Following the third-quarter 2014 earnings release before the opening bell last Thursday, shares of PrivateBancorp, Inc. ( PVTB ) gained 6.4%. The company reported earnings per share of 51 cents, outpacing the Zacks Consensus Estimate of 48 cents. This marks the company's seventh consecutive earnings beat. Also, earnings came in 21% higher than the prior-year quarter figure.
Consistent robust performance of PrivateBancorp was assisted by sustained growth in the top line, partially offset by escalating expenses. Moreover, growth in loans as well as deposits along with constantly improving asset quality further strengthened the results. However, capital ratios continued to demonstrate mixed figures.
Net income applicable to shareholders amounted to $40.5 million, up 23% year over year.
Performance in Detail
PrivateBancorp generated net revenues of $147.4 million, up 10% year over year and above the Zacks Consensus Estimate of $143.0 million. Operating profit grew 11% year over year on the back of lower credit costs and loan driven revenue growth.
Net interest income (NII) climbed 10% year over year to $116.8 million, triggered by higher average loan balances. Moreover, net interest margin (NIM) inched up 5 basis points (bps) to 3.23%.
Non-interest income rose 10% year over year to $30.7 million. The rise was the result of an increase in treasury management income, syndication fees, deposit service charges and fees and other income as well as loan and letter of credit and commitment fees, partly mitigated by a reduction in asset management income, capital market products and net securities gains.
PrivateBancorp recorded a 9% year-over-year surge in non-interest expenses amounting to $77.8 million. The elevation was mainly driven by higher salaries and employee benefits, marketing, insurance, loan and collection expenses as well as other expenses. However, these were slightly offset by a fall in net foreclosed property expenses.
Efficiency ratio stood at 52.51%, down from 53.02% in the year-ago quarter. A decline in the efficiency ratio reflects improved profitability.
Assets under management and administration increased 16% year over year to $6.5 billion.
As of Sep 30, 2014, PrivateBancorp's net loans summed $11.4 billion, up 11% year over year. Total deposits grew 9% year over year to $12.8 billion.
Credit quality metrics continued to display a marked improvement with net charge-offs dropping substantially year over year to $88,000. Provision for loan and covered loan losses declined 52% year over year to $3.9 million.
Further, PrivateBancorp's non-performing assets decreased 39% year over year to $90.7 million, while allowance for loan losses, as a percentage of total loans, fell 10 bps to 1.30% from the prior-year quarter.
Capital & Profitability Ratios
PrivateBancorp's capital ratios exhibited a mixed performance. As of Sep 30, 2014, total risk-based capital reduced 30 bps year over year to 13.18%, while tier 1 risk-based capital stood at 11.12%, increasing 7 bps year over year.
Profitability ratios remained strong during the quarter. Return on average common equity came in at 11.27%, rising from the prior-year quarter return of 10.43%. Return on average assets came in at 1.09%, up compared with 0.96% in the year-ago quarter.
PrivateBancorp remains well positioned for future development on the back of its strengthening top line and robust balance sheet position. Moreover, the bank's successful efforts in keeping the growth momentum alive would aid in gaining investors' confidence going forward.
Nonetheless, sluggish economic recovery, persistent low interest rate environment and several regulatory issues might keep the company's financials under pressure.
Among other Midwest banks, Chemical Financial Corporation ( CHFC ) is scheduled to report third-quarter 2014 earnings results on Oct 22, while Old National Bancorp. ( ONB ) and First Interstate Bancsystem Inc. ( FIBK ) are slated to report on Oct 27.
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