UPDATE 2-California National Bank parent to buy PFF Bancorp

(Recasts; adds details, background, analysts' comments) By Supantha Mukherjee

BANGALORE, June 16 (Reuters) - PFF Bancorp Inc PFB.N, a financial services company hit hard by exposure to problem loans, said it agreed to be bought by FBOP Corp, the parent company of California National Bank, for about $30.5 million.

PFF, which had about 22.6 million shares outstanding as of the end of last year, said as part of the deal, the privately held banking company will pay $1.35 a share, a premium of about 14 percent over its Friday closing price of $1.18.

FBOP might have got PFF at an attractive price as the company had a very severe liquidity crunch and it needed to do something very quickly, B Riley & Co analyst Joe Gladue said.

PFF expects the transaction to close by the end of September.

PFF, which provides financing and consulting services to home builders and land owners, has been hurt by a rise in bad and classified loans caused by downward pricing pressure and slowing sales rates for both new and existing residential real estate.

The company's shares, which had lost about 96 percent over the past one year, were up more than 8 percent at $1.28 in afternoon trade on the New York Stock Exchange.

In order to maintain PFF's "adequately capitalized" regulatory status, FBOP will loan $7 million in exchange for a secured note convertible into preferred stock, PFF said.

"FBOP has given a clear sign that liquidity problem should not be a problem," Keefe, Bruyette & Woods analyst Robert Bohlen said.

Bohlen has a "market perform" rating on the stock and Gladue rates the stock "neutral."

The maturity date of the company's secured commercial bank loan with a current outstanding principal balance of $44 million was also extended by one year to June 16, 2009, PFF said.

INLAND EMPIRE POTENTIAL

The California-based company operates 37 branches in the Inland Empire region of Southern California and the Los Angeles area. Riverside and San Bernardino counties, located east of Los Angeles are known as the Inland Empire.

"While PFF and the Inland Empire are facing economic challenges, we see this market as a land of opportunity," said Greg Mitchell, chief executive of California National Bank.

Construction in Inland Empire is a big problem for everybody involved now, but long-term economic viability of being in Inland is very strong, analyst Bohlen said.

However, Bohlen said there was still significant levels of construction loan on PFF's books that had to be worked through, which will take a while.