While Congressional leaders continue to negotiate the terms of a bailout plan to relieve mortgage lenders and investment banks of their distressed mortgage debt, a shareholder derivative action has been filed against PFBB Bancorp ("PFBB") and several of its directors and officers in the Delaware Chancery Court to enjoin a proposed merger between PFBB and FBOP Bancorp ("FBOP"). A copy of the complaint, filed on September 22, 2008, can be found by clicking here.

On June 13, 2008, PFBB and FBOP allegedly entered into a merger agreement whereby PFBB shareholders would receive $1.35 per share in cash upon the consummation of the merger. On September 22, 2008, just three days prior to the scheduled shareholder vote to approve the merger, the Secretary of the Treasury, Henry Paulson, announced a bailout plan, entitled the "Troubled Asset Relief Program", that would authorize the federal government to spend up to $700 billion to purchase distressed mortgages. The plaintiff alleges that the federal government's bailout would increase the value of the PFBB loan portfolio by creating a market for subprime mortgages. According to the plaintiff, the merger price, negotiated on the premise that these assets were nearly worthless, does not reflect the true value of PFBB in the event the bailout plan becomes law.

The plaintiff alleges that PFBB and its directors and officers breached their fiduciary duty by failing to provide an updated disclosure to shareholders that accounts for the increased value of the mortgages as a result of the bailout plan. According to the plaintiff, an updated disclosure would be material to the shareholders in both assessing the financial fairness of the merger and pursuing their rights to appraisal. The plaintiff seeks injunctive relief to delay the closing of the merger (scheduled for September 30, 2008) and to compel the dissemination of a supplement to the proxy statement that values PFBB's assets in light of the proposed bailout.