PrivateBancorp Reports Earnings Per Share of $0.41 for the Fourth Quarter 2005 and $1.58 for 200518 January 2006
PrivateBancorp, Inc. (Nasdaq: PVTB) today reported earnings of $0.41 per diluted share for the fourth quarter 2005 compared to fourth quarter 2004 earnings per diluted share of $0.36, an increase of 14 percent. Net income for the fourth quarter 2005 was $8.9 million compared to fourth quarter 2004 net income of $7.5 million. During the fourth quarter, reported earnings per share were reduced by $0.02 per share due to the combined impact of a charge associated with the early redemption of the Company's outstanding 9.50% trust preferred securities, and securities losses, which were partially offset by a gain on an interest rate swap and on our sale of $40.0 million of FHLB advances.
For the twelve months ended December 31, 2005, net income was $33.4 million, or $1.58 per diluted share, compared to net income of $27.0 million, or $1.30 per diluted share, for the twelve months ended December 31, 2004, reflecting a 21 percent increase in diluted earnings per share year over year. Reported results include the financial results of The PrivateBank -- Michigan, from its acquisition date of June 20, 2005.
"Strong growth in our core private banking business continued to fuel our financial performance. During the fourth quarter, we experienced strong growth in core deposits and loans. During the year, organic core deposit and loan growth were strong across our network of offices, reflecting growth of 35 percent and 39 percent, respectively" said Ralph B. Mandell, Chairman, President and CEO. "Overall balance sheet growth, a relatively stable net interest margin and increases in wealth management and other income combined to drive our earnings performance."
"During this period of strong growth, we have worked diligently to maintain our credit quality. In fact, credit quality at year-end 2005 improved from the levels experienced at year-end 2004. The ratio of nonperforming loans to total loans at year's end stood at four basis points," Mandell said.
For the fourth quarter 2005, net interest income totaled $27.7 million compared to fourth quarter 2004 net interest income of $20.2 million, an increase of $7.5 million or 37 percent, primarily due to growth in earning assets compared to the year earlier period. Net interest income for The PrivateBank -- Michigan was $3.9 million for the fourth quarter 2005. Net interest margin (on a tax equivalent basis) was 3.55 percent in the fourth quarter 2005, down from 3.63 percent in the prior year fourth quarter and up two basis points from the third quarter 2005.
As previously announced, on December 9, 2005, the Company issued $40.0 million of trust preferred securities and related subordinated debentures. These securities, which mature in December 2035, are redeemable at par at the Company's option after five years, pay interest initially at a rate of 6.10% until December 2010, and thereafter at a rate equal to the three-month LIBOR rate plus 1.50%. A portion of the proceeds were used to fund the redemption of $20.0 million in previously outstanding 9.50% trust preferred securities and related subordinated debentures on December 31, 2005. As a result of the early redemption, we incurred a charge to earnings of $980,000, or $0.03 per share, relating to the remaining unamortized underwriting commissions and offering expenses associated with the issuance of these securities in 2001.
The provision for loan losses was $1.7 million in the fourth quarter 2005, compared to $1.5 million in the prior year fourth quarter and $2.0 million in the third quarter 2005. The year-to-year increase in the provision for loan losses reflects the impact of continued strong loan growth. Net charge-offs were $186,000 in the fourth quarter 2005 versus net charge offs of $263,000 in the prior year quarter and net recoveries of $686,000 in the third quarter 2005. The allowance for loan losses as a percentage of total loans was 1.13 percent as of December 31, 2005, down from 1.15 percent at September 30, 2005 and December 31, 2004. The allowance stood at 22.0 times non-performing loans at December 31, 2005 versus 7.5 times non-performing loans at December 31, 2004 and 19.5 times non-performing loans at September 30, 2005. At December 31, 2005, nonperforming loans as a percentage of total loans were 0.04 percent, down from 0.05 percent at September 30, 2005 and 0.15 percent at December 31, 2004.
Non interest income increased 34 percent to $5.0 million in the fourth quarter 2005 from $3.7 million in the fourth quarter 2004 and was down 9 percent, or $495,000, from the third quarter 2005. The growth in non interest income for the fourth quarter 2005 as compared to the prior year fourth quarter was driven primarily by increased wealth management income and other income. The sequential decrease in non interest income is due to a decrease in mortgage banking income.
Wealth management fee income increased to $2.8 million for the fourth quarter 2005, up from $2.1 million in the fourth quarter 2004 and $2.6 million in the third quarter 2005. Wealth management assets under management increased 41 percent to $2.4 billion at December 31, 2005 compared to $1.7 billion at December 31, 2004 and up 18 percent from $2.1 billion at September 30, 2005. Excluding Michigan's assets under management at date of acquisition, wealth management assets under management increased by 29 percent year over year.
Mortgage banking income decreased 6 percent to $784,000 for the fourth quarter 2005 compared to $834,000 for the fourth quarter 2004 and down 39 percent from $1.3 million during the third quarter 2005. On a quarter-linked basis, the decrease in non interest income resulted primarily from a reduction in revenue from the sale of residential real estate loans in the secondary market.
During the fourth quarter 2005, the Company recognized $275,000 of other income associated with the sale of $40.0 million of Federal Home Loan Bank -- Chicago ("FHLB Chicago") advances to a third party bank. For the fourth quarter 2005, a $252,000 gain from an interest rate swap combined with securities losses of $192,000 resulted in $60,000 of other income, compared to a loss of $134,000 in the fourth quarter 2004 and a gain of $395,000 in the third quarter 2005.
Non interest expense increased to $18.1 million in the fourth quarter 2005 from $12.0 million in the prior year quarter and $16.6 million in the third quarter 2005. The increase in non interest expense as compared to the fourth quarter 2004 is primarily attributable to the increase in the scale and scope of the Company's operations, including the acquisition of The PrivateBank -- Michigan, which had non interest expense of $2.6 million for the quarter. Other factors driving increases in non interest expense include increased personnel, professional fees and marketing expenditures attributable to growth in the Company's operations, as well as $980,000, or $0.03 per share, associated with the early redemption of the outstanding 9.50% trust preferred securities during the fourth quarter.
Full-time equivalent employees at quarter's end increased to 386 from 261 at December 31, 2004 and from 366 at September 30, 2005, reflecting the addition of 73 people as a result of the acquisition of The PrivateBank -- Michigan, as well as increases associated with our overall growth. At December 31, 2005, the Company had 114 managing directors compared to 80 at December 31, 2004 and 109 managing directors at September 30, 2005. The efficiency ratio was 53.6 percent in the fourth quarter 2005 compared to 48.3 percent in the prior year quarter and 50.4 percent in the third quarter 2005. The increase is primarily attributable to the impact of the expense of the unamortized underwriting commissions and offering expenses associated with the early redemption of the trust preferred securities on December 31, 2005. Excluding the impact of the trust preferred securities, the efficiency ratio would have been 50.8 percent.
Total assets were $3.5 billion at December 31, 2005, an increase of 38 percent from $2.5 billion at December 31, 2004, and an increase of 5 percent from $3.3 billion at September 30, 2005. Total assets of The PrivateBank -- Michigan were $462.9 million at December 31, 2005. At December 31, 2005, total loans were $2.6 billion, versus $1.7 billion at December 31, 2004 and $2.4 billion at September 30, 2005. Total loans of The PrivateBank -- Michigan were $397.8 million at December 31, 2005.
Investment securities were $695.2 million at December 31, 2005, down from $764.0 million at December 31, 2004 and $720.1 million at September 30, 2005. The decrease in the investment portfolio during the quarter was due to the combined effect of run-off of mortgage-related securities and the redemption of FHLB Chicago stock. During the fourth quarter 2005, the Company had net redemptions of $8.5 million of FHLB Chicago stock, reducing the investment to $138.5 million from $147.0 million at September 30, 2005. During the fourth quarter 2005, the annualized yield paid by the FHLB Chicago was reduced to 3.75 percent from the 5.0 percent yield paid during the third quarter 2005.
Total deposits were $2.8 billion at December 31, 2005, up from $1.9 billion at December 30, 2004 and up from $2.6 billion at September 30, 2005. The PrivateBank -- Michigan contributed deposits of $328.9 million to the consolidated total at December 31, 2005. Core deposits, defined as total deposits less brokered deposits, increased 54 percent to $2.2 billion compared to $1.4 billion at December 31, 2004, and were up $193.0 million, or 9 percent, from $2.0 billion at September 30, 2005. Brokered deposits were $586.6 million at December 31, 2005, up 39 percent from $423.1 million at December 31, 2004 and up $58.0 million, or 11 percent, from $528.7 million at September 30, 2005. Funds borrowed, which include Federal Home Loan Bank advances, decreased 28 percent to $297.0 million at December 31, 2005 from $414.5 million at December 31, 2004, and decreased 29 percent from $417.7 million at September 30, 2005, primarily as a result of the sale of $40.0 million of FHLB advances to a third party commercial bank during the fourth quarter 2005.
PrivateBancorp, Inc. was organized in 1989 to provide highly personalized financial services primarily to affluent individuals, professionals, owners of closely-held businesses and commercial real estate investors. The Company uses a European tradition of "private banking" as a model to develop lifetime relationships with its clients. Utilizing a team of highly qualified managing directors, The PrivateBank tailors products and services to meet each client's needs in personal and commercial banking services and wealth management services. The Company, which had assets of $3.5 billion as of December 31, 2005, has 13 offices located in the Chicago, Detroit, Milwaukee, and St. Louis metropolitan areas.
Additional information can be found in the Investor Relations section of PrivateBancorp, Inc.'s website at http://www.pvtb.com.
Forward-Looking Statements: Statements contained in this news release that are not historical facts may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to, fluctuations in market rates of interest and loan and deposit pricing, deterioration in asset quality due to an economic downturn in the greater Chicago, Detroit, Milwaukee, and St. Louis metropolitan areas, legislative or regulatory changes, adverse developments in the Company's loan or investment portfolios, the dividend and redemption practices of the FHLB Chicago relating to its stock and the Company's ability to redeem the shares of FHLB Chicago stock it owns, slower than anticipated growth of the Company's business or unanticipated business declines, unforeseen difficulties in the continued integration of The PrivateBank -- Michigan or higher than expected operational costs, unexpected difficulties in the continued integration of or in operating our mortgage banking business, competition and the possible dilutive effect of potential acquisitions, expansion or future capital raises. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update publicly any of these statements in light of future events unless required under the federal securities laws.
PrivateBancorp, Inc.
Consolidated Statements of Income
(dollars in thousands except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
unaudited unaudited unaudited audited
Interest Income
Interest and fees on
loans $45,244 $22,802 $139,613 $79,499
Interest on
investment
securities 8,585 9,386 36,319 33,571
Interest on
short-term
investments 207 12 500 40
Total Interest
Income 54,036 32,200 176,432 113,110
Interest Expense
Interest on
deposits 21,000 9,495 62,649 30,970
Interest on
borrowings 3,756 2,049 13,367 6,659
Interest on long-term
debt - trust preferred
securities 1,563 484 4,016 1,939
Total Interest Expense 26,319 12,028 80,032 39,568
Net Interest Income 27,717 20,172 96,400 73,542
Provision for
loan losses 1,690 1,498 6,538 4,399
Net Interest Income
After Provision 26,027 18,674 89,862 69,143
Non Interest Income
Wealth management
income 2,771 2,113 9,945 8,316
Mortgage banking income 784 834 3,886 2,856
Other income 1,361 903 4,276 3,029
Net securities
(losses) gains (192) (123) 499 968
Gains (losses) on
interest rate swap 252 (11) 404 (870)
Total Non Interest
Income 4,976 3,716 19,010 14,299
Non Interest Expense
Salaries and benefits 9,969 7,124 33,553 26,027
Occupancy expense 2,012 1,567 7,517 5,671
Professional fees 1,736 1,082 5,756 5,054
Marketing 1,140 695 3,549 2,521
Data processing 820 529 2,832 2,009
Amortization of
intangibles 156 42 411 168
Insurance 287 276 1,095 919
Other operating
expenses 2,006 717 5,215 3,305
Total Non Interest
Expense 18,126 12,032 59,928 45,674
Minority interest
expense 76 64 307 270
Income Before Income
Taxes 12,801 10,294 48,637 37,498
Income tax expense 3,951 2,768 15,217 10,503
Net Income $8,850 $7,526 $33,420 $26,995
Weighted Average
Shares
Outstanding 20,427,363 19,911,662 20,202,415 19,725,855
Diluted Average
Shares
Outstanding 21,410,469 20,976,725 21,138,387 20,690,396
Earnings Per Share
Basic $0.43 $0.38 $1.65 $1.37
Diluted $0.41 $0.36 $1.58 $1.30
Note 1: Certain reclassifications have been made to prior period
statements to place them on a basis comparable with the current
period financial statements.
PrivateBancorp, Inc.
Consolidated Balance Sheets
(dollars in thousands except per share data)
12/31/05 12/31/04
unaudited audited
Assets
Cash and due from banks $47,736 $49,534
Short-term investments 14,133 1,120
Investment securities: available-for-sale 695,151 763,985
Loans held for sale 5,269 7,200
Loans 2,608,067 1,653,363
Allowance for loan losses (29,388) (18,986)
Net loans 2,578,679 1,634,377
Premises and equipment, net 11,754 6,486
Goodwill 63,176 20,547
Other assets 78,312 52,568
Total Assets $3,494,210 $2,535,817
Liabilities
Non-interest bearing deposits $252,625 $165,170
Interest bearing deposits 2,570,757 1,707,465
Total deposits 2,823,382 1,872,635
Funds borrowed 296,980 414,519
Long-term debt - trust preferred securities 98,000 20,000
Other liabilities 40,318 34,590
Total Liabilities 3,258,680 2,341,744
Stockholders' Equity
Common stock and additional paid-in-capital 134,013 120,491
Treasury stock (2,728) (2,207)
Retained earnings 104,710 73,789
Accumulated other comprehensive income 7,434 7,056
Deferred compensation (7,899) (5,056)
Total Stockholders' Equity 235,530 194,073
Total Liabilities and
Stockholders' Equity $3,494,210 $2,535,817
Book Value Per Share $11.22 $9.51
Note 1: Certain reclassifications have been made to prior period
statements to place them on a basis comparable with the current
period financial statements.
Source: prnewswire
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