FRGB » Topics » Loans

This excerpt taken from the FRGB 10-Q filed May 12, 2008.
Loans:  The Company does not record loans at fair value on a recurring basis.  However, from time to time, nonrecurring fair value adjustments to collateral dependent loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of the collateral, when available, or estimates using Level 3 inputs based on internally customized valuation criteria.  As of March 31, 2008 all fair value adjustments to collateral dependent loans were recorded based on estimates of the underlying fair value of the collateral using Level 3 inputs based on internally customized valuation criteria.

 

The balances of financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2008 were as follows (in $1,000s):

 

 

 

Total

 

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

 

 

 

 

 

 

 

Securities available for sale

 

$

25,135

 

$

1,246

 

$

23,889

 

 

8



 

The balances of financial assets and liabilities measured at fair value on a nonrecurring basis as of March 31, 2008 were as follows (in $1,000s):

 

 

 

Total

 

Significant
Unobservable
Inputs
(Level 3)

 

Total Gains
(Losses)

 

 

 

 

 

 

 

 

 

Impaired Loans

 

$

38,170

 

$

38,170

 

$

(8,516

)

 

Certain non-financial assets and non-financial liabilities measured at fair value on a non-recurring basis include long-lived assets and foreclosed assets.  SFAS No. 157 is applicable to these fair value measurements beginning January 1, 2009.

 

This excerpt taken from the FRGB 10-K filed Mar 16, 2006.
Loans are carried at face amount less payments collected, deferred fees, and allowances for loan losses. Interest on loans is accrued daily on a simple-interest basis. Loan origination fees and

57




FIRST REGIONAL BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003

This excerpt taken from the FRGB 10-K filed Mar 31, 2005.

3.    LOANS

        The loan portfolio consisted of the following at December 31:

 
  2004
  2003
 
Real estate loans   $ 871,567,000   $ 501,317,000  
Commercial loans     153,480,000     113,563,000  
Real estate construction loans     129,106,000     90,596,000  
Government guaranteed loans     6,001,000     9,398,000  
Other loans     2,973,000     2,232,000  
   
 
 
      1,163,127,000     717,106,000  
Allowance for loan losses     (11,825,000 )   (7,660,000 )
Deferred loan fees—net     (7,073,000 )   (4,120,000 )
   
 
 
Loans—net   $ 1,144,229,000   $ 705,326,000  
   
 
 

        Government guaranteed loans represent loans for which the repayment of principal and interest is guaranteed by the U.S. government. The loans bear contractual interest at various rates tied to national prime lending rates and were generally purchased at premiums. Premiums on purchases of government guaranteed loans are amortized on a level-yield method over the estimated lives of the loans, considering estimated prepayments.

        The Bank's lending is concentrated in real estate and businesses in Southern California. From time to time, this area has experienced adverse economic conditions. Future declines in the local economy or in real estate values may result in increased losses that cannot reasonably be predicted at this date. No industry constitutes a concentration in the Bank's portfolio, except the real estate construction industry.

        An analysis of the activity in the allowance for loan losses is as follows for the years ended December 31:

 
  2004
  2003
  2002
Balance—beginning of year   $ 7,660,000   $ 5,500,000   $ 5,000,000
Provision for loan losses     4,902,000     3,058,000     500,000
Loans charged off     (515,000 )   (758,000 )    
Allowance for unfunded loan commitments and lines of credit     (335,000 )   (140,000 )    
Recoveries on loans previously charged off     113,000            
   
 
 
Balance—end of year   $ 11,825,000   $ 7,660,000   $ 5,500,000
   
 
 

        Management believes the allowance for loan losses as of December 31, 2004 is adequate to absorb losses inherent in the loan portfolio. Management's estimates of the allowance are subject to potential

50



adjustment by the Federal Deposit Insurance Corporation ("FDIC") and the California Department of Financial Institutions upon examination of the Bank by such authorities.

        At December 31, 2004 and 2003, the recorded investment in loans for which impairment had been recognized was $63,000 and $2,822,000, with specific reserves of $13,000 and $753,000, respectively. The average recorded investment in impaired loans during 2004, 2003 and 2002 was $805,000, $3,042,000 and $153,000, respectively. No interest income on impaired loans was recognized for cash payments received in 2004, 2003 or 2002.

        Nonaccrual loans totaled $43,000 and $687,000 at December 31, 2004 and 2003, respectively. Loans which were past due by 90 days or more but not on nonaccrual were $2,000 and $139,000 at December 31, 2004 and 2003, respectively. There were no restructured loans as of December 31, 2004 and 2003.

        Allowance for unfunded loan commitments and lines of credit is maintained at a level believed by management to be sufficient to absorb estimated probable losses related to these unfunded credit facilities. The determination of the adequacy of the allowance is based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities. The allowance for unfunded loan commitments and lines of credit is included in other liabilities on the accompanying consolidated balance sheets. Net adjustments to the allowance for unfunded loan commitments and lines of credit are included in the provision for loan losses.

        In the ordinary course of business, the Bank may grant loans to its directors and executive officers. Following is a summary of such loans for the years ended December 31:

 
  2004
  2003
 
Balance—beginning of year   $   $ 203,000  
Loans granted or renewed     133,000     405,000  
Repayments     (125,000 )   (608,000 )
   
 
 
Balance—end of year   $ 8,000   $  
   
 
 
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