UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

 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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x                                                      Accelerated filer ¨                                           Non-accelerated filer ¨                                                            Smaller reporting company ¨

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

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

Class	Outstanding as of August 7, 2008
Common, no par value	33,336,297

EXPLANATORY NOTE

PRIVATEBANCORP, INC. IS FILING THIS AMENDMENT TO ITS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2008 (THE “INITIAL REPORT”) FILED ON AUGUST 11, 2008 SOLELY TO CORRECT AN INADVERTENT CLERICAL ERROR OF CERTAIN NUMBERS INCLUDED IN THE RATE/VOLUME TABLE IN THE “NET INTEREST INCOME” SECTION UNDER ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.  IN THE INITIAL REPORT, CERTAIN NUMBERS REFLECTED IN THE “JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES HELD BY TRUSTS THAT ISSUED GUARANTEED CAPITAL DEBT SECURITIES” LINE IN THE THREE MONTH ANALYSIS AND THE SIX MONTH ANALYSIS AND IN THE “FUNDS BORROWED” LINE IN THE SIX MONTH ANALYSIS WERE INCORRECT AND THEREFORE CERTAIN DATA IN THE “TOTAL INTEREST EXPENSE” AND “NET TAX EQUIVALENT INTEREST INCOME” LINE ITEMS WAS ALSO INCORRECT IN THE RATE VOLUME TABLE.  THIS FORM 10-Q/A SETS FORTH ITEM 2 IN ITS ENTIRETY; HOWEVER, THE ONLY MODIFICATION TO ITEM 2 IS THE CORRECTED RATE/VOLUME TABLE.  THIS FORM 10-Q/A DOES NOT REFLECT EVENTS OCCURRING AFTER THE FILING OF THE INITIAL REPORT OR MODIFY OR UPDATE ANY OTHER DISCLOSURES INCLUDED IN THE INITIAL REPORT.  ALL OTHER INFORMATION IN THE INITIAL REPORT NOT AFFECTED BY THE AMENDMENT IS UNCHANGED AND REFLECTS THE DISCLOSURES MADE AT THE TIME OF THE FILING OF THE INITIAL REPORT. ACCORDINGLY, THIS AMENDMENT SHOULD BE READ IN CONJUNCTION WITH THE INITIAL REPORT AND OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

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

Overview

PrivateBancorp, Inc. (“PrivateBancorp” or the “Company”), a Delaware corporation, is a growing diversified financial services company with 22 offices in nine states. Through its subsidiaries, PrivateBancorp delivers customized business and personal financial services to middle-market commercial and commercial real estate companies, as well as business owners, executives, entrepreneurs and wealthy families. Since its inception in 1989, The PrivateBank has expanded into multiple geographic markets in the Midwest and Southeastern United States through the creation of de novo banks and banking offices and the acquisition of existing banks.

In the fourth quarter of 2007, we announced the implementation of our Strategic Growth Plan (the “Plan”), designed to take advantage of the disruption in the Chicago middle-market commercial banking market and realize our vision to be the bank of choice for middle-market commercial and commercial real estate companies, as well as business owners, executives, entrepreneurs and wealthy families in all of our markets by providing a sophisticated suite of private banking, lending, treasury management, capital markets and wealth management services through a relationship-based business model.

Ongoing implementation of the Plan, including associated expenses for personnel and professional fees, an increase in our provision for loan losses, and expenses associated with the correction of a prior-period accounting error, contributed to a net loss for the second quarter 2008 of $13.3 million, or $0.48 per diluted share, compared to net income of $8.8 million, or $0.40 per diluted share, for the second quarter 2007.  Non-interest expense was $51.2 million in the second quarter 2008, compared with $42.9 million in the first quarter 2008, an increase of 19%, and $23.3 million in the second quarter 2007, an increase of 120%.  The increase from a year ago is reflective of significant increases in professional fees and deposit insurance during the quarter as well as the ongoing increased compensation and marketing expenses related to the investment in the Strategic Growth Plan. Salaries and benefits expense increased to $31.8 million in the second quarter from $27.7 million in the first quarter 2008, an increase of 15%, mainly due to an increase in stock-based compensation expense and the previously discussed accounting error, and grew $19.1 million, or 150%, over the second quarter 2007.  We hired 25 new Managing Directors in the second quarter, bringing the total number of MDs to 294.

We continue to see strong balance sheet and revenue growth through the execution of our Plan, as reflected in the following specific results:

·   Client deposits grew 33% from year-end 2007.

·   Loans grew 54% from year-end 2007.

·   Revenue grew 33% over prior year quarter and 17% over the first quarter 2008.

·   Completion of two successful capital-raising transactions – the issuance of $143.8 million of Trust Preferred Securities and a $166.1 million equity offering, net of underwriting commissions, increasing our total risk-based capital ratio to 13.5%.

The credit markets, however, remain challenging and the Company continues to make asset quality monitoring a key priority.  The allowance for loan losses as a percentage of total loans was 1.23% at June 30, 2008, compared to 1.21% at March 31, 2008 and 1.17% at December 31, 2007.  During the second quarter 2008, the provision for loan losses increased to $23.0 million compared to $3.0 million in the second quarter 2007. The increase is attributable to the substantial loan growth the Company continues to experience, as well as an increase in non-performing assets, current market conditions and loans charged off during the quarter. Non-performing assets to total assets were 0.98% at June 30, 2008, compared to 0.97% at December 31, 2007.  Net charge-offs totaled $6.0 million in the second quarter 2008, or an annualized rate of 0.42% of average total loans, compared with net charge-offs of $571,000, or an annualized rate of 0.06% of average total loans, in the prior year second quarter.  Year-to-date, charge-offs were primarily attributable to residential development loans.

Delinquencies (loans 30-89 days past due and still accruing) at June 30, 2008, improved to $30.1 million, or 0.47% of total loans, compared to $146.4 million in delinquencies, or 2.85% of total loans, at March 31, 2008, and $102.6 million, or 2.46% of total loans at December 31, 2007. This reduction in delinquencies as a percent of total loans is a direct result of a disciplined focus on actively reducing delinquent accounts.

Net interest income totaled $43.1 million in the second quarter 2008, compared to $36.3 million in the first quarter 2008, an increase of 19%, and $32.1 million for the second quarter 2007, an increase of 34%.  Net interest margin (on a tax equivalent basis) decreased to 2.75% for the second quarter 2008 compared to 2.88% for the first quarter 2008 and 3.19% for the second quarter 2007.  Net interest margin declined as a result of the substantial decrease in short-term rates in the first and second quarters. Further affecting the margin was the additional cost of funds incurred as a result of the $143.8 million trust preferred securities offering in May.

We are committed to differentiating our Company in the marketplace through the quality of our people, commitment to our clients, discipline around the quality of our portfolios, and our processes and the solid fundamentals that will support our growth.   Management is keenly focused on the key performance indicators of operating efficiency, revenue growth, deposit and loan growth, asset quality and capital in order to enhance stockholder value as we continue to execute our Plan.

For financial information regarding our business segments, which include Banking, The PrivateWealth Group and Holding Company Activities, see “Operating Segments Results” beginning on page 35 and “Note 2−Operating Segments” to our consolidated unaudited financial statements as of and for the three and six months ended June 30, 2008 included in this report.

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. Reference should also be made to our significant accounting policies set out in the notes to consolidated financial statements, beginning on page F-8 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.  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 consolidated financial statements.  Actual results could differ from those estimates.  Management has reviewed the application of these policies with the Audit Committee of the Company’s Board of Directors.

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

Allowance for Loan Losses

We maintain an allowance for loan losses at a level management believes is 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 based on a review of available and relevant information.  The allowance contains provisions for probable losses that have been identified relating to specific borrowing relationships as well as probable losses inherent in our loan portfolio.  During the second quarter 2008, we enhanced our allowance methodology and established a market-specific reserve model that includes the quantification of external and internal factors impacting different markets.  Our allowance for loan losses is assessed monthly to determine the appropriate level of the allowance. Our analysis is influenced by the following factors: assessment of the credit risk of the loans in the portfolio, impaired loans, evaluation of current economic conditions in the regional market areas, trends in asset quality, delinquent loans, actual charge-offs and recoveries during the period, industry loss averages, historical loss experience, loan portfolio concentrations and loan growth.  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.

Upon the determination of an appropriate allowance level, 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 uncollectable by management. We believe that the allowance for loan losses is adequate to provide for estimated probable credit losses inherent in our loan portfolio.

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 Statement of Financial Accounting Standards (SFAS) No. 142, which requires that goodwill and intangible assets that have indefinite lives be reviewed for impairment annually, or more frequently if certain indicators arise.   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 annual testing performed during 2007.  In the second quarter 2008, as a result of the substantial drop in many peer bank valuations and the general deterioration of market conditions affecting banks, the Company reevaluated its goodwill valuations and found that no events or circumstances occurred during the period that would more likely than not reduce the fair value of a reporting unit below its carrying value.  In the fourth quarter 2008, the Company will perform its annual goodwill impairment tests.

Goodwill was adjusted during the second quarter 2008 to correct an accounting error made in connection with the acquisition of Lodestar by The PrivateBank – Chicago in December 2002.  At the time of the acquisition, the Company did not properly record a liability and offsetting entries to goodwill and client relationship intangibles for the value of certain contractual "put" rights related to the minority interest owned by the principals of Lodestar.  As a result of the error, goodwill and client deposit intangibles were understated by $1.7 million and $514,000, respectively.

Identifiable intangibles consist of customer intangibles acquired through various acquisitions and are amortized over their estimated lives using amortization methods determined by management to represent the recovery of their value.  The estimates of the value upon acquisition, the useful life, and periodic assessment of impairment require significant judgment.  Note 2 - Operating Segments contains additional information regarding goodwill carrying values.

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 innately intricate 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 FOR THE THREE AND SIX MONTHS

 ENDED JUNE 30, 2008 AND 2007

The profitability of our operations depends on our net interest income, provision for loan losses, non-interest income, and non-interest expense. Net interest income is dependent on the amount of, and yields we are able to earn on, interest-earning assets, such as loans, as compared to the amount of, and rates we are required to pay on, interest-bearing liabilities, such as deposits. 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, including loan growth, management’s assessment of the collectability of the loan portfolio, historical loss experience, as well as economic and market factors.  Non-interest income consists primarily of fee revenue generated by The PrivateWealth Group, capital markets products income, treasury management income, mortgage banking income, earnings on bank-owned life insurance and fees for ancillary banking services.  Net securities gains/losses are also included in non-interest income.

Net Income

The Company reported a net loss for the second quarter 2008 of $13.3 million, or $0.48 per diluted share, compared to net income of $8.8 million, or $0.40 per diluted share, for the second quarter 2007. For the six months ended June 30, 2008 the Company reported a net loss of $22.2 million, or $0.82 per diluted share, compared to net income of $17.8 million, or $0.81 per diluted share, for the prior year period. The net loss was primarily attributed to expenses associated with the implementation of our previously announced Strategic Growth Plan, an increase in our provision for loan losses, and a charge associated with the correction of a prior-period accounting error.

Net Interest Income

Net interest income was $43.1 million for the three months ended June 30, 2008, compared to $32.1 million in the prior year quarter, an increase of 34%, primarily attributable to a significant increase in loan volume.  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.  Net interest income increased over the prior year period primarily due to a larger base of assets earning interest, which more than offset the net interest margin compression during the quarter. Average earning assets at June 30, 2008 were $6.4 billion compared to $4.1 billion at June 30, 2007, an increase of 55%.  Given the strong growth in earning assets during the second quarter 2008, we expect growth in net interest income will continue during the third quarter 2008.

Our net interest margin on a tax equivalent basis was 2.75% for the three months ended June 30, 2008 compared to 3.19% for the prior year quarter, a decrease of 44 basis points.  Earning assets yielded 5.81% in the second quarter 2008 compared to 7.53% in the second quarter 2007, a decrease of 172 basis points.  Our cost of funds was 3.44% during the second quarter 2008 compared to 4.77% during the second quarter 2007, a decrease of 133 basis points.  Non-interest bearing funds, which represent non-interest bearing sources of funds that are able to be deployed in interest bearing assets, positively impacted net interest margin by 0.38% for the three months ended June 30, 2008 compared to 0.43% in the prior year quarter.

A large portion of our funding is sensitive to movements in the federal funds rate through our prime rate of interest and in the short end of the LIBOR yield curve, as a large majority of our loan portfolio is effectively priced off the prime rate and LIBOR.  Our net interest margin declined during 2008 due to continued decreases in the prime and LIBOR rates of interest and loans repricing more quickly than deposits; over the twelve month period from June 30, 2007 to June 30, 2008, the prime rate decreased 325 basis points and average 3-month LIBOR decreased 257 basis points.  The cost of available funding sources used to support our loan growth further negatively impacted our margin in 2008; we issued $143.8 million of 10% trust preferred securities during the quarter and continued to rely on relatively more expensive brokered deposits as a funding source for a portion of our balance sheet growth.  If the Federal Reserve continues to lower rates, we expect additional pressure on our net interest margin.

Additionally, our net interest margin was negatively impacted by the increase in non-performing assets during the quarter, which grew to $73.1 million at June 30, 2008 from $65.9 million at March 31, 2008 and $48.3 million at December 31, 2007.  During the second quarter 2008, the Company reversed approximately $666,000 in accrued interest income due to loans which became non-performing.  The interest reversal during the quarter accounted for four basis points of margin compression.

Net interest income was $79.4 million for the six months ended June 30, 2008, compared to $64.1 million for the same period in 2007, an increase of 24%. Net interest margin on a tax equivalent basis was 2.80% for the six months ended June 30, 2008, compared to 3.23% in the prior year period, a decrease of 43 basis points.

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

	Three Months Ended June 30,
	2008								2007
	Average Balance(1)			Interest		Rate			Average Balance(1)			Interest		Rate
Fed funds sold and interest bearing deposits	$	22,221		$	207		2.74	%	$	14,670		$	239		5.15	%
Tax-exempt municipal securities		190,236			3,173		6.67	%		198,166			3,416		6.89	%
US Government Agencies, MBS and CMOs		415,797			5,176		4.98	%		265,139			3,428		5.17	%
Taxable municipal securities		3,816			75		7.91	%		3,810			72		7.53	%
FHLB stock		9,207			105		4.52	%		5,656			80		5.24	%
Other securities		11,279			100		3.55	%		4,148			14		1.92	%
Taxable securities and investments		440,099			5,456		4.96	%		278,753			3,594		5.16	%
Commercial and Industrial, Construction and Commercial Real Estate Loans		5,022,839			74,410		5.91	%		3,056,057			60,650		7.91	%
Residential Real Estate Loans		303,503			4,475		5.79	%		254,303			3,705		5.69	%
Private Client Loans		410,156			5,346		5.23	%		321,532			6,377		7.96	%
Total Loans(2)		5,736,498			84,231		5.85	%		3,631,892			70,732		7.76	%
Total earning assets	$	6,389,054		$	93,067		5.81	%	$	4,123,481		$	77,981		7.53	%
Allowance for Loan Losses		(69,492	)							(39,304	)
Cash and Due from Banks		59,550								68,293
Other Assets		312,571								234,505
Total Average Assets	$	6,691,683							$	4,386,975
Interest Bearing Demand accounts	$	170,134		$	425		1.00	%	$	147,590		$	437		1.19	%
Regular Savings Accounts		14,778			58		1.56	%		13,450			72		2.14	%
Money Market Accounts		1,927,357			11,245		2.33	%		1,469,677			16,595		4.52	%
Time Deposits		1,417,049			13,721		3.89	%		1,038,222			13,441		5.19	%
Brokered Deposits		1,543,714			16,229		4.22	%		597,618			7,796		5.23	%
Total Deposits		5,073,032			41,678		3.29	%		3,266,557			38,341		4.70	%
FHLB advances		162,654			1,561		3.84	%		92,981			1,081		4.65	%
Other borrowings		288,761			2,962		3.95	%		290,010			3,791		5.04	%
Junior Subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities		164,224			2,758		6.64	%		101,033			1,585		6.20	%
Total interest-bearing liabilities	$	5,688,671		$	48,959		3.44	%	$	3,750,581		$	44,798		4.77	%
Non-Interest Bearing Deposits		409,254								302,941
Other Liabilities		54,677								32,379
Stockholders' Equity		539,081								301,074
Total Average Liabilities & Stockholders' Equity	$	6,691,683							$	4,386,975
Tax equivalent net interest income(3)				$	44,108							$	33,183
Net interest spread(4)							2.37	%							2.76	%
Effect of non interest bearing funds							0.38	%							0.43	%
Net interest margin(3)(5)							2.75	%							3.19	%

	Six Months Ended June 30,
	2008								2007
	Average Balance(1)			Interest		Rate			Average Balance(1)			Interest		Rate
Fed funds sold and interest bearing deposits	$	23,313		$	453		3.07	%	$	19,423		$	477		4.25	%
Tax-exempt municipal securities		190,164			6,442		6.78	%		198,471			6,837		6.89	%
US Government Agencies, MBS and CMOs		366,870			9,178		5.00	%		267,602			6,810		5.09	%
Taxable municipal securities		3,803			146		7.73	%		3,810			142		7.53	%
FHLB stock		8,625			189		4.39	%		5,543			153		5.17	%
Other securities		12,091			229		3.78	%		3,982			78		2.00	%
Taxable securities and investments		391,389			9,742		4.98	%		280,937			7,183		5.08	%
Commercial and Industrial, Construction and Commercial Real Estate Loans		4,469,699			140,210		6.25	%		3,003,065			119,142		7.95	%
Residential Real Estate Loans		292,287			8,788		5.91	%		257,444			7,756		5.84	%
Private Client Loans		398,376			11,346		5.71	%		321,691			12,720		7.97	%
Total Loans(2)		5,160,362			160,344		6.19	%		3,582,200			139,618		7.80	%
Total earning assets	$	5,765,228			176,981		6.11	%	$	4,081,031		$	154,115		7.55	%
Allowance for Loan Losses		(59,261	)							(38,733	)
Cash and Due from Banks		69,693								62,928
Other Assets		289,084								229,474
Total Average Assets	$	6,064,744							$	4,334,700
Interest Bearing Demand accounts	$	161,328		$	847		1.05	%	$	143,720		$	1,033		1.17	%
Regular Savings Accounts		14,482			117		1.62	%		13,525			115		2.14	%
Money Market Accounts		1,755,234			24,407		2.78	%		1,504,360			33,614		4.53	%
Time Deposits		1,345,240			28,265		4.21	%		1,021,446			26,096		5.15	%
Brokered Deposits		1,274,713			28,043		4.41	%		575,263			14,918		5.23	%
Total Deposits		4,550,997			81,679		3.60	%		3,258,314			75,776		4.69	%
FHLB advances		151,554			1,595		4.07	%		92,484			2,162		4.62	%
Other borrowings		286,392			7,924		4.33	%		263,105			6,794		5.07	%
Junior Subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities		132,629			4,330		6.46	%		101,033			3,152		6.11	%
Total interest-bearing liabilities	$	5,121,572			95,528		3.72	%	$	3,714,936			87,884		4.75	%
Non-Interest Bearing Deposits		380,105								290,848
Other Liabilities		65,301								30,235
Stockholders' Equity		497,766								298,681
Total Average Liabilities & Stockholders' Equity	$	6,064,744							$	4,334,700
Tax equivalent net interest income(3)				$	81,453							$	66,231
Net interest spread(4)							2.39	%							2.80	%
Effect of non interest bearing funds							0.41	%							0.43	%
Net interest margin(3)(5)							2.80	%							3.23	%

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

(2)   Non-accrual loans are included in the average balances and the average annualized interest foregone on these loans was approximately $3.1 million for the quarter ended June 30, 2008 compared to approximately $990,000 in the prior year quarter.  The average annualized interest foregone on these loans was approximately $3.0 million for the six months ended June 30, 2008 compared to approximately $712,000 in the prior year period.

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

	Three months ended June 30,
	2008		2007
Net interest income	$	43,116	$	32,111
Tax equivalent adjustment to net interest income		992		1,072
Net interest income, tax equivalent basis	$	44,108	$	33,183

	Six months ended June 30,
	2008		2007
Net interest income	$	79,436	$	64,086
Tax equivalent adjustment to net interest income		2,017		2,145
Net interest income, tax equivalent basis	$	81,453	$	66,231

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

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

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

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
	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	$	(88	)	$	97		$	(41	)	$	(32	)
Investment securities (taxable)		(138	)		2,075			(75	)		1,862
Investment securities (non-taxable)(1)		(110	)		(136	)		3			(243	)
Loans, net of unearned discount		(17,231	)		40,703			(9,973	)		13,499
Total tax equivalent interest income(1)		(17,567	)		42,739			(10,086	)		15,086
Interest-bearing deposits		(11,494	)		21,177			(6,346	)		3,337
Funds borrowed		(987	)		843			(205	)		(349	)
Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities		111			977			85			1,173
Total interest expense		(12,370	)		22,997			(6,466	)		4,161
Net tax equivalent interest income(1)	$	(5,197	)	$	19,742		$	(3,620	)	$	10,925
Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
	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	$	(114	)	$	83		$	7		$	(24	)
Investment securities (taxable)		(144	)		2,798			(95	)		2,559
Investment securities (non-taxable)(1)		(113	)		(285	)		3			(395	)
Loans, net of unearned discount		(30,146	)		84,899			(34,027	)		20,726
Total tax equivalent interest income(1)		(30,517	)		87,495			(34,112	)		22,866
Interest-bearing deposits		(5,729	)		(69,454	)		81,086			5,903
Funds borrowed		(1,270	)		2,037			(204	)		563
Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities		174			963			41			1,178
Total interest expense		(6,825	)		(66,454	)		80,923			7,644
Net tax equivalent interest income(1)	$	(23,692	)	$	153,949		$	(115,035	)	$	15,222

(1)   Interest income on tax-advantaged investment securities reflects a tax equivalent adjustment based on a marginal federal corporate tax rate of 35% for 2008 and 2007.  The total tax equivalent adjustment reflected in the above table was $992,000 and $1.1 million for the three months ended June 30, 2008 and 2007, respectively. The total tax equivalent adjustment reflected in the above table was $2.0 million and $2.1 million for the six months ended June 30, 2008 and 2007, respectively.

Provision for Loan Losses

We provide for an adequate allowance for loan losses that are probable and reasonably estimable in the portfolio. The provision for loan losses reflects management’s assessment of the inherent losses in the loan portfolio. Our allowance for probable loan losses is reassessed monthly to determine the appropriate level of the reserve.  Our analysis is influenced by the following factors: assessment of the credit risk of the loans in the portfolio, impaired loans, evaluation of current economic conditions in the regional market areas, trends in asset quality, delinquent loans, actual charge-offs and recoveries during the period, industry loss averages, historical loss experience, loan portfolio concentrations and loan growth.  A discussion of the allowance for loan losses and the factors on which provisions are based begins on page 38.

During the second quarter 2008, the provision for loan losses increased to $23.0 million compared to $3.0 million in the second quarter 2007 due to the substantial loan growth the Company continues to experience, as well as an increase in non-performing assets, current market conditions, and loans charged off during the quarter. Net charge-offs for the three months ended June 30, 2008 were $6.0 million, or an annualized rate of 0.42% of average total loans, compared to charge-offs of $571,000, or an annualized rate of 0.06% of average total loans, for the comparable period in 2007. For the six months ended June 30, 2008, the provision for loan losses increased to $40.2 million compared to $4.4 million in the prior year period.

Non-interest Income

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

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2008		2007			Variance			2008		2007			Variance
The PrivateWealth Group fee revenue	$	4,350	$	4,024			8	%	$	8,769	$	7,850			12	%
Mortgage banking income		997		1,229			(19	)%		2,527		2,543			(1	)%
Banking and other services		1,119		1,251			(11	)%		1,866		1,812			3	%
Capital markets products income		1,959		--			--	%		2,349		--			--	%
Treasury management services		279		125			123	%		463		295			57	%
Bank owned life insurance		437		427			2	%		869		822			6	%
Securities gains (losses)		286		(97	)		395	%		1,100		(18	)		6,211	%
Total non-interest income	$	9,427	$	6,959			35	%	$	17,943	$	13,304			35	%

Non-interest income was $9.4 million for the three months ended June 30, 2008 compared to $7.0 million for the prior year period, reflecting an increase of 35%. Of the $2.5 million increase in non-interest income, approximately 85% was due to an increase in fee income generated on new products and services to clients, including capital markets products and treasury management services.  One of the goals of our Strategic Growth Plan is to diversify our non-interest income by generating new sources of fee income through the offering of new products and services.  Over the last three quarters, the Company has enhanced or introduced a variety of new products and services including capital markets products, lockbox, control disbursement, virtual vault, interest-rate swaps, and foreign exchange services.

Non-interest income was $17.9 million for the six months ended June 30, 2008, compared to $13.3 million for the prior year period, an increase of 35%. Of the $4.6 million increase in non-interest income, approximately 54% was due to increases in capital markets products and treasury management services. Approximately 24% of the increase in non-interest income for six months ending June 30, 2008 compared to the prior year period is due to securities gains.

The PrivateWealth Group fee revenue was $4.4 million for the three months ended June 30, 2008, an increase of 8% from $4.0 million in the prior year period.  The PrivateWealth Group fee revenue increased 12% to $8.8 million for the six months ended June 30, 2008, compared to $7.9 million for the first six months of the prior year. The PrivateWealth Group assets under management increased 6% to $3.3 billion at June 30, 2008 compared to $3.1 billion at June 30, 2007 and decreased 2% from $3.4 billion at December 31, 2007.  Volatility in the capital markets and a general market downturn in the 2008 period encumbered growth in assets under management and revenue.

Reflecting the slow residential mortgage market, mortgage banking fee income decreased 19% for the second quarter 2008 to $997,000, compared to $1.2 million for the second quarter 2007.  For the six months ended June 30, 2008 and June 30, 2007, mortgage banking income remained relatively unchanged at $2.5 million.

Banking and other services income decreased for the second quarter 2008 to $1.1 million from $1.3 million in the prior year quarter mainly because the second quarter 2007 included $646,000 of insurance proceeds the Company received during that quarter covering a portion of losses the Company incurred in the fourth quarter 2006 as a result of a previously disclosed employee fraud.  For the six months ended June 30, 2008, banking and other services income increased slightly to $1.9 million from the prior year period.

Capital markets product income was $2.0 million for the three months ended June 30, 2008. We launched the capital markets group late in the first quarter of 2008 to assist middle-market clients with hedging interest rates, foreign currency fluctuation and commodity pricing risks.  Capital markets product income for the six months ending June 30, 2008 was $2.3 million.

Treasury management services income increased 123% to $279,000 for the second quarter 2008 in comparison to $125,000 for the prior year quarter. For the six months ended June 30, 2008, treasury management services generated income of $463,000 in comparison to $295,000 in the prior year period.

During the second quarter 2008, bank owned life insurance (BOLI) revenue increased 2% compared to the prior year quarter.  Income recognized on this product includes policies covering certain higher-level employees who are deemed to be significant contributors to the Company. For the six months ended June 30, 2008, BOLI increased 6% in comparison to the prior year period. The cash surrender value of BOLI at June 30, 2008 was $45.0 million, compared to $44.2 million at December 31, 2007.

Securities gains were $286,000 for the three months ended June 30, 2008 compared to a loss of $97,000 in the prior year period. For the six months ended June 30, 2008, securities gains were $1.1 million compared to a loss of $18,000 in the prior year period. The increase from both prior year periods was due to gains realized in selective repositioning of the investment portfolio.  Please refer to Note 5 to the financial statements for additional information on our securities portfolio.

Non-interest Expense

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

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2008		2007		Variance			2008		2007		Variance
	(in thousands)							(in thousands)
Salaries and employee benefits	$	31,817	$	12,734		150	%	$	59,566	$	26,463		125	%
Occupancy		4,338		3,160		37	%		8,183		5,950		38	%
Professional fees		5,005		1,610		211	%		7,316		3,325		120	%
Investment manager expenses		812		868		(7	)%		1,780		1,650		8	%
Marketing		2,700		1,330		103	%		5,528		2,619		111	%
Data processing		1,168		984		19	%		2,388		1,885		27	%
Postage, telephone and delivery		546		412		32	%		1,087		815		33	%
Office supplies and printing		371		251		48	%		721		501		44	%
Amortization of intangibles		422		242		8	%		656		485		35	%
Insurance		1,627		363		348	%		2,497		714		250	%
Other expense		2,401		1,356		77	%		4,417		2,268		95	%
Total non-interest expense	$	51,207	$	23,310		120	%	$	94,139	$	46,675		102	%

Non-interest expense was $51.2 million in the second quarter 2008, compared with $42.9 million in the first quarter 2008, an increase of 19%, and $23.3 million in the second quarter 2007, an increase of 120%.  The increase from a year ago is reflective of significant increases in professional fees and deposit insurance as well as the ongoing increased compensation, marketing and occupancy expenses related to the investment in the Strategic Growth Plan. Non-interest expense for the six months ended June 30, 2008 was $94.1 million, an increase of 102% from $46.7 million for the same period in the prior year.

Salaries and benefits expense increased 150% to $31.8 million in the second quarter from $12.7 million in the second quarter 2007. The majority of the remaining increase in salaries and benefits expense is a result of the implementation of the Plan, including the hiring of 25 new managing directors, and an increase in the non-cash cost of options and restricted stock awards.  For the six months ended June 30, 2008, salaries and benefits expense increased 125% to $59.6 million compared to $26.5 million in the prior year period as we continue hire commercial bankers and other professionals to support the Plan.

The significant increase in salaries and benefit expenses in the 2008 periods over the 2007 periods is the result of the significant number of new employees the Company hired in implementing the Plan and the compensation used to recruit these individuals to join the Compay including base salary, sign-on bonuses, annual bonus opportunities and equity awards.  Full-time equivalent employees increased 42% to 712 at the end of the second quarter 2008, from 503 at the end of the second quarter 2007.   During the second quarter 2008, sign-on bonus payments to newly hired employees were $1.6 million compared to $3.7 million in the first quarter 2008 and $13.7 million in the fourth quarter 2007.

The transformation awards outstanding, which were granted by the Company from the time the Plan was announced and through June 30, 2008, had a value of approximately $81.5 million at June 30, 2008 compared to approximately $50.0 million at December 31, 2007.  The cost of these awards, based on their grant-date value, will be expensed over the five-year period ending December 31, 2012.  Compensation costs associated with these awards totaled $3.7 million for the second quarter 2008 compared to $2.2 million for the first quarter 2008. Total equity award expense, including transformation awards, was $6.7 million in the second quarter 2008, compared to $2.8 million in the first quarter 2008, and $2.0 million in the second quarter 2007. Approximately $1.3 million of the increase during the quarter is associated with expense recognized during the quarter to correct the Lodestar accounting error explained in Note 13 to the financial statements.  Non-interest expense in the second quarter of 2008 also includes the accrual of a pro rata portion of the Company’s current estimate of aggregate annual cash bonus incentive compensation for 2008 which may be awarded based on performance that the Company believes is indicative of the Company’s progress toward achieving long-term success under the Plan.  As the significant portion of our hiring and the granting of transformation equity grants related to the Plan is completed, we expect the pace of growth in salaries and benefits expense to moderate in the coming quarters.

Professional fees, which include fees paid for legal, accounting, information systems and other consulting services, increased 211% to $5.0 million for the second quarter 2008, from $1.6 million in the prior year quarter.  For the six months ended June 30, 2008, professional fees were $7.3 million compared to $3.3 million in the prior year period.  The increase is primarily due to higher legal and consulting fees to support various strategic initiatives including the rapid expansion of products and service offerings, hiring of key personnel and increased fees paid for external and internal audit services. The Company expects professional fees will be reduced in the third quarter 2008 as internal staff assumes more responsibility for matters previously outsourced.

For the three months ended June 30, 2008, marketing expenses increased 103% over the prior year period to $2.7 million. For the six months ended June 30, 2008, marketing expenses increased to $5.5 million compared to $2.6 million in the prior year period. The increase in marketing expense reflects an increase in marketing initiatives for client development pursuant to the Plan, website upgrading, charitable contributions and overall growth in the Company’s business development activities.

The 37% increase in occupancy expense in the second quarter 2008 compared to the second quarter 2007 is due to the expansion and improvement of several of our existing offices, leasing new office space and an increase in common area maintenance charges at our headquarters location. For the six months ended June 30 2008, occupancy expense increased to $8.2 million compared to $6.0 million in the prior year period. Since June 30, 2007, we have opened offices in Minneapolis, Cleveland, Des Moines and Denver as well as leased additional space in downtown Chicago.  During the second quarter 2008, we signed a definitive lease agreement to move our headquarters location to 120 S. LaSalle Street in Chicago during the first quarter 2009.  We will continue to maintain our offices at our current downtown Chicago location at 70 W. Madison.

Insurance expense increased 348% to $1.6 million for the three months ended June 30, 2008 from $363,000 in the prior year period. For the six months ended June 30, 2008, insurance expense increased 250% to $2.5 million from $714,000 in the prior year period. The increase in insurance expense is primarily due to an increase in FDIC insurance caused by increased rates and a substantial increase in deposit balances.

Data processing costs, which include fees paid for information technology services and support, increased 19% during the second quarter 2008 compared to the second quarter 2007 due to investments in technology Company-wide, the enhancements in document retention methods, support for facility relocations and upgrading. Data processing costs increased 27% for the six months ended June 30, 2008.

For the three months ended June 30, 2008, investment manager expenses, which are fees paid to third party investment managers decreased 7% over the prior year period. For the six months ended June 30, 2008, investment manager fees increased 8% over the prior year.

Approximately $822,000 and $1.6 million of the other expense category for the three and six months ended June 30, 2008, respectively, includes operating expenses and disposition costs related to the resolution of OREO property.

The efficiency ratio (on a tax-equivalent basis), which measures the percentage of revenue that is expended as non-interest expense, was 95.7% in the second quarter 2008, up from 58.1% in the prior year second quarter.  On a tax-equivalent basis, this ratio indicates that in the second quarter 2008, we spent 95.7 cents to generate each dollar of revenue while in the second quarter 2007 we spent 58.1 cents.

The Company is enhancing disciplines in its expense management and expects to gain increased operating leverage going forward as we continue to grow our revenue.  Excluding the accounting error adjustment in the second quarter 2008, we achieved a very modest amount of operating leverage in the second quarter.  Our goal is to achieve more substantial operating leverage in the coming quarters.

Minority Interest Expense

In April 2008, the Company amended its agreement with the principals of Lodestar and effectively reduced its controlling interest in Lodestar to 75.35% from 80%.  The Company granted a form of restricted stock of an approximately 5% controlling interest in Lodestar to one of the key principals of Lodestar in recognition of the principal’s contributions and the substantial amount of new business this principal has generated over the past few years.  The Company has made a loan to this principal to acquire the 5% interest.  Contingent on the continued employment of this principal, the Company will forgive the repayment of principal and interest on this loan over a four-year period.  For the quarters ended June 30, 2008 and 2007, we recorded $101,000 and $95,000 of minority interest expense, respectively.

Income Taxes

The following table shows the Company’s income before income taxes, applicable income taxes and effective tax rate for the six months ended June 30, 2008 and 2007, respectively (in thousands):

	Six months ended June 30,
	2008			2007
Income before taxes	$	(37,086	)	$	26,166
Income tax provision		(14,858	)		8,379
Effective tax rate		40.1	%		32.0	%

The effective income tax rate varies from statutory rates principally due to certain interest income that is tax-exempt for federal or state purposes, and certain expenses that are disallowed for tax purposes. The increase in the effective tax rate for 2008 compared to the same period in 2007 is a result of changes in the mix of certain items that are permanently excluded from the calculation of income tax and changes to tax laws in the state of Illinois.

Operating Segments Results

As described in Note 2 to the consolidated financial statements included herewith, our operations consist of three primary business segments: Banking; The PrivateWealth Group; and the Holding Company.  The PrivateBank Mortgage Company results are included with the Banking segment.

Banking

The profitability of the Banking segment is primarily dependent on net interest income, provision for loan losses, non-interest income and non-interest expense.  Net income for the Banking segment for the quarter ended June 30, 2008 decreased 126% to a net loss of $3.3 million from net income of $12.8 million for the year earlier period.  For the six months ended June 30, 2008, the Banking segment reported a net loss of $6.4 million, compared to net income of $25.8 million in the prior year period.  The decrease in net income for the Banking segment resulted primarily from expenses associated with the implementation of our Strategic Growth Plan, including significant compensation-related expense and other non-interest expenses as well as higher provision for loan losses. Net interest income for the Banking segment for the quarter ended June 30, 2008 increased to $48.2 million from $35.7 million in the prior year period.  Total loans for the Banking segment increased by 54% to $6.4 billion at June 30, 2008 as compared to $4.2 billion at December 31, 2007.  The majority of the loan growth for the period occurred in the commercial and commercial real estate categories, which grew by 177% and 36%, respectively. Total deposits increased by 61% to $6.4 billion at June 30, 2008 from $4.0 billion at December 31, 2007.  Growth in other time deposits, interest bearing demand deposits and money market accounts accounted for the majority of the client deposit growth.  CDARs™ deposits, which are included in brokered deposits and is a deposit services arrangement that achieves FDIC deposit insurance for jumbo deposit relationships, increased by $380.4 million from December 31, 2007.

The PrivateWealth Group

The PrivateWealth Group fee revenue was $4.4 million for the three months ended June 30, 2008, an increase of 8% from $4.0 million from the prior year period.  The PrivateWealth Group fee revenue increased 12% to $8.8 million for the six months ended June 30, 2008, compared to $7.9 million for the first six months of the prior year. The PrivateWealth Group assets under management, which include assets under management, assets supervised and assets in accounts receiving services or products from LPL, increased 6% to $3.3 billion at June 30, 2008 compared to $3.1 billion at June 30, 2007 and decreased 2% from $3.4 million at December 31, 2007.

For a number of our wealth management relationships, we utilize third-party investment managers and these fees are included in investment manager expenses.  Investment manager expenses decreased to $812,000 for the three months ended June 30, 2008, compared to $868,000 for same period in 2007.  Of our third-party investment managers, none individually managed more than 5% of total wealth management assets under management as of June 30, 2008.

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 (which includes The PrivateBank – Kansas City), 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 $10.1 million for the quarter ended June 30, 2008, compared to a net loss of $4.3 million for the same period in 2007.  For the six months ended June 30, 2008, the Holding Company segment reported a net loss of $16.1 million, compared to a net loss of $8.4 million for the same period in 2007.  The increase in net loss year over year is primarily due to an increase in non-interest expenses, primarily related to compensation expense associated with share-based payment expense, professional fees and marketing expenses.

FINANCIAL CONDITION

Total Assets

Total assets increased to $7.5 billion at June 30, 2008, an increase of 50% from $5.0 billion at December 31, 2007.  Asset growth from December 31, 2007 was due to loan growth of 54% during the period.  Loan growth was funded primarily with brokered deposits and secondarily by client deposits, which grew 33% from December 31, 2007.

Loans

Total gross loans increased to $6.4 billion at June 30, 2008, an increase of approximately 54%, from $4.2 billion at December 31, 2007.  Company-wide, the loan growth since December 31, 2007 has occurred in all categories, but primarily in the commercial and commercial real estate categories.  Our Strategic Growth Plan is driving our loan growth and our loan pipeline remains strong. Accordingly, we anticipate approximately $1.0 billion in loan growth per quarter for the next two quarters.

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

	June 30, 2008		Percentage of total loans			December 31, 2007		Percentage of total loans			Variance between periods
Commercial and industrial	$	2,292,960		35	%	$	827,837		20	%		177	%
Owner occupied CRE		451,455		7	%		483,920		12	%		(7	)%
Total commercial	$	2,744,415		42	%	$	1,311,757		32	%		109	%
Commercial real estate		1,838,301		29	%		1,386,275		33	%		33	%
Commercial real estate - multi-family		349,220		5	%		217,884		5	%		60	%
Total CRE	$	2,187,521		34	%	$	1,604,159		38	%		36	%
Construction		705,503		11	%		613,468		15	%		15	%
Private client (1)		296,458		5	%		247,462		6	%		20	%
Residential real estate		318,358		5	%		265,466		6	%		20	%
Home equity		164,771		3	%		135,483		3	%		22	%
Total loans	$	6,417,026		100	%	$	4,177,795		100	%		54	%

(1)   Includes personal, auto, watercraft, and overdraft lines of credit.

The following table sets forth the composition of our construction and commercial real estate loan portfolio, net of unearned discount, by property type and collateral location at June 30, 2008 and December 31, 2007.  Construction loans totaled $705.5 million and commercial real estate loans totaled $2.2 billion at June 30, 2008.

	Collateral Location at June 30, 2008																		Loan Type
Loan Type	IL			MO			MI			WI			GA			Other			as a % of total
Construction:
Residential 1-4 Family		4.5	%		1.0	%		0.6	%		0.1	%		2.4	%		0.3	%		8.9	%
Multi-Family		0.6	%		0.4	%		0.0	%		0.0	%		0.0	%		0.1	%		1.1	%
Other		6.0	%		1.0	%		0.6	%		0.6	%		0.4	%		2.8	%		11.4	%
Total Construction		11.1	%		2.4	%		1.2	%		0.7	%		2.8	%		3.2	%		21.4	%
Commercial Real Estate:
Health Care		4.2	%		0.0	%		0.0	%		0.0	%		0.0	%		6.3	%		10.5	%
Land Development		9.8	%		1.4	%		0.4	%		0.5	%		0.2	%		3.0	%		15.3	%
Residential 1-4 Family		3.0	%		0.6	%		0.6	%		0.4	%		0.0	%		2.0	%		6.6	%
Multi-Family		5.8	%		1.3	%		0.5	%		0.3	%		1.1	%		1.2	%		10.2	%
Office		5.2	%		2.2	%		1.1	%		0.5	%		1.1	%		1.9	%		12.0	%
Warehouse		4.0	%		0.2	%		1.5	%		0.0	%		0.5	%		0.9	%		7.1	%
Mixed Use		2.6	%		0.8	%		0.4	%		0.1	%		0.0	%		0.2	%		4.0	%
Retail		3.1	%		0.3	%		2.8	%		0.2	%		0.7	%		1.9	%		9.0	%
Other		1.9	%		0.0	%		0.6	%		0.0	%		0.4	%		0.9	%		3.9	%
Total Commercial Real Estate		39.6	%		6.8	%		7.9	%		2.0	%		4.0	%		18.3	%		78.6	%
Total Construction and Commercial Real Estate		50.7	%		9.2	%		9.1	%		2.7	%		6.8	%		21.5	%		100.0	%

	Collateral Location at December 31, 2007																		Loan Type
Loan Type	IL			MO			MI			WI			GA			Other			as a % of total
Construction:
Residential 1-4 Family		7.0	%		1.9	%		0.5	%		0.2	%		3.0	%		0.4	%		13.0	%
Multi-Family		1.6	%		0.2	%		0.2	%		0.1	%		0.0	%		0.1	%		2.2	%
Other		6.6	%		0.9	%		0.4	%		1.1	%		0.0	%		1.5	%		10.5	%
Total Construction		15.2	%		3.0	%		1.1	%		1.4	%		3.0	%		2.0	%		25.7	%
Commercial Real Estate:
Vacant Land		14.0	%		2.1	%		2.9	%		0.5	%		1.7	%		1.6	%		22.8	%
Residential 1-4 Family		4.4	%		0.9	%		0.0	%		0.4	%		0.0	%		1.4	%		7.1	%
Multi-Family		7.6	%		0.7	%		0.6	%		0.4	%		0.2	%		0.1	%		9.6	%
Mixed Use		2.6	%		1.1	%		1.1	%		0.1	%		1.1	%		0.2	%		6.2	%
Office		4.5	%		1.1	%		1.9	%		0.4	%		0.9	%		1.0	%		9.8	%
Warehouse		5.4	%		0.1	%		0.7	%		0.2	%		0.5	%		0.7	%		7.6	%
Retail		3.1	%		0.2	%		2.2	%		0.4	%		0.6	%		0.6	%		7.1	%
Other		2.2	%		0.1	%		0.5	%		0.0	%		0.4	%		0.9	%		4.1	%
Total Commercial Real Estate		43.8	%		6.3	%		9.9	%		2.4	%		5.4	%		6.5	%		74.3	%
Total Construction and Commercial Real Estate		59.0	%		9.3	%		11.0	%		3.8	%		8.4	%		8.5	%		100.0	%

We are closely monitoring exposure and sector performance of loans extended to finance residential development; either land developed for home sites or homes available for sale.  This sector performance has weakened from prior periods and is expected to remain weak into 2009, which has caused us to initiate a specific review process followed on all subject residential development loans.  On a monthly basis, a specific review is held with the assigned relationship team to update activity regarding residential developments financed.  We analyze and monitor sale activity, payment status, underlying valuation support and guarantor support (if available).  From this review process, risk ratings and loan classifications are validated.

Approximately $501.0 million, or 8%, of the Company’s total loan portfolio is in the residential development sector.  The sector exposure is nearly evenly split between land development and vertical constructions (homes, condominiums and townhouses).  Approximately 60% of these loans are on property located in the Chicago market, 18% in the Atlanta market, 11% in the St. Louis market, 10% in the Michigan market and 1% in the Milwaukee market.  A portion of our residential development loan exposure is supported with interest reserves, which are closely monitored for adequacy.  Where loans do not have an interest reserve or where the interest reserve is, or is about to be fully absorbed, the supplementary source of cash flow to support required payments is closely analyzed through our monthly reviews.

Allowance for Loan Losses

Loan quality is monitored by management and reviewed by the Board of Directors.  The amount of 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 an assessment of the credit risk of the loans in the portfolio, impaired loans, evaluation of current economic conditions in the regional market areas, trends in asset quality, delinquent loans, actual charge-offs and recoveries during the period, industry loss averages, historical loss experience, loan portfolio concentrations, and loan growth.  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.

During the second quarter 2008, the Company enhanced its allowance methodology.  Our previous methodology, adopted in the second quarter 2005, provided a loan loss reserve calculation based on each of the market area’s loan portfolios by loan type and by risk rating multiplied by the sum of historical loss and loss adjustment factors (i.e. reserve factors), specific reserves set aside for impaired loans to comprise an allocated reserve amount and the application of an unallocated percentage in recognition that there are other factors affecting the determination of probable losses inherent in the portfolio that are not necessarily captured in the allocation portion of the reserve.  At the market area level, the loan loss reserve calculations reflected differences between the market areas as a result of the composition and risk rating profile of each market area’s loan portfolio along with variance in the unallocated percentage.   The total of the historical loss and loss adjustment factors or reserve factors, however, were the same for all the market areas.

Beginning with the second quarter 2008, we enhanced the existing methodology with the institution of a market area specific reserve model that includes the quantification of external and internal factors impacting each one of our different market areas.  External factors include the national and regional economic, political and legal environment quantified by unemployment percentage, changes in housing starts, personal bankruptcy filings, non-farm job growth and mortgage delinquencies.  Internal factors include aggregate loan portfolio asset quality measures not directly reflected in individual loan risk ratings such as the weighted average risk rating and OREO percentage, the relative success of credit administration efforts measured by past due loan percentages, external loan review and bank examination results and internal asset quality review results as well as other factors including loan portfolio diversification, loan growth and staffing changes.

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.  The allowance contains provisions for probable losses that have been identified relating to specific borrowing relationships, as well as probable losses inherent in the loan portfolio.  Management’s application of the methodology for determining the allowance for loan losses resulted in an allowance for loan losses of $79.0 million at June 30, 2008 compared with $62.0 million at March 31, 2008 and $48.9 million at December 31, 2007.  The increase in the allowance for loan losses from December 31, 2007 reflects management’s judgment about the comprehensive risk of lending in our various markets and loan growth resulting from the execution of our Strategic Growth Plan.  We believe that the allowance for loan losses is adequate to provide for probable and reasonably estimable credit losses inherent in our loan portfolio.

The allowance for loan losses as a percentage of total loans was 1.23% at June 30, 2008, up from 1.17% at December 31, 2007.  Net charge-offs totaled $6.0 million for the quarter ended June 30, 2008 compared to $571,000 for the prior year quarter.  The provision for loan losses was $23.0 million for the three months ended June 30, 2008, versus $3.0 million in the prior year quarter.  The key factors in determining the level of provision is the composition of the types of loans in our portfolio, the risk ratings on these loans and internal and external trends impacting loan quality.

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

	June 30, 2008					December 31, 2007
Allocation of the Allowance for Loan Losses	Amount		% of allowance to total allowance			Amount		% of allowance to total allowance
Allocated Inherent Reserve:	(dollars in thousands)
General Inherent Allocated Component
Commercial Loans	$	26,809		34	%	$	8,375		17	%
Commercial Real Estate Loans		26,676		34	%		22,909		47	%
Construction Loans		15,792		20	%		9,966		20	%
Personal Loans		2,863		4	%		2,229		5	%
Residential Real Estate Loans		542		1	%		360		1	%
Home Equity Loans		273		--	%		202		--	%
Specific Reserve		1,680		2	%		2,964		6	%
Total Allocated Inherent Reserve		74,635		95	%		47,005		96	%
Unallocated Inherent Reserve		4,386		5	%		1,886		4	%
Total Allowance for Loan Losses	$	79,021		100	%	$	48,891		100	%

We considered various qualitative and quantitative factors about 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 Component of the Reserve

General Inherent Component of the Reserve

The general inherent allocated portion of the allowance for loan losses is based on loan type and allocated by loan risk within each loan type.  The Company assigns each of its loans a risk rating at the time of loan origination and either confirms or changes the risk rating at the time of subsequent reviews, loan renewals or upon default.  The loss allocations are based on a combination of a historical analysis of the Company’s losses and adjustment factors deemed relevant by management.  The adjustment factors also take into account banking industry-wide loss statistics.  Beginning with the second quarter 2008, the Company enhanced its existing methodology by instituting a market area specific reserve model that includes the quantification of external and internal factors impacting our various market areas.  External factors include the national and regional economic, political and legal environment quantified by unemployment percentage, changes in housing starts, personal bankruptcy filings, non-farm job growth and mortgage delinquencies.  Internal factors include aggregate loan portfolio asset quality measures not directly reflected in individual loan risk ratings such as the weighted average risk rating and OREO percentage, the relative success of credit administration efforts measured by past due loan percentages, external loan review and bank examination results and internal asset quality review results as well as other factors including loan portfolio diversification, loan growth and staffing changes.

The general inherent allocated component of the reserve increased by $29.0 million during 2008, from $44.0 million at December 31, 2007 to $73.0 million at June 30, 2008.  The increase in the general inherent allocated portion of the reserve reflects a combination of higher loan volumes in every category, particularly commercial loans, as well as an increase in adversely rated loans.

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.” At June 30, 2008, the specific component of the reserve decreased to $1.7 million from $3.0 million at December 31, 2007.

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.

The unallocated inherent component of the reserve increased by $2.5 million for the first six months of 2008, from $1.9 million at December 31, 2007, to $4.4 million at June 30, 2008.  In management’s judgment, an increase in the unallocated inherent component of the reserve is warranted based upon weakening asset quality trends and continued softness evidenced in certain regional banking markets.

Non-performing Assets

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

	6/30/08			3/31/08			12/31/07			9/30/07			6/30/07
	(dollars in thousands)
Nonaccrual loans	$	57,348		$	46,517		$	38,983		$	25,657		$	20,731
Loans past due 90 days or more and still accruing		1,180			23			53			3,294			5,844
Total non-performing loans		58,528			46,540			39,036			28,951			26,575
Other real estate owned (“OREO”)		14,579			19,346			9,265			7,044			4,683
Total non-performing assets	$	73,107		$	65,886		$	48,301		$	35,995		$	31,258
Total nonaccrual loans to total loans		0.89	%		0.91	%		0.93	%		0.69	%		0.56	%
Total non-performing loans to total loans		0.91	%		0.91	%		0.93	%		0.77	%		0.72	%
Total non-performing assets to total assets		0.98	%		1.10	%		0.97	%		0.80	%		0.70	%

Non-performing loans include nonaccrual loans and accruing loans that 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 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.

As a result of the continued weakening of the housing market and the deterioration of some residential real estate development loans, non-accrual loans were $57.3 million at June 30, 2008 as compared to $39.0 million at December 31, 2007 and $20.7 million at June 30, 2007.  Nonaccrual loans at June 30, 2008 are comprised of $21.9 million of loans at The PrivateBank – Chicago, $15.3 million of loans at The PrivateBank – Michigan, $13.5 million of loans at The PrivateBank – Georgia, and $6.6 million of loans at The PrivateBank – St. Louis.  The average annualized balance of total non-accrual loans was $48.2 million at June 30, 2008 compared to $18.7 million at December 31, 2007.  Annualized interest income foregone on non-accrual loans was approximately $3.0 million for the six months ended June 30, 2008 compared to $1.4 million for the entire year 2007.

Accruing loans delinquent over 90 days were $1.2 million at June 30, 2008 compared to $53,000 at December 31, 2007. Of the $58.5 million in non-performing loans, 38% are construction, 35% are commercial real estate loans, 20% are commercial and industrial loans, 4% are residential real estate loans, and the remaining 3% are personal loans.

Non-performing assets to total assets were 0.98% at June 30, 2008, compared to 0.97% at December 31, 2007 and 0.70% at June 30, 2007.  Of $73.1 million in total non-performing assets at June 30, 2008, 33% are located in the Chicago market, 27% are located in the Georgia market, 24% are located in the Michigan market, and 16% are in St. Louis.  Of total non-performing assets, 43% are construction, 36% are commercial real estate, 15% are commercial, and the remaining 6% are classified as residential real estate and personal.  Of the $73.1 million in non-performing assets at June 30, 2008, $49.1 million, or 67%, relate to residential development loans.

At June 30, 2008, the Company owned $14.6 million in OREO property compared to $9.3 million at December 31, 2007.  The OREO property at June 30, 2008 is comprised of $6.2 million of property held by The PrivateBank – Georgia, $4.7 million of property held by The PrivateBank – St. Louis, $2.4 million held by The PrivateBank – Chicago, and $1.3 million held by The PrivateBank – Michigan.   At June 30, 2008, 51% of OREO was comprisedof 1-4 family residential properties, 19% vacant land zoned for residential development, 18% multi-family and mixed use properties, 8% commercial properties, and the remaining 4% was vacant land zoned for commercial development.  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.  For the quarter ended June 30, 2008, we expensed $822,000 associated with the disposition of OREO property.

Delinquent Loans

We monitor the performance of our loan portfolio through regular contact with our clients, continuous portfolio review and careful monitoring of delinquency reports and internal watch lists.  As the delinquent status of a loan may determine its risk rating, the allowance for loan losses may be directly affected by loans that are performing despite past-due status.  The following table classifies our performing delinquent loans as of the dates shown:

	6/30/2008		3/31/2008		12/31/2007		9/30/2007		6/30/2007
	(dollars in thousands)
Loans past due 30-59 days and still accruing by type:
Commercial	$	5,196	$	34,022	$	8,981	$	2,770	$	2,306
Construction		5,136		26,304		32,411		9,227		8,368
Commercial Real Estate		6,083		39,802		29,590		18,967		8,599
Residential Real Estate		1,013		4,195		9,158		1,506		279
Personal and Home Equity		5,842		11,599		7,182		2,646		3,509
Total	$	23,270	$	115,922	$	87,322	$	35,116	$	23,061
Loans past due 60-89 days and still accruing by type:
Commercial	$	787	$	6,718	$	2,189	$	609	$	4,968
Construction		1,926		9,434		5996		2,991		--
Commercial Real Estate		2,199		7,463		4,776		2,266		2,810
Residential Real Estate		108		1,661		273		1,327		8
Personal and Home Equity		1,789		5,188		2,042		602		286
Total	$	6,809	$	30,464	$	15,276	$	7,795	$	8,072

	6/30/2008			3/31/2008			1 2/31/2007			9/30/2007			6/30/2007
	(dollars in thousands)
Loans past due 30-89 days and still accruing by type:
Commercial	$	5,983		$	40,740		$	11,170		$	3,379		$	7,274
Construction		7,062			35,738			38,407			12,218			8,368
Commercial Real Estate		8,282			47,265			34,366			21,233			11,409
Residential Real Estate		1,121			5,856			9,431			2,833			287
Personal and Home Equity		7,631			16,787			9,224			3,248			3,795
Total	$	30,079		$	146,386		$	102,598		$	42,911		$	31,133
Loans past due 30-89 days and still accruing by type:
Commercial		0.22	%		2.20	%		0.85	%		0.32	%		0.75	%
Construction		1.00	%		5.75	%		6.26	%		2.08	%		1.35	%
Commercial Real Estate		0.38	%		2.40	%		2.14	%		1.42	%		0.74	%
Residential Real Estate		0.35	%		2.07	%		3.55	%		1.09	%		0.12	%
Personal and Home Equity		1.65	%		4.05	%		2.41	%		0.92	%		1.14	%
Total		0.47	%		2.85	%		2.46	%		1.15	%		0.84	%

Delinquencies (loans 30-89 days past due and still accruing) at June 30, 2008, improved to $30.1 million, or 0.47% of total loans, compared to $31.1 million in delinquencies, or 0.84% of total loans, at June 30, 2007, and $102.6 million, or 2.46% of total loans at December 31, 2007. This is a direct result of a disciplined focus on actively reducing delinquent accounts.  Despite this focus, no assurance can be given that delinquencies will continue to trend down and this is especially the case given the weakness in the residential development sector and the economy. To the extent delinquencies increase, it may affect the determination of the Company’s allowance for loan losses, and accordingly, the loan loss provision. The current period delinquencies were 0.89% of total loans in the St. Louis market, 0.68% of total loans in the Georgia market, 0.41% of total loans in the Michigan market and 0.40% of total loans in the Chicago market.  Of total loans by loan type, 1.65% of personal and home equity loans were delinquent, 1.00% of construction loans were delinquent, 0.38% of commercial real estate loans were delinquent, 0.35% of residential real estate loans were delinquent and 0.22% of commercial loans were delinquent.

Deposits and Funds Borrowed

The following table presents the balances of deposits by category and each category as a percentage of total deposits at June 30, 2008 and December 31, 2007:

	June 30,					December 31,					Variance
	2008					2007					between
	Balance		% of Total			Balance		% of Total			periods
	(dollars in thousands)
Non-interest bearing demand	$	548,710		9	%	$	299,043		8	%		83	%
Interest-bearing demand		164,541		3	%		157,761		4	%		4	%
Savings		15,810		--	%		12,309		1	%		28	%
Money market		2,071,119		33	%		1,581,863		42	%		31	%
Brokered deposits		1,889,401		31	%		542,470		14	%		248	%
Other time deposits		1,466,369		24	%		1,167,692		31	%		26	%
Total deposits	$	6,155,950		100	%	$	3,761,138		100	%		64	%

Given the acceleration in loan growth since inception of the Plan, the Company is focused on balancing growth in its loan portfolio with an emphasis on appropriate sources of funding, including gathering client deposits and other alternative funding sources.  Total deposits of $6.2 billion at June 30, 2008 represent an increase of $2.4 billion, as compared to total deposits of $3.8 billion at December 31, 2007, primarily due to an increase in brokered deposits, money market and other time deposits.  Client deposits, which represent total deposits less brokered deposits, were $4.3 billion at June 30, 2008, a 33% increase from $3.2 billion at December 31, 2007.

During the quarter, the Company facilitated its deposit growth by aggressively pursuing deposits from existing and new clients, increasing institutional and municipal deposits, expanding its business DDA account balances due to its enhanced treasury management services, and the continued implementation of the CDARs™ deposit program.  The CDARs™ reciprocal deposit program is a deposit services arrangement that achieves FDIC deposit insurance for jumbo deposit relationships, which is an attractive feature to many of our middle-market and private banking clients.  These deposits are classified as brokered deposits for regulatory deposit purposes; however, the source of the deposits is our existing and new client relationships and are, therefore, not traditional ‘brokered’ deposits.

We utilized brokered deposits as a source of funding for the substantial growth in our loan portfolio during the quarter.  Brokered deposits were $1.9 billion at June 30, 2008, up from $542.5 million at December 31, 2007.  Our brokered deposits to total deposits ratio was 31% at June 30, 2008 and 14% at December 31, 2007.  Brokered deposits at June 30, 2008 include $382.2 million in CDARs™ deposits. As the Company attracts new clients, loan volume tends to lead client deposit volume associated with those new relationships.  We anticipate continuing our reliance on traditional brokered deposits to fund a portion of this growth.  Long-term, as client deposits grow, the Company expects to reduce its reliance on traditional brokered deposits as a percentage of total deposits.

We have issued certain brokered deposits that include call option provisions, which provide us with the opportunity to redeem the certificates of deposit on a specified date prior to the contractual maturity date.  As of June 30, 2008, we held 13 outstanding brokered deposits containing unexercised call provisions.  We have brokered deposits with 15 different brokers and we receive periodic information from other brokers regarding potential deposits.

The scheduled maturities of brokered deposits, net of unamortized prepaid broker commissions, as of June 30, 2008, for the upcoming 2008 quarters, and fiscal years 2009 through 2012 and thereafter, are as follows:

Scheduled Maturities of Brokered Deposits

net of unamortized prepaid brokered commissions

at June 30, 2008

Maturity Date	Rate (1)	6/30/08
	(in thousands)
3rd quarter 2008	4.13%	$ 542,457
4th quarter 2008	3.81%	468,232
2009 (2)	3.92%	741,737
2010-2011 (3)	4.38%	11,389
Thereafter (4)(5)	5.15%	128,348
Total Brokered Deposits		1,892,163
Unamortized prepaid broker commissions		(2,762)
Total brokered deposits, net of unamortized prepaid broker commissions		$1,889,401

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

(2)   This tranche includes two callable deposits: a $4.9 million brokered deposit with a maturity date of 6/12/2009 and a $5.0 million brokered deposit with a maturity date of 8/11/2009, which are both callable monthly.

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

(4)   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 $9.6 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 $11.1 million brokered deposit with a maturity date of 2/27/2019 callable monthly; $8.8 million brokered deposit with a maturity date of 3/12/2024 callable semi-annually; a $7.2 million brokered deposit with a maturity date of 4/23/2024 callable monthly; and a $6.1 million brokered deposit with a maturity date of 6/30/2025, callable semi-annually.

(5)   This segment includes a zero coupon brokered deposit with a maturity date of 3/18/2024, an effective yield of 5.75% and callable semi-annually.

Funds borrowed, which include federal funds purchased, FHLB advances, borrowings under the Company’s credit facility, and convertible senior notes, decreased to $369.6 million at June 30, 2008 from $560.8 million at December 31, 2007, primarily as a result of an increase in client and brokered deposits.  As of June 30, 2008, the Company had a total of $115.0 million of contingent convertible senior notes held by qualified institutional investors. The notes are senior, unsecured obligations of PrivateBancorp, Inc. and pay interest semi-annually at a rate of 3.625 % per year. The notes will mature on March 15, 2027, and will be convertible under certain circumstances into cash and, if applicable, shares of the Company’s common stock at an initial conversion price of $45.05 per share.

Membership in the FHLB system gives us the ability to borrow funds from the FHLB (Des Moines), the FHLB (Indianapolis), the FHLB (Atlanta), and the FHLB (Chicago) (the “FHLBs”) under a variety of programs.  We have periodically used the services of the FHLBs for funding needs and other correspondent services.  The PrivateBank – Wisconsin became a member of the FHLB (Chicago) in the fourth quarter 2007 and is allowed to borrow funds and participate in other programs of the FHLB, despite The PrivateBank – Chicago’s withdrawal as a member of the FHLB (Chicago) during the second quarter 2006.  In 2006, the Company sold and paid off its outstanding FHLB (Chicago) advances prior to its withdrawal and The PrivateBank – Chicago will not have access until 2011 to advances from the FHLB (Chicago).  We will continue to be members of, and to take advantage of the programs offered by, the FHLBs through our other subsidiary banks.  At June 30, 2008, our FHLB borrowings consisted of $68.5 million from the FHLB (Des Moines), $36.0 million from the FHLB (Atlanta), and $64.0 million from the FHLB (Indianapolis).  The FHLB requires us to pledge collateral in connection with obtaining FHLB advances.  Our pledged collateral consists of residential real estate loans and certain qualifying multi-family loans and investment securities.

As of June 30, 2008, the Company had a credit facility with a correspondent bank comprised of a $25.0 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 $24.75 million revolving loan with a maturity date of December 31, 2008.  The subordinated debt matures on December 31, 2017.  The interest rate on the senior debt facility resets quarterly, and is based on, at the Company’s option, either the correspondent bank’s prime rate or three-month LIBOR plus 120 basis points, with a floor of 3.50%.  The interest rate on the subordinated debt resets quarterly, and is equal to three-month LIBOR plus 135 basis points, with a floor of 3.50%.  The subordinated debt qualifies as Tier 2 capital under applicable rules and regulations promulgated by the Board of Governors of the Federal Reserve System.

At June 30, 2008, included in funds borrowed, the Company had $250,000 outstanding on the senior debt facility and $75.0 million of subordinated debt outstanding.  The credit facility is used for general corporate and other working capital purposes.

Capital Resources

Stockholders’ equity was $645.5 million at June 30, 2008, an increase of $144.7 million from December 31, 2007 stockholders’ equity of $500.8 million, due primarily to the two capital-raising transactions that occurred during the second quarter, as described in Note 9 to the financial statements.

At June 30, 2008, $214.1 million of our outstanding junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt 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 consolidated financial statements, potentially impact the ability of the Company to pay its obligations and encumber the Company’s ability to upstream dividends from its bank subsidiaries.

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

The following table sets forth our consolidated regulatory capital amounts and ratios as of June 30, 2008 and December 31, 2007:

	June 30, 2008								December 31, 2007
	Capital			“Well- capitalized” Standard			Excess Capital		Capital			“Well- capitalized” Standard			Excess Capital
Dollar basis (in thousands):
Leverage capital	$	755,086		$	329,516		$	425,570	$	494,095		$	225,953		$	268,142
Tier 1 risk-based capital		755,086			418,543			336,543		494,095			260,310			233,785
Total risk-based capital		939,789			697,571			242,218		615,881			433,850			182,031
Percentage basis:
Leverage ratio		11.46	%		5.00	%				10.93	%		5.00	%
Tier 1 risk-based capital ratio		10.82	%		6.00	%				11.39	%		6.00	%
Total risk-based capital ratio		13.47	%		10.00	%				14.20	%		10.00	%
Total equity to total assets		8.63	%		—					10.04	%		—

To be considered “well-capitalized,” an entity must maintain a leverage ratio of at least 5.0%, a Tier 1 risk-based capital ratio of at least 6.0%, and a total risk-based capital ratio of at least 10.0%.  To be “adequately capitalized,” a bank must maintain a leverage ratio of at least 4.0%, a Tier 1 risk-based capital ratio of at least 4.0%, and a total risk-based capital ratio of at least 8.0%.  At June 30, 2008, 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.  The Company is committed to maintaining its well-capitalized position and the capital raised during the second quarter is expected to support our growth through 2009.

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.  We have experienced strong loan growth during the six months ended June 30, 2008, with loans increasing $2.2 billion, or 54%, since December 31, 2007.  This compares to loan growth during the comparable period in 2007 of $205.4 million, or 6%.  Our Strategic Growth Plan is driving our loan growth and we expect loan growth to continue.  The loan growth resulting from the adoption of the Plan has affected our liquidity, and we manage our liquidity position today differently than we did at this time last year before the plan had been adopted.  Since adoption of the Plan, we have enhanced our suite of deposit and cash management product and service offerings in order to increase our client deposits.  We also have evaluated, and in some cases adopted, new wholesale funding strategies.  To fund the anticipated $1.0 billion loan growth per quarter over the next two quarters, we anticipate that about half will be funded with client deposits and the remaining portion would be funded primarily through FHLB advances or brokered deposits.  At June 30, 2008 we had $3.1 billion in unfunded commitments to extend credit.   

Net cash outflows from operations totaled $11.3 million in the six months ended June 30, 2008 compared to net cash provided by operations of $12.2 million in the prior year period.  Net cash outflows from investing activities totaled $2.4 billion in the first six months of 2008 compared to a net cash outflow of $212.3 million in the prior year period primarily due to increased loan growth.  Cash inflows from financing activities in the first six months of 2008 totaled $2.5 billion compared to a net inflow of $203.4 million in the first six months of 2007.

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, Chicago, 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 31% of total deposits at June 30, 2008 and 14% of total deposits at December 31, 2007.  We do not expect our 40% threshold limitation to limit our ability to implement our Plan.

The majority of our deposits are a stable source of long-term liquidity for our bank subsidiaries due to the nature of long-term relationships generally established with our clients. At June 30, 2008, 56.9% of our total assets were funded by such deposits, compared to 61.5% at December 31, 2007. Deposits for purposes of this ratio are defined to include all deposits, including time deposits and CDARs™ deposits, but excluding traditional brokered deposits and public funds. Time deposits are included since these deposits have historically not been volatile deposits for us.  CDARs™ deposits are included for this calculation as the source of the deposits is our existing and new client relationships and are, therefore, not traditional ‘brokered’ deposits.

Part II – Other Information

Item 6.  Exhibits 

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.

Signatures

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

	PRIVATEBANCORP, INC.
	By:	/s/ Larry D. Richman
		Larry D. Richman,
		President and Chief Executive Officer
	By:	/s/ Dennis L. Klaeser
		Dennis L. Klaeser,
		Chief Financial Officer
Date:  September 8, 2008

EXHIBIT INDEX

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.