CHICAGO, Ill. ( TheStreet) -- A big earnings miss from Chicago-based PrivateBancorp ( PVTB) highlighted the volatile trading in Chicago-based banks on Monday.

PrivateBancorp shares were down more than 13% on Monday afternoon for one of the market's biggest daily losses.

Last week, shares of PrivateBancorp had surged more than $3 per share, as the regional banking sector delivered strong earnings and the credit outlook in regional bank guidance improved.

PrivateBancorp and other Chicago banks also received a boost at the end of last week when a number of failed Chicago banking institutions became M&A targets.

By Monday afternoon, PrivateBancorp shares had more or less returned to the price at which they were trading before last weeks' rally ensued. The PrivateBancorp share price of $14.83 late in trading on Monday was still above its price last Wednesday, even after a one-day 13% drop.

Monday's trading level in PrivateBancorp shares was close to three times its average volume of 673,000 shares traded, at more than two million shares.

PrivateBancorp significantly underperformed the Street consensus in its earnings released early Monday morning. The bank's 35-cent-per-share loss was much worse than the Street expectation of a 20 cent loss.

The fact that loan loss provisions ticked up at PrivateBancorp -- non-performing loans were up in the first quarter, too -- bucked the credit improvements outlined in many regional bank earnings reports last week.

Still, at least one Street analyst expected from PrivateBancorp the exact performance that the bank delivered: Terry McEvoy of Oppenheimer & Co.

The Oppenheimer analyst expected a 33 cent per share loss, and the difference between the 33 cent Oppenheimer estimate and the 35 cent loss was not due to weaker than expected performance from the bank, but an under-estimate of the impact of a recent equity share offering, McEvoy said.

The Oppenheimer analyst continues to believe in the long-term story for PrivateBancorp, especially taking into account that the big drop on Monday did no more than bring the bank's share price back to where it was five days ago.

The fact that so many regional banking peers were showing stable to slightly improving credit trends in this earnings season hurt PrivateBancorp, McEvoy said. All eyes have been focused on commercial real estate loan performance in this round of regional bank earnings, also, and PrivateBancorp continued to show stress in its commercial loan portfolio.

What's more, the Oppenheimer analyst said that PrivateBancorp management was unwilling to provide specific guidance on the earnings conference call, only indicating that the growth rate of non-performing loans would moderate. McEvoy was not concerned by this lack of management optimism from PrivateBancorp, though, saying that, "the risk of being wrong with an aggressive loan forecast is dangerous, so I can't fault them on that."

PrivateBancorp also faced criticism for not taking part in the Chicago-based game of FDIC musical chairs over the weekend, as seven Chicago area banks failed and were gobbled up by regional banks. McEvoy questioned how much would have really been added to PrivateBancorp's long-term strategy of focusing on larger customers by adding failed Chicago area banks with as little as four branches. "This isn't a plain vanilla community bank," the Oppenheimer analyst said.

PrivateBancorp said on the earnings call that they were being selective on the acquisition front, though they would not say whether they bid on the banks acquired over the weekend.

One big negative in the PrivateBancorp earnings -- though not a major trigger for the selloff -- was much higher operating expenses than expected by the Street.

Expenses in the first quarter were $38 million, and related to stock compensation restructuring for former Bank of America executives who joined PrivateBancorp in 2007. The Oppenheimer analyst said those higher expenses are only expected to come down by $1 million in the second quarter.

"To some degree, we're back where we started from last week," McEvoy said.

This was true for several Chicago area banks. The Monday selloff in Chicago banks also hit WinTrust Financial ( WTFC), down more than 10% on Monday -- it was one of the banks to make acquisitions over the weekend.

WinTrust shares were also right back where they closed last Tuesday, at $39.68 late in Monday trading -- WinTrust shares closed at $39.65 last Tuesday.

Itasca, Ill.-based First Midwest Bank ( FMBI) was also down more than 10%. Last week, First Midwest posted a surprise profit on Wednesday of last week and surged 10%. First Midwest was also among the Chicago-area banks making acquisitions over the weekend.

The Oppenheimer analyst believes in the PrivateBancorp long-term story. "When they move into offensive mode, they have earnings leverage," said McEvoy.

Yet trading in the Chicago bank's shares may continue to be volatile. "It's a controversial stock, you have people who love it or hate, who believe in its earnings leverage, or question credit stress, its legacy assets, and the decision to double size of its loan portfolio during a recession. Time will tell," McEvoy said.

After Monday's selloff -- and the volatile heights which the Chicago banks had reached just a few days ago -- it seemed that several of the Chicago banks had gotten a little ahead of themselves.

"I don't think it's a question of long-term growth," the Oppenheimer analyst said.

Yet it was unclear whether investors were willing to wait around for the time it would take for earnings leverage to return, at least in the case of PrivateBancorp.

-- Reported by Eric Rosenbaum in New York.

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