-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KC/a0fwvWW+/QOwaoXiDLDTVXevZCPB7j2AQ20JqYWPtVCahgV/ILFWh4GTdAVgD lZrq+0LQyhA/P9YkClvOPQ== 0000944209-97-000542.txt : 19970509 0000944209-97-000542.hdr.sgml : 19970509 ACCESSION NUMBER: 0000944209-97-000542 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST REGIONAL BANCORP CENTRAL INDEX KEY: 0000356708 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 953582843 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10232 FILM NUMBER: 97597681 BUSINESS ADDRESS: STREET 1: 1801 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3105521776 MAIL ADDRESS: STREET 1: 1801 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: GREAT AMERICAN BANCORP DATE OF NAME CHANGE: 19880309 10-Q 1 FORM 10-Q FOR PERIOD ENDED 03/31/1997 Page 1 of 18 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 Quarter Ended March 31, 1997 ------------------------------------------------------------- Commission File Number 0-10232 ---------------------------------------------------- FIRST REGIONAL BANCORP --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 95-3582843 - ------------------------------- --------------------------- State or other jurisdiction of IRS Employer incorporation or organization Identification Number 1801 Century Park East, Los Angeles, California 90067 - --------------------------------------------------------------------------- Address of principal executive offices Zip Code (310) 552-1776 - --------------------------------------------------------------------------- Registrant's telephone number, including area code Not applicable - --------------------------------------------------------------------------- Former name, former address, and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding in each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, No Par Value 2,446,131 -------------------------- ----------------------------- Class Outstanding on May 9, 1997 2 FIRST REGIONAL BANCORP ---------------------- INDEX -----
Page ---- Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Financial Condition 3 Consolidated Statements of Income 5 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Part II - Other Information Item 1. Legal Proceedings 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18
3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ----------------------------- FIRST REGIONAL BANCORP AND SUBSIDIARY ------------------------------------- CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION ---------------------------------------------- (In Thousands) (unaudited)
March 31 December 31, 1997 1996 -------- ------------ ASSETS - ------ Cash and due from banks $ 6,648 $ 6,499 Time deposits with other financial institutions 5,340 5,242 Investment securities 23,830 26,817 Funds sold 15,830 22,780 Federally guaranteed loans 3,902 7,498 Other loans, net of allowance for losses of $1,714,000 in 1997 and $2,300,000 in 1996 90,778 80,104 Premises and equipment, net of accumulated depreciation 372 362 Other real estate owned 0 0 Accrued interest receivable and other assets 2,772 3,147 -------- -------- Total Assets $149,472 $152,499 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Liabilities: Demand deposits $ 23,198 $ 22,516 Savings deposits 5,026 5,444 Money market deposits 82,663 83,956 Time deposits 22,453 24,839 -------- -------- Total deposits 133,340 136,755 Securities sold under agreement to repurchase (94) 0 Accrued interest payable and other liabilities 1,571 1,378 -------- -------- Total Liabilities 134,817 138,133 Shareholders' Equity: Common Stock, no par value, 50,000,000 shares authorized; 2,446,131 and 2,398,800 shares outstanding in 1997 and 1996, respectively 11,332 11,332 Retained earnings 3,319 2,958
4
March 31 December 31, 1997 1996 -------- ------------ Net unrealized gain (loss) on securities available for sale 4 26 -------- -------- Total Shareholders' Equity 14,655 14,316 -------- -------- Total Liabilities and Shareholders' Equity $149,472 $152,499 ======== ========
The accompanying notes are an integral part of these statements. 5 FIRST REGIONAL BANCORP AND SUBSIDIARY ------------------------------------- CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (In Thousands Except Per Share Amounts) (Unaudited)
Three Months Ended March 31, ------------------ 1997 1996 -------- -------- REVENUE FROM EARNING ASSETS: Interest and fees on loans $2,007 $2,120 Interest on time deposits with other financial institutions 78 97 Interest on investment securities 593 263 Interest on funds sold 255 294 ------ ------ Total revenue from earning assets 2,933 2,774 COST OF FUNDS: Interest on deposits 846 724 Interest on securities sold under agreements to repurchase (1) 4 ------ ------ Total cost of funds 845 728 Net revenue from earning assets before provision for loan losses 2,088 2,046 PROVISION FOR LOAN LOSSES 156 100 ------ ------ Net revenue from earning assets 1,932 1,946 OPERATING INCOME Net gains (losses) on sales of investment securities 0 (20) Other revenue 183 105 ------ ------ Total operating income 183 85 OPERATING EXPENSES: Salaries and related benefits 691 625 Occupancy expense 92 89 Equipment expense 46 33 Promotion expense 37 30 Professional service expense 165 171 Customer service expense 298 318 Supply/communication expense 31 42 Other expenses 137 123 ------ ------ Total operating expenses 1,497 1,431 Income before provision for income taxes 618 600 PROVISION FOR INCOME TAXES 256 66 ------ ------
6
Three Months Ended March 31, ------------------ 1997 1996 ------ ------ NET INCOME $ 362 $ 534 ====== ====== NET INCOME PER SHARE (Note 2) $ 0.15 $ 0.22 ====== ======
The accompanying notes are an integral part of these statements. 7 FIRST REGIONAL BANCORP AND SUBSIDIARY ------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (In Thousands) (Unaudited)
Three Months Ended March 31, -------------------- 1997 1996 --------- -------- OPERATING ACTIVITIES Net Income $ 362 $ 534 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 156 100 Provision for depreciation and amortization 19 12 Amortization of investment security and guaranteed loan premiums 32 111 Accretion of investment security discounts (43) (42) Decrease (increase) in interest receivable 357 19 Increase (decrease) in interest payable 12 138 Increase (decrease) in taxes payable 255 66 Net increase (decrease) in other liabilities (75) 764 -------- ------- Net cash provided by operating activities $ 1,075 $ 1,702 INVESTING ACTIVITIES Decrease (increase) in investments in time deposits with other financial institutions $ (98) $ 3,466 Decrease (increase) in investment securities 2,988 (5,055) Decrease (increase) in guaranteed loans 3,584 2,005 Net decrease (increase) in other loans (10,830) 602 Decrease (increase) in premises and equipment (29) (2) Decrease (increase) in other real estate owned 0 32 Net decrease (increase) in other assets 18 (703) -------- ------- Net cash provided by investing activities $ (4,367) $ 345
8
Three Months Ended March 31, 1997 1996 --------- --------- FINANCING ACTIVITIES Net increase (decrease) in demand deposits, savings accounts, and money market accounts $(1,029) $(5,461) Net increase (decrease) in time deposits (2,386) 2,029 Increase (decrease) in securities sold under agreement to repurchase (94) (15) ------- ------- Net cash provided by financing activities $(3,509) $(3,447) Increase (decrease) in cash and cash equivalents $(6,801) $(1,400) Cash and cash equivalents, beginning of period 29,279 27,467 ------- ------- Cash and cash equivalents, end of period $22,478 $26,067 ======= =======
The accompanying notes are an integral part of these statements. 9 FIRST REGIONAL BANCORP AND SUBSIDIARY ------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ March 31, 1997 (Unaudited) NOTE 1 - The consolidated financial statements include the accounts of First Regional Bancorp (the Company), a bank holding company, and its wholly-owned subsidiary, First Regional Bank (the Bank). Certain amounts in the 1996 financial statements have been reclassified to be comparable with the classifications used in the 1997 financial statements. In the opinion of the Company, the accompanying consolidated financial statements contain all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the financial position as of March 31, 1997 and December 31, 1996 and the results of operations for the three month periods ended March 31, 1997 and 1996. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Company's 1996 annual report. NOTE 2 - Per share information is based on the number of common shares outstanding, which was 2,446,131 for 1997 and 2,398,800 for 1996. No adjustment has been made for outstanding stock options. NOTE 3 - As of March 31, 1997 the Bank had a total of $777,000 in standby letters of credit outstanding. No losses are anticipated as a result of these transactions. NOTE 4 - The Company adopted Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan," effective January 1, 1995. This Statement defines an impaired loan as one for which it is likely that an institution will be unable to collect all amounts due (that is, all principal and interest) according to the contractual terms of the loan. The Statement generally requires impaired loans to be measured at the present value of expected future cash flows discounted at the effective interest rate of the loan, or, as an expedient, at the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. For the quarter ended March 31, 1997 the Company had identified loans having an aggregate average balance of $3,361,917 which it concluded were impaired under SFAS No. 114. The Company's policy is to discontinue the accrual of interest income on impaired loans, and to recognize income on such loans only after the loan principal has been repaid in full. Pursuant to this policy, the Company had already ceased to accrue interest on the impaired loans, and had established a general loss reserve for each of the loans which at March 31, 1997 totalled $237,000 for the loans as a group. As the loss reserves established by the Company were greater than those called for under SFAS No. 114, the adoption of 10 SFAS No. 114 had no effect on the Company's financial statements as of March 31, 1997. NOTE 5 - The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Investments in Certain Debt and Equity Securities," effective January 1, 1994. This Statement supersedes SFAS No. 12, and significantly amends SFAS No. 65 and SFAS No. 60, the standards previously used by the Company. The effect of adopting SFAS No. 115 on the Company's financial statements was to increase shareholders' equity at March 31, 1997 by $4,000 from the level which would have existed had SFAS No. 115 not been adopted. Because the applicable investment securities are classified by the Company as "available for sale," there was no effect on the Company's income statement. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------------------------------------------------------------------------ RESULTS OF OPERATIONS --------------------- SUMMARY - ------- First Regional Bancorp did not conduct any significant business activities independent of First Regional Bank. The following discussion and analysis relates primarily to the Bank. As of March 31, 1997 total assets were $149,472,000 compared to $152,499,000 at December 31, 1996, a decrease of $3,027,000 or 2%. A modest decline in asset levels is customary in the first quarter of each year, and the March 31, 1997 total reflects considerable growth over the $135,907,000 in total assets which existed on the same date in 1996. For the most part, this year's shrinkage was the result of a decrease in deposits of $3,415,000 or 2%, to $133,340,000 on March 31, 1997 from $136,755,000 at December 31, 1996; the reduction was centered in time deposits, although smaller decreases were experienced in the areas of savings deposits and money market deposits. Demand deposits grew in the first quarter, partially offsetting the declines which took place in the other deposit categories. There were several changes in the composition of the Bank's assets during the first quarter. Other loans (net) grew by $10,674,000 due to increased investments in bankers acceptances, but Federally guaranteed loans fell by $3,596,000 due to continued sales of loans during the quarter under the loan sale program begun in the fourth quarter of 1996. These changes brought the Bank's total loans to $94,680,000 at March 31, 1997 from the December 31, 1996 total of $87,602,000. The combined effect of the growth in loans and the modest reduction in deposits was some shrinkage in the level of total liquid assets. In particular, investment securities fell by approximately $3 million due to maturing instruments, while funds sold fell by $6,950,000 in order to accommodate the changes which took place in the rest of the balance sheet. The Company earned a profit of $362,000 in the first quarter of 1997, compared to earnings of $534,000 in the three months ended March 31, 1996. The 1996 results reflect the benefits of the reversal of a tax reserve in that period; income before taxes was $618,000 in the first quarter of 1997 versus $600,000 for the same period in the prior year. The increase in pre-tax earnings primarily reflects stable net interest revenue resulting from the growth in the level of earning assets over the prior year, combined with gains on sale of loans and real estate which offset slightly higher non-interest expenses. NET INTEREST INCOME - ------------------- Total revenue from earning assets rose by $159,000 (6%) for the three months ended March 31, 1997 compared to the same period in 1996. This revenue increase came largely because of the higher level of earning assets which prevailed in 1997 compared to the prior year, although modest reductions in interest rates which occurred in the latter part of 1996 served to reduce the effects of the growth when viewed in relation to the preceding year. While yields on earning assets fell over the past year, the cost of funds has been much more stable, with the result that growth in 12 deposits over the past year has resulted in a substantial increase in interest expense, which rose from $728,000 in the first quarter of 1996 to $845,000 for the same period in 1997, an increase of $117,000 or 16%. Thus, in comparing the first quarter of 1997 to the same period in 1996, the cost of interest bearing liabilities rose significantly, while interest revenues likewise rose. The combined effect of these changes was a slight increase in net revenue from earning assets to $2,088,000 in the first quarter of 1997 from $2,046,000 for the first three months of 1996. OPERATING INCOME - ---------------- Other revenue rose from $105,000 in the first quarter of 1996 to $183,000 in the three months ended March 31, 1997. The increase in this category of income was largely due to gains realized on the sale of loans of $79,000, and gains on sales of land of $70,000. There were no such gains in either of these categories in the first quarter of 1996. During the first quarter of 1996, changes in the relative levels of interest rates made it advisable for one of the Bank's investment securities to be sold, and a loss of $20,000 was incurred on the sale. No gains or losses on securities sales were realized in the first quarter of 1997. PROVISION FOR POSSIBLE LOSSES - ----------------------------- The allowance for possible losses is intended to reflect known and inherent risks in a portfolio. The allowance for possible losses is increased by provisions for possible losses, and is decreased by net chargeoffs. Management continues to evaluate the portfolio in light of many factors, including loss experience and current economic conditions. Management believes the allowance for possible losses is adequate to provide for losses that might be reasonably anticipated. The allowance for possible losses was $1,714,000 and $2,300,000 (or 1.78% and 2.56% of gross outstanding loans) at March 31, 1997 and December 31, 1996 respectively. Reflecting the Company's ongoing analysis of the risks presented by its loan portfolio, provisions for possible losses were $156,000 for the three month period ended March 31, 1997, compared to 100,000 in the first quarter of 1996. For the three months ended March 31, 1997, the Company generated net loan chargeoffs of $541,000; by comparison, in the first quarter of 1996 the Company experienced net loan recoveries of $43,000. In addition, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan," effective January 1, 1995. This Statement defines an impaired loan as one for which it is likely that an institution will be unable to collect all amounts due (that is, all principal and interest) according to the contractual terms of the loan. The Statement generally requires impaired loans to be measured at the present value of expected future cash flows discounted at the effective interest rate of the loan, or, as an expedient, at the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. For the quarter ended March 31, 1997 the Company had identified loans having an aggregate average balance of $3,362,000 which it concluded were impaired under SFAS No. 114. The Company's policy is to discontinue the accrual of interest income on impaired loans, and to recognize income on such loans only after the loan 13 principal has been repaid in full. Pursuant to this policy, the Company had already ceased to accrue interest on the impaired loans, and had established a general loss reserve for each of the loans which at March 31, 1997 totalled $237,000 for the loans as a group. As the loss reserves established by the Company were greater than those called for under SFAS No. 114, the adoption of SFAS No. 114 had no effect on the Company's financial statements as of March 31, 1997. OPERATING EXPENSES - ------------------ Overall operating expenses increased in the first quarter of 1997 compared to the same period of 1996, although some categories of expense actually decreased from the levels of previous periods. Operating expenses rose from a total of $1,431,000 for the first quarter of 1996 to $1,497,000 for the three months ended March 31, 1997. Salary and related benefits increased by $66,000, rising to a total of $691,000 for the first quarter of 1997 from $625,000 for the same period in 1996. The increase principally reflects employee salary adjustments, as well as increases in staffing which took place in recent years as part of the Bank's program to increase its level of assets. Occupancy expense remained generally stable, rising slightly from $89,000 for the three months ended March 31, 1996 to $92,000 in the first quarter of 1997. Other operating expenses were virtually unchanged in 1997 compared to the prior year, falling to $714,000 for the first quarter of 1997 from $717,000 for the first three months of 1996. In addition to the benefits of the Bank's ongoing program of expense control, the expense reduction from prior years reflects the absence in both 1997 and 1996 of premiums for deposit insurance. The combined effects of the above-described factors resulted in income before taxes of $618,000 for the first quarter of 1997 compared to $600,000 for the three months ended March 31, 1996. In the first quarter of 1996, the Company's federal tax provision was offset by the reversal of a reserve for deferred tax assets; there was no such reserve reversal in 1997. Thus, reflecting both the higher 1997 income level and the absence of the reserve reversal, the Company's provision for taxes for the first quarter rose from just $66,000 in 1996 to $256,000 in 1997. This brought Net Income for the first quarter of 1997 to $362,000 compared to $534,000 for the same period in 1996. LIQUIDITY, SOURCES OF FUNDS, AND CAPITAL RESOURCES - -------------------------------------------------- The Company's financial position remains highly liquid. Total liquid assets (cash and due from banks, time deposits with other financial institutions, investment securities, and funds sold) stood at 38.7% of total deposits at March 31, 1997. This level represents a slight decrease from the 44.9% liquidity level which existed on December 31, 1996. In addition, at March 31, 1997 almost $27 million of the Bank's total loans consisted of bankers acceptances or government guaranteed loans, both of which represent a significant sources of liquidity due to the active secondary markets which exist for these assets. The ratio of net loans (including bankers acceptances and government guaranteed loans) to deposits was 71.0% and 64.1% as of March 31, 1997 and December 31, 1996, respectively. 14 Because customer deposits are the Company's principal funding source outside of its capital, management has attempted to match rates and maturities of its deposits with its investment and loan portfolios as part of its liquidity and asset and liability management policies. The objective of these policies is to limit the fluctuations of net interest income resulting from interest rate changes. The table which follows indicates the repricing or maturity characteristics of the major categories of the Bank's assets and liabilities as of March 31, 1997, and thus the relative sensitivity of the Bank's net interest income to changes in the overall level of interest rates. A positive "gap" for a period indicates that an upward or downward movement in the level of interest rates would cause a corresponding change in net interest income, while a negative "gap" implies that an interest rate movement would result in an inverse change in net interest income.
One month Six months One year but less but less but less Non-interest Floating Less than than than than Five years earning Category Rate one month six months one year five years or more or bearing Total ================================================================================================================================ Fed funds sold 15,830 0 0 0 0 0 0 15,830 Time deposits with other banks 0 1,683 3,558 99 0 0 0 5,340 Investment securities 15,935 0 7,870 0 25 0 0 23,830 Subtotal 31,765 1,683 11,428 99 25 0 0 45,000 Loans 71,277 4,000 19,050 313 40 0 0 94,680 Total earning assets 103,042 5,683 30,478 412 65 0 0 139,680 Cash and due from banks 0 0 0 0 0 0 6,648 6,648 Premises and equipment 0 0 0 0 0 0 372 372 Other real estate owned 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 2,772 2,772 Total non-earning assets 0 0 0 0 0 0 9,792 9,792 Total assets 103,042 5,683 30,478 412 65 0 9,792 149,472 Funds purchased (94) 0 0 0 0 0 0 (94) Repurchase agreements 0 0 0 0 0 0 0 0 Subtotal (94) 0 0 0 0 0 0 (94) Savings deposits 5,026 0 0 0 0 0 0 5,026 Money market deposits 82,663 0 0 0 0 0 0 82,663 Time deposits 0 12,903 8,406 1,074 70 0 0 22,453 Total bearing liabilities 87,595 12,903 8,406 1,074 70 0 0 110,048 Demand deposits 0 0 0 0 0 0 23,198 23,198 Other liabilities 0 0 0 0 0 0 1,571 1,571 Equity capital 0 0 0 0 0 0 14,655 14,655 Total non-bearing liabilities 0 0 0 0 0 0 39,424 39,424 Total liabilities 87,595 12,903 8,406 1,074 70 0 39,424 149,472 GAP 15,447 (7,220) 22,072 (662) (5) 0 (29,632) 0 Cumulative GAP 15,447 8,227 30,299 29,637 29,632 29,632 0 0
15 As the table indicates, the vast majority of the Company's assets are either floating rate or, if fixed rate, have extremely short maturities. Since the yields on these assets quickly adjust to reflect changes in the overall level of interest rates, there are no significant unrealized gains or losses with respect to the Company's assets, nor is there much likelihood of large realized or unrealized gains or losses developing in the future. For this reason, realized or unrealized gains or losses are not expected to have any significant impact on the Company's future operating results or liquidity. The Bank's investment portfolio continues to be composed of high quality, low risk securities, primarily U.S. Treasury or Agency obligations. As mentioned above, a loss of $20,000 was incurred on a security sale in the first quarter of 1996; no gains or losses were recorded on securities sales in the first quarter of 1997. As of March 31, 1997 the Company's investment portfolio contained gross unrealized gains of $63,000 and gross unrealized losses of $57,000. By comparison, at March 31, 1996 the Bank's investment portfolio contained gross unrealized gains of $51,000 and gross unrealized losses of $4,000. As discussed more fully in Note 5, the Company adopted SFAS No. 115 in 1994, with the result that the unrealized net gain (adjusted for taxes) of $4,000 at March 31, 1997 gave rise to a $4,000 increase in the Company's shareholders' equity as of that date. Because the Company's holdings of securities are intended to serve as a source of liquidity should conditions warrant, the securities have been classified by the Company as "available for sale." The Company continues to enjoy a strong capital position. Total capital was $14,655,000 and $14,316,000 as of March 31, 1997 and December 31, 1996, respectively. The Company's capital ratios for those dates in comparison with regulatory capital requirements were as follows:
3-31-97 12-31-96 ------- -------- Leverage Ratio (Tier I Capital to Assets): Regulatory requirement 4.00% 4.00% First Regional Bancorp 9.80% 9.38%
The "regulatory requirement" listed represents the level of capital required for Adequately Capitalized status. In addition, bank regulators have issued risk-adjusted capital guidelines which assign risk weighting to assets and off-balance sheet items and place increased emphasis on common equity. The Company's risk adjusted capital ratios for the dates listed in comparison with the risk adjusted regulatory capital requirements were as follows:
3-31-97 12-31-96 ------- -------- Tier I Capital to Assets: Regulatory requirement 4.00% 4.00% First Regional Bancorp 16.19% 17.07%
16
3-31-97 12-31-96 ------- -------- Tier I + Tier II Capital to Assets: Regulatory requirement 8.00% 8.00% First Regional Bancorp 17.45% 18.34%
The Company believes that it will continue to meet all applicable capital standards. INFLATION - --------- The impact of inflation on the Company differs significantly from other industries, since virtually all of its assets and liabilities are monetary. During periods of rising inflation, companies with net monetary assets will always experience a reduction in purchasing power. Inflation continues to have an impact on salary, supply, and rent expenses, but the rate of inflation in general and its impact on these expenses in particular has remained moderate in recent years. 17 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - -------------------------- Litigation - ---------- The Company is a party as plaintiff or defendant to a number of lawsuits that have arisen in connection with the normal conduct of its banking business. It is management's opinion, based upon advice of legal counsel, that none of the pending litigation will have a materially adverse effect on the Company or the Bank. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ No items were submitted to a vote of the Company's shareholders during the first quarter of 1997. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- Exhibits - -------- There are no exhibits to this report. Reports on Form 8-K - ------------------- No reports on Form 8-K were filed during the first quarter of 1997. 18 SIGNATURES 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 thereunto duly authorized. FIRST REGIONAL BANCORP Date: May 9, 1997 /s/ Jack A. Sweeney ------------------------------------------ Jack A. Sweeney, Chairman of the Board and Chief Executive Officer Date: May 9, 1997 /s/ Thomas McCullough ------------------------------------------ Thomas McCullough, Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 6,648,000 5,340,000 15,830,000 0 23,830,000 0 0 94,680,000 1,714,000 149,472,000 133,340,000 (94,000) 1,571,000 0 0 0 11,332,000 3,323,000 149,472,000 2,007,000 671,000 255,000 2,933,000 846,000 845,000 2,088,000 156,000 0 1,497,000 618,000 362,000 0 0 362,000 0.15 0.13 0.059 2,712,000 2,424,000 0 0 2,300,000 764,000 22,000 1,714,000 1,714,000 0 0
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