PrivateBancorp Reports First Quarter 2015 Earnings

CHICAGO, April 16, 2015 /PRNewswire/ -- PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income of $41.5 million, or $0.52 per diluted share, for the first quarter 2015, compared to $34.5 million, or $0.44 per diluted share, for the first quarter 2014, and $37.2 million, or $0.47 per diluted share, for the fourth quarter 2014.

"I am pleased with our start to the year as we leverage the momentum we have built in our business," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "Through our consistent execution, we delivered another quarter of strong results for our shareholders. First quarter net income increased 20 percent year over year to $41 million, largely driven by client loan growth in our commercial and industrial portfolio as well as the gain we realized from the sale of our branch in Georgia.

"Our solid loan growth helped boost net interest income by 12 percent from the first quarter last year, which led to a 15 percent increase in net revenue to $156 million," Richman continued. "We are well-positioned to continue to add new client relationships and do more for our existing clients in 2015 as we build on our differentiated commercial banking model."

First Quarter 2015 Highlights

• Total loans grew to $12.2 billion, up $1.2 billion from a year ago and $278.3 million from December 31, 2014, primarily driven by growth in commercial and industrial loans.
• Total deposits were $14.1 billion at March 31, 2015, up $2.2 billion from a year ago, and $1.0 billion from December 31, 2014. Average deposits increased $1.6 billion from a year ago and $210.0 million from the previous quarter.
• Net interest margin was 3.21 percent, compared to 3.23 percent for the first quarter 2014 and 3.07 percent for the fourth quarter 2014. The current quarter reflected the full benefit of the fourth quarter's redemption of trust preferred securities.
• Operating profit of $73.3 million for the first quarter 2015 included seasonally higher benefits expense and a gain on sale of the Norcross, Ga., branch. Excluding the one-time gain on sale, operating profit increased 15 percent from the first quarter 2014 and 6 percent from the fourth quarter 2014, primarily reflecting continued growth in earning assets.
• Return on average assets was 1.07 percent and return on average common equity was 11.05 percent for the first quarter 2015. In comparison, return on average assets was 0.95 percent and return on average common equity was 10.0 percent for the fourth quarter 2014.

Operating Performance

Net interest income was $122.0 million in the first quarter 2015, an increase of 12 percent compared to the first quarter 2014, and up 4 percent compared to the fourth quarter 2014, despite two fewer days in the first quarter. Average loan growth of 13 percent from the first quarter 2014 and 3 percent from the fourth quarter 2014, as well as a full-quarter's benefit from the fourth quarter 2014 trust preferred securities redemption, positively impacted net interest income.

Net interest margin was 3.21 percent in the first quarter 2015, compared to 3.23 percent in the first quarter 2014 and 3.07 percent in the fourth quarter 2014. The trust preferred securities redemption lowered borrowing costs and improved net interest margin by seven basis points on a comparative basis. The current quarter also benefited from a higher level of loan fees, including the collection of a one-time fee that contributed three basis points to loan yields. Average cash equivalents declined from the fourth quarter 2014, which benefited net interest margin by three basis points on a comparative basis. Interest-bearing deposit costs were relatively unchanged. Loan pricing remains competitive in the current environment with ongoing yield compression. Contractual loan yields on a total portfolio basis declined two basis points on a sequential basis.

Noninterest income was $33.5 million in the first quarter 2015, compared to $26.2 million for the first quarter 2014 and $30.4 million compared to the fourth quarter 2014. Results for the first quarter 2015 reflected a $4.1 million gain on sale of the Norcross, Ga., branch. Treasury management fees grew to $7.3 million in the first quarter 2015, up 11 percent from the first quarter 2014 and up slightly from the fourth quarter 2014. Continued cross selling to new clients drove higher treasury management volume. Mortgage banking revenue more than doubled from the first quarter 2014 and increased 22 percent from the fourth quarter 2014, as purchase activity increased and a decline in rates during the first quarter 2015 drove an increase in refinancing volume.

Capital markets revenue was up slightly from the first quarter 2014 and down $1.5 million from the fourth quarter 2014. Excluding the impact of the credit valuation adjustment, capital markets revenue was $5.0 million for the first quarter 2015, down from $5.9 million for the fourth quarter 2014, when several larger transactions drove higher interest rate swap volume. The demand for interest rate derivatives continues to be influenced by rate environment expectations. Foreign exchange revenue, which represented 36 percent of capital markets revenue for the first quarter 2015, benefited from several larger transactions, growing 5 percent from the fourth quarter 2014. Syndication fees were $2.6 million for the first quarter 2015, down from $3.3 million for the first quarter 2014 and $3.9 million for the fourth quarter 2014. Syndication fees vary from quarter to quarter depending on the mix of loan originations.

Assets under management and administration (AUMA) were $7.3 billion as of March 31, 2015, compared to $6.0 billion a year ago and $6.6 billion at December 31, 2014. Asset management revenue was $4.4 million in the first quarter 2015, compared to $4.3 million for the first quarter 2014 and $4.2 million for the fourth quarter 2014.

Expenses

Noninterest expense was $83.1 million for the first quarter 2015, compared to $75.8 million for the first quarter 2014 and $83.0 million for the fourth quarter 2014. Salaries and benefits expense increased $7.7 million from the first quarter 2014 and $5.6 million from the fourth quarter 2014. First-quarter salaries and benefits expense included seasonally higher payroll taxes attributable to incentive compensation payments and higher benefits expenses during the period. Additional hires made throughout 2014, annual salary adjustments, and a higher bonus accrual contributed to increased compensation expense compared to the prior-year period.

Other expenses declined $3.9 million on a sequential basis, as the fourth quarter 2014 included $1.6 million of office relocation costs and a higher provision related to unfunded commitments. Unfunded commitments at March 31, 2015, increased 3 percent from year-end, primarily related to growth in commercial and industrial commitments. The provision for unfunded commitments declined to $376,000 for the first quarter 2015, compared to $496,000 for the first quarter 2014 and $2.5 million for the fourth quarter 2014. Net foreclosed property expense declined 53 percent compared to the first quarter 2014, reflecting a lower amount of writedowns and carrying costs on a reduced amount of foreclosed property (OREO).

The efficiency ratio was 53.1 percent for the first quarter 2015, compared to 55.8 percent for the first quarter 2014 and 56.0 percent for the fourth quarter 2014. For the full year 2014, the efficiency ratio was 54.2 percent.

Credit Quality

The allowance for loan losses as a percentage of total loans was 1.29 percent at March 31, 2015, comparable to December 31, 2014. The provision for loan losses was $5.5 million for the first quarter 2015, compared to $4.0 million for the fourth quarter 2014 and $3.4 million for the first quarter 2014. Net charge-offs to average loans were 0.05 percent for the first quarter 2015, consistent with the fourth quarter 2014.

Nonperforming assets were 0.53 percent of total assets at March 31, 2015, down from 0.82 percent at March 31, 2014, and comparable to December 31, 2014. At March 31, 2015, nonperforming loans were $71.0 million, compared to $93.8 million at March 31, 2014, and $67.5 million at December 31, 2014. OREO of $15.6 million at March 31, 2015, declined $7.9 million from March 31, 2014, and $1.8 million from December 31, 2014.

Credit quality results exclude covered assets acquired through an FDIC-assisted transaction that are subject to a loss sharing agreement.

Balance Sheet

Total assets grew to $16.4 billion at March 31, 2015, compared to $14.3 billion at March 31, 2014, and $15.6 billion at December 31, 2014. Total loans of $12.2 billion increased 11 percent from March 31, 2014, and 2 percent from December 31, 2014, primarily driven by growth in commercial and industrial loans. At March 31, 2015, total commercial loans comprised 67 percent of total loans, and commercial real estate and construction represented 27 percent of total loans.

The Company's investment securities portfolio was $2.8 billion at March 31, 2015, up 7 percent from March 31, 2014, and consistent with December 31, 2014. Cash and cash equivalents were $958.4 million at March 31, 2015 and reflected deposit growth, compared to $351.1 million at March 31, 2014, and $424.6 million at December 31, 2014.

Total liabilities were $14.8 billion at March 31, 2015, up compared to $13.0 billion at March 31, 2014, and $14.1 billion compared to December 31, 2014. Total deposits were $14.1 billion at March 31, 2015, increasing 19 percent from March 31, 2014, and 8 percent from December 31, 2014. Deposit balances of commercial clients fluctuate based on their cash management and liquidity needs. Transactional inflows relating to several commercial clients contributed to the deposit growth in the first quarter 2015, a meaningful portion of which was subsequently redeployed by the clients. At March 31, 2015, the loan-to-deposit ratio was 86 percent, compared to 92 percent as of March 31, 2014, and 91 percent as of December 31, 2014.

Capital

As of March 31, 2015, the total risk-based capital ratio was 12.29 percent, the Tier 1 risk-based capital ratio was 10.34 percent, and the leverage ratio was 10.16 percent. The Tier 1 common capital ratio was 9.23 percent and the tangible common equity ratio was 8.86 percent at the end of the first quarter 2015. These capital ratios are calculated in accordance with the new capital rules that became effective on January 1, 2015.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call Thursday, April 16, 2015, 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 #8210528. A live webcast of the call can be accessed on the Company website at: investor.theprivatebank.com. A rebroadcast will be available beginning approximately two hours after the call until midnight April 30, 2015, by calling (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) and entering passcode #8210528.

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, 2015, the Company had 34 offices in 11 states and $16.4 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 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;
• 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 our ability to recruit and retain appropriate talent;
• 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 costs or regulatory burdens; or
• failures or disruptions to, or compromises of, 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 Annual Report on Form 10-K for the year ended December 31, 2014, 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.

 

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SOURCE PrivateBancorp, Inc.