Irwin Execs Get Six-Figure Bonuses After 7 Straight Losing Quarters

The Star's Dan Lee has a great catch today from an SEC filing Irwin Financial made this week. Three of its top executives will collect $291,664 in "retention" bonuses over the next four months despite the fact that the bank has experienced seven straight quarterly losses, including a $107 million loss in the most recent quarter, and cut 400 jobs in recent months. The bank is planning to raise additional capital through a new stock offering and believes it is important to retain these three key executives in the coming months. Lee explains the bonuses:

Chief Financial Officer Greg Ehlinger, Commercial Banking President Brad Kime and Chief Administrative Officer Matt Souza are in line to receive extra payments over the next four months equal to their base salaries for those months, according to a federal regulatory filing made Tuesday by Irwin . . .

Ehlinger is in line to receive a retention bonus of $105,332, Kime $101,332 and Souza $85,000.

"The compensation committee . . . thought it would be critical to keep these three people focused on the capital offering, on the other elements of the strategic restructuring plan over the very short term, because they're critical to the success of the restructuring plan," said Souza, who added that he was speaking as a company spokesman.

Irwin is closely allied with Columbus, Indiana's Cummins, Inc., which earlier announced it would invest $25 million in the struggling bank to help it through these rough times. Lee earlier reported on risky home equity investments Irwin made in the booming Nevada and California housing markets before the housing bubble burst. According to Lee, the bank is currently holding close to a $1 billion in bad home equity debt. Lee said the bank was looking to return to its Indiana roots, "small business and community banking." Lee also made this observation on the bank's risk management:

Another interesting point is that, according to Irwin's proxy, the risk committee met four times in 2007. Meanwhile, the compensation committee -- which sets compensation for top executives, including CEO [Will] Miller's pay package worth $1.2 million last year -- met seven times.

I can understand why Irwin doesn't want key executives walking out in the middle of an important stock offering, but on the other hand, investors are left shaking their heads at the bank's decision to reward those same key executives at a time when its performance has been so dismal. If investors are expected to kick in more when the bank's stock value has already declined precipitously, you would think the key executives would be willing to make some sacrifices as well. Otherwise, investors might be thinking something like "don't let the door hit you on the way out."