<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 8, 1997
REGENCY BANCORP
(Exact name of registrant as specified in its charter)
California 33-82150 77-0378956
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
7060 N. Fresno, Fresno, California 93720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (209) 438-2600
Not Applicable
(Former name or former address, if changed since last report).
Page 1 of 25 pages
The Exhibit Index is on Page 4.
1
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Item 5. OTHER EVENTS.
The Registrant and the Federal Deposit Insurance Corporation ("FDIC")
have executed the Stipulation and Consent to the issuance of an Order
to Cease and Desist as of October 28, 1997, and the FDIC has executed
and issued the Order to Cease and Desist as of November 14, 1997. The
Order to Cease and Desist becomes effective ten days after issuance by
the FDIC. The Registrant has also executed the Waiver and Consent to
the issuance of an Order under Financial Code Section 1913 by the
California Department of Financial Institutions ("CDFI") and the CDFI
has issued its Final Order pursuant to section 1913 of the Financial
Code dated as of November 14, 1997. The above-referenced Orders and
related documents are substantially identical to the Orders and
documents filed as exhibits to the Registrant's Current Report on Form
8-K dated November 6, 1997, filed with the Commission on November 10,
1997.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Not Applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Not Applicable.
(c) EXHIBITS.
(99.1) Copies of the Stipulation and Consent to the Issuance of an
Order to Cease and Desist and Order to Cease and Desist
executed by the Registrant and the FDIC, dated October 28,
1997 and November 14, 1997, respectively.
(99.2) Copies of the Waiver and Consent and Final Order as executed
by the Company and the California Department of Financial
Institutions, dated October 28, 1997 and November 14, 1997,
respectively.
2
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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 hereunto duly authorized.
REGENCY BANCORP
Date: December 8, 1997 /s/ STEVEN F. HERTEL
--------------------
Steven F. Hertel
President & CEO
3
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EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
99.1 Copies of the Stipulation and Consent to the 5 -20
Issuance of an Order to Cease and Desist and
Order to Cease and Desist executed by the
Company and the FDIC, dated October 28, 1997
and November 14, 1997, respectively.
99.2 Copies of the Waiver and Consent and Final Order 21-25
as executed by the Company and the California
Department of Financial Institutions, dated
October 28, 1997 and November 14, 1997,
respectively.
4
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FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
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)
) STIPULATION
In the Matter of ) AND
) CONSENT
REGENCY BANK ) TO THE ISSUANCE OF
FRESNO, CALIFORNIA ) AN ORDER TO
) CEASE AND DESIST
(INSURED STATE NONMEMBER BANK) )
) FDIC-97- b
)
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Subject to the acceptance of this STIPULATION AND CONSENT TO THE
ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") by the Federal
Deposit Insurance Corporation ("FDIC"), it is hereby stipulated and agreed by
and between a representative of the Legal Division of FDIC and Regency Bank,
Fresno, California ("Bank"), as follows:
1. The Bank has been advised of its right to receive a Notice of
Charges and of Hearing detailing the unsafe or unsound banking practices
alleged to have been committed by the Bank and of its right to a public
hearing on the alleged charges under Section 8(b)(1) of the Federal Deposit
Insurance Act ("Act"), 12 U.S.C. Section 1818(b)(1), and has waived those
rights.
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2. The Bank, solely for the purpose of this proceeding and without
admitting or denying any of the alleged charges of unsafe or unsound banking
practices, hereby consents and agrees to the issuance of an ORDER TO CEASE
AND DESIST ("ORDER") by the FDIC. The Bank further stipulates and agrees that
such ORDER will be deemed to be an order which has become final under the
Act, and that said ORDER shall become effective ten (10) days after its
issuance by the FDIC and fully enforceable by the FDIC pursuant to the
provisions of the Act.
3. In the event the FDIC accepts the CONSENT AGREEMENT and issues the
ORDER, it is agreed that no action to enforce said ORDER in the United States
District Court will be taken by the FDIC unless the Bank or any
institution-affiliated party, as such term is defined in Section 3(u) of the
Act, 12 U.S.C. Section 1813(u), has violated or is about to violate any
provision of the ORDER.
4. The Bank hereby waives:
(a) The receipt of a Notice of Charges and of Hearing;
(b) All defenses in this proceeding;
(c) A hearing for the purpose of taking evidence on such alleged
charges;
(d) The filing of Proposed Findings of Fact and Conclusions of Law;
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(e) A recommended decision of an Administrative Law Judge; and
(f) Exceptions and briefs with respect to such recommended decision.
DATED: October 28, 1997.
FEDERAL DEPOSIT INSURANCE REGENCY BANK
CORPORATION, LEGAL DIVISION FRESNO, CALIFORNIA
BY: BY:
/s/ James L. Miller /s/ Steven F. Hertel
________________________________ _____________________________________
James L. Miller Steven F. Hertel
Counsel Chairman of the Board
/s/ Joseph L. Castanos
_____________________________________
Joseph Castanos
/s/ Roy Jura
_____________________________________
Roy Jura
/s/ Barbara Palmquist
_____________________________________
Barbara Palmquist
/s/ David N. Price
_____________________________________
David N. Price
/s/ Daniel Ray
_____________________________________
Daniel Ray
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/s/ Daniel Suchy
_____________________________________
Daniel R. Suchy, M.D.
/s/ Waymon E. Watts
_____________________________________
Waymon E. Watts, C.P.A.
Comprising the Board of Directors of
Regency Bank, Fresno, California
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
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)
)
In the Matter of ) ORDER TO
) CEASE AND DESIST
REGENCY BANK )
FRESNO, CALIFORNIA )
) FDIC-97- b
(INSURED STATE NONMEMBER BANK) )
)
)
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Regency Bank, Fresno, California ("Bank"), having been advised of its
right to a Notice of Charges and of Hearing detailing the unsafe or unsound
banking practices alleged to have been committed by the Bank and of its right
to a hearing on the alleged charges under Section 8(b)(1) of the Federal
Deposit Insurance Act ("Act"), 12 U.S.C. Section 1818(b)(1), and having waived
those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN
ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal
Deposit Insurance Corporation ("FDIC") dated October 28, 1997, whereby solely
for the purpose of this proceeding and without admitting or denying the
alleged charges of unsafe or unsound banking practices, the Bank consented to
the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
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The FDIC considered the matter and determined that it had reason to
believe that the Bank had engaged in unsafe or unsound banking practices. The
FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:
ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties,
as that term is defined in Section 3(u) of the Act, 12 U.S.C. Section 1813(u),
and its successors and assigns cease and desist from the following
unsafe and unsound banking practices and/or regulations:
(a) operating with inadequate management;
(b) operating with inadequate equity capital in relation to the volume
and quality of assets held by the Bank;
(c) operating with a large volume of poor quality assets;
(d) conducting an excessive amount of real estate development
activities;
(e) operating with a large concentration of direct real estate
investment assets;
(g) operating in such a manner as to produce operating losses; and
(h) operating in such a manner as to produce low earnings.
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IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties,
and its successors and assigns, take affirmative action as follows:
1. The Bank shall have and retain qualified management.
(a) Each member of management shall have qualifications and
experience commensurate with his or her duties and responsibilities at the
Bank. Management shall include the following individuals:
(i) a chief executive officer with proven ability in
managing a Bank of comparable size, and experience in resolving a high level
of classifications, improving earnings, and other matters needing particular
attention including, but not limited to, resolution of the Bank's real estate
investments;
(ii) a chief financial officer with appropriate experience in
investments, liquidity and funds management; and
(iii) a senior lending officer with significant appropriate
lending, collection, and loan supervision experience.
(b) Each member of management shall be provided appropriate written
authority from the Bank's Board of Directors to implement the provisions of
this ORDER.
(c) The qualifications of management shall be assessed on its
ability to:
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(i) comply with the requirements of this ORDER;
(ii) operate the Bank in a safe and sound manner;
(iii) comply with applicable laws and regulations; and
(iv) restore all aspects of the Bank to a safe and sound
condition, including asset quality, capital adequacy, earnings, management
effectiveness, and liquidity.
(d) During the life of this ORDER, the Bank shall notify the
Regional Director of the FDIC's San Francisco Regional Office ("Regional
Director") and Conrad W. Hewitt, Commissioner of the Department of Financial
Institutions for the State of California ("Commissioner") in writing when it
proposes to add any individual to the Bank's Board of Directors or to employ
any individual as a senior executive officer. The notification must be
received at least 30 days before such addition or employment is intended to
become effective and should include a description of the background and
experience of the individual or individuals to be added or employed.
(e) The Bank may not add any individual to its Board of Directors
or employ any individual as a senior executive officer if the Regional
Director issues a notice of disapproval pursuant to Section 32 of the Act,
12 U.S.C. Section 1831i.
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2. (a) On or before December 31, 1997, the Bank shall increase Tier 1
capital to an amount not less than the greater of (i) seven (7.0) percent of
the Bank's total assets or (ii) $14,000,000. Thereafter, during the life of
this ORDER, the Bank shall maintain Tier 1 capital in such an amount not less
than the greater of (i) seven (7.0) percent of the Bank's total assets or
(ii) $14,000,000.
(b) Within 60 days from the effective date of this ORDER, the Bank
shall submit to the Regional Director its plan to comply with the minimum
risk-based capital requirements as described in the FDIC Statement of Policy
on Risk-Based Capital contained in Appendix A to Part 325 of the FDIC Rules
and Regulations, 12 C.F.R. Part 325, Appendix A. The plan shall be in a form
and manner acceptable to the Regional Director as determined at subsequent
examinations.
(c) The level of Tier 1 capital to be maintained during the life of
this ORDER pursuant to Subparagraph 2(a) shall be in addition to a fully
funded allowance for loan and lease losses, the adequacy of which shall be
satisfactory to the Regional Director and Commissioner as determined at
subsequent examinations and/or visitations.
(d) Any increase in Tier 1 capital necessary to meet the
requirements of Paragraph 2 of this ORDER may be accomplished
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by the following:
(i) the sale of common stock; or
(ii) the sale of noncumulative perpetual preferred
stock; or
(iii) the direct contribution of cash by the Board of
Directors, shareholders, and/or parent holding company; or
(iv) any other means acceptable to the Regional
Director and the Commissioner; or
(v) any combination of the above means.
Any increase in Tier 1 capital necessary to meet the requirements of
Paragraph 2 of this ORDER may not be accomplished through a deduction
from the Bank's allowance for loan and lease losses.
(e) If all or part of the increase in Tier 1 capital required
by Paragraph 2 of this ORDER is accomplished by the sale of new
securities, the Board of Directors shall forthwith take all necessary
steps to adopt and implement a plan for the sale of such additional
securities, including the voting of any shares owned or proxies held or
controlled by them in favor of the plan. Should the implementation of
the plan involve a public distribution of the Bank's securities
(including a distribution limited only to the Bank's existing
shareholders), the Bank shall prepare offering materials fully
describing the securities being offered, including an accurate
description of the financial condition of
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the Bank and the circumstances giving rise to the offering, and any
other material disclosures necessary to comply with the Federal
securities laws. Prior to the implementation of the plan and, in any
event, not less than fifteen (15) days prior to the dissemination of
such materials, the plan and any materials used in the sale of
the securities shall be submitted to the FDIC, Registration and
Disclosure Section, 550 - 17th Street, N.W., Washington, D.C. 20429, for
review. Any changes requested to be made in the plan or materials by the
FDIC shall be made prior to their dissemination. If the increase in Tier
1 capital is provided by the sale of the noncumulative perpetual
preferred stock, then all terms and conditions of the issue including,
but not limited to, those terms and conditions relative to interest rate
and convertibility factor, shall be presented to the Regional Director
and the Commissioner for prior approval.
(f) In complying with provisions of Paragraph 2 of this
ORDER, the Bank shall provide to any subscriber and/or purchaser of the
Bank's securities, a written notice of any planned or existing
development or other changes which are materially different from the
information reflected in any offering materials used in connection with
the sale of Bank securities. The written notice required by this
Paragraph shall be furnished within ten (10) days from the date such
material
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development or change was planned or occurred, whichever is earlier, and
shall be furnished to every subscriber and/or purchaser of the Bank's
securities who received or was tendered the information contained in the
Bank's original offering materials.
(g) For the purposes of this ORDER, the terms "Tier 1
capital" and "total assets" shall have the meanings ascribed to them in
Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Sections 325.2(t)
and 325.2(v).
3. (a) Within 10 days from the effective date of this ORDER,
the Bank shall eliminate from its books, by charge-off or collection,
all assets classified "Loss" and one-half of the assets classified
"Doubtful" as of July 7, 1997, that have not been previously collected
or charged off. Elimination of these assets through proceeds of other
loans made by the Bank is not considered collection for the purpose of
this Paragraph.
(b) The requirements of Subparagraph 3(a) of this ORDER are
not to be construed as standards for future operations and, in addition
to the foregoing, the Bank shall eventually reduce the total of all
adversely classified assets listed in the July 7, 1997 Report of
Examination to zero. Reduction of these assets through proceeds of other
loans made by the Bank is not
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considered collection for the purpose of this Paragraph.
4. Beginning with the effective date of this ORDER, the Bank shall not
extend, directly or indirectly, any additional credit to, or for the benefit
of, any borrower who has a loan or other extension of credit from the Bank
that has been charged off or classified, in whole or in part, "Loss" or
"Doubtful" and is uncollected. The requirements of this Paragraph shall not
prohibit the Bank from renewing (after collection in cash of interest due
from the borrower) any credit already extended to any borrower, unless prior
approval is given by the Regional Director.
5. Upon issuance of this ORDER, the Bank and its wholly-owned
subsidiary, Regency Service Corporation, may continue to engage in certain
activities that are not permissible for a subsidiary of a national bank as
set forth in the Bank's December 27, 1995 application to the FDIC; provided,
however, that the Bank and Regency Service Corporation shall continue in
these activities only pursuant to the terms and conditions set forth in the
FDIC's November 29, 1996 letter to the Bank which includes, but is not
limited to, the requirement that Regency Service Corporation divest itself of
all property currently held by December 31, 1998.
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6. The Bank's Board of Directors shall maintain an adequate allowance
for loan and lease losses and shall provide for a review of the allowance at
least once each calendar quarter. Said review should be completed prior to
the end of each quarter in order that the findings of the Board of Directors
with respect to the allowance for loan and lease losses may be properly
reported in the Bank's quarterly Reports of Condition and Income. The review
should focus on the results of the Bank's internal loan review, loan and
lease loss experience, trends of delinquent and non-accrual loans, an
estimate of potential loss exposure of significant credits, concentrations of
credit, and present and prospective economic conditions. A deficiency in the
allowance shall be remedied in the calendar quarter it is discovered, prior
to submitting the Report of Condition, by a charge to current operating
earnings. The minutes of the Board of Directors meeting at which such review
is undertaken shall indicate the results of the review.
7. Within 60 days from the effective date of this ORDER, the Bank shall
revise, adopt, and submit to the Regional Director a plan to control overhead
and other expenses and restore the Bank's profitability.
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8. Within 60 days from the effective date of this ORDER, the Bank shall
prepare and submit to the Regional Director a written business/strategic plan
covering the overall operation of the Bank. The plan shall be in a form and
manner acceptable to the Regional Director as determined at subsequent
examinations and/or visitations.
9. The Bank shall not pay cash dividends without the prior written
consent of the Regional Director and the Commissioner.
10. Within 30 days of the end of the first quarter following the
effective date of this ORDER, and within thirty (30) days of the end of each
quarter thereafter, the Bank shall furnish written progress reports to the
Regional Director and the Commissioner detailing the form and manner of any
actions taken to secure compliance with this ORDER and the results thereof.
Such reports shall include a copy of the Bank's Report of Condition and the
Bank's Report of Income. Such reports may be discontinued when the
corrections required by this ORDER have been accomplished and the Regional
Director and the Commissioner have released the Bank in writing from making
further reports.
This ORDER shall become effective ten (10) days from the date of its
issuance.
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The provisions of this ORDER shall remain effective and enforceable
except to the extent that, and until such time as, any provisions of this
ORDER shall have been modified, terminated, suspended, or set aside by the
FDIC.
Pursuant to delegated authority.
Dated at San Francisco, California, this 14th day of November, 1997.
/s/ George J. Masa
_________________________________________
George J. Masa
Regional Director
Division of Supervision
San Francisco Region
Federal Deposit Insurance Corporation
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EXHIBIT 99.2
STATE OF CALIFORNIA
DEPARTMENT OF FINANCIAL INSTITUTIONS
In the Matter of )
)
REGENCY BANK, ) WAIVER AND CONSENT
Respondent )
)
_______________________________)
Regency Bank (the "Bank") consents to the issuance of an order under
Financial Code Section 1913 substantially in the form attached, marked
Exhibit A (the "Order").
In addition, in connection with the issuance of the Order, the Bank waives
(i) the issuance of an order under Financial Code Section 1912, (ii) notice
and a hearing, and (iii) findings, including findings of fact and ultimate
findings.
Dated: OCTOBER 28, 1997.
REGENCY BANK
By /s/ Steven F. Hertel
_________________________________________
(Signature)
Steven F. Hertel
Chairman of the Board, Chief Executive
Officer, President
_________________________________________
(Print Name and Title)
<PAGE>
STATE OF CALIFORNIA
DEPARTMENT OF FINANCIAL INSTITUTIONS
In the Matter of )
)
REGENCY BANK ) FINAL ORDER
) (Financial Code Section 1913)
)
_______________________________)
FINAL ORDER
Pursuant to Section 1913 of the Financial Code, the Commissioner of
Financial Institutions of the State of California (the "Commissioner") orders
as follows:
I. Regency Bank ("Respondent") shall discontinue its unsafe and injurious
practices, as follows:
A. Respondent shall retain management and maintain a Board of Directors
(the "Board") acceptable to the Commissioner and the Regional Director of the
FDIC (the "Regional Director"). Such management shall include a chief
executive officer, a chief financial officer, and a senior lending officer
(collectively, "executive officers") qualified to restore Respondent to a
sound condition, operate Respondent in a safe and sound manner, and comply
with the provisions of this Order. Without limiting the generality of the
foregoing, the Commissioner reserves the right to determine whether present
executive officers and directors of Respondent will continue to be deemed
acceptable.
Respondent shall cause its subsidiary, Regency Service Corporation
("RSC"), to retain management ("RSC Officers"), and maintain a Board of
Directors
<PAGE>
acceptable to the Commissioner and the Regional Director of the FDIC. Without
limiting the generality of the foregoing, the Commissioner reserves the right
to determine whether present RSC Officers and the directors of RSC will
continue to be deemed acceptable.
Respondent shall notify the Commissioner and the Regional Director
in writing whenever it or RSC proposes to add, elect or appoint any
individual to its Board of Directors or employ any individual as an executive
officer or an RSC Officer. The notification must be received at least 30 days
before such addition, election, appointment or employment is intended to
become effective, and such notice shall include a description of the
background and experience of the individual or individuals to be added,
elected, appointed, or employed. Respondent shall not add, elect or appoint
any individual to the Board, cause or allow any individual to be added,
elected, or appointed to the Board of Directors of RSC, employ any individual
as an executive officer, or cause or allow any person to be employed as an
RSC Officer, if the Commissioner, in response to Respondent's notification
as required in this paragraph, notifies Respondent of his disapproval.
B. By December 31, 1997, Respondent shall increase its tangible
shareholders' equity (shareholders' equity less intangible assets) to an
amount not less than the greater of (i) 7 percent of its tangible assets
(total assets less intangible assets) or (ii) $14,000,000. At all times
thereafter during the life of this Order, Respondent shall maintain tangible
shareholders' equity in an amount not less than the greater of (i) 7 percent
of its tangible assets or (ii) $14,000,000.
C. Respondent shall have and maintain at all times an adequate
allowance for loan and lease losses. The Board shall review the adequacy of
Respondent's allowance for loan and lease losses prior to the end of each
calendar quarter. The minutes of the Board meeting at which such review is
undertaken shall indicate the results of the review, the amount of any
increase in the allowance and the basis for determination of the amount of
the allowance provided. In determining the adequacy of
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the allowance, the Board shall consider, among other things, the size and
composition of the loan portfolio, the level of problem and past due loans,
and Respondent's history of loan losses.
D. Respondent shall cause RSC to have and maintain at all times an
adequate reserve for losses on its real estate investments.
E. Respondent shall cause RSC to reduce the assets of RSC classified
as substandard in the Report of Examination of Respondent as of June 30, 1997
(the "Report of Examination")(to "reduce" means to collect, to charge off, or
to place in such condition as to not be subject to classification as
substandard as determined by the Commissioner) so that:
(1) By December 31, 1997, the amount of such assets shall have
been reduced to an amount not to exceed $10,115,000;
(2) By March 31, 1998, the amount of such assets shall have been
reduced to an amount not to exceed $8,750,000;
(3) By June 30, 1998, the amount of such assets shall not exceed
$7,100,000;
(4) By September 30, 1998, the amount of such assets shall not
exceed $4,900,000;
F. By December 31, 1997, Respondent shall develop and adopt and it
shall therefore implement a plan acceptable to the Commissioner for RSC to
dispose of all of its real estate investments. The plan shall provide that
such real estate investments shall be liquidated or otherwise disposed of by
not later than December 31, 1998.
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G. During the life of this Order, Respondent shall not make any
distribution to its shareholders, except with the prior written approval of
the Commissioner.
H. Within 30 days after the end of the first quarter following the
date of this Order and within 30 days after the end of each quarter
thereafter, Respondent shall furnish a written progress report to the
Commissioner and the Regional Director. The reports shall describe
Respondent's actions to comply with this Order, and the results of such
actions.
II. This Order is effective immediately and shall remain effective and
enforceable except to the extent that and until such time as, the
Commissioner shall have amended, suspended or terminated this Order.
Dated: 11/14, 1997.
CONRAD W. HEWITT
Commissioner of Financial Institutions
By
DAVID L. SCOTT
Chief State Bank Examiner
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