This company gladly took $250mm in TARP when times looked tough. Then, reading the fine print of what TARP allowed, the mgt did everything they could to insure they would still get a bonus in 2008, TARP requiring they defer it until the TARP was paid back. The bonuses were not small either, even tho 2008 was a year in which the bank had to take decent-sized write downs and lost $92mm! So now the bank has just raised capital via JPM, guess how much? $225mm, just enough to pay back the TARP so mgt can officially take their 2008 bonuses. So the gov't helped guarantee mgt didn't lose everything in the panic, which pretty much allowed the mgt team to get their coveted bonuses. This is kinda sickening from a taxpayer point of view. Most banks that recieved TARP wisely chose to dance around 2008 bonus issues, especially after AIG fiasco earlier this year. Not this bank! Excerpts from their 4Q review.... "During the fourth quarter, we undertook a comprehensive loan review, which resulted in substantial charge-offs." They weren't afraid to lend money in 2008 either. Was this wise? "We added a large number of new client relationships that resulted in almost $4 billion in new loans." They had only about $800mm in tangible capital, compare this to loan loss provisions for 2008 alone.... "The fourth quarter loan loss provision was $119.3 million and resulted from $108.8 million net charge-offs (an annualized rate of 5.49 percent of average total loans." 5.49% seems kinda high, no? chargeoffs rapidly accelerating... "Total charge-offs for the year were $125.8 million, or a net charge-off ratio of 2.00 percent, compared to $6.1 million, or a net charge-off ratio of 0.17 percent, for the year ended December 31, 2007." seems like JPM is desperate for fees, if they are encouraging their clients to invest in this. don't think this is wise, it implies current loan portfolio isn't going to have much losses... "The allowance for loan losses as a percent of non-performing loans decreased to 85 percent in the fourth quarter 2008 from... 125 percent in the fourth quarter 2007." Not sure this is a great portfolio of loan assets these days, with only 1 bn in capital... "After giving effect to these charge-offs, as of December 31, 2008, the Company had approximately $400 million in residential development loans remaining, with 59 percent in single family homes/condominiums built for sale, which is held as construction exposure, and 41 percent in land (developed and undeveloped), which is held as commercial real estate exposure." Did they curtail early enough? "The Company made a strategic decision in early 2008 to curtail any new production in the residential development sector and will allow a substantial portion of this portfolio to wind down as residential development lending is not a core component of the Strategic Growth Plan. The Company had $155.7 million in total non-performing assets at December 31, 2008, compared to $106.5 million at September 30, 2008, and $48.3 million at December 31, 2007. Non-accruing loans totaled $131.9 million and other real estate owned (OREO) was $23.8 million." Who exactly are they loaning money now? "The Company's loan portfolio increased in the fourth quarter by more than $700 million compared to an increase of $1.0 billion in the third quarter." Commercial loans increasing.... (not the best growth area for 2009) "Commercial loans increased to $4.0 billion, or 50 percent of the Company's total loans, from $1.3 billion, or 32 percent of total loans, at the end of 2007. Commercial loans include commercial and industrial and owner-occupied commercial real estate loans and continue to be the fastest-growing segment of the loan portfolio." Rising interest rates in long term t-bills vs.... "The Company's securities portfolio is primarily comprised of U.S. government agency backed mortgage pools, agency collateralized mortgage obligations, and investment grade municipal bonds." BUT THIS IS THE KICKER... source: http://www.chicagobusiness.com/cgi-bin/news.pl?id=33825&seenI... "Chicago-based PrivateBancorp paid cash bonuses to its top executives other than CEO Larry Richman, who opted to accept his $600,010 bonus in the form of restricted stock that vests only after the bank repays the $244 million it received under the federal Troubled Asset Relief Program. Bonuses paid in that form are permitted under TARP. The listed PrivateBancorp execs who got cash bonuses were Bruce Hague, president of national banking, who received a $375,000 cash bonus for 2008 performance in addition to his $435,000 salary; Bruce Lubin, president of Illinois commercial banking, who received $345,000 in addition to his $385,000 salary; and Kevin Van Solkema, chief risk officer, who got a $165,000 bonus on top of his $246,333 salary."
$19.08 (05/22/09)
