Oct. 26, 2009 (PR Newswire) -- CHICAGO, Oct. 26 /PRNewswire-FirstCall/ -- PrivateBancorp, Inc. (Nasdaq: PVTB) today reported a net loss of $31.2 million, or $0.68 per diluted share, for the third quarter ended September 30, 2009, compared with a net loss of $7.8 million, or $0.25 per diluted share, for the third quarter 2008. For the nine months ended September 30, 2009, the net loss was $23.9 million, or $0.62 per diluted share, compared to a net loss of $30.7 million, or $1.07 per diluted share, for the prior year period.

"Despite the earnings setback this quarter, we are meeting many of the goals of our Strategic Growth Plan and, most importantly, we remain well-positioned to seize market opportunities that drive long-term shareholder value," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "The ongoing weakness in the economy continues to impact our loan portfolio, and we are taking steps to address these credit quality issues. At the same time, we have not lost sight of our fundamental belief in serving our clients and our communities, and you can see evidence of those successes in our deposit and loan growth, which continue to drive our core performance."

Notable items in the third quarter included:

--  Provision for loan losses was $90.0 million and net charge-offs were
$37.3 million, resulting in an increased allowance for loan losses of
$192.8 million or 2.14 percent of total loans.
--  Net revenue grew 6 percent over the second quarter to $101.2 million,
including $11.5 million from the Founders Bank transaction, from $95.8
million and net interest margin grew 10 basis points to 3.09 percent.
--  Client deposits grew 21 percent from the second quarter, including
$793.9 million from the Founders Bank transaction and $759.6 million of
organic growth; while loans grew 3 percent, reflecting selectivity and
market conditions.

--  Total risk-based capital ratio was 13.44 percent, Tier 1 capital ratio
was 11.04 percent and tangible common equity ratio was 6.00 percent.

Credit Quality (Excluding Covered Assets)

During the quarter, credit quality continued the negative trend from prior periods reflecting the challenging economy. Defaulted loans increased, causing a significant rise in the Company's non-performing loans. The Company had $396.6 million in total non-performing assets at September 30, 2009, compared to $106.5 million at September 30, 2008, and $212.8 million at June 30, 2009. The third quarter increase in non-performing assets included $37 million from Shared National Credits. Non-performing assets to total assets were 3.28 percent at September 30, 2009 (non-performing assets to total assets excluding covered assets were 3.43 percent), compared to 1.18 percent at September 30, 2008, and 1.94 percent at June 30, 2009.

As a result of the credit quality deterioration in the quarter, the Company took additional steps to review loan exposures in targeted areas of its credit portfolio, concentrating primarily on the commercial real estate sector and loans originated prior to November 2007. The targeted review of loans assessed loan performance, underlying project characteristics and the strength of sponsor support, and it provided the Company greater insight into existing and emerging credit issues to proactively mitigate credit risk in future quarters.

Based on the credit quality deterioration in the quarter and in light of the results of the credit portfolio review, the Company increased the allowance for loan losses. The third quarter 2009 provision for loan losses was $90.0 million, compared to $30.2 million in the third quarter 2008 and $21.5 million in the second quarter 2009. The allowance for loan losses as a percentage of total loans increased to 2.14 percent at September 30, 2009, compared with 1.37 percent at September 30, 2008, and 1.60 percent at June 30, 2009. Charge-offs were $40.1 million for the quarter ended September 30, 2009, offset by recoveries of $2.8 million, and $12.6 million for the quarter ended June 30, 2009, offset by recoveries of $4.1 million.

The increase in provision expense and elevated levels of non-performing loans reflects ongoing deterioration primarily in the Company's commercial real estate portfolio but also across select industry sectors. The increased level of loan loss coverage reflects growth in non-performing assets and recognition of lower underlying collateral values. During the quarter, deterioration of the commercial real estate portfolio followed trends in the sector, including elevated commercial vacancy rates, sponsor bankruptcies and downward pressure on real estate values. The weak state of the economy continues to put pressure on other business sectors represented in our portfolio, but not to the degree seen in commercial real estate.

The Company expects increasing levels of non-performing assets for the next several quarters. The trends in the credit portfolio will remain weak due to the under-performing commercial real estate sector and the generally soft economic environment. Specifically, fourth quarter growth in non-performing assets is expected to be meaningful, though at a rate less than the increase between the end of the second and third quarters.

"Covered assets" refers to certain assets acquired as a result of the Founders Bank transaction.

Update on Founders Bank Transaction

On July 2, 2009, the Company, through its subsidiary, The PrivateBank and Trust Company, acquired all non-brokered deposits and certain assets of the former Founders Bank, which are reflected in the Company's consolidated financial statements as of September 30, 2009. The transaction is contributing to the overall execution of the Strategic Growth Plan according to management's expectations. The client retention has been strong since the transaction, with total deposits growing 3 percent to $793.9 million as of September 30, 2009. In conjunction with the FDIC Loss Sharing Agreement on the Founders transaction, the acquired loans and foreclosed loan collateral, including the fair value of expected FDIC reimbursements, is presented in our Consolidated Statement of Condition as "Covered Assets." In accordance with business combination accounting rules, these loans were recorded at fair value without a related allowance for loan losses.

Balance Sheet

Total assets increased to $12.1 billion at September 30, 2009, from $9.0 billion at September 30, 2008, and $11.0 billion at June 30, 2009. Assets attributable to Founders totaled $836.5 million at September 30, 2009. Total loans increased to $9.0 billion at September 30, 2009, from $7.4 billion at September 30, 2008, and $8.7 billion at June 30, 2009. The $300 million in loan growth during the quarter reflected the Company's selective approach to credit generation and prevailing market conditions. Commercial loans were 51 percent of the Company's total loans at the end of the third quarter 2009, compared with 46 percent of total loans at September 30, 2008, and 53 percent of total loans at June 30, 2009. Commercial real estate loans were 29 percent of total loans at the end of the third quarter 2009, compared to 33 percent of total loans at the end of the third quarter 2008 and up from 28 percent at the end of the second quarter 2009.

Total deposits were $9.6 billion at September 30, 2009, compared to $7.4 billion at September 30, 2008, and $8.3 billion at June 30, 2009. Deposits attributable to Founders totaled $793.9 million at September 30, 2009. Client deposits increased to $8.9 billion at September 30, 2009, from $5.0 billion at September 30, 2008, and $7.4 billion at June 30, 2009. Client deposits at September 30, 2009, include $981.7 million in client CDARS® deposits. Brokered deposits (excluding client CDARS) were 7 percent of total deposits in the third quarter 2009, a decrease from 33 percent of total deposits as of September 30, 2008, and down from 11 percent in the second quarter 2009. The significant decrease in brokered deposits year-over-year reflects success in executing an important element of the Strategic Growth Plan, namely relying on less-expensive client deposits to fund loan growth.

Funds borrowed, which include federal funds purchased, FHLB advances, trust preferred securities, borrowings under the Company's credit facilities, and convertible senior notes, was $1.3 billion at September 30, 2009, up from $836.3 million at September 30, 2008, and down from $1.5 billion at June 30, 2009. Funds borrowed attributable to Founders was $25.4 million at September 30, 2009, and consisted of FHLB advances.

The Company's investment securities portfolio was $1.7 billion at September 30, 2009, compared to $918.3 million at September 30, 2008 and $1.5 billion at June 30, 2009. The investment securities portfolio attributable to Founders was $150.5 million at September 30, 2009. Net unrealized gains were $61.5 million, compared to $2.8 million at the end of the third quarter 2008, and $38.7 million at the end of the second quarter 2009. The Company's securities portfolio is primarily composed of U.S. government agency backed mortgage pools, agency collateralized mortgage obligations, and investment grade municipal bonds.

Net Revenue Growth

Net revenue grew to $101.2 million in the third quarter 2009, including $11.5 million attributable to Founders, from $65.2 million in the third quarter 2008, and $95.8 million in the second quarter 2009. Net interest income improved to $87.4 million, including $9.8 million attributable to Founders, in the third quarter 2009, up from $52.6 million for the third quarter 2008, and from $74.1 million in the second quarter 2009. Net interest margin (on a tax equivalent basis) was 3.09 percent for the third quarter 2009, compared to 2.70 percent for the third quarter 2008, and 2.99 percent in the second quarter 2009. Founders contributed 16 basis points to the improvement in net interest margin over the second quarter 2009. This helped offset the cost associated with carrying increased non-accruing loans, which diluted the net interest margin by 6 basis points.

Non-interest income was $12.9 million in the third quarter 2009, compared to $11.7 million in the third quarter 2008, and $20.7 million in the second quarter 2009. The decrease in non-interest income during the third quarter was primarily due to $7.1 million in net securities gains in the second quarter 2009 largely from the sale of treasury securities. Founders contributed $1.6 million to non-interest income in the third quarter 2009. Treasury management income was $3.1 million in the third quarter 2009, compared to $600,000 in the third quarter 2008, and $2.1 million in the second quarter 2009. Capital markets activities for the third quarter 2009 resulted in a negative revenue position of $322,000 compared to revenue of $3.9 million in the third quarter 2008, and $3.8 million in the second quarter 2009. Capital markets revenue was significantly impacted by a $2.4 million negative credit valuation adjustment, slow loan growth and client expectations that the interest rate environment will remain stable in the near-to-medium term.

Mortgage banking income was $1.8 million in the third quarter 2009, compared to $776,000 for the third quarter 2008, and $2.7 million in the second quarter 2009. Banking and other services income was $4.1 million in the third quarter 2009, compared to $1.7 million in the third quarter 2008, and $2.1 million in the second quarter 2009, primarily due to the addition of Founders service charges as well as increased loan and letter of credit fees.

The PrivateWealth Group's fee revenue was $4.1 million in the third quarter 2009, flat to the third quarter 2008, and up from $3.5 million in the second quarter 2009. The PrivateWealth Group's assets under management at September 30, 2009 increased to $4.0 billion, of which $455.6 million was attributable to Founders, compared with $3.4 billion at September 30, 2008, and $3.2 billion at June 30, 2009.

Expenses

Non-interest expense was $56.8 million in the third quarter, of which $8.7 million relates to ongoing and defined transaction integration costs from Founders. This compares to $47.1 million in the third quarter 2008 and $64.0 million in the second quarter 2009. Expenses decreased by $7.2 million from the second quarter 2009 primarily due to the reduction in salaries and benefits as a result of the $9.8 million reversal of incentive compensation accruals, reduction in incentive compensation expenses in the third quarter, and the absence of the FDIC special assessment.