PrivateBancorp Reports First Quarter 2016 Earnings

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.

SOURCE PrivateBancorp, Inc.

Related Links

http://www.theprivatebank.com