• Accelerates progress in resolving problem credits
• Further strengthens loan loss reserves
• Substantial loan loss provisions lead to operating loss for period
• Exceeds all financial ratio requirements for “Well Capitalized” status
• Achieves planned shrinkage in total assets and net loans; deposits rise from year ago levels

First Regional Bancorp (Nasdaq-GSM: FRGB) reported operating losses for the second quarter and first half of 2009. The losses principally reflect additional loan loss provisions and other costs incurred in the course of resolving problem loans resulting from the current severe economic recession.

For the three months ended June 30, 2009, the net loss was $17.8 million, equal to $1.50 per diluted share, versus a net loss of $18.5 million, or $1.57 per diluted share, in last year’s second quarter. For the first six months of 2009, the net loss was $21.0 million, or $1.78 per diluted share, compared to a net loss of $13.8 million, or $1.17 per diluted share, for the comparable period in 2008.

Operating results continue to be adversely impacted by historic lows in interest rates resulting from the Federal Reserve’s aggressive actions directed at reviving the economy during the past twelve months. These actions have significantly impacted the yield on First Regional’s loan portfolio, which consists almost entirely of variable-rate notes that adjust immediately upon any change in interest rates. In contrast, deposit accounts generally require a longer period to mature, and interest costs adjust accordingly. As a result, net interest income in the first half of 2009 amounted to $31.6 million, down sharply from $50.5 million in the corresponding period of 2008.

H. Anthony Gartshore, President and Chief Executive Officer, commented: “While times remain difficult for First Regional and financial institutions in general, we continue to make steady progress confronting our challenges. Our highest priority remains to resolve problem assets spawned by the current economic recession. As well, First Regional has made a deliberate effort to reduce total assets and net loans in concert with our ongoing program of shrinking the asset base, thereby further strengthening our capital position."

At June 30, 2009, total assets were $2.380 billion, compared to $2.472 billion one year earlier. Net loans declined more sharply to $2.157 billion at June 30, 2009, compared to $2.282 billion on the same date in 2008. Total deposits at the end of the quarter were $2.011 billion, up from $1.982 billion in the prior year. Reflecting the impact of operating losses over the past year in the difficult economic environment, shareholders’ equity at the end of the second quarter of 2009 amounted to $129.7 million, or $10.96 per share outstanding, compared with $159.3 million, or $13.50 per outstanding share a year ago. First Regional continues to exceed all financial ratio requirements for Well Capitalized status under applicable regulations. As First Regional holds no material intangible assets, all of First Regional’s equity capital is tangible.

Mr. Gartshore continued: “In the second quarter of 2009 we completed the resolution of over $46 million in nonperforming assets, and we expect that resolution process to continue. Despite our success in resolving problem assets, our long-standing policy of dealing firmly and pragmatically with delinquent borrowers resulted in our nonperforming asset totals increasing in the second quarter. We are confident that those totals will decline as we complete the asset resolution transactions which we have in process."

In the second quarter of 2009 First Regional made provisions of $31.1 million to its reserve for loan losses, compared to provisions of $44.7 million in the second quarter of 2008. Year to date, 2009 loan loss provisions were $38.6 million, versus provisions of $55.5 million for the same period in 2008. First Regional’s loan loss reserve totaled $74.5 million, or 3.34% of gross loans at June 30, 2009, compared to a reserve of $44.2 million, or 1.90% of gross loans at the close of the second quarter of 2008.

Mr. Gartshore stated: “As reported earlier, most of our nonperforming assets are secured by real estate, meaning that our risk of loss is limited by the value of the underlying collateral even in the present soft market. As required by applicable accounting standards, we have made loan loss provisions to reflect our latest estimates of such potential losses, so the anticipated impact of such losses is already reflected in our financial results. As always, we will continue to make loan loss provisions as necessary based on our ongoing analysis of First Regional’s loan portfolio performance and economic conditions in general.

“As previously disclosed, our vigorous loan collection efforts combined with normal loan repayments are expected to result in a significant reduction in both net loans and total assets as we move through the balance of 2009,” continued Mr. Gartshore. “The aforementioned asset shrinkage, along with the historically low interest rate environment currently prevailing, is placing continued pressure on our 2009 operating results. The shrinkage will, however, further strengthen First Regional’s capital ratios, which already exceed the ‘well capitalized’ standards established by banking regulators.”

Mr. Gartshore concluded: “Despite the many challenges that remain, we look to the future with continued confidence and resolve. Our strong capital base provides the solid foundation which enables us to offer customers and prospects creative solutions to their loan and deposit needs, and an unmatched level of personal service which has long been our hallmark. While our actions in the present environment are limiting current growth and profitability, they contribute to our fundamental goal of enhancing value for our shareholders over time.”

First Regional Bancorp is a bank holding company headquartered in Century City. Its subsidiary, First Regional Bank, specializes in providing businesses and professionals with the management expertise of a major bank and the personalized service of an independent.

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included herein may constitute forward-looking statements. Although First Regional believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from First Regional’s expectations include fluctuations in interest rates, inflation, government regulations, and economic conditions and competition in the geographic and business areas in which First Regional conducts its operations.

First Regional Bancorp
H. Anthony Gartshore
President and Chief Executive Officer
310-552-1776