PrivateBancorp Reports Second Quarter 2015 Earnings

CHICAGO, July 16, 2015 /PRNewswire/ -- PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income of $46.4 million, or $0.58 per diluted share, for the second quarter 2015, compared to $40.8 million, or $0.52 per diluted share, for the second quarter 2014, and $41.5 million, or $0.52 per diluted share, for the first quarter 2015. For the six months ended June 30, 2015, the Company had net income of $87.9 million, or $1.10 per diluted share, compared to $75.3 million, or $0.96 per diluted share, for the six months ended June 30, 2014.

"We drove top-line growth in the second quarter through our consistent focus on providing high-touch client solutions to commercial middle market companies," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "We increased net interest income and fee revenue in the quarter as we added new clients and expanded our relationships with existing clients. This drove an 11 percent increase in net revenue year over year to $158.7 million and a 14 percent increase in net income to $46.4 million.

"I am pleased with our strong results in the first two quarters of this year as we continue to capitalize on our ability to help our clients achieve their business goals," Richman continued. "I believe we are well positioned for the second half of 2015 as we continue to leverage the strength of our experienced teams to build lasting relationships with our clients."

Second Quarter 2015 Highlights

• Total loans grew to $12.5 billion, up $1.4 billion, or 13 percent, from a year ago and up $372.8 million, or 3 percent, from March 31, 2015, driven by growth in commercial and industrial and commercial real estate loans.
• Total deposits were $13.4 billion, a decline of $712.8 million, or 5 percent, from March 31, 2015, reflecting the expected client redeployment of transaction-related funds received during the first quarter. Deposits were up $1.2 billion, or 9 percent, from a year ago.
• Net interest margin was 3.17 percent, declining from 3.21 percent both for the second quarter 2014 and the first quarter 2015, primarily driven by a lower level of loan fees and continued yield compression.
• Net revenue of $158.7 million benefited from growth in earning assets and improvement in fee income, increasing 11 percent from the second quarter 2014 and up slightly from the first quarter 2015. Excluding a one-time gain related to the Norcross, Ga., branch sale in the first quarter 2015, net revenue improved by 4 percent on a sequential basis.
• The provision for loan and covered loan losses was $2.1 million, compared to $327,000 for the second quarter 2014 and $5.6 million for the first quarter 2015. The current quarter's provision was impacted by the release of specific reserves established in earlier periods.
• Return on average assets was 1.15 percent and return on average common equity was 11.9 percent for the second quarter 2015. In comparison, return on average assets was 1.07 percent and return on average common equity was 11.1 percent for the first quarter 2015.

Operating Performance

Net interest income was $124.6 million in the second quarter 2015, an increase of 11 percent compared to the second quarter 2014 and 2 percent compared to the first quarter 2015, primarily reflecting growth in average loans. Average loan balances increased 13 percent from the second quarter 2014 and 3 percent from the first quarter 2015. Compared to the second quarter 2014, net interest income also benefited from interest savings of $1.9 million largely related to the trust preferred securities redemption in the fourth quarter 2014.

Net interest margin was 3.17 percent in the second quarter 2015, compared to 3.21 percent in both the second quarter 2014 and the first quarter 2015. Compared to the first quarter 2015, net interest margin was primarily impacted by lower loan yields, which declined by seven basis points largely due to lower loan fees. Loan fees declined by five basis points, including the impact of a large fee collected in the prior quarter. The remaining decline in loan yields from the first quarter 2015 reflects lower contractual interest rates on a total portfolio basis, partially mitigated by an increase in one-month LIBOR. Interest-bearing deposit costs remained stable on a sequential basis. Compared to the second quarter 2014, net interest margin was impacted by lower loan yields and higher levels of average cash equivalents, which was partially offset by the benefit from the trust preferred securities redemption.

Noninterest income was $33.1 million in the second quarter 2015, compared to $30.3 million for the second quarter 2014 and $33.5 million for the first quarter 2015. Excluding a $4.1 million gain on the branch sale included in the first quarter 2015, non-interest income increased 12 percent on a sequential basis. Treasury management fees grew to $7.4 million in the second quarter 2015, up 11 percent from the second quarter 2014 and up slightly from the first quarter 2015. Continued success in cross-sell activities drove higher treasury management volume. Syndication fees of $5.4 million in the second quarter 2015 were comparable to the second quarter 2014 and more than doubled from the first quarter 2015. The current quarter benefited from a higher volume of transactions compared to the first quarter. Syndication fees will vary from quarter to quarter depending on the mix of loans originated and distributed.

Capital markets revenue was $4.9 million in the second quarter 2015, comparable to the second quarter 2014 and up $747,000 from the first quarter 2015. Excluding the impact of the credit valuation adjustment, capital markets revenue was $4.3 million in the second quarter 2015, down from $5.3 million in the second quarter 2014 and $5.0 million for the first quarter 2015. Foreign exchange revenue grew 33 percent from the first quarter 2015 reflecting increased client penetration. The demand for interest rate derivatives continues to be influenced by rate environment expectations.

Assets under management and administration were $7.5 billion as of June 30, 2015, growing from $6.4 billion a year ago and $7.3 billion at March 31, 2015, due to continued focus on cross-selling asset management services to banking clients and ongoing client development in this business. Asset management revenue was $4.7 million in the second quarter 2015, up compared to $4.4 million for both the second quarter 2014 and the first quarter 2015. Mortgage banking grew 58 percent from the second quarter 2014 and 10 percent from the first quarter 2015, primarily reflecting favorable market conditions and active client development.

Expenses

Noninterest expense was $81.9 million for the second quarter 2015, compared to $75.5 million for the second quarter 2014 and $83.1 million for the first quarter 2015. The efficiency ratio was 51.6 percent for the second quarter 2015, compared to 52.6 percent for the second quarter 2014 and 53.1 percent for the first quarter 2015.

Salaries and benefits expense declined $2.3 million from the first quarter 2015. First quarter's seasonally higher payroll taxes and benefits expenses were partially offset by a full quarter's impact of annual salary adjustments and additional performance-based incentive compensation accruals. Compared to the second quarter 2014, salaries and employee benefits increased $5.6 million due to annual salary adjustments, additional hires made throughout the period, and higher incentive compensation accruals based on improved performance.

Net foreclosed property expense declined $2.2 million from the second quarter 2014 and $743,000 from the first quarter 2015, reflecting a lower amount of writedowns and carrying costs on a reduced amount of foreclosed property (OREO). Marketing expense increased $1.1 million from the second quarter 2014 and the first quarter 2015 and included additional advertising and branding expenses, including the launch of an advertising campaign in the current quarter.

Credit Quality

The allowance for loan losses as a percentage of total loans was 1.25 percent at June 30, 2015, compared to 1.29 percent at March 31, 2015. The provision for loan losses was $2.1 million for the second quarter 2015, compared to $2.0 million for the second quarter 2014 and $5.5 million for the first quarter 2015. The current quarter's provision was impacted by loan growth, some credit migration, and favorable developments relating to several nonperforming loans that reduced specific reserve requirements. Specific reserves at June 30, 2015, declined to $7.5 million compared to $15.6 million at March 31, 2015. Net charge-offs to average loans were 0.05 percent for the second quarter 2015, consistent with the first quarter 2015.

Nonperforming assets were 0.44 percent of total assets at June 30, 2015, down from 0.53 percent at March 31, 2015. At June 30, 2015, nonperforming loans were $56.6 million, compared to $71.0 million at March 31, 2015. OREO declined 3 percent during the current quarter to $15.1 million at June 30, 2015.

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 $16.2 billion at June 30, 2015, compared to $14.6 billion at June 30, 2014, and $16.4 billion at March 31, 2015. Total loans of $12.5 billion increased 13 percent from June 30, 2014, and 3 percent from March 31, 2015, primarily driven by growth in commercial and industrial loans, as well as commercial real estate loans. At June 30, 2015, total commercial loans (including owner-occupied commercial real estate) comprised 67 percent of total loans, and commercial real estate and construction represented 27 percent of total loans.

Total liabilities were $14.6 billion at June 30, 2015, compared to $13.2 billion at June 30, 2014, and $14.8 billion compared to March 31, 2015. Total deposits were $13.4 billion at June 30, 2015, up 9 percent from June 30, 2014, and up 2 percent from year end. As anticipated, deposits declined 5 percent from March 31, 2015, primarily attributable to several commercial clients redeploying transaction-related funds received during the first quarter. The deposit base is predominately comprised of commercial client balances, which will fluctuate from time to time based on their business and liquidity needs. At June 30, 2015, the loan-to-deposit ratio was 94 percent, compared to 91 percent as of June 30, 2014, and 86 percent as of March 31, 2015.

Capital

As of June 30, 2015, the total risk-based capital ratio was 12.41 percent, the Tier 1 risk-based capital ratio was 10.49 percent, and the leverage ratio was 10.24 percent. The common equity Tier 1 ratio was 9.41 percent and the tangible common equity ratio was 9.22 percent at the end of the second quarter 2015.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call Thursday, July 16, 2015, 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 #72801553. A live webcast of the call can be accessed at investor.theprivatebank.com. A rebroadcast will be available beginning approximately two hours after the call until midnight ET July 30, 2015, by calling (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) and entering passcode #72801553.

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 June 30, 2015, the Company had 34 offices in 11 states and $16.2 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 or an extended period of continued historically low interest rates;
• competitive pressures in the financial services industry relating to both pricing and loan structures, which have led to ongoing compression in loan yields and 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;
• an inability to attract sufficient or 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 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 security 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 our fiscal year ended December 31, 2014, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, 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 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.

 

 

 

 

 

 

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SOURCE PrivateBancorp, Inc.