PrivateBancorp Reports First Quarter Earnings Per Share of $0.15

Continued asset quality improvement and loan growth lead to increased earnings

24 Apr, 2012, 07:30 ET from PrivateBancorp, Inc.

CHICAGO, April 24, 2012 /PRNewswire/ -- PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income available to common shareholders of $10.8 million, or $0.15 per diluted share, for the first quarter 2012, compared to $7.5 million, or $0.10 per diluted share, for the first quarter 2011, and $7.6 million, or $0.11 per diluted share for the fourth quarter 2011.

"In the first quarter, we saw solid quarter-over-quarter improvement, with a 42 percent increase in net income from the fourth quarter and a 45 percent increase year over year," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc.  "Our results were driven by continued success in client development and ongoing improvement in asset quality.  I was pleased by the increase in total loans and fee income, and by the continued reduction in problem assets, as we build on the strength of our core commercial middle market bank. 

"Our pipeline is strong and we are positioned to benefit as middle market companies resume investing in their own businesses.  We believe our strategy will continue to generate opportunities that will translate into improved earnings, a stronger balance sheet and improved shareholder value."

Highlights

  • Net income was $10.8 million, up 42 percent from the fourth quarter 2011, largely as a result of lower provision costs as well as growth in average loan balances and fee income. 
  • Net revenue increased 3 percent from the fourth quarter 2011.
  • Non-interest income grew 8 percent from the prior quarter, primarily driven by increased fees from capital markets, treasury management, and syndication activity.  
  • Total loans grew $213.7 million this quarter to $9.2 billion at March 31, 2012, largely driven by growth of commercial and industrial loans with new and existing clients. 
  • Improvement in asset quality continued with non-performing assets down 7 percent and special mention and potential problem loans down 14 percent from year-end 2011.

Operating Performance

Net revenue was $132.6 million in the first quarter 2012, compared to $127.0 million in the first quarter 2011 and $129.0 million in the fourth quarter 2011.  Net revenue increased 4 percent compared to the same period prior year and 3 percent compared to the prior quarter.  Operating profit was $52.3 million in the first quarter 2012, compared to $51.6 million in the same period prior year and $52.8 million in the prior quarter.  Higher compensation costs and elevated net foreclosed property expense reduced the impact of revenue growth.

Net interest income was $104.4 million for the first quarter 2012, up from $102.6 million for the first quarter 2011 and $103.0 million for the fourth quarter 2011.  An increase in average loan balances and lower funding costs continued to mitigate declining yields within the investment portfolio in comparison to the fourth quarter 2011.  Net interest margin increased to 3.53 percent for the first quarter 2012, up from 3.46 percent in the same period prior year and 3.48 percent in the prior quarter.  Net interest margin primarily benefitted from a reduction in short-term investments and continued reductions in cost of funds. 

Non-interest income was $27.5 million in the first quarter 2012, compared to $23.6 million in the first quarter 2011 and $25.4 million in the fourth quarter 2011.  Non-interest income increased 16 percent compared to the same period prior year and 8 percent compared to the prior quarter.  Capital markets revenue benefited in the first quarter 2012 from steady origination activity, deeper cross-sell across the business lines, and some larger transactions.  Treasury management revenue was 19 percent higher in comparison to the same period prior year and up 7 percent from the prior quarter.  Loan and credit-related fees increased 11 percent from the same period prior year and 16 percent from the prior quarter due largely to an increase in syndications revenue.

Expenses

Non-interest expense was $80.2 million for the first quarter 2012, compared to $75.3 million for the first quarter 2011 and $76.2 million for the fourth quarter 2011.  The increase in non-interest expense was primarily due to higher compensation expenses and credit-related operating costs.  Compared to the same period prior year, salary and benefit expense was higher in the first quarter 2012, primarily due to an increase in incentive-based compensation.  Compared to the prior quarter, salary and benefit expense was up due to seasonally higher payroll taxes and 401(k) benefit payments.  Net foreclosed property expense remained elevated, reflecting the current level of other real estate owned.  The increase of other expense during first quarter 2012 was primarily due to additional provision for unfunded commitments. 

The efficiency ratio was 60.5 percent in the first quarter 2012, compared to 59.3 percent in the first quarter 2011 and 59.1 percent in the fourth quarter 2011.

The effective tax rate for the quarter was 40.5 percent and continues to be impacted by the non-deductibility of certain compensation expense as well as a reduction in tax benefits of previously awarded stock-based compensation due to the impact of current share price valuation. 

Credit Quality  

During the first quarter 2012, the Company continued to make meaningful progress in reducing problem assets and improving asset quality.  Non-performing assets declined to $356.7 million at March 31, 2012, down 21 percent from $450.7 million at March 31, 2011, and down 7 percent from $385.6 million at December 31, 2011.  Non-performing assets to total assets were 2.83 percent at March 31, 2012, compared to 3.61 percent a year ago, and 3.11 percent at year-end 2011.  Non-performing loans were $233.2 million at the end of the first quarter 2012, a 35 percent decline from $356.9 million a year ago, and a 10 percent decline from $259.9 million at year-end 2011.  Non-performing loan inflows were $69.6 million during the first quarter 2012 and special mention and potential problem loans declined 14 percent from year-end 2011. 

The Company disposed of $67.4 million of problem assets in the first quarter 2012, with an incremental charge of 14 percent based on the carrying value net of specific reserves at the time of disposition.  During the quarter, the Company used a series of resolution strategies including asset sales and loan restructurings.  Restructured loans accruing interest were $136.5 million at the end of first quarter 2012, compared to $100.9 million a year ago and $100.9 million at year-end 2011.  As problem loan indicators continue to trend positively and problem loan resolutions continue, the Company expects further improvement in the credit quality of the portfolio.

The allowance for loan losses in the first quarter 2012 reflects the improvement in asset quality, the reduced requirement for specific reserves, and additions to reserves supporting loan growth.  The allowance for loan losses at March 31, 2012, was $183.8 million, or 1.99 percent of total loans, compared to $218.2 million, or 2.41 percent of total loans, at March 31, 2011, and $191.6 million, or 2.13 percent of total loans at December 31, 2011.  As a percentage of non-performing loans the allowance for loan losses was 79 percent at the end of the first quarter 2012, compared to 61 percent a year ago, and 74 percent at year-end 2011.  The first quarter 2012 provision for loan losses was $27.6 million, excluding covered loan provision, down from $36.7 million in the same period prior year and $29.8 million in the prior quarter.  Net charge-offs declined to $35.4 million for the first quarter 2012, from $41.3 million for the same period prior year and $38.2 million for the prior quarter.

Credit quality results exclude $276.5 million in covered assets as of the end of the first quarter 2012, referring to certain assets acquired through an FDIC-assisted transaction that are subject to a loss-sharing agreement, compared to $364.4 million in the first quarter 2011 and $306.8 million in the fourth quarter 2011. 

Balance Sheet

Total loans were $9.2 billion at March 31, 2012, up from $9.0 billion at December 31, 2011.  The Company continued to build the loan portfolio, primarily in commercial and industrial loans, through growth in new relationships and increases in existing facilities.  Commercial and industrial loans grew 3 percent from year-end 2011.  Total assets were $12.6 billion at March 31, 2012, up from $12.4 billion at year-end 2011.

Total deposits were $10.4 billion at March 31, 2012, flat compared to $10.4 billion at December 31, 2011.  Non-interest bearing deposits comprised 29 percent of total deposits at March 31, 2012, compared to 31 percent of total deposits at year-end 2011.  Short-term borrowings were $355.0 million at March 31, 2012, as the Company increased short-term FHLB advances by $199.0 million during the quarter. 

The Company's investment securities portfolio was $2.3 billion at March 31, 2012, flat compared to $2.3 billion at December 31, 2011.  The securities portfolio is primarily comprised of U.S. government agency backed mortgage pools, agency collateralized mortgage obligations, and investment grade municipal bonds.

Capital

As of March 31, 2012, the Company's total risk-based capital ratio was 14.20 percent, the Tier 1 risk-based capital ratio was 12.31 percent, and the leverage ratio was 11.35 percent. Tier 1 common capital ratio was 8.04 percent and tangible common equity ratio was 7.69 percent at the end of the first quarter 2012.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call on Tuesday, April 24, 2012, at 10 a.m. CT.  The call may be accessed by telephone at (888) 782-9127 (U.S. and Canada) or (706) 634-5643 (International) and entering passcode #65265700.  A live webcast of the call can be accessed on the Company website at www.theprivatebank.com by visiting the Investor Relations tab under the About Us section.  A rebroadcast will be available beginning approximately two hours after the call until midnight on April 26, 2012, by calling (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) and entering passcode # 65265700.

About PrivateBancorp, Inc.

PrivateBancorp, Inc., through its subsidiaries, delivers customized business and personal financial services to middle-market companies, as well as business owners, executives, entrepreneurs and families in all of the markets and communities we serve.  As of March 31, 2012, the Company had 34 offices in 9 states and $12.6 billion in assets.  The Company website is www.theprivatebank.com.

Forward-Looking Statements

Statements contained in this press release that are not historical facts may constitute forward-looking statements within the meaning of federal securities laws.  Our ability to predict results or the actual effects of future plans, strategies or events is inherently uncertain. Factors which could cause actual results to differ from those reflected in forward-looking statements include, but are not limited to: unforeseen credit quality problems or further deterioration in problem assets that could result in charge-offs greater than we have anticipated in our allowance for loan losses; adverse developments impacting one or more large credits; the extent of further deterioration in real estate values in our market areas, particularly in the Chicago area; difficulties in resolving problem credits or slower than anticipated dispositions of other real estate owned which may result in increased losses or higher credit-related operating costs; continued uncertainty regarding U.S. and global economic recovery and economic outlook, and ongoing volatility in market conditions, that may impact credit quality or prolong weakness in demand for loans or other banking products and services; unanticipated withdrawals of significant client deposits; lack of sufficient or cost-effective sources of liquidity or funding; the terms and availability of capital when and to the extent necessary or required to repay TARP preferred stock or otherwise; loss of key personnel or an inability to recruit and retain appropriate talent; unanticipated changes in interest rates or significant tightening of credit spreads; competitive pricing pressures; uncertainty regarding implications of the Dodd-Frank Act, including evolving regulatory capital standards, and the rules and regulations to be adopted in connection with implementation of the legislation that may negatively affect our revenues or profitability; other legislative, regulatory or accounting changes affecting financial services companies and/or the products and services offered by financial services companies; or failures or disruptions to our data processing or other information or operational systems.  These forward-looking statements are subject to significant risks, assumptions and uncertainties and could be affected by many factors, including those set forth in the "Risk Factors" section of our Form 10-K for the year ended December 31, 2011 as well as those set forth in our subsequent periodic and current reports filed with the SEC.  These factors should be considered in evaluating forward-looking statements and undue reliance should not be placed on our forward-looking statements.  Forward-looking statements speak only as of the date they are made and we assume no obligation to update any of these statements in public filings in light of future events unless required under the federal securities laws.

Non-GAAP Measures

This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures.  The Company believes that these non-GAAP financial measures provide information useful to investors in understanding the underlying operational performance of the Company, its business, and performance trends and facilitates comparisons with the performance of others in the banking industry.  If non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconcilement to the comparable GAAP financial measure, can be found in this press release.  These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Editor's Note: Financial highlights attached.    

Quarterly Consolidated Income Statements

Unaudited

(Amounts in thousands except per share data)

1Q12

4Q11

3Q11

2Q11

1Q11

Interest Income

Loans, including fees

$ 103,539

$ 102,897

$ 102,174

$ 102,391

$ 105,647

Federal funds sold and other short-term investments

132

215

231

399

336

Securities:

     Taxable

15,380

15,263

15,196

15,568

15,390

     Exempt from Federal income taxes

1,300

1,273

1,293

1,387

1,486

     Total interest income

120,351

119,648

118,894

119,745

122,859

Interest Expense

Interest-bearing demand deposits

636

585

625

587

642

Savings deposits and money market accounts

4,602

4,857

5,356

6,082

6,662

Brokered and time deposits

5,017

5,561

5,895

6,528

6,692

Short-term borrowings

142

152

466

566

827

Long-term debt

5,578

5,511

5,463

5,479

5,483

   Total interest expense

15,975

16,666

17,805

19,242

20,306

     Net interest income

104,376

102,982

101,089

100,503

102,553

Provision for loan and covered loan losses

27,701

31,611

32,615

31,093

37,578

Net interest income after provision for 

      loan and covered loan losses

76,675

71,371

68,474

69,410

64,975

Non-interest Income

Trust and Investments

4,219

3,992

4,452

4,720

4,662

Mortgage banking 

2,663

3,032

1,565

704

1,402

Capital markets products

7,349

5,471

5,510

3,871

4,489

Treasury management

5,154

4,813

4,590

4,453

4,325

Loan and credit related fees

6,527

5,606

5,413

5,290

5,898

Deposit service charges and fees and other income

1,487

2,115

1,735

1,884

2,484

Net securities gains

105

364

4,370

670

367

     Total non-interest income

27,504

25,393

27,635

21,592

23,627

Non-interest Expense

Salaries and employee benefits

42,698

40,729

38,841

38,636

38,557

Net occupancy expense

7,679

7,394

7,515

7,545

7,532

Technology and related costs

3,296

3,142

2,856

2,729

2,661

Marketing

2,160

2,250

2,218

2,500

1,943

Professional services

1,957

2,126

2,434

2,312

2,334

Outsourced servicing costs

1,710

2,077

1,918

1,852

2,154

Net foreclosed property expenses

8,235

6,862

7,129

7,485

6,306

Postage, telephone, and delivery

869

953

944

931

888

Insurance

4,305

3,462

5,393

5,092

7,340

Loan and collection expense

3,157

3,840

2,931

4,247

2,553

Other expenses

4,163

3,395

2,855

2,335

3,081

     Total non-interest expense

80,229

76,230

75,034

75,664

75,349

Income before income taxes

23,950

20,534

21,075

15,338

13,253

Income tax provision

9,695

9,468

7,593

6,320

2,279

     Net income

14,255

11,066

13,482

9,018

10,974

Net income attributable to noncontrolling interests

-

7

33

58

72

     Net income attributable to controlling interests

14,255

11,059

13,449

8,960

10,902

Preferred stock dividends and discount accretion

3,436

3,430

3,426

3,419

3,415

     Net income available to common stockholders

$   10,819

$     7,629

$   10,023

$     5,541

$     7,487

Per Common Share Data

Basic earnings per share

$       0.15

$       0.11

$       0.14

$       0.08

$       0.10

Diluted earnings per share

$       0.15

$       0.11

$       0.14

$       0.08

$       0.10

Cash dividends declared

$       0.01

$       0.01

$       0.01

$       0.01

$       0.01

Weighted-average common shares outstanding

70,780

70,540

70,479

70,428

70,347

Weighted-average diluted common shares outstanding

70,932

70,713

70,621

70,663

70,396

Note 1: Certain reclassifications have been made to prior period financial statements to place them on a basis comparable with the current period financial statements.

 

Consolidated Balance Sheets

(Dollars in thousands)

03/31/12

12/31/11

09/30/11

06/30/11

03/31/11

unaudited

audited

unaudited

unaudited

unaudited

Assets

Cash and due from banks

$     166,062

$     156,131

$     171,268

$     160,289

$     181,738

Fed funds sold and other short-term investments

193,571

205,610

248,559

457,422

621,206

Loans held for sale

29,185

32,049

24,126

13,503

22,611

Securities available-for-sale, at fair value

1,705,649

1,783,465

1,872,587

2,057,290

1,892,304

Securities held-to-maturity, at amortized cost

598,066

490,143

273,200

-

-

Non-marketable equity investments

43,882

43,604

43,894

20,406

23,490

Loans - excluding covered assets, net of unearned fees

9,222,253

9,008,561

8,674,955

8,672,642

9,037,067

Allowance for loan losses

(183,844)

(191,594)

(200,041)

(206,286)

(218,237)

     Loans, net of allowance for loan losses and unearned fees

9,038,409

8,816,967

8,474,914

8,466,356

8,818,830

Covered assets

276,534

306,807

318,973

346,452

364,372

Allowance for covered loan losses

(26,323)

(25,939)

(16,689)

(16,904)

(19,738)

     Covered assets, net of allowance for covered loan losses

250,211

280,868

302,284

329,548

344,634

Other real estate owned, excluding covered assets

123,498

125,729

116,364

123,997

93,770

Premises, furniture, and equipment, net

37,462

38,633

39,069

38,171

39,019

Accrued interest receivable

36,033

35,732

32,686

32,128

33,960

Investment in bank owned life insurance

51,356

50,966

50,565

50,183

49,799

Goodwill

94,559

94,571

94,584

94,596

94,609

Other intangible assets

14,683

15,353

15,715

16,089

16,464

Capital markets derivative assets

97,805

101,676

111,248

93,453

87,273

Other assets

142,733

145,373

148,798

161,946

177,735

     Total assets

$12,623,164

$12,416,870

$12,019,861

$12,115,377

$12,497,442

Liabilities

Demand deposits:

     Noninterest-bearing 

$  3,054,536

$  3,244,307

$  2,832,481

$  2,527,230

$  2,438,709

     Interest-bearing 

714,522

595,238

611,293

531,107

540,215

Savings deposits and money market accounts

4,347,832

4,378,220

4,392,697

4,497,297

4,831,253

Brokered deposits 

961,481

815,951

902,002

1,342,422

1,467,196

Time deposits

1,344,341

1,359,138

1,370,190

1,336,212

1,348,603

     Total deposits

10,422,712

10,392,854

10,108,663

10,234,268

10,625,976

Short-term borrowings

355,000

156,000

59,154

63,311

88,468

Long-term debt

379,793

379,793

379,793

409,793

409,793

Accrued interest payable

5,425

5,567

5,841

5,767

5,529

Capital markets derivative liabilities

100,109

104,140

113,968

95,043

88,351

Other liabilities

47,971

81,764

66,266

46,547

41,193

     Total liabilities

11,311,010

11,120,118

10,733,685

10,854,729

11,259,310

Equity 

Preferred stock - Series B

240,791

240,403

240,020

239,642

239,270

Common stock

71,611

71,483

71,220

71,155

71,036

Treasury stock

(21,749)

(21,454)

(20,680)

(20,615)

(20,312)

Additional paid-in capital

973,417

968,787

965,640

963,156

959,135

Retained earnings/(accumulated deficit)

932

(9,164)

(16,075)

(25,388)

(30,223)

Accumulated other comprehensive income, net of tax

47,152

46,697

46,051

32,535

19,121

     Total stockholders' equity

1,312,154

1,296,752

1,286,176

1,260,485

1,238,027

Noncontrolling interests

-

-

-

163

105

     Total equity

1,312,154

1,296,752

1,286,176

1,260,648

1,238,132

     Total liabilities and equity

$12,623,164

$12,416,870

$ 12,019,861

$ 12,115,377

$ 12,497,442

 

 

Selected Financial Data

Unaudited

(Amounts in thousands except per share data)

1Q12

4Q11

3Q11

2Q11

1Q11

Selected Statement of Income Data:

Net interest income

$   104,376

$   102,982

$   101,089

$   100,503

$   102,553

Net revenue (1) (2)

$   132,560

$   129,046

$   129,404

$   122,811

$   126,970

Operating profit (1) (2)

$     52,331

$     52,816

$     54,370

$     47,147

$     51,621

Provision for loan and covered loan losses

$     27,701

$     31,611

$     32,615

$     31,093

$     37,578

Income before taxes

$      23,90

$     20,534

$     21,075

$     15,338

$     13,253

Net income available to common stockholders

$     10,819

$       7,629

$     10,023

$       5,541

$       7,487

Per Common Share Data:

Basic earnings per share

$        0.15

$        0.11

$         0.14

$        0.08

$         0.10

Diluted earnings per share

$        0.15

$        0.11

$         0.14

$         0.08

$         0.10

Dividends declared

$        0.01

$         0.01

$         0.01

$         0.01

$         0.01

Book value (period end) (1)

$      14.79

$       14.72

$       14.57

$       14.22

$       13.98

Tangible book value (period end) (1) (2)

$      13.29

$       13.19

$       13.04

$       12.68

$       12.43

Market value (close)

$        15.7

$       10.98

$         7.52

$       13.80

$       15.29

Book value multiple 

1.03

 x 

0.75

 x 

0.52

 x 

0.97

 x 

1.09

 x 

Share Data:

Weighted average common shares outstanding

70,780

70,540

70,479

70,428

70,347

Diluted average common shares outstanding 

70,932

70,713

70,621

70,663

70,396

Common shares issued (at period end)

73,205

72,514

72,491

72,497

72,096

Common shares outstanding (at period end) 

72,415

71,745

71,789

71,808

71,428

Performance Ratios:

Return on average assets

0.46%

0.36%

0.44%

0.29%

0.35%

Return on average common equity

4.05%

2.86%

3.80%

2.18%

3.03%

Net interest margin (1) (2)

3.53%

3.48%

3.49%

3.36%

3.46%

Covered asset accretion impact on net interest margin

-0.03%

0.00%

0.03%

0.03%

0.05%

Net interest margin, excluding impact of covered asset

  accretion

3.56%

3.48%

3.46%

3.33%

3.41%

Fee revenue as a percent of total revenue (1)

20.79%

19.55%

18.71%

17.23%

18.49%

Non-interest income to average assets

0.89%

0.82%

0.91%

0.69%

0.77%

Non-interest expense to average assets

2.59%

2.45%

2.46%

2.43%

2.44%

Net overhead ratio (1)

1.70%

1.64%

1.56%

1.74%

1.68%

Efficiency ratio(1) (2) 

60.52%

59.07%

57.98%

61.61%

59.34%

Selected Information:

Assets under management and administration (AUMA) (1)

$4,879,947

$4,303,547

$4,161,614

$4,395,516

$4,313,843

  Custody assets included in AUMA

$2,060,455

$1,599,528

$1,525,001

$1,623,190

$1,724,589

Credit valuation adjustment on capital markets

  derivatives(1)

$            19

$          244

$     (1,207)

$        (573)

$          817

Balance Sheet Ratios:

Loans to Deposits (period end)(3)

88.48%

86.68%

85.82%

84.74%

85.05%

Average interest-earning assets to average interest-

  bearing liabilities

149.68%

150.70%

145.30%

139.77%

134.88%

Capital Ratios (period end):

Total risk-based capital (1)

14.20%

14.28%

14.82%

15.12%

14.55%

Tier 1 risk-based capital (1)

12.31%

12.38%

12.89%

12.95%

12.41%

Leverage(1)

11.35%

11.33%

11.48%

11.00%

10.91%

Tier 1 common capital (1) (2)

8.04%

8.04%

8.34%

8.34%

7.97%

Tangible common equity to tangible assets (1) (2)

7.69%

7.69%

7.86%

7.58%

7.17%

Total equity to total assets

10.39%

10.44%

10.70%

10.41%

9.91%

(1) Refer to Glossary of Terms for definition.

(2) This is a non-U.S. GAAP financial measure, refer to Non-U.S. GAAP Financial Measures for a reconciliation from non-U.S. GAAP to U.S. GAAP.

(3)Excludes covered assets. Refer to Glossary of Terms for definition. 

SOURCE PrivateBancorp, Inc.



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