California First National Bancorp, which has been criticized for its commercial loan portfolio, said it’s undertaking a strategic review of options after a regulator advised further reduction of leveraged loans.
The Irvine-based bank last week reported a decline of 10% in its syndicated loan portfolio in the first quarter, and the portfolio may decline by another 6% pending the close of a sale or payoff, according to a company filing with the Securities and Exchange Commission.
The Office of the Comptroller of the Currency advised the Irvine-based bank in February to stop originating leveraged or nonleveraged syndicated commercial loans until the agency validates that an acceptable risk-management framework is in place.
In a March 21 letter, the OCC further advised the bank to take action to substantially reduce its concentration of leveraged loans.
The bank said it may reduce its leveraged loan portfolio by 50% in the next 12 months and that the process may have a material adverse effect on net interest income.
It said it plans to report third-quarter results around April 28, when it will update its strategic plan.
California First is the ninth biggest commercial bank based in Orange County, according to the Business Journal’s latest ranking.
—Peter J. Brennan
