PrivateBancorp Reports Record Earnings

CHICAGO, Oct. 17, 2013 /PRNewswire/ -- PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income available to common shareholders of $33.1 million, or $0.42 per diluted share, for the third quarter 2013, as compared to $19.6 million, or $0.27 per diluted share, for the third quarter 2012 and $28.9 million, or $0.37 per diluted share, for the second quarter 2013. For the nine months ended September 30, 2013, the Company had net income available to common shareholders of $89.2 million, or $1.14 per diluted share, as compared to $44.5 million, or $0.61 per diluted share, for the nine months ended September 30, 2012.

"Our ability to generate new client relationships and win market share helped drive meaningful growth in new loans this quarter," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "We grew loans by $315 million, with the growth coming from our commercial and industrial business, and we grew client deposits by over $470 million, including over $300 million in noninterest bearing demand deposits. Continued expense management, especially related to credit costs, helped drive our seventh consecutive quarter in net income growth. As we move beyond the burden of elevated credit costs, we see the strength of our core business driving future performance."

Third Quarter 2013 Highlights

• Operating profit increased to $63.2 million, as compared to $52.2 million for the third quarter 2012 and $56.3 million for the second quarter 2013, as noninterest expense trended lower.
• Return on average common equity was 10.4 percent, as compared to 7.0 percent for the third quarter 2012 and 9.3 percent for the prior quarter.
• Total loans grew to $10.4 billion as of September 30, 2013, up 8 percent from a year ago, and 3 percent from June 30, 2013. The majority of the growth was in commercial and industrial loans.
• Total deposits as of September 30, 2013, were $11.8 billion and increased 4 percent from a year ago and 5 percent from June 30, 2013. Noninterest bearing demand deposits increased 14 percent from the previous quarter end and comprised 26 percent of total deposits at September 30, 2013.
• Net interest margin declined 4 basis points during the quarter to 3.18 percent, reflecting ongoing pricing pressure.
• Credit quality metrics improved and nonperforming assets to total assets declined to 1.07 percent at September 30, 2013, as compared to 2.09 percent one year ago and 1.33 percent at June 30, 2013.

Operating Performance

Net revenue was $134.4 million in the third quarter 2013, relatively unchanged as compared to the third quarter 2012. Net revenue in the quarter included a $521,000 negative credit valuation adjustment, compared to a $1.9 million positive credit valuation adjustment in the previous quarter. Both operating profit and the efficiency ratio improved as a result of lower noninterest expense. Operating profit was up 21 percent as compared to the third quarter 2012 and up 12 percent as compared to the previous quarter. The efficiency ratio improved to 53.0 percent for the third quarter 2013.

Net interest income was $105.8 million in the third quarter 2013, comparable to the third quarter 2012 and up 2 percent as compared to the second quarter 2013. The growth in net interest income over the prior quarter reflected an additional day of interest and an increase in average loans. Average loans grew by $182.7 million during the quarter. Net interest margin was 3.18 percent in the third quarter 2013, as compared to 3.35 percent in the third quarter 2012 and 3.22 percent in the previous quarter. The decline in net interest margin as compared to previous periods primarily reflects competitive pressure on loan pricing.

Noninterest income of $27.8 million in the third quarter 2013 was comparable to the third quarter 2012 and down from $29.0 million in the second quarter 2013. Syndication fees of $4.3 million increased 60 percent from the third quarter 2012 and 38 percent from the previous quarter. Trust and investments income was $4.6 million, a 7 percent increase from the third quarter 2012 and a modest decline from the previous quarter. Assets under management and administration reached $5.6 billion, growing 11 percent from a year ago. Mortgage banking revenue was $2.9 million, a 20 percent decline from the third quarter 2012 and an 8 percent decrease from the previous quarter, reflecting lower mortgage refinancing volume.

Capital markets revenue of $3.9 million in the third quarter 2013 was down from $5.8 million in the third quarter 2012 and $6.0 million in the second quarter 2013. Capital markets revenue excluding the impact of credit valuation adjustments was $4.4 million in the quarter, down from the third quarter 2012 and relatively consistent with the previous quarter. Excluding the impact of credit valuation adjustments, noninterest income was $28.3 million, an increase of 4 percent as compared to the previous quarter.

Treasury management fees grew 13 percent from the third quarter 2012, primarily reflecting new and existing client business, and were unchanged from the previous quarter.

Expenses

Noninterest expense was $71.3 million in the third quarter 2013, down 13 percent from the third quarter 2012, reflecting ongoing expense management as well as a significant decline in net foreclosed property expenses. Compensation expense declined $3.5 million, or 8 percent, from the third quarter 2012, benefiting from lower share-based costs after certain awards were fully amortized in December 2012. Net foreclosed property expenses decreased 49 percent from the third quarter 2012 and benefited from lower levels of OREO.

As compared to the second quarter 2013, noninterest expense was down 8 percent, resulting from a $4.7 million decline in other expenses and a $1.2 million reduction of net foreclosed property expenses. Second quarter 2013 other expenses included one-time charges of $3.0 million, including $2.0 million of restructuring costs and a charge on repurchased loans. Third quarter 2013 other expenses benefited from a $1.3 million reduction of the unfunded commitments reserve. The $1.5 million, or 4 percent, increase in salaries and employee benefits was largely attributable to increased incentive compensation accruals to reflect year to date performance.

Credit Quality

The Company's credit quality metrics continued to improve this quarter as nonperforming assets were $148.6 million at September 30, 2013, declining 46 percent from September 30, 2012 and 17 percent from June 30, 2013. The decline in nonperforming assets was largely attributable to sales of OREO in the third quarter 2013. At quarter end, OREO was $35.3 million, a reduction of $62.5 million from September 30, 2012, and $21.8 million from June 30, 2013. Nonperforming assets to total assets were 1.07 percent at September 30, 2013, compared to 2.09 percent at September 30, 2012 and 1.33 percent at June 30, 2013.

As of September 30, 2013, the allowance for loan losses as a percent of total loans was 1.40 percent, down from 1.73 percent at September 30, 2012, and 1.47 percent at June 30, 2013. Net charge-offs of $10.5 million for the third quarter 2013 were down 49 percent as compared to the third quarter 2012 and 26 percent as compared to the previous quarter. The provision for loan losses was $7.8 million for the third quarter 2013, a decline of $5.4 million from the third quarter 2012 and $512,000 from the previous quarter.

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 $13.9 billion at September 30, 2013, compared to $13.3 billion at September 30, 2012, and $13.5 billion at June 30, 2013. Total loans of $10.4 billion, grew 8 percent from September 30, 2012, and 3 percent from the previous quarter end, with the growth primarily attributable to increased commercial and industrial loans. Strong new client activity, as well as increased borrowings from existing clients, contributed to loan growth during the current quarter.

Total deposits were $11.8 billion at September 30, 2013, a 4 percent increase as compared to September 30, 2012, and a 5 percent increase as compared to June 30, 2013. At September 30, 2013, the loan to deposit ratio was 88 percent. Noninterest bearing demand deposits, which typically have been higher in the second half of the year, increased $370 million or 14 percent from the previous quarter and comprised 26 percent of total deposits at September 30, 2013. Approximately one-half of the increase in noninterest bearing demand deposits is attributable to an increase in two large client accounts, a portion of which is anticipated to be redeployed in the fourth quarter 2013.

The Company's investment securities portfolio was $2.5 billion at September 30, 2013, up 9 percent from September 30, 2012, and flat as compared to June 30, 2013. The securities portfolio is primarily composed of U.S. government agency backed mortgage securities, U.S. Treasuries, agency backed collateralized mortgage obligations, and investment grade municipal bonds.

Capital

As of September 30, 2013, the total risk-based capital ratio was 13.48 percent, the Tier 1 risk-based capital ratio was 11.05 percent, and the leverage ratio was 10.30 percent. The Tier 1 common capital ratio was 9.11 percent (without giving effect to the final Basel III capital rules adopted and issued by the Federal Reserve Board in July 2013) and tangible common equity ratio was 8.49 percent at the end of the third quarter 2013.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call on Thursday, October 17, 2013, 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 #72261519. 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 October 31, 2013, by calling (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) and entering passcode #72261519.

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 September 30, 2013, the Company had 36 offices in 10 states and $13.9 billion in assets. The Company 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 and credit quality or prolong weakness in demand for loans or other 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 trends in our markets;
• unforeseen credit quality problems that could result in charge-offs greater than we have anticipated in our allowance for loan losses;
• slower than anticipated dispositions of other real estate owned or declines in real estate values which may negatively impact foreclosed property expense;
• 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 recently adopted capital rules;
• greater than anticipated impact on costs, revenues and offered products and services associated with the implementation of other regulatory changes;
• uncertainty regarding the impact of the recent U.S. Government shutdown;
• changes in monetary or fiscal policies of the U.S. Government and the potential impact from current debates related to the federal debt ceiling; 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, 2012 as well as those set forth in our subsequent periodic 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 Company's website at www.theprivatebank.com.

Note:  Certain reclassifications have been made to prior period financial statements to place them on a basis comparable with the current period financial statements.

⁽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⁾     Does not give effect to the final Basel III capital rules adopted and issued by the Federal Reserve Board in July 2013.

SOURCE PrivateBancorp, Inc.