Claremont Insider: PFF Bancorp: Directors First

Friday, May 2, 2008

PFF Bancorp: Directors First

Trading in PFF Bancorp shares resumed on the New York Stock Exchange yesterday, a day after the NYSE suspended trading of the stock. PFF is the parent company of PFF Bank & Trust.

PFF Bancorp (PFB: NYSE) continued it plunge from its 52-week high of $30.37 and closed yesterday down to $2.48 per share, or minus 34% for the day. Yesterday's fall came on the heels of bad from the bank Wednesday, according to a Daily Bulletin article by Matt Wrye:

But late Wednesday, PFF announced that it expects to report one of its largest ever quarterly losses, totaling $159 million for its fourth quarter ended March 31.

"These losses reflect continued difficulty in the real estate market that all financial institutions are experiencing," said PFF spokesman David Sweet.

PFF also disclosed plans to restructure a $44 million loan with an unidentified commercial bank that it couldn't repay by an April 30 deadline - an event that could have led to a default.

In yet another surprise, PFF announced loan and lease losses greater than expected in the quarter, a sign of the deepening real estate quagmire gripping the region.

A provision for loan and lease losses of $196 million is expected in the quarter, the bank said. This provision is related to real estate loans in the greater Inland Empire region.

PFF director Jil Stark, who is described on PFF's website as a retired Claremont McKenna College administrator and former Scripps College faculty member,was also quoted in the article:

Long-time PFF board member Jil Stark was out of town on Wednesday but said she was "surprised" to hear news of the halted stock trading. Bad weather cut off the phone connection to her June Lake cabin most of the day, she said. Stark joined the board in 1975. "We've weathered many cycles of ups and downs, and each had its unique challenges," Stark said.

The current crisis, due in part to homebuilder loans that have gone bad, certainly qualifies as a unique challenge. For PFF, which has been around since the late 1800's, this is probably the worst down for them since the Great Depression.

Of course, one thing easing Stark's pain is the fact that she was able to cash in on some PFF stock options in early 2007 for a $417,000 profit.

For bank employees, shareholders, and customers, the prospect of weathering the current down cycle may be considerably less certain without the sort of cushion Stark has.

After the Matt Wrye article was posted on the Bulletin's website, one of our readers wrote in and was less than enamored of Stark's stiff-upper-lip talk:

You should have included Jil Stark's comments in your blog. She sounds somewhat like Marie Antoinette who, when informed that the masses were without bread, allegedly said "Let them eat cake". Jil, who is enjoying her June Lake home and could not be reached, has been able to have HER cake and eat it as well by cashing out her stock (some or all, I am not sure which) before the bottom fell out of the PFF stock.

Yes, and at least one other PFF director, San Dimas Mayor Curt Morris did even better than Stark, netting $515,000 in 2006.

PFF Bank & Trust, assuming they are able to weather this down cycle without having to file for bankruptcy or being bought out, may need to change its motto.