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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 20, 2016
PRIVATEBANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
 
001-34066
 
36-3681151
(State or other jurisdiction
of incorporation)
 
(Commission
file number)
 
(I.R.S. employer
identification no.)
120 South LaSalle Street
Chicago, Illinois
 
60603
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (312) 564-2000
Not Applicable
(Former name or former address, if changed since last report)

 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2 below):
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





ITEM 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On October 20, 2016, PrivateBancorp, Inc. (the “Company”) announced its earnings results for the third quarter and nine months ended September 30, 2016. Attached as Exhibit 99.1 is a copy of the press release relating to the Company’s earnings results, which is incorporated herein by reference. Certain supplemental information relating to non-GAAP financial measures is reported in the attached press release in Exhibit 99.1.

ITEM 7.01
REGULATION FD DISCLOSURE
On October 20, 2016, PrivateBancorp, Inc. announced that it has published on its website the summary results of its annual company-run capital stress test as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and Federal Reserve regulations. Attached as Exhibit 99.2 is a copy of the press release relating to the announcement, which is incorporated herein by reference.

Note: the information in this item of this report (including the exhibit) is furnished pursuant to Item 7.01 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. This report will not be deemed a determination or an admission as to the materiality of any information in the report that is required to be disclosed solely by Regulation FD.

ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

Exhibit
 
Description
 
 
 
99.1
 
Third Quarter 2016 Earnings Release dated October 20, 2016 (intended to be deemed furnished with the Commission rather than filed pursuant to General Instruction B.2. to Form 8-K)
99.2
 
Press Release dated October 20, 2016 (intended to be deemed furnished with the Commission rather than filed pursuant to General Instruction B.2. to Form 8-K)

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
PRIVATEBANCORP, INC.
 
 
 
 
 
 
 
Dated:
October 20, 2016
 
 
By:
 
/s/ Kevin M. Killips
 
 
 
 
 
 
Kevin M. Killips
 
 
 
 
 
 
Chief Financial Officer

INDEX TO EXHIBITS

Exhibit
 
Description
 
 
 
99.1
 
Third Quarter 2016 Earnings Release dated October 20, 2016 (intended to be deemed furnished with the Commission rather than filed pursuant to General Instruction B.2. to Form 8-K)
99.2
 
Press Release dated October 20, 2016 (intended to be deemed furnished with the Commission rather than filed pursuant to General Instruction B.2. to Form 8-K)



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1



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For further information:

Media Contact:
Amy Yuhn
312-564-1378
ayuhn@theprivatebank.com

Investor Relations Contact:
Jeanette O'Loughlin
312-564-6076
joloughlin@theprivatebank.com

PrivateBancorp Reports Third Quarter 2016 Earnings
Earnings per share of $0.60 for third quarter 2016, compared to $0.57 for third quarter 2015
and $0.62 for second quarter 2016

CHICAGO, October 20, 2016 - PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income of $48.9 million, or $0.60 per diluted share, for the third quarter 2016, compared to $45.3 million, or $0.57 per diluted share, for the third quarter 2015, and $50.4 million, or $0.62 per diluted share, for the second quarter 2016. For the nine months ended September 30, 2016, the Company had net income of $148.8 million, or $1.84 per diluted share, compared to $133.2 million, or $1.67 per diluted share, for the nine months ended September 30, 2015.

“Our third quarter results reflect our continued focus on consistent execution of our strategy to build long-term client relationships,” said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. “Net loan growth was $619 million, which helped to drive net interest income to $145.5 million, 11 percent higher than the year-ago quarter, and noninterest income was up over third quarter 2015 to $37.6 million. Third quarter net income of $48.9 million was up 8 percent from a year ago. Overall asset quality remains strong, although we saw higher provision expense this quarter. I am pleased with the momentum in our business as we enter the final quarter of the year.

“We remain on track to close our pending transaction with CIBC, announced in June, by the end of the first quarter 2017 and remain eager for the opportunities this proposed merger presents for both PrivateBancorp and CIBC,” Richman continued.

Third Quarter 2016 Highlights

During the quarter, total loans grew to $14.7 billion, up $1.6 billion from a year ago and $618.8 million from June 30, 2016, driven primarily by activity in commercial and industrial loans.

Total deposits were $15.5 billion, increasing $1.6 billion from a year ago and $931.5 million from June 30, 2016. Noninterest-bearing demand deposits grew 19 percent from a year ago, representing 31 percent of total deposits at September 30, 2016.

Net interest margin was 3.18 percent, compared to 3.23 percent for the third quarter 2015 and 3.28 percent for the second quarter 2016. A lower level of loan fees primarily drove the decline in net interest margin on a sequential basis.


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Growth in earning assets continued to benefit operating profit, which increased 19 percent from the third quarter 2015 and 7 percent from the second quarter 2016. On a sequential basis, operating profit also benefited from lower professional services expense, largely related to $6.3 million of transaction-related costs reflected in the results for the second quarter 2016.

The provision for loan and covered loan losses was $15.7 million for the third quarter 2016, reflecting loan growth and some credit migration, compared to $4.2 million for the third quarter 2015 and $5.6 million for the second quarter 2016.

Return on average assets was 1.04 percent and return on average common equity was 10.4 percent for the third quarter 2016.

Operating Performance

Net interest income grew to $145.5 million in the third quarter 2016, increasing 11 percent from the third quarter 2015 and 2 percent from the second quarter 2016, primarily driven by growth in average loans of 12 percent compared to third quarter 2015 and 4 percent compared to the second quarter 2016.

Net interest margin was 3.18 percent in the third quarter 2016, declining 5 basis points from a year ago and 10 basis points from the second quarter 2016, primarily related to lower loan yields and, to a lesser extent, security yields. Loan yields decreased 9 basis points compared to the second quarter 2016, largely related to lower loan fees on a comparative basis. Second quarter results included an elevated fee impact from payoffs and interest recoveries on previous nonaccrual loans. The level of loan fees tends to be uneven quarter-to-quarter, dependent on when loans pays off during their term as well as whether early termination fees exist. Loan yields also reflected a continued upwards move in LIBOR over the last two quarters, benefiting loan yields for the third quarter by 3 basis points. Excluding the contribution from loan fees, hedging, and movement in LIBOR, loan yields were stable in the current environment. Securities yields declined 9 basis points on a sequential basis, as the low rate environment has accelerated prepayment speeds and reduced yields on securities purchased during the quarter. A higher Fed funds effective rate contributed to a slight rise in deposit costs on a sequential basis.

Noninterest income was $37.6 million in the third quarter 2016, increasing $6.8 million from the third quarter 2015 and $484,000 from the second quarter 2016. Other income for the third quarter 2016 reflected a $1.3 million gain on sale of a loan. Treasury management fees were $8.6 million in the third quarter 2016, up 8 percent from the third quarter 2015 and 4 percent from the second quarter 2016, primarily reflecting the onboarding of new commercial clients. Mortgage banking revenue increased $1.7 million from the third quarter 2015 and $453,000 on a sequential basis, reflecting a higher volume of loans sold.

Syndication fees of $4.7 million for the third quarter 2016 increased $357,000 from the third quarter 2015 and declined $943,000 from the second quarter 2016, reflecting a somewhat lower volume of deals compared to the sequential quarter. Capital markets revenue for the third quarter 2016 reflected a positive credit valuation adjustment (CVA) of $910,000, compared to a negative CVA of $1.2 million for the third quarter 2015 and $1.0 million for the second quarter 2016. Excluding the CVA impact for all periods, capital markets revenue was $4.5 million in the third quarter 2016, compared to $4.3 million for the third quarter 2015 and $6.9 million in the second quarter 2016. The sequential decline reflected moderated interest rate derivative activity compared to the first half of 2016. Interest rates derivatives activity is significantly influenced by clients' views on the extent and timing of future interest rate movements. Foreign exchange revenue for the third quarter 2016 was comparable to the year ago quarter and on a sequential basis.

Asset management revenue was $5.6 million in the third quarter 2016, increasing 25 percent from the third quarter 2015 and up slightly from the second quarter 2016. Assets under management and administration were $10.0 billion as of September 30, 2016, compared to $7.2 billion a year ago and $10.7 billion at June 30, 2016. Managed assets grew $178.2 million, or 4 percent, on a sequential basis. Custody assets declined by $818.7 million, largely reflecting a continuation of expected outflows from a corporate trust added during the first quarter 2016. It is anticipated

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that this account will be reduced by approximately $500 million by the end of the year as funds are disbursed or redeployed.

Expenses

Noninterest expense for the third quarter 2016 increased $6.7 million from the third quarter 2015 and declined $2.3 million from the second quarter 2016. Included in second quarter 2016 non-interest expense were $6.3 million of transaction-related expenses that were largely reflected in professional services expense.

Other expenses includes the provision for unfunded commitments, which was $1.9 million for the third quarter 2016, compared to $2.0 million for the third quarter 2015 and $1.4 million for the second quarter 2016. The increase in the provision on a sequential basis primarily reflected growth in unfunded commitments, as well as some credit migration related to unfunded commercial commitments.

The efficiency ratio was 49.9 percent for the third quarter 2016, compared to 52.2 percent for the third quarter 2015 and 52.2 percent for the second quarter 2016.

Credit Quality

The allowance for loan losses was $180.3 million, or 1.23 percent of total loans, at September 30, 2016, compared to $168.6 million, or 1.20 percent of total loans, at June 30, 2016. The provision for loan losses was $15.9 million for the third quarter 2016, increasing from $4.2 million for the third quarter 2015 and $5.6 million from the second quarter 2016. While asset quality remained strong, the provision was higher following several quarters of unusually low credit costs. The increase in the general reserve reflected strong loan growth and some level of credit migration. Higher nonperforming loan levels at September 30, 2016 reflected irregularities with a single lending relationship, which increased specific reserves by approximately $5 million. The provision for loan loss will fluctuate from period to period depending on the level of loan growth and unevenness in credit quality due to the size of individual credits. Charge-offs were elevated on a comparative basis largely related to a single relationship that was identified during the quarter. Annualized net charge-offs to average loans were 0.12 percent for the third quarter 2016, compared to 0.07 percent for the second quarter 2016 and annualized net recoveries to average loans of 0.05 percent for the third quarter 2015.

Nonperforming assets were 0.52 percent of total assets at September 30, 2016, compared to 0.44 percent at June 30, 2016. At September 30, 2016, nonperforming loans were $87.4 million, increasing $21.9 million from June 30, 2016. OREO decreased $2.5 million from June 30, 2016 to $12.0 million at September 30, 2016.

Balance Sheet

Total assets were $19.1 billion at September 30, 2016, compared to $16.9 billion at September 30, 2015, and $18.2 billion at June 30, 2016. Total loans of $14.7 billion increased 12 percent from September 30, 2015, and 4 percent from June 30, 2016. Loan growth for the third quarter 2016 reflected loans to new clients of $456.4 million, payoffs lower than the five quarter average, and higher draws on revolving loans. At September 30, 2016, commercial loans represented 65 percent of total loans compared to 64 percent at June 30, 2016, and commercial real estate and construction loans represented 29 percent of total loans, compared to 30 percent of total loans at June 30, 2016.

Total liabilities were $17.2 billion at September 30, 2016, compared to $15.2 billion at September 30, 2015, and $16.3 billion at June 30, 2016. Total deposits were $15.5 billion at September 30, 2016, increasing 11 percent from September 30, 2015, and 6 percent from June 30, 2016. Deposit growth included an increase in noninterest-bearing demand deposits of $788.7 million from a year ago and $345.6 million from June 30, 2016. Noninterest-bearing demand deposits represented 31 percent of total deposits at September 30, 2016, compared to 29 percent a year ago and consistent with June 30, 2016. At September 30, 2016, the loan-to-deposit ratio was 95 percent, compared to 94 percent as of September 30, 2015, and 96 percent as of June 30, 2016. Given the nature of our commercial client base, deposit balances have historically increased in the second half of the year compared to the first half.

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Capital

As of September 30, 2016, the total risk-based capital ratio was 12.41 percent, the Tier 1 risk-based capital ratio was 10.64 percent, and the leverage ratio was 10.43 percent. The common equity Tier 1 ratio was 9.71 percent and the tangible common equity ratio was 9.40 percent at the end of the third quarter 2016.

No Quarterly Conference Call

In light of PrivateBancorp's announcement regarding its pending transaction with CIBC, PrivateBancorp does not intend to conduct an earnings conference call to discuss third quarter 2016 results.

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 September 30, 2016, the Company had 34 offices in 12 states and $19.1 billion in assets. The Company’s website is www.theprivatebank.com. On June 29, 2016, PrivateBancorp announced plans to merge with CIBC, a leading Canadian bank. The transaction is expected to close by the end of the first quarter 2017, pending regulatory and stockholder approval and other customary closing conditions.

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:

the possibility that the transaction with CIBC does not close when expected or at all because required regulatory, stockholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all; or the possibility that, as a result of the announcement and pendency of the proposed transaction, we experience difficulties in employee retention and/or clients or vendors seek to change their existing business relationships with us, or competitors change their strategies to compete against us, any of which may have a negative impact on our business or operations;
uncertainty regarding geopolitical developments and the U.S. and global economic outlook that may continue to 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;
competitive pressures in the financial services industry relating to both pricing and loan structures, which 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;
unanticipated changes in monetary policies of the Federal Reserve or significant adjustments in the pace of, or market expectations for, future interest rate changes;
availability of sufficient and 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 or regulatory costs and 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


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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 fiscal year ended December 31, 2015, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Form 10-Q for the quarter ended June 30, 2016, 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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Consolidated Income Statements
 
 
 
 
 
 
 
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Interest Income
 
 
 
 
 
 
 
Loans, including fees
$
148,759

 
$
132,106

 
$
432,990

 
$
380,455

Federal funds sold and interest-bearing deposits in banks
380

 
168

 
1,055

 
674

Securities:
 
 
 
 
 
 
 
Taxable
15,283

 
13,599

 
45,651

 
40,696

Exempt from Federal income taxes
2,322

 
2,177

 
6,951

 
5,964

Other interest income
139

 
69

 
459

 
180

Total interest income
166,883

 
148,119

 
487,106

 
427,969

Interest Expense
 
 
 
 
 
 
 
Deposits
15,238

 
11,838

 
42,274

 
34,742

Short-term borrowings
1,070

 
24

 
2,295

 
455

Long-term debt
5,065

 
5,048

 
15,492

 
14,948

Total interest expense
21,373

 
16,910

 
60,061

 
50,145

Net interest income
145,510

 
131,209

 
427,045

 
377,824

Provision for loan and covered loan losses
15,691

 
4,197

 
27,662

 
11,959

Net interest income after provision for loan and covered loan losses
129,819

 
127,012

 
399,383

 
365,865

Non-interest Income
 
 
 
 
 
 
 
Asset management
5,590

 
4,462

 
15,854

 
13,566

Mortgage banking
5,060

 
3,340

 
12,636

 
11,267

Capital markets products
5,448

 
3,098

 
16,499

 
12,189

Treasury management
8,617

 
8,010

 
25,093

 
22,758

Loan, letter of credit and commitment fees
5,293

 
5,670

 
16,031

 
15,690

Syndication fees
4,721

 
4,364

 
15,819

 
12,361

Deposit service charges and fees and other income
2,885

 
1,585

 
5,303

 
8,740

Net securities gains

 
260

 
1,111

 
793

Total non-interest income
37,614

 
30,789

 
108,346

 
97,364

Non-interest Expense
 
 
 
 
 
 
 
Salaries and employee benefits
55,889

 
50,019

 
169,554

 
152,400

Net occupancy and equipment expense
7,099

 
7,098

 
21,326

 
21,087

Technology and related costs
6,282

 
4,665

 
17,062

 
13,540

Marketing
4,587

 
3,682

 
12,916

 
11,926

Professional services
2,865

 
3,679

 
15,349

 
8,574

Outsourced servicing costs
1,379

 
1,786

 
5,271

 
5,500

Net foreclosed property expenses
965

 
1,080

 
1,891

 
2,993

Postage, telephone, and delivery
818

 
857

 
2,603

 
2,618

Insurance
3,931

 
3,667

 
11,730

 
10,328

Loan and collection expense
1,972

 
2,324

 
5,521

 
6,802

Other expenses
6,133

 
6,318

 
13,406

 
14,449

Total non-interest expense
91,920

 
85,175

 
276,629

 
250,217

Income before income taxes
75,513

 
72,626

 
231,100

 
213,012

Income tax provision
26,621

 
27,358

 
82,291

 
79,838

Net income available to common stockholders
$
48,892

 
$
45,268

 
$
148,809

 
$
133,174

Per Common Share Data
 
 
 
 
 
 
 
Basic earnings per share
$
0.61

 
$
0.58

 
$
1.87

 
$
1.70

Diluted earnings per share
$
0.60

 
$
0.57

 
$
1.84

 
$
1.67

Cash dividends declared
$
0.01

 
$
0.01

 
$
0.03

 
$
0.03

Weighted-average common shares outstanding
79,007

 
78,144

 
78,803

 
77,834

Weighted-average diluted common shares outstanding
80,673

 
79,401

 
80,283

 
79,027

Note: Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

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Consolidated Income Statements
 
 
 
 
 
 
 
 
 
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
3Q16
 
2Q16
 
1Q16
 
4Q15
 
3Q15
Interest Income
 
 
 
 
 
 
 
 
 
Loans, including fees
$
148,759

 
$
144,164

 
$
140,067

 
$
137,006

 
$
132,106

Federal funds sold and interest-bearing deposits in banks
380

 
335

 
340

 
229

 
168

Securities:
 
 
 
 
 
 
 
 
 
Taxable
15,283

 
15,158

 
15,210

 
14,587

 
13,599

Exempt from Federal income taxes
2,322

 
2,296

 
2,333

 
2,306

 
2,177

Other interest income
139

 
170

 
150

 
115

 
69

Total interest income
166,883

 
162,123

 
158,100

 
154,243

 
148,119

Interest Expense
 
 
 
 
 
 
 
 
 
Deposits
15,238

 
13,895

 
13,141

 
12,364

 
11,838

Short-term borrowings
1,070

 
995

 
230

 
201

 
24

Long-term debt
5,065

 
5,216

 
5,211

 
5,087

 
5,048

Total interest expense
21,373

 
20,106

 
18,582

 
17,652

 
16,910

Net interest income
145,510

 
142,017

 
139,518

 
136,591

 
131,209

Provision for loan and covered loan losses
15,691

 
5,569

 
6,402

 
2,831

 
4,197

Net interest income after provision for loan and covered loan losses
129,819

 
136,448

 
133,116

 
133,760

 
127,012

Non-interest Income
 
 
 
 
 
 
 
 
 
Asset management
5,590

 
5,539

 
4,725

 
4,392

 
4,462

Mortgage banking
5,060

 
4,607

 
2,969

 
2,812

 
3,340

Capital markets products
5,448

 
5,852

 
5,199

 
6,341

 
3,098

Treasury management
8,617

 
8,290

 
8,186

 
7,883

 
8,010

Loan, letter of credit and commitment fees
5,293

 
5,538

 
5,200

 
4,958

 
5,670

Syndication fees
4,721

 
5,664

 
5,434

 
4,844

 
4,364

Deposit service charges and fees and other income
2,885

 
1,060

 
1,358

 
1,389

 
1,585

Net securities gains

 
580

 
531

 
29

 
260

Total non-interest income
37,614

 
37,130

 
33,602

 
32,648

 
30,789

Non-interest Expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
55,889

 
55,326

 
58,339

 
52,619

 
50,019

Net occupancy and equipment expense
7,099

 
7,012

 
7,215

 
7,127

 
7,098

Technology and related costs
6,282

 
5,487

 
5,293

 
5,221

 
4,665

Marketing
4,587

 
3,925

 
4,404

 
4,196

 
3,682

Professional services
2,865

 
9,490

 
2,994

 
2,746

 
3,679

Outsourced servicing costs
1,379

 
2,052

 
1,840

 
1,994

 
1,786

Net foreclosed property expenses
965

 
360

 
566

 
1,217

 
1,080

Postage, telephone, and delivery
818

 
945

 
840

 
964

 
857

Insurance
3,931

 
3,979

 
3,820

 
3,644

 
3,667

Loan and collection expense
1,972

 
2,017

 
1,532

 
1,754

 
2,324

Other expenses
6,133

 
3,623

 
3,650

 
1,538

 
6,318

Total non-interest expense
91,920

 
94,216

 
90,493

 
83,020

 
85,175

Income before income taxes
75,513

 
79,362

 
76,225

 
83,388

 
72,626

Income tax provision
26,621

 
28,997

 
26,673

 
31,251

 
27,358

Net income available to common stockholders
$
48,892

 
$
50,365

 
$
49,552

 
$
52,137

 
$
45,268

Per Common Share Data
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.61

 
$
0.63

 
$
0.63

 
$
0.66

 
$
0.58

Diluted earnings per share
$
0.60

 
$
0.62

 
$
0.62

 
$
0.65

 
$
0.57

Cash dividends declared
$
0.01

 
$
0.01

 
$
0.01

 
$
0.01

 
$
0.01

Weighted-average common shares outstanding
79,007

 
78,849

 
78,550

 
78,366

 
78,144

Weighted-average diluted common shares outstanding
80,673

 
80,317

 
79,856

 
79,738

 
79,401



7

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Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
Unaudited
 
Unaudited
 
Unaudited
 
Audited
 
Unaudited
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
166,607

 
$
155,292

 
$
133,001

 
$
145,147

 
$
145,477

Federal funds sold and interest-bearing deposits in banks
245,193

 
230,036

 
337,465

 
238,511

 
231,600

Loans held-for-sale
75,438

 
61,360

 
64,029

 
108,798

 
76,225

Securities available-for-sale, at fair value
1,961,099

 
1,864,636

 
1,831,848

 
1,765,366

 
1,703,926

Securities held-to-maturity, at amortized cost
1,633,235

 
1,435,334

 
1,456,760

 
1,355,283

 
1,293,433

Federal Home Loan Bank ("FHLB") stock
30,213

 
21,113

 
38,113

 
26,613

 
30,740

Loans – excluding covered assets, net of unearned fees
14,654,570

 
14,035,808

 
13,457,665

 
13,266,475

 
13,079,314

Allowance for loan losses
(180,268
)
 
(168,615
)
 
(165,356
)
 
(160,736
)
 
(162,868
)
Loans, net of allowance for loan losses and unearned fees
14,474,302

 
13,867,193

 
13,292,309

 
13,105,739

 
12,916,446

Covered assets
23,889

 
25,151

 
25,769

 
26,954

 
28,559

Allowance for covered loan losses
(4,879
)
 
(5,525
)
 
(5,526
)
 
(5,712
)
 
(6,337
)
Covered assets, net of allowance for covered loan losses
19,010

 
19,626

 
20,243

 
21,242

 
22,222

Other real estate owned, excluding covered assets
12,035

 
14,532

 
14,806

 
7,273

 
12,760

Premises, furniture, and equipment, net
44,760

 
43,394

 
41,717

 
42,405

 
38,265

Accrued interest receivable
48,512

 
47,209

 
47,349

 
45,482

 
43,064

Investment in bank owned life insurance
57,750

 
57,380

 
57,011

 
56,653

 
56,292

Goodwill
94,041

 
94,041

 
94,041

 
94,041

 
94,041

Other intangible assets
1,809

 
2,349

 
2,890

 
3,430

 
4,008

Derivative assets
62,094

 
80,995

 
66,406

 
40,615

 
59,978

Other assets 
179,462

 
174,701

 
169,384

 
196,250

 
159,531

Total assets 
$
19,105,560

 
$
18,169,191

 
$
17,667,372

 
$
17,252,848

 
$
16,888,008

Liabilities
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
Noninterest-bearing
$
4,857,470

 
$
4,511,893

 
$
4,338,177

 
$
4,355,700

 
$
4,068,816

Interest-bearing
10,631,384

 
10,045,501

 
10,126,692

 
9,989,892

 
9,828,923

Total deposits
15,488,854

 
14,557,394

 
14,464,869

 
14,345,592

 
13,897,739

Short-term borrowings
1,233,318

 
1,287,934

 
602,365

 
372,467

 
514,121

Long-term debt
338,286

 
338,262

 
688,238

 
688,215

 
688,191

Accrued interest payable
7,953

 
7,967

 
6,630

 
7,080

 
6,509

Derivative liabilities
19,236

 
27,940

 
22,498

 
18,229

 
21,967

Other liabilities
135,559

 
118,544

 
114,781

 
122,314

 
111,482

Total liabilities 
17,223,206

 
16,338,041

 
15,899,381

 
15,553,897

 
15,240,009

Equity
 
 
 
 
 
 
 
 
 
Common stock
79,101

 
78,918

 
78,894

 
78,439

 
78,197

Treasury stock

 

 
(4,389
)
 
(103
)
 
(63
)
Additional paid-in capital
1,091,275

 
1,082,173

 
1,078,470

 
1,071,674

 
1,060,274

Retained earnings
678,059

 
629,976

 
580,418

 
531,682

 
480,342

Accumulated other comprehensive income, net of tax
33,919

 
40,083

 
34,598

 
17,259

 
29,249

Total equity
1,882,354

 
1,831,150

 
1,767,991

 
1,698,951

 
1,647,999

Total liabilities and equity 
$
19,105,560

 
$
18,169,191

 
$
17,667,372

 
$
17,252,848

 
$
16,888,008


8

36318461_privatebancorplogo3q.jpg


Selected Financial Data
 
 
 
 
 
 
 
 
 
 
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
3Q16
 
2Q16
 
1Q16
 
4Q15
 
3Q15
 
Selected Statement of Income Data:
 
 
 
 
 
 
 
 
 
 
Net interest income
$
145,510

 
$
142,017

 
$
139,518

 
$
136,591

 
$
131,209

 
Net revenue (1)(2)
$
184,331

 
$
180,341

 
$
174,337

 
$
170,445

 
$
163,134

 
Operating profit (1)(2)
$
92,411

 
$
86,125

 
$
83,844

 
$
87,425

 
$
77,959

 
Provision for loan and covered loan losses
$
15,691

 
$
5,569

 
$
6,402

 
$
2,831

 
$
4,197

 
Income before income taxes
$
75,513

 
$
79,362

 
$
76,225

 
$
83,388

 
$
72,626

 
Net income available to common stockholders
$
48,892

 
$
50,365

 
$
49,552

 
$
52,137

 
$
45,268

 
Per Common Share Data:
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.61

 
$
0.63

 
$
0.63

 
$
0.66

 
$
0.58

 
Diluted earnings per share
$
0.60

 
$
0.62

 
$
0.62

 
$
0.65

 
$
0.57

 
Dividends declared
$
0.01

 
$
0.01

 
$
0.01

 
$
0.01

 
$
0.01

 
Book value (period end) (1)
$
23.64

 
$
23.04

 
$
22.29

 
$
21.48

 
$
20.90

 
Tangible book value (period end) (1)(2)
$
22.43

 
$
21.83

 
$
21.07

 
$
20.25

 
$
19.65

 
Market value (period end)
$
45.92

 
$
44.03

 
$
38.60

 
$
41.02

 
$
38.33

 
Book value multiple (period end)
1.94

x
1.91

x
1.73

x
1.91

x
1.83

x
Share Data:
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
79,007

 
78,849

 
78,550

 
78,366

 
78,144

 
Weighted-average diluted common shares outstanding
80,673

 
80,317

 
79,856

 
79,738

 
79,401

 
Common shares issued (period end)
79,640

 
79,464

 
79,443

 
79,099

 
78,865

 
Common shares outstanding (period end)
79,640

 
79,464

 
79,322

 
79,097

 
78,863

 
Performance Ratio:
 
 
 
 
 
 
 
 
 
 
Return on average common equity
10.40
%
 
11.20
%
 
11.40
%
 
12.29
%
 
11.05
%
 
Return on average assets
1.04
%
 
1.14
%
 
1.15
%
 
1.21
%
 
1.09
%
 
Return on average tangible common equity (1)(2)
11.04
%
 
11.91
%
 
12.16
%
 
13.13
%
 
11.85
%
 
Net interest margin (1)(2)
3.18
%
 
3.28
%
 
3.30
%
 
3.25
%
 
3.23
%
 
Fee revenue as a percent of total revenue (1)
20.54
%
 
20.47
%
 
19.16
%
 
19.28
%
 
18.88
%
 
Non-interest income to average assets
0.80
%
 
0.84
%
 
0.78
%
 
0.75
%
 
0.74
%
 
Non-interest expense to average assets
1.96
%
 
2.12
%
 
2.09
%
 
1.92
%
 
2.04
%
 
Net overhead ratio (1)
1.16
%
 
1.29
%
 
1.32
%
 
1.16
%
 
1.30
%
 
Efficiency ratio (1)(2)
49.87
%
 
52.24
%
 
51.91
%
 
48.71
%
 
52.21
%
 
Balance Sheet Ratios:
 
 
 
 
 
 
 
 
 
 
Loans to deposits (period end) (3)
94.61
%
 
96.42
%
 
93.04
%
 
92.48
%
 
94.11
%
 
Average interest-earning assets to average interest-bearing liabilities
153.16
%
 
151.10
%
 
153.64
%
 
152.94
%
 
149.67
%
 
Capital Ratios (period end):
 
 
 
 
 
 
 
 
 
 
Total risk-based capital (1)
12.41
%
 
12.42
%
 
12.56
%
 
12.37
%
 
12.28
%
 
Tier 1 risk-based capital (1)
10.64
%
 
10.66
%
 
10.76
%
 
10.56
%
 
10.39
%
 
Tier 1 leverage ratio (1)
10.43
%
 
10.56
%
 
10.50
%
 
10.35
%
 
10.35
%
 
Common equity Tier 1 (1)
9.71
%
 
9.70
%
 
9.76
%
 
9.54
%
 
9.35
%
 
Tangible common equity to tangible assets (1)(2)
9.40
%
 
9.60
%
 
9.51
%
 
9.34
%
 
9.23
%
 
Total equity to total assets
9.85
%
 
10.08
%
 
10.01
%
 
9.85
%
 
9.75
%
 
(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.

9

36318461_privatebancorplogo3q.jpg


Selected Financial Data (continued)
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
3Q16
 
2Q16
 
1Q16
 
4Q15
 
3Q15
Additional Selected Information:
 
 
 
 
 
 
 
 
 
Decrease (increase) credit valuation adjustment on capital markets derivatives (1)
$
910

 
$
(1,033
)
 
$
(1,904
)
 
$
1,043

 
$
(1,227
)
Salaries and employee benefits:
 
 
 
 
 
 
 
 
 
Salaries and wages
$
30,923

 
$
30,335

 
$
28,963

 
$
28,113

 
$
28,143

Share-based costs
4,728

 
4,618

 
6,357

 
4,871

 
4,509

Incentive compensation and commissions
15,604

 
15,882

 
13,307

 
14,676

 
13,308

Payroll taxes, insurance and retirement costs
4,634

 
4,491

 
9,712

 
4,959

 
4,059

Total salaries and employee benefits
$
55,889

 
$
55,326

 
$
58,339

 
$
52,619

 
$
50,019

Loan and collection expense:
 
 
 
 
 
 
 
 
 
Loan origination and servicing expense
$
1,716

 
$
1,666

 
$
1,297

 
$
1,445

 
$
1,522

Loan remediation expense
256

 
351

 
235

 
309

 
802

Total loan and collection expense
$
1,972

 
$
2,017

 
$
1,532

 
$
1,754

 
$
2,324

Transaction related expenses
$
106

 
$
6,270

 
$

 
$

 
$

Assets under management and administration (AUMA):
 
 
 
 
 
 
 
 
 
Personal managed
$
2,068,772

 
$
2,017,797

 
$
1,867,572

 
$
1,872,737

 
$
1,839,829

Corporate and institutional managed
2,653,264

 
2,526,043

 
1,592,394

 
1,787,187

 
1,800,522

Total managed assets
4,722,036

 
4,543,840

 
3,459,966

 
3,659,924

 
3,640,351

Custody assets
5,326,757

 
6,145,445

 
6,161,827

 
3,631,149

 
3,519,364

Total AUMA
$
10,048,793

 
$
10,689,285

 
$
9,621,793

 
$
7,291,073

 
$
7,159,715

Basic and Diluted Earnings per Common Share
 
 
 
 
 
 
 
 
 
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
3Q16
 
2Q16
 
1Q16
 
4Q15
 
3Q15
Basic earnings per common share
 
 
 
 
 
 
 
 
 
Net income
$
48,892

 
$
50,365

 
$
49,552

 
$
52,137

 
$
45,268

Net income allocated to participating stockholders (2)
(379
)
 
(381
)
 
(425
)
 
(412
)
 
(354
)
Net income allocated to common stockholders
$
48,513

 
$
49,984

 
$
49,127

 
$
51,725

 
$
44,914

Weighted-average common shares outstanding
79,007

 
78,849

 
78,550

 
78,366

 
78,144

Basic earnings per common share
$
0.61

 
$
0.63

 
$
0.63

 
$
0.66

 
$
0.58

Diluted earnings per common share
 
 
 
 
 
 
 
 
 
Diluted earnings applicable to common stockholders (3)
$
48,520

 
$
49,990

 
$
49,134

 
$
51,729

 
$
44,922

Weighted-average diluted common shares outstanding:
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
79,007

 
78,849

 
78,550

 
78,366

 
78,144

Dilutive effect of stock awards
1,666

 
1,468

 
1,306

 
1,372

 
1,257

Weighted-average diluted common shares outstanding
80,673

 
80,317

 
79,856

 
79,738

 
79,401

Diluted earnings per common share
$
0.60

 
$
0.62

 
$
0.62

 
$
0.65

 
$
0.57

(1) 
Refer to Glossary of Terms for definition.
(2) 
Participating stockholders are those that hold certain share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents. Such shares or units are considered participating securities (i.e., the Company’s deferred stock units and certain restricted stock units and performance share units, and restricted stock awards).
(3) 
Net income allocated to common stockholders for basic and diluted earnings per share may differ under the two-class method as a result of adding common stock equivalents for options to dilutive shares outstanding, which alters the ratio used to allocate earnings to common stockholders and participating securities for the purposes of calculating diluted earnings per share.

10

36318461_privatebancorplogo3q.jpg


Loan Portfolio Composition (excluding covered assets (1))
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9/30/16
 
% of Total
 
6/30/16
 
% of Total
 
3/31/16
 
% of Total
 
12/31/15
 
% of Total
 
9/30/15
 
% of Total
 
Unaudited
 
 
 
Unaudited
 
 
 
Unaudited
 
 
 
Audited
 
 
 
Unaudited
 
 
Commercial and industrial
$
7,446,754

 
51
%
 
$
7,141,069

 
51
%
 
$
6,812,596

 
51
%
 
$
6,747,389

 
51
%
 
$
6,654,268

 
51
%
Commercial - owner-occupied CRE
2,062,614

 
14
%
 
1,889,400

 
13
%
 
1,865,242

 
14
%
 
1,888,238

 
14
%
 
2,017,733

 
16
%
Total commercial
9,509,368

 
65
%
 
9,030,469

 
64
%
 
8,677,838

 
65
%
 
8,635,627

 
65
%
 
8,672,001

 
67
%
Commercial real estate
2,946,687

 
20
%
 
2,860,618

 
20
%
 
2,705,694

 
20
%
 
2,629,873

 
20
%
 
2,545,143

 
19
%
Commercial real estate - multi-family
883,850

 
6
%
 
787,792

 
6
%
 
764,292

 
5
%
 
722,637

 
5
%
 
704,195

 
5
%
Total commercial real estate
3,830,537

 
26
%
 
3,648,410

 
26
%
 
3,469,986

 
25
%
 
3,352,510

 
25
%
 
3,249,338

 
24
%
Construction
496,773

 
3
%
 
552,183

 
4
%
 
537,304

 
4
%
 
522,263

 
4
%
 
412,688

 
3
%
Residential real estate
525,836

 
4
%
 
497,709

 
4
%
 
477,263

 
4
%
 
461,412

 
4
%
 
439,005

 
3
%
Home equity
124,367

 
1
%
 
127,967

 
1
%
 
126,096

 
1
%
 
129,317

 
1
%
 
133,122

 
1
%
Personal
167,689

 
1
%
 
179,070

 
1
%
 
169,178

 
1
%
 
165,346

 
1
%
 
173,160

 
2
%
Total loans
$
14,654,570

 
100
%
 
$
14,035,808

 
100
%
 
$
13,457,665

 
100
%
 
$
13,266,475

 
100
%
 
$
13,079,314

 
100
%
Total new loans to new clients (2)
$
456,360

 
 
 
$
421,860

 
 
 
$
396,599

 
 
 
$
498,496

 
 
 
$
399,209

 
 
(1) 
Refer to Glossary of Terms for definition.
(2) 
Amounts are unaudited.
Commercial Loan Portfolio Composition by Industry Segment
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
(Classified pursuant to the North American Industrial Classification System standard industry descriptions and represents our client's primary business activity)
 
 
 
 
 
September 30, 2016
 
June 30, 2016
 
December 31, 2015
 
Amount
 
% of Total
 
Amount
 
% of Total
 
Amount
 
% of Total
Manufacturing
$
1,957,888

 
21
%
 
$
1,828,584

 
20
%
 
1,810,085

 
21
%
Healthcare
1,939,350

 
20
%
 
1,807,451

 
20
%
 
1,807,764

 
21
%
Finance and insurance
1,603,178

 
17
%
 
1,487,560

 
17
%
 
1,333,363

 
15
%
Wholesale trade
815,370

 
9
%
 
804,519

 
9
%
 
768,571

 
9
%
Professional, scientific and technical services
599,732

 
6
%
 
572,881

 
6
%
 
574,278

 
7
%
Real estate, rental and leasing
537,135

 
6
%
 
559,329

 
6
%
 
542,437

 
6
%
Administrative, support, waste management and remediation
499,734

 
5
%
 
486,771

 
5
%
 
481,827

 
5
%
Architecture, engineering and construction
280,378

 
3
%
 
293,087

 
3
%
 
252,351

 
3
%
Telecommunication and publishing
243,865

 
3
%
 
239,363

 
3
%
 
203,994

 
2
%
Retail
241,295

 
3
%
 
242,367

 
3
%
 
228,935

 
3
%
All other (1)
791,443

 
7
%
 
708,557

 
8
%
 
632,022

 
8
%
Total commercial (2)
$
9,509,368

 
100
%
 
$
9,030,469

 
100
%
 
$
8,635,627

 
100
%
(1) 
All other consists of numerous smaller balances across a variety of industries with no category greater than 2% of total loans.
(2) 
Includes owner-occupied commercial real estate of $2.1 billion at September 30, 2016 and $1.9 billion at June 30, 2016 and December 31, 2015.


11

36318461_privatebancorplogo3q.jpg


Commercial Real Estate and Construction Loan Portfolio by Collateral Type
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2016