PrivateBancorp Reports First Quarter 2016 Earnings

Earnings per share of $0.62 for first quarter 2016, compared to $0.52 for first quarter 2015 and $0.65 for fourth quarter 2015

News provided by

PrivateBancorp, Inc.

Apr 21, 2016, 07:30 ET

CHICAGO, April 21, 2016 /PRNewswire/ -- PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income of $49.6 million, or $0.62 per diluted share, for the first quarter 2016, compared to $41.5 million, or $0.52 per diluted share, for the first quarter 2015, and $52.1 million, or $0.65 per diluted share, for the fourth quarter 2015.

"We had a solid first quarter as we continued to drive results through consistent execution and delivery for our clients," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "We generated solid loan origination activity, deposit growth and cross-sell opportunities and benefited from a full quarter's impact of the December rate rise. Asset quality remains strong and our portfolio is performing well as we would expect at this point in the cycle. Our first quarter results were a good start to the year. We are positioned well as we continue adding new relationships and expanding what we do for existing clients to build long-term value for our shareholders."

First Quarter 2016 Highlights

Total loans grew to $13.5 billion, up $1.3 billion from a year ago and $191.2 million from December 31, 2015.
Total deposits were $14.5 billion, increasing $363.1 million from a year ago and $119.3 million from December 31, 2015. Noninterest-bearing demand deposits grew 10 percent from a year ago, representing 30 percent of total deposits at March 31, 2016, comparable to December 31, 2015.
Net interest margin was 3.30 percent, up from 3.21 percent for the first quarter 2015 and 3.25 percent for the fourth quarter 2015. The current quarter reflected the benefit from the fourth quarter's rise in short-term interest rates.
Operating profit of $83.8 million for the first quarter 2016 increased 14 percent from the first quarter 2015, benefiting from continued growth in earning assets and higher short-term rates. Compared to the fourth quarter 2015, operating profit declined 4 percent, as the current quarter included seasonally higher employee expense.
The provision for loan and covered loan losses was $6.4 million for the first quarter 2016, compared to $5.6 million for the first quarter 2015 and $2.8 million for the fourth quarter 2015.
Return on average assets was 1.15 percent and return on average common equity was 11.4 percent for the first quarter 2016.

Operating Performance

Net interest income grew to $139.5 million in the first quarter 2016, increasing 14 percent from the first quarter 2015 and 2 percent from the fourth quarter 2015. The December 2015 interest rate increase and growth in average loans of 11 percent from the first quarter 2015 and 1 percent from the fourth quarter 2015 positively benefited net interest income.

Net interest margin was 3.30 percent in the first quarter 2016, up nine basis points from a year ago and five basis points from the fourth quarter 2015. Loan yields were 10 basis points higher on a sequential basis, largely reflecting variable loans repricing to higher short-term rates, while loan fees moderated from fourth quarter's levels. Deposit costs increased by three basis points compared to the fourth quarter 2015, primarily impacted by the repricing of deposits indexed to the federal funds rate.

Noninterest income was $33.6 million in the first quarter 2016, comparable to the first quarter 2015 and increasing 3 percent from the fourth quarter 2015. First quarter 2015 included a $4.1 million gain on a branch sale. Treasury management fees were $8.2 million in the first quarter 2016, up 12 percent from the first quarter 2015 and 4 percent from the fourth quarter 2015, primarily reflecting the onboarding of new commercial clients. Syndication fees were $5.4 million in the first quarter 2016, up from $2.6 million in the first quarter 2015 and $4.8 million in the fourth quarter 2015. Syndication fees vary from quarter to quarter depending on the level and mix of loans originated and distributed as well as market conditions.

Capital markets revenue for the first quarter 2016 reflected a negative credit valuation adjustment (CVA) of $1.9 million, compared to a positive CVA of $1.0 million for the fourth quarter 2015. Excluding the CVA impact for all periods, capital markets revenue was $7.1 million in the first quarter 2016, increasing $1.8 million from the fourth quarter 2015. Activity was influenced by the rise in short-term rates and some clients taking advantage of attractive market opportunities to purchase interest rate derivatives.

Asset management revenue was $4.7 million in the first quarter 2016, compared to $4.4 million for the first quarter 2015 and the fourth quarter 2015. Assets under management and administration (AUMA) were $9.6 billion as of March 31, 2016, compared to $7.3 billion a year ago and at December 31, 2015. The increase in AUMA largely reflects the addition of a sizable custodial account during the first quarter 2016.

Expenses

Noninterest expense was $90.5 million for the first quarter 2016, increasing 9 percent from the first quarter 2015 and the fourth quarter 2015. The efficiency ratio was 51.9 percent for the first quarter 2016, compared to 53.1 percent for the first quarter 2015 and 48.7 percent for the fourth quarter 2015.

First quarter 2016 salaries and benefits expense increased $5.7 million compared to the fourth quarter 2015, primarily related to seasonally higher payroll taxes and benefits attributable to incentive compensation payments. Compared to the first quarter 2015, compensation expense increased $6.0 million, largely reflecting additional hires made over the last year and annual salary adjustments. Other expenses includes the provision for unfunded commitments, which was $595,000 for the first quarter 2016, compared to a release of reserves of $3.5 million for fourth quarter 2015, largely attributable to an individual credit reserved for in third quarter 2015.

The effective tax rate for the first quarter 2016 was 35.0 percent, compared to 37.8 percent for the first quarter 2015 and 37.5 percent for the fourth quarter 2015. The lower tax rate in the first quarter 2016 was primarily attributable to net tax benefits of $1.5 million, largely related to the adoption of a new accounting standard regarding income taxes associated with share-based compensation.

Credit Quality

The allowance for loan losses was $165.4 million, or 1.23 percent of total loans, at March 31, 2016, compared to $160.7 million, or 1.21 percent of total loans, at December 31, 2015. The provision for loan losses was $6.4 million for the first quarter 2016, increasing $945,000 from the first quarter 2015 and $3.5 million from the fourth quarter 2015. Annualized net charge-offs to average loans were 0.05 percent for the first quarter 2016, comparable to the first quarter 2015 and 0.15 percent for the fourth quarter 2015.

Nonperforming assets were 0.42 percent of total assets at March 31, 2016, compared to 0.35 percent at December 31, 2015. At March 31, 2016, nonperforming loans were $59.1 million, increasing $5.3 million from December 31, 2015. OREO increased $7.5 million to $14.8 million at March 31, 2016.

Balance Sheet

Total assets were $17.7 billion at March 31, 2016, compared to $16.4 billion at March 31, 2015, and $17.3 billion at December 31, 2015. Total loans of $13.5 billion increased $1.3 billion from March 31, 2015, and $191.2 million from December 31, 2015. Loan growth for the first quarter 2016 included loans to new clients of $396.6 million, offset in part by higher-than-average payoffs and lower revolver usage. At March 31, 2016, commercial loans represented 65 percent of total loans, and commercial real estate and construction loans represented 29 percent of total loans, consistent with December 31, 2015.

Total liabilities were $15.9 billion at March 31, 2016, compared to $14.8 billion at March 31, 2015, and $15.6 billion at December 31, 2015. Total deposits were $14.5 billion at March 31, 2016, increasing 3 percent from March 31, 2015, and 1 percent from December 31, 2015. Noninterest-bearing demand deposits increased $402.0 million from March 31, 2015, representing 30 percent of total deposits at March 31, 2016, compared to 28 percent a year ago and 30 percent at December 31, 2015. At March 31, 2016, the loan-to-deposit ratio was 93 percent, compared to 86 percent as of March 31, 2015, and 92 percent as of December 31, 2015.

Capital

As of March 31, 2016, the total risk-based capital ratio was 12.56 percent, the Tier 1 risk-based capital ratio was 10.76 percent, and the leverage ratio was 10.50 percent. The common equity Tier 1 ratio was 9.76 percent and the tangible common equity ratio was 9.51 percent at the end of the first quarter 2016.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call Thursday, April 21, 2016, 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 #72434311. A live webcast of the call can be accessed at investor.theprivatebank.com. A rebroadcast will be available at that website and by telephone by calling (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) and entering passcode #72434311 beginning approximately two hours after the call until midnight ET May 5, 2016.

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 March 31, 2016, the Company had 35 offices in 12 states and $17.7 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:

uncertainty regarding geopolitical developments and the U.S. and global economic outlook that may continue to 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;
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;
unanticipated changes in monetary policies of the Federal Reserve or significant adjustments in the pace of, or market expectations for, future interest rate changes;
availability of sufficient and 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 or regulatory costs and burdens;
the impact of possible future acquisitions, if any, including the costs and burdens of integration efforts; 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.

Forward-looking statements are subject to risks, assumptions and uncertainties and could be significantly affected by many factors, including those set forth in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Annual Report on Form 10-K for our fiscal year ended December 31, 2015, 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 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.

Consolidated Income Statements
(Amounts in thousands, except per share data)
(Unaudited)
	1Q16		4Q15		3Q15		2Q15		1Q15
Interest Income
Loans, including fees	$	140,067	$	137,006	$	132,106	$	125,647	$	122,702
Federal funds sold and interest-bearing deposits in banks	340		229		168		245		261
Securities:
Taxable	15,210		14,587		13,599		13,541		13,556
Exempt from Federal income taxes	2,333		2,306		2,177		1,981		1,806
Other interest income	150		115		69		63		48
Total interest income	158,100		154,243		148,119		141,477		138,373
Interest Expense
Deposits	13,141		12,364		11,838		11,649		11,255
Short-term borrowings	230		201		24		234		197
Long-term debt	5,211		5,087		5,048		4,972		4,928
Total interest expense	18,582		17,652		16,910		16,855		16,380
Net interest income	139,518		136,591		131,209		124,622		121,993
Provision for loan and covered loan losses	6,402		2,831		4,197		2,116		5,646
Net interest income after provision for loan and covered loan losses	133,116		133,760		127,012		122,506		116,347
Non-interest Income
Asset management	4,725		4,392		4,462		4,741		4,363
Mortgage banking	2,969		2,812		3,340		4,152		3,775
Capital markets products	5,199		6,341		3,098		4,919		4,172
Treasury management	8,174		7,878		8,010		7,421		7,327
Loan, letter of credit and commitment fees	5,200		4,958		5,670		4,914		5,106
Syndication fees	5,434		4,844		4,364		5,375		2,622
Deposit service charges and fees and other income	1,370		1,394		1,585		1,538		5,617
Net securities gains (losses)	531		29		260		(1)		534
Total non-interest income	33,602		32,648		30,789		33,059		33,516
Non-interest Expense
Salaries and employee benefits	58,339		52,619		50,019		50,020		52,361
Net occupancy and equipment expense	7,215		7,127		7,098		7,055		6,934
Technology and related costs	5,293		5,221		4,665		4,524		4,351
Marketing	4,404		4,196		3,682		4,666		3,578
Professional services	2,994		2,746		3,679		2,585		2,310
Outsourced servicing costs	1,840		1,994		1,786		2,034		1,680
Net foreclosed property expenses	566		1,217		1,080		585		1,328
Postage, telephone, and delivery	840		964		857		899		862
Insurance	3,820		3,644		3,667		3,450		3,211
Loan and collection expense	1,532		1,754		2,324		2,210		2,268
Other expenses	3,650		1,538		6,318		3,869		4,262
Total non-interest expense	90,493		83,020		85,175		81,897		83,145
Income before income taxes	76,225		83,388		72,626		73,668		66,718
Income tax provision	26,673		31,251		27,358		27,246		25,234
Net income available to common stockholders	$	49,552	$	52,137	$	45,268	$	46,422	$	41,484
Per Common Share Data
Basic earnings per share	$	0.63	$	0.66	$	0.58	$	0.59	$	0.53
Diluted earnings per share	$	0.62	$	0.65	$	0.57	$	0.58	$	0.52
Cash dividends declared	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01
Weighted-average common shares outstanding	78,550		78,366		78,144		77,942		77,407
Weighted-average diluted common shares outstanding	79,856		79,738		79,401		79,158		78,512

Note: Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

Consolidated Balance Sheets
(Dollars in thousands)
	3/31/16		12/31/15		9/30/15		6/30/15		3/31/15
	Unaudited		Audited		Unaudited		Unaudited		Unaudited
Assets
Cash and due from banks	$	133,001	$	145,147	$	145,477	$	185,983	$	158,431
Federal funds sold and interest-bearing deposits in banks	337,465		238,511		231,600		192,531		799,953
Loans held-for-sale	64,029		108,798		76,225		54,263		89,461
Securities available-for-sale, at fair value	1,831,848		1,765,366		1,703,926		1,698,233		1,631,237
Securities held-to-maturity, at amortized cost	1,456,760		1,355,283		1,293,433		1,199,120		1,159,853
Federal Home Loan Bank ("FHLB") stock	38,113		26,613		30,740		25,854		28,556
Loans – excluding covered assets, net of unearned fees	13,457,665		13,266,475		13,079,314		12,543,281		12,170,484
Allowance for loan losses	(165,356)		(160,736)		(162,868)		(157,051)		(156,610)
Loans, net of allowance for loan losses and unearned fees	13,292,309		13,105,739		12,916,446		12,386,230		12,013,874
Covered assets	25,769		26,954		28,559		30,529		32,191
Allowance for covered loan losses	(5,526)		(5,712)		(6,337)		(6,332)		(6,021)
Covered assets, net of allowance for covered loan losses	20,243		21,242		22,222		24,197		26,170
Other real estate owned, excluding covered assets	14,806		7,273		12,760		15,084		15,625
Premises, furniture, and equipment, net	41,717		42,405		38,265		37,672		38,544
Accrued interest receivable	47,349		45,482		43,064		43,442		41,202
Investment in bank owned life insurance	57,011		56,653		56,292		55,926		55,561
Goodwill	94,041		94,041		94,041		94,041		94,041
Other intangible assets	2,890		3,430		4,008		4,586		5,230
Derivative assets	66,406		40,615		59,978		47,442		56,607
Other assets⁽¹⁾	169,384		196,250		159,531		154,672		140,361
Total assets⁽¹⁾	$	17,667,372	$	17,252,848	$	16,888,008	$	16,219,276	$	16,354,706
Liabilities
Deposits:
Noninterest-bearing	$	4,338,177	$	4,355,700	$	4,068,816	$	3,702,377	$	3,936,181
Interest-bearing	10,126,692		9,989,892		9,828,923		9,686,559		10,165,547
Total deposits	14,464,869		14,345,592		13,897,739		13,388,936		14,101,728
Short-term borrowings	602,365		372,467		514,121		434,695		258,788
Long-term debt⁽¹⁾	688,238		688,215		688,191		688,169		338,146
Accrued interest payable	6,630		7,080		6,509		7,543		7,004
Derivative liabilities	22,498		18,229		21,967		24,696		26,967
Other liabilities	114,781		122,314		111,482		90,441		82,644
Total liabilities⁽¹⁾	15,899,381		15,553,897		15,240,009		14,634,480		14,815,277
Equity
Common stock	78,894		78,439		78,197		78,047		77,968
Treasury stock	(4,389)		(103)		(63)		(29)		(5,560)
Additional paid-in capital	1,078,470		1,071,674		1,060,274		1,051,778		1,047,227
Retained earnings	580,418		531,682		480,342		435,872		390,247
Accumulated other comprehensive income, net of tax	34,598		17,259		29,249		19,128		29,547
Total equity	1,767,991		1,698,951		1,647,999		1,584,796		1,539,429
Total liabilities and equity⁽¹⁾	$	17,667,372	$	17,252,848	$	16,888,008	$	16,219,276	$	16,354,706

⁽¹⁾

Prior period amounts have been updated to reflect the first quarter 2016 adoption of Accounting Standard Update ("ASU") 2015-03 and ASU 2015-15 related to debt issuance costs.

Selected Financial Data
(Amounts in thousands, except per share data)
(Unaudited)
	1Q16				4Q15				3Q15				2Q15				1Q15
Selected Statement of Income Data:
Net interest income	$	139,518			$	136,591			$	131,209			$	124,622			$	121,993
Net revenue ⁽¹⁾⁽²⁾	$	174,337			$	170,445			$	163,134			$	158,717			$	156,453
Operating profit ⁽¹⁾⁽²⁾	$	83,844			$	87,425			$	77,959			$	76,820			$	73,308
Provision for loan and covered loan losses	$	6,402			$	2,831			$	4,197			$	2,116			$	5,646
Income before income taxes	$	76,225			$	83,388			$	72,626			$	73,668			$	66,718
Net income available to common stockholders	$	49,552			$	52,137			$	45,268			$	46,422			$	41,484
Per Common Share Data:
Basic earnings per share	$	0.63			$	0.66			$	0.58			$	0.59			$	0.53
Diluted earnings per share	$	0.62			$	0.65			$	0.57			$	0.58			$	0.52
Dividends declared	$	0.01			$	0.01			$	0.01			$	0.01			$	0.01
Book value (period end)⁽¹⁾	$	22.29			$	21.48			$	20.90			$	20.13			$	19.61
Tangible book value (period end) ⁽¹⁾⁽²⁾	$	21.07			$	20.25			$	19.65			$	18.88			$	18.35
Market value (period end)	$	38.60			$	41.02			$	38.33			$	39.82			$	35.17
Book value multiple (period end)	1.73			x	1.91			x	1.83			x	1.98			x	1.79			x
Share Data:
Weighted-average common shares outstanding	78,550				78,366				78,144				77,942				77,407
Weighted-average diluted common shares outstanding	79,856				79,738				79,401				79,158				78,512
Common shares issued (period end)	79,443				79,099				78,865				78,718				78,654
Common shares outstanding (period end)	79,322				79,097				78,863				78,717				78,494
Performance Ratio:
Return on average common equity	11.40		%		12.29		%		11.05		%		11.85		%		11.05		%
Return on average assets	1.15		%		1.21		%		1.09		%		1.15		%		1.07		%
Return on average tangible common equity ⁽¹⁾⁽²⁾	12.16		%		13.13		%		11.85		%		12.75		%		11.94		%
Net interest margin ⁽¹⁾⁽²⁾	3.30		%		3.25		%		3.23		%		3.17		%		3.21		%
Fee revenue as a percent of total revenue⁽¹⁾	19.16		%		19.28		%		18.88		%		20.97		%		21.28		%
Non-interest income to average assets	0.78		%		0.75		%		0.74		%		0.82		%		0.86		%
Non-interest expense to average assets	2.09		%		1.92		%		2.04		%		2.03		%		2.14		%
Net overhead ratio⁽¹⁾	1.32		%		1.16		%		1.30		%		1.21		%		1.27		%
Efficiency ratio ⁽¹⁾⁽²⁾	51.91		%		48.71		%		52.21		%		51.60		%		53.14		%
Balance Sheet Ratios:
Loans to deposits (period end)⁽³⁾	93.04		%		92.48		%		94.11		%		93.68		%		86.30		%
Average interest-earning assets to average interest-bearing liabilities	153.64		%		152.94		%		149.67		%		144.67		%		144.69		%
Capital Ratios (period end):
Total risk-based capital⁽¹⁾	12.56		%		12.37		%		12.28		%		12.41		%		12.29		%
Tier 1 risk-based capital ⁽¹⁾	10.76		%		10.56		%		10.39		%		10.49		%		10.34		%
Tier 1 leverage ratio⁽¹⁾	10.50		%		10.35		%		10.35		%		10.24		%		10.16		%
Common equity Tier 1 ⁽¹⁾	9.76		%		9.54		%		9.35		%		9.41		%		9.23		%
Tangible common equity to tangible assets⁽¹⁾⁽²⁾	9.51		%		9.34		%		9.23		%		9.22		%		8.86		%
Total equity to total assets	10.01		%		9.85		%		9.75		%		9.77		%		9.41		%

⁽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.

Selected Financial Data (continued)
(Dollars in thousands)
(Unaudited)
	1Q16		4Q15		3Q15		2Q15		1Q15
Additional Selected Information:
(Increase) decrease credit valuation adjustment on capital markets derivatives ⁽¹⁾	$	(1,904)	$	1,043	$	(1,227)	$	616	$	(805)
Salaries and employee benefits:
Salaries and wages	$	28,963	$	28,113	$	28,143	$	27,461	$	27,002
Share-based costs	6,357		4,871		4,509		4,316		5,143
Incentive compensation and commissions	13,307		14,676		13,308		13,091		11,062
Payroll taxes, insurance and retirement costs	9,712		4,959		4,059		5,152		9,154
Total salaries and employee benefits	$	58,339	$	52,619	$	50,019	$	50,020	$	52,361
Loan and collection expense:
Loan origination and servicing expense	$	1,297	$	1,445	$	1,522	$	1,607	$	1,626
Loan remediation expense	235		309		802		603		642
Total loan and collection expense	$	1,532	$	1,754	$	2,324	$	2,210	$	2,268
Assets under management and administration (AUMA):
Personal managed	$	1,867,572	$	1,872,737	$	1,839,829	$	1,892,973	$	1,897,644
Corporate and institutional managed	1,592,394		1,787,187		1,800,522		1,883,166		1,826,215
Total managed assets	3,459,966		3,659,924		3,640,351		3,776,139		3,723,859
Custody assets	6,161,827		3,631,149		3,519,364		3,682,388		3,604,333
Total AUMA	$	9,621,793	$	7,291,073	$	7,159,715	$	7,458,527	$	7,328,192