plan, approved by its Board and acceptable to the Regional Director and the Commissioner for systematically reducing the amount of loans or other extensions of credit advanced, directly or indirectly, to or for the benefit of, any borrowers in the “Land & Construction Loan” Concentrations, as more fully set forth in the ROE dated December 1, 2008.  

7.       Within 90 days of the effective date of this ORDER, the Bank shall develop and submit to the Regional Director and the Commissioner a written three-year strategic plan.  Such plan shall include specific goals for the dollar volume of total loans, total investment securities, and total deposits as of December 31, 2009, December 31, 2010, and December 31, 2011.  For each time frame, the plan will also specify the anticipated average maturity and average yield on loans and securities; the average maturity and average cost of deposits; the level of earning assets as a percentage of total assets; and the ratio of net interest income to average earning assets.  The plan shall be in a form and manner acceptable to the Regional Director and the Commissioner as determined at subsequent examinations and/or visitations.

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8.       Within 90 days from the effective date of this ORDER, the Bank shall formulate and implement a written profit plan.  This plan shall be forwarded to the Regional Director and the Commissioner for review and comment and shall address, at a minimum, the following:

(a)      goals and strategies for improving and sustaining the earnings of the Bank, including:

(i)      an identification of the major areas in, and means by which, the Bank’s Board will seek to improve the Bank's operating performance;

(ii)     realistic and comprehensive budgets;

(iii)    a budget review process to monitor the income and expenses of the Bank to compare actual figures with budgetary projections; and

(iv)     a description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components.

(b)      coordination of the Bank's loan, investment, and operating policies, and budget and profit planning, with the funds management policy.

9.       Within 60 days from the effective date of this ORDER, the Bank shall develop or revise, adopt, and implement a written liquidity and funds management policy.  Such policy and its implementation shall be in a form and manner acceptable to the Regional Director and the Commissioner as determined at subsequent examinations and/or visitations.

10.      Within 30 days of the effective date of this ORDER, the Bank shall submit to the Regional Director and the Commissioner a written plan for reducing its reliance on brokered deposits.  The plan should contain details as to the current composition of brokered deposits by maturity and explain the means by which such deposits will be paid in compliance with 12 C.F.R. § 337.6.  The Regional Director and the Commissioner shall have the right to reject the Bank’s plan.  On the 15^th day of each month, the Bank shall provide a written progress report to the Regional Director and the Commissioner with specific reference to progress under the Bank’s plan.  For purposes of this ORDER, brokered deposits are defined as described in section 337.6(a)(2) of the FDIC’s Rules and Regulations to include any deposits funded by third party agents or nominees for depositors, including deposits managed by a trustee or custodian when each individual beneficial interest is entitled to or asserts a right to federal deposit insurance.

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11.      The Bank shall not pay cash dividends without the prior written consent of the Regional Director and the Commissioner.

12.      Within 30 days of the end of the first quarter, following the effective date of this ORDER, and within 30 days of the end of each quarter thereafter, the Bank shall furnish written progress reports to the Regional Director and the Commissioner detailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof.  Such reports shall include a copy of the Bank's Report of Condition and the Bank's Report of Income.  Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director and the Commissioner have released the Bank in writing from making further reports.

13.      Following the effective date of this ORDER, the Bank shall send to its shareholder(s) or otherwise furnish a description of this ORDER in conjunction with the Bank's next shareholder communication and also in conjunction with its notice or proxy statement preceding the Bank's next shareholder meeting.  The description shall fully describe the ORDER in all material respects.  The description and any accompanying communication, statement, or notice shall be sent to the FDIC, Accounting and Securities Section, Washington, D.C. 20429, and to the Commissioner, at least 15 days prior to dissemination to shareholders.  Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice, or statement.

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         This ORDER will become effective upon its issuance by the FDIC and the CDFI.  Violation of any provision of this Order will be deemed to be conducting business in an unsafe or unsound manner, and will subject the Bank to further regulatory enforcement action.  The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC and the CDFI.

         Pursuant to delegated authority.

         Dated at San Francisco, California, this 12^th day of February, 2009.

/s/ J. GEORGE DOERR, for

Stan Ivie

Regional Director

Division of Supervision and Consumer Protection

San Francisco Region

Federal Deposit Insurance Corporation

/s/ WILLIAM S. HARAF

William S. Haraf

Commissioner

California Department of Financial Institutions

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EX-10.2

Exhibit 10.2

UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.

	)
Written Agreement by and between	)
	)
TEMECULA VALLEY BANCORP INC.	)
Temecula, California	)
	)
and	)
	)	Docket No. 09-011-WA/RB-HC
FEDERAL RESERVE BANK OF SAN	)
FRANCISCO	)
	)

         WHEREAS, Temecula Valley Bancorp Inc., Temecula, California (“TVBC”), a registered bank holding company, owns and controls Temecula Valley Bank, Temecula, California (the “Bank”), a start chartered nonmember bank, and various nonbank subsidiaries;

         WHEREAS, it is the common goal of TVBC and the Federal Reserve Bank of San Francisco (the “Reserve Bank”) to maintain the financial soundness of TVBC so that TVBC may serve as a source of strength to the Bank;

         WHEREAS, TVBC and the Reserve Bank have mutually agreed to enter into this Written Agreement (the “Agreement”); and

         WHEREAS, on ____________________, 2009, the board of directors of TVBC, at a duly constituted meeting, adopted a resolution authorizing and directing ___________________ to enter into this Agreement on behalf of TVBC, and consenting to compliance with each and every provision of this Agreement by TVBC and its institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C.§§ 1813(u) and 1818(b)(3)).

1

         NOW, THEREFORE, TVBC and the Reserve Bank agree as follows:

Dividends

         1.        (a)       TVBC shall not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation (the “Director”) of the Board of Governors of the Federal Reserve System (the “Board of Governors”).

                   (b)       TVBC shall not directly or indirectly take dividends or any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank.

                   (c)       TVBC and its nonbank subsidiaries shall not make any distributions of interest, principal, or other sums on subordinated debentures of trust preferred securities without the prior written approval of the Reserve Bank and the Director.

                   (d)       All requests for prior approval shall be received by the Reserve Bank at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities. All requests shall contain, at a minimum, current and projected information on TVBC’s capital, earnings, and cash flow; the Bank’s capital, asset quality, earnings, and allowance for loan and lease losses (“ALLL”); and identification of the sources of funds for the proposed payment, or distribution. For requests to declare or pay dividends, TVBC must also demonstrate that the requested declaration or payment of dividends is consistent with the Board of Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).

2

Debt and Stock Redemption

         2.        (a)       TVBC and any nonbank subsidiary shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank. All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

                   (b)       TVBC shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank.

Capital Plan

         3.        Within 60 days of this Agreement, TVBC shall submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at TVBC, on a consolidated basis, and the Bank, as a separate legal entity on a stand-alone basis. The plan shall, at a minimum, address, consider, and include:

                   (a)       The consolidated organization’s and the Bank’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D) and the applicable capital adequacy guidelines for the Bank issued by the Bank’s federal regulator;

                   (b)       the adequacy of the Bank’s capital, taking into account the volume of classified credits, concentrations of credit, ALLL, current and projected asset growth, and projected retained earnings;

                   (c)       the sources and timing of additional funds to fulfill the consolidated organization’s and the Bank’s future capital requirements;

                   (d)       supervisory requests for additional capital at the Bank or the requirements of any supervisory action imposed on the Bank by its federal or state regulator;

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                   (e)       the requirements of section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R. § 225.4(a)) that TVBC serve as a source of strength to the Bank; and

                   (f)       procedures for TVBC to: (i) notify the Reserve Bank, in writing, no more than 30 days after the end of any quarter in which TVBC’s consolidated capital ratios or the Bank’s capital ratios (total risk-based, Tier 1 risk-based, or leverage) fall below the plan’s minimum ratios; and (ii) submit simultaneously to the Reserve Bank an acceptable written plan that details the steps TVBC will take to increase its and the Bank’s capital ratios above the plan’s minimums.

Compliance with Laws and Regulations

         4.        (a)       In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, TVBC shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R.  §§ 225.71 et seq.).

                   (b)       TVBC shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).

Progress Reports

         5.        Within 30 days after the end of each calendar quarter following the date of this Agreement, the board of directors shall submit to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with the provisions of this Agreement and the results thereof, and a parent company only balance sheet, income statement, and, as applicable, a report of changes in stockholders’ equity.

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Approval and Implementation of Plan

         6.        (a)       TVBC shall submit a written capital plan that is acceptable to the Reserve Bank within the applicable time period set forth in paragraph 3 of this Agreement.

                   (b)       Within 10 days of approval by the Reserve Bank, TVBC shall adopt the approved capital plan. Upon adoption, TVBC shall promptly implement the approved plan, and thereafter fully comply with it.

                   (c)       During the term of this Agreement, the approved capital plan shall not be amended or rescinded without the prior written approval of the Reserve Bank.

Communications

         7.        All communications regarding this Agreement shall be sent to:

                   (a)       Mr. Dale Vaughan
                             Examining Officer
                             Banking Supervision & Regulation
                             Federal Reserve Bank of San Francisco
                             950 South Grand Avenue
                             Los Angeles, California 90015

                   (b)       Mr. Neil Cleveland
                             Chairman of the Board
                             Temecula Valley Bancorp Inc.
                             27710 Jefferson Avenue, Suite 100
                             Temecula, California 92590

Miscelleneous

         8.        Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole discretion, grant written extensions of time to TVBC to comply with any provision of this Agreement.

         9.        The provisions of this Agreement shall be binding upon TVBC and its institution-affiliated parties, in their capacities as such, and their successors and assigns.

         10.       Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank.

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         11.       The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting TVBC, the Bank, any nonbank subsidiary of TVBC, or any of their current or former institution-affiliated parties and their successors and assigns.

         12.       Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

         IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the _____ day of __________________, 2009.

TEMECULA VALLEY	FEDERAL RESERVE BANK
BANCORP INC.	OF SAN FRANCISCO
By: __________________________	By: __________________________
Frank Basirico	Dale Vaughan
Chief Executive Officer	Examining Officer, Community
	Institutions Group
	Banking Supervision & Regulation

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EX-99.1

Exhibit 99.1

Temecula Valley Bank Agrees to FDIC Action Plan

Agreement Builds Upon Aggressive Actions Taken to Enhance Capital, Reduce Risk, Strengthen Management and Diversify Portfolio

Temecula Valley Bancorp Enters Agreement with Federal Reserve Bank of San Francisco to Further Enhance the Company’s Ability to Support and Strengthen the Bank

TEMECULA, Calif.--(BUSINESS WIRE)--February 18, 2009--Temecula Valley Bancorp Inc. (NASDAQ: TMCV) today announced that its wholly owned subsidiary Temecula Valley Bank has entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) and the California Department of Financial Institutions (DFI) to adopt an action program designed to further enhance the strength and stability of its operations. The Company also announced that it has entered into an agreement with the Federal Reserve Bank of San Francisco (FRB) intended to augment the Company’s ability to act as a source of strength to the Bank.

“Since my appointment as CEO in December, the entire management team has maintained a laser-like focus on addressing the areas of concern that have been raised by our regulators as part of our ongoing efforts to strengthen our operations,” said Frank Basirico, Chief Executive Officer of Temecula Valley Bancorp. “As a result, many of the prudent actions required in these agreements have been completed, while the others are nearing completion. Nonetheless, we will continue to work closely with the FDIC, the DFI and the Federal Reserve Bank to ensure that Temecula Valley Bank meets the highest standards of strength, security and performance.”

As part of the FDIC and DFI agreement, the Bank consented to the issuance of an order to cease-and-desist, which formally outlines specific areas the Bank agrees to address through the adoption and implementation of policies that further enhance the soundness of the Bank. These affirmative actions, many of which the Bank has already undertaken as part of its strategic three-year plan, include management assessment, increased Board participation and the implementation of plans to address capital, disposition of assets, allowance for loan losses, reduction in the level of classified and delinquent loans, loan portfolio diversification, profitability, strategic planning, funds management and a reduction in the level of brokered deposits. Additionally, the Bank is required to maintain specified capital levels, notify the FDIC and the DFI of director and management changes and obtain prior approval of dividend payments.

The FRB agreement requires that the Company obtain FRB approval before paying dividends, taking dividends from the Bank, making payments on subordinated debt or trust preferred securities, incurring debt or purchasing/redeeming Company stock. It also requires the Company to submit a capital plan, obtain FRB approval before appointing new directors or senior executive officers, and comply with certain payment restrictions on golden parachute payments and indemnification restrictions.

Marty Plourd, President and COO, said, “As we move forward with these agreements, we will continue to act aggressively on our strategy to strengthen our balance sheet, align our operations with the current market environment and restore the bank to profitability. To date, we have reduced headcount by 12%, significantly downsized our SBA operations, and begun to deleverage our balance sheet and to shrink our loan portfolio and reliance on brokered deposits in a systematic and orderly fashion. At the same time, we are continuing to increase our loan loss reserves prudently while building our core deposit base and diversifying our sources of stable funding.”

As previously announced in a news release dated February 3, Temecula Valley Bancorp has made substantial progress against its three-year strategic plan, which addresses many of the areas and issues raised in the regulatory agreements. To date, the Company has:

• Developed a strategy to enhance capital ratios for the Bank and the Holding Company;
• Expanded and enhanced Board supervision of management, policies and objectives;
• Developed and implemented an asset disposition plan for classified assets to reduce nonperforming loans through collection and negotiations with delinquent borrowers, and to document the improved methodology of its loan loss reserve policy;
• Developed a plan to systematically diversify its loan portfolio and reduce concentrations in land and construction loans;
• Developed a plan to systematically diversify the deposit base and reduce reliance on brokered deposits;
• Ensured that the senior management team has the talent and expertise needed to implement this strategic realignment and determined a means to retain and recruit seasoned professionals, as necessary; and
• Developed and implemented a plan to return the bank to profitable operations.

About Temecula Valley Bank

Temecula Valley Bank was established in 1996 and operates eleven full service banking offices in California, in the communities of Temecula, Murrieta, Corona, Carlsbad, El Cajon, Escondido, Fallbrook, Rancho Bernardo, San Marcos, Solana Beach and Ontario. Regional commercial and SBA loan offices are located throughout the state of California. The Bank is an SBA Preferred Lender. Temecula Valley Bancorp Inc. was established in June 2002 and operates as a bank holding company for the Bank. For more information about the Company, visit Temecula’s website at www.temvalbank.com.

Statements concerning future performance, developments, or events concerning expectations for growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, the effect of interest rate changes, the ability to control costs and expenses, the impact of consolidation in the banking industry, financial policies of the U.S. government, and general economic conditions. Additional information on these and other factors that could affect financial results are included in the filings made with the Securities and Exchange Commission by Temecula Valley Bancorp Inc. The Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise.

CONTACT:
Temecula Valley Bancorp Inc.
Frank Basirico, CEO, 951-694-9940