PrivateBancorp Reports Fourth Quarter and Full Year 2013 Earnings

CHICAGO, Jan. 16, 2014 /PRNewswire/ -- PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income available to common shareholders of $33.7 million or $0.43 per diluted share for the fourth quarter 2013, compared to $20.0 million or $0.26 per diluted share for the fourth quarter 2012 and $33.1 million or $0.42 per diluted share for the third quarter 2013. For the year ended December 31, 2013, the Company had net income available to common shareholders of $122.9 million or $1.57 per diluted share, compared to $64.5 million or $0.88 per diluted share for the year ended December 31, 2012.

"We finished the year with another strong quarter for PrivateBancorp," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "Compared to the prior year, earnings per share increased 65 percent for the quarter and 78 percent for the year. We grew net loans $235 million and client deposits $321 million in the quarter. This growth, along with further reductions of credit costs, helped to drive net income to $34 million in the period.

"I am proud of what the team accomplished in 2013 and how that positions us for the future," Richman continued. "Our 2013 net income nearly doubled and reflects continued client relationship development as well as our success in significantly improving asset quality, which drove credit costs lower for the year. Revenue grew to $538 million for the year despite ongoing pricing pressure in the competitive, low-rate environment. As we look ahead to 2014, our credit problems are largely behind us and we believe we can benefit from a strengthening economic environment. We will focus on consistent execution of our strategy, adding new commercial banking relationships and expanding those we have through cross-sell of our commercial, wealth management and personal banking services."

Fourth Quarter 2013 Highlights

• Net revenue was $136.0 million, an increase of $1.6 million compared to third quarter 2013, benefiting from the growth in average loans and lower cost of funds.
• Total loans grew to $10.6 billion as of December 31, 2013, up 5 percent from a year ago and 2 percent from September 30, 2013. The increase in total loans reflected growth in commercial and industrial loans and commercial real estate and construction loans compared to the third quarter 2013.
• Total deposits were $12.0 billion as of December 31, 2013, an increase of $181.1 million from September 30, 2013, with noninterest bearing demand deposit balances representing 26 percent of total deposits.
• Net interest margin was 3.18 percent, up 2 basis points from a year ago and stable compared to third quarter 2013, benefiting in part from the repayment of $120 million of subordinated debt during the quarter.
• Nonperforming assets to total assets declined to 0.87 percent at December 31, 2013, compared to 1.57 percent one year ago and 1.07 percent at September 30, 2013. Nonperforming loans were $94.2 million as of December 31, 2013, a decline of 32 percent from December 31, 2012, and 17 percent from September 30, 2013. In comparison to the third quarter 2013, a reduction in net charge-offs of $3.2 million contributed to the $2.9 million decline in provision for loan losses.  
• Return on average common equity was 10.3 percent and return on average assets was 0.96 percent for the fourth quarter 2013.

Operating Performance

Net revenue was $136.0 million in the fourth quarter 2013, an increase of 1 percent compared to the fourth quarter 2012 and the third quarter 2013. The increase in net revenue was attributable to growth in net interest income from higher average loan balances and lower cost of funds. For the full year 2013, net revenue was $538.3 million, up 1 percent compared to 2012, reflecting both increased net interest income from higher average loan balances and noninterest income.

Operating profit of $60.2 million in the fourth quarter 2013 was up 12 percent compared to the fourth quarter 2012 and down 5 percent compared to the third quarter 2013. The reduction in operating profit compared to the third quarter 2013 was a result of increased noninterest expenses primarily related to increased employee expense, and an increase in the provision for unfunded commitments. For the full year, operating profit was $235.0 million, up 14 percent compared to 2012, and benefited primarily from lower costs associated with net foreclosed property expenses and a reduction of share-based compensation costs.

Net interest income was $108.5 million in the fourth quarter 2013, an increase of 3 percent compared to the fourth quarter 2012 and 2 percent compared to the third quarter 2013. The growth in net interest income over the prior quarter benefited from a 2 percent increase in average loan balances and the repayment of $120 million of long-term subordinated debt. For the full year 2013, net interest income was $421.1 million, compared to net interest income of $419.9 million for full year 2012. Net interest margin was 3.18 percent in the fourth quarter 2013, compared to 3.16 percent in the fourth quarter 2012 and 3.18 percent in the third quarter 2013. While one-month LIBOR declined in the fourth quarter, net interest margin benefited from the repayment of subordinated debt and higher yields on earning assets compared to the prior quarter. The lending environment remains highly competitive and continues to put downward pressure on loan pricing.

Noninterest income was $26.7 million in the fourth quarter 2013, a decline of $2.7 million compared to the fourth quarter 2012 and $1.0 million compared to the third quarter 2013. Lower mortgage financing volume reduced noninterest income by $2.3 million compared to the fourth quarter 2012 and $1.1 million compared to the third quarter 2013. Syndication fees were comparable to the fourth quarter 2012, though declined by $2.2 million compared to the third quarter 2013. The level of syndication activity may vary from quarter to quarter with syndication fees for third quarter 2013 a record amount.

Trust and investments income was $4.6 million, an increase of 9 percent from the fourth quarter 2012 and 1 percent from the third quarter 2013. Focused marketing efforts to add trust and investment clients in 2013 contributed to the 10 percent increase of assets under management and administration compared to the prior year. Capital markets revenue of $5.7 million declined from $6.7 million in the fourth quarter 2012 and increased from $3.9 million in the third quarter 2013. Capital markets revenue excluding the impact of CVA was $5.1 million in the quarter, a decrease of $789,000 from the fourth quarter 2012 and an increase of $659,000 from the previous quarter. Fourth quarter 2013 capital markets revenue included an increase in foreign exchange activity compared to the third quarter. Treasury management fees of $6.3 million grew 13 percent from the fourth quarter 2012 and 2 percent from the previous quarter, benefiting in part from new credit relationships.

For the full year 2013, noninterest income increased 3 percent to $114.0 million compared to $111.0 million for the full year 2012. In comparison to the prior year, syndication fees increased 48 percent, benefiting from the Company's loan origination capabilities combined with a broader product offering and strong market demand. Capital markets products revenue declined as client demand for interest rate management products shifted to lower revenue products and mortgage banking revenue decreased due to lower volumes primarily as a result of increasing mortgage rates.

Expenses

Noninterest expense was $75.8 million in the fourth quarter 2013, a decrease of 7 percent from the fourth quarter 2012 and an increase of 6 percent from third quarter 2013. The reduction of noninterest expense compared to the fourth quarter 2012 reflected a decline of $6.0 million in expenses associated primarily with reduced net foreclosed property expense and share-based compensation costs offset by increased provision for unfunded commitments. The efficiency rate was 55.7 percent in the fourth quarter, compared to 60.2 percent in fourth quarter 2012 and 53.0 percent in third quarter 2013.

Compared to the third quarter 2013, the increase of noninterest expense was comprised primarily of $1.2 million of additional variable performance-based compensation and a $1.0 million increase in provision for unfunded commitments, offset by a $796,000 reduction in net foreclosed property expense. In the third quarter 2013, other expenses benefited from a $1.3 million reduction in the unfunded commitment reserve that was associated with a single credit.

Noninterest expense for the full year 2013 was $303.3 million, a decline of 7 percent from $327.1 million for 2012 with reductions in net foreclosed property expense, certain share-based compensation, insurance and loan and collection costs.

Credit Quality

In 2013, the Company significantly improved credit quality and reduced credit costs. Nonperforming assets were $122.8 million at December 31, 2013, a decline of 44 percent from December 31, 2012, and 17 percent from September 30, 2013, with the reduction attributable to continued sales of other real estate owned ("OREO") and resolution of nonperforming loans. At year end, OREO was $28.5 million, a reduction of $53.3 million from December 31, 2012, and $6.8 million from September 30, 2013, as a result of ongoing dispositions of foreclosed property. Nonperforming loans were $94.2 million, compared to $138.8 million at December 31, 2012, and $113.3 million at September 30, 2013. Nonperforming assets to total assets were 0.87 percent at December 31, 2013, compared to 1.57 percent at December 31, 2012, and 1.07 percent at September 30, 2013.

As of December 31, 2013, the allowance for loan losses as a percent of total loans was 1.34 percent, down from 1.59 percent at December 31, 2012, and 1.40 percent at September 30, 2013. Net charge-offs were $7.3 million for the fourth quarter 2013, a decline of 59 percent compared to the fourth quarter 2012 and 30 percent compared to the third quarter 2013, and benefited from a higher level of loan recoveries. The provision for loan losses was $4.9 million for the fourth quarter 2013 compared to $12.6 million for the fourth quarter 2012 and $7.8 million for third quarter 2013. On a full year basis, provision for loan loss expense was $31.2 million compared to $70.9 million for the full year 2012, reflecting lower net charge-offs and a decline in reserve requirements for problem loans.

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 $14.1 billion at December 31, 2013, flat compared to $14.1 billion at December 31, 2012, and up from $13.9 billion at September 30, 2013. Total loans of $10.6 billion grew $504.0 million or 5 percent from December 31, 2012 and $234.6 million or 2 percent from the previous quarter end, benefiting largely from net loan growth of commercial and industrial loans. In comparison to September 30, 2013, commercial real estate and construction loans increased as well, despite continued payoffs of loans, many of which were replaced with permanent financing. At December 31, 2013, total commercial loans comprised 67 percent of total loans, up from 64 percent a year ago, and total commercial real estate and construction loans comprised 27 percent of total loans, down from 28 percent at December 31, 2012.

Total deposits were $12.0 billion at December 31, 2013, a decline of 1 percent as of December 31, 2012, and an increase of 2 percent compared to September 30, 2013. At December 31, 2013, the loan to deposit ratio was 88.6 percent. Noninterest bearing demand deposits were $3.2 billion and comprised 26 percent of total deposits at December 31, 2013. On October 24, 2013, the $120.0 million balance of a subordinated debt facility with a weighted average rate of 3.8 percent was repaid in full and replaced with lower-cost liquidity.

The Company's investment securities portfolio was $2.5 billion at December 31, 2013, up 9 percent from December 31, 2012, and a relatively flat compared to September 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 December 31, 2013, the total risk-based capital ratio was 13.30 percent, the Tier 1 risk-based capital ratio was 11.08 percent, and the leverage ratio was 10.37 percent. The Tier 1 common capital ratio was 9.19 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 8.57 percent at the end of the fourth quarter 2013.

Quarterly Conference Call and Webcast Presentation

PrivateBancorp will host a conference call on Thursday, January 16, 2014, 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 #25250239. 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 on January 30, 2014, by calling (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) and entering passcode #25250239.

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 December 31, 2013, the Company had 33 offices in 10 states and $14.1 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 net 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;
• 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.

SOURCE PrivateBancorp, Inc.