PrivateBancorp Reports Third Quarter 2015 Earnings

CHICAGO, Oct. 13, 2015 /PRNewswire/ -- PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income of $45.3 million, or $0.57 per diluted share, for the third quarter 2015, compared to $40.5 million, or $0.51 per diluted share, for the third quarter 2014, and $46.4 million, or $0.58 per diluted share, for the second quarter 2015. For the nine months ended September 30, 2015, the Company had net income of $133.2 million, or $1.67 per diluted share, compared to $115.9 million, or $1.47 per diluted share, for the nine months ended September 30, 2014.

"Our third quarter results reflect our consistent execution as we continue to establish relationships with new clients and expand our banking business with existing clients," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "We grew loans $536 million from the prior quarter, with a good mix of commercial and industrial and commercial real estate. We grew deposits from new and existing clients, and noninterest-bearing demand deposits increased 10 percent over the previous quarter.

"On a year-over-year basis, third quarter net revenue was up 10 percent to $163 million as our steady loan growth drove a 12 percent increase in net interest income," Richman continued. "Net income increased 12 percent over third quarter 2014 to $45 million. Overall, I'm pleased with our performance this quarter and believe we are well positioned to finish the year strong."

Third Quarter 2015 Highlights

• Total loans grew to $13.1 billion, up $1.5 billion, or 13 percent, from a year ago and up $536.0 million, or 4 percent, from June 30, 2015. Commercial loans represented 67 percent of total loans and commercial real estate and construction loans represented 27 percent of total loans at September 30, 2015.
• Total deposits were $13.9 billion, increasing $1.0 billion, or 8 percent, from a year ago and $508.8 million, or 4 percent, from June 30, 2015. Noninterest-bearing demand deposits represented 29 percent of total deposits at September 30, 2015, compared to 26 percent a year ago.
• Net revenue of $163.1 million benefited from growth in earning assets, increasing 10 percent from the third quarter 2014 and 3 percent from the second quarter 2015.
• Net interest margin was 3.23 percent, comparable to the third quarter 2014 and up from 3.17 percent for the second quarter 2015. The current quarter benefited from a higher level of loan fees and lower average cash equivalents compared to the sequential quarter.
• The provision for loan and covered loan losses was $4.2 million, compared to $3.9 million for the third quarter 2014 and $2.1 million for the second quarter 2015.
• Return on average assets was 1.09 percent and return on average common equity was 11.1 percent for the third quarter 2015.

Operating Performance

Net interest income was $131.2 million in the third quarter 2015, an increase of 12 percent from the third quarter 2014 and 5 percent from the second quarter 2015, primarily reflecting growth in average loans. Average loan balances increased 13 percent from the third quarter 2014 and 3 percent from the second quarter 2015. Compared to the third quarter 2014, net interest income also benefited from interest savings largely related to the trust preferred securities redemption in the fourth quarter 2014.

Net interest margin was 3.23 percent in the third quarter 2015, comparable to the third quarter 2014, as the benefit from the trust preferred securities redemption offset the impact of lower loan yields. Compared to the second quarter 2015, net interest margin improved by six basis points. The current quarter benefited from a higher level of loan fees on a comparative basis, including one large fee from an early repayment that contributed three basis points to net interest margin. Excluding the impact of loan fees, loan yields remained relatively stable on a sequential basis. While loan pricing remains competitive in the current environment, the loan portfolio is largely indexed to short-term rates and benefited from a modest rise in one-month LIBOR. Lower average cash equivalents on a comparative basis also contributed three basis points to net interest margin. Deposits costs increased by two basis points, which was offset by an increase in average noninterest-bearing funds from the second quarter.

Noninterest income was $30.8 million in the third quarter 2015, compared to $30.7 million for the third quarter 2014 and $33.1 million for the second quarter 2015. Treasury management fees grew to $8.0 million in the third quarter 2015, up 16 percent from the third quarter 2014 and up 8 percent from the second quarter 2015. Continued success in cross-sell activities drove higher treasury management volume. Syndication fees declined to $4.4 million in the third quarter 2015, down from $6.8 million in the third quarter 2014 and $5.4 million in the second quarter 2015. Syndication fees will vary from quarter to quarter depending on the level and mix of loans originated and distributed.

Capital markets revenue of $3.1 million in the third quarter 2015 reflected a negative credit valuation adjustment (CVA) of $1.2 million. Excluding the CVA impact for all periods, capital markets revenue was $4.3 million in the third quarter 2015, up $1.6 million from the third quarter 2014 and comparable to the second quarter 2015. Compared to the third quarter 2014, the current quarter benefited from several larger interest rate derivative transactions, and foreign exchange revenues grew reflecting increased client penetration.

Assets under management and administration (AUMA) were $7.2 billion as of September 30, 2015, compared to $6.5 billion a year ago, benefiting from the continued focus on cross-selling asset management services to commercial and private wealth clients and ongoing client development. Compared to June 30, 2015, AUMA balances declined 4 percent primarily driven by market performance. Asset management revenue was $4.5 million in the third quarter 2015, compared to $4.2 million for the third quarter 2014 and $4.7 million for the second quarter 2015. Mortgage banking revenue improved 15 percent from the third quarter 2014 and declined 20 percent from the second quarter 2015 which benefited from a higher level of refinance activity.

Expenses

Noninterest expense was $85.2 million for the third quarter 2015, compared to $77.8 million for the third quarter 2014 and $81.9 million for the second quarter 2015. The efficiency ratio was 52.2 percent for the third quarter 2015, compared to 52.5 percent for the third quarter 2014 and 51.6 percent for the second quarter 2015.

Salaries and benefits expense was comparable to the second quarter 2015 and increased $3.6 million from the third quarter 2014 due to annual salary adjustments made during the first quarter, additional hires made over the last year, and higher incentive compensation accruals. Other expenses increased by $1.8 million from the third quarter 2014 and $2.4 million from the second quarter 2015, primarily related to a higher provision for unfunded commitments.

Credit Quality

The allowance for loan losses as a percentage of total loans was 1.25 percent at September 30, 2015, comparable to June 30, 2015. The provision for loan losses was $4.2 million for the third quarter 2015, increasing $471,000 from the third quarter 2014 and $2.1 million from the second quarter 2015. The current quarter's provision for loan losses reflected loan growth, portfolio movement, and recoveries exceeding charge-offs. Net recoveries to average loans were 0.05 percent for the third quarter 2015, compared to net charge-offs to average loans of less than 0.01 percent for the third quarter 2014 and 0.05 percent for the second quarter 2015.

Nonperforming assets were 0.34 percent of total assets at September 30, 2015, down from 0.44 percent at June 30, 2015. At September 30, 2015, nonperforming loans were $44.0 million, declining from $56.6 million at June 30, 2015. OREO declined 15 percent during the current quarter to $12.8 million at September 30, 2015.

Credit quality results exclude covered assets acquired through an FDIC-assisted transaction that are subject to a loss sharing agreement.

Balance Sheet

Total assets were $16.9 billion at September 30, 2015, compared to $15.2 billion at September 30, 2014, and $16.2 billion at June 30, 2015. Total loans of $13.1 billion increased 13 percent from September 30, 2014, and 4 percent from June 30, 2015, driven by growth in commercial and industrial and commercial real estate loans. At September 30, 2015, total commercial loans (including owner-occupied commercial real estate) comprised 67 percent of total loans, and commercial real estate and construction loans represented 27 percent of total loans.

Total liabilities were $15.2 billion at September 30, 2015, compared to $13.8 billion at September 30, 2014, and $14.6 billion compared to June 30, 2015. Total deposits were $13.9 billion at September 30, 2015, increasing 8 percent from September 30, 2014, and 4 percent from June 30, 2015, driven primarily by higher noninterest-bearing demand deposit and money market account balances. Noninterest-bearing demand deposits represented 29 percent of total deposits at September 30, 2015, compared to 26 percent a year ago and 28 percent at June 30, 2015. The deposit base is predominately comprised of commercial client balances, including deposits from a variety of financial service businesses, which will fluctuate from time to time based on their business and liquidity needs. At September 30, 2015, the loan-to-deposit ratio was 94 percent, compared to 90 percent as of September 30, 2014, and 94 percent as of June 30, 2015.

Capital

As of September 30, 2015, the total risk-based capital ratio was 12.28 percent, the Tier 1 risk-based capital ratio was 10.39 percent, and the leverage ratio was 10.35 percent. The common equity Tier 1 ratio was 9.35 percent and the tangible common equity ratio was 9.23 percent at the end of the third quarter 2015.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call Tuesday, October 13, 2015, 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 #33786969. A live webcast of the call can be accessed at investor.theprivatebank.com. A rebroadcast will be available beginning approximately two hours after the call until midnight ET October 27, 2015, by calling (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) and entering passcode #33786969.

About PrivateBancorp, Inc.

PrivateBancorp, Inc., through its subsidiary The PrivateBank, 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 it serves. As of September 30, 2015, the Company had 35 offices in 12 states and $16.9 billion in assets. The Company's website is www.theprivatebank.com.

Forward-Looking Statements

Statements made 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:

• continued uncertainty regarding U.S. and global economic outlook that may impact market conditions or affect demand for certain banking products and services;
• unanticipated developments in pending or prospective loan transactions or greater-than-expected paydowns or payoffs of existing loans;
• competitive pressures in the financial services industry relating to both pricing and loan structures, which may impact our growth rate due to increasing availability in the market of financing alternatives offering terms outside our risk tolerances;
• unforeseen credit quality problems or changing economic conditions that could result in charge-offs greater than we have anticipated in our allowance for loan losses or changes in value of our investments;
• an inability to attract sufficient or cost-effective sources of liquidity or funding as and when needed;
• unanticipated losses of one or more large depositor relationships, or other significant deposit outflows;
• loss of key personnel or an inability to recruit appropriate talent cost-effectively;
• greater-than-anticipated costs to support the growth of our business, including investments in technology, process improvements or other infrastructure enhancements, or greater-than-anticipated compliance costs or regulatory burdens; or
• failures or disruptions to, or compromises of, our data processing or other information or operational systems, including the potential impact of disruptions or security breaches at our third-party service providers.

These factors should be considered in evaluating forward-looking statements and undue reliance should not be placed on our forward-looking statements. Readers should also consider the risks, assumptions and uncertainties set forth in the "Risk Factors" section of our Annual Report on Form 10-K for our fiscal year ended December 31, 2014, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, as well as those set forth in our subsequent periodic and current reports filed with the SEC. Forward-looking statements speak only as of the date they are made and we assume no obligation to update any of these statements in light of new information, future events or otherwise unless required under the federal securities laws.

Non-U.S. GAAP Financial Measures

This press release contains both financial measures based on accounting principles generally accepted in the United States (U.S. GAAP) and non-U.S. GAAP based financial measures. We believe that presenting these non-U.S. GAAP financial measures will provide information useful to investors in understanding our underlying operational performance, our business, and performance trends and facilitates comparisons with the performance of others in the banking industry. If non-U.S. GAAP financial measures are used, the comparable U.S. GAAP financial measure, as well as the reconciliation of the non-U.S. GAAP financial measure to the comparable U.S. 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 U.S. GAAP, nor are they necessarily comparable to non-U.S. GAAP performance measures that may be presented by other companies.

Editor's Note: Financial highlights attached. Full financial supplement available on the Company's website at investor.theprivatebank.com.

SOURCE PrivateBancorp, Inc.