PrivateBancorp 10Q 2007 Q4 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 September 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 x Accelerated 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 October 26, 2007
Common, no par value	22,187,374

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	21
	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	50
Signatures				51

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
	09/30/07		06/30/07			03/31/07		12/31/06 (1)			09/30/06
	(dollars in thousands, except per share data)
Selected Statement of Income Data:
Interest income:
Loans, including fees	$	72,299	$	70,732		$	68,886	$	64,418		$	60,361
Securities		5,795		5,938			5,937		5,274			6,367
Federal funds sold and interest-bearing deposits		259		239			238		320			116
Total interest income		78,353		76,909			75,061		70,012			66,844
Interest expense:
Interest-bearing demand deposits		475		437			596		570			569
Savings and money market deposit accounts		17,904		16,667			17,062		16,142			14,499
Brokered deposits and other time deposits		21,732		21,237			19,777		19,062			17,736
Funds borrowed		4,350		4,872			4,084		2,840			2,398
Trust preferred securities		1,604		1,585			1,567		1,601			1,602
Total interest expense		46,065		44,798			43,086		40,215			36,804
Net interest income		32,288		32,111			31,975		29,797			30,040
Provision for loan losses		2,399		2,958			1,406		707			1,494
Net interest income after provision for loan losses		29,889		29,153			30,569		29,090			28,546
Non-interest income:
The PrivateWealth Group income		4,029		4,024			3,826		3,615			3,477
Mortgage banking income		1,157		1,229			1,314		807			804
Other income		1,214		1,803			1,126		1,172			1,351
Securities gains (losses), net		366		(97	)		79		(1	)		1,212
Losses on interest rate swap		--		--			--		--			(904	)
Total non-interest income		6,766		6,959			6,345		5,593			5,940
Non-interest expense:
Salaries and employee benefits		13,083		12,734			13,729		12,205			10,864
Occupancy expense		3,336		3,160			2,790		2,733			2,639
Professional fees		2,109		1,610			1,715		1,976			1,866
Investment management fees		857		868			782		686			774
Marketing		1,058		1,330			1,289		1,137			1,159
Data processing		1,039		984			901		999			788
Insurance		452		363			352		337			349
Amortization of intangibles		241		242			243		169			152
Other operating expenses		1,749		2,019			1,564		2,321			1,420
Total non-interest expense		23,924		23,310			23,365		22,563			20,011
Minority interest expense		100		95			90		82			85
Income before income taxes		12,631		12,707			13,459		12,038			14,390
Income tax expense		3,466		3,956			4,423		2,986			4,596
Net income	$	9,165	$	8,751		$	9,036	$	9,052		$	9,794
Per Share Data:
Basic earnings	$	0.43	$	0.41		$	0.42	$	0.43		$	0.48
Diluted earnings		0.42		0.40			0.41		0.42			0.46
Dividends		0.075		0.075			0.075		0.060			0.060
Book value (at end of period)		14.73		14.19			13.92		13.83			12.73

Footnotes begin on page 3.

	Quarter Ended
	09/30/07			06/30/07			03/31/07			12/31/06 (1)			09/30/06
Selected Financial Data (at end of period):
Total securities(2)	$	497,948		$	495,854		$	482,024		$	496,782		$	458,869
Total loans		3,737,523			3,705,339			3,581,398			3,499,988			3,136,634
Total assets		4,498,226			4,486,010			4,343,872			4,264,424			3,877,593
Total deposits		3,588,062			3,638,545			3,582,821			3,551,013			3,238,822
Funds borrowed		464,021			407,696			334,128			281,733			235,858
Trust preferred securities		101,033			101,033			101,033			101,033			101,033
Total stockholders’ equity		318,400			306,109			299,672			297,124			265,227
The PrivateWealth Group assets under management		3,281,576			3,119,878			2,952,227			2,902,205			2,780,121
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin(3)(9)		3.13	%		3.19	%		3.26	%		3.25	%		3.47	%
Net interest spread(4)		2.68			2.76			2.84			2.77			2.97
Non-interest income to average assets		0.60			0.64			0.60			0.56			0.63
Non-interest expense to average assets		2.13			2.13			2.22			2.27			2.13
Net overhead ratio(5)		1.53			1.49			1.62			1.71			1.50
Efficiency ratio(6)(9)		59.6			58.1			59.3			61.9			53.9
Return on average assets(7)		0.82			0.80			0.86			0.91			1.04
Return on average equity(8)		11.80			11.66			12.37			13.61			15.43
Fee income to total revenue(10)		16.54			18.01			16.39			15.81			15.79
Dividend payout ratio		17.84			18.64			18.50			14.44			12.96
Asset Quality Ratios:
Non-performing loans to total loans		0.77	%		0.72	%		0.28	%		0.25	%		0.06	%
Allowance for loan losses to:
total loans		1.13			1.11			1.09			1.09			1.11
Non-performing loans		145			155			391			427			1,877
Net charge-offs to average total loans		0.17			0.06			0.07			0.01			0.04
Non-performing assets to total assets		0.80			0.70			0.34			0.23			0.06
Non-accrual loans to total loans		0.69			0.56			0.13			0.11			0.02
Balance Sheet Ratios:
Loans to deposits		104.2	%		101.8	%		100.0	%		98.6	%		96.8	%
Average interest-earning assets to average interest-bearing liabilities		110.4			109.9			109.8			111.3			112.2
Capital Ratios:
Total equity to total assets		7.08	%		6.82	%		6.90	%		6.97	%		6.84	%
Total risk-based capital ratio		10.60			10.63			10.45			10.36			10.71
Tier 1 risk-based capital ratio		8.07			8.06			7.93			8.06			8.53
Leverage ratio		7.20			7.08			6.95			7.51			7.26

(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
	3Q07		2Q07		1Q07		4Q06		3Q06
Net interest income	$	32,288	$	32,111	$	31,975	$	29,797	$	30,040
Tax equivalent adjustment to net interest income		1,072		1,072		1,073		1,058		1,166
Net interest income, tax equivalent basis	$	33,360	$	33,183	$	33,048	$	30,855	$	31,206

(10)	The PrivateWealth Group, mortgage banking and other income as a percentage of the sum of net interest income and The PrivateWealth Group, 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)

	September 30, 2007			December 31, 2006
	(unaudited)
Assets
Cash and due from banks	$	52,922		$	42,428
Federal funds sold and other short-term investments		22,117			36,969
Total cash and cash equivalents		75,039			79,397
Loans held for sale		4,262			14,515
Available-for-sale securities, at fair value		497,948			496,782
Loans, net of unearned discount		3,737,523			3,499,988
Allowance for loan losses		(42,113	)		(38,069	)
Net loans		3,695,410			3,461,919
Goodwill		93,357			93,043
Premises and equipment, net		24,844			21,413
Accrued interest receivable		23,422			23,490
Other assets		83,944			73,865
Total assets	$	4,498,226		$	4,264,424
Liabilities and Stockholders’ Equity
Demand deposits:
Non-interest-bearing	$	285,003		$	300,689
Interest-bearing		134,428			152,323
Savings and money market deposit accounts		1,577,930			1,575,080
Brokered deposits		500,296			589,321
Other time deposits		1,090,405			933,600
Total deposits		3,588,062			3,551,013
Funds borrowed		464,021			281,733
Trust preferred securities		101,033			101,033
Accrued interest payable		13,968			16,071
Other liabilities		12,742			17,450
Total liabilities	$	4,179,826		$	3,967,300
Stockholders’ Equity
Preferred stock, 1,000,000 shares authorized		—			—
Common stock, without par value, $1 stated value; 39,000,000 shares authorized; 22,182,571 and 22,035,050 shares issued and outstanding as of September 30, 2007 and December 31, 2006, respectively		21,612			21,481
Treasury stock		(13,475	)		(5,254	)
Additional paid-in-capital		160,178			153,487
Retained earnings		143,585			121,539
Accumulated other comprehensive income		6,500			5,871
Total stockholders’ equity		318,400			297,124
Total liabilities and stockholders’ equity	$	4,498,226		$	4,264,424

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 September 30,					Nine Months Ended September 30,
	2007		2006			2007		2006
Interest Income
Loans, including fees	$	72,299	$	60,361		$	211,917	$	164,398
Federal funds sold and interest-bearing deposits		259		116			736		402
Securities:
Taxable		3,450		3,816			10,633		14,815
Exempt from federal income taxes		2,345		2,551			7,037		7,684
Total interest income		78,353		66,844			230,323		187,299
Interest Expense
Deposits:
Interest-bearing demand		475		569			1,508		1,174
Savings and money market		17,904		14,499			51,633		39,051
Brokered and other time		21,732		17,736			62,746		46,412
Funds borrowed		4,350		2,398			13,306		8,253
Trust preferred securities		1,604		1,602			4,756		4,731
Total interest expense		46,065		36,804			133,949		99,621
Net interest income		32,288		30,040			96,374		87,678
Provision for loan losses		2,399		1,494			6,763		6,129
Net interest income after provision for loan losses		29,889		28,546			89,611		81,549
Non-interest Income
The PrivateWealth Group income		4,029		3,477			11,878		10,240
Mortgage banking income		1,157		804			3,700		2,532
Other income		1,214		1,351			4,144		5,106
Securities gains (losses)		366		1,212			348		(373	)
(Losses) gains on interest rate swap		--		(904	)		--		64
Total non-interest income		6,766		5,940			20,070		17,569
Non-interest Expense
Salaries and employee benefits		13,083		10,864			39,546		31,725
Occupancy expense, net		3,336		2,639			9,286		7,022
Professional fees		2,109		1,866			5,434		4,837
Investment management fees		857		774			2,507		1,979
Marketing		1,058		1,159			3,676		3,154
Data processing		1,039		788			2,924		2,318
Postage, telephone & delivery		409		325			1,224		1,050
Insurance		452		349			1,166		982
Amortization of intangibles		241		152			726		459
Other non-interest expense		1,340		1,095			4,110		2,977
Total non-interest expense		23,924		20,011			70,599		56,503
Minority interest expense		100		85			285		248
Income before income taxes		12,631		14,390			38,797		42,367
Income tax provision		3,466		4,596			11,845		13,572
Net income	$	9,165	$	9,794		$	26,952	$	28,795
Basic earnings per share	$	0.43	$	0.48		$	1.27	$	1.40
Diluted earnings per share		0.42		0.46			1.23		1.35
Dividends per share		0.075		0.060			0.225		0.180

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

NINE MONTHS ENDED SEPTEMBER 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		—		—			—		28,795			—			28,795
Net decrease in fair value of securities classified as available-for-sale, net of income taxes and reclassification adjustments		—		—			—		—			(634	)		(634	)
Total comprehensive income		—		—			—		28,795			(634	)		28,161
Cash dividends declared ($0.180 per share)		—		—			—		(3,791	)		—			(3,791	)
Issuance of common stock		294		—			1,288		—			—			1,582
Acquisition of treasury stock		56		(1,102	)		499		—			—			(547	)
Share-based payment expense		—		—			2,837		—			—			2,837
Excess tax benefit from share-based payments		—		—			836		—			—			836
Balance, September 30, 2006	$	20,842	$	(3,830	)	$	127,617	$	113,798		$	6,800		$	265,227
Balance, January 1, 2007	$	21,481	$	(5,254	)	$	153,487	$	121,539		$	5,871		$	297,124
Net income		—		—			—		26,952			—			26,952
Net increase in fair value of securities classified as available-for-sale, net of income taxes and reclassification adjustments		—		—			—		—			629			629
Total comprehensive income		—		—			—		26,952			629			27,581
Cash dividends declared ($0.225 per share)		—		—			—		(4,906	)		—			(4,906	)
Issuance of common stock		91		—			1,274		—			—			1,365
Acquisition of treasury stock		40		(8,221	)		204		—			—			(7,977	)
Share-based payment expense		—		—			4,943		—			—			4,943
Excess tax benefit from share-based payments		—		—			270		—			—			270
Balance, September 30, 2007	$	21,612	$	(13,475	)	$	160,178	$	143,585		$	6,500		$	318,400

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

PRIVATEBANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)

(In thousands)

	Nine months ended September 30,
	2007			2006
Cash flows from operating activities
Net income	$	26,952		$	28,795
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,751			2,027
Provision for loan losses		6,763			6,129
Net (gain) loss on sale of securities		(348	)		373
Gains on interest rate swap		--			(64	)
Net decrease (increase) in loans held for sale		10,253			(2,451	)
Decrease in deferred loan fees		(1,005	)		(111	)
Share-based payment expense		4,943			2,837
Change in minority interest		285			248
Decrease (Increase) in accrued interest receivable		68			(4,345	)
(Decrease) Increase in accrued interest payable		(2,103	)		5,523
Increase in other assets		(10,999	)		(14,218	)
Decrease in other liabilities		(4,943	)		(10,071	)
Total adjustments		5,665			(14,123	)
Net cash provided by operating activities		32,617			14,672
Cash flows from investing activities
Proceeds from maturities, paydowns, and sales of available-for-sale securities		80,151			157,723
Purchase of securities available-for-sale		(80,002	)		(61,232	)
Redemption of FHLB (Chicago) Stock		--			138,506
Net loan principal advanced		(238,981	)		(529,261	)
Premises and equipment expenditures		(6,182	)		(10,100	)
Net cash used by investing activities		(245,014	)		(304,364	)
Cash flows from financing activities
Net increase in total deposits		36,993			415,461
Proceeds from equity transactions		1,609			2,137
Excess tax benefit from share-based payments		270			836
Acquisition of treasury stock		(8,221	)		(1,102	)
Dividends paid		(4,906	)		(3,791	)
Issuance of debt		406,577			223,703
Repayment of debt		(224,283	)		(284,830	)
Net cash provided by financing activities		208,039			352,414
Net (decrease) increase in cash and cash equivalents		(4,358	)		62,722
Cash and cash equivalents at beginning of year		79,397			61,869
Cash and cash equivalents at end of period	$	75,039		$	124,591

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 nine months ended September 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 September 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 (which includes The PrivateBank - Kansas City), The PrivateBank - Michigan, The PrivateBank - Georgia, The PrivateBank - Wisconsin, The PrivateWealth Group (formerly “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.

We apply the accrual basis of accounting for each reportable segment and for transactions between reportable segments. During the first nine 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.

Balance sheet highlights at September 30, 2007 and December 31, 2006 for each business segment are summarized in the following segment tables (in thousands).

9/30/2007	Total Assets			Total Deposits			Total Borrowings ⁽¹⁾			Total Gross Loans			Total Capital
The PrivateBank - Chicago	$	3,024,423		$	2,481,654		$	228,213		$	2,451,236		$	299,790
The PrivateBank - St. Louis & KC		438,187			343,455			51,484			372,706			40,702
The PrivateBank - Wisconsin		129,084			115,921			--			103,574			12,655
The PrivateBank - Michigan		628,621			485,700			42,023			550,452			96,614
The PrivateBank - Georgia		337,682			233,235			41,799			258,910			59,719
Holding Company		593,273			--			271,283			--			318,399
Intersegment Eliminations (2)		(653,044	)		(71,903	)		(69,748	)		645			(509,479	)
Consolidated	$	4,498,226		$	3,588,062		$	565,054		$	3,737,523		$	318,400

12/31/2006		Total Assets			Total Deposits			Total Borrowings⁽¹⁾			Total Gross Loans			Total Capital
The PrivateBank - Chicago	$	2,931,583		$	2,532,657		$	111,013		$	2,383,752		$	266,110
The PrivateBank - St. Louis & KC		413,265			311,784			51,178			350,722			47,586
The PrivateBank - Wisconsin		99,488			101,738			--			62,758			(2,126	)
The PrivateBank - Michigan		572,327			418,097			58,031			503,214			91,996
The PrivateBank - Georgia		281,491			202,788			22,506			200,487			54,919
Holding Company		483,616			--			183,250			--			297,124
Intersegment Eliminations (2)		(517,346	)		(16,051	)		(43,212	)		(945	)		(458,485	)
Consolidated	$	4,264,424		$	3,551,013		$	382,766		$	3,499,988		$	297,124

Growth between periods		Change in Total Assets			Change in Total Deposits			Change in Total Borrowings⁽¹⁾			Change in Total Gross Loans			Change in Total Capital
The PrivateBank - Chicago		3	%		(2	)%		106	%		3	%		13	%
The PrivateBank - St. Louis & KC		6	%		10	%		1	%		6	%		(14	)%
The PrivateBank - Wisconsin		30	%		14	%		--			65	%		695	%
The PrivateBank - Michigan		10	%		16	%		(28	)%		9	%		5	%
The PrivateBank - Georgia		20	%		15	%		86	%		29	%		9	%
Holding Company		23	%		--			48	%		--			7	%
Consolidated		5	%		1	%		48	%		7	%		7	%

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

(2)

Intersegment eliminations for gross loans reflect the exclusion of the unearned income for management reporting purposes. The intersegment eliminations for total capital reflect the elimination of the net investment in each of the Holding Company subsidiaries in consolidation. The intersegment eliminations for total deposits reflect the elimination of the holding company’s cash deposited at The PrivateBanks - Chicago, St. Louis and Georgia. The intersegment eliminations for total borrowings reflect 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.

Financial results for each business segment for the three and nine months ended September 30, 2007 and 2006 are presented below (all dollar amounts are in thousands):

Three months ended September 30, 2007	Net Interest Income (Expense)			Provision for Loan Losses			Non Interest Income (Expense)			Non Interest Expense			Minority Interest Expense			YTD Net Income (Loss)
The PrivateBank - Chicago	$	24,171		$	1,152		$	2,120		$	9,783		$	--		$	10,776
The PrivateBank - St. Louis & KC		3,165			(18	)		712			3,013			--			632
The PrivateBank - Wisconsin		1,001			(36	)		3			709			--			198
The PrivateBank - Michigan		4,619			855			157			2,382			--			1,042
The PrivateBank - Georgia		2,497			446			81			1,693			--			298
The PrivateWealth Group		340			--			4,029			3,528			100			462
Holding Company Activities		(3,716	)		--			50			2,995			--			(4,059	)
Intersegment Eliminations (1)		211			--			(386	)		(179	)		--			(184	)
Consolidated	$	32,288		$	2,399		$	6,766		$	23,924		$	100		$	9,165

Three months ended September 30, 2006		Net Interest Income (Expense)			Provision for Loan Losses			Non Interest Income (Expense)			Non Interest Expense			Minority Interest Expense			YTD Net Income (Loss)
The PrivateBank - Chicago	$	23,301		$	1,139		$	2,154		$	9,569		$	--		$	10,099
The PrivateBank - St. Louis		3,641			151			488			2,109			--			1,240
The PrivateBank - Wisconsin		345			44			2			596			--			(194	)
The PrivateBank - Michigan		4,554			160			214			2,317			--			1,493
The PrivateBank - Georgia		--			--			--			--			--			--
The PrivateWealth Group		166			--			3,477			3,181			85			394
Holding Company Activities		(2,120	)		--			50			2,657			--			(3,069	)
Intersegment Eliminations (1)		153			--			(445	)		(418	)		--			(169	)
Consolidated	$	30,040		$	1,494		$	5,940		$	20,011		$	85		$	9,794

Growth between periods		Change in Net Interest Income			Change in Provision for Loan Losses			Change in Non Interest Income			Change in Non Interest Expense			Change in Minority Interest Expense			Change in YTD Net Income
The PrivateBank - Chicago		4	%		1	%		(2	)%		2	%		--			7	%
The PrivateBank - St. Louis & KC		(13	)%		(112	)%		46	%		43	%		--			(49	)%
The PrivateBank - Wisconsin		190	%		(181	)%		33	%		19	%		--			202	%
The PrivateBank - Michigan		1	%		435	%		(27	)%		3	%		--			(30	)%
The PrivateBank - Georgia		--			--			--			--			--			--
The PrivateWealth Group		105	%		--			16	%		11	%		18	%		17	%
Holding Company Activities		(75	)%		--			0	%		13	%		--			(32	)%
Consolidated		7	%		61	%		14	%		20	%		18	%		(6	)%

(1) The intersegment eliminations for interest expense reflect the elimination of the holding company’s cash deposited at The PrivateBanks - Chicago, St. Louis and Georgia. The intersegment eliminations for interest expense reflect 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.

Nine months ended September 30, 2007	Net Interest Income (Expense)			Provision for Loan Losses			Non Interest Income (Expense)				Non Interest Expense	Minority Interest Expense			YTD Net Income (Loss)
The PrivateBank - Chicago	$71,557			$1,592			$6,035				$28,876	$--			$32,470
The PrivateBank - St. Louis & KC	9,494			2,235			1,867				8,330	--			791
The PrivateBank - Wisconsin	2,713			317			50				2,164	--			155
The PrivateBank - Michigan	13,641			2,097			715				7,101	--			3,515
The PrivateBank - Georgia	7,783			522			338				4,934	--			1,736
The PrivateWealth Group	869			--			11,878				10,600	285			1,244
Holding Company	(10,322)			--			188				9,034	--			(12,427)
Intersegment Eliminations (1)	639			--			(1,001)				(442)	--			(532)
Consolidated	$96,374			$6,763			$20,070				$70,599	$285			$26,952

Nine months ended September 30, 2006	Net Interest Income (Expense)			Provision for Loan Losses			Non Interest Income (Expense)				Non Interest Expense	Minority Interest Expense			YTD Net Income (Loss)
The PrivateBank - Chicago	$67,892			$3,478			$6,053				$27,033	$--			$30,162
The PrivateBank - St. Louis	10,623			1,698			1,436				5,723	--			3,181
The PrivateBank - Wisconsin	935			333			5				1,747	--			(755)
The PrivateBank - Michigan	12,837			620			594				6,649	--			4,021
The PrivateBank - Georgia	--			--			--				--	--			--
The PrivateWealth Group	748			--			10,240				9,069	248			1,340
Holding Company	(5,645)			--			162				7,245	--			(8,656)
Intersegment Eliminations (1)	288			--			(921)				(963)	--			(498)
Consolidated	$87,678			$6,129			$17,569				$56,503	$248			$28,795

Variance	Change in Net Interest Income			Change in Provision for Loan Losses			Change in Non Interest Income			Change in Non Interest Expense		Change in Minority Interest Expense			Change in YTD Net Income
The PrivateBank - Chicago		5	%		(54	)%		--		7%			--			8	%
The PrivateBank - St. Louis & KC		(11	)%		32	%		30	%	46%			--			(75	)%
The PrivateBank - Wisconsin		190	%		(5	)%		891	%	24%			--			121	%
The PrivateBank - Michigan		6	%		238	%		20	%	7%			--			(13	)%
The PrivateBank - Georgia		--			--			--		--			--			--
The PrivateWealth Group		16	%		--			16	%	17%			15	%		(7	)%
Holding Company		(83	)%		--			16	%	25%			--			(44	)%
Consolidated		10	%		10	%		14	%	25%			15	%		(6	)%

(1)

The intersegment eliminations for interest expense reflect the elimination of the holding company’s cash deposited at The PrivateBanks - Chicago, St. Louis and Georgia. The intersegment eliminations for interest expense reflect 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.

The PrivateBanks

The PrivateBanks - Chicago, St. Louis, Wisconsin, Michigan and Georgia, provide personal and commercial banking services primarily to affluent individuals, professionals, entrepreneurs and their business interests. 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 remote capture, merchant credit card processing, electronic funds transfer, and other cash management products. In addition, some of our banks provide lock-box and cash concentration accounts. The banks 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, investment brokerage accounts and domestic and international wire transfers. Additionally, some of our banks offer secured and unsecured personal loans and lines of credit, foreign currency exchange and access to wealth management services and products.

The PrivateBank - Chicago

The PrivateBank - Chicago’s main office is located in downtown Chicago with seven full-service Chicago and suburban locations. The PrivateBank - Chicago’s balance sheet reflects goodwill of $19.2 million at September 30, 2007, which remained unchanged from December 31, 2006, and intangibles of $1.7 million at September 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 - St. Louis

The PrivateBank - St. Louis, a federal savings bank, is headquartered in St. Louis, Missouri with offices in Brentwood and Chesterfield, Missouri. Our newest de novo bank, The PrivateBank - Kansas City (in organization), opened in March of 2007 as an office of The PrivateBank - St. Louis. The PrivateBank - Kansas City moved into its permanent offices in August 2007. In addition to private banking services, clients of The PrivateBank - Kansas City also have access to wealth management products and services through this location. The Company has received conditional OTS approval for The PrivateBank - Kansas City’s federal savings bank charter, and the application remains subject to approval from the FDIC and Federal Reserve Bank of Chicago.

For the nine months ended September 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 $935,000 resulting from start-up expenses including the new office in Kansas City and compensation expenses associated with management personnel in the Kansas City office. Excluding the impact of The PrivateBank - Kansas City, The PrivateBank - St. Louis had net income of $1.7 million for the nine months ended September 30, 2007.

The PrivateBank - Wisconsin

The PrivateBank - Michigan

The PrivateBank - Michigan’s main office is located in Bloomfield Hills; additional offices are located in the cities of Grosse Pointe and Rochester. The PrivateBank - Michigan balance sheet reflects goodwill of $42.6 million, which remained unchanged from December 31, 2006, and intangibles of $2.8 million at September 30, 2007 compared to $3.1 million at December 31, 2006.

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 is also a Small Business Lending Preferred Lending Participant offering this alternative financing vehicle to business clients. The PrivateBank - Georgia’s balance sheet reflects goodwill of $30.2 million, compared to $29.9 million at December 31, 2006 due to routine adjustments of deferred taxes and acquisition costs related to the purchase of The PrivateBank-Georgia as allowable under accounting rules. The PrivateBank - Georgia had intangibles of $2.2 million at September 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 PrivateWealth Group

The PrivateWealth Group (formerly “Wealth Management”) includes investment management, personal trust, and estate administration, custodial, qualified plan, IRA, brokerage and investment advisory services. The PrivateWealth Group 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, The PrivateWealth Group 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 The PrivateWealth Group for segment reporting purposes. Lodestar provides investment management services to high net worth clients, some of whom are also fiduciary services clients of the The PrivateWealth 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.

The following tables indicate the breakdown of The PrivateWealth Group’s assets under management at September 30, 2007 and September 30, 2006, by account classification and related gross revenue for the nine months ended September 30, 2007 and September 30, 2006:

	At or for the nine months ended September 30, 2007						At or for the nine months ended September 30, 2006
	Market Value			Revenue			Market Value			Revenue
Fiduciary Services (1)	(in thousands)						(in thousands)
Discretionary accounts
Trusts, estates and guardianships	$	952,172		$	3,806		$	805,033		$	3,225
Investment agency		746,287			3,509			554,856			2,840
Retirement plans and accounts		161,129			502			119,852			265
Total discretionary accounts		1,859,588			7,817			1,479,741			6,330
Non-Discretionary accounts
Investment agency		4,383			23			842			4
Custody (includes retirement plans and accounts)		692,699			758			628,031			818
Total non-discretionary accounts		697,082			781			628,873			822
Lodestar investment management accounts		770,234			3,541			739,279			3,258
Less assets managed and revenue earned by Lodestar(2)		(103,828	)		(405	)		(115,635	)		(332	)
Brokerage services		58,500			144			47,863			162
Net fiduciary services and Lodestar investment management accounts	$	3,281,576		$	11,878		$	2,780,121		$	10,240

(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.

For the nine months ended September 30, 2007, fees paid to third party investment managers were $2.5 million compared to $2.0 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 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 PrivateBank - 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.

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 nine months ended September 30, 2007 and 2006:

	Three months ended September 30,
	2007		2006
Net income	$	9,165	$	9,794
Weighted average common shares outstanding		21,223		20,581
Weighted average common shares equivalent⁽¹⁾		596		859
Weighted average common shares and common share equivalents		21,819		21,440
Net income per average common share - basic	$	0.43	$	0.48
Net income per average common share - diluted	$	0.42	$	0.46

	Nine months ended September 30,
	2007		2006
Net income	$	26,952	$	28,795
Weighted average common shares outstanding		21,246		20,520
Weighted average common shares equivalent⁽¹⁾		642		893
Weighted average common shares and common share equivalents		21,888		21,413
Net income per average common share - basic	$	1.27	$	1.40
Net income per average common share - diluted	$	1.23	$	1.35

(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 nine months ended September 30, 2007 and 2006 (in thousands):

	September 30, 2007
	Before Tax Amount			Tax Effect			Net of Tax Amount
Change in unrealized gains on securities available-for-sale	$	1,264		$	406		$	858
Less: reclassification adjustment for gains included in net income		(348	)		(119	)		(229	)
Change in net unrealized gains	$	916		$	287		$	629

	September 30, 2006
	Before Tax Amount			Tax Effect			Net of Tax Amount
Change in unrealized losses on securities available-for-sale	$	(2,109	)	$	(1,239	)	$	(870	)
Less: reclassification adjustment for losses included in net income		373			137			236
Change in net unrealized losses	$	(1,736	)	$	(1,102	)	$	(634	)

NOTE 5—LONG TERM DEBT

The following table is a summary of the Company’s trust preferred securities as of September 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

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 September 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 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 September 30, 2007 is $101.0 million. As of September 30, 2007, all of our trust preferred securities are 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 September 30, 2007, the Company would still be considered well-capitalized under regulatory capital guidelines.

As of September 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 September 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 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 2007 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 which may be settled in cash upon conversion (including partial cash settlement). 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. Retrospective application to all periods presented would be required. The Company is currently evaluating the impact of the proposal on its financial position, results of operations and liquidity.

NOTE 6—CAPITAL TRANSACTIONS

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

During the third quarter 2007 the Company repurchased 9,644 shares of its common stock compared to none during the third 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 2004. Although tax year 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 this year. Similarly, tax years 2003 through 2005 may still be subject to examination due to the statute of limitations, the Illinois Department of Revenue has previously completed its review of the Illinois state tax returns for these years.

NOTE 8—SUBSEQUENT EVENTS

On November 2, 2007, the Company filed a Form 8-K with the SEC announcing that Larry D. Richman has joined the Company and on November 5, 2007 will assume the role of President and Chief Executive Officer succeeding Ralph B. Mandell, who will continue as Chairman of the Board. Mr. Richman was also appointed to the positions of Chairman, President and Chief Executive Officer of The PrivateBank - Chicago and was appointed to the board of directors of PrivateBancorp, expanding the board to 16 members. The Company further announced a Strategic Growth and Transformation Plan (the “Plan”) and a Transformation Equity Award Program as a means to acquire talent and to promote the achievement of exceptional performance benchmarks. As such, substantial equity awards were granted during the fourth quarter 2007. The Company will incur substantial income statement charges during the fourth quarter 2007, primarily as a result of sign-on bonuses paid to new hires. For additional information, please read the Form 8-K filed with the SEC on November 2, 2007.

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 The PrivateWealth Group.

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. Our newest de novo bank, The PrivateBank - Kansas City (in organization), opened in March of 2007 as an office of The PrivateBank - St. Louis. The PrivateBank - Kansas City moved into its permanent offices in August 2007. In addition to private banking services, clients of The PrivateBank - Kansas City also have access to our wealth management products and services. The Company has received conditional OTS approval for The PrivateBank - Kansas City’s federal savings bank charter, and the application remains subject to approval from the FDIC and Federal Reserve Bank of Chicago.

For financial information regarding our seven separate operating segments, The PrivateBank - Chicago, The PrivateBank - Michigan, The PrivateBank - St. Louis, The PrivateBank - Georgia, The PrivateBank - Wisconsin, The PrivateWealth Group, and our Holding Company, see “Operating Segments Results” beginning on page 32 and “Note 2—Operating Segments” to our consolidated financial statements as of and for the three and nine months ended September 30, 2007.

Recent Developments

On November 2, 2007, the Board of Directors of the Company announced that Larry D. Richman has joined the Company and on November 5, 2007 will assume the role as its President and Chief Executive Officer succeeding Ralph B. Mandell, who will continue as Chairman of the Board. Mr. Richman was also appointed to the positions of Chairman, President and Chief Executive Officer of The PrivateBank - Chicago and was appointed to the board of directors of PrivateBancorp, expanding the board to 16 members.

Subsequent to quarter’s end, the Company hired 27 commercial banking executives as part of a Strategic Growth and Transformation Plan (the “Plan”) adopted by the Board of Directors. Given these new hires, the total number of Managing Directors increased to 195 from 168 as of September 30, 2007.

The Company plans to hire additional Managing Directors over the next three quarters consistent with the Plan. The Board of Directors has appointed a special committee of independent outside directors, which has overseen all aspects of the development of the Plan. The Plan is based on the continuation of the Company’s business model with a goal of substantially increasing its commercial banking market share.

As a key component of the Plan, the Board of Directors has established a Transformation Equity Award Program for making inducement awards as a means to attract talent and to promote the achievement of exceptional performance benchmarks. Two-thirds of these awards have performance-vesting provisions that create an incentive for management to achieve significant stock price appreciation or earnings per share growth hurdles (“Performance Awards”). The remaining one-third of the equity awards are stock options, which will vest over a five-year period.

Total equity inducement awards made to Mr. Richman and the other newly recruited Managing Directors were 763,500 time-vested options, 763,500 performance options and 559,350 performance shares. The grants made to existing management totaled 386,875 time vested options, 386,875 performance options, and 280,875 performance shares.

Approximately half of the Performance Awards vest upon achievement of a 20% compounded annual growth rate in the Company’s stock price over a five-year period ending December 31, 2012. The remaining Performance Awards vest upon achievement of earnings per share growth hurdles: 50%, 75% and 100% will vest if the sum of GAAP earnings per share is equivalent to compounded annual growth rates in earnings per share of 15%, 17.5% and 20%, respectively over a five year time period ending December 31, 2012. The baselines for the performance hurdles are the ten day average closing stock price prior to the date of the grant, $27.91, and the latest twelve months earnings per share as of September 30, 2007, $1.65.

The GAAP valuation and the determination of the amortization schedule for Performance Awards involves the application of complex calculations and estimations. For future period income statements, the Company will identify the costs associated with implementing the Plan, including the GAAP costs associated with the Transformation Equity Award Program. In addition to its GAAP earnings, the Company intends to report a core earnings number (i.e., GAAP earnings less costs related to recruitment and Transformation Equity Awards), consistent with the provisions of Regulation G under the Sarbanes-Oxley Act of 2002.

For the fourth quarter 2007, the Company will incur substantial income statement charges, primarily as a result of sign-on bonuses paid to new hires. The sign-on bonus expense to be incurred during the fourth quarter is estimated to exceed $15.0 million. For 2008, the Company anticipates a significant reduction in GAAP earnings primarily as a result of amortization expenses associated with the Transformation Equity Award Program, increased salary expenses and increased loan loss provision expense as a result of anticipated loan growth. Longer term, the Company believes the Strategic Growth and Transformation Plan will be accretive to earnings per share.

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 used are in accordance with U.S. generally accepted accounting principles, and conform to the general practices within the industry.

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 1.13% as of September 30, 2007, compared to 1.09% as of December 31, 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 $93.4 million at September 30, 2007, up from $93.0 million at December 31, 2006, due to routine adjustments of deferred taxes and acquisition costs related to the purchase of The PrivateBank - Georgia as allowable under accounting rules. Total customer intangibles at September 30, 2007 were $6.7 million. Amortization expense related to the Lodestar customer intangible assets of $1.7 million is currently recognized at approximately $170,000 per year until 2017. The amortization expense related to The PrivateBank - Michigan intangibles of $2.8 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 $2.2 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 NINE MONTHS

ENDED SEPTEMBER 30, 2007 AND 2006

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 The PrivateWealth Group 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.

Net Income

Net income for the third quarter ended September 30, 2007 was $9.2 million, or $0.42 per diluted share compared to $9.8 million, or $0.46 per diluted share for the third quarter 2006. Net income for the nine months ended September 30, 2007 was $27.0 million, or $1.23 per diluted share, compared to $28.8 million, or $1.35 per diluted share, for the same period last year. The third 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. Start-up costs associated with The PrivateBank - Kansas City reduced earnings per share by $0.015 for the quarter ended September 30, 2007. The decrease in net income over prior year quarter was due to a 20% increase in non-interest expenses, slower loan growth and continued compression of our net interest income. Our cost of funds increased by 16 basis points over the third quarter 2006 while yields on earning assets declined by 14 basis points. Continued higher levels of non-performing assets resulted in the reversal of $296,000 of accrued interest due to loans placed on non-performing status . The decrease in net income for the nine months ended September 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 25%.

Net Interest Income

Net interest income was $32.3 million for the three months ended September 30, 2007, compared to $30.0 million in the prior year quarter, an increase of 7%. 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 a modest increase in loan volumes. Average earning assets at September 30, 2007 were $4.2 billion compared to $3.5 billion at September 30, 2006, an increase of 19%. Our net interest margin on a tax equivalent basis was 3.13% for the three months ended September 30, 2007 compared to 3.47% for the prior year quarter primarily due to slower growth in loans and deposits and a higher cost of funds. Earning assets yielded 7.45% in the third quarter 2007 compared to 7.59% in the third quarter 2006, a decrease of 14 basis points primarily due to a 14 basis point decrease in the yield earned on loans. We also experienced a decrease in the yield on our assets due to a shift in loan composition, specifically a decrease in higher-yielding construction loans, and because of the impact of non-performing assets. Our cost of funds was 4.78% during the third quarter 2007 compared to 4.62% during the third quarter 2006, an increase of 16 basis points. Increases in rates paid on savings, brokered deposits, jumbo certificates of deposit and money market accounts 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 0.45% for the three months ended September 30, 2007 compared to 0.50% in the prior year period.

Net interest income on a tax equivalent basis was $99.6 million for the nine months ended September 30, 2007 compared to $91.2 million for the same period in 2006. Net interest margin on a tax equivalent basis was 3.19% for the nine months ended September 30, 2007, compared to 3.49% in the prior year period. The decline in net interest margin during the nine months ended September 30, 2007 as compared to the same period in 2006 was primarily attributable to an increase of 46 basis points in the rates paid on our interest bearing liabilities, which more than offset the 17 basis point increase in the rates earned on interest yielding assets.

In the short-term, in particular if the Federal Reserve determines to lower interest rates, we will continue to experience some margin pressure because our balance sheet is asset sensitive. To the extent the yield curve shifts to a more flat or positive slope longer-term, our net interest margin should benefit.

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 September 30,
	2007								2006
	Average Balance⁽¹⁾			Interest		Rate			Average Balance⁽¹⁾			Interest		Rate
Fed funds sold and interest bearing deposits	$	15,390		$	259		5.37	%	$	7,101		$	116		6.40	%
Tax-exempt municipal securities		198,148			3,417		6.90	%		216,056			3,717		6.88	%
US Government Agencies, MBS and CMOs		269,899			3,290		4.87	%		263,531			3,288		4.99	%
Taxable municipal securities		3,810			72		7.52	%		3,825			72		7.51	%
FHLB stock		5,662			68		4.75	%		3,749			404		42.22	%
Other securities		4,577			20		1.73	%		2,199			52		9.38	%
Investment securities (taxable)		283,948			3,450		4.85	%		273,304			3,816		5.57	%
Commercial, Construction and Commercial Real Estate Loans		3,111,582			61,612		7.80	%		2,503,998			50,791		7.98	%
Residential Real Estate Loans		261,271			4,035		6.09	%		248,632			3,690		5.94	%
Personal Loans		334,646			6,652		7.89	%		287,773			5,880		8.11	%
Total Loans⁽²⁾		3,707,499			72,299		7.69	%		3,040,403			60,361		7.83	%
Total earning assets	$	4,204,985			79,425		7.45	%	$	3,536,864		$	68,010		7.59	%
Allowance for Loan Losses		(41,174	)							(34,335	)
Cash and Due from Banks		50,613								43,029
Other Assets		231,973								184,816
Total Average Assets	$	4,446,397							$	3,730,374

Interest Bearing Demand accounts		137,740		$	475		1.37	%	$	122,321		$	734		2.38	%
Regular Savings Accounts		11,979			64		2.11	%		14,179			28		0.78	%
Money Market Accounts		1,556,302			17,840		4.54	%		1,301,051			14,306		4.36	%
Time Deposits		1,069,887			14,101		5.23	%		737,814			9,339		5.02	%
Brokered Deposits		588,139			7,631		5.15	%		697,531			8,397		4.78	%
Total Deposits		3,364,047			40,111		4.72	%		2,872,896			32,804		4.53	%
FHLB advances		88,963			1,056		4.75	%		46,775			221		1.85	%
Other borrowings		254,857			3,294		4.89	%		133,834			2,177		6.36	%
Trust preferred securities		101,033			1,604		6.21	%		101,033			1,602		6.20	%
Total interest-bearing liabilities	$	3,808,900		$	46,065		4.78	%	$	3,154,538		$	36,804		4.62	%
Non-Interest Bearing Deposits		299,201								271,287
Other Liabilities		30,373								52,703
Stockholders' Equity		307,923								251,846
Total Average Liabilities & Stockholders' Equity	$	4,446,397							$	3,730,374
Tax equivalent net interest income⁽³⁾				$	33,360							$	31,206
Net interest spread⁽⁴⁾							2.68	%							2.97	%
Effect of non interest bearing funds							0.45	%							0.50	%
Net interest margin⁽³⁾⁽⁵⁾							3.13	%							3.47	%

	Nine Months Ended September 30,
	2007								2006
	Average Balance⁽¹⁾			Interest		Rate			Average Balance⁽¹⁾			Interest		Rate
Fed funds sold and interest bearing deposits	$	16,230		$	736		5.21	%	$	6,592		$	402		8.05	%
Tax-exempt municipal securities		198,362			10,254		6.89	%		216,491			11,197		6.90	%
US Government Agencies, MBS and CMOs		268,376			10,099		5.02	%		295,450			11,818		5.33	%
Taxable municipal securities		3,810			215		7.53	%		3,825			215		7.52	%
FHLB stock		5,583			212		5.03	%		65,269			2,604		5.26	%
Other securities		4,183			107		1.90	%		2,136			178		11.11	%
Investment securities (taxable)		281,952			10,633		5.00	%		366,680			14,815		5.38	%
Commercial, Construction and Commercial Real Estate Loans		3,039,017			180,753		7.90	%		2,345,472			137,849		7.80	%
Residential Real Estate Loans		258,347			11,792		5.93	%		239,333			10,594		5.90	%
Personal Loans		326,230			19,372		7.94	%		275,094			15,955		7.75	%
Total Loans⁽²⁾		3,623,594			211,917		7.76	%		2,859,899			164,398		7.63	%
Total earning assets		4,120,138			233,540		7.52	%	$	3,449,662		$	190,812		7.35	%
Allowance for Loan Losses		(39,556	)							(32,305	)
Cash and Due from Banks		60,250								38,598
Other Assets		230,608								178,904
Total Average Assets	$	4,371,440							$	3,634,859

Interest Bearing Demand accounts	$	141,705		$	1,508		1.23	%	$	124,895		$	1,687		1.81	%
Regular Savings Accounts		13,004			179		2.13	%		14,643			81		0.74	%
Money Market Accounts		1,522,154			51,454		4.53	%		1,262,223			38,457		4.07	%
Time Deposits		1,037,705			40,197		5.18	%		663,897			22,872		4.61	%
Brokered Deposits		579,602			22,549		5.20	%		688,598			23,540		4.57	%
Total Deposits		3,294,170			115,887		4.70	%		2,754,256			86,637		4.21	%
FHLB advances		91,297			2,113		4.67	%		119,585			2,791		3.08	%
Other borrowings		258,520			11,193		5.06	%		117,662			5,462		6.12	%
Trust preferred securities		101,033			4,756		6.15	%		101,033			4,731		6.18	%
Total interest-bearing liabilities	$	3,745,020			133,949		4.76	%	$	3,092,536			99,621		4.30	%
Non-Interest Bearing Deposits		294,980								259,094
Other Liabilities		29,636								44,411
Stockholders' Equity		301,804								238,818
Total Average Liabilities & Stockholders' Equity	$	4,371,440							$	3,634,859
Tax equivalent net interest income⁽³⁾				$	99,591							$	91,191
Net interest spread⁽⁴⁾							2.76	%							3.05	%
Effect of non interest bearing funds							0.43	%							0.44	%
Net interest margin⁽³⁾⁽⁵⁾							3.19	%							3.49	%

(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 September 30,
	2007		2006
Net interest income	$	32,288	$	30,040
Tax equivalent adjustment to net interest income		1,072		1,166
Net interest income, tax equivalent basis	$	33,360	$	31,206

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

	Nine months ended September 30,
	2007		2006
Net interest income	$	96,374	$	87,678
Tax equivalent adjustment to net interest income		3,217		3,513
Net interest income, tax equivalent basis	$	99,591	$	91,191

(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 September 30, 2007 Compared to Three Months Ended September 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	$	(18	)	$	134		$	27		$	143
Investment securities (taxable)		(494	)		150			(22	)		(366	)
Investment securities (non-taxable)⁽¹⁾		8			(311	)		3			(300	)
Loans, net of unearned discount		(1,053	)		13,162			(171	)		11,938
Total tax equivalent interest income⁽¹⁾		(1,557	)		13,135			(163	)		11,415
Interest-bearing deposits	$	1,409		$	5,608		$	290		$	7,307
Funds borrowed		(156	)		2,138			(30	)		1,952
Trust preferred securities		3			-			(1	)		2
Total interest expense		1,256			7,746			259			9,261
Net tax equivalent interest income⁽¹⁾	$	(2,813	)	$	5,389		$	(422	)	$	2,154
Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 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	$	(140	)	$	580		$	(106	)	$	334
Investment securities (taxable)		(1,020	)		(3,407	)		245			(4,182	)
Investment securities (non-taxable)⁽¹⁾		(6	)		(935	)		(2	)		(943	)
Loans, net of unearned discount		2,795			43,599			1,125			47,519
Total tax equivalent interest income⁽¹⁾		1,629			39,837			1,262			42,728
Interest-bearing deposits	$	10,177		$	16,983		$	2,090		$	29,250
Funds borrowed		650			3,862			541			5,053
Trust preferred securities		(22	)		-			47			25
Total interest expense		10,805			20,845			2,678			34,328
Net tax equivalent interest income⁽¹⁾	$	(9,176	)	$	18,992		$	(1,416	)	$	8,400

(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 September 30, 2007 and 2006, respectively. The total tax equivalent adjustment reflected in the above table was $3.2 million and $3.5 million for the nine months ended September 30, 2007 and 2006, respectively.

Provision for Loan Losses

For the three months ended September 30, 2007, the provision for loan losses was $2.4 million compared to $1.5 million for the prior period in 2006. Net charge-offs totaled $1.6 million, or 0.17% of average loans, for the quarter ended September 30, 2007 versus net charge-offs of $291,000, or 0.04% of average loans for the third quarter 2006. Due to the increased level of net charge-offs, a higher level of non-performing loans during the last two quarters, the expectation of modestly higher net charge-offs in the fourth quarter, and the Watch List at September 30, 2007, management determined that an increase in the provision over prior year quarter was appropriate. For the nine months ended September 30, 2007, the provision for loan losses was $6.8 million compared to $6.1 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 37.

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							Nine Months Ended
	September 30,							September 30,
	2007		2006		Variance			2007		2006			Variance
The PrivateWealth Group fee revenue	$	4,029	$	3,477		16	%	$	11,878	$	10,240			16	%
Mortgage banking income		1,157		804		44	%		3,700		2,532			46	%
Banking and other services		811		872		(7	)%		2,919		3,895			(25	)%
Bank owned life insurance		403		479		(16	)%		1,225		1,211			1	%
Net securities and interest rate swap gains (losses)		366		308		19	%		348		(309	)		213	%
Total non-interest income	$	6,766	$	5,940		14	%	$	20,070	$	17,569			14	%

Non-interest income was $6.8 million for the three months ended September 30, 2007 compared to $5.9 million for the prior year period, reflecting an increase of 14% due to an increase in The PrivateWealth Group fee revenue and mortgage banking income. The PrivateWealth Group fee revenue was $4.0 million for the three months ended September 30, 2007, an increase of 16% from $3.5 million from the prior year period. Securities gains of $1.2 million combined with a $904,000 loss on an interest rate swap positively affected the third quarter 2006 by $308,000, while $366,000 of securities gains positively affected the third quarter 2007.

Non-interest income for the nine months ended September 30, 2007 was $20.1 million compared to $17.6 million during the same period in 2006, reflecting an increase of $2.5 million, or 14%, due to an increase in The PrivateWealth Group fee revenue, mortgage banking income and net securities gains. The increase in The PrivateWealth Group 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. The PrivateWealth Group assets under management increased 18% to $3.3 billion at September 30, 2007 compared to $2.8 billion at September 30, 2006 and up $379.4 million from $2.9 billion at December 31, 2006.

Mortgage banking income for the third quarter 2007 was $1.2 million compared to $804,000 for the third quarter 2006 and was $3.7 million for the first nine months of 2007, an increase from $2.5 million compared to 2006. Mortgage banking income increased over these periods due to a higher volume of loans sold.

During the third quarter 2007, bank owned life insurance (BOLI) revenue decreased 16% compared to the prior year quarter and increased 1% compared to the first nine months of 2006 for the first nine months of 2007. 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 September 30, 2007 was $43.7 million, compared to $42.5 million at December 31, 2006, and is included in other assets on the balance sheet.

Banking and other services income decreased 7% during the third quarter 2006, compared to the third quarter 2007 and decreased 25% for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. The decrease during the first nine months of 2007 compared to the same period in 2006 was 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 services income for the nine months ended September 30, 2007 includes $646,000 of insurance proceeds the Company received during the second quarter 2007 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 services income for the nine months ended September 30, 2007 are $100,000 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							Nine Months Ended
	September 30,							September 30,
	2007		2006		Variance			2007		2006		Variance
	(in thousands)							(in thousands)
Salaries and employee benefits	$	13,083	$	10,864		20	%	$	39,546	$	31,725		25	%
Occupancy		3,336		2,639		26	%		9,286		7,022		32	%
Professional fees		2,109		1,866		13	%		5,434		4,837		12	%
Investment management fees		857		774		11	%		2,507		1,979		27	%
Marketing		1,058		1,159		(9	)%		3,676		3,154		17	%
Data processing		1,039		788		32	%		2,924		2,318		26	%
Postage, telephone and delivery		409		325		26	%		1,224		1,050		17	%
Office supplies and printing		221		285		(22	)%		722		656		10	%
Insurance		452		349		30	%		1,166		982		19	%
Amortization of intangibles		241		152		59	%		726		459		58	%
Other expense		1,119		810		38	%		3,388		2,321		46	%
Total non-interest expense	$	23,924	$	20,011		20	%	$	70,599	$	56,503		25	%

Non-interest expense was $20.0 million in the third quarter 2006 and $23.9 million in the third quarter 2007. During the third quarter 2007, total non-interest expense at The PrivateBank - Georgia was $1.7 million, and the total non-interest expense from The PrivateBank - Kansas City was $592,000. Excluding the impact of The PrivateBank - Georgia and costs associated with the start-up of The PrivateBank - Kansas City, non-interest expense increased 8% for the third quarter 2007 compared to the third quarter 2006. Non-interest expense was $70.6 million for the nine months ended September 30, 2007 compared to $56.5 million in the prior year period, an increase of 25% primarily due to increases in occupancy and salaries expense. Excluding the impact of The PrivateBank - Georgia and costs associated with the start-up of The PrivateBank - Kansas City, for the nine months ended September 30, 2007, non-interest expense increased 14% compared to the nine months ended September 30, 2006. 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 and upgrades to and the expansion of several of our banking offices, which are reflected in salaries and benefits expense and occupancy expense, respectively. Included in salaries and employee benefits expense for the nine months ended September 30, 2007 is $4.9 million of share based compensation expense versus $2.8 million in the prior year period.

We continue to nurture the future growth of the Company by investing in human capital. The number of managing directors increased to 168 at September 30, 2007, compared to 129 at September 30, 2006. The increase from prior year includes 11 managing directors from the acquisition of The PrivateBank - Georgia and four managing directors from the start-up of The PrivateBank - Kansas City. Full-time equivalent (FTE) employees increased 23% to 517 at the end of the third quarter 2007, from 421 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. As we continue to add additional managing directors and other senior executives in Chicago as well as our other offices, we expect our non-interest expense, specifically our compensation and benefits-related expense, to significantly increase in the near term.

The 26% increase in occupancy expense in the third quarter 2007 compared to the third quarter 2006 and the 32% increase in the first nine months of 2007 compared to the first nine months of 2006 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. Of $9.3 million in total occupancy expenses for the Company for the nine months ended September 30, 2007, The PrivateBank - Georgia contributed $662,000 and The PrivateBank - Kansas City contributed $133,000. The relocation and improvement of other offices impacted occupancy expense as well.

For the nine months ended September 30, 2007, investment management fees, which are fees paid to third party investment managers, increased 27% over the prior year period. This reflects the 18% increase in assets managed by The PrivateWealth Group and the restructuring of certain fee relationships. Investment management fees grew 11% during the third quarter 2007 compared to the third quarter 2006.

For the nine months ended September 30, 2007, marketing expenses increased 17% over the prior year period, reflecting an increase in marketing initiatives for client development, website upgrading and charitable contributions. 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 32% during the third quarter 2007 compared to the third quarter 2006 and 26% during the first nine months of 2007 compared to the first nine months of 2006 due to investments in technology Company-wide, processor conversion and expansion expenses and the addition of The PrivateBank - Georgia.

Professional fees, which include fees paid for legal, accounting, consulting, and information systems consulting services, increased 13% for the third quarter 2007 compared to the third quarter 2006 and 12% during the first nine months of 2007 compared to the first nine months of 2006 primarily due to increased legal, consulting and external audit fees due to the Company’s growth and strategic initiatives.

During the first nine months of 2007, the Company amortized $726,000 in intangible assets, including $127,000 related to our acquisition of a controlling interest in Lodestar, $319,000 related to our acquisition of The PrivateBank - Michigan, and $280,000 related to our acquisition of The PrivateBank - Georgia. The increase in amortization expense between the periods relates to the acquisition of The PrivateBank - Georgia in December, 2006.

The other expense category for the three months ended September 30, 2007 includes $141,000 of expenses paid relating to the resolution of OREO property. For the nine months ended September 30, 2007, expenses attributable to OREO were approximately $601,000. The other expense category also includes loan and collection expenses, which include fees relating to the workout of non-performing loans and other loan fees, and were $1.3 million for the nine months ended September 30, 2007 versus $1.1 million in the prior year period.

The efficiency ratio (on a tax-equivalent basis), which measures the percentage of revenue that is expended as non-interest expense, was 59.6% in the third quarter 2007, up from 53.9% in the prior year third quarter. On a tax-equivalent basis, this ratio indicates that in the third quarter 2007, we spent 59.6 cents to generate each dollar of revenue while in the third quarter 2006, we spent 53.9 cents. Our efficiency ratio for the nine months ended September 30, 2007 was 59.0% compared to the efficiency ratio of 52.0% for the nine months ended September 30, 2006. The increase in the efficiency ratio for the first nine months 2007 compared to the first nine months of 2006 was due to the combined effect of the 25% increase in the Company’s non-interest expenses and a lower net interest margin.

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 September 30, 2007 and 2006, we recorded $100,000 and $85,000 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 nine months ended September 30, 2007 and 2006, respectively (in thousands):

	Nine months ended September 30,
	2007			2006
Income before taxes	$	38,797		$	42,367
Income tax provision		11,845			13,572
Effective tax rate		30.5	%		32.0	%

The decrease in our effective tax rate is due to the effect of new tax legislation in Illinois and greater deductions than originally anticipated on our 2006 federal tax return filed in the third quarter. Income before taxes for the first nine months of 2007 decreased 8% over the same period in 2006. Our effective tax rate was 30.5% at September 30, 2007 versus 32.0% at September 30, 2006. 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. The new tax legislation means we will have a higher effective tax rate in the future and caused us to record a tax benefit to increase our net deferred tax asset. We anticipate our effective tax rate will increase modestly in the fourth quarter to be more consistent with the tax rate we have experienced in previous quarters.

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 (which includes The PrivateBank - Kansas City (in organization)), The PrivateBank - Michigan, The PrivateBank - Georgia, The PrivateBank - Wisconsin, The PrivateWealth Group, which includes Lodestar for segment reporting purposes, and the Holding Company. The PrivateBank Mortgage Company results are included in The PrivateBank - Chicago. Note 2 provides financial condition and results by segment on a period to period basis.

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 nine months ended September 30, 2007 increased 8% to $32.5 million from $30.2 million for the nine months ended September 30, 2006. The growth in net income for the period resulted from growth in net interest income and a lower provision level relative to the prior year period. Net interest income for The PrivateBank - Chicago for the nine months ended September 30, 2007 increased to $71.6 million from $67.9 million, or 5% primarily due to growth in earning assets. Improvements in net interest income for the nine months ended September 30, 2007 were offset by a 7% increase in operating expenses associated with continued growth of The PrivateBank - Chicago as compared to the same period in 2006.

Total gross loans for The PrivateBank - Chicago increased by 3% to $2.5 billion at September 30, 2007 as compared to $2.4 billion at December 31, 2006. The majority of the modest loan growth occurred in the commercial real estate and commercial loan categories. Commercial real estate loans grew by 7%, commercial loans grew by 3%, and residential real estate loans grew by 1% over year-end. Of secured commercial and residential real estate loans in Chicago at September 30, 2007, 83% were located in Illinois, 3% were located in Michigan and 3% were located in Missouri. Approximately 12% of commercial real estate loans were owner-occupied at September 30, 2007.

Total deposits decreased by 2% to $2.48 billion at September 30, 2007 from $2.53 billion at December 31, 2006. A small increase in demand and other time deposits was offset by a decrease in brokered deposits and money market deposits. Brokered deposits for The PrivateBank - Chicago decreased 18% to $422.2 million at September 30, 2007 compared to $512.8 million at year-end. Core deposits grew by 2% from December 31, 2006 to $2.1 billion at September 30, 2007.

The PrivateBank - St. Louis

For the nine months ended September 30, 2007, the financial results of The PrivateBank - St. Louis include a net loss of $935,000 for The PrivateBank - Kansas City (in organization). Excluding the results of The PrivateBank - Kansas City, net income for The PrivateBank - St. Louis was $1.7 million for the nine months ended September 30, 2007, compared to $3.2 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 19% increase in non interest expense and a 20% increase in the provision for loan losses, from $1.7 million in the prior year period to $2.0 million for the nine months ended September 30, 2007, due to a higher level of non-performing loans in the St. Louis market over the last few quarters.

The PrivateBank - Kansas City, which officially opened as a branch of The PrivateBank - St. Louis in March, 2007, incurred $1.5 million in operating expenses since its opening. 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 was completed during the third quarter 2007, and the operation had 14 full time employees at September 30, 2007.

Net interest income for The PrivateBank - St. Louis for the nine months ended September 30, 2007 decreased to $9.5 million from $10.6 million due to compression in net interest margin and the reversal of interest income on loans placed on non-accrual status. Total gross loans for The PrivateBank - St. Louis increased by 6%, or $22.0 million, to $372.7 million at September 30, 2007 as compared to $350.7 million at December 31, 2006 due to the inclusion of loans originated at The PrivateBank - Kansas City of $24.0 million. Since December 31, 2006, The PrivateBank - St. Louis experienced growth in the commercial real estate and personal loan categories. Of secured commercial and residential real estate loans in The PrivateBank - St. Louis portfolio, 87% were located in Missouri at September 30, 2007. Approximately 5% of commercial real estate loans were owner-occupied at September 30, 2007.

Deposits for The PrivateBank - St. Louis increased by $31.7 million, or 10%, to $343.5 million at September 30, 2007 from $311.8 million at December 31, 2006. The majority of the deposit growth at The PrivateBank - St. Louis was due to an increase in money market and other time deposits at September 30, 2007 as compared to year-end. Core deposits grew 10% to $287.0 million at September 30, 2007, from $260.4 at December 31, 2006. Included in these totals at September 30, 2007 are deposits located at The PrivateBank - Kansas City of $11.4 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 net income of $155,000 for the nine months ended September 30, 2007, compared to a net loss of $755,000 for the prior year period. Net interest income for the nine months ended September 30, 2007 was $2.7 million, compared to $935,000 for the nine months ended September 30, 2006. Total gross loans for The PrivateBank - Wisconsin increased to $103.6 million at September 30, 2007, compared to $62.8 million at December 31, 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, 70% were located in Wisconsin and 19% were located in Illinois at September 30, 2007. Approximately 6% of commercial real estate loans were owner-occupied at September 2007.

Deposits for The PrivateBank - Wisconsin increased by $14.2 million, or 14%, to $115.9 million at September 30, 2007 from $101.7 million at December 31, 2006. The majority of the deposit growth at The PrivateBank - Wisconsin was due to increased money market and other time deposits at September 30, 2007 as compared to year-end.

The PrivateBank - Michigan

Net income for The PrivateBank - Michigan was $3.5 million for the nine months ended September 30, 2007, compared to $4.0 million in the prior year period, primarily due to a higher provision for loan losses. Provision for loan losses was $2.1 million for the nine months ended September 30, 2007 compared to $620,000 in the prior year period. Net interest income for the nine months ended September 30, 2007 was $13.6 million, compared to $12.8 million for the nine months ended September 30, 2006. The PrivateBank - Michigan had gross loans of $550.5 million at September 30, 2007, up from $503.2 million at December 31, 2006. This 9% increase in loan growth was mainly due to an increase in commercial real estate and construction loans. Of secured commercial and residential real estate loans in The PrivateBank - Michigan portfolio, 95% were located in Michigan at September 30, 2007. Approximately 32% of commercial real estate loans were owner-occupied at September 30, 2007.

Total deposits at The PrivateBank - Michigan increased by $67.6 million to $485.7 million at September 30, 2007, an increase of 16% from December 31, 2006. All of the deposit growth was due to increases in other time deposits.

The PrivateBank - Georgia

The PrivateBank - Georgia was acquired on December 13, 2006. Net income for The PrivateBank - Georgia for the nine months ended September 30, 2007 was $1.7 million. Net interest income for the period was $7.8 million. Total loans at September 30, 2007 were $258.9 million, a 29% increase from $200.5 million in gross loans at year-end. Total deposits for The PrivateBank - Georgia were $233.2 million at September 30, 2007, a 15% increase from $202.8 million in deposits at year-end.

The PrivateWealth Group

The PrivateWealth Group includes investment management, personal trust and estate services, custodial services, retirement accounts and brokerage and investment services. The PrivateWealth Group’s assets under management increased by 18%, or $501.5 million, to $3.3 billion at September 30, 2007 as compared to $2.8 billion at September 30, 2006. This growth was due to the addition of new assets under management as well as portfolio performance. The PrivateWealth Group’s fee revenue increased to $11.9 million, or 16%, for the nine months ended September 30, 2007 compared to $10.2 million in the prior year period. Net income for The PrivateWealth Group decreased 7% to $1.2 million for the nine months ended September 30, 2007 from $1.3 million for the same period in 2006, mainly due to an increase in personnel and occupancy expenses attributable to The PrivateWealth Group’s operations initiated at The PrivateBank - Kansas City and new brokerage operations initiated at The PrivateBank - Chicago. Fees paid to third party investment managers were $2.5 million for the nine months ended September 30, 2007, compared to $2.0 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 segment reported a net loss of $12.4 million for the nine months ended September 30, 2007, compared to a net loss of $8.7 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 continued growth of the Company.

FINANCIAL CONDITION

Total Assets

Total assets increased to $4.5 billion at September 30, 2007, an increase of 5% from $4.3 billion at December 31, 2006. Asset growth from December 31, 2006 was due to loan growth of 7% during the period. Loan growth was funded primarily through marginal core deposit growth and a significant increase in other borrowings.

Loans

Total loans increased to $3.7 billion at September 30, 2007, an increase of approximately 7%, from $3.5 billion at December 31, 2006. Company-wide, the modest loan growth since December 31, 2006 has occurred primarily in the commercial real estate, commercial and personal categories.

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

	September 30, 2007		% loans to total loans			December 31, 2006		% loans to total loans			Variance between periods
Loans
Commercial real estate	$	1,684,406		45	%	$	1,539,038		44	%		9	%
CRE: Multi-family		184,093		5	%		212,863		6	%		(14	)%
Commercial		670,106		17	%		563,155		16	%		19	%
Residential real estate		260,427		7	%		262,107		8	%		(1	)%
Personal (1)		218,998		6	%		192,397		5	%		14	%
Home Equity		133,224		4	%		138,724		4	%		(4	)%
Construction		586,269		16	%		591,704		17	%		(1	)%
Total loans, net of unearned discount	$	3,737,523		100	%	$	3,499,988		100	%		7	%

(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 September 30, 2007.

																			Product
							Collateral Location												as a % of
Loan Type	IL			MO			MI			WI			GA			Other			total CRE
Construction:
Residential 1-4 Family		6.17	%		2.00	%		0.64	%		0.13	%		3.69	%		0.32	%		12.95	%
Multi-Family		1.54	%		0.35	%		0.02	%		0.06	%		0.00	%		0.06	%		2.03	%
Other		5.35	%		0.77	%		0.61	%		0.62	%		0.03	%		0.56	%		7.94	%
Total Construction		13.06	%		3.12	%		1.27	%		0.81	%		3.72	%		0.94	%		22.92	%

Commercial:
Vacant Land		11.69	%		1.83	%		2.36	%		0.41	%		0.68	%		1.68	%		18.65	%
Residential 1-4 Family		4.32	%		0.97	%		0.36	%		0.51	%		0.09	%		1.65	%		7.90	%
Multi-Family		5.49	%		0.68	%		0.57	%		0.36	%		0.14	%		0.08	%		7.32	%
Hotel		0.95	%		0.05	%		0.00	%		0.08	%		0.05	%		0.16	%		1.29	%
Mixed Use		2.97	%		1.58	%		2.11	%		0.35	%		2.34	%		0.35	%		9.70	%
Office		7.05	%		1.37	%		2.68	%		0.32	%		1.67	%		0.46	%		13.55	%
Restaurant		0.64	%		0.01	%		0.55	%		0.00	%		0.06	%		0.02	%		1.28	%
Warehouse		5.04	%		0.15	%		0.93	%		0.19	%		0.50	%		0.57	%		7.38	%
Farmland		0.57	%		0.01	%		0.17	%		0.05	%		0.00	%		0.60	%		1.40	%
Airport		0.00	%		0.00	%		0.01	%		0.00	%		0.00	%		0.00	%		0.01	%
Retail		4.26	%		0.28	%		2.60	%		0.04	%		0.67	%		0.75	%		8.60	%
Total Commercial Real Estate		42.98	%		6.93	%		12.34	%		2.31	%		6.20	%		6.32	%		77.08	%
Total Commercial Real Estate & Construction		56.04	%		10.05	%		13.61	%		3.12	%		9.92	%		7.26	%		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

Management’s application of the methodology for determining the allowance for loan losses resulted in an allowance for loan losses of $42.1 million at September 30, 2007 compared with $38.1 million at December 31, 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, a significant increase in non-performing loans 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 1.13% at September 30, 2007 compared to 1.09% at December 31, 2006. Net charge-offs totaled $2.7 million for the nine months ended September 30, 2007 versus net charge-offs of $824,000 in the prior year period. During the third quarter 2007, our net charge-offs to average total loans ratio increased to 0.17% compared to 0.06% in the second quarter 2007. The provision for loan losses was $6.8 million for the nine months ended September 30, 2007, versus $6.1 million in the prior year period. Following is a summary of changes in the allowance for loan losses for the nine months ended September 30, 2007 and 2006 (in thousands):


	2007			2006
Balance, January 1	$	38,069		$	29,388
Provisions charged to earnings		6,763			6,129
Loans charged-off, net of recoveries		(2,719	)		(824	)
Balance, September 30	$	42,113		$	34,693

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

	September 30, 2007					December 31, 2006
Allocation of the Allowance for Loan Losses	Amount		% of allowance to total allowance			Amount		% of allowance to total allowance
Allocated Inherent Reserve:	($ in thousands)
Commercial Real Estate Loans	$	20,743		49	%	$	19,570		50	%
Commercial Loans		6,871		16	%		5,984		16	%
Residential Loans		351		1	%		479		1	%
Personal Loans		1,900		5	%		1,877		5	%
Home Equity Loans		196		1	%		218		1	%
Construction Loans		8,523		20	%		7,509		20	%
Allocated Inherent Reserve		38,584		92	%		35,637		93	%
Specific Reserve		1,828		4	%		291		1	%
Unallocated Inherent Reserve		1,701		4	%		2,141		6	%
Total Allowance for Loan Losses	$	42,113		100	%	$	38,069		100	%

The Company considers 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 adjusts 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 in the credit-related markets. 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 $2.9 million during the first nine months of 2007, from $35.6 million at December 31, 2006 to $38.6 million at September 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 $4.3 million during the first nine months of 2007 to $1.8 million at September 30, 2007 after $2.7 million in net charge-offs during the period as a result of an increase in loans with significant impairments. 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 was $1.7 million at September 30, 2007, compared to $2.1 million at December 31, 2006, a decrease of $440,000.

Non-performing Assets

The following table classifies our non-performing assets as of the dates shown:

	9/30/07			6/30/07			3/31/07			12/31/06			9/30/06
	(dollars in thousands)
Nonaccrual loans	$	25,657		$	20,731		$	4,816		$	3,770		$	588
Loans past due 90 days or more		3,294			5,844			5,124			5,137			1,260
Total non-performing loans		28,951			26,575			9,940			8,907			1,848
Other real estate owned (“OREO”)		7,044			4,683			4,831			1,101			480
Total non-performing assets	$	35,995		$	31,258		$	14,771		$	10,008		$	2,328

Total nonaccrual loans to total loans		0.69	%		0.56	%		0.13	%		0.11	%		0.02	%
Total non-performing loans to total loans		0.77	%		0.72	%		0.28	%		0.25	%		0.06	%
Total non-performing assets to total assets		0.80	%		0.70	%		0.34	%		0.23	%		0.06	%

Non-performing 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 $25.7 million at September 30, 2007 as compared to $3.8 million at December 31, 2006. Nonaccrual loans at September 30, 2007 are comprised of $7.8 million of loans at The PrivateBank - Chicago, $7.1 million at The PrivateBank - St. Louis, $6.1 million at The PrivateBank - Georgia and $4.7 million at The PrivateBank - Michigan. The average annualized balance of nonaccrual loans was $10.5 million at September 30, 2007 compared to $1.3 million at September 30, 2006. Annualized interest income foregone on nonaccrual loans was approximately $810,000 for the nine months ended September 30, 2007 compared to $96,000 for the prior year period.

Accruing loans delinquent over 90 days were $3.3 million at September 30, 2007 compared to $5.1 million at December 31, 2006. Of the $29.0 million in non-performing loans, 45% are commercial real estate loans, 37% are construction loans, 9% are commercial and industrial loans, 5% are personal loans and the remaining 4% are residential real estate loans.

Of total non-performing assets at September 30, 2007, 29% are from Chicago, 28% are from St. Louis, 26% are from Michigan and 17% are from Georgia. The majority of non-performing assets are related to residential development lending. At September 30, 2007, the Company owned $7.0 million in OREO property compared to $1.1 million at December 31, 2006. The $7.0 million of OREO property at September 30, 2007 is comprised of $2.4 million of property at The PrivateBank - Michigan, $2.3 million at The PrivateBank - St. Louis and $2.3 million at The PrivateBank - Chicago. 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 September 30, 2007 we had a loss of $178,000 associated with the disposition of OREO property. At September 30, 2007, OREO was comprised of 23% vacant land zoned for residential development, 9% vacant land zoned for commercial development, 40% 1-4 residential properties, and 28% commercial properties.

We continue to closely monitor our level of non-performing assets; however, we expect our charge-off rate for the full year 2007 to increase to a modestly higher level given the substantial increase in non-performing loans.

Investment Securities

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

	September 30, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Investment Securities—Available for Sale
U. S. Agency Notes	$	6,965	$	18	$	--		$	6,983
U. S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations		270,605		1,102		(1,701	)		270,006
Tax-Exempt Municipal Securities		195,730		10,747		(11	)		206,466
Taxable Municipal Securities		3,810		1		--			3,811
Federal Home Loan Bank Stock		5,892		—		—			5,892
Other		4,788		2		--			4,790
	$	487,790	$	11,870	$	(1,712	)	$	497,948

	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 debt securities and equity investments. 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 September 30, 2007, reported stockholders’ equity reflected unrealized securities gains net of tax of $6.5 million. This represented an increase of $629,000 from unrealized securities gains net of tax of $5.9 million at December 31, 2006. As of September 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 September 30, 2007, we owned $497.9 million of available-for-sale securities, a $1.2 million increase from $496.8 million in securities at December 31, 2006. The increase is primarily due to additions in The PrivateBank - Chicago.

Deposits and Funds Borrowed

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

	September 30,					December 31,					Variance
	2007					2006					between
	Balance		% of Total			Balance		% of Total			periods
	(dollars in thousands)										periods
Non-interest bearing demand	$	285,003		8	%	$	300,689		8	%		(5	)%
Savings		11,856		1	%		13,977		1	%		(15	)%
Interest-bearing demand		134,428		4	%		152,323		4	%		(12	)%
Money market		1,566,074		44	%		1,561,103		44	%		—
Brokered deposits		500,296		14	%		589,321		17	%		(15	)%
Other time deposits		1,090,405		29	%		933,600		26	%		17	%
Total deposits	$	3,588,062		100	%	$	3,551,013		100	%		1	%

Total deposits of $3.59 billion at September 30, 2007 represent an increase of $37.0 million, as compared to total deposits of $3.55 billion at December 31, 2006. The slight increase in deposits during the period is due to an increase in other time deposit accounts. Core deposits, which represent total deposits less brokered deposits, were $3.1 billion at September 30, 2007, a 4% increase from $3.0 billion at December 31, 2006.

We continue to utilize brokered deposits as a source of funding for growth in the loan portfolio. Brokered deposits were $500.3 million at September 30, 2007, down from $589.3 million at December 31, 2006. Our brokered deposits to total deposits ratio was 14% at September 30, 2007 and 17% at 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 September 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 September 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 September 30, 2007

Maturity Date	Rate (1)			9/30/07
	(in thousands)
4th quarter 2007		5.26	%	$	173,184
1^st quarter 2008 ⁽²⁾		5.23	%		132,630
2^nd quarter 2008		5.38	%		18,361
Remainder 2008		6.63	%		31,369
2009 ⁽³⁾		4.78	%		46,248
2010-2011 ⁽⁴⁾		4.49	%		10,585
Thereafter ⁽⁵⁾⁽⁶⁾		5.20	%		89,323
Total Brokered Deposits					501,700
Unamortized prepaid broker commissions					(1,404	)
Total brokered deposits, net of unamortized prepaid broker commissions				$	500,296

(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 one callable deposit: a $4.9 million brokered deposit with a maturity date of 6/12/2009, which is callable monthly.

(4)	This tranche includes two callable deposits: a $1.6 million brokered deposit with a maturity date of 5/19/2010, which is callable quarterly.

(5)

This tranche includes several callable deposits: a $3.4 million brokered deposit with a maturity date of 11/19/2012 callable semi-annually; a $9.6 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 $9.8 million brokered deposit with a maturity date of 12/17/2014 callable monthly; a $6.8 million brokered deposit with a maturity of 1/28/2015 callable semi-annually; a $11.3 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 $7.7 million brokered deposit with a maturity date of 4/23/2024 callable monthly; and a $6.3 million brokered deposit with a maturity date of 6/30/2025, an original call date of 12/30/2005, and semi-annually thereafter.

(6)	This segment includes a zero coupon brokered deposit with a maturity date of 3/18/2024, an effective yield of 5.58% and callable semi-annually.

Funds borrowed, which include federal funds purchased, FHLB advances, borrowings under our credit facility, and convertible senior notes, increased 65% to $464.0 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 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. 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). The PrivateBank - Chicago withdrawal as a member of the FHLB (Chicago) was completed during the second quarter 2006. Therefore, The PrivateBank - Chicago is no longer able to borrow funds or participate in any of the other programs of the FHLB (Chicago); however, The PrivateBank - Wisconsin received membership approval to the FHLB (Chicago) in September 2007. At September 30, 2007 our FHLB borrowings consisted of $42.0 million from the FHLB (Indianapolis), $27.5 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 September 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.

Capital Resources

Stockholders’ equity was $318.4 million at September 30, 2007, an increase of $21.3 million from December 31, 2006 stockholders’ equity of $297.1 million, due primarily to net income of $27.0 million and an increase in treasury stock of $8.2 million as a result of the repurchase of approximately 233,000 shares by the Company of its stock during the first nine months of 2007.

At September 30, 2007, all of our $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 September 30, 2007 and December 31, 2006:

	September 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	$	312,917		$	217,317		$	95,600		$	287,889		$	191,691		$	96,198
Tier 1 risk-based capital		312,917			232,520			80,397			287,889			214,324			73,565
Total risk-based capital		410,947			387,534			23,413			369,903			357,207			12,696
Percentage basis:
Leverage ratio		7.20	%		5.00	%					7.51	%		5.00	%
Tier 1 risk-based capital ratio		8.07	%		6.00	%					8.06	%		6.00	%
Total risk-based capital ratio		10.60	%		10.00	%					10.36	%		10.00	%
Total equity to total assets		7.08	%								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 September 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 $32.6 million in the nine months ended September 30, 2007 compared to net cash provided by operations of $14.7 million in the prior year period. Net cash outflows from investing activities totaled $245.0 million in the first nine months of 2007 compared to a net cash outflow of $304.4 million in the prior year period primarily due to slower loan growth. Cash inflows from financing activities in the first nine months of 2007 totaled $208.0 million compared to a net inflow of $352.4 million in the first nine 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 14% of total deposits at September 30, 2007 and 17% of total deposits at December 31, 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 66% 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 September 30, 2007 and December 31, 2006:

	September 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	$	2,265,955		$	400,358		$	957,601		$	71,496		$	3,695,410
Investments		22,439			65,374			204,653			198,856			491,322
FHLB stock		5,892			—			—			—			5,892
Federal funds sold		2,086			—			—			—			2,086
Total interest-earning assets	$	2,296,372		$	465,732		$	1,162,254		$	270,352		$	4,194,710
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	—		$	—		$	—		$	134,428		$	134,428
Savings deposits		11,856			—			—			—			11,856
Money market deposits		1,566,074			—			—			—			1,566,074
Time deposits		513,785			458,206			118,223			191			1,090,405
Brokered deposits		171,780			181,667			59,811			87,038			500,296
Funds borrowed		220,519			31,500			247,785			65,250			565,054
Total interest-bearing liabilities	$	2,484,014		$	671,373		$	425,819		$	286,907		$	3,868,113
Cumulative
Rate sensitive assets (RSA)	$	2,296,372		$	2,762,104		$	3,924,358		$	4,194,710
Rate sensitive liabilities (RSL)		2,484,014			3,155,387			3,581,206			3,868,113
GAP (GAP=RSA-RSL)		(187,642	)		(393,283	)		343,152			326,597
RSA/RSL		92.45	%		87.54	%		109.58	%		108.44	%
RSA/Total assets		51.05	%		61.40	%		87.24	%		93.25	%
RSL/Total assets		55.22	%		70.15	%		79.61	%		85.99	%
GAP/Total assets		-4.17	%		-8.74	%		7.63	%		7.26	%
GAP/Total RSA		-4.47	%		-9.38	%		8.18	%		7.79	%

	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 September 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.

	September 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
	-4.3%	-2.0%	1.6%	3.0%	-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 September 30, 2007, net interest income would increase by 1.6% 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 September 30, 2007 would result in an increase in net interest income of 3.0% over a one-year period as compared to 4.1% measured on the basis of the December 31, 2006 portfolio. At September 30, 2007, if there had been an instantaneous parallel shift in the yield curve of -100 basis points, we would have suffered a decline in net interest income of 2.0%, as compared to a 3.5% decline measured on the basis of the December 31, 2006 portfolio. At September 30, 2007, if there had been an instantaneous parallel shift in the yield curve of -200 basis points, we would have suffered a decline in net interest income of 4.3%, 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 September 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 September 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, earnings, financial condition 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 and/or an increase in non-performing loans;

·	adverse developments in the Company’s loan or investment portfolios;

·	a significant increase in non-interest expense, specifically compensation and benefits-related expense, due to our strategic growth initiatives, including the recent and anticipated future hiring of additional Managing Directors and other senior officers;

·	unforeseen difficulties in integrating new hires;

·	our ability to implement our growth strategy, including slower than anticipated growth of the Company’s business, specifically its commercial and C&I lending, or unanticipated business declines;

·	failure to get regulatory approval for a de novo federal savings bank in Kansas City

·	unforeseen difficulties in the continued integration of The PrivateBank - Georgia or higher than expected operational costs;

·	competition;

·	failure to improve operating efficiencies through expense controls;

·	legislative or regulatory changes; and

l	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 September 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)
07/01/2007 - 07/31/2007	-	-	-	286,800
08/01/2007 - 08/31/2007	-	-	-	286,800
09/01/2007 - 09/30/2007	9,644 (1)	33.89	9,644 (1)	286,800
Total	9,644(1)	33.89	9,644 (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

None.

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.
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: November 2, 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.
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.

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PrivateBancorp (PVTB) Inactive 10-Q2007 Q4 Quarterly report

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