1004969--6/19/2008--PFF_BANCORP

related topics

{loan, real, estate}

{loss, insurance, financial}

{control, financial, internal}

{acquisition, growth, future}

{financial, litigation, operation}

{interest, director, officer}

{regulation, change, law}

{tax, income, asset}

{condition, economic, financial}

{debt, indebtedness, cash}

{system, service, information}

{stock, price, operating}

{competitive, industry, competition}

{operation, international, foreign}

Failure to consummate the Merger Agreement could materially and adversely affect the Company s results of operations and stock price. Our independent registered public accountants have expressed substantial doubt about our ability to continue as a going concern. Our business and earnings are highly sensitive to general business and economic conditions, particularly in Southern California, that affect housing prices and the job market, and continued deterioration in these conditions have resulted, and may continue to result, in a deterioration of our loan portfolio. Deterioration in credit quality has had, and could continue to have, a negative impact on our business and earnings. Our current organizational structure does not include a Chief Credit Officer to manage loan portfolio risks. Our ability to service our debt, pay dividends, and otherwise satisfy our obligations as they become due is substantially dependent on capital distributions from the Bank and restrictions imposed by the OTS. The Inland Empire continues to reflect the impact of a distressed housing market. Our loan portfolio has a high concentration of construction loans. Our construction loans are based upon estimates of costs and value associated with the completed project. These estimates could prove to be inaccurate, which would expose us to additional credit risk. We have reported substantial net losses during each of the last three fiscal quarters. No assurance can be given as to when or if we will return to profitability. Our loan portfolio has suffered substantial deterioration during fiscal 2008 and a substantial portion of the portfolio currently consists of non-performing loans or is otherwise adversely classified. No assurance can be given that the portfolio will not experience further weakness or loss. We may be subject to an increased likelihood of class action litigation. We may need to raise additional capital, but that capital may not be available, or may not be available on terms acceptable to us when needed. Our commercial lending activity and the commercial loans that are held in our loan portfolio expose us to credit risks. We invest, in a limited manner, in mortgage-backed obligations, which may lead to volatility in cash flow and market risk. Our allowance for loan losses may prove inadequate or we may be negatively affected by credit risk exposures. An inadequate allowance for loan losses would reduce our earnings. Fluctuations in interest rates could reduce our profitability and adversely affect the value of our assets, our net interest income and our earnings. Loan servicing income derived from residential mortgage loan servicing rights and our overall profitability may be adversely affected during periods of declining interest rates due to increases in loan prepayments. Mortgage loans in our loan portfolio are subject to risks of delinquency, foreclosure and loss, which could result in losses to us. Certain of our loan products have features that may result in increased credit risk. Our revenues from loan servicing can also be adversely affected by delinquencies and defaults. If we sell loans or servicing rights and the underlying loan defaults, we may be liable to the purchaser for unpaid principal and interest on the loan. If a loan originator or seller of loans and servicing rights breaches its representations and warranties to us, we may be at risk if such seller does not have the financial capacity to pay for damages we incur as a result of such breach or to repurchase any such loan. We are subject to losses due to fraudulent and negligent acts on the part of loan applicants, brokers, other vendors and our employees. If we continue to experience significant losses, we may need to raise additional capital, which could have a dilutive effect on existing stockholders. Our accounting policies and methods are fundamental to how we report our financial condition and results of operations and we use estimates in determining the fair value of certain of our assets, which estimates may prove to be imprecise and result in significant changes in valuation. We, and our independent registered public accounting firm, have identified material weaknesses in our internal control over financial reporting. We are subject to extensive regulation that could restrict our activities, including capital distributions, and impose financial requirements or limitations on the conduct of our business. Changes in the regulation of financial services companies, housing government-sponsored enterprises and mortgage lenders and servicers could adversely affect us. In addition, changes in federal bankruptcy law, state foreclosure laws, and other laws impacting a lender s ability to collect debts or to realize the full value of collateral backing loans could negatively affect us. We are subject to operational risks, which may result in incurring financial losses. The security of our network infrastructure is important to our business and our ability to protect customer information, and breaches of our network security may result in customer information being compromised and/or identity theft, which would have a material adverse effect upon our business. We may face damage to our professional reputation and business as a result of negative publicity, including increase in deposit outflows. We operate in a competitive environment with other financial institutions, which could adversely affect our profitability. We are exposed to risk of environmental liabilities with respect to properties to which we take title. Terrorist activities could cause reductions in investor confidence and substantial volatility in real estate and securities markets. We may change our business and operational policies in ways that harm our financial condition or results of operations. We rely on Federal Home Loan Bank system borrowings for secondary and contingent liquidity sources. We have had fluctuations in our quarterly results and may continue to have fluctuations in our quarterly results.

Full 10-K form ▸

1004969--6/19/2008--PFF_BANCORP_INC