Suprisingly sharp deterioration of its commercial real estate loans forced PrivateBancorp Inc. in Chicago to a $31.2 million loss in the third quarter and sent its stock tumbling Monday.
The loss of 68 cents a share marked a huge earnings miss for the $12.1 billion-asset company, which also announced Monday that it intends to raise $175 million of capital. On average analysts had expected Private to earn 8 cents a share.
The company took an unexpectedly large $90 million provision for loan losses, as nonperforming assets shot up 86% from June 30, to $396.6 million, or 3.43% of total assets. (The total excludes assets acquired from the failed Founders Bank and covered by the Federal Deposit Insurance Corp.)
Chargeoffs ballooned 196% from June 30, to $37.3 million.
On the earnings conference call, Kevin Van Solkema, Private's chief risk officer, cited intensifying economic stress, particularly for commercial borrowers in the Chicago area. About 70% of the increase in nonperformers resulted from missed payments, with the rest arising from declining property values.
Van Solkema said nonperformers would continue to grow in the fourth quarter, though not at the same speed. "Property values may have bottomed, yet marketplace demand and employment remains anemic and will result in additional defaulted loans."
The company earned $2.5 million, or 6 cents a share, in the second quarter, after paying preferred dividends. It lost $7.8 million, or 25 cents a share, in the third quarter of 2008.
Its stock had dropped 32% by Monday afternoon, to $12.93.