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Illinois Banks Improve but Weakest Are Vulnerable

Stocks in this article: NTRS BMO PVTB MBFI

PrivateBancorp's shares closed at $13.70 Friday, returning 25% year-to-date, following a 23% decline in 2011.

The holding company owes $243.8 million in federal bailout funds received through the Troubled Assets Relief Program in January 2009. During the company's earnings conference call on April 24, PrivateBancorp CFO Kevin Killips said "We continue to evaluate all aspects to determine the best execution and timing for our shareholders."

PrivateBancorp's shares trade just above their reported March 31 tangible book value of $13.29, and for 12 times the consensus 2013 EPS estimate of $1.15. The 2012 EPS estimate is 73 cents.

Private Bancorp bucked the industry trend for declining interest margins, with a first-quarter net interest margin increasing to 3.53%, from 3.48% in the fourth quarter and 3.46% in the first quarter of 2011.

Oppenheimer analyst Terry McEvoy on Friday included PrivateBancorp in a short list of bank holding companies in his firm's coverage universe "in a more favorable position" to limit net interest margin compression. During the prolonged low-rate environment, many banks have been able to limit their margin compression as their funding costs have declined, but "the costs of deposits is currently 39bps, extremely low by historical standards," so most banks are likely to see continued margin compression until short-term rates begin to rise.

McEvoy said in April that "a reduction in the amount of low-yielding short term investments, improved loan pricing, and reductions in the cost of funds contributed to the expansion" of PrivateBancorp's net interest margin during the first quarter.

The analyst rates PrivateBancorp "Outperform," with an $18 price target, estimating the company will earn 77 cents a share this year, followed by earnings of $1.15 during 2013.

Interested in more on PrivateBancorp? See TheStreet Ratings' report card for this stock.

Next is MB Financial Bank, NA of Chicago, with $9.6 billion in total assets as of March 31. The bank is held by MB Financial (MBFI).

The bank subsidiary achieved a fourth-quarter ROA of 0.92%, from 0.82% in the fourth quarter and 0.29% in the first quarter of 2011. MB Financial Bank's NPA declined to 3.13% as of March 31, from 3.60% the previous quarter and 5.68% a year earlier.

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