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Non-Tech : Silicon Valley Bancshares (SIVB)
SIVB 0.006000.0%Nov 7 4:00 PM EST
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To: Robert Douglas who wrote (12)10/1/1998 4:12:00 PM
From: Robert Douglas  Read Replies (1) of 56
 
There seems to be a misconception about what this news of nonperforming assets rising to the $40- 45 million range means. Firstly it doesn't mean that these loans are lost in their entirety. It is very possible that they could become performing again, in part or in whole. In 1993 Silicon Valley had $59 million on their books as nonperforming. A year later this number had dropped to $18 million, yet SIVB had booked net charge-offs of only $8 million. Therefore many of the loans began paying interest again or recoveries were made from the sale of the collateral. It is interesting to note that during the 5 year period ending Dec. 31, 1997 SIVB's total net charge offs were only $26 million. The chances of them losing the entire $45 million are slim. Even if they did however, they are adequately reserved to handle it.

A Bear Stearn's report that I have states the following about Silicon Valley's loan portfolio:

The bank's loan portfolio is dominated by commercial loans, which make up 88% of the portfolio…. Silicon Valley lends almost exclusively (90%-95%) on a secured basis, generally on a portion of the value of a client company's accounts receivables or equipment…..and the bank only advances up to 80% of the receivables value, excluding those that are past due 90 days or more. The average credit is approximately $2 million, and it is typically secured by all of the client company's assets, including intellectual property rights, fixed assets, and inventories.

This is not high risk lending.

-Robert
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