PrivateBancorp (PVTB) 10-Q 2007 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

࿶ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For transition period from ________ to ________

Commission File Number: 000-25887

PRIVATEBANCORP, INC.

(Exact name of Registrant as specified in its charter.)

Delaware (State or other jurisdiction of incorporation or organization)	36-3681151 (I.R.S. Employer Identification Number)
70 W. Madison Suite 900 Chicago, Illinois (Address of principal executive offices)	60602 (Zip Code)

(312) 683-7100

(Registrant’s telephone number, including area code)

Indicate by checkmark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ࿶

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer xAccelerated filer ࿶Non-accelerated filer ࿶

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes࿶ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of August 1, 2007
Common, no par value	22,127,083

PRIVATEBANCORP, INC.

FORM 10-Q Quarterly Report

Table of Contents

				Page Number
Selected Financial Data				2
Part I
	Item 1.		Financial Statements (unaudited)	5
	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.		Quantitative and Qualitative Disclosures About Market Risk	45
	Item 4.		Controls and Procedures	48
Part II
	Item 1.		Legal Proceedings	49
	Item 1A.	Risk Factors		49
	Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	49
	Item 3.		Defaults upon Senior Securities	50
	Item 4.		Submission of Matters to a Vote of Security Holders	50
	Item 5.		Other Information	50
	Item 6.		Exhibits	51
Signatures				52

SELECTED FINANCIAL DATA

The following table summarizes certain selected unaudited consolidated financial information of PrivateBancorp, Inc. at or for the periods indicated. This information should be read in conjunction with the unaudited consolidated financial statements and related notes included pursuant to Item 1 of this report.

	Quarter Ended
	06/30/07			03/31/07		12/31/06 (1)			09/30/06			06/30/06
	(dollars in thousands, except per share data)
Selected Statement of Income Data:
Interest income:
Loans, including fees	$	70,732		$	68,886	$	64,418		$	60,361		$	55,127
Securities		5,938			5,937		5,274			6,367			7,781
Federal funds sold and interest-bearing deposits		239			238		320			116			199
Total interest income		76,909			75,061		70,012			66,844			63,107
Interest expense:
Interest-bearing demand deposits		437			596		570			569			364
Savings and money market deposit accounts		16,667			17,062		16,142			14,499			13,089
Brokered deposits and other time deposits		21,237			19,777		19,062			17,736			15,828
Funds borrowed		4,872			4,084		2,840			2,398			2,387
Trust preferred securities		1,585			1,567		1,601			1,602			1,577
Total interest expense		44,798			43,086		40,215			36,804			33,245
Net interest income		32,111			31,975		29,797			30,040			29,862
Provision for loan losses		2,958			1,406		707			1,494			2,382
Net interest income after provision for loan losses		29,153			30,569		29,090			28,546			27,480
Non-interest income:
Wealth management income		4,024			3,826		3,615			3,477			3,603
Mortgage banking income		1,229			1,314		807			804			1,005
Other income		1,803			1,126		1,172			1,351			2,616
Securities (losses) gains, net		(97	)		79		(1	)		1,212			(1,007	)
(Losses) gains on interest rate swap		--			--		--			(904	)		413
Total non-interest income		6,959			6,345		5,593			5,940			6,630
Non-interest expense:
Salaries and employee benefits		12,734			13,729		12,205			10,864			10,325
Occupancy expense		3,160			2,790		2,733			2,639			2,214
Professional fees		1,610			1,715		1,976			1,866			1,955
Wealth management fees		868			782		686			774			799
Marketing		1,330			1,289		1,137			1,159			1,083
Data processing		984			901		999			788			764
Insurance		363			352		337			349			323
Amortization of intangibles		242			243		169			152			153
Other operating expenses		2,019			1,564		2,321			1,420			1,318
Total non-interest expense		23,310			23,365		22,563			20,011			18,934
Minority interest expense		95			90		82			85			86
Income before income taxes		12,707			13,459		12,038			14,390			15,090
Income tax expense		3,956			4,423		2,986			4,596			5,077
Net income	$	8,751		$	9,036	$	9,052		$	9,794		$	10,013
Per Share Data:
Basic earnings	$	0.41		$	0.42	$	0.43		$	0.48		$	0.48
Diluted earnings		0.40			0.41		0.42			0.46			0.47
Dividends		0.075			0.075		0.060			0.060			0.060
Book value (at end of period)		14.19			13.92		13.83			12.73			12.08

Footnotes begin on page 3.

	Quarter Ended
	06/30/07			03/31/07			12/31/06 (1)			09/30/06			06/30/06
Selected Financial Data (at end of period):
Total securities(2)	$	495,854		$	482,024		$	496,782		$	458,869		$	499,801
Total loans		3,705,339			3,581,398			3,499,988			3,136,634			2,956,026
Total assets		4,486,010			4,343,872			4,264,424			3,877,593			3,652,267
Total deposits		3,638,545			3,582,821			3,551,013			3,238,822			3,125,774
Funds borrowed		407,696			334,128			281,733			235,858			133,163
Trust preferred securities		101,033			101,033			101,033			101,033			101,033
Total stockholders’ equity		306,109			299,672			297,124			265,227			250,800
Wealth management assets under management		3,119,878			2,952,227			2,902,205			2,780,121			2,686,255
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin(3)(9)		3.19	%		3.26	%		3.25	%		3.47	%		3.55	%
Net interest spread(4)		2.76			2.84			2.77			2.97			3.09
Non-interest income to average assets		0.64			0.60			0.56			0.63			0.73
Non-interest expense to average assets		2.13			2.22			2.27			2.13			2.08
Net overhead ratio(5)		1.49			1.62			1.71			1.50			1.35
Efficiency ratio(6)(9)		58.1			59.3			61.9			53.9			50.3
Return on average assets(7)		0.80			0.86			0.91			1.04			1.10
Return on average equity(8)		11.66			12.37			13.61			15.43			16.65
Fee income to total revenue(10)		18.01			16.39			15.81			15.79			19.48
Dividend payout ratio		18.64			18.50			14.44			12.96			12.65
Asset Quality Ratios:
Nonperforming loans to total loans		0.72	%		0.28	%		0.25	%		0.06	%		0.10	%
Allowance for loan losses to:														��
total loans		1.11			1.09			1.09			1.11			1.13
Nonperforming loans		155			391			427			1,877			1,122
Net charge-offs to average total loans		0.06			0.07			0.01			0.04			0.05
Nonperforming assets to total assets		0.70			0.34			0.23			0.06			0.09
Non-accrual loans to total loans		0.56			0.13			0.11			0.02			0.06
Balance Sheet Ratios:
Loans to deposits		101.8	%		100.0	%		98.6	%		96.8	%		94.6	%
Average interest-earning assets to average interest-bearing liabilities		109.9			109.8			111.3			112.2			111.9
Capital Ratios:
Total equity to total assets		6.82	%		6.90	%		6.97	%		6.84	%		6.87	%
Total risk-based capital ratio		10.63			10.45			10.36			10.71			10.66
Tier 1 risk-based capital ratio		8.06			7.93			8.06			8.53			8.52
Leverage ratio		7.08			6.95			7.51			7.26			7.33

(1) Financial results for the quarter ended December 31, 2006 include the impact of The PrivateBank - Georgia as of the date of acquisition, December 13, 2006.

(2) For all periods, the entire securities portfolio was classified as “Available for Sale.”

(3) Net interest income, on a tax-equivalent basis, divided by average interest-earning assets.

(4) Tax equivalent yield on average interest-earning assets less rate on average interest-bearing liabilities.

(5) Non-interest expense less non-interest income divided by average total assets.

(6) Non-interest expense divided by the sum of net interest income, on a tax equivalent basis, plus non-interest income.

(7) Net income divided by average total assets.

(8) Net income divided by average common equity.

(Footnotes continued on next page.)

(9) GAAP reported net interest income is adjusted by the tax equivalent adjustment (assuming a 35% tax rate) to account for the tax attributes on federally tax exempt municipal securities. For GAAP purposes, tax benefits associated with federally tax-exempt municipal securities are recorded as a benefit in income tax expense. The following table reconciles reported net interest income to net interest income on a tax equivalent basis for the periods presented:

Reconciliation of net interest income to net interest income on a tax equivalent basis
	2Q07		1Q07		4Q06		3Q06		2Q06
Net interest income	$	32,111	$	31,975	$	29,797	$	30,040	$	29,862
Tax equivalent adjustment to net interest income		1,072		1,073		1,058		1,166		1,173
Net interest income, tax equivalent basis		33,183	$	33,048	$	30,855	$	31,206	$	31,035

(10) Wealth management, mortgage banking and other income as a percentage of the sum of net interest income and wealth management, mortgage banking and other income.

Part I

Item 1. Financial Statements

PRIVATEBANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

		June 30, 2007			December 31, 2006			June 30, 2006
		(unaudited)						(unaudited)
Assets
Cash and due from banks	$	63,074		$	42,428		$	46,625
Federal funds sold and other short-term investments		19,672			36,969			1,496
Total cash and cash equivalents		82,746			79,397			48,121
Loans held for sale		20,905			14,515			6,443
Available-for-sale securities, at fair value		495,854			496,782			499,801
Loans, net of unearned discount		3,705,339			3,499,988			2,956,026
Allowance for loan losses		(41,280	)		(38,069	)		(33,490	)
Net loans		3,664,059			3,461,919			2,922,536
Goodwill		93,043			93,043			63,176
Premises and equipment, net		23,415			21,413			17,902
Accrued interest receivable		23,554			23,490			19,197
Other assets		82,434			73,865			75,091
Total assets	$	4,486,010		$	4,264,424		$	3,652,267
Liabilities and Stockholders’ Equity
Demand deposits:
Non-interest-bearing	$	303,455		$	300,689		$	273,003
Interest-bearing		150,234			152,323			127,445
Savings and money market deposit accounts		1,505,303			1,575,080			1,277,067
Brokered deposits		630,905			589,321			747,980
Other time deposits		1,048,558			933,600			700,279
Total deposits		3,638,545			3,551,013			3,125,774
Funds borrowed		407,696			281,733			133,163
Trust preferred securities		101,033			101,033			101,033
Accrued interest payable		14,334			16,071			13,536
Other liabilities		18,293			17,450			27,961
Total liabilities	$	4,179,901		$	3,967,300		$	3,401,467
Stockholders’ Equity
Preferred stock, 1,000,000 shares authorized		—			—			--
Common stock, without par value, $1 stated value; 39,000,000 shares authorized; 22,132,645, 22,035,050, and 21,198,759 shares issued and outstanding as of June 30, 2007, December 31, 2006 and June 30, 2006, respectively		21,568			21,481			20,770
Treasury stock		(13,148	)		(5,254	)		(3,812	)
Additional paid-in-capital		157,960			153,487			126,054
Retained earnings		136,057			121,539			105,269
Accumulated other comprehensive income		3,672			5,871			2,519
Total stockholders’ equity		306,109			297,124			250,800
Total liabilities and stockholders’ equity	$	4,486,010		$	4,264,424		$	3,652,267

The accompanying notes to consolidated financial statement are an integral part of these statements.

PRIVATEBANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Interest Income
Loans, including fees	$	70,732		$	55,127		$	139,618		$	104,037
Federal funds sold and interest-bearing deposits		239			199			477			286
Securities:
Taxable		3,594			5,215			7,183			10,998
Exempt from federal income taxes		2,344			2,566			4,692			5,133
Total interest income		76,909			63,107			151,970			120,454
Interest Expense
Deposits:
Interest-bearing demand		437			364			1,033			605
Savings and money market		16,667			13,089			33,729			24,552
Brokered and other time		21,237			15,828			41,014			28,676
Funds borrowed		4,872			2,387			8,956			5,855
Trust preferred securities		1,585			1,577			3,152			3,129
Total interest expense		44,798			33,245			87,884			62,817
Net interest income		32,111			29,862			64,086			57,637
Provision for loan losses		2,958			2,382			4,364			4,635
Net interest income after provision for loan losses		29,153			27,480			59,772			53,002
Non-interest Income
Wealth management income		4,024			3,603			7,850			6,763
Mortgage banking income		1,229			1,005			2,543			1,728
Other income		1,803			2,616			2,929			3,755
Securities losses, net		(97	)		(1,007	)		(18	)		(1,585	)
Gains on interest rate swap		--			413			--			968
Total non-interest income		6,959			6,630			13,304			11,629
Non-interest Expense
Salaries and employee benefits		12,734			10,325			26,463			20,861
Occupancy expense, net		3,160			2,214			5,950			4,383
Professional fees		1,610			1,955			3,325			2,971
Wealth management fees		868			799			1,650			1,205
Marketing		1,330			1,083			2,619			1,996
Data processing		984			764			1,885			1,530
Postage, telephone & delivery		412			351			815			725
Insurance		363			323			714			632
Amortization of intangibles		242			153			485			307
Other non-interest expense		1,607			967			2,769			1,882
Total non-interest expense		23,310			18,934			46,675			36,492
Minority interest expense		95			86			185			163
Income before income taxes		12,707			15,090			26,166			27,976
Income tax provision		3,956			5,077			8,379			8,976
Net income	$	8,751		$	10,013		$	17,787		$	19,000
Basic earnings per share	$	0.41		$	0.48		$	0.84		$	0.92
Diluted earnings per share		0.40			0.47			0.81			0.88
Dividends per share		0.075			0.060			0.150			0.120

The accompanying notes to consolidated financial statement are an integral part of these statements.

PRIVATEBANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

(In thousands, except per share data)

	Common Stock		Treasury Stock			Additional paid-in-capital		Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
Balance, January 1, 2006	$20,492		$(2,728)			$122,157		$88,794			$7,434			$236,149
Net income	—		—			—		19,000			—			19,000
Net decrease in fair value of securities classified as available-for-sale, net of income taxes and reclassification adjustments		—		—			—		—			(4,915	)		(4,915	)
Total comprehensive income		—		—			—		19,000			(4,915	)		14,085
Cash dividends declared ($0.120 per share)		—		—			—		(2,525	)		—			(2,525	)
Issuance of common stock		222		—			784		—			—			1,006
Acquisition of treasury stock		56		(1,084	)		499		—			—			(529	)
Share-based payment expense		—		—			1,937		—			—			1,937
Excess tax benefit from share-based payments		—		—			677		—			—			677
Balance, June 30, 2006	$	20,770	$	(3,812	)	$	126,054	$	105,269		$	2,519		$	250,800
Balance, January 1, 2007	$	21,481	$	(5,254	)	$	153,487	$	121,539		$	5,871		$	297,124
Net income		—		—			—		17,787			—			17,787
Net decrease in fair value of securities classified as available-for-sale, net of income taxes and reclassification adjustments		—		—			—		—			(2,199	)		(2,199	)
Total comprehensive income		—		—			—		17,787			(2,199	)		15,588
Cash dividends declared ($0.150 per share)		—		—			—		(3,269	)		—			(3,269	)
Issuance of common stock		65		—			496		—			—			561
Acquisition of treasury stock		22		(7,894	)		204		—			—			(7,668	)
Share-based payment expense		—		—			3,516		—			—			3,516
Excess tax benefit from share-based payments		—		—			257		—			—			257
Balance, June 30, 2007	$	21,568	$	(13,148	)	$	157,960	$	136,057		$	3,672		$	306,109

The accompanying notes to consolidated financial statement are an integral part of these statements.

PRIVATEBANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

(In thousands)

	Six months ended June 30,
		2007			2006
Cash flows from operating activities
Net income	$	17,787		$	19,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,688			1,477
Provision for loan losses		4,364			4,635
Net loss on sale of securities		18			1,585
Gains on interest rate swap		--			(968	)
Net increase in loans held for sale		(6,390	)		(1,174	)
(Decrease) Increase in deferred loan fees		(353	)		566
Share-based payment expense		3,516			1,937
Change in minority interest		185			163
Increase in accrued interest receivable		(64	)		(2,555	)
(Decrease) Increase in accrued interest payable		(1,737	)		4,769
Increase in other assets		(7,437	)		(6,540	)
Increase (Decrease) in other liabilities		657			(4,389	)
Total adjustments		(5,553	)		(494	)
Net cash provided (used) by operating activities		12,234			18,506
Cash flows from investing activities
Proceeds from maturities, paydowns, and sales of available-for-sale securities		45,695			104,445
Purchase of securities available-for-sale		(48,169	)		(55,780	)
Redemption of FHLB (Chicago) Stock		--			138,506
Net loan principal advanced		(206,105	)		(349,008	)
Premises and equipment expenditures		(3,691	)		(7,628	)
Net cash used by investing activities		(212,270	)		(169,465	)
Cash flows from financing activities
Net increase in total deposits		87,544			302,437
Proceeds from equity transactions		787			1,562
Excess tax benefit from share-based payments		257			677
Acquisition of treasury stock		(7,894	)		(1,084	)
Dividends paid		(3,269	)		(2,525	)
Issuance of debt		345,243			117,174
Repayment of debt		(219,283	)		(281,030	)
Net cash provided by financing activities		203,385			137,211
Net increase (decrease) in cash and cash equivalents		3,349			(13,748	)
Cash and cash equivalents at beginning of year		79,397			61,869
Cash and cash equivalents at end of period	$	82,746		$	48,121

The accompanying notes to consolidated financial statement are an integral part of these statements.

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTE 1—BASIS OF PRESENTATION

The consolidated financial information of PRIVATEBANCORP, Inc. (the “Company”) and its direct and indirect subsidiaries, The PrivateBank and Trust Company (the “Bank” or “The PrivateBank - Chicago”), The PrivateBank - St. Louis (which includes The PrivateBank - Kansas City (in organization), an office of The PrivateBank - St. Louis), The PrivateBank - Michigan, The PrivateBank - Wisconsin, The PrivateBank - Georgia, The PrivateBank Mortgage Company (the “Mortgage Company”), and Lodestar Investment Counsel, LLC (“Lodestar”), included herein is unaudited; however, such information reflects all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation for the interim periods. The financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

The annualized results of operations for the three and six months ended June 30, 2007 are not necessarily indicative of the results expected for the full year ending December 31, 2007. The accompanying consolidated financial statements are unaudited and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, or cash flows in accordance with U.S. generally accepted accounting principles. The consolidated financial statements for the period ended June 30, 2007 should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2006 included in the Company’s Annual Report on Form 10-K. For 2006, the results of operations of The PrivateBank - Georgia are included since the date of acquisition, December 13, 2006.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reported period. Actual results could differ from these estimates.

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). This interpretation prescribes a consistent recognition threshold and measurement attribute, as well as criteria for subsequently recognizing, derecognizing and measuring such tax positions for financial statement purposes. FIN 48 also requires expanded disclosure with respect to the uncertainty in income taxes. Adoption of FIN 48 as of January 1, 2007 did not impact the Company’s consolidated financial position or results of operations.

Effective January 1, 2007, the Company adopted the Emerging Issues Task Force (“EITF”) Issue 06-5, “Accounting for Purchases of Life Insurance - Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4,” which explains how to determine the amount that can be realized from a life insurance contract. It also requires that if the contract provides for a greater surrender value if all individual policies in a group are surrendered at the same time, that the surrender value be determined based on the assumption that policies will be surrendered on an individual basis. In addition, the cash surrender value should not be discounted when contractual limitations on the ability to surrender a policy exist. EITF 06-5 also requires that fixed amounts that are recoverable by the policyholder in future periods over one year from the surrender of the policy be recognized at their present value. Adoption of EITF Issue 06-5 as of January 1, 2007 did not impact the Company’s consolidated financial position or results of operations.

In February 2006, the FASB issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments,” which permits, but does not require, fair value accounting for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation in accordance with Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS No. 133”). The statement also subjects beneficial interests in securitized financial assets that were previously exempted to the requirements of SFAS No. 133. This statement is effective for fiscal years beginning after December 15, 2006. Adoption of this statement as of January 1, 2007 did not impact the Company’s consolidated financial position or results of operations.

In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements,” to provide guidance on how to measure fair value, which would apply broadly to financial and non-financial assets and liabilities that are measured at fair value under other authoritative accounting pronouncements. The statement defines fair value, provides a hierarchy that prioritizes inputs that should be used in valuation techniques used to measure fair value, and expands current disclosures about the use of fair value to measure assets and liabilities. The disclosures focus on the methods used for the measurements and their effect on earnings and would apply whether the assets were measured at fair value in all periods, such as trading securities, or in only some periods, such as for impaired assets. A transition adjustment would be recognized as a cumulative-effect adjustment to beginning retained earnings for the fiscal year in which the statement is initially adopted. This adjustment is measured as the difference between the carrying amounts and the fair values of those financial instruments at the date of adoption. The statement is effective for fiscal years beginning after November 15, 2007 (or January 1, 2008 for calendar-year companies) and interim periods within those fiscal years. The Company will adopt the statement on January 1, 2008. The fair value disclosures required by this statement will be effective for the first interim period in which the statement is adopted. The Company is currently evaluating the impact of the statement on its financial position, results of operations, and liquidity.

In February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). The statement gives companies the option, at specified election dates, to measure certain financial assets and liabilities at fair value. The election may be applied to financial assets and liabilities on an instrument by instrument basis, is irrevocable, and may only be applied to entire instruments. Unrealized gains and losses on instruments for which the fair value option has been elected will be reported in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of the statement on its financial position, results of operations, and liquidity.

NOTE 2—OPERATING SEGMENTS

For purposes of making operating decisions and assessing performance, management regards The PrivateBank - Chicago, The PrivateBank - St. Louis, The PrivateBank - Michigan, The PrivateBank - Georgia, The PrivateBank - Wisconsin, Wealth Management, which includes Lodestar for segment reporting purposes, and the Holding Company as seven operating segments. The Company’s investment securities portfolio is comprised of the five banks’ portfolios and accordingly, each portfolio is included in total assets of each bank. Insurance expense for the Company is allocated to all segments. The results for each business segment are summarized in the paragraphs below and included in the following segment tables.

We apply the accrual basis of accounting for each reportable segment and for transactions between reportable segments. During the first six months of 2007, there were no changes in the measurement methods used to determine reported segment profit or loss as compared to the same period for 2006.

The accounting policies of the segments are generally the same as those described in Note 1—Basis of Presentation to the consolidated financial statements.

The PrivateBank - Chicago

The PrivateBank - Chicago, through its main office located in downtown Chicago as well as seven full-service Chicago and suburban locations, provides personal and commercial banking services primarily to affluent individuals, professionals, entrepreneurs and their business interests. The PrivateBank - Chicago’s commercial lending products include lines of credit for working capital, term loans for equipment and letters of credit to support the commitments made by its clients. Non-credit products include lock-box, remote capture, cash concentration accounts, merchant credit card processing, electronic funds transfer, other cash management products and insurance. The PrivateBank - Chicago offers a full range of real estate lending products including fixed and floating rate permanent and mini-permanent mortgages, and construction and commercial real estate loans. Personal loans include installment loans and lines of credit, home equity loans and a wide variety of home mortgage loans.

Individual banking services include interest-bearing checking, money market accounts, certificates of deposit, ATM/debit cards and investment brokerage accounts. Additionally, The PrivateBank - Chicago offers secured and unsecured personal loans and lines of credit. The PrivateBank - Chicago also offers domestic and international wire transfers and foreign currency exchange.

The PrivateBank - Chicago’s balance sheet reflects goodwill of $19.2 million at June 30, 2007, which remained unchanged from December 31, 2006, and intangibles of $1.8 million at June 30, 2007, compared to $1.9 million at December 31, 2006.

For segment reporting purposes, The PrivateBank Mortgage Company results are included in The PrivateBank - Chicago.

	The PrivateBank - Chicago
	At or for the six months ended June 30,
		2007		2006	Variance (	%)
	(in thousands)
Total gross loans	$	2,451,274	$	2,113,335	16	%
Total assets		3,035,275		2,666,011	14	%
Total deposits		2,538,208		2,345,542	8	%
Total borrowings		192,043		48,880	293	%
Total capital		286,350		240,120	19	%
Net interest income		47,385		44,675	6	%
Provision for loan loss		440		2,339	(81	)%
Non-interest income		3,915		3,900	--
Non-interest expense		19,093		17,464	9	%
Net income		21,694		20,064	8	%

The PrivateBank - St. Louis

The PrivateBank - St. Louis, a federal savings bank, is headquartered in St. Louis, Missouri with an office in Brentwood, Missouri. The PrivateBank - Wisconsin operated as an office of The PrivateBank - St. Louis, until it became a stand-alone national bank effective January 2, 2007. The PrivateBank - Kansas City, is a de novo bank in formation, with an office currently operating as a branch office of The Private Bank - St. Louis. The Company has received conditional OTS approval for The PrivateBank - Kansas City’s federal savings bank charter and approvals from the FDIC and Federal Reserve Bank of Chicago are pending.

The PrivateBank - St. Louis locations offer a full range of real estate lending products including fixed and floating rate permanent and mini-permanent mortgages and construction loans. Personal loans include installment loans and lines of credit, home equity loans and a wide variety of home mortgage loans. Commercial lending products provided by The PrivateBank - St. Louis include lines of credit for working capital, term loans for equipment and letters of credit to support the commitments made by its clients. Non-credit products include lock-box, remote capture, cash concentration accounts, merchant credit card processing, electronic funds transfer, and other cash management products. Individual banking services include interest-bearing checking, money market deposit accounts, certificates of deposit, ATM/debit cards and investment brokerage accounts. The PrivateBank - St. Louis also offers domestic and international wire transfers and foreign currency exchange.

For the six months ended June 30, 2007, the financial results of The PrivateBank - Kansas City are included with the St. Louis segment. The PrivateBank - Kansas City incurred a year-to-date net loss of $601,000 resulting from start-up expenses including the new office in Kansas City and compensation expenses associated with management personnel in the Kansas City office.

	The PrivateBank - St. Louis
	At or for the six months ended June 30,
		2007		2006	Variance (	%)
	(in thousands)
Total gross loans	$	371,223	$	337,778	10	%
Total assets		449,141		399,498	12	%
Total deposits		338,668		324,895	4	%
Total borrowings		68,541		26,409	160	%
Total capital		39,813		44,897	(11	)%
Net interest income		6,329		6,983	(9	)%
Provision for loan losses		2,253		1,548	46	%
Non-interest income		1,154		948	22	%
Non-interest expense		5,316		3,614	47	%
Net income		160		1,940	(92	)%

The PrivateBank - Wisconsin

The PrivateBank - Wisconsin was originally established under the charter of The PrivateBank - St. Louis and was an office of The PrivateBank - St. Louis until it became a stand-alone bank, The PrivateBank, N.A., which we refer to as The PrivateBank - Wisconsin, effective January 2, 2007. This office opened a permanent space in downtown Milwaukee, Wisconsin in the third quarter 2005. The PrivateBank - Wisconsin offers a full range of real estate lending products including fixed and floating rate permanent and mini-permanent mortgages and construction loans. Personal loans include installment loans and lines of credit, home equity loans and a wide variety of home mortgage loans. Commercial lending products provided by The PrivateBank - Wisconsin include lines of credit for working capital, term loans for equipment and letters of credit to support the commitments made by its clients. Non-credit products include lock-box, remote capture, cash concentration accounts, merchant credit card processing, electronic funds transfer, and other cash management products. Individual banking services include interest-bearing checking, money market deposit accounts, certificates of deposit, ATM/debit cards and investment brokerage accounts. The PrivateBank - Wisconsin offers domestic and international wire transfers and foreign currency exchange.

	The PrivateBank - Wisconsin
	At or for the six months ended June 30,
		2007		2006		Variance (	%)
	(in thousands)
Total gross loans	$	105,710	$	55,822		89	%
Total assets		122,270		59,759		105	%
Total deposits		109,286		61,833		77	%
Total capital		12,457		(1,841	)	777	%
Net interest income		1,712		589		191	%
Provision for loan losses		353		288		22	%
Non-interest income		47		3		1434	%
Non-interest expense		1,455		1,151		26	%
Net loss		43		561		92	%

The PrivateBank - Michigan

The PrivateBank - Michigan, through its main office located in Bloomfield Hills, and offices located in the cities of Grosse Pointe and Rochester, provides personal and commercial banking services primarily to affluent individuals, professionals, entrepreneurs and their business interests. The PrivateBank - Michigan’s commercial lending products include lines of credit for working capital, term loans for equipment and other asset acquisitions and letters of credit to support the commitments made by its clients. Non-credit products include merchant credit card processing and electronic funds transfer. The PrivateBank - Michigan offers a full range of real estate lending products including fixed and floating rate permanent and mini-permanent mortgages, construction and commercial real estate loans. Personal loans include installment loans and secured and unsecured lines of credit, home equity loans and a wide variety of home mortgage loans.

Individual banking services include interest-bearing checking, money market deposit accounts, certificates of deposit, ATM/debit cards and investment brokerage accounts. The PrivateBank - Michigan also offers domestic and international wire transfers and foreign currency exchange. The PrivateBank - Michigan balance sheet reflects goodwill of $42.6 million, which remained unchanged from December 31, 2006, and intangibles of $2.9 million at June 30, 2007 compared to $3.1 million at December 31, 2006.

	The PrivateBank - Michigan
	At or for the six months ended June 30,
	2007		2006		Variance (%)
	(in thousands)
Total gross loans	$	539,907	$	449,091		20	%
Total assets		640,814		536,552		19	%
Total deposits		494,054		401,426		23	%
Total borrowings		47,033		45,024		4	%
Total capital		95,513		86,873		10	%
Net interest income		9,023		8,282		9	%
Provision for loan losses		1,242		460		170	%
Non-interest income		558		381		47	%
Non-interest expense		4,720		4,332		9	%
Net Income		2,474		2,528		(2	)%

The PrivateBank - Georgia

The PrivateBank - Georgia operates a main office located on the north side of Atlanta in the affluent Buckhead market and two banking offices located in the high net worth markets of Norcross and Alpharetta, Georgia. The bank provides personal and business banking services to individuals and small and middle market businesses. The bank offers traditional loan and deposit solutions including commercial real estate construction and term loans as well as lines of credit. The bank is also a Small Business Lending Preferred Lending Participant offering this alternative financing vehicle to business clients. The PrivateBank - Georgia also provides traditional deposit solutions such as traditional checking, money markets and certificates of deposit as well as cash management alternatives, including remote capture deposits for its business clients. The PrivateBank - Georgia’s balance sheet reflects goodwill of $29.9 million, which remained unchanged from December 31, 2006, and intangibles of $2.3 million at June 30, 2007 compared to $2.5 million at December 31, 2006, as a result of its acquisition by the Company on December 13, 2006.

	The PrivateBank - Georgia
	At or for the six months ended June 30,
	2007
	(in thousands)
Total gross loans	$	241,431
Total assets		321,175
Total deposits		236,040
Total borrowings		24,498
Total capital		56,320
Net interest income		5,287
Provision for loan loss		76
Non-interest income		256
Non-interest expense		3,242
Net income		1,439

Wealth Management

 Wealth Management includes investment management, personal trust and estate services, custodial services, retirement accounts and brokerage and investment services. Wealth management professionals work with trust and investment management clients to define objectives, goals and strategies for clients’ investment portfolios. They also assist some clients with the selection of independent investment managers to handle account investments. In addition, account administrators work with trust clients and their attorneys to establish estate plans. Consistent with the Company’s philosophy, Wealth Management emphasizes a high level of personal service, including prompt collection and reinvestment of interest and dividend income, weekly valuation, tracking of tax information, customized reporting and ease of security settlement. Lodestar is an investment management firm that is 80% owned by The PrivateBank and Trust Company and is part of the Wealth Management segment. Lodestar provides investment management services to high net worth clients, some of whom are also clients of the Wealth Management Group. The minority interest expense related to Lodestar is included in non-interest expense for this segment. Additionally, clients have access to investment advisory, insurance products, and securities brokerage services through an affiliation each of The PrivateBank - Chicago, The PrivateBank - St. Louis, and The PrivateBank - Michigan has with Linsco Private Ledger, a registered broker dealer and registered investment advisor.

	Wealth Management
	At or for the six months ended June 30,
	2007		2006		Variance (%)
	(in thousands)
Wealth Management fee revenue	$	7,759	$	6,653		17	%
Brokerage fee revenue		91		110		(17	)%
Net interest income		529		498		6	%
Non-interest expense		7,072		5,887		20	%
Minority interest expense		185		163		14	%
Net income		783		945		(17	)%

The following tables indicate the breakdown of the Company’s wealth management assets under management at June 30, 2007, by account classification and related gross revenue for the six months ended June 30, 2007 and June 30, 2006:

	At or for the six months ended June 30, 2007		At or for the six months ended June 30, 2006
	Market Value	Revenue	Market Value	Revenue
Fiduciary Services (1)	(in thousands)		(in thousands)
Discretionary accounts
Trusts, estates and guardianships	$870,401	$2,568	$709,395	$2,158
Investment agency	727,252	2,291	537,842	1,779
Retirement plans and accounts	153,154	329	115,014	171
Total discretionary accounts	1,750,807	5,188	1,362,251	4,108
Non-Discretionary accounts
Investment agency	766	3	843	3
Custody (includes retirement plans and accounts)	657,342	492	692,754	566
Total non-discretionary accounts	658,108	495	693,597	569
Lodestar investment management accounts	771,653	2,214	691,951	2,178
Less assets managed and revenue earned by Lodestar(2)	(118,734)	(138)	(109,346)	(202)
Brokerage services	58,044	91	47,802	110
Net fiduciary services and Lodestar investment management accounts	$3,119,878	$7,850	$2,686,255	$6,763

(1)   Fiduciary Services includes accounts administered at The PrivateBank - Chicago and The PrivateBank - Michigan. The PrivateBank - Chicago also provides fiduciary services delivered in The PrivateBank - Wisconsin, The PrivateBank - St. Louis, and The PrivateBank - Kansas City.

(2)   These assets are held in Fiduciary Services accounts at The PrivateBank - Chicago and The PrivateBank - Michigan.

Holding Company

Holding Company Activities consist of parent company only matters. The Holding Company’s most significant assets are net investments in its five banking subsidiaries, The PrivateBank - Chicago, The PrivateBank - St. Louis, The PrivateBank - Wisconsin, The PrivateBank - Michigan, and The PrivateBank - Georgia and a mortgage company subsidiary, The PrivateBank Mortgage Company. The Company acquired The Private Bank - Georgia on December 13, 2006, as part of its acquisition of Piedmont Bancshares, Inc.

Holding Company Activities are reflected primarily by interest expense on borrowings and operating expenses. Recurring Holding Company operating expenses consist of compensation (amortization of restricted stock awards and stock option expense) and professional fees.

	Holding Company Activities
	At or for the six months ended June 30,
	2007	2006	Variance (%)
	(in thousands)
Total assets	$581,920	$384,008	52%
Other borrowings	170,250	33,250	412%
Trust preferred securities	101,033	101,033	--
Total capital	306,109	253,058	21%
Net interest expense	6,606	3,526	87%
Non-interest income	138	112	23%
Non-interest expense	6,039	4,588	32%
Net loss	8,368	5,587	(50)%

The following tables present a reconciliation of certain operating information for reportable segments for the periods presented and the reported consolidated balances (in millions):

At or for the six months ended June 30, 2007	The PrivateBank -Chicago		The PrivateBank -St. Louis		The PrivateBank -Wisconsin		The PrivateBank - Michigan		The PrivateBank - Georgia		Wealth Management		Holding Company Activities			Intersegment Eliminations(2)			Consolidated
Total assets	$	3,035.3	$	449.1	$	122.3	$	640.8	$	321.2	$	—	$	581.9		$	(664.6	)	$	4,486.0
Total deposits		2,538.2		338.7		109.3		494.1		236.0		—		—			(77.8	)		3,638.5
Total borrowings(1)		192.0		68.5		—		47.0		24.5		—		271.3			(94.6	)		508.7
Total gross loans		2,451.3		371.2		105.7		539.9		241.4		—		—			(4.2	)		3,705.3
Total capital		286.4		39.8		12.5		95.5		56.3		—		306.1			(490.5	)		306.1
Net interest income (expense)		47.4		6.3		1.7		9.0		5.3		0.5		(6.6	)		0.5			64.1
Non-interest income		3.9		1.1		—		0.6		0.3		7.9		0.1			(0.6	)		13.3
Non-interest expense		19.1		5.3		1.5		4.7		3.2		7.1		6.0			(0.2	)		46.7
Net income (loss)		21.7		0.2		—		2.5		1.4		0.8		(8.4	)		(0.4	)		17.8
Wealth Management assets under management		—		—		—		—		—		3,238.6		—			(118.7	)		3,119.9

At or for the six months ended June 30, 2006	The PrivateBank -Chicago	The PrivateBank - St. Louis	The PrivateBank - Wisconsin	The PrivateBank - Michigan	Wealth Management	Holding Company Activities	Intersegment Eliminations(2)	Consolidated
Total assets	$2,666.0	$399.5	$59.8	$536.6	$—	$384.0	$(393.6)	$3,652.3
Total deposits	2,345.5	324.9	61.8	401.4	—	—	(7.8)	3,125.8
Total borrowings(1)	48.9	26.4	—	45.0	—	134.3	(20.4)	234.2
Total gross loans	2,113.3	337.8	55.8	449.1	—	—	--	2,956.0
Total capital	240.1	44.9	(1.8)	86.9	—	253.1	(372.4)	250.8
Net interest income (expense)	44.7	7.0	0.6	8.3	0.5	(3.5)	--	57.6
Non-interest income	3.9	1.0	—	0.4	6.8	0.1	(0.6)	11.6
Non-interest expense	17.5	3.6	1.2	4.3	5.9	4.6	(0.6)	36.5
Net income (loss)	20.1	1.9	(0.6)	2.5	0.9	(5.6)	(0.2)	19.0
Wealth Management assets under management	—	—	—	—	2,795.6	—	(109.3)	2,686.3

(1)   Includes trust preferred securities for the Holding Company segment.

(2)   Intersegment elimination for gross loans reflects the exclusion of the unearned income for management reporting purposes. The intersegment elimination for total capital reflects the elimination of the net investment in each of the Holding Company subsidiaries in consolidation. The intersegment elimination for total deposits and interest expense reflects the elimination of the holding company’s cash deposited at The PrivateBanks - Chicago, St. Louis and Georgia. The intersegment eliminations for total borrowings and interest expense reflects the exclusion of The PrivateBank Mortgage Company revolving line of credit with The PrivateBank - Chicago and the elimination of intercompany federal funds purchased. The intersegment eliminations include adjustments necessary for each category to agree with the related consolidated financial statements.

NOTE 3—EARNINGS PER SHARE

The following table shows the computation of basic and diluted earnings per share (in thousands except per share data) for the three and six months ended June 30, 2007 and 2006:

	Three months ended June 30,
	2007		2006
Net income	$	8,751	$	10,013
Weighted average common shares outstanding		21,185		20,660
Weighted average common shares equivalent(1)		625		864
Weighted average common shares and common share equivalents		21,810		21,524
Net income per average common share - basic	$	0.41	$	0.48
Net income per average common share - diluted	$	0.40	$	0.47

	Six months ended June 30,
	2007		2006
Net income	$	17,787	$	19,000
Weighted average common shares outstanding		21,258		20,615
Weighted average common shares equivalent(1)		660		895
Weighted average common shares and common share equivalents		21,918		21,510
Net income per average common share - basic	$	0.84	$	0.92
Net income per average common share - diluted	$	0.81	$	0.88

(1)   Common shares equivalent result from stock options being treated as if they had been exercised and are computed by application of the treasury stock method.

NOTE 4—OTHER COMPREHENSIVE INCOME

Change in the fair value of securities available-for-sale is presented on a net basis on the Consolidated Statement of Changes in Stockholders’ Equity. The following table discloses the changes in the components of other accumulated comprehensive income for the six months ended June 30, 2007 and 2006 (in thousands):

	June 30, 2007
	Before Tax Amount			Tax Effect			Net of Tax Amount
Change in unrealized gains (losses) on securities available-for-sale	$	(3,516	)	$	(1,309	)	$	(2,207	)
Less: reclassification adjustment for (gains) losses included in net income		18			10			8
Change in net unrealized gains (losses)	$	(3,498	)	$	(1,299	)	$	(2,199	)

	June 30, 2006
	Before Tax Amount			Tax Effect			Net of Tax Amount
Change in unrealized gains (losses) on securities available-for-sale	$	(9,649	)	$	(3,733	)	$	(5,916	)
Less: reclassification adjustment for (gains) losses included in net income		1,585			584			1,001
Change in net unrealized gains (losses)	$	(8,064	)	$	(3,149	)	$	(4,915	)

Note 5—Long Term Debt

The following table is a summary of the Company’s trust preferred securities as of June 30, 2007. The Debentures represent the aggregate liquidation amount issued.

Trust Preferred Securities (dollars in thousands)
	Trust						Earliest
	Preferred				Maturity		Redemption		Coupon
Issuance Trust	Securities		Debentures		Date		Date		Rate
PrivateBancorp Statutory Trust II	$	50,000	$	51,547		09/15/35		09/15/10		6.00%(1	)
PrivateBancorp Statutory Trust III		40,000		41,238		12/15/35		12/15/10		6.10%(2	)
Bloomfield Hills Statutory Trust I		8,000		8,248		06/17/34		06/17/09		Floating LIBOR + 2.65	%
Total	$	98,000	$	101,033

(1)   6.00% rate effective until 9/15/2010, then floating at three-month LIBOR + 1.71%.

(2)   6.10% rate effective until 12/15/2010, then floating at three-month LIBOR + 1.50%.

As of June 30, 2007, the Company owned 100% of the common securities of three trusts, PrivateBancorp Statutory Trust II, Bloomfield Hills Statutory Trust I and PrivateBancorp Statutory Trust III. PrivateBancorp Statutory Trust II and PrivateBancorp Statutory Trust III were established as wholly-owned subsidiaries of the Company in June 2005 and December 2005, respectively. Bloomfield Hills Statutory Trust I was acquired as part of the acquisition of BHB on June 20, 2005. The Trusts were formed for purposes of issuing trust preferred securities to third-party investors and investing the proceeds from the issuance of the trust preferred securities and common securities solely in junior subordinated debentures (“Debentures”) issued by the Company with the same maturities and interest rates as the trust preferred securities. The Debentures are the sole assets of the Trusts.

The Trusts are reported in the Company’s consolidated financial statements as unconsolidated subsidiaries. Accordingly, the Debentures, which include the Company’s ownership interest in the Trusts, are reflected as “trust preferred securities” and the common securities are included in “other assets.” The Company has made certain reclassifications on its financial statements for all preceding periods based on its interpretation of FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities”.

The Company has guaranteed the payment of distributions and payments upon liquidation or redemption of the trust preferred securities, in each case to the extent of funds held by the Trusts. The Company and the Trusts believe that, taken together, the obligations of the Company under the guarantees, the Debentures, and other related agreements provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a subordinated basis, of all of the obligations of the Trusts under the trust preferred securities. Subject to certain limitations, the Company has the right to defer the payment of interest on the Debentures at any time, or from time to time, for a period not to exceed 20 consecutive quarters. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the Debentures at maturity or their earlier redemption. The Debentures are redeemable in whole or in part prior to maturity at any time after the dates shown in the table, and earlier at the discretion of the Company if certain conditions are met, and, in any event, only after the Company has obtained Federal Reserve approval, if then required under applicable guidelines or regulations.

The Company’s aggregate principal amount of outstanding trust preferred securities at June 30, 2007 is $101.0 million. As of June 30, 2007, $100.8 million of the trust preferred securities is eligible for treatment as Tier 1 capital as allowed by the Federal Reserve. On March 1, 2005, the Federal Reserve issued a final rule that retains Tier 1 capital treatment for trust preferred securities but with stricter limits. Under the rule, after a five-year transition period, the aggregate amount of the trust preferred securities and certain other capital elements will retain their current limit of 25% of Tier 1 capital elements, net of goodwill less any associated deferred tax liability. The amount of trust preferred securities and certain other capital elements in excess of the limit could be included in Tier 2 capital, subject to restrictions. Applying the final rule at June 30, 2007, the Company would still be considered well-capitalized under regulatory capital guidelines.

As of June 30, 2007 the Company had a credit facility with a correspondent bank comprised of a $40.0 million senior debt facility and a $75.0 million subordinated debt facility. The senior debt facility is comprised of a $250,000 term loan with a maturity date of December 31, 2017 and a revolving loan with a maturity date of December 31, 2007. Management expects to renew the revolving loan on an annual basis. The subordinated debt matures on December 31, 2017. The interest rate on the senior debt facility resets quarterly, and is based on, at the Company’s option, either the correspondent bank’s prime rate or three-month LIBOR plus 120 basis points, with a floor of 3.50%. The interest rate on the subordinated debt resets quarterly, and is equal to three-month LIBOR plus 135 basis points, with a floor of 3.50%. The subordinated debt qualifies as Tier 2 capital under applicable rules and regulations promulgated by the Board of Governors of the Federal Reserve System.

At June 30, 2007, the Company had $250,000 outstanding on the senior debt facility and $55.0 million of subordinated debt outstanding. The credit facility is used for general corporate and other working capital purposes.

On March 14 and March 20, 2007 the Company issued a total of $115.0 million of contingent convertible senior notes to qualified institutional investors. The notes are senior, unsecured obligations of PrivateBancorp, Inc. and pay interest on March 15 and September 15 each year at a rate of 3.625% per year. The notes will mature on March 15, 2027, and will be convertible under certain circumstances into cash and, if applicable, shares of PrivateBancorp’s common stock at an initial conversion price of $45.05 per share. A portion of the net proceeds from the notes were used during the first quarter to pay down $41.5 million of the senior debt facility and approximately $7.5 million of the net proceeds were used to repurchase 213,200 shares of common stock. The Company will use the remaining net proceeds for working capital and other general corporate purposes.

In July 2007, the Financial Accounting Standards Board (FASB) announced a proposed FASB Staff Position (FSP) related to convertible debt. The proposed FSP would require the Company to separately account for the liability and equity components of the convertible debt in a manner that reflects the Company's economic interest cost. The proposed FSP would require bifurcation of a component of the debt, classification of that component in equity, and then accretion of the resulting discount on the debt to result in the economic interest cost being reflected in the income statement. The proposed FSP would make any final guidance effective for fiscal periods beginning after December 15, 2007. The Company is currently evaluating the impact of the proposal on its financial position, results of operation and liquidity.

NOTE 6—CAPITAL TRANSACTIONS

During the second quarter 2007, the Company declared and paid a $0.075 per share dividend, even with the first quarter 2007 and a 25% increase from the fourth quarter 2006 dividend of $0.06.

During the second quarter 2007 the Company repurchased 2,319 shares of its common stock compared to the repurchase of 3,350 shares of its common stock during the second quarter 2006.

NOTE 7—INCOME TAXES

As discussed in Note 1, “Recent Accounting Pronouncements,” the Company adopted FIN 48 as of January 1, 2007. As of the date of adoption, there were no unrecognized tax benefits included in the consolidated balance sheet. Accordingly, there were no amounts recognized for potential penalties and interest related to unrecognized tax benefits. If incurred, the Company would recognize any interest and penalties in the provision for income taxes.

The Company files U.S. federal and various state income tax returns. The Company is no longer subject to income tax examination by the Federal Internal Revenue Service (IRS) or certain state departments of revenue with which it files for years prior to 2003. Although tax years 2003 and 2004 may still be subject to examination due to the statute of limitations, the IRS has previously completed its review of the U.S. federal tax returns for these years.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

PrivateBancorp, Inc. was organized as a Delaware corporation in 1989 to serve as the holding company for The PrivateBank - Chicago, a de novo bank. We completed our initial public offering in June of 1999. We currently have five bank subsidiaries that operate through 18 offices in Chicago, suburban Detroit, St. Louis, Milwaukee, Kansas City, and Atlanta. Using the European tradition of “private banking” as our model, we provide our clients with traditional individual and corporate banking services as well as access to mortgage loans offered through The PrivateBank Mortgage Company, and wealth management services offered through our wealth management division.

We have grown our business organically as well as through the acquisition of existing banks and the establishment of de novo banks and offices in new markets. We completed our most recent acquisition in December 2006 when we purchased Piedmont Bancshares, Inc., and its subsidiary, Piedmont Bank of Georgia. Subsequent to the acquisition, we changed the name of Piedmont Bank to The PrivateBank. Piedmont’s executive officers continue to manage The PrivateBank - Georgia. Our newest de novo bank, The PrivateBank - Kansas City (in organization), opened in March of 2007 as a branch of The PrivateBank - St. Louis. The PrivateBank - Kansas City will move into their permanent offices during the third quarter 2007. The Company has received conditional OTS approval for The PrivateBank - Kansas City’s federal savings bank charter and approvals from the FDIC and Federal Reserve Bank of Chicago are pending.

For financial information regarding our seven separate lines of business, The PrivateBank - Chicago, The PrivateBank - Michigan, The PrivateBank - St. Louis, The PrivateBank - Georgia, The PrivateBank - Wisconsin, Wealth Management Services, and Holding Company Activities, see “Operating Segments Results” beginning on page 32 and “Note 2—Operating Segments” to our consolidated financial statements as of and for the quarter ended June 30, 2007.

The profitability of our operations depends on our net interest income, provision for loan losses, non-interest income, and non-interest expense. Net interest income is dependent on the amount of, and yields earned on, interest-earning assets as compared to the amount of, and rates paid on, interest-bearing liabilities. Net interest income is sensitive to changes in market rates of interest as well as to the execution of our asset/liability management strategy. The provision for loan losses is affected by changes in the loan portfolio, management’s assessment of the collectability of the loan portfolio, loss experience, as well as economic and market factors. Non-interest income consists primarily of wealth management fee revenue, mortgage banking income, earnings on bank owned life insurance and, to a lesser extent, fees for ancillary banking services. Net securities gains/losses and net gains/losses on an interest rate swap are also included in non-interest income.

Critical Accounting Policies

Generally accepted accounting principles are complex and require management to apply significant judgment to various accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply these principles where actual measurements are not possible or practical. Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements included herein. For a complete discussion of our significant accounting policies, see the footnotes to our Consolidated Financial Statements included on pages F-8 through F-14 in our Form 10-K for the fiscal year ended December 31, 2006. Below is a discussion of our critical accounting policies. These policies are critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements. Actual results could differ from those estimates. Management has reviewed the application of these policies with the Audit Committee of the Company’s Board of Directors.

The accounting policies that we view as critical to us are those relating to estimates and judgments regarding the determination of the adequacy of the allowance for loan losses, the estimation of the valuation of goodwill and the useful lives applied to intangible assets, and income taxes.

Allowance for Loan Losses

We maintain an allowance for loan losses sufficient to absorb credit losses inherent in our loan portfolio. The allowance for loan losses represents our estimate of probable losses in the portfolio at each balance sheet date and is supported by available and relevant information. Management of the banks continuously monitors loan quality. Any additions to the allowance for loan losses, which is charged to earnings through the provision for loan losses, is determined based on a variety of factors, including assessment of the credit risk of the portfolio based on the composition of the loan portfolio by loan type and by loan risk rating, evaluation of loans classified as impaired, trends in loan quality, delinquent loans, results of independent loan reviews and bank examinations, evaluation of current economic conditions in the market area, actual charge-offs and recoveries during the year, historical loss experience and industry loss averages. The unallocated portion of the reserve involves the exercise of judgment by management and reflects various considerations, including management’s view that the reserve should have a margin that recognizes the imprecision inherent in the process of estimating credit losses.

Management adjusts the allowance for loan losses by recording a provision for loan losses in an amount sufficient to maintain the allowance at the level determined appropriate. Loans are charged-off when deemed to be uncollectible by management. We believe that the allowance for loan losses is adequate to provide for estimated probable credit losses inherent in our loan portfolio. The allowance for loan losses as a percentage of total loans was 1.11% as of June 30, 2007, compared to 1.09% as of December 31, 2006 and 1.13% at June 30, 2006.

Goodwill and Intangible Assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be separately distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. We perform an annual goodwill impairment test in accordance with SFAS No. 142, which requires that goodwill and intangible assets that have indefinite lives no longer be amortized but be reviewed for impairment annually, or more frequently if certain indicators arise. Prior to the adoption of SFAS No. 142, goodwill was being amortized using the straight-line method over a period of 15 years. Impairment losses on recorded goodwill, if any, will be recorded as operating expenses.

Goodwill is “pushed down” to business segments at acquisition. Fair values of reporting units are determined using either discounted cash flow analyses based on internal financial forecasts or, if available, market-based valuation multiples for comparable businesses. No impairment was identified as a result of the testing performed during 2006 or 2005. Note 1 to our audited financial statements for the years ended December 31, 2006, 2005, and 2004 included in our 2006 Form 10-K contains additional information regarding goodwill and the carrying values by segment.

Customer intangibles acquired in connection with the acquisition of Lodestar are amortized over an estimated useful life of 15 years. Customer intangibles acquired in connection with the acquisition of The PrivateBank - Michigan are amortized over 10 years using an accelerated method of amortization. Customer intangibles acquired in connection with the acquisition of The PrivateBank - Georgia will be amortized over 8 years using an accelerated method of amortization.

Goodwill was $93.0 million at June 30, 2007, up from $63.2 million at June 30, 2006, due to the acquisition of The PrivateBank - Georgia. Total customer intangibles at June 30, 2007 were $7.0 million. Amortization expense related to the Lodestar customer intangible assets of $1.8 million is currently recognized at approximately $170,000 per year until 2017. The amortization expense related to The PrivateBank - Michigan intangibles of $2.9 million for the years 2007 through 2011, will be approximately $423,000, $406,000, $389,000, $373,000 and $358,000, respectively. The amortization expense related to The PrivateBank - Georgia intangibles of $2.3 million for the years 2007 through 2011, will be approximately $373,000, $355,000, $338,000, $320,000, and $302,000, respectively.

Income Taxes

The Company is subject to the federal income tax laws of the United States, and the tax laws of the states and other jurisdictions where it conducts business. Due to the complexity of these laws, taxpayers and the taxing authorities may subject these laws to different interpretations. Management must make conclusions and estimates about the application of these laws, related regulations, and case law. When preparing the Company’s tax returns, management attempts to make reasonable interpretations of the tax laws. Taxing authorities have the ability to challenge management’s analysis of the tax law or any reinterpretation management makes in its ongoing assessment of facts and the developing case law. Management assesses the reasonableness of its effective tax rate quarterly based on its current estimate of net income and the applicable taxes expected for the full year. On a quarterly basis, management also reviews circumstances and developments in tax law affecting the reasonableness of deferred tax assets and liabilities and reserves for contingent tax liabilities.

RESULTS OF OPERATIONS -THREE MONTHS AND SIX MONTHS

ENDED JUNE 30, 2007 AND 2006

Net Income

Net income for the second quarter ended June 30, 2007 was $8.8 million, or $0.40 per diluted share compared to $10.0 million, or $0.47 per diluted share for the second quarter 2006. Net income for the six months ended June 30, 2007 was $17.8 million, or $0.81 per diluted share, compared to $19.0 million, or $0.88 per diluted share, for the same period last year. The second quarter 2007 results include the financial results for The PrivateBank - Georgia, which was acquired on December 13, 2006, and start-up costs associated with The PrivateBank - Kansas City. The acquisition of The PrivateBank - Georgia contributed $0.01 to earnings per share for the second quarter 2007 and start-up costs associated with The PrivateBank - Kansas City reduced earnings per share by $0.01. The decrease in net income over prior year quarter was due to an increase in our nonperforming assets which resulted in the reversal of interest income on non-accruing loans during the quarter, an increase in our cost of funds which more than offset the increase in yields on earning assets and a 23% increase in non-interest expenses. The decrease in net income for the six months ended June 30, 2007 compared to the prior year period was also due to a higher cost of funds compared to yields earned on assets, while non-interest expenses increased 28%.

Net Interest Income

Net interest income was $32.1 million for the three months ended June 30, 2007, compared to $29.9 million in the prior year quarter, an increase of 8%. Net interest income is affected by both the volume of assets and liabilities recorded during the period and the corresponding rates earned and paid on those balance sheet accounts. The increase in net interest income is primarily attributable to an increase in loan volumes. Average earning assets at June 30, 2007 were $4.1 billion compared to $3.5 billion at June 30, 2006, an increase of 19%. Our net interest margin, which, on a tax equivalent basis, was 3.19% for the three months ended June 30, 2007 compared to 3.55% for the prior year quarter, was negatively impacted by the reversal of approximately $611,000 of interest income on non-accruing loans during the quarter. Earning assets yielded 7.53% in the second quarter 2007 compared to 7.39% in the second quarter 2006, an increase of 14 basis points primarily due to increased loan volumes. However, improvements in yields on earning assets were offset by a slower growth in deposits and a higher cost of funds. Our cost of funds was 4.77% during the second quarter 2007 compared to 4.30% during the second quarter 2006, an increase of 47 basis points. Increases in rates paid on money market, other time and brokered deposits contributed to the higher cost of funds. Non-interest bearing funds, which represent non-interest bearing sources of funds that are deployed in interest bearing assets, positively impacted net interest margin by 0.43% for the three months ended June 30, 2007 and by 0.46% in the prior year period.

During the second quarter 2007, the yield on average interest earning assets decreased by three basis points from the first quarter 2007 to 7.53% while the cost of average interest-bearing liabilities increased by four basis points to 4.77% from the first quarter 2007. The reversal of interest income on non-accruing loans impacted net interest margin by approximately six basis points, therefore margin was stable with last quarter absent the effect of the interest reversal.

Net interest income on a tax equivalent basis was $66.2 million for the six months ended June 30, 2007 compared to $60.0 million for the same period in 2006. Net interest margin on a tax equivalent basis was 3.23% for the six months ended June 30, 2007, compared to 3.50% in the prior year period. The decline in net interest margin during the six months ended June 30, 2007 as compared to the same period in 2006 was primarily attributable to an increase of 62 basis points in the rates paid on our interest bearing liabilities, which more than offset the 34 basis point increase in the rates earned on interest yielding assets.

The following tables present a summary of our net interest income, related net interest margin, and average balance sheet calculated on a tax equivalent basis (dollars in thousands):

	Three Months Ended June 30,
	2007								2006
	Average Balance(1)			Interest		Rate			Average Balance(1)			Interest		Rate
Fed funds sold and interest bearing deposits	$	14,670		$	239		5.15	%	$	15,647		$	199		5.02	%
Tax-exempt municipal securities		198,166			3,416		6.89	%		216,842			3,739		6.90	%
US Government Agencies, MBS and CMOs		265,139			3,428		5.17	%		301,218			3,975		5.28	%
Taxable municipal securities		3,810			72		7.53	%		3,825			72		7.52	%
FHLB stock		5,656			80		5.24	%		51,187			1,106		8.55	%
Other securities		4,148			14		1.92	%		2,227			62		11.32	%
Investment securities (taxable)		278,753			3,594		5.16	%		358,457			5,215		5.81	%
Commercial, Construction and Commercial Real Estate Loans		3,056,057			60,650		7.91	%		2,371,667			46,449		7.79	%
Residential Real Estate Loans		254,303			3,705		5.69	%		233,354			3,475		5.96	%
Personal Loans		321,532			6,377		7.96	%		267,891			5,203		7.79	%
Total Loans(2)		3,631,892			70,732		7.76	%		2,872,912			55,127		7.64	%
Total earning assets	$	4,123,481		$	77,981		7.53	%	$	3,463,858		$	64,280		7.39	%
Allowance for Loan Losses		(39,304	)							(32,517	)
Cash and Due from Banks		68,293								37,582
Other Assets		234,505								174,746
Total Average Assets	$	4,386,975							$	3,643,669
Interest Bearing Demand accounts	$	147,590		$	437		1.19	%	$	128,854		$	364		1.67	%
Regular Savings Accounts		13,450			72		2.14	%		15,058			29		0.76	%
Money Market Accounts		1,469,677			16,595		4.52	%		1,258,581			13,060		4.11	%
Time Deposits		1,038,222			13,441		5.19	%		653,202			7,386		4.54	%
Brokered Deposits		597,618			7,796		5.23	%		736,154			8,442		4.60	%
Total Deposits		3,266,557			38,341		4.70	%		2,791,849			29,281		4.21	%
FHLB advances		92,981			1,081		4.65	%		115,792			1,234		4.22	%
Other borrowings		290,010			3,791		5.04	%		90,306			1,153		5.05	%
Trust preferred securities		101,033			1,585		6.20	%		101,033			1,577		6.17	%
Total interest-bearing liabilities	$	3,750,581		$	44,798		4.77	%	$	3,098,980		$	33,245		4.30	%
Non-Interest Bearing Deposits		302,941								264,798
Other Liabilities		32,379								38,670
Stockholders' Equity		301,074								241,221
Total Average Liabilities & Stockholders' Equity	$	4,386,975							$	3,643,669
Tax equivalent net interest income(3)				$	33,183							$	31,035
Net interest spread(4)							2.76	%							3.09	%
Effect of non interest bearing funds							0.43	%							0.46	%
Net interest margin(3)(5)							3.19	%							3.55	%

	Six Months Ended June 30,
	2007								2006
	Average Balance(1)			Interest		Rate			Average Balance(1)			Interest		��	Rate
Fed funds sold and interest bearing deposits	$	19,423		$	477		4.25	%	$	11,505		$	286			4.95	%
Tax-exempt municipal securities		198,471			6,837		6.89	%		216,712			7,480			6.90	%
US Government Agencies, MBS and CMOs		267,602			6,810		5.09	%		311,674			8,530			5.47	%
Taxable municipal securities		3,810			142		7.53	%		3,825			143			7.52	%
FHLB stock		5,543			153		5.17	%		96,539			2,200			4.53	%
Other securities		3,982			78		2.00	%		2,104			125			12.03	%
Investment securities (taxable)		280,937			7,183		5.08	%		414,142			10,998			5.31	%
Commercial, Construction and Commercial Real Estate Loans		3,003,065			119,142		7.95	%		2,265,924			87,058			7.69	%
Residential Real Estate Loans		257,444			7,756		5.84	%		233,626			6,904			5.91	%
Personal Loans		321,691			12,720		7.97	%		268,601			10,075			7.56	%
Total Loans(2)		3,582,200			139,618		7.80	%		2,768,151			104,037			7.52	%
Total earning assets	$	4,081,031		$	154,115		7.55	%	$	3,410,510		$	122,801			7.21	%
Allowance for Loan Losses		(38,733	)							(31,274	)
Cash and Due from Banks		62,928								36,348
Other Assets		229,474								175,900
Total Average Assets	$	4,334,700							$	3,591,484
Interest Bearing Demand accounts	$	143,720		$	1,033		1.17	%	$	126,204		$	605			1.52	%
Regular Savings Accounts		13,525			115		2.14	%		14,879			53			0.72	%
Money Market Accounts		1,504,360			33,614		4.53	%		1,242,487			24,500			3.92	%
Time Deposits		1,021,446			26,096		5.15	%		626,173			13,532			4.36	%
Brokered Deposits		575,263			14,918		5.23	%		684,211			15,143			4.46	%
Total Deposits		3,258,314			75,776		4.69	%		2,693,954			53,833			4.03	%
FHLB advances		92,484			2,162		4.62	%		177,067			2,593			2.91	%
Other borrowings		263,105			6,794		5.07	%		89,056			3,262			7.28	%
Trust preferred securities		101,033			3,152		6.11	%		101,033			3,129			6.16	%
Total interest-bearing liabilities	$	3,714,936			87,884		4.75	%	$	3,061,110			62,817			4.13	%
Non-Interest Bearing Deposits		290,848								252,529
Other Liabilities		30,235								40,080
Stockholders' Equity		298,681								237,765
Total Average Liabilities & Stockholders' Equity	$	4,334,700							$	3,591,484
Tax equivalent net interest income(3)				$	66,231							$	59,984
Net interest spread(4)							2.80	%								3.08	%
Effect of non interest bearing funds							0.43	%								0.42	%
Net interest margin(3)(5)							3.23	%								3.50	%

(1)   Average balances were generally computed using daily balances.

(2)   Nonaccrual loans are included in the average balances and do not have a material effect on the average yield.

(3)   Reconciliation of quarter net interest income to quarter net interest income on a tax equivalent basis:

	Three months ended June 30,
	2007		2006
Net interest income	$	32,111	$	29,862
Tax equivalent adjustment to net interest income		1,072		1,173
Net interest income, tax equivalent basis	$	33,183	$	31,035

Reconciliation of year-to-date net interest income to year-to-date net interest income on a tax equivalent basis:

	Six months ended June 30,
	2007		2006
Net interest income	$	64,086	$	57,637
Tax equivalent adjustment to net interest income		2,145		2,347
Net interest income, tax equivalent basis	$	66,231	$	59,984

(4)   Yield on average interest-earning assets less rate on average interest-bearing liabilities.

(5)   Net interest income, on a tax-equivalent basis, divided by average interest-earning assets.

The following table shows the dollar amount of changes in interest income and interest expense by major categories of interest-earning assets and interest-bearing liabilities attributable to changes in volume or rate or a mix of both, for the periods indicated, calculated on a tax equivalent basis. Volume variances are computed using the change in volume multiplied by the previous year’s rate. Rate variances are computed using the changes in rate multiplied by the previous year’s volume.

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006
	Change due to rate			Change due to volume			Change due to mix			Total change
	(in thousands)
Interest income/expense from:
Fed funds sold and other short-term investments	$	5		$	(12	)	$	47		$	40
Investment securities (taxable)		(580	)		(1,154	)		113			(1,621	)
Investment securities (non-taxable)(1)		(1	)		(321	)		(1	)		(323	)
Loans, net of unearned discount		814			14,463			328			15,605
Total tax equivalent interest income(1)	$	238		$	12,976		$	487		$	13,701
Interest-bearing deposits	$	3,449		$	4,979		$	632		$	9,060
Funds borrowed		186			2,020			279			2,485
Trust preferred securities		8			--			--			8
Total interest expense		3,643			6,999			911			11,553
Net tax equivalent interest income(1)	$	(3,405	)	$	5,977		$	(424	)	$	2,148
Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006
		Change due to rate			Change due to volume			Change due to mix			Total change
	(in thousands)
Interest income/expense from:
Fed funds sold and other short-term investments	$	(40	)	$	194		$	37		$	191
Investment securities (taxable)		(462	)		(3,505	)		152			(3,815	)
Investment securities (non-taxable)(1)		(14	)		(624	)		(5	)		(643	)
Loans, net of unearned discount		3,778			30,374			1,429			35,581
Total tax equivalent interest income(1)	$	3,262		$	26,439		$	1,613		$	31,314
Interest-bearing deposits	$	8,780		$	11,277		$	1,886		$	21,943
Funds borrowed		(5,774	)		1,941			6,934			3,101
Trust preferred securities		(24	)		--			47			23
Total interest expense		2,982			13,218			8,867			25,067
Net tax equivalent interest income(1)	$	280		$	13,221		$	(7,254	)	$	6,247

(1)   Interest income on tax-advantaged investment securities reflects a tax equivalent adjustment based on a marginal federal corporate tax rate of 35% for 2007 and 2006. The total tax equivalent adjustment reflected in the above table was $1.1 million and $1.2 million for the three months ended June 30, 2007 and 2006, respectively. The total tax equivalent adjustment reflected in the above table was $2.1 million and $2.3 million for the six months ended June 30, 2007 and 2006, respectively.

Provision for Loan Losses

For the three months ended June 30, 2007, the provision for loan losses was $3.0 million compared to $2.4 million for the comparable period in 2006. Net charge-offs totaled $571,000, or 0.06% of average loans, for the quarter ended June 30, 2007 versus net charge-offs of $389,000, or 0.05% of average loans for the second quarter 2006 and net charge-offs of $582,000, or 0.07% of average loans for the quarter ended March 31, 2007. While net charge-offs were stable over the last several quarters, a higher level of nonperforming loans and the expectation of modestly higher net charge offs in future quarters necessitated the increase in the provision over prior year quarter. For the six months ended June 30, 2007, the provision for loan losses was $4.4 million compared to $4.6 million in the prior year period.

The Company provides for an adequate allowance for loan losses that are probable and reasonably estimable in the portfolio. The provision for loan losses reflects management’s latest assessment of the known and inherent losses in the loan portfolio. Our allowance for probable loan losses is reassessed quarterly to determine the appropriate level of the reserve. Our analysis is influenced by the following factors: credit quality of loans, the volume, type and quality of loans and commitments in the portfolio, historical loss experience, and economic conditions. A discussion of the allowance for loan losses and the factors on which provisions are based begins on page 36.

Non-interest Income

The following table presents the breakdown of income from non-interest income for the periods presented and the variance between periods:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2007			2006			Variance			2007			2006			Variance
Wealth management fee revenue	$	4,024		$	3,603			12	%	$	7,850		$	6,763			16	%
Mortgage banking income		1,229			1,005			22	%		2,543			1,728			47	%
Banking and other services		1,376			2,247			(39	)%		2,107			3,023			(30	)%
Bank owned life insurance		427			369			16	%		822			732			12	%
Net securities and interest rate swap gains (losses)		(97	)		(594	)		84	%		(18	)		(617	)		97	%
Total non-interest income	$	6,959		$	6,630			5	%	$	13,304		$	11,629			14	%

Non-interest income was $7.0 million for the three months ended June 30, 2007 compared to $6.6 million for the prior year period, reflecting an increase of 5%; this increase is primarily from wealth management fees. Wealth management fee income was $4.0 million for the three months ended June 30, 2007, an increase of 12% from $3.6 million from the prior year period and up 5% from $3.8 million in the first quarter 2007. Mortgage banking income was $1.2 million for the three months ended June 30, 2007 compared to $1.0 million in the prior year period and $1.3 million for the first quarter 2007. Securities losses of $1.0 million combined with a $413,000 gain on an interest rate swap negatively affected the second quarter 2006, while $97,000 of securities losses negatively affected the second quarter 2007.

Non-interest income for the six months ended June 30, 2007 was $13.3 million compared to $11.6 million during the same period in 2006, reflecting an increase of $1.7 million, or 14%, due mainly to an increase in wealth management fees. The increase in wealth management fee revenue was primarily due to the growth in net new business, an increase in the value of accounts due to an increase in market value and the change of fee structures for certain client relationships. Wealth management assets under management increased 16% to $3.12 billion at June 30, 2007 compared to $2.69 billion at June 30, 2006 and up $217.7 million from $2.90 billion at December 31, 2006.

Mortgage banking income is generated by The PrivateBank Mortgage Company, The PrivateBank - Michigan, The PrivateBank - St. Louis, and The PrivateBank - Georgia. Mortgage banking income generated by The PrivateBank Mortgage Company was $683,000 and fee income generated by The PrivateBank - St. Louis was $463,000 for the second quarter 2007. Overall residential mortgage fee income has increased quarter over quarter and year over year due to a higher volume of loans sold and the addition of business from The PrivateBank - Georgia.

During the second quarter 2007, bank owned life insurance (BOLI) revenue increased 16% over the prior year quarter and 12% year over year. Income recognized on this product includes policies covering certain higher-level employees who are deemed to be significant contributors to the Company. All employees included in this policy are aware and have consented to the coverage. The cash surrender value of BOLI at June 30, 2007 was $43.3 million, compared to $41.6 million at June 30, 2006, and is included in other assets on the balance sheet.

Banking and other services income decreased 39% quarter over quarter and 30% year over year mainly due to the inclusion of a $1.4 million gain associated with the sale of FHLB (Chicago) advances during the second quarter 2006 as a result of the withdrawal of our membership at that time. Banking and other income for the second quarter 2007 includes $646,000 of insurance proceeds the Company received during the quarter covering a portion of losses the Company incurred in the fourth quarter 2006 as a result of a previously disclosed employee fraud. The Company does not expect to recover any additional insurance proceeds relating to this fraud. Also included in banking and other income for the three months ended June 30, 2007 are $81,000 in gains on sales of Small Business Administration (“SBA”) loans at The PrivateBank - Georgia.

Non-interest Expense

The following table presents the breakdown of non-interest expense for the periods presented and the variance between periods:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2007		2006		Variance			2007		2006		Variance
	(in thousands)							(in thousands)
Salaries and employee benefits	$	12,734	$	10,325		23	%	$	26,463	$	20,861		27	%
Occupancy		3,160		2,214		43	%		5,950		4,383		36	%
Professional fees		1,610		1,955		(18	)%		3,325		2,971		12	%
Wealth management fees		868		799		9	%		1,650		1,205		37	%
Marketing		1,330		1,083		23	%		2,619		1,996		31	%
Data processing		984		764		29	%		1,885		1,530		23	%
Postage, telephone and delivery		412		351		17	%		815		725		12	%
Office supplies and printing		251		162		55	%		501		371		35	%
Insurance		363		323		12	%		714		632		13	%
Amortization of intangibles		242		153		58	%		485		307		58	%
Other expense		1,356		805		68	%		2,268		1,511		50	%
Total non-interest expense	$	23,310	$	18,934		23	%	$	46,675	$	36,492		28	%

Non-interest expense was $18.9 million in the second quarter 2006 and $23.3 million in the second quarter 2007. During the second quarter 2007, total non-interest expense at The PrivateBank - Georgia was $1.6 million, and the total non-interest expense from The PrivateBank - Kansas City was $0.5 million. Non-interest expense was $46.7 million for the six months ended June 30, 2007 compared to $36.5 million in the prior year period, an increase of 28%. Excluding the impact of The PrivateBank - Georgia and costs associated with the start-up of The PrivateBank - Kansas City, non-interest expense increased 12% year over year. Quarter over quarter and year over year core growth in our non-interest expense is primarily attributable to the increased scale and scope of the Company’s operations, including investments in human capital, upgrades to and the expansion of several of our banking offices, marketing expenses and information technology costs.

We continue to nurture the future growth of the Company by investing in human capital. The number of managing directors increased to 160 at June 30, 2007, compared to 126 at June 30, 2006 and 150 at March 31, 2007. Since the end of the last quarter, seven of the ten new managing directors were the result of promotions and three were net new hires. The year over year increase includes 11 managing directors from the acquisition of The PrivateBank - Georgia and seven managing directors from The PrivateBank - Kansas City at June 30, 2007. Full-time equivalent (FTE) employees increased 23% to 503 at the end of the second quarter 2007, from 409 at the end of the second quarter 2006, reflecting the continued growth of our Company and the addition of 37 FTEs as a result of the acquisition of The PrivateBank - Georgia and 13 FTEs from The PrivateBank - Kansas City as of June 30, 2007.

The 43% increase in occupancy expense quarter over quarter and the 36% increase year over year is due to the new Chesterfield office of The PrivateBank - St. Louis and the addition of The PrivateBank - Georgia and The PrivateBank - Kansas City offices. The relocation of three offices, including our headquarters, to larger facilities impacted occupancy expense as well.

The 37% increase year over year in wealth management fees, which are fees paid to third party investment managers, reflects the increase in assets managed by Wealth Management and the restructuring of certain fee relationships. Wealth management fees grew 9% quarter over quarter.

The 23% increase in marketing expense quarter over quarter and 31% increase year over year reflects the increase in marketing initiatives for client development and website upgrading. The increase is also due to additional marketing expenses related to the addition of The PrivateBank - Georgia and The PrivateBank - Kansas City offices and receptions at relocated offices.

Data processing costs, which include fees paid for information technology services and support, increased 29% quarter over quarter and 23% year over year due to investments in technology Company-wide and the addition of The PrivateBank - Georgia and The PrivateBank - Kansas City offices.

Professional fees, which include fees paid for legal, accounting, consulting, and information systems consulting services, increased year over year primarily due to increased legal and external audit fees at the holding company level due to the Company growth. Professional fees decreased quarter over quarter, due to the inclusion of $228,000 in legal and other costs associated with the Company’s withdrawal from the FHLB (Chicago) during the second quarter 2006.

During the first six months of 2007, the Company amortized $485,000 in intangible assets, $85,000 related to our acquisition of a controlling interest in Lodestar, $213,000 related to our acquisition of The PrivateBank - Michigan, and $187,000 related to our acquisition of The PrivateBank - Georgia.

The other expense category for the three months ended June 30, 2007 includes $121,000 of expenses paid relating to the resolution of OREO property at the Chicago and St. Louis banks.

The efficiency ratio (on a tax-equivalent basis), which measures the percentage of revenue that is expended as non-interest expense, was 58.1% in the second quarter 2007, up from 50.3% in the prior year second quarter, but down from 59.3% reported in the first quarter 2007. The year over year increase in the efficiency ratio was due to the combined effect of the increase in the Company’s operating expenses and a lower net interest margin. On a tax-equivalent basis, this ratio indicates that in the second quarter of 2007, we spent 58.1 cents to generate each dollar of revenue while in the second quarter 2006, we spent 50.3 cents. Our efficiency ratio for the six months ended June 30, 2007 was 59.5% compared to the efficiency ratio of 51.0% for the six months ended June 30, 2006. The year over year increase resulted primarily from the decrease in the net interest margin. With continued growth in the balance sheet and as we more fully lever the investment made in our new offices, we expect the efficiency ratio will trend down to the mid 50% range by the end of 2007.

During the second quarter 2007, the Company made nonqualified stock option awards to non-officer members of the Board of Directors and Mr. William Goldstein, President of Lodestar Investment Counsel, LLC. As planned, the Company made nonqualified stock option and restricted stock awards to certain employees who had joined the Company or had been promoted since September 2006 and to the Company’s Chief Executive Officer (“CEO”). Due to the retirement eligibility provisions for stock option and restricted stock grants under the plan, ten years of employment and at least 62 years of age, the CEO's grant of approximately $400,000 in equity awards was immediately expensed in the second quarter because the CEO satisfied these retirement eligibility provisions. As a result of these awards, share-based compensation expense increased approximately $537,000 compared to the first quarter 2007 and $1.0 million compared to the second quarter 2006.

Minority Interest Expense

On December 30, 2002, The PrivateBank - Chicago acquired an 80% controlling interest in Lodestar. The Company records its 20% non-controlling interest related to Lodestar’s results of operations in minority interest expense on the consolidated statement of income. For the quarters ended June 30, 2007 and 2006, we recorded $95,000 and $86,000 of minority interest expense, respectively.

Income Taxes

The following table shows the Company’s income before income taxes, applicable income taxes and effective tax rate for the six months ended June 30, 2007 and 2006, respectively (in thousands):

	Six months ended June 30,
	2007			2006
Income before taxes	$	26,166		$	27,976
Income tax provision		8,379			8,976
Effective tax rate		32.0	%		32.1	%

The effective income tax rate varies from statutory rates principally due to certain interest income, which is tax-exempt for federal or state purposes, and certain expenses, which are disallowed for tax purposes. Income before taxes for the first six months of 2007 decreased 6% over the same period in 2006. Our effective tax rate was 32.0% at June 30, 2007 versus 32.1% at June 30, 2006.

Operating Segments Results

As described in Note 2 to the consolidated financial statements, our operations consist of seven primary business segments: The PrivateBank - Chicago, The PrivateBank - St. Louis, The PrivateBank - Michigan, The PrivateBank - Georgia, The PrivateBank - Wisconsin, Wealth Management, which includes Lodestar for segment reporting purposes, and the Holding Company. The PrivateBank Mortgage Company results are included in The PrivateBank - Chicago since June 15, 2004, the date of our acquisition of Corley Financial.

The PrivateBank - Chicago

The profitability of The PrivateBank - Chicago is primarily dependent on net interest income, the provision for loan losses, non-interest income and non-interest expense. Net income for The PrivateBank - Chicago for the six months ended June 30, 2007 increased 8% to $21.7 million from $20.1 million for the six months ended June 30, 2006. The growth in net income for the period resulted from improvements in net interest income and a lower provision level relative to the prior year period. Improvements in net interest income for the three months ended June 30, 2007 more than offset a 9% increase in operating expenses associated with continued growth of The PrivateBank - Chicago as compared to the same period in 2006.

Net interest income for The PrivateBank - Chicago for the six months ended June 30, 2007 increased to $47.4 million from $44.7 million, or 6% primarily due to growth in earning assets. Total loans increased by 16% to $2.5 billion at June 30, 2007 as compared to $2.1 billion at June 30, 2006. The majority of the loan growth occurred in the commercial real estate, construction, and commercial loan categories. Commercial real estate loans grew by 19%, construction loans grew by 18%, and commercial loans grew by 14% over prior year’s quarter. Of secured commercial and residential real estate loans in Chicago at June 30, 2007, 84% were located in Illinois, 3% were located in Michigan and 2% each were located in Wisconsin and Missouri. Approximately 12% of commercial real estate loans were owner-occupied at June 30, 2007.

Total deposits increased by 8% to $2.5 billion at June 30, 2007 from $2.3 billion at June 30, 2006. Growth in other time deposits, money market deposits and demand deposits accounted for the majority of the deposit growth. Brokered deposits for The PrivateBank - Chicago decreased 15% to $560.4 million at June 30, 2007 compared to $660.5 million in the prior year. Core deposits grew by 17% year over year to $2.0 billion at June 30, 2007.

The PrivateBank - St. Louis

For the six months ended June 30, 2007, the financial results of The PrivateBank - St. Louis include a net loss of $601,000 for The PrivateBank - Kansas City (in organization). Excluding the results of The PrivateBank - Kansas City, net income for The PrivateBank - St. Louis was $761,000 for the six months ended June 30, 2007, compared to $1.9 million for the prior year period. Excluding the effect of The PrivateBank - Kansas City, the decrease in net income year over year is due to a 21% increase in non interest expense and a 39% increase in the provision for loan losses, from $1.5 million in the prior year period to $2.1 million for the six months ended June 30, 2007, due to a higher level of nonperforming loans in the St. Louis market.

Much of the sequential increase in non interest expense from first quarter 2007 for The PrivateBank - St. Louis is attributable to occupancy and salary expenses at The PrivateBank - Kansas City, which officially opened as a branch of St. Louis in March, 2007. The Company has received conditional OTS approval for The PrivateBank - Kansas City’s federal savings bank charter and approvals from the FDIC and Federal Reserve Bank of Chicago are pending. A new main office facility for the Kansas City bank will be complete during the third quarter 2007, and the operation had 13 full time employees at June 30, 2007.

Net interest income for The PrivateBank - St. Louis for the six months ended June 30, 2007 decreased to $6.3 million from $7.0 million due to compression in net interest margin and the reversal of interest income on loans placed on non-accrual status. Total loans increased by 10%, or $33.4 million, to $371.2 million at June 30, 2007 as compared to $337.8 million at June 30, 2006 due to growth in commercial real estate and commercial loan categories. Included in St. Louis totals at June 30, 2007 are Kansas City loans of $15.8 million. Of secured commercial and residential real estate loans in The PrivateBank - St. Louis portfolio, 85% were located in Missouri and 5% were located in Illinois at June 30, 2007. Approximately 5% of commercial real estate loans were owner-occupied at June 30, 2007.

Deposits increased by $13.8 million, or 4%, to $338.7 million at June 30, 2007 from $324.9 million at June 30, 2006. The majority of the deposit growth at The PrivateBank - St. Louis was due to an increase in other time deposits and demand deposits at June 30, 2007 as compared to the prior year period. Core deposits grew 22% to $289.9 million at June 30, 2007, from $237.4 at June 30, 2006. Included in St. Louis totals at June 30, 2007 are Kansas City deposits of $6.9 million.

The PrivateBank - Wisconsin

The PrivateBank - Wisconsin was originally established under the charter of The PrivateBank - St. Louis and was an office of The PrivateBank - St. Louis until it became a stand-alone bank, The PrivateBank, N.A., which we refer to as The PrivateBank - Wisconsin, effective January 2, 2007. The PrivateBank - Wisconsin had a net loss of $43,000 for the six months ended June 30, 2007, compared to a net loss of $561,000 for the prior year period. Net interest income for the six months ended June 30, 2007 was $1.7 million, compared to $589,000 for the six months ended June 30, 2006. Total loans increased to $105.7 million at June 30, 2007, compared to $55.8 million at June 30, 2006 primarily due to growth in personal and commercial real estate loan categories. Of secured commercial and residential real estate loans in The PrivateBank - Wisconsin portfolio, 68% were located in Wisconsin and 24% were located in Illinois at June 30, 2007. Approximately 6% of commercial real estate loans were owner-occupied at June 30, 2007.

Deposits increased by $47.5 million, or 77%, to $109.3 million at June 30, 2007 from $61.8 million at June 30, 2006. The majority of the deposit growth at The PrivateBank - Wisconsin was due to increased money market and interest-bearing demand deposits at June 30, 2007 as compared to the prior year period.

The PrivateBank - Michigan

Net income for The PrivateBank - Michigan was $2.5 million for the six months ended June 30, 2007, even with the prior year period. Net interest income for the six months ended June 30, 2007 was $9.0 million, compared to $8.3 million for the six months ended June 30, 2006. The PrivateBank - Michigan had loans of $539.9 million at June 30, 2007, up from $449.1 million at June 30, 2006. This 20% increase in loan growth was mainly due to an increase in commercial real estate loans. Of secured commercial and residential real estate loans in The PrivateBank - Michigan portfolio, 91% were located in Michigan at June 30, 2007. Approximately 28% of commercial real estate loans were owner-occupied at June 30, 2007.

Total deposits at The PrivateBank - Michigan increased by $92.6 million to $494.1 million at June 30, 2007, an increase of 23% from June 30, 2006. The majority of the deposit growth was due to increases in other time and money market deposits.

The PrivateBank - Georgia

The PrivateBank - Georgia was acquired on December 13, 2006. Net income for The PrivateBank - Georgia for the six months ended June 30, 2007 was $1.4 million. Net interest income for the period was $5.3 million. Total loans at June 30, 2007 were $241.4 million, a 19% increase from $202.9 million in loans at acquisition. Total deposits for The PrivateBank - Georgia were $236.0 million at June 30, 2007, a 25% increase from $188.6 million in deposits at acquisition.

Wealth Management

Wealth Management includes investment management, personal trust and estate services, custodial services, retirement accounts and brokerage and investment services. Consolidated Wealth Management assets under management increased by 16%, or $433.6 million, to $3.1 billion at June 30, 2007 as compared to $2.7 billion at June 30, 2006. This growth was due to the addition of new assets under management and portfolio performance. Wealth management and brokerage fee revenue increased to $7.9 million for the six months ended June 30, 2007 compared to $6.8 million in the prior year period. Net income for our Wealth Management segment decreased 20% to $783,000 for the six months ended June 30, 2007 from $945,000 for the same period in 2006, mainly due to an increase in personnel and occupancy expenses, as well as fees paid to third party investment managers. These fees were $1.7 million for the six months ended June 30, 2006, compared to $1.2 million in the prior year period.

Holding Company

Holding Company activities consist of parent company only matters. The Holding Company’s most significant assets are its net investments in its five banking subsidiaries, The PrivateBank - Chicago, The PrivateBank - St. Louis, The PrivateBank - Michigan, The PrivateBank - Wisconsin, The PrivateBank - Georgia, and our mortgage banking subsidiary, The PrivateBank Mortgage Company. Holding Company activities are reflected primarily by interest expense on borrowings and operating expenses of the parent company. Recurring holding company operating expenses consist primarily of compensation (amortization of restricted stock and stock awards and stock option expense) and professional fees. The Holding Company activities segment reported a net loss of $8.4 million for the six months ended June 30, 2007, compared to a net loss of $5.6 million for the same period in 2006. The increase in net loss year over year is primarily due to an increase in interest expense related to the issuance of $115.0 million contingent convertible senior notes during the first quarter 2007 and increased legal and external audit fees at the holding company level due to the growth of the Company.

FINANCIAL CONDITION

Total Assets

Total assets increased to $4.5 billion at June 30, 2007, an increase of $0.8 billion, or 23% over total assets of $3.7 billion at June 30, 2006 and up 5% from $4.3 billion at December 31, 2006. The balance sheet growth from the prior year period was due to loan growth throughout the Company and the addition of The PrivateBank - Georgia. Asset growth from December 31, 2006 was due to loan growth of 6% during the period. Loan growth was funded primarily through core deposit growth and increases in other borrowings.

Loans

Total loans increased to $3.7 billion at June 30, 2007, an increase of approximately 6%, from $3.5 billion at December 31, 2006 and an increase of $0.7 billion, or 25%, from $3.0 billion at June 30, 2006. Excluding The PrivateBank - Georgia loans at acquisition, loans grew by 18% from June 30, 2006. Company-wide, loan growth since December 31, 2006 has occurred primarily in the commercial real estate, commercial and construction categories.

The following table sets forth the composition of our loan portfolio net of unearned discount by category (in thousands) at the following dates:

	June 30, 2007		% loans to total loans			December 31, 2006		% loans to total loans			Variance between periods
Loans
Commercial real estate	$	1,668,025		45	%	$	1,539,038		44	%		8	%
CRE: Multi-family		193,776		5	%		212,863		6	%		(9	)%
Commercial		643,954		17	%		563,155		16	%		14	%
Residential real estate		247,928		7	%		262,107		8	%		(5	)%
Personal (1)		195,918		5	%		192,397		5	%		2	%
Home Equity		137,561		4	%		138,724		4	%		(1	)%
Construction		618,177		17	%		591,704		17	%		4	%
Total loans, net of unearned discount	$	3,705,339		100	%	$	3,499,988		100	%		6	%

(1)Includes overdraft lines.

The following table sets forth the composition of our construction and commercial real estate loan portfolio net of unearned discount by property type and collateral location at June 30, 2007.

																			Loan Type
							Collateral Location												as a % of
Loan Type	IL			MO			MI			WI			GA			Other			total
Construction:
Residential 1-4 Family		6.17	%		2.04	%		0.60	%		0.67	%		3.82	%		0.32	%		13.62	%
Multi-Family		2.63	%		0.33	%		0.02	%		0.06	%		0.00	%		0.03	%		3.07	%
Other		5.24	%		0.76	%		0.68	%		0.30	%		0.00	%		0.54	%		7.52	%
Total Construction		14.04	%		3.13	%		1.30	%		1.03	%		3.82	%		0.89	%		24.21	%
Commercial Real Estate:
Vacant Land		11.09	%		1.47	%		2.07	%		0.38	%		0.30	%		2.33	%		17.64	%
Residential 1-4 Family		3.77	%		0.98	%		1.03	%		0.30	%		0.19	%		1.63	%		7.90	%
Multi-Family		5.68	%		0.66	%		0.60	%		0.38	%		0.14	%		0.08	%		7.54	%
Hotel		1.05	%		0.05	%		0.07	%		0.05	%		0.05	%		0.05	%		1.32	%
Mixed Use		2.74	%		1.58	%		1.88	%		0.34	%		2.33	%		0.21	%		9.08	%
Office		7.12	%		1.24	%		2.62	%		0.31	%		1.45	%		0.65	%		13.39	%
Restaurant		0.63	%		0.01	%		0.47	%		0.00	%		0.06	%		0.02	%		1.19	%
Warehouse		5.10	%		0.14	%		0.73	%		0.14	%		0.36	%		0.70	%		7.17	%
Farmland		0.55	%		0.01	%		0.21	%		0.05	%		0.00	%		0.59	%		1.41	%
Airport		0.00	%		0.00	%		0.02	%		0.00	%		0.00	%		0.00	%		0.02	%
Retail		5.03	%		0.28	%		2.37	%		0.04	%		0.57	%		0.84	%		9.13	%
Total Commercial Real Estate		42.76	%		6.42	%		12.07	%		1.99	%		5.45	%		7.10	%		75.79	%
Total Commercial Real Estate & Construction		56.80	%		9.55	%		13.37	%		3.02	%		9.27	%		7.99	%		100.00	%

The composition of the vacant land used as loan collateral is primarily farm and ranch land owned by high net worth clients that may eventually be used for real estate development or land owned by real estate developers being proposed for development.

Allowance for Loan Losses

We maintain an allowance for loan losses sufficient to absorb credit losses inherent in our loan portfolio. The allowance for loan losses represents our estimate of probable losses in the portfolio at each balance sheet date and is supported by available and relevant information. Management of the banks continuously monitors loan quality. Any additions to the allowance for loan losses, which is charged to earnings through the provision for loan losses, is determined based on a variety of factors, including assessment of the credit risk of the portfolio based on the composition of the loan portfolio by loan type and by loan risk rating, evaluation of loans classified as impaired, trends in loan quality, delinquent loans, results of independent loan reviews and bank examinations, evaluation of current economic conditions in the market area, actual charge-offs and recoveries during the year, historical loss experience and industry loss averages. The unallocated portion of the reserve involves the exercise of judgment by management and reflects various considerations, including management’s view that the reserve should have a margin that recognizes the imprecision inherent in the process of estimating credit losses.

Management’s application of the methodology for determining the allowance for loan losses resulted in an allowance for loan losses of $41.3 million at June 30, 2007 compared with $38.1 million at December 31, 2006 and $33.5 million at June 30, 2006. The increase in the allowance for loan losses from December 31, 2006 reflects management’s judgment about the higher level of aggregate risk in the loan portfolio resulting primarily from the impact on our borrowers of the downturn in the residential real estate market as well as the need for increased reserves brought about by loan growth from all existing offices in 2007. We believe that the allowance for loan losses is adequate to provide for estimated probable credit losses inherent in our loan portfolio.

The allowance for loan losses as a percentage of total loans was 1.11% at June 30, 2007 compared to 1.09% at December 31, 2006 and 1.13% at June 30, 2006. Net charge-offs totaled $1.2 million for the six months ended June 30, 2007 versus net charge-offs of $533,000 in the prior year period. The provision for loan losses was $4.4 million for the six months ended June 30, 2007, versus $4.6 million in the prior year period. Following is a summary of changes in the allowance for loan losses for the six months ended June 30, 2007 and 2006 (in thousands):

	2007			2006
Balance, January 1	$	38,069		$	29,388
Provisions charged to earnings		4,364			4,635
Loans charged-off, net of recoveries		(1,153	)		(533	)
Balance, June 30	$	41,280		$	33,490

The following table shows our allocation of the allowance for loan losses by specific category at the dates shown.

	June 30, 2007					December 31, 2006
Allocation of the Allowance for Loan Losses ($ in thousands)	Amount		% of allowance to total allowance			Amount		% of allowance to total allowance
Allocated Inherent Reserve:
Commercial Real Estate Loans	$	20,981		51	%	$	19,570		50	%
Commercial Loans		6,595		16	%		5,984		16	%
Residential Loans		338		1	%		479		1	%
Personal Loans		1,533		4	%		1,877		5	%
Home Equity Loans		200		0	%		218		1	%
Construction Loans		8,423		20	%		7,509		20	%
Allocated Inherent Reserve		38,070		92	%		35,637		93	%
Specific Reserve		2,114		5	%		291		1	%
Unallocated Inherent Reserve		1,096		3	%		2,141		6	%
Total Allowance for Loan Losses	$	41,280		100	%	$	38,069		100	%

The Company considered various qualitative and quantitative factors concerning the loan portfolio in determining the level of the allowance for loan losses. Under our methodology, the allowance for loan losses is comprised of the following components.

Allocated Inherent Component of the Reserve

The allocated portion of the allowance for loan losses is derived based upon loan type and the credit risk inherent in each loan type. To this end, the Company assigns each of its loans a risk rating at the time of loan origination and either confirms or changes the risk rating at the time of subsequent reviews, loan renewals or upon default. The loss allocations are based on a combination of a historical analysis of the Company’s credit losses and adjustment factors deemed relevant by management. The adjustment factors take into account banking industry-wide loss statistics and changes in the current legal, political and economic environment as well as long-term trends. Our historical analysis includes a five-year migration analysis of the Company’s credit losses and a review of banking industry losses over the last 25 years.

The allocated inherent component of the reserve increased by $2.4 million during the first six months of 2007, from $35.6 million at December 31, 2006 to $38.1 million at June 30, 2007. The increase in the allocated portion of the reserve reflects higher loan volumes, particularly construction and commercial real estate loans as well as a higher level of classified loans caused by intervening events affecting the borrower’s ability to repay.

Specific Component of the Reserve

For loans where management deems either the amount or the timing of the repayment to be significantly impaired, there are specific reserve allocations established. The specific reserve is based on a loan’s current value compared to the present value of its projected future cash flows, collateral value or market value, as is relevant for the particular loan pursuant to SFAS 114, “Accounting by Creditors for Impairment of a Loan.” The specific component of the reserve increased by $3.0 million during the first six months of 2007 to $2.1 million at June 30, 2007 after $1.2 million in net charge-offs during the period as a result of the identification of twelve new borrowing relationships with impaired loans. In addition to on-going reviews of the entire loan portfolio, credit administration reviews the watch list (i.e., classified loans) on a monthly basis to determine whether there has been further deterioration in any of the loans to merit the identification of impairment. The specific component of the reserve was $291,000 at December 31, 2006.

Unallocated Inherent Components of the Reserve

The unallocated inherent component of the reserve is based on management’s review of other factors affecting the determination of probable losses inherent in the portfolio, which are not necessarily captured by the application of loss and loss adjustment factors. This portion of the reserve analysis involves the exercise of judgment and reflects consideration such as management’s view that the reserve should have a margin that recognizes the imprecision inherent in the process of estimating credit losses. Accordingly, based on management’s judgment, the unallocated inherent component of the reserve decreased by $1.0 million for the first six months of 2007, from $2.1 million at December 31, 2006 to $1.1 million at June 30, 2007.

Nonperforming Assets

The following table classifies our nonperforming assets as of the dates shown:

	6/30/07			3/31/07			12/31/06			9/30/06			6/30/06
	(dollars in thousands)
Nonaccrual loans	$	20,731		$	4,816		$	3,770		$	588		$	1,721
Loans past due 90 days or more		5,844			5,124			5,137			1,260			1,262
Total nonperforming loans		26,575			9,940			8,907			1,848			2,983
Other real estate owned (“OREO”)		4,683			4,831			1,101			480			203
Total nonperforming assets	$	31,258		$	14,771		$	10,008		$	2,328		$	3,186
Total nonaccrual loans to total loans		0.56	%		0.13	%		0.11	%		0.02	%		0.06	%
Total nonperforming loans to total loans		0.72	%		0.28	%		0.25	%		0.06	%		0.10	%
Total nonperforming assets to total assets		0.70	%		0.34	%		0.23	%		0.06	%		0.09	%

Nonperforming loans include nonaccrual loans and accruing loans, which are 90 days or more delinquent. Loans in this category include those with characteristics such as past maturity more than 90 days, those that have interest payments past due more than 90 days, those that have recent adverse operating cash flow or balance sheet trends, or loans that have general risk characteristics that management believes might jeopardize the future timely collection of principal and interest payments.

Nonaccrual loans were $20.7 million at June 30, 2007 as compared to $3.8 million at December 31, 2006 and $1.7 million at June 30, 2006. Nonaccrual loans at June 30, 2007 are comprised of $8.6 million of loans at The PrivateBank - St. Louis, $7.2 million at The PrivateBank - Chicago, $3.1 million at The PrivateBank - Michigan, and $1.8 million at The PrivateBank - Georgia. The average annualized balance of nonaccrual loans was $4.6 million at June 30, 2007 compared to $1.8 million at December 31, 2006. Annualized interest income foregone on nonaccrual loans was approximately $356,000 for the six months ended June 30, 2007 compared to $136,000 for the full year 2006.

Accruing loans delinquent over 90 days were $5.8 million at June 30, 2007 compared to $5.1 million at December 31, 2006. Of the $26.6 million in nonperforming loans, 39% are commercial real estate loans, 27% are commercial loans, 20% are construction loans and the remaining 14% are personal and residential real estate loans.

At June 30, 2007, the Company owned $4.7 million in OREO property compared to $1.1 million at December 31, 2006 and $203,000 at June 30, 2006. The $4.7 million of OREO property at June 30, 2007 is comprised of $2.4 million of property at The PrivateBank - Michigan, $1.2 million at The PrivateBank - St. Louis, $1.1 million at The PrivateBank - Chicago, and $32,000 at The PrivateBank - Georgia. OREO is included in other assets on the balance sheet and we carry OREO at the fair value less estimated costs to sell the property. At June 30, 2007, OREO was comprised of 32% vacant land zoned for residential development, 2% vacant land zoned for commercial development, 48% 1-4 residential properties, and 18% commercial properties.

Investment Securities

The amortized cost and the estimated fair value of securities at June 30, 2007 and December 31, 2006, were as follows (in thousands):

	June 30, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Investment Securities—Available for Sale
U. S. Agency Notes	$	10,947	$	3	$	(13	)	$	10,937
U. S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations		267,097		486		(3,238	)		264,345
Tax-Exempt Municipal Securities		198,215		8,615		(102	)		206,728
Taxable Municipal Securities		3,810		—		(6	)		3,804
Federal Home Loan Bank Stock		5,442		—		—			5,442
Other		4,599		—		(1	)		4,598
	$	490,110	$	9,104	$	(3,360	)	$	495,854

	December 31, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Investment Securities—Available for Sale
U. S. Agency Notes	$	30,022	$	—	$	—		$	30,022
U. S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations		245,962		593		(3,315	)		243,240
Tax-Exempt Municipal Securities		199,058		11,975		(10	)		211,023
Taxable Municipal Securities		3,810		—		(1	)		3,809
Federal Home Loan Bank Stock		5,141		—		—			5,141
Other		3,547		—		—			3,547
	$	487,540	$	12,568	$	(3,326	)	$	496,782

Investments are comprised of federal funds sold, debt securities and equity investments. Federal funds sold are overnight investments in which, except for cash reserves, all remaining funds are invested. Our debt securities portfolio is primarily comprised of U.S. government agency obligations, municipal bonds, mortgage-backed pools and collateralized mortgage obligations. Our equity investments consist primarily of equity investments in FHLB (Des Moines), FHLB (Indianapolis), and FHLB (Atlanta).

All securities are classified as available-for-sale and may be sold as part of our asset/liability management strategy in response to changes in interest rates, liquidity needs or significant prepayment risk. Securities available-for-sale are carried at fair value, with related unrealized net gains or losses, net of deferred income taxes, recorded as an adjustment to equity capital. At June 30, 2007, reported stockholders’ equity reflected unrealized securities gains net of tax of $3.7 million. This represented a decrease of $2.2 million from unrealized securities gains net of tax of $5.9 million at December 31, 2006. As of June 30, 2007, the Company has the intent and ability to hold any underwater securities for a period of time sufficient to allow for any anticipated recovery in value and has made a determination not to sell any securities in an unrealized loss position.

At June 30, 2007, we owned $495.9 million of available-for-sale securities, a $928,000 decrease from $496.8 million in securities at December 31, 2006 and a $3.9 million decrease from $499.8 million in securities at June 30, 2006.

Deposits and Funds Borrowed

The following table presents the balances of deposits by category and each category as a percentage of total deposits at June 30, 2007 and December 31, 2006:

	June 30,					December 31,					Variance
	2007					2006					between periods
	Balance		% of Total			Balance		% of Total
	(dollars in thousands)
Non-interest bearing demand	$	303,455		8	%	$	300,689		8	%		1	%
Savings		12,398		1	%		13,977		1	%		(11	)%
Interest-bearing demand		150,324		4	%		152,323		4	%		(1	)%
Money market		1,492,905		41	%		1,561,103		44	%		(4	)%
Brokered deposits		630,905		17	%		589,321		17	%		7	%
Other time deposits		1,048,558		29	%		933,600		26	%		12	%
Total deposits	$	3,638,545		100	%	$	3,551,013		100	%		2	%

Total deposits of $3.6 billion at June 30, 2007 represent an increase of $87.5 million, as compared to total deposits of $3.6 billion at December 31, 2006. The increase in deposits during the period is primarily due to an increase in other time deposit accounts. Core deposits, which represents total deposits less brokered deposits, were $3.0 billion at June 30, 2007 and at December 31, 2006, compared to $2.4 billion at June 30, 2006.

We continue to utilize brokered deposits as a source of funding for growth in the loan portfolio. Brokered deposits were $630.9 million at June 30, 2007, down from $748.0 million at June 30, 2006 and up from $589.3 million at December 31, 2006. Our brokered deposits to total deposits ratio was 17% at June 30, 2007 and December 31, 2006. We have issued certain brokered deposits that include call option provisions, which provide us with the opportunity to redeem the certificates of deposit on a specified date prior to the contractual maturity date.

As of June 30, 2007, we held 13 outstanding brokered deposits containing unexercised call provisions. We have brokered deposits with 16 different brokers and we receive periodic information from other brokers regarding potential deposits. The scheduled maturities of brokered deposits, net of unamortized prepaid broker commissions, as of June 30, 2007, for the upcoming 2007 and 2008 quarters and fiscal years 2009 through 2011 and thereafter, are as follows:

Scheduled Maturities of Brokered Deposits

net of unamortized prepaid brokered commissions

at June 30, 2007

Maturity Date	Rate (1)			6/30/07
	(in thousands)
3rd quarter 2007		5.09	%	$	183,773
4th quarter 2007		5.06	%		161,730
1st quarter 2008 (2)		4.88	%		124,945
2nd quarter 2008		5.39	%		18,361
Remainder 2008		4.89	%		4,588
2009-2010 (3)		4.62	%		48,936
Thereafter (4) (5)		5.20	%		90,241
Total Brokered Deposits					632,574
Unamortized prepaid broker commissions					(1,669	)
Total brokered deposits, net of unamortized prepaid broker commissions				$	630,905

(1)   Represents the all-in rate of each brokered deposit.

(2)   This tranche includes one callable deposit: a $14.8 million brokered deposit with a maturity date of 3/26/2008, which is callable monthly.

(3)   This tranche includes two callable deposits: a $4.9 million brokered deposit with a maturity of 6/12/2009, which is callable monthly and a $1.6 million brokered deposit with a maturity date of 5/19/2010 callable quarterly

(4)   This tranche includes several callable deposits: a $3.5 million brokered deposit with a maturity date of 11/19/2012 callable semi-annually; a $9.7 million brokered deposit with a maturity date of 2/11/2013 callable monthly; a $9.8 million brokered deposit with a maturity date of 1/21/2014 callable monthly; a $9.9 million brokered deposit with a maturity date of 12/17/2014 callable monthly; a $6.9 million brokered deposit with a maturity of 1/28/2015 callable semi-annually; a $11.4 million brokered deposit with a maturity date of 2/27/2019 callable monthly; $8.9 million brokered deposit with a maturity date of 3/12/2024 callable semi-annually; a $7.8 million brokered deposit with a maturity date of 4/23/2024 callable monthly; and a $6.4 million brokered deposit with a maturity date of 6/30/2025, an original call date of 12/30/2005, and semi-annually thereafter.

(5)   This segment includes a zero coupon brokered deposit with a maturity date of 3/18/2024, an effective yield of 5.67% and callable semi-annually.

Funds borrowed, which include federal funds purchased, FHLB advances, borrowings under our credit facility, and convertible senior notes, increased 45% to $407.7 million, from $281.7 million at December 31, 2006. On March 14 and March 20, 2007 the Company issued a total of $115.0 million of contingent convertible senior notes to qualified institutional investors. The notes are senior, unsecured obligations of PrivateBancorp, Inc. and pay interest on March 15 and September 15 each year at a rate of 3.625 % per year. The notes will mature on March 15, 2027, and will be convertible under certain circumstances into cash and, if applicable, shares of the Company’s common stock at an initial conversion price of $45.05 per share. A portion of the net proceeds from the notes were used during the first quarter to pay down $41.5 million of the senior debt facility and approximately $7.5 million of the net proceeds were used to repurchase 213,200 shares of common stock. The Company used the remaining net proceeds for working capital and other general corporate purposes.

Membership in the FHLB system gives us the ability to borrow funds from the FHLB (Des Moines), the FHLB (Indianapolis), and the FHLB (Atlanta) under a variety of programs. We have periodically used the services of the FHLB for funding needs and other correspondent services. Our withdrawal as a member of the FHLB (Chicago) was completed during the second quarter 2006. Therefore, we are no longer able to borrow funds or participate in any of the other programs of the FHLB (Chicago); however, we anticipate that we will continue to be members of, and to take advantage of the programs offered by, the FHLB (Des Moines), the FHLB (Indianapolis), and the FHLB (Atlanta). At June 30, 2007 our FHLB borrowings consisted of $47.0 million from the FHLB (Indianapolis), $17.5 million from the FHLB (Atlanta), and $24.0 million from the FHLB (Des Moines). The FHLB requires us to pledge collateral in connection with obtaining FHLB advances. Our pledged collateral consists of residential real estate loans and certain qualifying multi-family loans and investment securities.

As of June 30, 2007, the Company had a credit facility with a correspondent bank comprised of a $40.0 million senior debt facility and $75.0 million of subordinated debt. The senior debt facility is comprised of a $250,000 term loan with a maturity date of December 31, 2017 and a revolving loan with a maturity date of December 31, 2007. Management expects to renew the revolving loan on an annual basis. The subordinated debt matures on December 31, 2017. The interest rate on the senior debt facility resets quarterly, and is based on, at the Company’s option, either the correspondent bank’s prime rate or three-month LIBOR plus 120 basis points, with a floor of 3.50%. The interest rate on the subordinated debt resets quarterly, and is equal to three-month LIBOR plus 135 basis points, with a floor of 3.50%. The subordinated debt qualifies as Tier 2 capital under applicable rules and regulations promulgated by the Board of Governors of the Federal Reserve System.

At June 30, 2007, the Company had $250,000 outstanding on the senior debt facility and $55.0 million of subordinated debt outstanding. The credit facility is used for general corporate and other working capital purposes.

Capital Resources

Stockholders’ equity was $306.1 million at June 30, 2007, an increase of $9.0 million from December 31, 2006 stockholders’ equity of $297.1 million, due primarily to net income of $17.8 million and an increase in treasury stock of $7.9 million as a result of the repurchase of approximately 223,000 shares by the Company of its stock during the first six months of 2007.

At June 30, 2007, $100.8 million of our total $101.0 million outstanding trust preferred securities were treated as Tier 1 capital. The Company and its banking subsidiaries are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors, and the regulators can lower classifications in certain areas. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

The prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If a banking subsidiary is not “well capitalized,” regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited as is asset growth and expansion and plans for capital restoration are required.

The following table sets forth our consolidated regulatory capital amounts and ratios as of June 30, 2007 and 2006, and December 31, 2006:

	June 30,								December 31,
	2007								2006
	Capital			“Well-capital-ized” Standard			Excess/ (Deficit) Capital		Capital			“Well-capital-ized” Standard			Excess/ (Deficit) Capital
Dollar basis:
Tier 1 leverage capital	$	303,269		$	214,284		$	88,985	$	287,889		$	191,691		$	96,198
Tier 1 risk-based capital		303,269			225,751			77,518		287,889			214,324			73,565
Total risk-based capital		399,770			376,251			23,519		369,903			357,207			12,696
Percentage basis:
Leverage ratio		7.08	%		5.00	%				7.51	%		5.00	%
Tier 1 risk-based capital ratio		8.06	%		6.00	%				8.06	%		6.00	%
Total risk-based capital ratio		10.63	%		10.00	%				10.36	%		10.00	%
Total equity to total assets		6.82	%							6.97	%

To be considered “well-capitalized,” an entity must maintain a leverage ratio of at least 5.0%, a Tier 1 risk-based capital ratio of at least 6.0%, and a total risk-based capital ratio of at least 10.0%. To be “adequately capitalized,” a bank must maintain a leverage ratio of at least 4.0%, a Tier 1 risk-based capital ratio of at least 4.0%, and a total risk-based capital ratio of at least 8.0%. At June 30, 2007, the Company and each of the banking subsidiaries exceeded the minimum levels of all regulatory capital requirements, and were considered “well-capitalized” under regulatory standards.

Liquidity

Liquidity measures our ability to meet maturing obligations and our existing commitments, to withstand fluctuations in deposit levels, to fund our operations and to provide for clients’ credit needs. Our liquidity principally depends on cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings and our ability to borrow funds in the money or capital markets.

Net cash provided by operations totaled $12.2 million in the six months ended June 30, 2007 compared to net cash provided by operations of $18.5 million in the prior year period. Net cash outflows from investing activities totaled $212.3 million in the first six months of 2007 compared to a net cash outflow of $169.5 million in the prior year period primarily due to loan growth, the redemption of FHLB (Chicago) stock in the 2006 period, and less proceeds from maturities, pay downs, and sales in the current period. Cash inflows from financing activities in the first six months of 2007 totaled $203.4 million compared to a net inflow of $137.2 million in the first six months of 2006.

In the event of short-term liquidity needs, our banking subsidiaries may purchase federal funds from correspondent banks and our investment portfolio can be used as a source of liquidity. Additionally, membership in the FHLB System gives the banking subsidiaries the ability to borrow funds from the FHLBs (Atlanta, Des Moines, and Indianapolis) for short- or long-term purposes under a variety of programs. Our asset/liability policy currently limits our use of brokered deposits to levels no more than 40% of total deposits. Brokered deposits were 17% of total deposits at June 30, 2007 and December 31, 2006 and were 24% of total deposits at June 30, 2006. We do not expect our 40% threshold limitation to limit our ability to implement our growth plan.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Risk Management

We are exposed to market risk from changes in interest rates that could affect our results of operations and financial condition. We manage our exposure to these market risks through our regular operating and financing activities. We occasionally use derivative financial instruments as a risk management tool to hedge interest rate risk.

Interest Rate Risk

To manage the interest rate mix of our balance sheet and related cash flows, we have the ability to use a combination of financial instruments, including medium-term and short-term financings, variable-rate debt instruments, fixed rate loans and securities and, to a lesser extent, interest rate swaps. Approximately 67% of the loan portfolio is indexed to the prime rate of interest or otherwise adjusts with other short-term interest rates. Changes in market rates and the shape of the yield curve may give us the opportunity to make changes to our investment security portfolio as part of our asset/liability management strategy.

 We have not changed our interest rate risk management strategy from December 31, 2006 and do not foresee or expect any significant changes in our exposure to interest rate fluctuations, but we will continue to consider the use of interest rate swaps on our debt obligations in the future depending on changes in market rates of interest.

Asset/Liability Management Policy

As a continuing part of our financial strategy, we attempt to manage the impact of fluctuations in market interest rates on our net interest income. This effort entails providing a reasonable balance between interest rate risk, credit risk, liquidity risk and maintenance of yield. Asset/liability management policy is established by our investment committee of our Board of Directors and is monitored by management. The policy sets standards within which we are expected to operate. These standards include guidelines for exposure to interest rate fluctuations, liquidity, loan limits as a percentage of funding sources, exposure to correspondent banks and brokers, and reliance on non-core deposits. The policy also states our reporting requirements to our Board of Directors. The investment policy complements the asset/liability management policy by establishing criteria by which we may purchase securities. These criteria include approved types of securities, brokerage sources, terms of investment, quality standards, and diversification.

One way to estimate the potential impact of interest rate changes on our income statement is a gap analysis. The gap represents the net position of assets and liabilities subject to repricing in specified time periods. During any given time period, if the amount of rate sensitive liabilities exceeds the amount of rate sensitive assets, a company would generally be considered negatively gapped and would benefit from falling rates over that period of time. Conversely, a positively gapped company would generally benefit from rising rates.

We have structured our assets and liabilities to mitigate the risk of either a rising or falling interest rate environment. We manage our gap position at the one-year horizon. Depending upon our assessment of economic factors such as the magnitude and direction of projected interest rates over the short- and long-term, we generally operate within guidelines set by our asset/liability management policy and attempt to maximize our returns within an acceptable degree of risk.

Interest rate changes do not affect all categories of assets and liabilities equally or simultaneously. There are other factors that are difficult to measure and predict that would influence the effect of interest rate fluctuations on our income statement.

The following tables illustrate our estimated interest rate sensitivity and periodic and cumulative gap positions calculated as of June 30, 2007 and December 31, 2006:

	June 30, 2007 Time to Maturity or Repricing
	0-90 days			91-365 days			1-5 years			Over 5 years			Total
	(dollars in thousands)
Interest-Earning Assets
Net loans	$	2,180,376		$	399,489		$	1,007,822		$	76,372		$	3,664,059
Investments		22,386			60,011			209,410			203,258			495,065
FHLB stock		5,442			—			—			—			5,442
Federal funds sold		2,491			—			—			—			2,491
Total interest-earning assets	$	2,210,695		$	459,500		$	1,217,232		$	279,630		$	4,167,057
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	—		$	—		$	—		$	150,324		$	150,324
Savings deposits		12,398			—			—			—			12,398
Money market deposits		1,492,905			—			—			—			1,492,905
Time deposits		523,087			407,547			117,736			188			1,048,558
Brokered deposits		182,103			305,036			56,123			87,643			630,905
Funds borrowed		157,194			37,000			254,285			60,250			508,729
Total interest-bearing liabilities	$	2,367,687		$	749,583		$	428,144		$	298,405		$	3,843,819
Cumulative
Rate sensitive assets (RSA)	$	2,210,695		$	2,670,195		$	3,887,427		$	4,167,057
Rate sensitive liabilities (RSL)		2,367,687			3,117,270			3,545,414			3,843,819
GAP (GAP=RSA-RSL)		(156,992	)		(447,075	)		342,013			323,238
RSA/RSL		93.37	%		85.66	%		109.65	%		108.41	%
RSA/Total assets		49.28	%		59.52	%		86.66	%		92.89	%
RSL/Total assets		52.78	%		69.49	%		79.03	%		85.68	%
GAP/Total assets		-3.50	%		-9.97	%		7.62	%		7.21	%
GAP/Total RSA		-3.77	%		-10.73	%		8.21	%		7.76	%

	December 31, 2006 Time to Maturity or Repricing
	0-90 days			91-365 days			1-5 years			Over 5 years			Total
	(dollars in thousands)
Interest-Earning Assets
Net loans	$	2,115,048		$	357,609		$	927,626		$	61,635		$	3,461,918
Investments		14,779			61,353			206,369			208,289			490,790
FHLB stock		5,141			—			—			—			5,141
Federal funds sold		32,546			—			—			—			32,546
Total interest-earning assets	$	2,167,514		$	418,962		$	1,133,995		$	269,924		$	3,990,395
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	—		$	—		$	—		$	152,323		$	152,323
Savings deposits		13,977			—			—			—			13,977
Money market deposits		1,561,103			—			—			—			1,561,103
Time deposits		388,757			431,567			113,080			195			933,599
Brokered deposits		199,198			208,358			89,761			92,004			589,321
Funds borrowed		119,231			65,250			150,785			47,500			382,766
Total interest-bearing liabilities		2,282,266			705,175			353,626			292,022			3,633,089
Cumulative
Rate sensitive assets (RSA)	$	2,167,514		$	2,586,476		$	3,720,471		$	3,990,395
Rate sensitive liabilities (RSL)		2,282,266			2,987,441			3,341,067			3,633,089
GAP (GAP=RSA-RSL)		(114,752	)		(400,965	)		379,404			357,306
RSA/RSL		94.97	%		86.58	%		111.36	%		109.83	%
RSA/Total assets		50.83	%		60.65	%		87.24	%		93.57	%
RSL/Total assets		53.52	%		70.05	%		78.35	%		85.20	%
GAP/Total assets		-2.69	%		-9.40	%		8.89	%		8.38	%
GAP/Total RSA		-2.88	%		-10.05	%		9.51	%		8.95	%

The following table shows the impact of immediate 200 and 100 basis point changes in interest rates as of June 30, 2007 and December 31, 2006. The effects are determined through the use of a simulation model based on our interest-earning asset and interest-bearing liability portfolios, assuming the size of these portfolios remains constant from the balance sheet date throughout the one-year measurement period. The simulation assumes that assets and liabilities accrue interest on their current pricing basis. Assets and liabilities then reprice based on their terms and remain at that interest rate through the end of the measurement period. The model attempts to illustrate the potential change in net interest income if the foregoing occurred.

	June 30, 2007				December 31, 2006
Percentage change in net interest income due to an immediate 100 and 200 basis point change in interest rates over a one-year time horizon	-200 Basis Points	-100 Basis Points	+100 Basis Points	+200 Basis Points	-200 Basis Points	-100 Basis Points	+100 Basis Points	+200 Basis Points
	-5.0%	-2.2%	1.8%	3.3%	-7.3%	-3.5%	2.2%	4.1%

This table shows that if there had been an instantaneous parallel shift in the yield curve of +100 basis points on June 30, 2007, net interest income would increase by 1.8% over a one-year period, as compared to a net interest income increase of 2.2% if there had been an instantaneous parallel shift of +100 basis points at December 31, 2006. The measurement of a +200 basis point instantaneous parallel shift in the yield curve at June 30, 2007 would result in an increase in net interest income of 3.3% over a one-year period as compared to 4.1% measured on the basis of the December 31, 2006 portfolio. At June 30, 2007, if there had been an instantaneous parallel shift in the yield curve of -100, we would have suffered a decline in net interest income of 2.2%, as compared to a 3.5% decline measured on the basis of the December 31, 2006 portfolio. At June 30, 2007, if there had been an instantaneous parallel shift in the yield curve of -200, we would have suffered a decline in net interest income of 5.0%, as compared to a 7.3% decline measured on the basis of the December 31, 2006 portfolio.

Changes in the effect on net interest income from a 100 and 200 basis point movement at June 30, 2007, compared to December 31, 2006 are due to the timing and nature of the repricing of rate sensitive assets to rate sensitive liabilities within the one year time frame.

The preceding sensitivity analysis is based on numerous assumptions including: the nature and timing of interest rate levels including the shape of the yield curve, prepayments on loans and securities, changes in deposit levels, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows and others. While our assumptions are developed based upon current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions including how client preferences or competitor influences might change.

We continue to monitor our gap and rate shock reports to detect changes to our exposure to fluctuating rates. We have the ability to shorten or lengthen maturities on newly acquired assets, sell investment securities, or seek funding sources with different maturities in order to change our asset and liability structure for the purpose of mitigating the effect of interest rate risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as contemplated by Exchange Act Rule 13a-15. Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective, in all material respects, in timely alerting them to material information relating to the Company (and its consolidated subsidiaries) required to be included in the periodic reports the Company is required to file and submit to the SEC under the Exchange Act.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the three months ended June 30, 2007 that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to, fluctuations in market rates of interest and loan and deposit pricing in the Company’s market areas, the effect of continued margin pressure on the Company’s earnings, further deterioration in asset quality, legislative or regulatory changes, adverse developments in the Company’s loan or investment portfolios, slower than anticipated growth of the Company’s business or unanticipated business declines, unforeseen difficulties in the continued integration of The PrivateBank - Georgia or higher than expected operational costs, failure to get regulatory approval for a de novo federal savings bank in Kansas City, competition, failure to improve operating efficiencies through expense controls, and the possible dilutive effect of potential acquisitions, expansion or future capital raises. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update publicly any of these statements in light of future events unless required under the federal securities laws.

Part II

Item 1. Legal Proceedings

From time to time, we may be party to various legal proceedings arising in the normal course of our business. Since we act as a depository of funds, we may be named from time to time as a defendant in various lawsuits (such as garnishment proceedings) involving claims to the ownership of funds in particular accounts. Neither PrivateBancorp, Inc. nor any of our subsidiaries is currently a defendant in any such proceedings that we believe will have a material adverse effect on our business, results of operations, financial condition or cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases by the Company during the quarter ended June 30, 2007 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

Period	(a) Total Number of Shares Purchased			(b) Average Price paid per Share		(c) Total Number of Shares Purchased as part of publicly announced Plans or Programs			(d) Maximum Number of Shares that may be purchased under the Plans/Program (2)
04/01/2007 - 04/30/2007		2,319 (1	)		34.72		2,319 (1	)		286,800
05/31/2007 - 05/30/2007		-			-		-			286,800
06/01/2007 - 06/30/2007		-			-		-			286,800
Total		2,319			34.72		2,319(1	)		286,800
(1)Represents shares acquired by the Company in payment of the exercise price and/or withholding taxes in connection with the exercise of certain employee/director stock options. (2)On July 25, 2001, the Company’s Board of Directors approved the repurchase by the Company of up to an aggregate of 231,192 shares of its common stock. Subsequently on March 7, 2007, the Board of Directors approved the repurchase of a total aggregate of 500,000 shares by the Company. Unless terminated or amended earlier by the Board of Directors, this authorization will expire when the Company has repurchased all 500,000 shares authorized for issuance.

Item 3. Defaults upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

At the Company’s Annual Meeting of Stockholders held on April 26, 2007, the following matters were submitted to and approved by a vote of the Company’s Stockholders:

(1)   The election of five Class III directors for a three-year term ending at the Annual Meeting of Stockholders to be held in 2010:

Directors	Votes For	Votes Withheld
Robert F. Coleman	19,407,369	662,908
James M. Guyette	19,735,424	334,853
Philip M. Kayman	19,747,188	323,089
William J. Podl	19,790,471	279,806
William R. Rybak	19,791,033	279,244

The following directors continue to serve after the Annual Meeting:

Continuing Director	Term Expires
Ralph B. Mandell	2008
William A. Castellano	2008
Cheryl Mayberry-McKissack	2008
Edward W. Rabin, Jr.	2008
Patrick F. Daly	2008
Donald L. Beal	2009
William A. Goldstein	2009
Richard C. Jensen	2009
John B. Williams	2009
Alejandro Silva	2009
Robert F. Coleman	2010
James M. Guyette	2010
Philip M. Kayman	2010
William J. Podl	2010
William R. Rybak	2010

Item 5. Other Information

None.

Item 6. Exhibits 

3.1	Certificate of amendment of the Amended and Restated Certificate of Incorporation of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2004 (File No. 000-25887) and incorporated herein by reference).
3.2	Amended and Restated Certificate of Incorporation of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 000-25887) and incorporated herein by reference).
3.3	Amended and Restated By-laws of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 000-25887) and incorporated herein by reference).
4.1	Certain instruments defining the rights of the holders of long-term debt of the Company and certain of its subsidiaries, none of which authorize a total amount of indebtedness in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis, have not been filed as exhibits. The Company hereby agrees to furnish a copy of any of these agreements to the SEC upon request.
15.0	Acknowledgment of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.0	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Report of Independent Registered Public Accounting Firm.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

	PRIVATEBANCORP, INC.
	By:	/s/ Ralph B. Mandell
		Ralph B. Mandell,
		Chairman, President and
		Chief Executive Officer
	By:	/s/ Dennis L. Klaeser
		Dennis L. Klaeser,
		Chief Financial Officer
Date: August 8, 2007

EXHIBIT INDEX

3.1	Certificate of amendment of the Amended and Restated Certificate of Incorporation of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2004 (File No. 000-25887) and incorporated herein by reference).
3.2	Amended and Restated Certificate of Incorporation of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 000-25887) and incorporated herein by reference).
3.3	Amended and Restated By-laws of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 000-25887) and incorporated herein by reference).
4.1	Certain instruments defining the rights of the holders of long-term debt of the Company and certain of its subsidiaries, none of which authorize a total amount of indebtedness in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis, have not been filed as exhibits. The Company hereby agrees to furnish a copy of any of these agreements to the SEC upon request.
15.0	Acknowledgment of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.0	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Report of Independent Registered Public Accounting Firm.