PrivateBancorp Reports First Quarter Earnings Per Share of $0.15 Continued asset quality improvement and loan growth lead to increased earnings

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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