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PrivateBancorp Inc. Reports Operating Results (10-Q)

November 09, 2009 | About:

10qk

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PrivateBancorp Inc. (PVTB) filed Quarterly Report for the period ended 2009-09-30.

PRIVATEBANCORP is a bank holding company for The PrivateBank and Trust Company. Privatebancorp Inc. has a market cap of $488.1 million; its shares were traded at around $10.27 with and P/S ratio of 1.1. The dividend yield of Privatebancorp Inc. stocks is 0.4%. Privatebancorp Inc. had an annual average earning growth of 5.9% over the past 5 years.

Highlight of Business Operations:

The Company reported a net loss of $31.2 million, or $0.68 per diluted share, for the third quarter ended September 30, 2009, compared with a net loss of $7.8 million, or $0.25 per diluted share, for the third quarter 2008. For the nine months ended September 30, 2009, the net loss was $23.9 million, or $0.62 per diluted share, compared to a net loss of $30.7 million, or $1.07 per diluted share, for the prior year period. Earnings for the third quarter 2009 were negatively impacted by ongoing weakness in the economy and in particular its impact on our commercial real estate borrowers, which directly impacted the performance of our loan portfolio and the amount of provision we recorded to maintain our allowance for loan losses in an amount adequate for GAAP accounting purposes. Despite the earnings setback this quarter, we believe we continue to meet many of the goals of our Strategic Growth Plan (the Plan) announced in the fourth quarter 2007 and remain well-positioned to seize market opportunities that drive long-term shareholder value. We continue to be selective in the clients we choose to do business with, opting for people and businesses we know and with which we have relationships. Based on our strategy, loans and deposits, due in large part to the FDIC-assisted acquisition of Founders Bank, have continued to grow. Notable items for the third quarter 2009 include:

Total deposits were $9.6 billion at September 30, 2009, compared to $8.0 billion at December 31, 2008. Deposits attributable to Founders totaled $793.9 million at September 30, 2009. Client deposits increased to $8.9 billion at September 30, 2009, from $6.0 billion at December 31, 2008. Client deposits at September 30, 2009, include $981.7 million in client CDARS® deposits. Brokered deposits (excluding client CDARS®) were 7% of total deposits at September 30, 2009, a decrease from 25% of total deposits at December 31, 2008.

Net revenue grew to $101.2 million in the third quarter 2009, including $11.5 million attributable to Founders, from $65.2 million in the third quarter 2008. Net interest income improved to $87.4 million in the third quarter 2009, including $9.8 million attributable to Founders, up from $52.6 million for the third quarter 2008. Net interest margin (on a tax equivalent basis) was 3.09% for the third quarter 2009, compared to 2.70% for the third quarter 2008. The improvement in net interest margin was primarily the result of our interest bearing liabilities repricing downward more quickly than our interest earning assets. An increased client deposit base and repositioning within funding types further served to reduce our cost of funds by 166 basis points. The inclusion of Founders net interest income during the third quarter 2009 also aided our net interest margin improvement by 16 basis points over the second quarter 2009.

Non-interest income was $12.9 million in the third quarter 2009, compared to $11.7 million in the third quarter 2008. Founders contributed $1.6 million to non-interest income in the third quarter 2009. Treasury management income was $3.1 million in the third quarter 2009 compared to $600,000 in the third quarter 2008. Mortgage banking income increased to $1.8 million in the third quarter 2009, compared to $776,000 for the third quarter 2008. Banking and other services income was $4.1 million in the third quarter 2009, compared to $1.7 million in the third quarter 2008. Capital markets activities resulted in a negative revenue position of $322,000, compared with income of $3.9 million in the third quarter 2008, primarily due to a trading credit valuation adjustment of $2.4 million.

The combination of the need for specific reserves, deteriorating credit quality and increased charge-offs necessitated the provisioning of $90.0 during the third quarter 2009, compared to $30.2 million in the third quarter 2008. Charge-offs were $40.1 million for the quarter ended September 30, 2009, offset by recoveries of $2.8 million, and $109.5 million for the quarter ended December 31, 2008, offset by recoveries of $658,000. The allowance for loan losses as a percentage of total loans was increased to 2.14% at September 30, 2009, compared with 1.40% at December 31, 2008.

As shown in Table 2, third quarter 2009 tax-equivalent net interest income increased to $88.3 million compared to $53.5 million in the third quarter 2008. The increase in interest-earning assets increased interest income by $43.6 million, while a decline in the average rate earned on interest-earning assets reduced interest income by $28.8 million. Third quarter 2009 interest expense declined $20.0 million compared to third quarter 2008.

Read the The complete ReportPVTB is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, John Keeley of Keeley Fund Management.

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