Pacific First May Be Told To Oust Exec
SEATTLE - Pacific First Bank is facing pressure from regulators to make senior management changes that could include ousting its president and chief operating officer, William D. Pettit Jr., according to sources.
Mr. Pettit's status is said to be one of several issues on the table after a surge in loan problems and a harshly critical examination by the Office of Thrift Supervision. Seattle-based Pacific First, which has $7.5 billion in assets, is owned by Royal Trustco Ltd., Toronto.
"Bill is an issue," said a source familiar with the examination. "The OTS has questions about him, and his status is in doubt."
Report Not Completed
The final OTS examination report has not yet been issued, and Mr. Pettit's status remains under negotiation, sources said. The regulator's original hard line on Pacific First's second-ranking executive may be easing now that the agency as registered its dissatisfaction about the thrift's management, sources suggested.
"It's premature to talk of an ouster," said a second source. The OTS' position "could be softened substantially."
Pacific First and the OTS declined to comment, citing the confidentiality of examinations. Mr. Pettit could not be reached for comment.
Mr. Pettit, 42, joined Pacific First in 1988, a year before it was acquired by Royal Trustco. Before that, he had been an executive of Seafirst Corp. in Seattle for 13 years.
Boss Resigned in July
Mr. Pettit's former boss at Pacific First, chairman and chief executive Jerry E. Pohlman, resigned in July. Mr. Pohlman apparently left without prompting from the OTS, but his post would probably have been in jeopardy had he stayed, sources said.
Mr. Pohlman's duties as chairman were assumed by Royal Trustco chairman Hartland M. MacDougall. Pacific First has not yet named a chief executive.
The regulatory audit, which began in June, was the first done at Pacific First by the OTS San Francisco office. The thrift was previously under the jurisdiction of the smaller Seattle office of OTS, which was combined with San Francisco's in a reorganization last year.
Lending Heavily Criticized
Examiners criticized several operational areas, including the asset/liability function, which manages interest rate risk.
But the sharpest barbs were aimed at the lending area, especially commercial real estate credits. While OTS examiners found appraisals, reserve methodology, and loan documentation inadequate, the agency was especially critical of Pacific First's degree of real estate exposure.
"It was a very difficult exam report. The focus was on the amount of construction lending," said one source. Pacific First's concentration on real estate had not been an issue for the Seattle OTS, sources said.
Pacific First has about $400 million in construction loans outstanding on California residential developments, plus about $1 billion in mortgages on apartments and other income properties in California and the Pacific Northwest.
Nonperformers Grow Fast
Nonperforming assets totaled $226.5 million, or 3.03% of total assets, at June 30, 28.2% from the beginning of the year. But about $40.7 million in problem loans were spun off to an affiliate during the first half of 1991. Pacific First said most of the increase in problem assets reflected commercial real estate delinquencies.
Analysts said they expect a sharp upturn in problem assets in the third quarter, when examination results will be incorporated in earnings.
Separately, Pacific First announced that the OTS had rated its community reinvestment activities "outstanding," the highest of four possible grades.