The recession is finally behind most Southern California banks, but First Charter Bank continues to have its problems.

The Beverly Hills-based institution has reported a loss of almost $6.5 million for 1995 and said it has been deemed undercapitalized by the Office of the Comptroller of the Currency.

President and chief executive Peter Bustetter said the OCC has ordered First Charter to adopt a capital restoration plan within 45 days.

First Charter's stock did not take the news well, falling nearly 60%, from $1.50 a share to 62.5 cents.

The bank has been weighed down during the past year by bad real estate. In 1995, the bank expensed $5.4 million in loan loss provisions and nearly $2 million for properties obtained through foreclosure.

"It was a terrible year," Mr. Bustetter said. "We continue to suffer from a block of real estate-oriented loans, most of which originated between 1988 and 1992. The result of the later downturn in real estate killed many of these transactions."

Earlier this year First Charter engaged Sandler O'Neill & Partners, a New York investment bank, to assist in evaluating the bank's future, which could include an outright sale, a merger, or a capital infusion.

Mr. Bustetter said the bank had been working heavily with Sandler O'Neill, but could not reveal details.

First Charter has not had an easy time of it this decade. The bank was hard hit by plummeting area real estate values and has lost nearly $10 million in the past two years alone.

Total assets at the institution fell from $154 million to $130 million over the past year.

"It's surprising to see any bank today coming out with these kind of losses," said Howard B. Levenson, chairman and chief executive of Western Financial Services, San Diego.

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