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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): January 18, 2017
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 January 18, 2017, PrivateBancorp, Inc. (the “Company”) announced its earnings results for the fourth quarter and year ended December 31, 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 9.01
FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

Exhibit
 
Description
 
 
 
99.1
 
Fourth Quarter and Full Year 2016 Earnings Release dated January 18, 2017 (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:
January 18, 2017
 
 
By:
 
/s/ Kevin M. Killips
 
 
 
 
 
 
Kevin M. Killips
 
 
 
 
 
 
Chief Financial Officer

INDEX TO EXHIBITS

Exhibit
 
Description
 
 
 
99.1
 
Fourth Quarter and Full Year 2016 Earnings Release dated January 18, 2017 (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 Fourth Quarter and Full Year 2016 Earnings
Earnings per share up 12 percent from prior year quarter
and up 11 percent for the year

CHICAGO, January 18, 2017 - PrivateBancorp, Inc. (NASDAQ: PVTB) today reported net income of $59.5 million, or $0.73 per diluted share, for the fourth quarter 2016, compared to $52.1 million, or $0.65 per diluted share, for the fourth quarter 2015, and $48.9 million, or $0.60 per diluted share, for the third quarter 2016. For the year ended December 31, 2016, the Company had net income of $208.4 million, or $2.57 per diluted share, compared to $185.3 million, or $2.32 per diluted share, for the year ended December 31, 2015.

“We are pleased with our fourth quarter performance to cap a strong 2016,” said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. “Through the continued successful execution of our business development efforts, and with the benefit of a rising rate environment, we achieved annual double-digit growth in loans, deposits, revenue and net income as we continued to deliver value for our clients and stockholders in 2016. Our dedicated team members remain focused on executing our strategic priorities and building new client relationships while doing more for existing clients, enabling us to drive our bottom-line results.

“We have built a premier commercial bank that brings an unparalleled level of experience and understanding to our clients,” Richman continued. “Our clients turn to us for solutions that help them grow their businesses. I am pleased with our momentum going into 2017 and look forward to more favorable conditions for the banking industry with continued strengthening in our economy.

“Finally, we continue to work toward the successful completion of our proposed merger with CIBC. The long-term strategic benefits of the transaction remain compelling. We will announce the rescheduled stockholder meeting date when it is established by our Board of Directors.”

Fourth Quarter and Full Year 2016 Highlights

Total loans grew to $15.1 billion, up $1.8 billion from a year ago and $401.7 million from September 30, 2016, driven primarily by activity in commercial and commercial real estate ("CRE") loans. At December 31, 2016, commercial loans represented 64 percent and CRE and construction loans represented 30 percent of total loans, relatively consistent with the comparative periods.


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Total deposits were $16.1 billion, increasing $1.7 billion from a year ago and $576.4 million from September 30, 2016. The loan-to-deposit ratio was 93.7 percent at December 31, 2016, compared to 92.5 percent a year ago and 94.6 percent at September 30, 2016.

Net interest margin was 3.23 percent, compared to 3.25 percent for the fourth quarter 2015 and 3.18 percent for the third quarter 2016. The sequential improvement in net interest margin reflected higher fees recognized on early loan repayments and higher short-term rates. For the full year 2016, net interest margin increased by four basis points from the prior year, reflecting increased loan yields and the benefit from continued growth in noninterest-bearing funds in a higher rate environment, offset in part by increased costs for interest-bearing funds.

Growth in earning assets continued to benefit operating profit, which increased 15 percent from the fourth quarter 2015 and 8 percent from the third quarter 2016. For the full year 2016, average interest-earning assets grew $1.9 billion to $17.8 billion and operating profit increased by $47.1 million, or 15 percent, compared to 2015.

The efficiency ratio was 48.9 percent for the fourth quarter 2016, compared to 48.7 percent for the fourth quarter 2015 and 49.9 percent for the third quarter 2016. For the full year 2016, the efficiency ratio was 50.7 percent, which was impacted by $6.7 million of transaction related expenses.

Asset quality remained strong, with nonperforming loans representing 0.56 percent of total loans at year end. The provision for loan and covered loan losses was $6.0 million for the fourth quarter 2016, compared to $2.8 million for the fourth quarter 2015 and $15.7 million for the third quarter 2016.

Return on average assets was 1.21 percent and return on average common equity was 12.4 percent for the fourth quarter 2016. For the full year 2016, return on average assets was 1.13 percent and return on average common equity was 11.4 percent.

Operating Performance

Net interest income grew to $155.4 million in the fourth quarter 2016, increasing 14 percent from the fourth quarter 2015 and 7 percent from the third quarter 2016, primarily driven by growth in average loans of 13 percent compared to fourth quarter 2015 and 4 percent compared to the third quarter 2016.

Net interest margin was 3.23 percent in the fourth quarter 2016, declining two basis points from a year ago and increasing five basis points from the third quarter 2016. For the full year 2016, net interest margin increased by four basis points from the prior year. Loan yields increased eight basis points from the third quarter 2016, attributable to higher loan fees tied to early loan repayments and continued upwards movement in LIBOR. The level of loan fees tends to be uneven quarter-to-quarter, dependent on when loans pay off during their term as well as whether early termination fees exist. Approximately 70 percent of the loan portfolio at year end was tied to one-month LIBOR, which was 77 basis points at December 31, 2016, compared to 43 basis points a year ago and 53 basis points at September 30, 2016, with most of the fourth quarter 2016 increase occurring in December. The interest rate moves during December 2016 are expected to be more impactful to loan yields during the first quarter 2017, as a meaningful portion of our variable loan portfolio reprices toward the beginning of the month. Excluding the contribution from loan fees, hedging, and the movement in LIBOR, loan yields were stable in the current environment. Deposit costs increased by one basis point from the third quarter 2016 and 10 basis points year-over year, but the impact on margin was mitigated by growth in average noninterest-bearing funds in a higher rate environment. As of year-end 2016, we had $1.7 billion of deposits indexed to the Fed funds effective or target rate, and the full effect of the December 2016 increase in the Fed funds effective rate will be reflected in first quarter 2017 deposit costs. Further interest rate increases, or changing expectations about future short-term interest rate movements, may impact market pricing and competitive dynamics for deposits generally, which may impact overall funding costs in future periods.


2


Noninterest income was $39.4 million in the fourth quarter 2016, increasing $6.8 million from the fourth quarter 2015 and $1.8 million from the third quarter 2016. Other income included gains related to loan sales of $1.5 million for the fourth quarter 2016 and $1.3 million for the third quarter 2016.

Capital markets revenue of $8.8 million for the fourth quarter 2016 reflected a positive credit valuation adjustment (CVA) of $3.1 million, compared to $1.0 million for the fourth quarter 2015 and $910,000 for the third quarter 2016. Excluding the CVA impact for all periods, capital markets revenue was $5.7 million in the fourth quarter 2016, compared to $5.3 million for the fourth quarter 2015 and $4.5 million for the third quarter 2016. Results for the fourth quarter 2016 reflected higher interest rate derivative activity from the comparative periods. Meaningful interest rate movements in fourth quarter 2016 and changing expectations about the timing and extent of future interest rate movements create potential for increased opportunities in the interest rate derivatives business in 2017.

The continued onboarding of new commercial clients benefited treasury management fees, which increased 12 percent from the fourth quarter 2015 and 3 percent from the third quarter 2016. Syndication fees were $5.1 million for the fourth quarter 2016, compared to $4.8 million for the fourth quarter 2015 and $4.7 million for the third quarter 2016. Syndication fees vary from quarter to quarter depending on the level and mix of loans originated and distributed.

Asset management revenue was $5.3 million in the fourth quarter 2016, increasing 20 percent from the fourth quarter 2015 and declining 6 percent from the third quarter 2016. Assets under management and administration were $9.7 billion at December 31, 2016, compared to $7.3 billion a year ago and $10.0 billion at September 30, 2016. Managed assets remained relatively consistent on a linked quarter basis. Custody assets declined by $351.5 million from September 30, 2016, reflecting a continuation of expected outflows from a large corporate trust account added during the first quarter 2016.

Expenses

Noninterest expense for the fourth quarter 2016 increased $12.8 million from the fourth quarter 2015 and $3.9 million from the third quarter 2016. The efficiency ratio was 48.9 percent for the fourth quarter 2016, compared to 48.7 percent for the fourth quarter 2015 and 49.9 percent for the third quarter 2016.

Higher incentive compensation accruals tied to improved performance primarily drove an increase in salaries and benefits expense of 4 percent from the third quarter 2016. Compared to the fourth quarter 2015, salaries and benefits expense increased 11 percent, primarily reflecting annual salary adjustments made during the first quarter and additional hires over the last year, as well as higher incentives tied to company performance. First quarter 2017 salaries and benefits expense will include seasonally higher payroll taxes and employee benefits.

Other expenses includes the provision for unfunded commitments, which was $1.5 million for the fourth quarter 2016, compared to $1.9 million for the third quarter 2016 and a release of reserves for unfunded commitments of $3.5 million for the fourth quarter 2015.

Credit Quality

The allowance for loan losses was $185.8 million, or 1.23 percent of total loans, at December 31, 2016, compared to $180.3 million, or 1.23 percent of total loans, at September 30, 2016. The provision for loan losses was $6.1 million for the fourth quarter 2016, compared to $2.9 million for the fourth quarter 2015 and $15.9 million for the third quarter 2016. Provision for loan loss for the third quarter 2016 included $5.6 million related to a single lending relationship. The increase in the general reserve from September 30, 2016 reflected strong loan growth and some level of credit migration. Specific reserve levels were relatively consistent on a linked quarter basis. 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. Annualized net charge-offs to average loans were 0.02 percent for the fourth quarter 2016, compared to 0.15 percent for the fourth quarter 2015 and 0.12 percent for the third quarter 2016.

3



Nonperforming assets were 0.47 percent of total assets at December 31, 2016, compared to 0.52 percent at September 30, 2016. At December 31, 2016, nonperforming loans were $83.7 million, or 0.56 percent of total loans, declining from $87.4 million, or 0.60 percent of total loans, at September 30, 2016. OREO declined $1.8 million from September 30, 2016 to $10.2 million at December 31, 2016.

Balance Sheet

Total assets were $20.1 billion at December 31, 2016, compared to $17.3 billion at December 31, 2015, and $19.1 billion at September 30, 2016. Total loans of $15.1 billion increased 13 percent from December 31, 2015, and 3 percent from September 30, 2016. Loan growth for the fourth quarter 2016 reflected loans to new clients of $652.3 million, partially offset by payoffs being higher than the five-quarter average and lower draws on revolving loans. At December 31, 2016, commercial loans represented 64 percent of total loans, and commercial real estate and construction loans represented 30 percent of total loans, relatively consistent with the prior comparative periods.

Total liabilities were $18.1 billion at December 31, 2016, compared to $15.6 billion at December 31, 2015, and $17.2 billion at September 30, 2016. Total deposits were $16.1 billion at December 31, 2016, increasing 12 percent from December 31, 2015, and 4 percent from September 30, 2016. Similar to prior years, deposit flows were stronger in the second half of 2016 compared to the first half. Deposit growth included an increase in noninterest-bearing demand deposits of $840.9 million from a year ago and $339.1 million from September 30, 2016. During 2016, deposit funding was supplemented with short-term borrowings, which increased by $1.2 billion from December 31, 2015 and $311.0 million from September 30, 2016.

Net accumulated other comprehensive income, net of tax declined $32.3 million from September 30, 2016, largely driven by a change in the value of the available-for-sale securities portfolio as a result of the increase in interest rates during the fourth quarter 2016.

Capital

As of December 31, 2016, the total risk-based capital ratio was 12.49 percent, the Tier 1 risk-based capital ratio was 10.73 percent, and the leverage ratio was 10.28 percent. The common equity Tier 1 ratio was 9.83 percent and the tangible common equity ratio was 9.14 percent at the end of the year end 2016.

Pending Transaction with CIBC

On June 29, 2016, PrivateBancorp announced that it had entered into a definitive agreement for a strategic merger transaction with CIBC, a leading Canadian bank. The completion of the transaction remains subject to the receipt of PrivateBancorp stockholder approval and CIBC’s receipt of required regulatory approvals. As previously announced, the special meeting of stockholders to vote on the transaction, originally scheduled for December 8, 2016, was postponed. The Board of Directors of PrivateBancorp will establish a new record date and meeting date for the special meeting of stockholders, which will be announced once determined.

No Quarterly Conference Call

PrivateBancorp does not intend to conduct an earnings conference call to discuss this quarterly earnings report.

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 December 31, 2016, the Company had 35 offices in 13 states and $20.1 billion in assets. The Company’s website is www.theprivatebank.com.


4


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.

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 September 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.


5


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)
 
 
 
 
 
 
 
 
Quarter Ended December 31,
 
Year Ended December 31,
 
2016
 
2015
 
2016
 
2015
 
Unaudited
 
Unaudited
 
Unaudited
 
Audited
Interest Income
 
 
 
 
 
 
 
Loans, including fees
$
158,061

 
$
137,006

 
$
591,051

 
$
517,461

Federal funds sold and interest-bearing deposits in banks
422

 
229

 
1,477

 
903

Securities:
 
 
 
 
 
 
 
Taxable
16,891

 
14,587

 
62,542

 
55,283

Exempt from Federal income taxes
2,375

 
2,306

 
9,326

 
8,270

Other interest income
163

 
115

 
622

 
295

Total interest income
177,912

 
154,243

 
665,018

 
582,212

Interest Expense
 
 
 
 
 
 
 
Deposits
16,300

 
12,364

 
58,574

 
47,106

Short-term borrowings
1,118

 
201

 
3,413

 
656

Long-term debt
5,113

 
5,087

 
20,605

 
20,035

Total interest expense
22,531

 
17,652

 
82,592

 
67,797

Net interest income
155,381

 
136,591

 
582,426

 
514,415

Provision for loan and covered loan losses
6,048

 
2,831

 
33,710

 
14,790

Net interest income after provision for loan and covered loan losses
149,333

 
133,760

 
548,716

 
499,625

Non-interest Income
 
 
 
 
 
 
 
Asset management
5,266

 
4,392

 
21,120

 
17,958

Mortgage banking
3,259

 
2,812

 
15,895

 
14,079

Capital markets products
8,824

 
6,341

 
25,323

 
18,530

Treasury management
8,849

 
7,883

 
33,942

 
30,641

Loan, letter of credit and commitment fees
5,312

 
4,958

 
21,343

 
20,648

Syndication fees
5,137

 
4,844

 
20,956

 
17,205

Deposit service charges and fees and other income
2,765

 
1,389

 
8,068

 
10,129

Net securities gains

 
29

 
1,111

 
822

Total non-interest income
39,412

 
32,648

 
147,758

 
130,012

Non-interest Expense
 
 
 
 
 
 
 
Salaries and employee benefits
58,223

 
52,619

 
227,777

 
205,019

Net occupancy and equipment expense
7,836

 
7,127

 
29,162

 
28,214

Technology and related costs
6,660

 
5,221

 
23,722

 
18,761

Marketing
4,580

 
4,196

 
17,496

 
16,122

Professional services
3,535

 
2,746

 
18,884

 
11,320

Outsourced servicing costs
930

 
1,994

 
6,201

 
7,494

Net foreclosed property expenses
1,633

 
1,217

 
3,524

 
4,210

Postage, telephone, and delivery
823

 
964

 
3,426

 
3,582

Insurance
4,066

 
3,644

 
15,796

 
13,972

Loan and collection expense
2,611

 
1,754

 
8,132

 
8,556

Other expenses
4,947

 
1,538

 
18,353

 
15,987

Total non-interest expense
95,844

 
83,020

 
372,473

 
333,237

Income before income taxes
92,901

 
83,388

 
324,001

 
296,400

Income tax provision
33,353

 
31,251

 
115,644

 
111,089

Net income available to common stockholders
$
59,548

 
$
52,137

 
$
208,357

 
$
185,311

Per Common Share Data
 
 
 
 
 
 
 
Basic earnings per share
$
0.75

 
$
0.66

 
$
2.62

 
$
2.36

Diluted earnings per share
$
0.73

 
$
0.65

 
$
2.57

 
$
2.32

Cash dividends declared
$
0.01

 
$
0.01

 
$
0.04

 
$
0.04

Weighted-average common shares outstanding
79,189

 
78,366

 
78,900

 
77,968

Weighted-average diluted common shares outstanding
81,083

 
79,738

 
80,484

 
79,206

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

7

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Consolidated Income Statements
 
 
 
 
 
 
 
 
 
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
4Q16
 
3Q16
 
2Q16
 
1Q16
 
4Q15
Interest Income
 
 
 
 
 
 
 
 
 
Loans, including fees
$
158,061

 
$
148,759

 
$
144,164

 
$
140,067

 
$
137,006

Federal funds sold and interest-bearing deposits in banks
422

 
380

 
335

 
340

 
229

Securities:
 
 
 
 
 
 
 
 
 
Taxable
16,891

 
15,283

 
15,158

 
15,210

 
14,587

Exempt from Federal income taxes
2,375

 
2,322

 
2,296

 
2,333

 
2,306

Other interest income
163

 
139

 
170

 
150

 
115

Total interest income
177,912

 
166,883

 
162,123

 
158,100

 
154,243

Interest Expense
 
 
 
 
 
 
 
 
 
Deposits
16,300

 
15,238

 
13,895

 
13,141

 
12,364

Short-term borrowings
1,118

 
1,070

 
995

 
230

 
201

Long-term debt
5,113

 
5,065

 
5,216

 
5,211

 
5,087

Total interest expense
22,531

 
21,373

 
20,106

 
18,582

 
17,652

Net interest income
155,381

 
145,510

 
142,017

 
139,518

 
136,591

Provision for loan and covered loan losses
6,048

 
15,691

 
5,569

 
6,402

 
2,831

Net interest income after provision for loan and covered loan losses
149,333

 
129,819

 
136,448

 
133,116

 
133,760

Non-interest Income
 
 
 
 
 
 
 
 
 
Asset management
5,266

 
5,590

 
5,539

 
4,725

 
4,392

Mortgage banking
3,259

 
5,060

 
4,607

 
2,969

 
2,812

Capital markets products
8,824

 
5,448

 
5,852

 
5,199

 
6,341

Treasury management
8,849

 
8,617

 
8,290

 
8,186

 
7,883

Loan, letter of credit and commitment fees
5,312

 
5,293

 
5,538

 
5,200

 
4,958

Syndication fees
5,137

 
4,721

 
5,664

 
5,434

 
4,844

Deposit service charges and fees and other income
2,765

 
2,885

 
1,060

 
1,358

 
1,389

Net securities gains

 

 
580

 
531

 
29

Total non-interest income
39,412

 
37,614

 
37,130

 
33,602

 
32,648

Non-interest Expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
58,223

 
55,889

 
55,326

 
58,339

 
52,619

Net occupancy and equipment expense
7,836

 
7,099

 
7,012

 
7,215

 
7,127

Technology and related costs
6,660

 
6,282

 
5,487

 
5,293

 
5,221

Marketing
4,580

 
4,587

 
3,925

 
4,404

 
4,196

Professional services
3,535

 
2,865

 
9,490

 
2,994

 
2,746

Outsourced servicing costs
930

 
1,379

 
2,052

 
1,840

 
1,994

Net foreclosed property expenses
1,633

 
965

 
360

 
566

 
1,217

Postage, telephone, and delivery
823

 
818

 
945

 
840

 
964

Insurance
4,066

 
3,931

 
3,979

 
3,820

 
3,644

Loan and collection expense
2,611

 
1,972

 
2,017

 
1,532

 
1,754

Other expenses
4,947

 
6,133

 
3,623

 
3,650

 
1,538

Total non-interest expense
95,844

 
91,920

 
94,216

 
90,493

 
83,020

Income before income taxes
92,901

 
75,513

 
79,362

 
76,225

 
83,388

Income tax provision
33,353

 
26,621

 
28,997

 
26,673

 
31,251

Net income available to common stockholders
$
59,548

 
$
48,892

 
$
50,365

 
$
49,552

 
$
52,137

Per Common Share Data
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.75

 
$
0.61

 
$
0.63

 
$
0.63

 
$
0.66

Diluted earnings per share
$
0.73

 
$
0.60

 
$
0.62

 
$
0.62

 
$
0.65

Cash dividends declared
$
0.01

 
$
0.01

 
$
0.01

 
$
0.01

 
$
0.01

Weighted-average common shares outstanding
79,189

 
79,007

 
78,849

 
78,550

 
78,366

Weighted-average diluted common shares outstanding
81,083

 
80,673

 
80,317

 
79,856

 
79,738



8

37563628_privatebancorplogo3qa01.jpg


Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
Unaudited
 
Unaudited
 
Unaudited
 
Unaudited
 
Audited
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
161,168

 
$
166,607

 
$
155,292

 
$
133,001

 
$
145,147

Federal funds sold and interest-bearing deposits in banks
587,563

 
245,193

 
230,036

 
337,465

 
238,511

Loans held-for-sale
103,284

 
75,438

 
61,360

 
64,029

 
108,798

Securities available-for-sale, at fair value
2,013,525

 
1,961,099

 
1,864,636

 
1,831,848

 
1,765,366

Securities held-to-maturity, at amortized cost
1,738,123

 
1,633,235

 
1,435,334

 
1,456,760

 
1,355,283

Federal Home Loan Bank ("FHLB") stock
54,163

 
30,213

 
21,113

 
38,113

 
26,613

Loans – excluding covered assets, net of unearned fees
15,056,241

 
14,654,570

 
14,035,808

 
13,457,665

 
13,266,475

Allowance for loan losses
(185,765
)
 
(180,268
)
 
(168,615
)
 
(165,356
)
 
(160,736
)
Loans, net of allowance for loan losses and unearned fees
14,870,476

 
14,474,302

 
13,867,193

 
13,292,309

 
13,105,739

Covered assets
22,063

 
23,889

 
25,151

 
25,769

 
26,954

Allowance for covered loan losses
(4,766
)
 
(4,879
)
 
(5,525
)
 
(5,526
)
 
(5,712
)
Covered assets, net of allowance for covered loan losses
17,297

 
19,010

 
19,626

 
20,243

 
21,242

Other real estate owned, excluding covered assets
10,203

 
12,035

 
14,532

 
14,806

 
7,273

Premises, furniture, and equipment, net
46,967

 
44,760

 
43,394

 
41,717

 
42,405

Accrued interest receivable
57,986

 
48,512

 
47,209

 
47,349

 
45,482

Investment in bank owned life insurance
58,115

 
57,750

 
57,380

 
57,011

 
56,653

Goodwill
94,041

 
94,041

 
94,041

 
94,041

 
94,041

Other intangible assets
1,269

 
1,809

 
2,349

 
2,890

 
3,430

Derivative assets
27,965

 
62,094

 
80,995

 
66,406

 
40,615

Other assets 
211,628

 
179,462

 
174,701

 
169,384

 
196,250

Total assets 
$
20,053,773

 
$
19,105,560

 
$
18,169,191

 
$
17,667,372

 
$
17,252,848

Liabilities
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
Noninterest-bearing
$
5,196,587

 
$
4,857,470

 
$
4,511,893

 
$
4,338,177

 
$
4,355,700

Interest-bearing
10,868,642

 
10,631,384

 
10,045,501

 
10,126,692

 
9,989,892

Total deposits
16,065,229

 
15,488,854

 
14,557,394

 
14,464,869

 
14,345,592

Short-term borrowings
1,544,746

 
1,233,318

 
1,287,934

 
602,365

 
372,467

Long-term debt
338,310

 
338,286

 
338,262

 
688,238

 
688,215

Accrued interest payable
9,063

 
7,953

 
7,967

 
6,630

 
7,080

Derivative liabilities
18,122

 
19,236

 
27,940

 
22,498

 
18,229

Other liabilities
158,628

 
135,559

 
118,544

 
114,781

 
122,314

Total liabilities 
18,134,098

 
17,223,206

 
16,338,041

 
15,899,381

 
15,553,897

Equity
 
 
 
 
 
 
 
 
 
Common stock
79,313

 
79,101

 
78,918

 
78,894

 
78,439

Treasury stock

 

 

 
(4,389
)
 
(103
)
Additional paid-in capital
1,101,946

 
1,091,275

 
1,082,173

 
1,078,470

 
1,071,674

Retained earnings
736,798

 
678,059

 
629,976

 
580,418

 
531,682

Accumulated other comprehensive income, net of tax
1,618

 
33,919

 
40,083

 
34,598

 
17,259

Total equity
1,919,675

 
1,882,354

 
1,831,150

 
1,767,991

 
1,698,951

Total liabilities and equity 
$
20,053,773

 
$
19,105,560

 
$
18,169,191

 
$
17,667,372

 
$
17,252,848


9

37563628_privatebancorplogo3qa01.jpg


Selected Financial Data
 
 
 
 
 
 
 
 
 
 
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
4Q16
 
3Q16
 
2Q16
 
1Q16
 
4Q15
 
Selected Statement of Income Data:
 
 
 
 
 
 
 
 
 
 
Net interest income
$
155,381

 
$
145,510

 
$
142,017

 
$
139,518

 
$
136,591

 
Net revenue (1)(2)
$
196,027

 
$
184,331

 
$
180,341

 
$
174,337

 
$
170,445

 
Operating profit (1)(2)
$
100,183

 
$
92,411

 
$
86,125

 
$
83,844

 
$
87,425

 
Provision for loan and covered loan losses
$
6,048

 
$
15,691

 
$
5,569

 
$
6,402

 
$
2,831

 
Income before income taxes
$
92,901

 
$
75,513

 
$
79,362

 
$
76,225

 
$
83,388

 
Net income available to common stockholders
$
59,548

 
$
48,892

 
$
50,365

 
$
49,552

 
$
52,137

 
Per Common Share Data:
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.75

 
$
0.61

 
$
0.63

 
$
0.63

 
$
0.66

 
Diluted earnings per share
$
0.73

 
$
0.60

 
$
0.62

 
$
0.62

 
$
0.65

 
Dividends declared
$
0.01

 
$
0.01

 
$
0.01

 
$
0.01

 
$
0.01

 
Book value (period end) (1)
$
24.04

 
$
23.64

 
$
23.04

 
$
22.29

 
$
21.48

 
Tangible book value (period end) (1)(2)
$
22.85

 
$
22.43

 
$
21.83

 
$
21.07

 
$
20.25

 
Market value (period end)
$
54.19

 
$
45.92

 
$
44.03

 
$
38.60

 
$
41.02

 
Book value multiple (period end)
2.25

x
1.94

x
1.91

x
1.73

x
1.91

x
Share Data:
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
79,189

 
79,007

 
78,849

 
78,550

 
78,366

 
Weighted-average diluted common shares outstanding
81,083

 
80,673

 
80,317

 
79,856

 
79,738

 
Common shares issued (period end)
79,849

 
79,640

 
79,464

 
79,443

 
79,099

 
Common shares outstanding (period end)
79,849

 
79,640

 
79,464

 
79,322

 
79,097

 
Performance Ratio:
 
 
 
 
 
 
 
 
 
 
Return on average common equity
12.40
%
 
10.40
%
 
11.20
%
 
11.40
%
 
12.29
%
 
Return on average assets
1.21
%
 
1.04
%
 
1.14
%
 
1.15
%
 
1.21
%
 
Return on average tangible common equity (1)(2)
13.12
%
 
11.04
%
 
11.91
%
 
12.16
%
 
13.13
%
 
Net interest margin (1)(2)
3.23
%
 
3.18
%
 
3.28
%
 
3.30
%
 
3.25
%
 
Fee revenue as a percent of total revenue (1)
20.23
%
 
20.54
%
 
20.47
%
 
19.16
%
 
19.28
%
 
Non-interest income to average assets
0.80
%
 
0.80
%
 
0.84
%
 
0.78
%
 
0.75
%
 
Non-interest expense to average assets
1.95
%
 
1.96
%
 
2.12
%
 
2.09
%
 
1.92
%
 
Net overhead ratio (1)
1.15
%
 
1.16
%
 
1.29
%
 
1.32
%
 
1.16
%
 
Efficiency ratio (1)(2)
48.89
%
 
49.87
%
 
52.24
%
 
51.91
%
 
48.71
%
 
Balance Sheet Ratios:
 
 
 
 
 
 
 
 
 
 
Loans to deposits (period end) (3)
93.72
%
 
94.61
%
 
96.42
%
 
93.04
%
 
92.48
%
 
Average interest-earning assets to average interest-bearing liabilities
155.71
%
 
153.16
%
 
151.10
%
 
153.64
%
 
152.94
%
 
Capital Ratios (period end):
 
 
 
 
 
 
 
 
 
 
Total risk-based capital (1)
12.49
%
 
12.41
%
 
12.42
%
 
12.56
%
 
12.37
%
 
Tier 1 risk-based capital (1)
10.73
%
 
10.64
%
 
10.66
%
 
10.76
%
 
10.56
%
 
Tier 1 leverage ratio (1)
10.28
%
 
10.43
%
 
10.56
%
 
10.50
%
 
10.35
%
 
Common equity Tier 1 (1)
9.83
%
 
9.71
%
 
9.70
%
 
9.76
%
 
9.54
%
 
Tangible common equity to tangible assets (1)(2)
9.14
%
 
9.40
%
 
9.60
%
 
9.51
%
 
9.34
%
 
Total equity to total assets
9.57
%
 
9.85
%
 
10.08
%
 
10.01
%
 
9.85
%
 
(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.

10

37563628_privatebancorplogo3qa01.jpg


Selected Financial Data (continued)
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
4Q16
 
3Q16
 
2Q16
 
1Q16
 
4Q15
Additional Selected Information:
 
 
 
 
 
 
 
 
 
Decrease (increase) credit valuation adjustment on capital markets derivatives (1)
$
3,112

 
$
910

 
$
(1,033
)
 
$
(1,904
)
 
$
1,043

Salaries and employee benefits:
 
 
 
 
 
 
 
 
 
Salaries and wages
$
30,974

 
$
30,923

 
$
30,335

 
$
28,963

 
$
28,113

Share-based costs
5,034

 
4,728

 
4,618

 
6,357

 
4,871

Incentive compensation and commissions
17,144

 
15,604

 
15,882

 
13,307

 
14,676

Payroll taxes, insurance and retirement costs
5,071

 
4,634

 
4,491

 
9,712

 
4,959

Total salaries and employee benefits
$
58,223

 
$
55,889

 
$
55,326

 
$
58,339

 
$
52,619

Loan and collection expense:
 
 
 
 
 
 
 
 
 
Loan origination and servicing expense
$
1,281

 
$
1,716

 
$
1,666

 
$
1,297

 
$
1,445

Loan remediation expense
1,330

 
256

 
351

 
235

 
309

Total loan and collection expense
$
2,611

 
$
1,972

 
$
2,017

 
$
1,532

 
$
1,754

Transaction related expenses
$
329

 
$
106

 
$
6,270

 
$

 
$

Assets under management and administration (AUMA):
 
 
 
 
 
 
 
 
 
Personal managed
$
2,046,758

 
$
2,068,772

 
$
2,017,797

 
$
1,867,572

 
$
1,872,737

Corporate and institutional managed
2,643,041

 
2,653,264

 
2,526,043

 
1,592,394

 
1,787,187

Total managed assets
4,689,799

 
4,722,036

 
4,543,840

 
3,459,966

 
3,659,924

Custody assets
4,975,269

 
5,326,757

 
6,145,445

 
6,161,827

 
3,631,149

Total AUMA
$
9,665,068

 
$
10,048,793

 
$
10,689,285

 
$
9,621,793

 
$
7,291,073

Basic and Diluted Earnings per Common Share
 
 
 
 
 
 
 
 
 
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
4Q16
 
3Q16
 
2Q16
 
1Q16
 
4Q15
Basic earnings per common share
 
 
 
 
 
 
 
 
 
Net income
$
59,548

 
$
48,892

 
$
50,365

 
$
49,552

 
$
52,137

Net income allocated to participating stockholders (2)
(475
)
 
(379
)
 
(381
)
 
(425
)
 
(412
)
Net income allocated to common stockholders
$
59,073

 
$
48,513

 
$
49,984

 
$
49,127

 
$
51,725

Weighted-average common shares outstanding
79,189

 
79,007

 
78,849

 
78,550

 
78,366

Basic earnings per common share
$
0.75

 
$
0.61

 
$
0.63

 
$
0.63

 
$
0.66

Diluted earnings per common share
 
 
 
 
 
 
 
 
 
Diluted earnings applicable to common stockholders (3)
$
59,084

 
$
48,520

 
$
49,990

 
$
49,134

 
$
51,729

Weighted-average diluted common shares outstanding:
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
79,189

 
79,007

 
78,849

 
78,550

 
78,366

Dilutive effect of stock awards
1,894

 
1,666

 
1,468

 
1,306

 
1,372

Weighted-average diluted common shares outstanding
81,083

 
80,673

 
80,317

 
79,856

 
79,738

Diluted earnings per common share
$
0.73

 
$
0.60

 
$
0.62

 
$
0.62

 
$
0.65

(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., certain of the Company’s deferred, restricted stock and performance share units, and nonvested 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.

11

37563628_privatebancorplogo3qa01.jpg


Loan Portfolio Composition (excluding covered assets (1))
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12/31/16
 
% of Total
 
9/30/16
 
% of Total
 
6/30/16
 
% of Total
 
3/31/16
 
% of Total
 
12/31/15
 
% of Total
 
Unaudited
 
 
 
Unaudited
 
 
 
Unaudited
 
 
 
Unaudited
 
 
 
Audited
 
 
Commercial and industrial
$
7,506,977

 
50
%
 
$
7,446,754

 
51
%
 
$
7,141,069

 
51
%
 
$
6,812,596

 
51
%
 
$
6,747,389

 
51
%
Commercial - owner-occupied CRE
2,142,068

 
14
%
 
2,062,614

 
14
%
 
1,889,400

 
13
%
 
1,865,242

 
14
%
 
1,888,238

 
14
%
Total commercial
9,649,045

 
64
%
 
9,509,368

 
65
%
 
9,030,469

 
64
%
 
8,677,838

 
65
%
 
8,635,627

 
65
%
Commercial real estate
3,127,373

 
21
%
 
2,946,687

 
20
%
 
2,860,618

 
20
%
 
2,705,694

 
20
%
 
2,629,873

 
20
%
Commercial real estate - multi-family
993,352

 
6
%
 
883,850

 
6
%
 
787,792

 
6
%
 
764,292

 
5
%
 
722,637

 
5
%
Total commercial real estate
4,120,725

 
27
%
 
3,830,537

 
26
%
 
3,648,410

 
26
%
 
3,469,986

 
25
%
 
3,352,510

 
25
%
Construction
417,955

 
3
%
 
496,773

 
3
%
 
552,183

 
4
%
 
537,304

 
4
%
 
522,263

 
4
%
Residential real estate
581,757

 
4
%
 
525,836

 
4
%
 
497,709

 
4
%
 
477,263

 
4
%
 
461,412

 
4
%
Home equity
119,049

 
1
%
 
124,367

 
1
%
 
127,967

 
1
%
 
126,096

 
1
%
 
129,317

 
1
%
Personal
167,710

 
1
%
 
167,689

 
1
%
 
179,070

 
1
%
 
169,178

 
1
%
 
165,346

 
1
%
Total loans
$
15,056,241

 
100
%
 
$
14,654,570

 
100
%
 
$
14,035,808

 
100
%
 
$
13,457,665

 
100
%
 
$
13,266,475

 
100
%
Total new loans to new clients (2)
$
652,251

 
 
 
$
456,360

 
 
 
$
421,860

 
 
 
$
396,599

 
 
 
$
498,496

 
 
(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)
 
 
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
Amount
 
% of Total
 
Amount
 
% of Total
 
Amount
 
% of Total
Manufacturing
$
1,843,901

 
19
%
 
$
1,957,888

 
21
%
 
$
1,810,085

 
21
%
Healthcare
2,016,041

 
21
%
 
1,939,350

 
20
%
 
1,807,764

 
21
%
Finance and insurance
1,669,453

 
17
%
 
1,603,178

 
17
%
 
1,333,363

 
15
%
Wholesale trade
860,657

 
9
%
 
815,370

 
9
%
 
768,571

 
9
%
Professional, scientific and technical services
617,264

 
6
%
 
599,732

 
6
%
 
574,278

 
7
%
Real estate, rental and leasing
583,701

 
6
%
 
537,135

 
6
%
 
542,437

 
6
%
Administrative, support, waste management and remediation
537,491

 
6
%
 
499,734

 
5
%
 
481,827

 
5
%
Architecture, engineering and construction
298,191

 
3
%
 
280,378

 
3
%
 
252,351

 
3
%
Telecommunication and publishing
250,941

 
3
%
 
243,865

 
3
%
 
203,994

 
2
%
Retail
231,739

 
2
%
 
241,295

 
3
%
 
228,935

 
3
%
All other (1)
739,666

 
8
%
 
791,443

 
7
%
 
632,022

 
8
%
Total commercial (2)
$
9,649,045

 
100
%
 
$
9,509,368

 
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 both December 31, 2016 and September 30, 2016 and $1.9 billion at December 31, 2015.
 

12

37563628_privatebancorplogo3qa01.jpg


Commercial Real Estate and Construction Loan Portfolio by Collateral Type
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
Amount
 
% of Total
 
Amount
 
% of Total
 
Amount
 
% of Total
Commercial Real Estate