PrivateBancorp Reports First Quarter 2014 Earnings

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.

SOURCE PrivateBancorp, Inc.