PrivateBancorp Reports First Quarter 2011 Results

CHICAGO, April 26, 2011 /PRNewswire/ -- PrivateBancorp, Inc. (Nasdaq: PVTB) today reported net income available to common shareholders of $7.5 million, or $0.10 per diluted share, for the first quarter 2011, compared to a net loss available to common shareholders of $24.3 million, or $0.35 per diluted share, for the first quarter 2010, and net income available to common shareholders of $8.5 million, or $0.12 per diluted share for the fourth quarter 2010.

"Today we reported our third-consecutive profitable quarter and our core business is performing well, with 26 percent growth in operating profit compared to a year ago," said Larry D. Richman, President & Chief Executive Officer, PrivateBancorp, Inc.  "We have increased total commercial loans by 18 percent from first quarter 2010 and decreased commercial real estate and construction loans by 15 percent as we continue to reshape our portfolio.  We are making steady progress in improving our overall credit quality as demonstrated by our ongoing reduction in non-performing loans.  I am pleased by our success in attracting new clients as well as expanding existing relationships, as this contributes to our improving bottom line results."

First Quarter Results

• Net revenue increased 11 percent to $127.0 million, compared to $114.3 million for the first quarter of 2010, and decreased 7 percent from $136.1 million in the fourth quarter 2010, which included $9.3 million of securities gains.
• Operating profit increased 26 percent to $51.6 million, compared to $40.9 million for the first quarter of 2010 and was down $2.3 million from $53.9 million in fourth quarter 2010.
• Net interest margin increased to 3.46 percent for the first quarter 2011, compared to 3.33 percent in the first and fourth quarters of 2010.  Net interest income increased to $102.6 million in the first quarter.
• Non-performing assets at quarter-end were down slightly from year-end to $450.7 million.  Non-performing loans decreased $8.9 million and other real estate owned (OREO) increased $5.0 million.  The allowance for loan losses declined to $218.2 million at quarter-end, or 2.41 percent of total loans.
• Total loans at March 31, 2011, were $9.0 billion, up nearly 2 percent from a year ago and relatively flat compared to year-end.  Commercial and industrial loans now comprise 56 percent of the loan portfolio.
• First quarter 2011 results included a $2.8 million, or $0.04 per share, positive one-time adjustment related to the revaluation of the deferred tax asset as a result of the increase in the Illinois corporate tax rate.

Operating Performance

The ongoing transformation to serve the commercial middle market has driven improved revenue and operating profit as the Company has added new clients, expanded relationships with existing clients through cross-sell and exited less profitable relationships that are no longer consistent with its strategy.  The net interest margin has increased 13 basis points over the first and fourth quarters of 2010, benefiting from the effect of lower cost of funds and the changing loan mix.  With a continued emphasis on building client relationships, there was steady growth in treasury management income, higher trust and investment fees and increased syndication revenues, offset by lower capital markets activity in the first quarter.

Net revenue was $127.0 million in the first quarter 2011, compared to $114.3 million in the first quarter 2010 and $136.1 million in the fourth quarter 2010.  Operating profit was $51.6 million in the first quarter 2011, compared to $40.9 million in the first quarter 2010 and $53.9 million in the fourth quarter 2010.  The fourth quarter 2010 results included net securities gains of $9.3 million, compared to $367,000 of net securities gains in the first quarter 2011 and $29,000 in the first quarter of 2010.

Net interest income was $102.6 million for the first quarter 2011, compared to $98.3 million for the first quarter 2010 and $100.3 million in the fourth quarter 2010. Net interest margin increased to 3.46 percent for the first quarter 2011, up from 3.33 percent in both the first quarter 2010 and the fourth quarter 2010. Excluding covered asset accretion, the net interest margin was 3.41 percent for the first quarter 2011, compared to 3.08 percent in the first quarter 2010 and 3.28 percent in the fourth quarter 2010.

Non-interest income was $23.6 million in the first quarter 2011, compared to $15.1 million in the first quarter 2010 and $34.9 million in the fourth quarter 2010.  Treasury management income was up 32 percent from the first quarter 2010 and 3 percent from the fourth quarter 2010, with increased volumes and strong demand deposit levels.  Trust and investment fee income increased 5 percent from first quarter 2010 and was up 2 percent from the fourth quarter 2010, reflecting client acquisition.  Capital markets revenue, including the credit valuation adjustment, was $4.5 million in the first quarter, up from $278,000 in the first quarter 2010, and down from $6.8 million in the fourth quarter 2010.  Capital markets demand, which was higher in the fourth quarter 2010, fluctuates depending on clients' interest rate outlook.  Loan and credit-related fees in the first quarter increased to $5.9 million, with growth in syndication revenue.

Mortgage banking income was $1.4 million for the first quarter 2011, compared to $2.1 million for the first quarter 2010 and $3.5 million for the fourth quarter 2010.  First quarter mortgage origination volumes were down from 2010 levels due to prevailing market conditions.

Expenses

Non-interest expense decreased 8 percent in first quarter 2011, as compared to fourth quarter 2010, primarily due to a lower loan and collection expense, provision for unfunded commitments, deposit insurance costs, and professional fees.   Non-interest expense was $75.3 million in the first quarter 2011, compared to $73.4 million in the first quarter 2010 and $82.1 million in the fourth quarter 2010.

Income tax expense for the quarter ended March 31, 2011, includes a positive one-time adjustment of $2.8 million relating to the revaluation of the Company's deferred tax asset.  The revaluation was the result of an increase in the Illinois corporate income tax rate that became effective during the quarter.

The efficiency ratio improved to 59.3 percent in the first quarter 2011, compared to 64.2 percent in the first quarter 2010 and 60.4 percent in the fourth quarter 2010.

Credit Quality

Ongoing portfolio management and workout efforts continued to drive improvement in overall credit quality.  Special mention loans were down from the fourth quarter.  Non-performing assets and non-performing loans declined as non-performing loan inflows were again less than the prior quarter.  Consistent with moving problem loans through the workout process, OREO and restructured loans increased in the quarter.  The decline in OREO and loan sales compared to the fourth quarter reflects the timing of resolution activity.

The first quarter 2011 provision for loan losses was $36.7 million, excluding covered loan provision, compared to $72.1 million in the first quarter 2010 and $34.5 million in the fourth quarter 2010.  The allowance for loan losses as a percentage of total loans was 2.41 percent at March 31, 2011, compared to 2.66 percent at March 31, 2010, and 2.44 percent at December 31, 2010.  The allowance for loan losses as a percentage of non-performing loans was 61 percent at March 31, 2011, compared to 62 percent at March 31, 2010, and 61 percent at December 31, 2010.

Net charge-offs were $41.3 million for the quarter ended March 31, 2011, compared to $56.9 million for the first quarter 2010 and $35.1 million for the fourth quarter 2010.

Non-performing assets totaled $450.7 million at March 31, 2011, compared to $442.0 million at March 31, 2010, and $454.6 million at December 31, 2010.  Non-performing assets to total assets were 3.61 percent at March 31, 2011, compared to 3.46 percent at March 31, 2010, and 3.65 percent at December 31, 2010.   Non-performing loans were $356.9 million at quarter-end, compared to $381.2 million at the end of first quarter 2010, and $365.9 million at year-end 2010.  OREO totaled $93.8 million at March 31, 2011, compared to $60.8 million at March 31, 2010, and $88.7 million at year-end 2010.

Restructured loans accruing interest were $100.9 million at the end of first quarter 2011, compared to $3.8 million at the end of the first quarter 2010 and $87.6 million at the end of fourth quarter 2010.  The Company continues to utilize loan restructuring to maximize economic recovery.

Credit quality results exclude $364.4 million in covered assets as of the end of the first quarter, referring to certain assets acquired through an FDIC-assisted transaction that are subject to a loss-sharing agreement, compared to $468.9 million in the first quarter 2010 and $397.2 million in the fourth quarter 2010.

Balance Sheet

The Company continued to reshape the portfolio as commercial and industrial loans increased 18 percent from first quarter 2010 and commercial real estate and construction balances decreased 15 percent.  This trend continued in the first quarter 2011 with a $157.3 million increase from the fourth quarter in commercial and industrial loans, and a $183.7 million decrease in commercial real estate and construction loans.  Commercial and industrial loans now comprise 56 percent of the total portfolio, compared to 48 percent a year ago.  Total loans were relatively flat from year-end with $210.5 million in loans from new relationships offset by payoffs, paydowns, charge-offs and loan sales.

Total loans were $9.0 billion at quarter-end, compared to $8.9 billion at March 31, 2010 and $9.1 billion at December 31, 2010. Total assets were $12.5 billion at March 31, 2011, compared to $12.8 billion at March 31, 2010, and $12.5 billion at December 31, 2010.

Total deposits were $10.6 billion at March 31, 2011, compared to $10.6 billion at March 31, 2010, and $10.5 billion at December 31, 2010.  Client deposits were $10.0 billion at the end of the first quarter 2011, compared to $9.9 billion at the end of first quarter 2010 and at December 31, 2010.   Client deposits at March 31, 2011, included $2.4 billion in non-interest bearing deposits.  Overall cost of funds has benefited from favorable changes in the deposit mix, improved pricing and the increase of demand deposits.

The Company's investment securities portfolio was $1.9 billion at March 31, 2011, compared to $1.8 billion at March 31, 2010, and $1.9 billion at December 31, 2010.  Net unrealized gains were $30.5 million, compared to $53.7 million at the end of the first quarter 2010 and $32.0 million at the end of the fourth quarter 2010.  The securities portfolio is primarily composed of U.S. government agency backed mortgage pools, agency collateralized mortgage obligations, and investment grade municipal bonds.

Federal funds sold and other short-term investments, primarily cash on deposit with the Federal Reserve, were $621.2 million at the end of the first quarter 2011, compared to $1.1 billion at the end of first quarter 2010 and $541.3 million in the fourth quarter 2010.  These levels fluctuate based on the anticipated liquidity needs of our commercial clients.

Capital

As of March 31, 2011, the Company's total risk-based capital ratio was 14.55 percent, the Tier 1 risk-based capital ratio was 12.41 percent, and the leverage ratio was 10.91 percent. Tier 1 common capital ratio was 7.97 percent and tangible common equity ratio was 7.17 percent at the end of the first quarter 2011.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call on Tuesday, April 26, 2011, 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 #54077150. 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 30, 2011, by calling (800) 642-1687 (U.S. and Canada) or (706) 645-9291 (International) and entering passcode #54077150.

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, 2011, the Company had 34 offices in 10 states and $12.5 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 asset quality 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 commercial real estate values in our market areas, particularly in Chicago; difficulties in resolving problem credits or slower than anticipated dispositions of OREO which may result in increased losses or significantly higher credit costs; slower than anticipated economic recovery or further deterioration in economic conditions; weakness in the commercial and industrial sector; 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 or otherwise; loss of key personnel or an inability to recruit and retain appropriate talent; potential for significant charges if our deferred tax or goodwill assets suffer impairment; unanticipated changes in interest rates or significant tightening of credit spreads; competitive pricing pressures; uncertainty regarding implications of the Dodd-Frank Act and the rules and regulations to be adopted in connection with implementation of the legislation, including evolving regulatory capital standards; other legislative, regulatory or accounting changes affecting financial services companies and/or the products and services offered by financial services companies; uncertainties related to potential costs associated with pending litigation; or failures or disruptions to our data processing or other information or operational systems.  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 the Company assumes no obligation to update publicly any of these statements 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.

SOURCE PrivateBancorp, Inc.