October 26, 2009 / 11:16 AM / 10 years ago

UPDATE 3-PrivateBancorp sinks on Q3 loss, $175 mln capital raise

* Q3 loss $0.68/shr vs $0.25/shr loss yr-ago

* To raise $175 mln through stock sale

* Sees increasing NPAs

* Q3 provision for loan losses triples * Stock slides 34 pct (Adds analysts’ comments; conference call comments, updates stock activity)

By Anurag Kotoky

BANGALORE, Oct 26 (Reuters) - PrivateBancorp Inc PVTB.O posted a surprise third-quarter loss, as weakness in commercial real estate forced the Chicago lender to almost triple its provision for bad loans, and announced a $175 million stock offering.

PrivateBancorp shares plunged as much as 34 percent on Monday, making them one of the top percentage losers on Nasdaq.

Rise in operating expenses stemming from its aggressive growth strategy and significant exposure to commercial real estate loans have hurt the company in the past, as it posted five consecutive quarterly losses, before turning profitable in its fiscal first quarter.

Analysts are concerned about the company’s strategy for growth after another disappointing quarter and a dilutive capital raise, and said the company has failed to cope with steep losses in commercial real estate.

“While some of the results are noisy as a result of the company’s FDIC-assisted acquisition of Founders Bank, the focus will be on credit at PrivateBancorp,” Sandler O’Neill analyst Daniel Arnold said.

In July, PrivateBancorp agreed to assume all of the deposits of Founders Bank from the FDIC and said it would will buy about $906 million in assets at a discount of $54.5 million.

PrivateBancorp said credit quality continued to decline in the third quarter and warned that non-performing assets could increase for the next several quarters.

In the fourth quarter, the growth in non-performing assets is expected to be meaningful, but at a rate less than the sequential increase in the third quarter, the company said in a statement.

“Property values may have bottomed, yet marketplace demand and employment remains anemic and will result in additional defaulted loans,” a company executive said on a conference call with analysts.

Oppenheimer analyst Terry McEvoy slashed his fourth-quarter and 2010 estimates for the company to reflect higher provisioning levels and additional shares.

He estimated provisions of $73.5 million for the fourth quarter and $137 million for 2010 at the company.

Separately, the company named C. Brant Ahrens as its chief operating officer, replacing John Williams, who would continue as chairman of The PrivateBank Milwaukee.

On its latest offering, the company said it would use the proceeds for working capital purpose and deals backed by the Federal Deposit Insurance Corp.

Following the offering, the company would also be eligible to request the U.S. Treasury to reduce the number of common shares issuable upon exercise of warrants by 50 percent.

For the third quarter, PrivateBancorp posted a loss of $31.2 million, or 68 cents a share, available to common shareholders, compared with $7.8 million, or 25 cents a share, a year earlier.

Provision for loan losses almost tripled to $90 million.

Non-performing assets as of Sept. 30 was 396.6 million, or 3.28 percent of total assets, compared with $106.5 million, or 1.18 percent, a year back.

PrivateBancorp provides personalized financial services primarily to entrepreneurial and middle-market companies, affluent individuals, wealthy families, professionals, entrepreneurs and real estate investors.

Shares of the company were down 31 percent at $13.12 Monday afternoon on Nasdaq. They earlier touched a low of $12.56. The shares had more than doubled in value through Friday since hitting a 52-week low of $9.08 in March. (Editing by Ratul Ray Chaudhuri and Anil D’Silva)

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