<PAGE>
PAGE 1 OF 17
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 September 30, 1995
------------------------------------------------------------------
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 2,398,800
-------------------------- -------------------------------
Class Outstanding on November 2, 1995
<PAGE>
2
FIRST REGIONAL BANCORP
----------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
----
Part I - Financial Information
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Financial
Condition 3
Consolidated Statements of Income 5
Consolidated Statements Cash Flow 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 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
<PAGE>
3
FIRST REGIONAL BANCORP AND SUBSIDIARY
-------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
September 30 December 31,
1995 1994
------------ ------------
ASSETS (unaudited)
- ------
<S> <C> <C>
Cash and due from banks $ 3,875 $ 4,677
Time deposits with other financial
institutions 9,011 6,627
Investment securities 8,169 11,807
Funds sold 35,510 21,300
Federally guaranteed loans 25,225 22,852
Other loans, net of allowance for losses of
$1,860,000 in 1995 and $1,390,000 in 1994 51,912 53,729
-------- --------
Total loans 77,137 76,581
Premises and equipment, net of accumulated
depreciation 209 166
Other real estate owned 576 1,163
Accrued interest receivable and other assets 2,025 1,966
-------- --------
Total Assets $136,512 $124,287
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Demand deposits $ 18,980 $ 18,777
Savings deposits 3,733 5,147
Money market deposits 83,618 78,295
Time deposits 15,299 11,447
-------- --------
Total deposits 121,630 113,666
Securities sold under agreement to repurchase 2,465 0
Accrued interest payable and other liabilities 781 399
-------- --------
Total Liabilities 124,876 114,065
Shareholders' Equity:
Common Stock, no par value, 50,000,000 shares
authorized; 2,398,800 shares outstanding in
1995 and 1994, respectively 11,332 11,332
Retained earnings 285 (1,105)
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
September 30 December 31,
1995 1994
------------ ------------
(unaudited)
<S> <C> <C>
Net unrealized gain (loss) on securities
available for sale 19 (5)
----------- ------------
Total Shareholders' Equity 11,636 10,222
----------- -----------
Total Liabilities and Shareholders' Equity $136,512 $124,287
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
5
FIRST REGIONAL BANCORP AND SUBSIDIARY
-------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30
------------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE FROM EARNING ASSETS:
Interest and fees on loans $ 1,802 $ 2,094 $ 6,234 $5,645
Interest on time deposits with
other financial institutions 109 78 304 225
Interest on investment securities 93 134 441 248
Interest on funds sold 527 140 1,039 418
------ ------ ------ ------
Total revenue from earning assets 2,531 2,446 8,018 6,536
COST OF FUNDS:
Interest on deposits 744 594 2,014 1,811
Interest on securities sold under
agreements to repurchase 0 0 0 0
------ ------ ------ ------
Total cost of funds 744 594 2,014 1,811
Net revenue from earning assets
before provision for loan losses 1,787 1,852 6,004 4,725
PROVISION FOR LOAN LOSSES 160 50 535 100
------ ------ ------ ------
Net revenue from earning assets 1,627 1,802 5,469 4,625
Net gain (loss) on sales of
securities 0 0 0 0
Other revenue 99 108 343 691
OPERATING EXPENSES:
Salaries and related benefits 558 473 1,644 1,460
Occupancy expense 91 97 256 276
Equipment expense 39 32 168 105
Promotion expense 38 45 121 102
Professional service expense 170 160 493 508
Customer service expense 308 294 893 929
Supply/communication expense 33 21 97 76
Other expenses (117) 484 578 1,401
------ ------ ------ ------
Total operating expenses 1,120 1,606 4,250 4,857
------ ------ ------ ------
Income before provision for
income taxes 606 304 1,562 459
</TABLE>
<PAGE>
6
FIRST REGIONAL BANCORP AND SUBSIDIARY
-------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In Thousands Except Per Share Amounts)
(Unaudited)
(continued)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PROVISION FOR INCOME TAXES 67 35 173 52
-------- ------- ------- -------
NET INCOME $ 539 $ 269 $ 1,389 $ 407
======== ======= ======= =======
NET INCOME (LOSS) PER SHARE
(Note 2) $ 0.23 $ 0.11 $ 0.58 $ 0.17
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
7
FIRST REGIONAL BANCORP AND SUBSIDIARY
-------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,389 $ 407
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 535 100
Provision for depreciation and
amortization 41 43
Amortization of investment securities
net discounts (309) (142)
Decrease (increase) in interest
receivable (52) 111
Increase (decrease) in interest payable 34 (14)
Increase (decrease) in taxes payable 93 52
Net increase (decrease) in other
liabilities 255 (51)
---------- -----------
Net cash provided (used) by
operating activities $ 1,986 $ 506
<CAPTION>
INVESTING ACTIVITIES
Decrease (increase) in investment
securities $ 3,966 $(10,820)
Decrease (increase) in time deposits
with other financial
institutions (2,384) 188
Decrease (increase) in loans (1,091) 7,590
Purchases of premises and equipment (84) (84)
Net decrease (increase) in other assets 586 8,355
---------- -----------
Net cash provided by
investing activities $ 993 $ 5,229
<CAPTION>
FINANCING ACTIVITIES
Net increase (decrease) in demand
deposits, savings accounts,
and money market accounts $ 4,112 $ (4,558)
Net increase (decrease) in time deposits 3,852 (5,201)
</TABLE>
<PAGE>
8
FIRST REGIONAL BANCORP AND SUBSIDIARY
-------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
(In Thousands)
(Unaudited)
(continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1995 1994
---- ----
<S> <C> <C>
Increase (decrease) in securities sold
under agreement to repurchase 2,465 0
--------- --------
Net cash provided by
financing activities $ 10,429 $ (9,759)
Increase (decrease) in cash and cash
equivalents $ 13,408 $ (4,024)
Cash and cash equivalents, beginning of
period 25,977 22,971
--------- --------
Cash and cash equivalents, end of period $ 39,385 $ 18,947
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
9
FIRST REGIONAL BANCORP AND SUBSIDIARY
-------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
September 30, 1995
(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).
In the opinion of management, the unaudited consolidated financial
statements of First Regional Bancorp at September 30, 1995 and
December 31, 1994 and the results of operations for the three and nine
month periods ended September 30, 1995 and 1994 contain all
adjustments (which consist only of normal recurring adjustments)
necessary to present fairly the financial position of the Company.
Certain items in the 1994 consolidated financial statements have been
reclassified to conform to the 1995 presentation. The results of
operations for the periods ended September 30, 1995 and 1994 are not
necessarily indicative of operating results that may be expected for
any other interim period or for the full year.
While management 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 1994 annual report.
NOTE 2 - Per share information was based on the number of common shares
outstanding. The number of shares outstanding was 2,398,800 in 1995
and 1994.
NOTE 3 - As of September 30, 1995 the Bank had a total of $360,000 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 September 30, 1995 the Company had identified loans
having an aggregate average balance of $773,939 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
<PAGE>
10
established a general loss reserve for each of the loans which at
September 30, 1995 totalled $163,336 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 September 30, 1995.
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 September 30, 1995 by $19,000 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.
<PAGE>
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- --------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
SUMMARY
- -------
First Regional Bancorp (the "Company") did not conduct any significant business
activities independent of First Regional Bank (the "Bank"). The following
discussion and analysis relates primarily to the Bank.
At September 30, 1995 total assets were $136,512,000 compared to $124,287,000 at
December 31, 1994, an increase of $12,225,000 or 10%. In 1995 the Company
initiated an expanded program of marketing and business development activities,
which resulted in growth in deposits of $7,964,000, or 7%, to $121,630,000 on
September 30, 1995 from $113,666,000 at December 31, 1994. This increase in
deposits occurred in most deposit categories, including demand deposits, money
market accounts, and time deposits, with only savings deposits shrinking in
comparison with the previous yearend level. At the same time that deposits were
growing, Net Loans increased by $556,000 or 1% to $77,137,000 compared to
$76,581,000 at the end of 1994. The modest growth in Net Loans reflected the
difficulty in finding acceptable new loans in light of the low level of economic
activity in the Bank's market area. The funds resulting from the growth in
deposits and the much more modest increase in loans flowed into Funds Sold,
which jumped from $21,300,000 at December 31, 1994 to $35,510,000 at September
30, 1995, and increase of $14,210,000 or 67%. Most other categories of assets
and liabilities experienced relatively minor changes in the period from December
31, 1994 to September 30, 1995.
The Company's successful program to increase asset levels while controlling
expenses led to higher revenues and lower expenses, and as a result, the Company
generated net income of $539,000 in the third quarter of 1995, compared to a
profit of $269,000 in the three months ended September 30, 1994. The results
for the nine months ended September 30, 1995 were profits of $1,389,000 versus a
$407,000 profit for the like period in 1994.
NET INTEREST INCOME
- -------------------
Net revenue from earning assets fell by $175,000 (10%) for the three months
ended September 30, 1995 compared to the same period in 1994. The apparent
decline was due to the reclassification of approximately $235,000 in loan
premium amortization from an expense account to a charge against the related
loan income; if these charges are added back, the result is a modest increase in
net interest income between the comparable periods. This result is consistent
with the generally stable level of assets and interest rates which existed
during the two periods. Despite the reclassification described, the net
interest income for the nine month period ending September 30, 1995 showed a
significant increase of $844,000 (18%) compared to the corresponding period in
1994. In this case, the higher levels of earning assets combined with stability
in interest rates resulted in an increase in net revenue. For both the quarter
and the first nine months of 1995, total revenue increased, reflecting higher
levels of assets combined with the comparable levels of interest rates which
prevailed between the two years. Not surprisingly, the stability in interest
rates along with the growth in deposits led to increases in the cost of funds.
For the three
<PAGE>
12
months ended September 30, 1995, Total Cost of Funds rose from the 1994 level of
$594,000 to $744,000, an increase of $150,000 (25%) from the 1994 level, while
for the first nine months of 1995 funding costs rose by $203,000 (11%) to
$2,014,000 from the 1994 total of $1,811,000. The modest increases in deposit
interest expense, combined with the general stability in interest revenues, gave
rise to the small net revenue declines which occurred.
OTHER REVENUE
- -------------
Other revenue was $99,000 for the three months ended September 30, 1995, for the
most part unchanged from the $108,000 recorded in the third quarter of 1994.
For the nine months ended September 30, 1995, other revenue was $343,000 versus
a corresponding 1994 total of $691,000. Much of the shortfall in the 1995 year
to date totals versus those of the prior year reflects the 1994 receipt of
rental income on an income property acquired via foreclosure during the period
preceding its eventual sale. As this property was sold in mid-1994, there is no
corresponding 1995 income. The remaining changes between 1994 and 1995
primarily reflect increases in service charge income on various deposit
accounts.
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
The allowance for possible loan losses is intended to reflect known and inherent
risks in the loan portfolio. The allowance for possible loan losses is
increased by provisions for possible loan losses, and is decreased by net loan
chargeoffs. Management continues to evaluate the loan portfolio in light of
many factors, including loan loss experience and current economic conditions.
While the economic recession has had and will continue to have a significant
impact on the Bank and its customers, management believes the allowance for
possible loan losses is adequate to provide for losses that might be reasonably
anticipated.
The allowance for possible loan losses was $1,860,000 and $1,390,000 (or 2.35%
and 1.78% of gross outstanding loans) at September 30, 1995 and December 31,
1994 respectively. Although credit quality continues to improve based on the
Company's ongoing analysis of the risks presented by its loan portfolio, in
anticipation of future loan growth provisions for possible losses were $160,000
and $535,000 for the three and nine month periods ended September 30, 1995
respectively, compared to provisions of $50,000 and $100,000 for the three and
nine month periods ended September 30, 1994. The Company experienced net loan
chargeoffs of $50,000 in the third quarter of 1994 and net chargeoffs of
$1,106,000 for the first nine months of 1994; by comparison, for 1995 the
Company experienced net chargeoffs of $465,000 in the quarter ended September
30, which brought the net chargeoff total through the third quarter of the year
to $434,000.
OPERATING EXPENSES
- ------------------
Management's ongoing programs to limit non-interest expenses led to declines in
most categories of operating expenses in 1995 compared to the prior year. As
mentioned earlier, however, the Company embarked on a growth program in 1995
which required additions to the calling officer force, and as a result salary
and related benefits increased by $85,000 for the three month period ended
September 30, 1995 compared with the same period in 1994, and for the
<PAGE>
13
same reason this category of expense also increased for the nine month period
ended September 30, to $1,644,000 in 1995 from $1,460,000 in 1994. Occupancy
expense remained essentially stable for the three month period ended September
30, 1995 versus the prior year, as there were no changes in the premises
occupied by the Company or the lease agreements covering those premises. Most of
the remaining categories of operating expenses either remained generally stable
or declined slightly in 1995 versus 1994, both for the third quarter and for the
full year to date. The only exception was in Other Expenses, which fell sharply
in the third quarter of 1995 compared to 1994 due to the reclassification of
loan premium amortizations described earlier. In addition, the success in
reducing the amount of other real estate owned reduced the level of expenses
associated with such properties as well as the amount of loss provisions
required. For both the third quarter of 1995 and the first nine months of the
year, the OREO loss provisions were $50,000. By comparison, these charges were
$70,000 and $130,000 for the three and nine periods ended September 30, 1994
respectively.
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, investment securities, and funds sold)
stood at 46.5% of total deposits at September 30, 1995. This compares with a
level of 39.1% which existed at December 31, 1994; this change reflects the fact
that, as deposits have risen during the course of 1995, most of the inflow of
funds has taken place in the various liquid asset components. In addition, at
September 30, 1995 and December 31, 1994 respectively, the Bank held
approximately $25.2 million and $22.9 million of loans fully guaranteed by the
United States government; due to the presence of an active secondary market for
such loans, these loans represent an important additional source of liquidity.
The ratio of net loans (including government guaranteed loans) to deposits was
63.4% and 67.3% as of September 30, 1995 and December 31, 1994, respectively.
The Bank's investment portfolio continues to be composed of high quality, low
risk securities, primarily U.S. Treasury or U.S. Agency securities. No gains or
losses were recorded on sales of securities during the first nine months of 1995
or 1994. At September 30, 1995 the Bank's investment portfolio contained gross
unrealized gains of $54,000 and gross unrealized losses of $35,000, for net
unrealized gains of $19,000; at December 31, 1994 the portfolio contained no
unrealized gains and unrealized losses of $5,000. As discussed more fully in
Note 5, the Company adopted SFAS No. 115 in 1994, with the result that the net
unrealized gains and losses gave rise to a $19,000 increase in the Company's
shareholders' equity as of September 30, 1995, and a $5,000 decrease in
shareholders' equity as of December 31, 1994. 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."
Because customer deposits are the Company's principal funding source outside of
its capital, management has attempted to match the 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
<PAGE>
14
or maturity characteristics of the major categories of the Bank's assets and
liabilities, 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.
<TABLE>
<CAPTION>
One month Six months One year Non-interest
Floating Less than but less than but less than but less than Five years earning
Category Rate one month six months one year five years or more or bearing Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fed funds sold 35,510 0 0 0 0 0 0 35,510
Time deposits with other banks 0 2,279 4,953 1,779 0 0 0 9,011
Investment securities 4,188 0 3,956 0 25 0 0 8,169
----- - ----- - -- - - -----
Subtotal 39,698 2,279 8,909 1,779 25 0 0 52,690
Loans 76,727 0 0 410 0 0 0 77,137
------ - - --- - - - ------
Total earning assets 116,425 2,279 8,909 2,189 25 0 0 129,827
Cash and due from banks 0 0 0 0 0 0 3,875 3,875
Premises and equipment 0 0 0 0 0 0 209 209
Other real estate owned 0 0 0 0 0 0 576 576
Other assets 0 0 0 0 0 0 2,025 2,025
- - - - - - ----- -----
Total non-earning assets 0 0 0 0 0 0 6,685 6,685
- - - - - - ----- -----
Total assets 116,425 2,279 8,909 2,189 25 0 6,685 136,512
Funds purchased 0 0 0 0 0 0 0 0
Repurchase agreements 2,465 0 0 0 0 0 0 2,465
----- - - - - - - -----
Subtotal 2,465 0 0 0 0 0 0 2,465
Savings deposits 3,733 0 0 0 0 0 0 3,733
Money market deposits 83,618 0 0 0 0 0 0 83,618
Time deposits 0 5,275 7,916 2,033 75 0 0 15,299
- ----- ----- ----- -- - - ------
Total bearing liabilities 89,816 5,275 7,916 2,033 75 0 0 105,115
Demand deposits 0 0 0 0 0 0 18,980 18,980
Other liabilities 0 0 0 0 0 0 781 781
Equity capital 0 0 0 0 0 0 11,636 11,636
- - - - - - ------ ------
Total non-bearing liabilities 0 0 0 0 0 0 31,397 31,397
- - - - - - ------ ------
Total liabilities 89,816 5,275 7,916 2,033 75 0 31,397 136,512
GAP 26,609 -2,996 993 156 -50 0 -24,712 0
Cumulative GAP 26,609 23,613 24,606 24,762 24,712 24,712 0 0
</TABLE>
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
<PAGE>
15
significant impact on the Company's future operating results or liquidity.
The Company continues to enjoy a strong capital position. Total capital was
$11,636,000 and $10,222,000 as of September 30, 1995 and December 31, 1994,
respectively. The Company's capital ratios for those dates in comparison with
regulatory capital requirements were as follows:
<TABLE>
<CAPTION>
09-30-95 12-31-94
-------- --------
<S> <C> <C>
Leverage Ratio (Tier I Capital
to Total Assets)
Regulatory requirement 3.00% 3.00%
First Regional Bancorp 8.47% 8.08%
</TABLE>
In addition, bank regulators have issued new 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:
<TABLE>
<CAPTION>
09-30-95 12-31-94
-------- --------
<S> <C> <C>
Tier I Capital to Risk-Weighted Assets:
Regulatory requirement 4.00% 4.00%
First Regional Bancorp 16.05% 14.94%
Tier I + Tier II Capital to Risk-Weighted
Assets:
Regulatory requirement 8.00% 8.00%
First Regional Bancorp 17.32% 16.20%
</TABLE>
The "regulatory requirement" figures listed above represent the level of capital
required for Adequately Capitalized status as established by federal regulators.
The Company believes that it will continue to meet all applicable capital
standards.
REGULATORY MATTERS
- ------------------
In February, 1993 the Company and the Bank each entered into agreements with
their respective Federal regulators calling for the maintenance of capital
strength, the improvement of asset quality, the development of various written
policies and procedures, and the forwarding of periodic progress reports to the
regulators. In the third quarter of 1995 the regulators each concluded that the
terms of the agreements had been fully complied with, and accordingly the
agreements were terminated by the regulators.
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.
<PAGE>
16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ---------------------------
Litigation
- ----------
The Company is a party as plaintiff or defendant to a number of lawsuits which
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 matters were submitted to a vote of security holders during the third quarter
of 1995.
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 third quarter of 1995.
<PAGE>
17
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: November 2, 1995 /s/ Jack A. Sweeney
------------------ ------------------------------------------
Jack A. Sweeney, Chairman of the Board
Chief Executive Officer
November 2, 1995 /s/ Thomas McCullough
------------------ ------------------------------------------
Thomas McCullough, Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,875,000
<INT-BEARING-DEPOSITS> 9,011,000
<FED-FUNDS-SOLD> 35,510,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,169,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 78,977,000
<ALLOWANCE> 1,860,000
<TOTAL-ASSETS> 136,512,000
<DEPOSITS> 121,630,000
<SHORT-TERM> 2,456,000
<LIABILITIES-OTHER> 781,000
<LONG-TERM> 0
<COMMON> 11,332,000
0
0
<OTHER-SE> 304,000
<TOTAL-LIABILITIES-AND-EQUITY> 136,512,000
<INTEREST-LOAN> 6,234,000
<INTEREST-INVEST> 441,000
<INTEREST-OTHER> 1,343,000
<INTEREST-TOTAL> 8,018,000
<INTEREST-DEPOSIT> 2,014,000
<INTEREST-EXPENSE> 2,014,000
<INTEREST-INCOME-NET> 6,004,000
<LOAN-LOSSES> 535,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,250,000
<INCOME-PRETAX> 1,562,000
<INCOME-PRE-EXTRAORDINARY> 1,562,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,389,000
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 0.062
<LOANS-NON> 609,000
<LOANS-PAST> 1,679,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,390,000
<CHARGE-OFFS> 183,000
<RECOVERIES> 117,000
<ALLOWANCE-CLOSE> 1,860,000
<ALLOWANCE-DOMESTIC> 1,860,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
