By Michael Oneal | Shares of Chicago-based PrivateBancorp Inc. jumped more than 6 percent after Chief Executive Larry Richman reassured analysts at a New York
investment conference that recent loan-quality problems were under
control.

Private Bank, which lost $42.5 million last year as troubled loans grew
10 percent to $437 million, remains well capitalized (thanks partly to
$244 million in TARP money), Richman said, and is diligently working to
clean up a portfolio skewed heavily toward commercial and real estate
loans.

“There is very active, very aggressive, and very focused attention not only on identification (of problems) but how do we manage through it,” Richman said. “Our objective moving forward is clearly to return to profitability.”

Private Bank has been transformed since 2007 when Richman arrived with a team of former LaSalle Bank lenders and began aggressively moving into commercial lending. Revenue growth has been impressive, with a 70 percent increase in 2009. But because almost two-thirds of its loan portfolio was in real estate and construction loans in 2007, the bank has been hit hard by the downturn, with non-performing assets rising to almost 4 percent of the total.

Richman said he has no intention of repaying anytime soon the bailout Private Bank received from the Troubled Asset Relief Program last year and is focused instead on cleaning up his loan portfolio. His team has trimmed real estate and commercial loans (where three-quarters of the problems came from) to 43 percent of the total as of last year’s fourth quarter by focusing more on commercial and industrial loans as well as owner-occupied real estate loans. They combed through every loan on the books, he said, in order to clear out the non-performers.

Kevin Killips, Private Bank chief financial officer, made a point of dividing the loans into those the Richman team inherited and those it had generated. Eighty four percent of the problems were in what he called the “old vintage” loans, he said, though Richman later pointed out that the new team now owns all the loans, no matter who generated them.

Richman also pointed out that he has focused the team on improving the quality of a deposit base that had grown more than 60 percent annually since 2007. Expensive brokered deposits are now just 6 percent of the total versus 25 percent at the end of 2008.

Despite its problems, Private Bank, which swooped in on a troubled Founders Bank last summer, is widely viewed as a potential buyer in this market as the Federal Deposit Insurance Corp. continues to take over problem banks and unload their assets. In response to a questions, Richman said there may be more opportunities to grow in the Chicago market through acquisition as more banks founder. But he’s more focused on fixing what he’s got right now.

“We continue to look,” Richman said. “If there are some (troubled banks) that fit our strategy and that are adjacent and supplemental (to our business), we would consider it. But it is not our primary mission. There are lots of organic growth opportunities that exist in Chicago and the Midwest markets where we have bankers that know the client base. That is our principal growth engine.”

Private Bank stock, which was trading at around $42 a share in September of 2008, has since fallen to closer to $13. It closed at $14.63 in Thursday.