PrivateBancorp Reports First Quarter 2014 Earnings

Earnings per share of $0.44 for first quarter 2014, up 26 percent from first quarter 2013 and 2 percent from fourth quarter 2013

Apr 17, 2014, 07:30 ET from PrivateBancorp, Inc.

CHICAGO, April 17, 2014 /PRNewswire/ -- PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income of $34.5 million or $0.44 per diluted share for the first quarter 2014, compared to $27.3 million or $0.35 per diluted share for the first quarter 2013 and $33.7 million or $0.43 per diluted share for the fourth quarter 2013.

"We have built a strong commercial banking platform that drove us to our ninth-consecutive quarter of net income growth," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "First quarter net income increased 27 percent from a year ago, largely on the significant improvement in credit quality we have achieved over the last year. Our loan growth continued as commercial and industrial loans drove a $281 million net increase in total loans from the prior quarter. We have a strong team in place and I am confident in our ability to both capture new market share and to expand our business with our growing client base in this gradually improving economy."

First Quarter 2014 Highlights

  • Return on average common equity improved to 10.5 percent and return on average assets improved to 1.0 percent for the first quarter 2014.
  • Net revenue was $135.8 million, up $1.5 million from the first quarter 2013 and comparable to the fourth quarter 2013, as loan growth and lower funding costs offset the impact of declining loan yields and lower noninterest income.
  • Operating profit of $60.0 million was $4.7 million higher than first quarter 2013 and comparable to the fourth quarter 2013. The increase relative to the first quarter 2013 was driven by lower noninterest expense, primarily the result of a decline in credit costs.
  • Total loans grew to $10.9 billion, up 9 percent from a year ago and 3 percent from December 31, 2013, primarily driven by commercial and industrial loans to new clients.
  • Total deposits were $11.9 billion, compared to $11.4 billion as of March 31, 2013, and $12.0 billion as of December 31, 2013. The loan-to-deposit ratio was 92 percent, as compared to 88 percent as of March 31, 2013, and 89 percent as of December 31, 2013.
  • Net interest margin was 3.23 percent, up 5 basis points from the fourth quarter 2013. The benefits of lower funding costs, reduced liquidity and interest recoveries on non-accrual loans overcame the impact of continued pricing pressure.
  • Provision for loan losses was $3.4 million, compared to $10.1 million for the first quarter 2013 and $4.9 million for the fourth quarter 2013, reflecting above average recoveries for the second consecutive quarter.

Operating Performance

Net interest income was $108.8 million in the first quarter 2014, an increase of 6 percent compared to the first quarter 2013, and comparable to the fourth quarter 2013, despite two fewer days in the first quarter. Compared to the previous periods, interest income benefited from higher average loan balances, while the competitive lending environment continued to put pressure on loan yields. Interest expense declined compared to the previous periods, reflecting lower deposit costs and a full quarter's benefit of the prepayment of a subordinated debt facility in the fourth quarter 2013. Net interest margin was 3.23 percent in the first quarter 2014, compared to 3.18 percent in the fourth quarter 2013. Lower funding costs, reduced excess liquidity and interest recoveries on nonaccrual loans in the quarter offset continued pricing pressure.

Noninterest income was $26.2 million in the first quarter 2014, down $4.2 million compared to the first quarter 2013, primarily due to lower mortgage banking revenue and other income, as the prior year quarter included a $1.1 million gain on loan sale. Noninterest income was $26.7 million in the fourth quarter 2013.

Asset management revenue was $4.3 million for the first quarter 2014, compared to $4.4 million for the first quarter 2013 and $4.6 million for the fourth quarter 2013. The prior periods included fees generated by the investment management subsidiary sold at year-end. Assets under management and administration were $6.0 billion as of March 31, 2014, compared to $5.5 billion a year ago and $5.7 billion as of December 31, 2013, benefiting from growth in both managed and custody assets.

Capital markets revenue of $4.1 million declined from $5.7 million in the fourth quarter 2013. Excluding the impact of CVA in the quarter, capital markets revenue was $4.1 million, a decrease of $952,000 from the previous quarter, reflecting lower demand given the outlook for interest rates. Treasury management fees of $6.6 million grew 4 percent from the previous quarter, benefiting in part from new credit relationships. Syndication fees were $3.3 million, up $1.2 million compared to the fourth quarter 2013, as syndication activity increased from a typically slow fourth quarter.

Expenses

Noninterest expense was $75.8 million in the first quarter 2014, a decline of 4 percent from the first quarter 2013 and comparable to the fourth quarter 2013. Noninterest expense largely benefited from continued declines in credit-related costs. Net foreclosed property expense declined $3.8 million from the first quarter 2013 and $777,000 from the fourth quarter 2013, a result of reduced foreclosed property ("OREO"). Loan and collection expense was down $1.7 million from the first quarter 2013 and $1.3 million from the fourth quarter 2013, a result of reduced mortgage activity and lower workout-related costs.

Salary and employee benefits expense increased 3 percent from the first quarter 2013 and 5 percent from the fourth quarter 2013. Compared to the previous quarter, salary and benefits expense included seasonally higher payroll taxes and benefits, annual salary adjustments that went into effect during the quarter and a lower bonus accrual. Marketing expense, while up slightly compared to the first quarter 2013, declined $1.2 million compared to the fourth quarter 2013, reflecting seasonally lower advertising activity. The efficiency ratio was 55.8 percent in the first quarter 2014, compared to 58.8 percent in the first quarter 2013 and 55.7 percent in the fourth quarter 2013.

Credit Quality

Credit quality was in line with the previous quarter. Nonperforming assets were 0.82 percent of total assets at March 31, 2014, down from 1.51 percent at March 31, 2013, and 0.87 percent at December 31, 2013, largely due to OREO dispositions. At March 31, 2014, OREO was $23.6 million, down $50.3 million from March 31, 2013, and $5.0 million from December 31, 2013.

The allowance for loan losses as a percentage of total loans was 1.34 percent at March 31, 2014, and December 31, 2013. Provision for loan losses was $3.4 million for the first quarter 2014 compared to $4.9 million for the fourth quarter 2013. The current period provision was impacted by loan growth, changes in the composition of the loan portfolio and larger than average recoveries exceeding charge-offs. In the first quarter 2014, total charge-offs were $4.9 million, compared to $19.5 million for the first quarter 2013 and $11.4 million for the fourth quarter 2013.

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 $14.3 billion at March 31, 2014, up compared to $13.4 billion at March 31, 2013, and $14.1 billion at December 31, 2013. Total loans of $10.9 billion grew $891.2 million, or 9 percent, from March 31, 2013, and $281.0 million, or 3 percent, from the previous quarter end, benefiting largely from net loan growth of commercial and industrial and construction loans. At March 31, 2014, total commercial loans comprised 68 percent of total loans, up from 65 percent a year ago, and total commercial real estate and construction loans comprised 26 percent of total loans, down slightly from 27 percent at March 31, 2013. The Company's investment securities portfolio was $2.6 billion at March 31, 2014, up 8 percent from March 31, 2013, and 3 percent from December 31, 2013.

Total liabilities were $13.0 billion at March 31, 2014, up compared to $12.1 billion at March 31, 2013, and $12.8 billion compared to December 31, 2013. Total deposits were $11.9 billion at March 31, 2014, an increase of $493.9 million, or 4 percent, from March 31, 2013, and a decline of $127.5 million, or 1 percent, from December 31, 2013. At March 31, 2014, the loan-to-deposit ratio was 91.9 percent. Noninterest bearing demand deposits comprised 26 percent of total deposits at March 31, 2014, as compared to 24 percent at March 31, 2013, and 26 percent at December 31, 2013.

Capital

As of March 31, 2014, the total risk-based capital ratio was 13.39 percent, the Tier 1 risk-based capital ratio was 11.19 percent, and the leverage ratio was 10.60 percent. The Tier 1 common capital ratio was 9.33 percent (excluding the effect of the final Basel III capital rules that go into effect January 2015) and the tangible common equity ratio was 8.74 percent at the end of the first quarter 2014.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call Thursday, April 17, 2014, at 10 a.m. CDT. The call may be accessed by telephone at (888) 782-9127 (U.S. and Canada) or (706) 634-5643 (International) and entering passcode #15890768. A live webcast of the call can be accessed on the Company website at: investor.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 April 30, 2014, by calling (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) and entering passcode #15890768.

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, 2014, the Company had 33 offices in 10 states and $14.3 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 prolong weakness in 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;
  • unanticipated changes in interest rates;
  • competitive pressures in the financial services industry that may affect the pricing of the Company's loan and deposit products as well as its services;
  • 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;
  • lack of sufficient or cost-effective sources of liquidity or funding as and when needed;
  • loss of key personnel or an inability to recruit and retain appropriate talent;
  • potential impact of adapting to the new capital standards and capital stress testing requirements;
  • greater than anticipated impact on costs, revenues and offered products and services associated with the implementation of other regulatory changes; or
  • failures or disruptions to our data processing or other information or operational systems, including the potential impact of disruptions or 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 Form 10-K for the year ended December 31, 2013, 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 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.

 

 

Consolidated Income Statements

(Amounts in thousands, except per share data)

(Unaudited)

1Q14

4Q13

3Q13

2Q13

1Q13

Interest Income

Loans, including fees

$

110,199

$

110,723

$

108,912

$

107,407

$

106,787

Federal funds sold and interest-bearing deposits in banks

142

221

111

112

208

Securities:

Taxable

13,255

13,038

12,931

12,519

12,822

Exempt from Federal income taxes

1,529

1,604

1,562

1,532

1,502

Other interest income

33

34

61

62

90

Total interest income

125,158

125,620

123,577

121,632

121,409

Interest Expense

Interest-bearing demand deposits

942

1,021

1,032

1,034

1,115

Savings deposits and money market accounts

3,974

4,169

3,895

3,887

4,399

Brokered and time deposits

4,806

5,062

5,014

4,956

5,129

Short-term and secured borrowings

196

161

161

410

118

Long-term debt

6,488

6,751

7,640

7,613

7,608

Total interest expense

16,406

17,164

17,742

17,900

18,369

Net interest income

108,752

108,456

105,835

103,732

103,040

Provision for loan and covered loan losses

3,707

4,476

8,120

8,843

10,357

Net interest income after provision for loan and covered loan losses

105,045

103,980

97,715

94,889

92,683

Non-interest Income

Asset management

4,347

4,613

4,570

4,800

4,394

Mortgage banking

1,632

1,858

2,946

3,198

4,170

Capital markets products

4,083

5,720

3,921

6,048

5,039

Treasury management

6,599

6,321

6,214

6,209

5,924

Loan, letter of credit and commitment fees

4,634

4,474

4,384

4,282

4,077

Syndication fees

3,313

2,153

4,322

3,140

3,832

Deposit service charges and fees and other income

1,297

1,322

1,298

1,196

2,391

Net securities gains

331

279

118

136

641

Total non-interest income

26,236

26,740

27,773

29,009

30,468

Non-interest Expense

Salaries and employee benefits

44,620

42,575

41,360

39,854

43,140

Net occupancy expense

7,776

7,548

7,558

7,387

7,534

Technology and related costs

3,283

3,443

3,343

3,476

3,464

Marketing

2,413

3,592

2,986

3,695

2,317

Professional services

2,759

2,393

2,465

1,782

1,899

Outsourced servicing costs

1,464

1,612

1,607

1,964

1,634

Net foreclosed property expenses

2,823

3,600

4,396

5,555

6,643

Postage, telephone, and delivery

825

845

852

981

843

Insurance

2,903

2,934

2,590

2,804

2,539

Loan and collection expense

1,056

2,351

1,345

2,280

2,777

Other expenses

5,828

4,934

2,767

7,477

6,173

Total non-interest expense

75,750

75,827

71,269

77,255

78,963

Income before income taxes

55,531

54,893

54,219

46,643

44,188

Income tax provision

21,026

21,187

21,161

17,728

16,918

Net income available to common stockholders

$

34,505

$

33,706

$

33,058

$

28,915

$

27,270

Per Common Share Data

Basic earnings per share

$

0.44

$

0.43

$

0.42

$

0.37

$

0.35

Diluted earnings per share

$

0.44

$

0.43

$

0.42

$

0.37

$

0.35

Cash dividends declared

$

0.01

$

0.01

$

0.01

$

0.01

$

0.01

Weighted-average common shares outstanding

76,675

76,533

76,494

76,415

76,143

Weighted-average diluted common shares outstanding

77,417

76,967

76,819

76,581

76,203

 

Consolidated Balance Sheets

(Dollars in thousands)

3/31/14

12/31/13

9/30/13

6/30/13

3/31/13

(Unaudited)

(Audited)

(Unaudited)

(Unaudited)

(Unaudited)

Assets

Cash and due from banks

$

233,685

$

133,518

$

247,460

$

150,683

$

118,583

Federal funds sold and interest-bearing deposits in banks

117,446

306,544

180,608

147,699

203,647

Loans held-for-sale

26,262

26,816

27,644

34,803

38,091

Securities available-for-sale, at fair value

1,577,406

1,602,476

1,611,022

1,580,179

1,457,433

Securities held-to-maturity, at amortized cost

1,023,214

921,436

931,342

955,688

959,994

Federal Home Loan Bank ("FHLB") stock

30,005

30,005

34,063

34,063

34,288

Loans – excluding covered assets, net of unearned fees

10,924,985

10,644,021

10,409,443

10,094,636

10,033,803

Allowance for loan losses

(146,768)

(143,109)

(145,513)

(148,183)

(153,992)

Loans, net of allowance for loan losses and unearned fees

10,778,217

10,500,912

10,263,930

9,946,453

9,879,811

Covered assets

94,349

112,746

140,083

158,326

176,855

Allowance for covered loan losses

(16,571)

(16,511)

(21,653)

(24,995)

(24,089)

Covered assets, net of allowance for covered loan losses

77,778

96,235

118,430

133,331

152,766

Other real estate owned, excluding covered assets

23,565

28,548

35,310

57,134

73,857

Premises, furniture, and equipment, net

39,556

39,704

36,445

37,025

38,373

Accrued interest receivable

39,273

37,004

35,758

38,325

39,205

Investment in bank owned life insurance

54,184

53,865

53,539

53,216

52,873

Goodwill

94,041

94,041

94,484

94,496

94,509

Other intangible assets

8,136

8,892

10,486

11,266

12,047

Derivative assets

44,528

48,422

57,771

57,361

90,303

Other assets

137,486

157,328

130,848

144,771

126,450

Total assets

$

14,304,782

$

14,085,746

$

13,869,140

$

13,476,493

$

13,372,230

Liabilities

Demand deposits:

Noninterest-bearing

$

3,103,736

$

3,172,676

$

3,106,986

$

2,736,868

$

2,756,879

Interest-bearing

1,466,095

1,470,856

1,183,471

1,234,134

1,390,955

Savings deposits and money market accounts

4,786,398

4,799,561

4,778,057

4,654,930

4,741,864

Brokered time deposits

1,097,865

1,119,777

1,303,596

1,190,796

983,625

Time deposits

1,432,067

1,450,771

1,460,446

1,491,604

1,518,980

Total deposits

11,886,161

12,013,641

11,832,556

11,308,332

11,392,303

Short-term and secured borrowings

333,400

8,400

131,400

308,700

107,775

Long-term debt

627,793

627,793

499,793

499,793

499,793

Accrued interest payable

6,251

6,326

6,042

5,963

6,787

Derivative liabilities

40,522

48,890

55,933

62,014

84,370

Other liabilities

67,409

78,792

69,728

58,651

49,137

Total liabilities

12,961,536

12,783,842

12,595,452

12,243,453

12,140,165

Equity

Common stock:

Voting

75,428

75,240

75,240

75,238

73,144

Nonvoting

1,585

1,585

1,585

1,585

3,536

Treasury stock

(1,697)

(6,415)

(7,303)

(9,001)

(9,631)

Additional paid-in capital

1,021,436

1,022,023

1,019,143

1,016,615

1,014,443

Retained earnings

233,347

199,627

166,700

134,423

106,288

Accumulated other comprehensive income, net of tax

13,147

9,844

18,323

14,180

44,285

Total equity

1,343,246

1,301,904

1,273,688

1,233,040

1,232,065

Total liabilities and equity

$

14,304,782

$

14,085,746

$

13,869,140

$

13,476,493

$

13,372,230

 

 

Selected Financial Data

(Amounts in thousands, except per share data)

(Unaudited)

1Q14

4Q13

3Q13

2Q13

1Q13

Selected Statement of Income Data:

Net interest income

$

108,752

$

108,456

$

105,835

$

103,732

$

103,040

Net revenue (1)(2)

$

135,788

$

136,036

$

134,426

$

133,546

$

134,292

Operating profit (1)(2)

$

60,038

$

60,209

$

63,157

$

56,291

$

55,329

Provision for loan and covered loan losses

$

3,707

$

4,476

$

8,120

$

8,843

$

10,357

Income before income taxes

$

55,531

$

54,893

$

54,219

$

46,643

$

44,188

Net income available to common stockholders

$

34,505

$

33,706

$

33,058

$

28,915

$

27,270

Per Common Share Data:

Basic earnings per share

$

0.44

$

0.43

$

0.42

$

0.37

$

0.35

Diluted earnings per share

$

0.44

$

0.43

$

0.42

$

0.37

$

0.35

Dividends declared

$

0.01

$

0.01

$

0.01

$

0.01

$

0.01

Book value (period end) (1)

$

17.21

$

16.75

$

16.40

$

15.88

$

15.87

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

$

15.90

$

15.43

$

15.05

$

14.52

$

14.49

Market value (close)

$

30.51

$

28.93

$

21.40

$

21.22

$

18.89

Book value multiple

1.77

x

1.73

x

1.31

x

1.34

x

1.19

x

Share Data:

Weighted-average common shares outstanding

76,675

76,533

76,494

76,415

76,143

Weighted-average diluted common shares outstanding

77,417

76,967

76,819

76,581

76,203

Common shares issued (period end)

78,108

77,982

77,993

78,015

78,050

Common shares outstanding (period end)

78,049

77,708

77,680

77,630

77,649

Performance Ratio:

Return on average common equity

10.48

%

10.28

%

10.43

%

9.28

%

9.01

%

Return on average assets

1.00

%

0.96

%

0.96

%

0.86

%

0.81

%

Return on average tangible common equity (1)(2)

11.50

%

11.33

%

11.55

%

10.30

%

10.04

%

Net interest margin (1)(2)

3.23

%

3.18

%

3.18

%

3.22

%

3.19

%

Fee revenue as a percent of total revenue (1)

19.24

%

19.61

%

20.72

%

21.77

%

22.45

%

Non-interest income to average assets

0.76

%

0.76

%

0.81

%

0.87

%

0.91

%

Non-interest expense to average assets

2.19

%

2.16

%

2.07

%

2.31

%

2.35

%

Net overhead ratio (1)

1.43

%

1.40

%

1.26

%

1.44

%

1.44

%

Efficiency ratio (1)(2)

55.79

%

55.74

%

53.02

%

57.85

%

58.80

%

Balance Sheet Ratios:

Loans to deposits (period end) (3)

91.91

%

88.60

%

87.97

%

89.27

%

88.08

%

Average interest-earning assets to average interest-bearing liabilities

143.43

%

144.87

%

140.72

%

139.76

%

141.21

%

Capital Ratios (period end):

Total risk-based capital (1)

13.39

%

13.30

%

13.48

%

13.70

%

13.58

%

Tier 1 risk-based capital (1)

11.19

%

11.08

%

11.05

%

11.04

%

10.90

%

Tier 1 leverage ratio (1)

10.60

%

10.37

%

10.32

%

10.25

%

9.86

%

Tier 1 common equity to risk-weighted assets (1)(2)(4)

9.33

%

9.19

%

9.11

%

9.05

%

8.89

%

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

8.74

%

8.57

%

8.49

%

8.43

%

8.48

%

Total equity to total assets

9.39

%

9.24

%

9.18

%

9.15

%

9.21

%

(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.

(4)    

For purposes of our presentation, we calculate this ratio under currently effective requirements and without giving effect to the final Basel III capital rules adopted and issued by the Federal Reserve Board in July 2013, which are effective January 1, 2014 with compliance required January 1, 2015.

 

 

Selected Financial Data (continued)

(Dollars in thousands)

(Unaudited)

1Q14

4Q13

3Q13

2Q13

1Q13

Additional Selected Information:

(Increase) decrease credit valuation adjustment on capital markets derivatives (1)

$

(66)

$

619

$

(521)

$

1,882

$

246

Salaries and employee benefits:

  Salaries and wages

$

24,973

$

23,971

$

23,639

$

23,397

$

24,015

  Share-based costs

3,685

3,316

3,261

3,236

2,863

  Incentive compensation, retirement costs and other employee benefits

15,962

15,288

14,460

13,221

16,262

  Total salaries and employee benefits

$

44,620

$

42,575

$

41,360

$

39,854

$

43,140

Provision (release) for unfunded commitments

$

496

$

1,019

$

(1,346)

$

467

$

1,723

Assets under management and administration (AUMA) (1)

$

6,036,381

$

5,731,980

$

5,570,614

$

5,427,498

$

5,515,199

Custody assets included in AUMA

$

2,663,502

$

2,506,291

$

2,427,093

$

2,351,163

$

2,438,600

(1) 

Refer to Glossary of Terms for definition.

 

SOURCE PrivateBancorp, Inc.



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