PFF Bancorp, Inc. (fka PFFBQ)

[lifegear]

FBOP was supposed to buyout PFF for $1.35_per share but the FDIC seized the bank and sold it to USB

Feds watching PFF's planned merger amid more losses and customer withdrawals

Thursday , November 20, 2008 12:34ET

Nov 20, 2008 (San Bernardino County Sun - McClatchy-Tribune Information Services via COMTEX) -- Federal regulators are keeping a very close eye on the merger of troubled PFF Bancorp Inc. with an out-of-state buyer, according to sources close to the situation.

The Rancho Cucamonga-based parent company of PFF Bank & Trust reported more financial losses and customer withdrawals last week.

The deal with Oak Park, Ill.-based FBOP Corp. is scheduled to close by year's end.

But the bargain price of $1.35 a share FBOP would pay may not be such a great deal anymore, according to one of those sources.

More than $1.1 billion has been drained from PFF Bancorp and its bank branches since March 2007, most in customer withdrawals from its banks.

Walter Hackett, a former PFF executive, isn't sure the merger will be halted, but he thinks FBOP may be getting nervous about the deal.

PFF's losses and mounting shareholder lawsuits "may be part of the reason that FBOP is blinking now," said Hackett, who during the housing market boom was a vice president and commercial loan department manager for PFF.

Hackett is also a witness for a group of shareholders who recently filed a lawsuit against PFF -- one of several suits claiming PFF executives foresaw financial losses and dumped their stock while telling shareholders everything was OK.

At the same time, FBOP is suffering major losses due to its exposure to Freddie Mac and Fannie Mae stock meltdown, according to a September article published by Crain's Chicago Business newspaper.

FBOP, owned by billionaire Michael Kelly, is trying to "extend the Federal Reserve approval of the merger, and to obtain other regulatory approvals," and intends to complete the merger on or before Dec. 31, documents show.

Kelly, who has a history of scooping up troubled banks for bargains, is known for turning those banks into cash cows.

But with the financial industry in limbo, Kelly may be seeing cracks in his empire, which means FBOP may be getting nervous about the deal, one source says.

Investor uncertainty decreases the chances that another buyer would acquire PFF if the merger doesn't go forward.

Dozens of PFF employee severance packages are at stake if the merger doesn't go forward. Some workers have been with the bank almost 30 years.

Severance packages for President and CEO Kevin McCarthy and Chief Financial Officer Gregory Talbott -- worth a combined $4.5 million -- would also be axed.

Executives at FBOP did not return calls for comment.

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Matt Wrye
Copyright (C) 2008, San Bernardino County Sun, Calif.