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Shares of the Chicago-based lender closed down 37 percent Monday after it posted a third-quarter loss of $31.2 million, or 68 cents a share.
A weakening commercial real estate market forced the $12.1 billion-asset bank to roughly triple its provision for potential loan losses to $90 million, up from $30.2 million in the same period a year ago. Such set-asides come right off of a bank's profit.
"The environment has not improved," the company said during a Monday conference call, "and stress will continue in the portfolio for the near term."
In last year's third quarter, PrivateBancorp lost $7.8 million, or 25 cents a share.
The bank is two years into a "strategic growth plan," during the course of which it hired dozens of former LaSalle Bank lenders, including Larry Richman, who is its chief executive.
In the past year, PrivateBancorp's loans have grown to $9.03 billion from $7.44 billion. It has added 700 clients over the past two years.
Bank observers say that while PrivateBancorp's growth was impressive, particularly during a recession, it's difficult to grow so quickly without losing some control over asset quality.
"The emergence of credit deterioration at PrivateBancorp in loans originated" since November 2007 "will no doubt result in the questioning of the company's decision to grow aggressively," Oppenheimer analyst Terry McEvoy wrote in a report.
The company had $396.6 million in nonperforming assets, including seriously delinquent loans, as of Sept. 30, compared with $106.5 million on Sept. 30, 2008, and $212.8 million on June 30.
The percentage of nonperforming assets jumped to 4.38 percent in the third quarter, from 2.43 percent in the second quarter, Oppenheimer estimates.
PrivateBancorp said 60 percent of the additions to its basket of seriously delinquent loans were originated before November 2007. Nonperforming loans will continue to grow but at a slower rate, the bank said.
The bank had two so-called shared national credit loans that were downgraded during the quarter. Such loans are larger loans in which a group of banks participate. PrivateBancorp has 79 such shared national credits totaling $1.6 billion, all of which were added over the past two years, Oppenheimer's report said.
It's "anybody's guess" whether more of PrivateBancorp's more recent loans will start souring, said Peyton Green, a Sterne Agee analyst. "All I know is that credit quality is deteriorating" industrywide, he said.
McEvoy maintains a "perform" rating on the bank, meaning he expects it to perform in line with the Standard & Poor's 500 index over the next 12 to 18 months.
PrivateBancorp also announced Monday that it plans to raise $175 million in a common stock offering. Some of the money might be used to buy failed banks, the company said.
PrivateBancorp said it is "extremely pleased" with its July acquisition of Founders Bank through a deal with assistance from the Federal Deposit Insurance Corp. Founders' deposits have grown 3 percent, to $793.9 million, as of Sept. 30.
PrivateBancorp notes there will "always be a digestion period necessary" after a deal, but plans similar FDIC-assisted deals in the future.
It shares closed at $11.98. Its 52-week trading range is $9.08 to $39.19.
byerak@tribune.com
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