<PAGE>
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
<PAGE>
2
FIRST REGIONAL BANCORP
----------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
<PAGE>
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
FIRST REGIONAL BANCORP AND SUBSIDIARY
-------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
March 31 December 31,
1997 1996
-------- ------------
ASSETS
- ------
<S> <C> <C>
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
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
March 31 December 31,
1997 1996
-------- ------------
<S> <C> <C>
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
======== ========
</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
March 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
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
------ ------
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
------ ------
<S> <C> <C>
NET INCOME $ 362 $ 534
====== ======
NET INCOME PER SHARE (Note 2) $ 0.15 $ 0.22
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
7
FIRST REGIONAL BANCORP AND SUBSIDIARY
-------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1997 1996
--------- --------
<S> <C> <C>
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
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
--------- ---------
<S> <C> <C>
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
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<TABLE>
<CAPTION>
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
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<PAGE>
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:
<TABLE>
<CAPTION>
3-31-97 12-31-96
------- --------
<S> <C> <C>
Leverage Ratio (Tier I Capital
to Assets):
Regulatory requirement 4.00% 4.00%
First Regional Bancorp 9.80% 9.38%
</TABLE>
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:
<TABLE>
<CAPTION>
3-31-97 12-31-96
------- --------
<S> <C> <C>
Tier I Capital to Assets:
Regulatory requirement 4.00% 4.00%
First Regional Bancorp 16.19% 17.07%
</TABLE>
<PAGE>
16
<TABLE>
<CAPTION>
3-31-97 12-31-96
------- --------
<S> <C> <C>
Tier I + Tier II Capital to Assets:
Regulatory requirement 8.00% 8.00%
First Regional Bancorp 17.45% 18.34%
</TABLE>
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.
<PAGE>
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.
<PAGE>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,648,000
<INT-BEARING-DEPOSITS> 5,340,000
<FED-FUNDS-SOLD> 15,830,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,830,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 94,680,000
<ALLOWANCE> 1,714,000
<TOTAL-ASSETS> 149,472,000
<DEPOSITS> 133,340,000
<SHORT-TERM> (94,000)
<LIABILITIES-OTHER> 1,571,000
<LONG-TERM> 0
0
0
<COMMON> 11,332,000
<OTHER-SE> 3,323,000
<TOTAL-LIABILITIES-AND-EQUITY> 149,472,000
<INTEREST-LOAN> 2,007,000
<INTEREST-INVEST> 671,000
<INTEREST-OTHER> 255,000
<INTEREST-TOTAL> 2,933,000
<INTEREST-DEPOSIT> 846,000
<INTEREST-EXPENSE> 845,000
<INTEREST-INCOME-NET> 2,088,000
<LOAN-LOSSES> 156,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,497,000
<INCOME-PRETAX> 618,000
<INCOME-PRE-EXTRAORDINARY> 362,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362,000
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.13
<YIELD-ACTUAL> 0.059
<LOANS-NON> 2,712,000
<LOANS-PAST> 2,424,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,300,000
<CHARGE-OFFS> 764,000
<RECOVERIES> 22,000
<ALLOWANCE-CLOSE> 1,714,000
<ALLOWANCE-DOMESTIC> 1,714,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
