PrivateBancorp Reports Upbeat Q1 Earnings - Analyst Blog

PrivateBancorp, Inc. PVTB reported impressive first-quarter 2014 results as evidenced by a nearly 6.1% gain in the share price on Apr 17. Earnings per share in the quarter were 44 cents, above the 35 cents recorded in the year-ago quarter. The bottom-line result also outpaced the Zacks Consensus Estimate by 3 cents or 7.3%.

Net income applicable to shareholders was $34.5 million, up 26.5% year over year. The stellar performance of PrivateBancorp was driven by increase in net interest income, fall in provision for credit losses and lower non-interest expenses. These positives were partially offset by decline in non-interest income.     

Performance in Detail

PrivateBancorp generated net revenues of $135.8 million in the reported quarter, up 1.1% year over year and above the Zacks Consensus Estimate of $134.0 million. Higher revenues and lower non-interest expenses led to an 8.5% year-over-year increase in operating profit to $60.0 million.

Net interest income (NII) was $108.8 million, up 5.5% year over year while net interest margin NIM improved 4 basis points (bps) to 3.23%.

Non-interest income in the quarter declined 13.9% year over year to $26.2 million. The fall was primarily due to a 60.9% decline in mortgage banking income, a 19.0% fall in income from capital markets products and a 45.8% decline in deposit service charges and fees and other income.

PrivateBancorp recorded a 4.1% year-over-year decline in non-interest expenses that came in at $75.8 million. The decrease was due to lower technology and related costs, outsourced servicing costs, net foreclosed property expenses and loan and collection expense.

Efficiency rate was 55.8%, down from 58.8% in the year-ago quarter. A decline in the efficiency ratio reflects improved profitability.

Assets under management and administration (AUMA) increased 9.4% year over year to $6.0 billion.

As of Mar 31, 2014, PrivateBancorp's net loans were $10.8 billion, up 9.1% year over year. Total deposits increased 4.3% year over year to $11.9 billion.

Credit Quality

Credit quality metrics exhibited a marked improvement with total charge-offs declining 75% year over year to $4.9 million in the reported quarter. Provision for loan losses declined 64.4% year over year to $3.4 million.

Further, PrivateBancorp's non-performing assets stood at $117.3 million, reflecting a solid decrease of 42% from the prior-year quarter, while allowance for loan losses, as a percentage of total loans, declined 19 bps to 1.34% from 1.53% in the year-ago quarter.

Capital Ratios & Profitability Ratios

PrivateBancorp's capital ratios exhibited mixed performance. As of Mar 31, 2014, total risk-based capital decreased 19 bps year over year to 13.39% while tier 1 risk-based capital stood at 11.19%, increasing 29 bps year over year.

Return on average common equity came in at 10.48%, an increase of 147 bps from the prior-year quarter. Return on average assets stood at 1.00%, rising 19 bps from 0.81% in the year-ago quarter.

PrivateBancorp presently has a $2.27 billion market capitalization and carries a Zacks Rank #3 (Hold).

Some better-ranked banks in the Regional-Midwest Banks industry include First Financial Bancorp. FFBC — scheduled to report first-quarter 2014 results on Apr 29, Peoples Bancorp Inc. PEBO — slated to report first-quarter 2014 results on Apr 22 and Old National Bancorp. ONB — scheduled to report first-quarter 2014 results on Apr 28. While First Financial Bancorp and Peoples Bancorp hold a Zacks Rank #1 (Strong Buy), Old National Bancorp carries a Zacks Rank #2 (Buy).